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Introduction The Trump Administration's Nuclear Posture Review, released on February 2, 2018, includes plans for the United States to deploy two new types of nuclear weapons "to enhance the flexibility and responsiveness of U.S. nuclear forces." The report highlights that these weapons represent a response to Russia's deployment of a much larger stockpile of lower-yield nonstrategic nuclear weapons and to Russia's apparent belief "that limited nuclear first use, potentially including low yield weapons" can provide "a coercive advantage in crises and at lower levels of conflict." The two capabilities identified in the NPR are a new low-yield nuclear warhead to be deployed on U.S. long-range submarine-launched ballistic missiles and a new sea-launched cruise missile that could be deployed on Navy ships or attack submarines. The report states that the United States does not need to deploy "non-strategic nuclear capabilities that quantitatively match or mimic Russia's more expansive arsenal." But it indicates that "expanding flexible U.S. nuclear options now, to include low yield options, is important for the preservation of credible deterrence against regional aggression." The NPR's recommended deployment of U.S. nonstrategic nuclear weapons follows growing concerns, both in Congress and among analysts outside of government, about new nuclear challenges facing the United States. For example, In late January 2015, Representatives Mike Rogers and Mike Turner, both members of the House Armed Services Committee, sent a letter to then-Secretary of State John Kerry and then-Secretary of Defense Chuck Hagel, seeking information about the agreements that would be needed and costs that might be incurred if the United States sought to deploy dual-capable aircraft and nuclear bombs at bases on the territories of NATO members in Eastern Europe. Neither NATO, as an organization, nor any of the nations who are members of NATO had called on the United States to pursue such deployments. However, Representatives Rogers and Turner noted that Russian actions in 2014—including aggression against Ukraine, noncompliance with the 1987 INF Treaty, and threats to deploy nuclear weapons in Crimea—threatened European security and warranted a more potent U.S. response. Some analysts outside government have also called for the deployment of greater numbers and/or types of nuclear weapons in Europe in response to Russia's continuing aggression in Ukraine and its apparent increased reliance on nuclear weapons. Others, however, have argued that more nuclear weapons would do little to enhance NATO's security and that NATO would be better served by enhancing its conventional capabilities. This interest in possible new deployments of U.S. nonstrategic, or shorter-range, nuclear weapons differs sharply from previous years, when Members of Congress, while concerned about Russia's larger stockpile of such weapons, seemed more interested in limiting these weapons through arms control than expanding U.S. deployments. During the Senate debate on the 2010 U.S.-Russian Strategic Arms Reduction Treaty (New START), many Members noted that this treaty did not impose any limits on nonstrategic nuclear weapons and that Russia possessed a far greater number of these systems than did the United States. Some expressed particular concerns about the threat that Russian nonstrategic nuclear weapons might pose to U.S. allies in Europe; others argued that these weapons might be vulnerable to theft or sale to nations or groups seeking their own nuclear weapons. In response to these concerns, the Senate, in its Resolution of Ratification on New START, stated that the United States should seek to initiate within one year, "negotiations with the Russian Federation on an agreement to address the disparity between the non-strategic (tactical) nuclear weapons stockpiles of the Russian Federation and of the United States and to secure and reduce tactical nuclear weapons in a verifiable manner." In addition, in the FY2013 Defense Authorization Act ( H.R. 4310 , §1037), Congress again indicated that "the United States should pursue negotiations with the Russian Federation aimed at the reduction of Russian deployed and nondeployed nonstrategic nuclear forces." Although the United States did raise the issue of negotiations on nonstrategic nuclear weapons with Russia within the year after New START entered into force, the two nations have not moved forward with efforts to negotiate limits on these weapons. Russia has expressed little interest in such a negotiation, and has stated that it will not even begin the process until the United States removes its nonstrategic nuclear weapons from bases in Europe. According to U.S. officials, the United States and NATO have been trying to identify and evaluate possible transparency measures and limits that might apply to these weapons. This report provides basic information about U.S. and Russian nonstrategic nuclear weapons. It begins with a brief discussion of how these weapons have appeared in public debates in the past few decades, then summarizes the differences between strategic and nonstrategic nuclear weapons. It then provides some historical background, describing the numbers and types of nonstrategic nuclear weapons deployed by both nations during the Cold War and in the past decade; the policies that guided the deployment and prospective use of these weapons; measures that the two sides have taken to reduce and contain their forces, and the 2018 NPR's recommendation for the deployment of new U.S. nonstrategic nuclear weapons. The report reviews the issues that have been raised with regard to U.S. and Russian nonstrategic nuclear weapons, and summarizes a number of policy options that might be explored by Congress, the United States, Russia, and other nations to address these issues. Background During the Cold War, nuclear weapons were central to the U.S. strategy of deterring Soviet aggression against the United States and U.S. allies. Toward this end, the United States deployed a wide variety of systems that could carry nuclear warheads. These included nuclear mines; artillery; short-, medium-, and long-range ballistic missiles; cruise missiles; and gravity bombs. The United States deployed these weapons with its troops in the field, aboard aircraft, on surface ships, on submarines, and in fixed, land-based launchers. The United States articulated a complex strategy, and developed detailed operational plans, that would guide the use of these weapons in the event of a conflict with the Soviet Union and its allies. During the Cold War, most public discussions about U.S. and Soviet nuclear weapons—including discussions about perceived imbalances between the two nations' forces and discussions about the possible use of arms control measures to reduce the risk of nuclear war and limit or reduce the numbers of nuclear weapons—focused on long-range, or strategic, nuclear weapons. These include long-range land-based intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs), and heavy bombers that carry cruise missiles or gravity bombs. These were the weapons that the United States and Soviet Union deployed so that they could threaten destruction of central military, industrial, and leadership facilities in the other country—the weapons of global nuclear war. But both nations also deployed thousands of nuclear weapons outside their own territories with their troops in the field. These weapons usually had less explosive power and were deployed with launchers that would deliver them across shorter ranges than strategic nuclear weapons. They were intended for use by troops on the battlefield or within the theater of battle to achieve more limited, or tactical, objectives. These "nonstrategic" nuclear weapons did not completely escape public discussion or arms control debates. Their profile rose in the early 1980s when U.S. plans to deploy new cruise missiles and intermediate-range ballistic missiles in Europe, as a part of NATO's nuclear strategy, ignited large public protests in many NATO nations. Their high profile returned later in the decade when the United States and Soviet Union signed the 1987 Intermediate Range Nuclear Forces (INF) Treaty and eliminated medium- and intermediate-range ballistic and cruise missiles. Then, in 1991, President George Bush and Soviet President Mikhail Gorbachev each announced that they would withdraw from deployment most of their nonstrategic nuclear weapons and eliminate many of them. These 1991 announcements, coming after the abortive coup in Moscow in August 1991, but months before the December 1991 collapse of the Soviet Union, responded to growing concerns about the safety and security of Soviet nuclear weapons at a time of growing political and economic upheaval in that nation. They also allowed the United States to alter its forces in response to easing tensions and the changing international security environment. Consequently, for many in the general public, these initiatives appeared to resolve the problems associated with nonstrategic nuclear weapons. As a result, although the United States and Russia included these weapons in some of their arms control discussions, most of their arms control efforts during the rest of that decade focused on strategic weapons, with efforts made to implement the 1991 Strategic Arms Reduction Treaty (START) and negotiate deeper reductions in strategic nuclear weapons. The lack of public attention did not, however, reflect a total absence of questions or concerns about nonstrategic nuclear weapons. In 1997, President Clinton and Russia's President Boris Yeltsin signed a framework agreement that stated they would address measures related to nonstrategic nuclear weapons in a potential START III Treaty. Further, during the 1990s, outside analysts, officials in the U.S. government, and many Members of Congress raised continuing questions about the safety and security of Russia's remaining nonstrategic nuclear weapons. Congress sought a more detailed accounting of Russia's weapons in legislation passed in the late 1990s. Analysts also questioned the role that these weapons might play in Russia's evolving national security strategy, the rationale for their continued deployment in the U.S. nuclear arsenal, and their relationship to U.S. nuclear nonproliferation policy. The terrorist attacks of September 11, 2001, also reminded people of the catastrophic consequences that might ensue if terrorists were to acquire and use nuclear weapons, with continuing attention focused on the potentially insecure stock of Russian nonstrategic nuclear weapons. The George W. Bush Administration did not adopt an explicit policy of reducing or eliminating nonstrategic nuclear weapons. When it announced the results of its Nuclear Posture Review (NPR) in early 2002, it did not outline any changes to the U.S. deployment of nonstrategic nuclear weapons at bases in Europe; it stated that NATO would address the future of those weapons. Although there was little public discussion of this issue during the Bush Administration, reports indicate that the United States did redeploy and withdraw some of its nonstrategic nuclear weapons from bases in Europe. It made these changes quietly and unilaterally, in response to U.S. and NATO security requirements, without requesting or requiring reciprocity from Russia. The Bush Administration also did not discuss these weapons with Russia during arms control negotiations in 2002. Instead, the Strategic Offensive Reductions Treaty (Moscow Treaty), signed in June 2002, limited only the number of operationally deployed warheads on strategic nuclear weapons. When asked about the absence of these weapons in the Moscow Treaty, then-Secretary of State Colin Powell noted that the treaty was not intended to address these weapons, although the parties could address questions about the safety and security of these weapons during less formal discussions. These discussions, however, never occurred. Nevertheless, Congress remained concerned about the potential risks associated with Russia's continuing deployment of nonstrategic nuclear weapons. The FY2006 Defense Authorization Act ( P.L. 109-163 ) contained two provisions that called for further study on these weapons. Section 1212 mandated that the Secretary of Defense submit a report that would determine whether increased transparency and further reductions in U.S. and Russian nonstrategic nuclear weapons were in the U.S. national security interest; Section 3115 called on the Secretary of Energy to submit a report on what steps the United States might take to bring about progress in improving the accounting for and security of Russia's nonstrategic nuclear weapons. In the 109 th Congress, H.R. 5017 , a bill to ensure implementation of the 9/11 Commission Report recommendations, included a provision (§334) that called on the Secretary of Defense to submit a report that detailed U.S. efforts to encourage Russia to provide a detailed accounting of its force of nonstrategic nuclear weapons. It also would have authorized $5 million for the United States to assist Russia in completing an inventory of these weapons. The 109 th Congress did not address this bill or its components in any detail. In the 110 th Congress, H.R. 1 sought to ensure the implementation of the 9/11 Commission Report recommendations. However, in its final form ( P.L. 110-53 ), it did not include any references to Russia's nonstrategic nuclear weapons. Several events in the past decade have served to elevate the profile of nonstrategic nuclear weapons in debates about the future of U.S. nuclear weapons and arms control policy. For example, in January 2007, four senior statesmen published an article in the Wall Street Journal that highlighted the continuing threat posed by the existence, and proliferation, of nuclear weapons. They called on leaders in nations with nuclear weapons to adopt the goal of seeking a world free of nuclear weapons. After acknowledging that that this was a long-term enterprise, they identified a number of urgent, near-term steps that these nations might take. They included among these steps a call for nations to eliminate "short-range nuclear weapons designed to be forward-deployed." In a subsequent article published in January 2008, they elaborated on this step, calling for "a dialogue, including within NATO and with Russia, on consolidating the nuclear weapons designed for forward deployment to enhance their security, as a first step toward careful accounting for them and their eventual elimination." They noted, specifically, that "these smaller and more portable nuclear weapons are, given their characteristics, inviting acquisition targets for terrorist groups." In addition, as a part of its renewed interest in the role of nuclear weapons in U.S. national security strategy, Congress established, in the FY2008 Defense Authorization Bill ( P.L. 110-181 §1062), a Congressional Commission on the Strategic Posture of the United States. The Congressional Commission, which issued its report in April 2009, briefly addressed the role of nonstrategic nuclear weapons in U.S. national security strategy and noted that these weapons can help the United States assure its allies of the U.S. commitment to their security. It also noted concerns about the imbalance in the numbers of U.S. and Russian nonstrategic nuclear weapons and mentioned that Russia had increased its reliance on these weapons to compensate for weaknesses in its conventional forces. The 110 th Congress also mandated ( P.L. 110-181 , §1070) that the next Administration conduct a new Nuclear Posture Review (NPR). The Obama Administration completed this NPR in early April 2010. This study identified a number of steps the United States would take to reduce the roles and numbers of nuclear weapons in the U.S. arsenal. A few of these steps, including the planned retirement of nuclear-armed, sea-launched cruise missiles, affected U.S. nonstrategic nuclear weapons. At the same time, though, the NPR recognized the role that U.S. nonstrategic nuclear weapons play in assuring U.S. allies of the U.S. commitment to their security. It indicated that the United States would "retain the capability to forward-deploy U.S. nuclear weapons on tactical fighter-bombers" and that the United States would seek to "expand consultations with allies and partners to address how to ensure the credibility and effectiveness of the U.S. extended deterrent. No changes in U.S. extended deterrence capabilities will be made without close consultations with our allies and partners." Discussions about the presence of U.S. nonstrategic nuclear weapons at bases in Europe and their role in NATO's strategy also increased in 2009 and 2010 during the drafting of NATO's most recent strategic concept. Officials in some NATO nations called for the removal of U.S. nonstrategic weapons from bases on the continent, noting that they had no military significance for NATO's security. Others called for the retention of these weapons, arguing that they played a political role in NATO, with shared rights and responsibilities, and that they helped balance Russia's deployment of greater numbers of nonstrategic nuclear weapons. When it was published, the Strategic Concept did not call for the removal of U.S. nonstrategic nuclear weapons. It stated that "deterrence, based on an appropriate mix of nuclear and conventional capabilities, remains a core element of our overall strategy." It also indicated that "the circumstances in which any use of nuclear weapons might have to be contemplated are extremely remote," but indicated that "as long as nuclear weapons exist, NATO will remain a nuclear alliance." It then concluded that NATO would "maintain an appropriate mix of nuclear and conventional forces." NATO nations continue to share responsibility for basing and delivery of the weapons and would weigh in on decisions about their possible use. At the same time, NATO recognized that the new Strategic Concept would not be the last word on the role or presence of nonstrategic nuclear weapons in NATO. In the declaration released at the conclusion of the November 2010 Lisbon Summit, the allies agreed that they would continue to review NATO's overall posture in deterring and defending against the full range of threats to the Alliance. They commissioned a comprehensive Deterrence and Defense Posture Review (DDPR) that would examine the range of capabilities required for defense and deterrence, including nuclear weapons, missile defense, and other means of strategic deterrence and defense. The DDPR was presented at the May 2012 NATO summit in Chicago. It did not, however, recommend any changes in NATO's nuclear posture. Instead, it noted that "nuclear weapons are a core component of NATO's overall capabilities for deterrence and defence," and that "the Alliance's nuclear force posture currently meets the criteria for an effective deterrence and defence posture." NATO reaffirmed this conclusion after its summit in Wales in September 2014, noting that "deterrence, based on an appropriate mix of nuclear, conventional, and missile defence capabilities, remains a core element of our overall strategy." NATO addressed this issue again during its summit in Warsaw in July 2016, and did not alter this conclusion about the value of nuclear weapons to the alliance. Moreover, although the alliance did not call for the deployment of additional nuclear weapons in Europe, the communique released at the end of the summit highlighted the continuing importance of U.S. nuclear weapons deployed in Europe and the nuclear sharing arrangements among the allies. Specifically, the allies reiterated that "as long as nuclear weapons exist, NATO will remain a nuclear alliance" and that "the strategic forces of the Alliance, particularly those of the United States, are the supreme guarantee of the security of the Allies." At the same time, they noted that "NATO's nuclear deterrence posture also relies, in part, on United States' nuclear weapons forward-deployed in Europe and on capabilities and infrastructure provided by Allies concerned." At the same time, NATO has begun to implement numerous initiatives in response to Russia's aggression in Ukraine and aggressive posture toward Europe. While some of these initiatives may strengthen NATO's planning and exercise capabilities, they are unlikely to result in changes in the numbers of deployed nuclear weapons. The 2018 Nuclear Posture Review picks up on many of the same themes highlighted in documents published in the past decade. Like the Strategic Posture Commission Report published in 2009, the NPR highlights the imbalance in the numbers of U.S. and Russian nonstrategic nuclear weapons and states that Russia has increased its reliance on these weapons in its national security strategy. It argues that Russia believes it could use these weapons to coerce the United States and its NATO allies to back down during a conventional conflict in Europe. The 2018 NPR also echoes the Obama Administration's NPR, indicating that the United States will maintain "the capability to forward deploy nuclear bombers and DCA around the world." It also states that the United States will continue Obama-era programs to communicate with and consult allies "on policy, strategy and capabilities." The 2018 NPR also supports of the recent changes in NATO's approach to nuclear modernization and planning, indicating that the United States is "committed to upgrading DCA [dual capable aircraft] with the nuclear-capable F-35 aircraft" and that the United States will "work with NATO to best ensure—and improve where needed—the readiness, survivability, and operational effectiveness of DCA based in Europe." However, while the 2010 NPR called for the retirement of U.S. Tomahawk nuclear-armed sea-launched cruise missiles (TLAMN), the 2018 NPR calls for the development of a new sea-launched cruise missile (SLCM). The 2010 NPR argued that "this system serves a redundant purpose in the U.S. nuclear stockpile" and, although the United States "remains committed to providing a credible extended deterrence posture and capabilities," the "deterrence and assurance roles of TLAMN can be adequately substituted by these other means." The 2018 NPR disputes this conclusion. It states that "the rapid development of a modern SLCM" will address "the increasing need for flexible and low-yield options to strengthen deterrence and assurance" and "will strengthen the effectiveness of the sea-based nuclear deterrence force." The Distinction Between Strategic and Nonstrategic Nuclear Weapons The distinction between strategic and nonstrategic (also known as tactical) nuclear weapons reflects the military definitions of, on the one hand, a strategic mission and, on the other hand, the tactical use of nuclear weapons. According to the Department of Defense Dictionary of Military Terms, a strategic mission is Directed against one or more of a selected series of enemy targets with the purpose of progressive destruction and disintegration of the enemy's warmaking capacity and will to make war. Targets include key manufacturing systems, sources of raw material, critical material, stockpiles, power systems, transportation systems, communication facilities, and other such target systems. As opposed to tactical operations, strategic operations are designed to have a long-range rather than immediate effect on the enemy and its military forces. In contrast, the tactical use of nuclear weapons is defined as "the use of nuclear weapons by land, sea, or air forces against opposing forces, supporting installations or facilities, in support of operations that contribute to the accomplishment of a military mission of limited scope, or in support of the military commander's scheme of maneuver, usually limited to the area of military operations." Definition by Observable Capabilities During the Cold War, it was relatively easy to distinguish between strategic and nonstrategic nuclear weapons because each type had different capabilities that were better suited to the different missions. Definition by Range of Delivery Vehicles The long-range missiles and heavy bombers deployed on U.S. territory and missiles deployed in ballistic missile submarines had the range and destructive power to attack and destroy military, industrial, and leadership targets central to the Soviet Union's ability to prosecute the war. At the same time, with their large warheads and relatively limited accuracies (at least during the earlier years of the Cold War), these weapons were not suited for attacks associated with tactical or battlefield operations. Nonstrategic nuclear weapons, in contrast, were not suited for strategic missions because they lacked the range to reach targets inside the Soviet Union (or, for Soviet weapons, targets inside the United States). But, because they were often small enough to be deployed with troops in the field or at forward bases, the United States and Soviet Union could have used them to attack targets in the theater of the conflict, or on the battlefield itself, to support more limited military missions. Even during the Cold War, however, the United States and Russia deployed nuclear weapons that defied the standard understanding of the difference between strategic and nonstrategic nuclear weapons. For example, both nations considered weapons based on their own territories that could deliver warheads to the territory of the other nation to be "strategic" because they had the range needed to reach targets inside the other nation's territory. But some early Soviet submarine-launched ballistic missiles had relatively short (i.e., 500 mile) ranges, and the submarines patrolled close to U.S. shores to ensure that the weapons could reach their strategic targets. Conversely, in the 1980s the United States considered sea-launched cruise missiles (SLCMs) deployed on submarines or surface ships to be nonstrategic nuclear weapons. But, if these vessels were deployed close to Soviet borders, these weapons could have destroyed many of the same targets as U.S. strategic nuclear weapons. Similarly, U.S. intermediate-range missiles that were deployed in Europe, which were considered nonstrategic by the United States, could reach central, strategic targets in the Soviet Union. Furthermore, some weapons that had the range to reach "strategic" targets on the territory of the other nations could also deliver tactical nuclear weapons in support of battlefield or tactical operations. Soviet bombers could be equipped with nuclear-armed anti-ship missiles; U.S. bombers could also carry anti-ship weapons and nuclear mines. Hence, the range of the delivery vehicle does not always correlate with the types of targets or objectives associated with the warhead carried on that system. This relationship between range and mission has become even more clouded since the end of the Cold War because the United States and Russia have retired many of the shorter- and medium-range delivery systems considered to be nonstrategic nuclear weapons. Further, both nations could use their longer-range "strategic" systems to deliver warheads to a full range of strategic and tactical targets, even if long-standing traditions and arms control definitions weigh against this change. Definition by Yield of Warheads During the Cold War, the longer-range strategic delivery vehicles also tended to carry warheads with greater yields, or destructive power, than nonstrategic nuclear weapons. Smaller warheads were better suited to nonstrategic weapons because they sought to achieve more limited, discrete objectives on the battlefield than did the larger, strategic nuclear weapons. But this distinction has also dissolved in more modern systems. Many U.S. and Russian heavy bombers can carry weapons of lower yields, and, as accuracies improved for bombs and missiles, warheads with lower yields could achieve the same expected level of destruction that had required larger warheads in early generations of strategic weapons systems. Definition by Exclusion The observable capabilities that allowed analysts to distinguish between strategic and nonstrategic nuclear weapons during the Cold War have not always been precise, and may not prove to be relevant or appropriate in the future. On the other hand, the "strategic" weapons identified by these capabilities—ICBMs, SLBMs, and heavy bombers—are the only systems covered by the limits in strategic offensive arms control agreements—the SALT agreements signed in the 1970s, the START agreements signed in the 1990s, the Moscow Treaty signed in 2002, and the New START Treaty signed in 2010. Consequently, an "easy" dividing line is one that would consider all weapons not covered by strategic arms control treaties as nonstrategic nuclear weapons. This report takes this approach when reviewing the history of U.S. and Soviet/Russian nonstrategic nuclear weapons, and in some cases when discussing remaining stocks of nonstrategic nuclear weapons. Hybrid Definitions The definition by exclusion, although the most common form used in recent discussions, may not prove sufficient when discussing current and future issues associated with these weapons. Since the early 1990s, the United States and Russia have withdrawn from deployment most of their nonstrategic nuclear weapons and eliminated many of the shorter- and medium-range launchers for these weapons (these changes are discussed in more detail below). Nevertheless, both nations maintain roles for these weapons in their national security strategies. Russia has enunciated a national security strategy that allows for the possible use of nuclear weapons in regional contingencies and conflicts near the periphery of Russia. The United States also maintains these capabilities in its nuclear arsenal and does not rule out the possibility that it might need them to deter or defeat potential adversaries. Moreover, the 2018 Nuclear Posture Review, with its plans for the deployment of two new types of nonstrategic weapons, further complicates efforts to identify a single definition. The sea-launched cruise missile clearly meets several definitions of nonstrategic nuclear weapons—it would not have the long range of a strategic system, it would likely have a relatively low-yield warhead, and it would not count under existing treaties limiting strategic offensive weapons. But a new low-yield warhead for submarine-launched ballistic missiles is more complicated. For the NPR, yield seems to be the distinguishing characteristic. But the delivery system—a submarine-launched ballistic missile—is clearly a strategic system, as it has the long range of a strategic delivery vehicle and it is counted within the limits of the New START Treaty. Moreover, missiles with low-yield warheads could be deployed on the same submarines as missiles with higher yield, or strategic, warheads, complicating efforts to distinguish between strategic and nonstrategic SLBMs. Then-Secretary of Defense James Mattis further complicated the discussion during his testimony before the House Armed Services Committee on February 6, 2018, when he stated that he does not believe "there is any such thing as a tactical nuclear weapon. Any nuclear weapon used any time is a strategic game changer." He also resisted using the phrase "nonstrategic" to describe U.S. capabilities, and instead referred to the U.S. ability to deliver a "low-yield" response. While his resistance to the phrases "tactical" and "nonstrategic" seemed to contradict the NPR's widespread use of the phrase "non-strategic nuclear weapons," his response likely reflects a different definition of the dividing line between strategic and nonstrategic nuclear weapons. His comments reflect the view that any use of nuclear weapons would have "strategic effect," possibly meaning that it would expand and escalate the conflict beyond the immediate battlefield. The distinction, therefore, between a strategic and a nonstrategic nuclear weapon could well reflect the nature of the target or the implications for the conflict, not the yield or delivery vehicle of the attacking warhead. U.S. and Soviet Nonstrategic Nuclear Weapons U.S. Nonstrategic Nuclear Weapons During the Cold War Throughout the Cold War, the United States deployed thousands of shorter-range nuclear weapons with U.S. forces based in Europe and Asia and on ships around the world. The United States maintained these deployments to extend deterrence and to defend its allies. Not only did the presence of these weapons (and the presence of U.S. forces, in general) increase the likelihood that the United States would come to the defense of its allies if they were attacked, the weapons also could have been used on the battlefield to slow or stop the advance of the adversaries' conventional forces. Strategy and Doctrine In most cases, these weapons were deployed to defend U.S. allies against aggression by the Soviet Union and its Warsaw Pact allies, but the United States did not rule out their possible use in contingencies with other adversaries. In Europe, these weapons were a part of NATO's strategy of "flexible response." Under this strategy, NATO did not insist that it would respond to any type of attack with nuclear weapons, but it maintained the capability to do so and to control escalation if nuclear weapons were used. This approach was intended to convince the Soviet Union and Warsaw Pact that any conflict, even one that began with conventional weapons, could result in nuclear retaliation. As the Cold War drew to a close, NATO acknowledged that it would no longer maintain nuclear weapons to deter or defeat a conventional attack from the Soviet Union and Warsaw Pact because "the threat of a simultaneous, full-scale attack on all of NATO's European fronts has effectively been removed." But NATO documents indicated that these weapons would still play an important political role in NATO's strategy by ensuring "uncertainty in the mind of any potential aggressor about the nature of the Allies' response to military aggression." Force Structure Throughout the Cold War, the United States often altered the size and structure of its nonstrategic nuclear forces in response to changing capabilities and changing threat assessments. These weapons were deployed at U.S. bases in Asia, and at bases on the territories of several of the NATO allies, contributing to NATO's sense of shared responsibility for the weapons. The United States began to reduce these forces in the late 1970s, with the numbers of operational nonstrategic nuclear warheads declining from more than 7,000 in the mid-1970s to below 6,000 in the 1980s, to fewer than 1,000 by the middle of the 1990s. These reductions occurred, for the most part, because U.S. and NATO officials believed they could maintain deterrence with fewer, but more modern, weapons. For example, when the NATO allies agreed in 1970 that the United States should deploy new intermediate-range nuclear weapons in Europe, they decided to remove 1,000 older nuclear weapons from Europe. And in 1983, in the Montebello Decision, when the NATO defense ministers approved additional weapons modernization plans, they also called for a further reduction of 1,400 nonstrategic nuclear weapons. These modernization programs continued through the 1980s. In his 1988 Annual Report to Congress, Secretary of Defense Caspar Weinberger noted that the United States was completing the deployment of Pershing II intermediate-range ballistic missiles and ground-launched cruise missiles in Europe; modernizing two types of nuclear artillery shells; upgrading the Lance short-range ballistic missile; continuing production of the nuclear-armed version of the Tomahawk sea-launched cruise missile; and developing a new nuclear depth/strike bomb for U.S. naval forces. However, by the end of that decade, as the Warsaw Pact dissolved, the United States had canceled or scaled back all planned modernization programs. In 1987, it also signed the Intermediate-Range Nuclear Forces (INF) Treaty, which eliminated all U.S. and Soviet ground-launched shorter and intermediate-range ballistic and cruise missiles. Soviet Nonstrategic Nuclear Weapons During the Cold War Strategy and Doctrine During the Cold War, the Soviet Union also considered nuclear weapons to be instrumental to its military strategy. Although the Soviet Union had pledged that it would not be the first to use nuclear weapons, most Western observers doubted that it would actually observe this pledge in a conflict. Instead, analysts argue that the Soviet Union had integrated nuclear weapons into its warfighting plans to a much greater degree than the United States. Soviet analysts stressed that these weapons would be useful for both surprise attack and preemptive attack. According to one Russian analyst, the Soviet Union would have used nonstrategic nuclear weapons to conduct strategic operations in the theater of war and to reinforce conventional units in large scale land and sea operations. This would have helped the Soviet Union achieve success in these theaters of war and would have diverted forces of the enemy from Soviet territory. The Soviet Union reportedly began to reduce its emphasis on nuclear warfighting strategies in the mid-1980s, under Soviet President Mikhail Gorbachev. He reportedly believed that the use of nuclear weapons would be catastrophic. Nevertheless, they remained a key tool of deterring and fighting a large-scale conflict with the United States and NATO. Force Structure The Soviet Union produced and deployed a wide range of delivery vehicles for nonstrategic nuclear weapons. At different times during the period, it deployed devices that were small enough to fit into a suitcase-sized container, nuclear mines, shells for artillery, short-, medium-, and intermediate-range ballistic missiles, short-range air-delivered missiles, and gravity bombs. The Soviet Union deployed these weapons at nearly 600 bases, with some located in Warsaw Pact nations in Eastern Europe, some in the non-Russian republics on the western and southern perimeter of the nation, and throughout Russia. Estimates vary, but many analysts believe that, in 1991, the Soviet Union had more than 20,000 of these weapons. The numbers may have been higher, in the range of 25,000 weapons in earlier years, before the collapse of the Warsaw Pact. The 1991 Presidential Nuclear Initiatives In September and October 1991, U.S. President George H. W. Bush and Soviet President Mikhail Gorbachev sharply altered their nations' deployments of nonstrategic nuclear weapons. Each announced unilateral, but reciprocal initiatives that marked the end of many elements of their Cold War nuclear arsenals. U.S. Initiative On September 27, 1991, U.S. President George H. W. Bush announced that the United States would withdraw all land-based tactical nuclear weapons (those that could travel less than 300 miles) from overseas bases and all sea-based tactical nuclear weapons from U.S. surface ships, submarines, and naval aircraft. Under these measures the United States began dismantling approximately 2,150 warheads from the land-based delivery systems, including 850 warheads for Lance missiles and 1,300 artillery shells. It also withdrew about 500 weapons normally deployed aboard surface ships and submarines, and planned to eliminate around 900 B-57 depth bombs, which had been deployed on land and at sea, and the weapons for land-based naval aircraft. Furthermore, in late 1991, NATO decided to reduce by about half the number of weapons for nuclear-capable aircraft based in Europe, which led to the withdrawal of an additional 700 U.S. air-delivered nuclear weapons. The United States implemented these measures very quickly. Nonstrategic nuclear weapons were removed from bases around the world by mid-1992. The Navy had withdrawn nuclear weapons from its surface ships, submarines, and forward bases by mid-1992. The warhead dismantlement process has moved more slowly, taking most of the 1990s to complete for some weapons, but this was due to the limits on capacity at the Pantex Plant in Texas, where dismantlement occurs. The first Bush Administration decided to withdraw these weapons for several reasons. First, the threat the weapons were to deter—Soviet and Warsaw Pact attacks in Europe—had diminished with the collapse of the Warsaw Pact in 1989. Further, the military utility of the land-based weapons had declined as the Soviet Union pulled its forces eastward, beyond the range of these weapons. The utility of the sea-based weapons had also declined as a result of changes in U.S. warfighting concepts that accompanied the end of the Cold War. Moreover, the withdrawal of the sea-based weapons helped ease a source of tensions between the United States and some allies, such as New Zealand and Japan, who had been uncomfortable with the possible presence of nuclear weapons during port visits by U.S. naval forces. The President's announcement also responded to growing concerns among analysts about the safety and security of Soviet nonstrategic nuclear weapons. The Soviet Union had deployed thousands of these weapons at bases in remote areas of its territory and at bases outside Soviet territory in Eastern Europe. The demise of the Warsaw Pact and political upheaval in Eastern Europe generated concerns about the safety of these weapons. The abortive coup in Moscow in August 1991 had also caused alarms about the strength of central control over nuclear weapons inside the Soviet Union. The U.S. initiative was not contingent on a Soviet response, and the Bush Administration did not consult with Soviet leadership prior to its public announcement, but many hoped that the U.S. initiative would provide President Gorbachev with the incentive to take similar steps to withdraw and eliminate many of his nation's nonstrategic nuclear weapons. Soviet and Russian Initiatives On October 5, 1991, Russia's President Gorbachev replied that he, too, would withdraw and eliminate nonstrategic nuclear weapons. He stated that the Soviet Union would destroy all nuclear artillery ammunition and warheads for tactical missiles; remove warheads for nuclear antiaircraft missiles and destroy some of them; destroy all nuclear land mines; and remove all naval nonstrategic weapons from submarines and surface ships and ground-based naval aviation, destroying some of them. Estimates of the numbers of nonstrategic nuclear weapons deployed by the Soviet Union varied, with a range as great as 15,000-21,700 nonstrategic nuclear weapons in the Soviet arsenal in 1991. Consequently, analysts expected these measures to affect several thousand weapons. Russia's President Boris Yeltsin pledged to continue implementing these measures after the Soviet Union collapsed at the end of 1991. He also stated that Russia would destroy many of the warheads removed from nonstrategic nuclear weapons. These included all warheads from short-range missiles, artillery, and atomic demolition devices; one-third of the warheads from sea-based nonstrategic weapons; half of the warheads from air-defense interceptors; and half of the warheads from the Air Force's nonstrategic nuclear weapons. Reports indicate that the Soviet Union had begun removing nonstrategic nuclear weapons from bases outside Soviet territory after the collapse of the Warsaw Pact, and they had probably all been removed from Eastern Europe and the Transcaucasus prior to the 1991 announcements. Nevertheless, President Gorbachev's pledge to withdraw and eliminate many of these weapons spurred their removal from other former Soviet states after the collapse of the Soviet Union. Reports indicate that they had all been removed from the Baltic States and Central Asian republics by the end of 1991, and from Ukraine and Belarus by mid-late spring 1992. The status of nonstrategic nuclear weapons deployed on Russian territory is far less certain. According to some estimates, the naval systems were removed from deployment by the end of 1993, but the Army and Air Force systems remained in the field until 1996 and 1997. Furthermore, Russia has been far slower to eliminate the warheads from these systems than has the United States. Some analysts and experts in the United States have expressed concerns about the slow pace of eliminations in Russia. They note that the continuing existence of these warheads, along with the increasing reliance on nuclear weapons in Russia's national security strategy, indicate that Russia may reverse its pledges and reintroduce nonstrategic nuclear weapons into its deployed forces. Others note that financial constraints could have slowed the elimination of these warheads, or that Russia decided to coordinate the elimination effort with the previously scheduled retirement of older weapons. U.S. Nonstrategic Nuclear Weapons after the Cold War Strategy and Doctrine NATO Policy In U.S. and NATO policy, nonstrategic nuclear weapons have served not only as a deterrent to a wide range of potential aggressors, but also as an important element in NATO's cohesion as an alliance. NATO reaffirmed the importance of nonstrategic nuclear weapons for deterrence and alliance cohesion several times during the 1990s. In the press communiqué released after their November 1995 meeting, the members of NATO's Defense Planning Committee and Nuclear Planning Group stated that "Alliance Solidarity, common commitment, and strategic unity are demonstrated through the current basing of deployable sub-strategic [nuclear] forces in Europe." In 1997, in the Founding Act on Mutual Relations, Cooperation, and Security Between the Russian Federation and the North Atlantic Treaty Organization , NATO members assured Russia that it had "no intention, no plan, and no reason to deploy nuclear weapons on the territory of new members." But NATO also stated that it had no need "to change any aspect of NATO's nuclear policy—and do not foresee any future need to do so [emphasis added]." Finally, the "New Strategic Concept" signed in April 1999 stated that "to protect peace and to prevent war or any kind of coercion, the Alliance will maintain for the foreseeable future an appropriate mix of nuclear and conventional forces. Nuclear weapons make a unique contribution in rendering the risks of aggression against the Alliance incalculable and unacceptable." NATO completed the next review of its Strategic Concept in November 2010. In this document, the allies indicated that "deterrence, based on an appropriate mix of nuclear and conventional capabilities, remains a core element of our overall strategy." The document went on to indicate that NATO would remain a nuclear alliance as long as nuclear weapons continued to exist. It also noted that the alliance would "maintain an appropriate mix of nuclear and conventional forces" to ensure that "NATO has the full range of capabilities to deter and defend against any threat." However, the Strategic Concept did not refer, specifically, to the U.S. nuclear weapons based in Europe, as had the communiqué released in 1995. Instead, the Strategic Concept noted that the "supreme guarantee of the security of the Allies is provided by the strategic nuclear forces of the Alliance, particularly those of the United States [emphasis added]." It went on to indicate that "the independent strategic nuclear forces of the United Kingdom and France, which have a deterrent role of their own, contribute to the overall deterrence and security of the Allies." Moreover, the 2010 Strategic Concept alluded to the possibility of further reductions in nuclear weapons, both within the alliance and globally, in the future. The document noted that the allies are "resolved to seek a safer world for all and to create the conditions for a world without nuclear weapons in accordance with the goals of the Nuclear Non-Proliferation Treaty, in a way that promotes international stability, and is based on the principle of undiminished security for all." It also noted that the alliance had "dramatically reduced the number of nuclear weapons stationed in Europe" and had reduced the role of nuclear weapons in NATO strategy." The allies pledged to "seek to create the conditions for further reductions in the future." The Strategic Concept indicated that the goal in these reductions should be to "seek Russian agreement to increase transparency on its nuclear weapons in Europe and relocate these weapons away from the territory of NATO members." Moreover, the document noted that this arms control process "must take into account the disparity with the greater Russian stockpiles of short-range nuclear weapons." Hence, even though NATO no longer viewed Russia as an adversary, the allies apparently agreed that the disparity in nonstrategic nuclear weapons could create security concerns for some members of the alliance. In recognition of different views about the role or nuclear weapons in alliance policy, the allies agreed that they would continue to review NATO's deterrence and defense posture in a study that would be completed in time for NATO's May 2012 summit in Chicago. They agreed that the Deterrence and Defense Posture Review (DDPR) would examine the full range of capabilities required, including nuclear weapons, missile defense, and other means of strategic deterrence and defense. However, the completed DDPR did not recommend any changes in NATO's nuclear posture. Instead, it noted that "nuclear weapons are a core component of NATO's overall capabilities for deterrence and defence," and that "the Alliance's nuclear force posture currently meets the criteria for an effective deterrence and defence posture." This force posture includes shared rights and responsibilities, with nuclear weapons stored at bases on the territories of five NATO nations, and all NATO nations (except France, which has chosen not to participate in nuclear decisionmaking or operations) participating in nuclear planning and policymaking. Specifically, NATO calls for "the broadest possible participation of Allies in collective defence planning on nuclear roles, in peacetime basing of nuclear forces, and in command, control and consultation arrangements." The DDPR reiterated the alliance's interest in pursuing arms control measures with Russia to address concerns with these weapons. It noted that the allies "look forward to continuing to develop and exchange transparency and confidence-building ideas with the Russian Federation in the NATO-Russia Council, with the goal of developing detailed proposals on and increasing mutual understanding of NATO's and Russia's non-strategic nuclear force postures in Europe." It also indicated that NATO would "consider, in the context of the broader security environment, what [it] would expect to see in the way of reciprocal Russian actions to allow for significant reductions in forward-based non-strategic nuclear weapons assigned to NATO." In other words, any further changes in NATO's nuclear posture were linked to reciprocal changes in Russia's nonstrategic nuclear weapons posture. NATO has continued to review and revise its statements about nuclear weapons during its recent summits in Wales (2014), Warsaw (2016), and Brussels. These summits occurred after Russia's annexation of Crimea and in the shadow of Russia's continuing aggressive behavior in Europe. While most of the efforts announced after these summits sought to bolster NATO's conventional capabilities and demonstrate an enduring commitment to the defense of all NATO allies, some also addressed the role of nuclear weapons and arms control in NATO strategy. For example, Paragraph 51 of the Warsaw Summit Communique confirms that "the greatest responsibility of the Alliance is to protect and defend our territory and our populations against attack ... " and that "no one should doubt NATO's resolve if the security of any of its members were to be threatened." As was noted above, the statement also reaffirmed the important role of nuclear deterrence in alliance security. It indicated that "the strategic forces of the Alliance, particularly those of the United States, are the supreme guarantee of the security of the Allies" and that "the independent strategic nuclear forces of the United Kingdom and France have a deterrent role of their own and contribute to the overall security of the Alliance." Moreover, the allies reaffirmed that "NATO's nuclear deterrence posture also relies, in part, on United States' nuclear weapons forward-deployed in Europe and on capabilities and infrastructure provided by Allies concerned." In addition, in response to concerns about Russian nuclear doctrine, the statement emphasized that "any employment of nuclear weapons against NATO would fundamentally alter the nature of a conflict" and, "if the fundamental security of any of its members were to be threatened however, NATO has the capabilities and resolve to impose costs on an adversary that would be unacceptable and far outweigh the benefits that an adversary could hope to achieve." On the other hand, the Warsaw Summit Communique recognized the strains on the arms control relationship with Russia. Where the 2012 DDPR had called for discussions with Russia on transparency and confidence-building and indicated that NATO would consider negotiating reductions in forward-based forces, the 2016 Warsaw statement simply noted that "arms control, disarmament, and non-proliferation continue to play an important role in the achievement of the Alliance's security objectives." It then stated that, "in this context, it is of paramount importance that disarmament and non-proliferation commitments under existing treaties are honoured ... " and called on "Russia to preserve the viability of the INF Treaty through ensuring full and verifiable compliance." The communique released after the Brussels summit in July 2018 reiterated many of the points raised in previous communiques. In several places, the allies noted that the changing security environment necessitated efforts to bolster the deterrence "as a core element" of the alliance's collective defense and noted that credible deterrence "will continue to be based on an appropriate mix of nuclear, conventional, and missile defence capabilities." It also stated that a "robust deterrence and defence posture strengthens Alliance cohesion and provides an essential political and military transatlantic link, through an equitable and sustainable distribution of roles, responsibilities, and burdens." At the same time, the 2018 communique went further in highlighting the allies' concerns with Russia's violation of the INF Treaty. The communique noted that the INF Treaty "has been crucial to Euro-Atlantic security" and pointed out that "full compliance with the INF Treaty is essential." It supported the U.S. position on Russian noncompliance, noting that the "allies have identified a Russian missile system, the 9M729, which raises serious concerns" and that "a pattern of behaviour and information over many years has led to widespread doubts about Russian compliance." Extended Deterrence Recent discussions about the U.S. nuclear weapons policy have placed a renewed emphasis on the role of U.S. nonstrategic nuclear weapons in extended deterrence and assurance. Extended deterrence refers to the U.S. threat to use nuclear weapons in response to attacks, from Russia or other adversaries, against allies in NATO and some allies in Asia. Assurance refers to the U.S. promise, made to those same allies, to come to their defense and assistance if they are threatened or attacked. The weapons deployed in Europe are a visible reminder of that commitment; the sea-based nonstrategic nuclear weapons that were in storage that could have been deployed in the Pacific in a crisis served a similar purpose for U.S. allies in Asia. Recent debates, however, have focused on the question of whether a credible U.S. extended deterrent requires that the United States maintain weapons deployed in Europe, and the ability to deploy them in the Pacific, or whether other U.S. military capabilities, including strategic nuclear weapons and conventional forces, may be sufficient. In the 2010 Nuclear Posture Review, the Obama Administration stated that the United States "will continue to assure our allies and partners of our commitment to their security and to demonstrate this commitment not only through words, but also through deeds." The NPR indicated that a wide range of U.S. military capabilities would support this goal, but also indicated that U.S. commitments would "retain a nuclear dimension as long as nuclear threats to U.S. allies and partners remain." The Administration did not, however, specify that the nuclear dimension would be met with nonstrategic nuclear weapons; the full range of U.S. capabilities would likely be available to support and defend U.S. allies. In addition, the Administration announced that the United States would retire the nuclear-armed sea-launched cruise missiles that had helped provide assurances to U.S. allies in Asia. In essence, the Administration concluded that the United States could reassure U.S. allies in Asia, and deter threats to their security, without deploying sea-based cruise missiles to the region in a crisis. Moreover, the possible use of nuclear weapons, and extended nuclear deterrence, were a part of a broader concept that the Obama Administration referred to as "regional security architectures." The 2010 NPR indicated that regional security architectures were a key part of "the U.S. strategy for strengthening regional deterrence while reducing the role and numbers of nuclear weapons." As a result, these architectures would "include effective missile defense, counter-WMD capabilities, conventional power-projection capabilities, and integrated command and control—all underwritten by strong political commitments." In other words, although the United States would continue to extend deterrence to its allies and seek to assure them of the U.S. commitment to their security, it would draw on political commitments and a range of military capabilities to achieve these goals. During the presidential campaign, President Trump questioned the value of U.S. alliance relationships in general and the relevance of NATO in particular. He argued that the United States was overextended around the world and that U.S. allies should contribute more toward their own defense or at least pay more for U.S. security guarantees. Moreover, he suggested that some U.S. allies would be better served if they acquired their own nuclear weapons rather than relying on U.S. nuclear weapons for their defense. These ideas did not translate into policy in the 2018 Nuclear Posture Review. To the contrary, the NPR asserts that the U.S. commitment to NATO and to allies and partners in the Asia-Pacific region "is unwavering." Concerns about the regional threats to U.S. allies in Europe and Asia and about the credibility of U.S. assurances to these allies dominate the analysis in the NPR. However, while the 2010 NPR called for a strengthening of U.S. conventional capabilities and missile defenses as a part of its effort to strengthen extended deterrence, the 2018 NPR focuses almost exclusively on enhancements to U.S. nuclear capabilities. It does not completely dismiss the value of U.S. conventional capabilities, but asserts that "conventional forces alone are inadequate to assure many allies who rightly place enormous value on U.S. extended nuclear deterrence for their security." According to the NPR, these concerns are central to the recommendation that the United States develop two new types of nonstrategic nuclear weapons. Regional Contingencies In the past, U.S. discussions about nonstrategic nuclear weapons have also addressed questions about the role they might play in deterring or responding to regional contingencies that involved threats from nations that may not be armed with their own nuclear weapons. For example, former Secretary of Defense Perry stated, during the Clinton Administration, that "maintaining U.S. nuclear commitments with NATO, and retaining the ability to deploy nuclear capabilities to meet various regional contingencies , continues to be an important means for deterring aggression, protecting and promoting U.S. interests, reassuring allies and friends, and preventing proliferation (emphasis added)." Specifically, both during the Cold War and after the demise of the Soviet Union, the United States maintained the option to use nuclear weapons in response to attacks with conventional, chemical, or biological weapons. For example, in 1999, Assistant Secretary of Defense Edward Warner testified that "the U.S. capability to deliver an overwhelming, rapid, and devastating military response with the full range of military capabilities will remain the cornerstone of our strategy for deterring rogue nation ballistic missile and WMD proliferation threats. The very existence of U.S. strategic and theater nuclear forces, backed by highly capable conventional forces, should certainly give pause to any rogue leader contemplating the use of WMD against the United States, its overseas deployed forces, or its allies." These statements do not indicate whether nonstrategic nuclear weapons would be used to achieve battlefield or tactical objectives, or whether they would contribute to strategic missions, but it remained evident, throughout the 1990s, that the United States continued to view these weapons as a part of its national security strategy. The George W. Bush Administration also emphasized the possible use of nuclear weapons in regional contingencies in its 2001 Nuclear Posture Review. The Bush Administration appeared to shift toward a somewhat more explicit approach when acknowledging that the United States might use nuclear weapons in response to attacks by nations armed with chemical, biological, and conventional weapons, stating that the United States would develop and deploy those nuclear capabilities that it would need to defeat the capabilities of any potential adversary whether or not it possessed nuclear weapons. This does not, by itself, indicate that the United States would plan to use nonstrategic nuclear weapons. However, many analysts concluded from these and other comments by Bush Administration officials that the United States was planning for the tactical, first use of nuclear weapons. The Bush Administration never confirmed this view, and, instead, indicated that it would not use nuclear weapons in anything other than the most grave of circumstances. The Obama Administration, on the other hand, seemed to foreclose the option of using nuclear weapons in some regional contingencies. Specifically, it stated, in the 2010 NPR, that "the United States will not use or threaten to use nuclear weapons against non-nuclear weapons states that are party to the Nuclear Non-Proliferation Treaty (NPT) and in compliance with their nuclear non-proliferation obligations." Specifically, if such a nation were to attack the United States with conventional, chemical, or biological weapons, the United States would respond with overwhelming conventional force, but it would not threaten to use nuclear weapons if the attacking nation was in compliance with its nuclear nonproliferation obligations and it did not have nuclear weapons of its own. At the same time, though, the NPR stated that any state that used chemical or biological weapons "against the United States or its allies and partners would face the prospect of a devastating conventional military response—and that any individuals responsible for the attack, whether national leaders or military commanders, would be held fully accountable." The 2018 NPR echoes some of this policy from the Obama Administration, but alters it in ways that track more closely with the policy of the Bush Administration. First, the 2018 NPR repeats the paragraph from the 2010 NPR stating that "the United States will not use or threaten to use nuclear weapons against non-nuclear weapons states that are party to the NPT and in compliance with their nuclear non-proliferation obligations." But it then states that "the United States reserves the right to make any adjustment in the assurance that may be warranted by the evolution and proliferation of non-nuclear strategic attack technologies [emphasis added] and U.S. capabilities to counter that threat." Elsewhere in the document the NPR indicates that non-nuclear strategic attacks could include chemical, biological, cyber, and large-scale conventional aggression. Hence, where the Obama Administration left open the possibility of nuclear retaliation in response to biological attacks, but stated that other threats could be deterred by the prospect of a devastating conventional response, the Trump Administration includes a wider range of circumstances where the United States might retaliate with nuclear weapons after an attack. Force Structure Through the late 1990s and early in George W. Bush Administration, the United States maintained approximately 1,100 nonstrategic nuclear weapons in its active stockpile. Unclassified reports indicate that, of this number, around 500 were air-delivered bombs deployed at bases in Europe. The remainder, including some additional air-delivered bombs and around 320 nuclear-armed sea-launched cruise missiles, were held in storage areas in the United States. After the Clinton Administration's 1994 Nuclear Posture Review, the United States eliminated its ability to return nuclear weapons to U.S. surface ships (it had retained this ability after removing the weapons under the 1991 PNI). It retained, however, its ability to restore cruise missiles to attack submarines, and it did not recommend any changes in the number of air-delivered weapons deployed in Europe. During this time, the United States also consolidated its weapons storage sites for nonstrategic nuclear weapons. It reportedly reduced the number of these facilities "by over 75%" between 1988 and 1994. It eliminated two of its four storage sites for sea-launched cruise missiles, retaining only one facility on each coast of the United States. It also reduced the number of bases in Europe that store nuclear weapons from over 125 bases in the mid-1980s to 10 bases, in seven countries, by 2000. The Bush Administration did not recommend any changes for U.S. nonstrategic nuclear weapons after completing its Nuclear Posture Review in 2001. Reports indicate that it decided to retain the capability to restore cruise missiles to attack submarines because of their ability to deploy, in secret, anywhere on the globe in time of crisis. The NPR also did not recommend any changes to the deployment of nonstrategic nuclear weapons in Europe, leaving decisions about their status to the members of the NATO alliance. Nevertheless, according to unclassified reports, the United States did reduce the number of nuclear weapons deployed in Europe and the number of facilities that house those weapons during the George W. Bush Administration. Some reports indicate that most of the weapons were withdrawn from Europe between 2001 and 2006. According to unclassified reports, some are stored at U.S. bases and would be delivered by U.S. aircraft; others are stored at bases operated by the "host nation" and would be delivered by that nation's aircraft if NATO decided to employ nuclear weapons. The Obama Administration did not announce any further reductions to U.S. nuclear weapons in Europe but it indicated that the United States would "consult with our allies regarding the future basing of nuclear weapons in Europe." In the months prior to the completion of NATO's 2010 Strategic Concept, some politicians in some European nations did propose that the United States withdraw these weapons. For example, Guido Westerwelle, Germany's foreign minister, stated that he supported the withdrawal of U.S. nuclear weapons from Germany. As was noted above, NATO did not call for the removal of these weapons in its new Strategic Concept, but did indicate that it would be open to reducing them as a result of arms control negotiations with Russia. Moreover, in the 2010 NPR, the Obama Administration indicated that it would take the steps necessary to maintain the capability to deploy U.S. nuclear weapons in Europe. It indicated that the U.S. Air Force would retain the capability to deliver both nuclear and conventional weapons as it replaced aging F-16 aircraft with the new F-35 Joint Strike Fighter. The NPR also indicated that the United States would conduct a "full scope" life extension program for the B61 bomb, the weapon that is currently deployed in Europe, "to ensure its functionality with the F-35." This life extension program will consolidate four versions of the B61 bomb, including the B61-3 and B61-4 that are currently deployed in Europe, into one version, the B61-12. Reports indicate that this new version will reuse the nuclear components of the older bombs, but will include enhanced safety and security features and a new "tail kit" that will increase the accuracy of the weapon. On the other hand, the 2010 NPR indicated that the U.S. Navy would retire its nuclear-armed, sea-launched cruise missiles (TLAM-N). It indicated that "this system serves a redundant purpose in the U.S. nuclear stockpile" because it is one of several weapons the United States could deploy forward. The NPR also noted that "U.S. ICBMs and SLBMs are capable of striking any potential adversary." As a result, because "the deterrence and assurance roles of TLAM-N can be adequately substituted by these other means," the United States could continue to extend deterrence and provide assurance to its allies in Asia without maintaining the capability to redeploy TLAM-N missiles. As was noted above, the Trump Administration's NPR reaffirms many of the policies and programs the United States has pursued in recent years. It does not announce any changes to the current basing of U.S. nuclear weapons in Europe, and reaffirms the U.S. commitment to upgrading U.S. dual-capable aircraft (DCA) with the nuclear-capable F-35 aircraft. It indicates that the United States will "maintain, and enhance as necessary, the capability to forward deploy nuclear bombers and DCA around the world" and will "work with NATO to best ensure—and improve where needed—the readiness, survivability, and operational effectiveness of DCA based in Europe." The 2018 NPR also reinforces U.S. support for measures that NATO is taking to ensure that its "overall deterrence and defense posture, including its nuclear forces, remain capable of addressing any potential adversary's doctrine and capabilities." These measures include, among other things, enhancing "the readiness and survivability of NATO DCA" and improving the "capabilities required to increase their operational effectiveness"; promoting "the broadest possible participation of Allies in their agreed burden sharing arrangements"; and enhancing "the realism of training and exercise programs to ensure the Alliance can effectively integrate nuclear and non-nuclear operations." On the other hand, the 2018 NPR reverses the Obama Administration's decision to remove sea-launched cruise missiles from the U.S. force structure. Where the 2010 NPR asserted that the capabilities provided by a SLCM were redundant with those available on other forward-deployable systems, the 2018 NPR argues that the SLCM will provide the United States with "a needed non-strategic regional presence" that will address "the increasing need for flexible and low-yield options." According to the NPR, this will strengthen deterrence of regional adversaries and assure allies of the U.S. commitment to their defense. The NPR also indicates that a new SLCM program could serve as a response to Russia's violation of the 1987 Intermediate-range Nuclear Forces (INF) Treaty and a "necessary incentive for Russia to negotiate seriously a reduction of its non-strategic nuclear weapons." Russian Nonstrategic Nuclear Weapons after the Cold War Strategy and Doctrine Russia has altered and adjusted the Soviet nuclear strategy to meet its new circumstances in a post-Cold War world. It explicitly rejected the Soviet Union's no-first-use pledge in 1993, indicating that it viewed nuclear weapons as a central feature in its military and security strategies. However, Russia did not maintain the Soviet Union's view of the need for nuclear weapons to conduct surprise attacks or preemptive attacks. Instead, it seems to view these weapons as more defensive in nature, as a deterrent to conventional or nuclear attack and as a means to retaliate and defend itself if an attack were to occur. Russia has revised its national security and military strategy several times in the past 20 years, with successive versions appearing to place a greater reliance on nuclear weapons. For example, the military doctrine issued in 1997 allowed for the use of nuclear weapons "in case of a threat to the existence of the Russian Federation." The doctrine published in 2000 expanded the circumstances when Russia might use nuclear weapons to include attacks using weapons of mass destruction against Russia or its allies "as well as in response to large-scale aggression utilizing conventional weapons in situations critical to the national security of the Russian Federation." In mid-2009, when discussing the revision of Russia's defense strategy that was expected late in 2009 or early 2010, Nikolai Patrushev, the head of Russia's Presidential Security Council, indicated that Russia would have the option to launch a "preemptive nuclear strike" against an aggressor "using conventional weapons in an all-out, regional, or even local war." However, when Russia published the final draft of the doctrine, in early 2010, it did not specifically authorize the preemptive use of nuclear weapons. Instead, it stated that "Russia reserves the right to use nuclear weapons in response to a use of nuclear or other weapons of mass destruction against her and (or) her allies, and in a case of an aggression against her with conventional weapons that would put in danger the very existence of the state." Instead of expanding the range of circumstances when Russia might use nuclear weapons, this actually seemed to narrow the range, from the 2000 version that allowed for nuclear use "in situations critical to the national security of the Russian Federation" to the current form that states they might be used in a case "that would put in danger the very existence of the state." Hence, there is little indication that Russia plans to use nuclear weapons at the outset of a conflict, before it has engaged with conventional weapons, even though Russia could resort to the use of nuclear weapons first, during an ongoing conventional conflict. This is not new, and has been a part of Russian military doctrine for years. Analysts have identified several factors that have contributed to Russia's increasing dependence on nuclear weapons. First, with the demise of the Soviet Union and the economic upheavals of the 1990s, Russia no longer had the means to support a large and effective conventional army. The conflicts in Chechnya and Georgia highlighted seeming weaknesses in Russia's conventional military forces. Russian analysts also saw emerging threats in other former Soviet states along Russia's periphery. Many analysts believed that by threatening, even implicitly, that it might resort to nuclear weapons, Russia hoped it could enhance its ability to deter similar regional conflicts. Russia's sense of vulnerability, and its view that the threats to its security were increasing, also stemmed from the debates over NATO enlargement. Russia has feared the growing alliance would create a new challenge to Russia's security, particularly if NATO moved nuclear weapons closer to Russia's borders. These concerns contributed to the statement that Russia might use nuclear weapons if its national survival were threatened. For many in Russia, NATO's air campaign in Kosovo in 1999 underlined Russia's growing weakness and NATO's increasing willingness to threaten Russian interests. Its National Security Concept published in 2000 noted that the level and scope of the military threat to Russia was growing. It cited, specifically, as a fundamental threat to its security, "the desire of some states and international associations to diminish the role of existing mechanisms for ensuring international security." There are also threats in the border sphere. "A vital task of the Russian Federation is to exercise deterrence to prevent aggression on any scale and nuclear or otherwise, against Russia and its allies." Consequently, Russia concluded that it "should possess nuclear forces that are capable of guaranteeing the infliction of the desired extent of damage against any aggressor state or coalition of states in any conditions and circumstances." The debate over the role of nuclear weapons in Russia's national security strategy in the late 1990s considered both strategic and nonstrategic nuclear weapons. With concerns focused on threats emerging around the borders of the former Soviet Union, analysts specifically considered whether nonstrategic nuclear weapons could substitute for conventional weaknesses in regional conflicts. The government appeared to resolve this debate in favor of the modernization and expansion of nonstrategic nuclear weapons in 1999, shortly after the conflict in Kosovo. During a meeting of the Kremlin Security Council, Russia's President Yeltsin and his security chiefs reportedly agreed "that Moscow should develop and deploy tactical, as well as, strategic nuclear weapons." Vladimir Putin, who was then chairman of the Security Council, stated that President Yeltsin had endorsed "a blueprint for the development and use of nonstrategic nuclear weapons." Many analysts in the United States interpreted this development, along with questions about Russia's implementation of its obligations under the 1991 PNI, to mean that Russia was "walking back" from its obligation to withdraw and eliminate nonstrategic nuclear weapons. Others drew a different conclusion. One Russian analyst has speculated that the documents approved in 1999 focused on the development of operations plans that would allow Russia to conduct "limited nuclear war with strategic means in order to deter the enemy, requiring the infliction of pre-planned, but limited damage." Specifically, he argued that Russia planned to seek a new generation of nonstrategic, or low-yield, warheads that could be to be delivered by strategic launchers. Others believe Russia has also pursued the modernization of existing nonstrategic nuclear weapons and development of new nuclear warheads for shorter-range nuclear missiles. The potential threat from NATO remained a concern for Russia in its 2010 and 2014 military doctrines. The 2010 doctrine stated that the main external military dangers to Russia are "the desire to endow the force potential of the North Atlantic Treaty Organization (NATO) with global functions carried out in violation of the norms of international law and to move the military infrastructure of NATO member countries closer to the borders of the Russian Federation, including by expanding the bloc." It also noted that Russia was threatened by "the deployment of troop contingents of foreign states (groups of states) on the territories of states contiguous with the Russian Federation and its allies and also in adjacent waters." The 2014 doctrine repeated these concerns. Hence, Russia views NATO troops in nations near Russia's borders as a threat to Russian security. This concern extends to U.S. missile defense assets that may be deployed on land in Poland and Romania and at sea near Russian territory as a part of the European Phased Adaptive Approach (EPAA). In an environment where Russia also has doubts about the effectiveness of its conventional forces, its doctrine allows for the possible use of nonstrategic nuclear weapons during a local or regional conflict on its periphery. The doctrines do not say that Russia would use nuclear weapons to preempt such an attack, but it does reserve the right to use them in response. Although Russia does not use the phrase in any of these recent versions of its military doctrine, analysts both inside and outside the U.S. government often refer to this approach as the "escalate to de-escalate" doctrine. Russian statements, when combined with military exercises that simulate the use of nuclear weapons against NATO members, have led many to believe that Russia might threaten to use its nonstrategic nuclear weapons to coerce or intimidate its neighbors. These threats could occur prior to the start of a conflict, or within a conflict if Russia believed that the threat to use nuclear weapons might lead its adversaries (including the United States and its allies) to back down. This doctrine, when combined with recent Russian statements designed to remind others of the strength of Russia's nuclear deterrent, seems to indicate that Russia has increased the role of nuclear weapons in its military strategy and military planning. The 2018 Nuclear Posture Review adheres to the view that Russia has adopted such a strategy and asserts that Russia "mistakenly assesses that the threat of nuclear escalation or actual first use of nuclear weapons would serve to 'de-escalate' a conflict on terms favorable to Russia." This view underlines the NPR's recommendations for the United States to develop new low-yield nonstrategic weapons that, it argues, would provide the United States with a credible response, thereby "ensuring that the Russian leadership does not miscalculate regarding the consequences of limited nuclear first use." Force Structure It is difficult to estimate the number of nonstrategic nuclear weapons remaining in the Russian arsenal. This uncertainty stems from several factors: uncertainty about the number of nonstrategic nuclear weapons that the Soviet Union had stored and deployed in 1991, when President Gorbachev announced his PNI; uncertainty about the pace of warhead elimination in Russia; and uncertainty about whether all warheads removed from deployment are still scheduled for elimination. Analysts estimate that the Soviet Union may have deployed 15,000-25,000 nonstrategic nuclear weapons, or more, in the late 1980s and early 1990s. During the 1990s, Russian officials stated publicly that they had completed the weapons withdrawals mandated by the PNIs and had proceeded to eliminate warheads at a rate of 2,000 per year. However, many experts doubt these statements, noting that Russia probably lacked the financial and technical means to proceed this quickly. In addition, Russian officials have offered a moving deadline for this process in their public statements. For example, at the Nuclear Nonproliferation Treaty review conference in 2000, Russian Foreign Minister Ivanov stated that Russia was about to finish implementing its PNIs. But, at a follow-up meeting two years later, Russian officials stated that the elimination process was continuing, and, with adequate funding, could be completed by the end of 2004. In 2007, an official from Russia's Ministry of Defense stated that Russia had completed the elimination of all of the warheads for its ground forces, 60% of its missile defense warheads, 50% of its air force warheads, and 30% of its naval warheads. In 2010, the Russian government revised this number and said it had reduced its nonstrategic nuclear weapons inventory by 75%. In 2003, General Yuri Baluyevsky, who was then the first deputy chief of staff of the Russian General Staff, stated that Russia would not destroy all of its tactical nuclear weapons and that it would, instead, "hold on to its stockpiles" in response to U.S. plans to develop new types of nuclear warheads. General Nikolai Makarov, head of the Russian General Staff, made a similar comment in 2008. He said that Russia would "keep nonstrategic nuclear forces as long as Europe is unstable and packed with armaments." Russia has also reportedly reduced the number of military bases that could deploy nonstrategic nuclear weapons and has consolidated its storage areas for these weapons. According to unclassified estimates, the Soviet Union may have had 500-600 storage sites for nuclear warheads in 1991. By the end of the decade, this number may have declined to about 100. In the past 10 years, Russia may have further consolidated its storage sites for nuclear weapons, retaining around 50 in operation. With consideration for the uncertainties in estimates of Russian nonstrategic nuclear forces, some sources indicate Russia may still have up to 4,000 warheads for nonstrategic nuclear weapons. In its 2009 report, the congressionally mandated Strategic Posture Commission indicated that Russia may have around 3,800 operational nonstrategic nuclear weapons. This number may exclude warheads slated for retirement. A more recent estimate indicates that Russia may have "nearly 2,000 nonstrategic nuclear warheads assigned for delivery by air, naval, and various defensive forces." The authors calculate that, within this total, Russia's navy maintains about 760 warheads for "cruise missiles, antisubmarine rockets, antiaircraft missiles, torpedoes, and depth charges." The Air Force may have 570 nuclear warheads available for delivery by fighters and bombers. Some of Russia's nonstrategic nuclear warheads are also allocated to Russia's air and missile defense forces, with about 140 warheads retained for short-range ballistic missiles. Another source, using a different methodology, concluded that Russia may have half that amount, or only 1,000 operational warheads for nonstrategic nuclear weapons. This estimate concludes that Russia may retain up to 210 warheads for its ground forces, up to 166 warheads for its air and missile defense forces, 334 warheads for its air force, and 330 warheads for its naval forces. Where past studies calculated the number of operational warheads by combining estimates of reductions from Cold War levels with assessments of the number of nuclear-capable units and delivery systems remaining in Russia's force structure, this author focused on the number of operational units and the likely number of nuclear warheads needed to achieve their assigned missions. Russia is also modernizing and updating its nonstrategic nuclear forces. According to unclassified sources, this effort appears to "involve phasing out Soviet-era weapons and replacing them with newer but fewer arms." Some argue that Russia will likely limit this modernization program and could retire more of these weapons than it acquires as it develops more capable advanced conventional weapons. Others, however, see Russia's modernization of its nonstrategic nuclear weapons as a partner to its "escalate to de-escalate" nuclear doctrine and argue that Russia will expand its nonstrategic nuclear forces as it raises their profile in its doctrine and war-fighting plans. The 2018 Nuclear Posture Review notes that Russia is "building a large, diverse, and modern set of non-strategic systems that ... may be armed with nuclear or conventional weapons." The NPR argues that Russia is "increasing the total number of such weapons in its arsenal, while significantly improving its delivery capabilities." The 2018 NPR also notes that one of Russia's new nonstrategic nuclear weapons is a ground-launched cruise missile with a range between 500 and 5,000 kilometers, which makes it a violation of the 1987 INF Treaty. The Obama Administration had first reported that Russia was in violation of INF in 2014, in the State Department's Report on Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments . According to the 2017 Report, Russia began deploying the missile, now known as the 9M729, in late 2016. Changing the Focus of the Debate The preceding sections of this report focus exclusively on U.S. and Soviet/Russian nonstrategic nuclear weapons. These weapons were an integral part of the Cold War standoff between the two nations. The strategy and doctrine that would have guided their use and the numbers of deployed weapons both figured into calculations about the possibility that a conflict between the two nations might escalate to a nuclear exchange. Other nations—including France, Great Britain, and China—also had nuclear weapons, but these did not affect the central conflict of the Cold War in the same way as U.S. and Soviet forces. The end of the Cold War, however, and the changing international security environment during the past 25 years has rendered incomplete any discussion of nonstrategic nuclear weapons that is limited to U.S. and Russian forces. Because both these nations maintain weapons and plans for their use, the relationship between the two nations could still affect the debate about these weapons. In addition, Russian officials have turned to these weapons as a part of their response to concerns about a range of U.S. and NATO policies. Nevertheless, both these nations have looked beyond their mutual relationship when considering possible threats and responses that might include the use of nonstrategic nuclear weapons. Both nations have highlighted the threat of the possible use of nuclear, chemical, or biological weapons by other potential adversaries or nonstate actors. Both have indicated that they might use nuclear weapons to deter or respond to threats from other nations. This theme is evident in the 2018 Nuclear Posture Review, which calls for the deployment of a new sea-launched cruise missile to address the threat, at least in part, to U.S. allies from the missile and nuclear programs in North Korea. In addition, many analysts believe that a debate about nonstrategic nuclear weapons can no longer focus exclusively on the U.S. and Russian arsenals. For example, India and Pakistan have joined the list of nations that may potentially resort to nuclear weapons in the event of a conflict. If measured by the range of delivery vehicles and the yield of the warheads, these nations' weapons could be considered to be nonstrategic. But each nation could plan to use these weapons in either strategic or nonstrategic roles. Both nations continue to review and revise their nuclear strategies, leaving many questions about the potential role for nuclear weapons in future conflicts. Pakistan, in particular, has considered deploying short-range tactical nuclear weapons with forward-deployed forces, with the intention of using them on the battlefield to blunt a possible Indian attack. China also has nuclear weapons with ranges and missions that could be considered nonstrategic. Many analysts have expressed concerns about the potential for the use of nuclear weapons in a conflict over Taiwan or other areas of China's interests. This report does not review the nuclear weapons programs in these nations. However, when reviewing the issues raised by, problems attributed to, and solutions proposed for nonstrategic nuclear weapons, the report acknowledges the role played by the weapons of these other nations. Issues for Congress During the 2010 debate on the New START Treaty, many Senators expressed concerns about Russian nonstrategic nuclear weapons. They noted that these weapons were not covered by the new treaty, that Russia possessed a far greater number of these weapons than did the United States, and that Russia's nonstrategic nuclear weapons might be vulnerable to theft or sale to other nations seeking nuclear weapons. More recently, some Members have raised concerns about the possibility that Russia might deploy these weapons in Crimea, which Russia annexed in March 2014, bringing them closer to the borders of some NATO allies. Russia's Foreign Minister Sergei Lavrov ignited these concerns in December 2014, when he noted that Russia had a right to put nuclear weapons in Crimea because Crimea was now a part of Russia. Although he did not offer details of plans for such deployments, other reports have indicated that Russia might move missiles and bombers that could deliver either nuclear or conventional weapons into Crimea in the next few years. The 2018 Nuclear Posture Review continues to highlight concerns about Russia's nonstrategic nuclear weapons and links proposed changes in U.S. nuclear forces—including the development of a new low-yield warhead for submarine launched ballistic missiles and new sea-launched cruise missile—to Russia's apparent nuclear doctrine and the modernization of its nonstrategic nuclear forces. During the 2010 debates prior to the completion of NATO's new Strategic Concept, analysts and government officials also raised many issues about U.S. nonstrategic nuclear weapons. These debates focused on questions about whether NATO should continue to rely on nuclear weapons to ensure its security and whether the United States should continue to deploy nonstrategic nuclear weapons at bases in Europe. Many of the discussions that focused on Russian nonstrategic nuclear weapons and many of those that focused on U.S. nonstrategic nuclear weapons reached a similar conclusion—there was widespread agreement about the need for further cooperation between the United States and Russia in containing, controlling, and possibly reducing nonstrategic nuclear weapons. The 112 th Congress reiterated its support for this agenda, when in the FY2013 Defense Authorization Act ( H.R. 4310 , §1037) it indicated that "the United States should pursue negotiations with the Russian Federation aimed at the reduction of Russian deployed and nondeployed nonstrategic nuclear forces." But the tone of the discussion has changed in recent years, following Russia's annexation of Crimea, its support for separatists in Ukraine, and its military maneuvers near NATO nations. There is little discussion of possible reductions in U.S. nuclear weapons in Europe and declining interest in pursuing transparency and confidence-building measures with Russia. Instead, while the prospects for cooperation with Russia seem limited, particularly in light of its reported violation of the INF Treaty, NATO has taken steps to bolster its nuclear capabilities and the United States is considering the deployment of new nonstrategic nuclear weapons. Safety and Security of Russian Nonstrategic Nuclear Weapons One potential risk from Russia's continued deployment of nonstrategic nuclear weapons stems from concerns about their safety and security in storage areas and a possible lack of central control over their use when deployed in the field. These weapons were deployed, and many remain in storage, at remote bases close to potential battlefields and far from the central command authority in Moscow. The economic chaos in Russia during the 1990s raised questions about the stability and reliability of the troops charged with monitoring and securing these weapons. At the time, some raised concerns about the possibility that the weapons might be lost, stolen, or sold to other nations or groups seeking nuclear weapons. Even though economic conditions in Russia have improved significantly, some analysts still view Russian nonstrategic nuclear weapons as a possible source of instability. Specifically, some have noted that "the continuing existence of … tactical nuclear weapons … creates a risk of accidental, unauthorized or mistaken use. In addition, the risk of terrorist groups acquiring these weapons is high. Therefore, security vigilance is essential." Russian officials deny that they might lose control over their nonstrategic nuclear weapons and they contend that the problems of the 1990s were resolved as the weapons were withdrawn to central storage areas. Moreover, there is no public evidence from Western sources about any episodes of lost, sold, or stolen Russian nuclear weapons. Nevertheless, concerns remain that these weapons might find their way to officials in rogue nations or nonstate actors. For example, during comments made after a speech in October 2008, Secretary of Defense Robert Gates stated that he was worried that the Russians did not know the numbers or locations of "old land mines, nuclear artillery shells, and so on" that might be of interest to rogue states or terrorists. Russian officials noted, in response to this comment, that its stocks of nuclear weapons were secure and well-guarded and that Gates's concerns were not valid. The Role of Nonstrategic Nuclear Weapons in Russia's National Security Policy As was noted above, many analysts argue that Russia's nonstrategic nuclear weapons pose a risk to the United States, its allies, and others because Russia has altered its national security concept and military strategies, increasing its reliance on nuclear weapons. Some fear that Russia might resort to the early use of nuclear weapons in a conflict along its periphery, which could lead to a wider conflict and the possible involvement of troops from NATO or other neighboring countries, possibly drawing in new NATO members. Some also believe that Russia could threaten NATO with its nonstrategic nuclear weapons because Russia sees NATO as a threat to its security. Russian analysts and officials have argued that NATO enlargement—with the possible deployment of nuclear weapons and missile defense capabilities on the territories of new NATO members close to Russia's borders—demonstrates how much NATO could threaten Russia. The congressionally mandated Strategic Posture Commission expressed a measure of concern about the military implications of Russia's nonstrategic nuclear forces. It noted that Russia "stores thousands of these weapons in apparent support of possible military operations west of the Urals." It further noted that the current imbalance between U.S. and Russian nonstrategic nuclear warheads is "worrisome to some U.S. allies in Central Europe." It argued that this imbalance, and the allies' worries, could become more pronounced in the future if the United States and Russia continue to reduce their numbers of deployed strategic nuclear weapons. Others have argued, however, that regardless of Russia's rhetoric, "Russia's theater nuclear weapons are not ... destabilizing." Even if modernized, these weapons will not "give Moscow the capability to alter the strategic landscape." Further, Russian weapons, even with its new military strategy, may not pose a threat to NATO or U.S. allies. Russia's doctrine indicates that it would use these weapons in response to a weak performance by its conventional forces in an ongoing conflict. Since it would be unlikely for NATO to be involved in a conventional conflict with Russia, it would also be unlikely for Russian weapons to find targets in NATO nations. This does not, however, preclude their use in other conflicts along Russia's periphery. As Russian documents indicate, Russia could use these weapons if its national survival were at stake. This view, however, has been tempered, in recent years, by both Russia's aggression in Ukraine and its frequent "nuclear saber-rattling." Not only have Russian officials reminded others of the existence and relevance of Russian nuclear weapons, Russian military exercises, bomber flights, and cruise missile launches have seemed designed to demonstrate Russia's capabilities and, possibly, its willingness to challenge NATO's eastern members. These actions have raised concerns about the possibility that Russia might threaten to use nuclear weapons during a crisis with NATO, in line with its apparent "escalate to de-escalate" strategy, to force a withdrawal by NATO forces defending an exposed ally or to terminate a conflict on terms favorable to Russia. While some analysts dispute this interpretation of Russia's doctrine, most agree that nonstrategic nuclear weapons appear to play a significant role in Russia's doctrine and war plans. The Role of Nonstrategic Nuclear Weapons in U.S. National Security Policy The Bush Administration argued, after the 2001 Nuclear Posture Review, that the United States had reduced its reliance on nuclear weapons by increasing the role of missile defenses and precision conventional weapons in the U.S. deterrent posture. At the same time, though, the Administration indicated that the United States would acquire and maintain those capabilities that it needed to deter and defeat any nation with the potential to threaten the United States, particularly if the potential adversary possessed weapons of mass destruction. It noted that these new, threatening capabilities could include hardened and deeply buried targets and, possibly, bunkers holding chemical or biological weapons. It indicated that the United States would seek to develop the capabilities to destroy these types of facilities. Using a similar construct, the Obama Administration, in the 2010 Nuclear Posture Review, also indicated that the United States would reduce the role of nuclear weapons in U.S. regional deterrence strategies by increasing its reliance on missile defenses and precision conventional weapons. Unlike the Bush Administration, however, the Obama Administration did not seek to acquire new nuclear weapons capabilities or to extend U.S. nuclear deterrence to threats from nations armed with chemical or biological weapons. It stated that it would not consider the use of nuclear weapons in response to conventional, chemical, or biological attack if the attacking nation were in compliance with its nuclear nonproliferation obligations. Instead, in such circumstances, the United States would deter and respond to attacks with missile defenses and advanced conventional weapons. In addition, the Administration announced that it planned to retire the Navy's nuclear-armed, sea-launched cruise missiles, which had been part of the U.S. extended deterrent to allies in Asia. Nevertheless, the Administration pledged to retain and modernize the B-61 warheads, carried by U.S. tactical fighters and bombers; these are also a part of the U.S. extended deterrent. Some questioned the wisdom of this change in policy. They recognized that the United States would only threaten the use of nuclear weapons in the most extreme circumstances, but they argued that, by taking these weapons "off the table" in some contingencies, the United States might allow some adversaries to conclude that they could threaten the United States without fear of an overwhelming response. The Obama Administration argued, however, that although it was taking the nuclear option off the table in some cases, this change would not undermine the U.S. ability to deter attacks from non-nuclear nations because the United States maintained the capability to respond to attacks from these nations with overwhelming conventional force. According to Under Secretary of State Ellen Tauscher, "we retain the prospect of using devastating conventional force to deter and respond to any aggression, especially if they were to use chemical or biological weapons. No one should doubt our resolve to hold accountable those responsible for such aggression, whether those giving the orders or carrying them out. Deterrence depends on the credibility of response. A massive and potential conventional response to non-nuclear aggression is highly credible." Questions about the role of U.S. nuclear weapons in regional contingencies have resurfaced in recent years, as analysts have sought to understand how these weapons might affect a conflict with a regional ally armed with nuclear weapons. Some analysts doubt that U.S. nuclear weapons would play any role in such a contingency, unless used in retaliation after an adversary used a nuclear weapon against the United States or an ally, because U.S. conventional forces should be sufficient to achieve most conceivable military objectives. Others, however, argue that the United States might need to threaten the use of nuclear weapons, and possibly even employ those weapons, when facing an adversary seeking to use its own nuclear capabilities to intimidate the United States or coerce it to withdraw support for a regional ally. Some have suggested, specifically, that forward-deployed nuclear weapons with lower yields—in other words, nonstrategic nuclear weapons—might serve as a more credible deterrent threat in these circumstances. The 2018 Nuclear Posture Review adopts this perspective, and seems to discount the approach, taken in both the Bush and Obama NPRs, of reducing the role of nuclear weapons by expanding the role and options available with advanced conventional weapons. It does not completely dismiss the value of U.S. conventional capabilities, but asserts that "conventional forces alone are inadequate to assure many allies who rightly place enormous value on U.S. extended nuclear deterrence for their security." These concerns are central to the NPR's recommendation that the United States develop two new types of nonstrategic nuclear weapons. Where the two previous NPRs sought to fill "gaps" in deterrence with ballistic missile defenses and advanced conventional weapons, the 2018 NPR asserts that new nuclear weapons are needed for this purpose. The Role of Nonstrategic Nuclear Weapons in NATO Policy and Alliance Strategy For years after the collapse of the Warsaw Pact and demise of the Soviet Union, analysts questioned whether the United States needed to continue to deploy nuclear weapons in Europe. During the Cold War, these weapons were a part of NATO's effort to offset the conventional superiority of the Soviet Union and its Warsaw Pact allies. Some argued that this role was no longer relevant following the collapse of the Soviet-era military and alliance structure. In addition, analysts argued that NATO conventional forces were far superior to those of Russia, and sufficient for NATO's defense. However, NATO policy still views nonstrategic nuclear weapons as a deterrent to any potential adversary, and they also serve as a link among the NATO nations, with bases in several nations and shared responsibility for nuclear policy planning and decisionmaking. They also still serve as a visible reminder of the U.S. extended deterrent and assurance of its commitment to the defense of its allies. The United States, its allies, and analysts outside government engaged in a heated debate over the role of and need for U.S. nonstrategic nuclear weapons deployed in Europe in the months leading up to the completion of NATO's Strategic Concept in November 2010. In early 2010, political leaders from several NATO nations—including Belgium, Germany, Luxembourg, the Netherlands, and Norway—called for the United States to remove these weapons from Europe. They argued that these weapons served no military purpose in Europe, and that their removal would demonstrate NATO's commitment to the vision of a world free of nuclear weapons, a vision supported by President Obama in a speech he delivered in April 2009. Those who sought the weapons' removal also argued that NATO could meet the political goals of shared nuclear responsibility in other ways, and that the United States could extend deterrence and ensure the security of its allies in Europe with conventional weapons, missile defenses, and longer-range strategic nuclear weapons. Moreover, some argue, because these weapons play no military or political role in Europe, they no longer serve as a symbol of alliance solidarity and cooperation. Others, however, including some officials in newer NATO nations, argued that U.S. nonstrategic nuclear weapons in Europe not only remained relevant militarily, in some circumstances, but that they were an essential indicator of the U.S. commitment to NATO security and solidarity. This argument has gained credence as some of the newer NATO allies, such as Poland and the Baltic states, feel threatened by Russia and its arsenal of nonstrategic nuclear weapons. They would view the withdrawal of U.S. nuclear weapons as a change in the U.S. and NATO commitment to their security. NATO foreign ministers addressed the issue of U.S. nonstrategic nuclear weapons during their meeting in Tallinn, Estonia, in April 2010. At this meeting, the allies sought to balance the views of those nations who sought NATO agreement on the removal of the weapons and those who argued that these weapons were still relevant to their security and to NATO's solidarity. At the conclusion of the meeting, Secretary of State Hillary Clinton said that the United States was not opposed to reductions in the number of U.S. nuclear weapons in Europe, but that the removal of these weapons should be linked to a reduction in the number of Russian nonstrategic nuclear weapons. Moreover, according to a NATO spokesman, the foreign ministers had agreed that no nuclear weapons would be removed from Europe unless all 28 member states of NATO agreed. Some also question whether the United States and NATO might benefit from the removal of these weapons from bases in Europe for safety and security reasons. An Air Force review of nuclear surety and security practices, released in early 2008, identified potential security concerns for U.S. weapons stored at some bases in Europe. The problems were evident at some of the national bases, where the United States stores nuclear weapons for use by the host nation's own aircraft, but not at U.S. air bases in Europe. The review noted that "host nation security at nuclear-capable units varies from country to country" and that most bases do not meet DOD's security requirements. As was noted earlier, some in Congress thought the United States should consider expanding its deployment of dual-capable aircraft and nuclear bombs into eastern NATO nations, in response to Russia's aggression in Ukraine. They argued that such moves would demonstrate that "Russian actions will come at a price." Some have also suggested that the United States consider deploying new nuclear-armed missiles in Europe, in response to Russia's violation of the 1987 INF Treaty. There is little evidence that NATO has requested, or would welcome, such deployments, even though the United States has announced that it plans to withdraw from the INF Treaty. Some have argued that such steps could ignite a new arms race that could further undermine security in Europe. Others have noted that these weapons might be destabilizing if they were vulnerable to preemptive strikes. Moreover, NATO has adjusted its conventional force posture and operations in response to Russia's actions in Ukraine. According to NATO documents, these changes, when backed by the strategic nuclear forces of the United States and United Kingdom, should help assure the eastern allies of NATO's ability to defend them. The Relationship Between Nonstrategic Nuclear Weapons and U.S. Nonproliferation Policy The George W. Bush Administration stated that the U.S. nuclear posture adopted after the 2002 NPR, along with the research into the development of new types of nuclear warheads, would contribute to U.S. efforts to stem the proliferation of nuclear, chemical, and biological weapons. It argued that, by creating a more credible threat against the capabilities of nations that seek these weapons, the U.S. policy would deter their acquisition or deployment. It also reinforced the value of the U.S. extended deterrent to allies in Europe and Japan, thus discouraging them from acquiring their own nuclear weapons. Critics of the Bush Administration's policy questioned whether the United States needed new nuclear weapons to deter the acquisition or use of WMD by other nations; as noted above, they claim that U.S. conventional weapons can achieve this objective. Further, many analysts claimed that the U.S. policy would actually spur proliferation, encouraging other countries to acquire their own WMD. Specifically, they noted that U.S. plans and programs could reinforce the view that nuclear weapons have military utility. If the world's only conventional superpower needs more nuclear weapons to maintain its security, then it would be difficult for the United States to argue that other nations could not also benefit from these weapons. Such nations could also argue that nuclear weapons would serve their security interests. Consequently, according to the Bush Administration's critics, the United States might ignite a new arms race if it pursued new types of nuclear weapons to achieve newly defined battlefield objectives. The Bush Administration countered this argument by noting that few nations acquire nuclear weapons in response to U.S. nuclear programs. They do so either to address their own regional security challenges, or to counter U.S. conventional superiority. The Obama Administration, in the 2010 Nuclear Posture Review, set out a different relationship between U.S. nuclear weapons policy and nonproliferation policy. The Bush Administration had indicated that a policy where the United States argued that it might use nuclear weapons against non-nuclear nations would discourage these nations from acquiring or using weapons of mass destruction. In other words, they could be attacked with nuclear weapons whether or not they had nuclear weapons of their own. The Obama Administration, however, argued that its adjustment to the U.S. declaratory policy—where it indicated that it would not use U.S. nuclear weapons to threaten or attack nations who did not have nuclear weapons and were in compliance with their nonproliferation obligations—would discourage their acquisition of nuclear weapons. Nations that did not yet have nuclear weapons would know that they could be added to the U.S. nuclear target list if they acquired them. And others, like Iran and North Korea, who were already pursuing nuclear weapons, would know that, if they disbanded their programs, they could be removed from the U.S. nuclear target list. The 2018 Nuclear Posture Review, for example, explicitly states that "credible U.S. extended nuclear deterrence will continue to be a cornerstone of U.S. non-proliferation efforts." Many analysts have argued that, if allies were not confident in the reliability and credibility of the U.S. nuclear arsenal, they may feel compelled to acquire their own nuclear weapons. Such calculations might be evident in Japan and South Korea, as they face threats or intimidation from nuclear-armed neighbors like China and North Korea. In recent years, some politicians in South Korea have called for the return of U.S. nonstrategic nuclear weapons to the peninsula, or even South Korea's development of its own nuclear capability, as a response to North Korea's development and testing of nuclear weapons. This view has not received the support of the current government in South Korea, but it does demonstrate that some may see U.S. security guarantees as fragile. Many analysts note, however, that extended deterrence rests on more than just U.S. nonstrategic nuclear weapons. For example, in recent years the United States and South Korea have participated in the U.S.-ROK (Republic of Korea) Extended Deterrence Policy Committee and the United States and Japan have pursued the U.S.-Japan Extended Deterrence Dialogue to discuss issues related to regional security and to bolster the allies' confidence in the U.S. commitment to their security. Moreover, the United States occasionally flies B-2 and B-52 bombers in joint exercises with South Korea to demonstrate its ability to project power, if needed, into a conflict in the area. Arms Control Options Concerns about the disparity between the numbers of U.S. and Russian nonstrategic nuclear weapons have dominated discussions about possible arms control measures addressing nonstrategic nuclear weapons in recent years. The United States and Russia have never employed their nonstrategic nuclear weapons to counter, or balance, the nonstrategic nuclear weapons of the other side. For NATO during the Cold War and for Russia in more recent years, these weapons have served to counter perceived weaknesses and an imbalance in conventional forces. As a result, there has been little interest, until recently, in calculating or creating a balance in the numbers of nonstrategic nuclear weapons. Some who have expressed a concern about the numerical imbalance in nonstrategic nuclear weapons argue that this imbalance could become more important as the United States and Russia reduce their numbers of strategic nuclear weapons. They fear that NATO nations located near Russia's borders may feel threatened or intimidated by Russia's nonstrategic nuclear weapons. They assert that Russia's advantage in the numbers of these weapons, when combined with a reduction in U.S. strategic forces, could convince these nations that Russia was the rising power in the region, and that they should, therefore, accede to Russia's political or economic pressure. Others, however, have questioned this logic. They agree that Russia's ability to intimidate, and possibly attack, NATO nations on its periphery may be related to the capabilities of Russia's conventional forces and the existence of Russia's nuclear forces. But this ability would exist whether Russia had dozens or hundreds of nuclear weapons in the region. And NATO's ability to resist Russian pressure and support vulnerable allies would be related more to its political cohesion and overall military capabilities than to the precise number of nuclear weapons that were deployed on European territory. Moreover, some note that, in spite of Russia's advantage in the aggregate number on nonstrategic nuclear weapons, many of Russia's weapons may be deployed at bases closer to its border with China than its borders with NATO nations, so many of these weapons should not count in the balance at all. Increase Transparency Many analysts have argued that the United States and Russia should, at a minimum, provide each other with information about their numbers of nonstrategic nuclear weapons and the status (i.e., deployed, stored, or awaiting dismantlement) of those weapons. According to one such article, "a crucial first step ... would be to ... agree on total transparency, verification, and the right to monitor changes and movement of the arsenal." Such information might help each side to monitor the other's progress in complying with the PNIs; it could also help resolve questions and concerns that might come up about the status of these weapons or their vulnerability to theft or misuse. The United States and Russia have discussed transparency measures for nuclear weapons in the past, in a separate forum in the early 1990s, and as a part of their discussions of the framework for a START III Treaty in the late 1990s. They failed to reach agreement on either occasion. Russia, in particular, has seemed unwilling to provide even basic information about its stockpile of nonstrategic nuclear weapons. Some in the United States resisted as well, arguing that public discussions about the numbers and locations of U.S. nuclear weapons in Europe could increase pressure on the United States to withdraw these weapons. After NATO completed its new Strategic Concept in 2010 and Deterrence and Defense Posture Review in 2012, many experts recognized that NATO was unlikely to approve reductions in U.S. nonstrategic nuclear weapons in Europe unless Russia agreed to similar reductions. As a result, in recent years, some again argued that NATO and Russia should focus on transparency and confidence-building measures as a way to ease concerns and build cooperation, before they seek to negotiate actual limits or reductions in nonstrategic nuclear weapons. They could begin, for example, with discussions about which types of weapons to include in the negotiation and what type of data to exchange on these weapons. Some have suggested, in addition, that the two nations could exchange information on the locations of storage facilities that no longer house these weapons, as a way to begin the process of building confidence and understanding. Those who support this approach argue that it would serve well as a first step, and could eventually lead to limits or reductions. Others, however, believe these talks might serve as a distraction, and, if the United States and Russia get bogged down in these details, they may never negotiate limits or reductions. Moreover, Russian officials seem equally as uninterested in transparency negotiations as they are in reductions at this time. Negotiate a Formal Treaty Over the years, some analysts have suggested that the United States and Russia negotiate a formal treaty to put limits and restrictions on each nation's nonstrategic nuclear weapons. This was a central theme in the debate over the New START Treaty in late 2010. Not only did Members of the Senate call on the Obama Administration to pursue such negotiations, Administration officials noted often that the New START Treaty was just a first step and that the United States and Russia would pursue limits on nonstrategic nuclear weapons in talks on a subsequent agreement. In April 2009, when Presidents Obama and Medvedev outlined their approach to nuclear arms control, they indicated that arms control would be a step-by-step process, with a replacement for the 1991 START Treaty coming first, but a more comprehensive treaty that might include deeper cuts in all types of warheads, including nonstrategic nuclear weapons, following in the future. Negotiations on a treaty to limit nonstrategic nuclear weapons could be complex, difficult, and very time-consuming. Given the large disparity in the numbers of U.S. and Russian nonstrategic nuclear weapons, and given the different roles these weapons play in U.S. and Russian security strategy, it may be difficult to craft an agreement that not only reduces the numbers of weapons in an equitable way but also addresses the security concerns addressed by the retention of these weapons. A treaty that imposed an equal ceiling on each sides' numbers of deployed nonstrategic weapons might appear equitable, but it would require sharp reductions in Russia's forces with little impact on U.S. forces. A treaty that required each side to reduce its forces by an equal percentage would have a similar result, requiring far deeper reductions on Russia's part. Even if the United States and Russia could agree on the depth of reductions to impose on these weapons, they may not be able to agree on which weapons would fall under the limit. For the United States, it may be relatively straightforward to identify the affected weapons—the limit could apply to the gravity bombs deployed in Europe and any spare weapons that may be stored in the United States. Russia, however, has many different types of nonstrategic nuclear weapons, including some that could be deployed on naval vessels, some that would be delivered by naval aircraft, and some that would be deployed with ground forces. Moreover, while many of these weapons might be deployed with units in western Russia, near Europe, others are located to the east, and would deploy with troops in a possible conflict with China. To address these problems, some analysts have suggested that the limits in the next arms control treaty cover all types of nuclear warheads—warheads deployed on strategic-range delivery vehicles, warheads deployed with tactical-range delivery vehicles, and nondeployed warheads held in storage. The Obama Administration reportedly considered this approach, and studied the contours of a treaty that would limit strategic, nonstrategic, and nondeployed nuclear warheads. This type of agreement would allow each side to determine, for itself, the size and mix of its forces, within the limits on total warheads. While this type of comprehensive agreement may seem to provide a solution to the imbalance between U.S. and Russian nonstrategic nuclear weapons, it is not clear that, once the parties move beyond limits on just their deployed strategic weapons, they will be able to limit the scope of the treaty in this way. Each side has its own list of weapons that it finds threatening; each may seek to include these in a more comprehensive agreement. For example, Russian officials, including the Foreign Minister, Sergei Lavrov, have stated that a future arms control agreement should also include limits on missile defenses, strategic-range weapons that carry conventional warheads, and possibly weapons in space. Minister Lavrov stated, specifically, that it is impossible to discuss only one aspect of the problem at strategic parity and stability negotiations held in the modern world. It is impossible to ignore such aspects as non-nuclear strategic armaments, on which the United States is actively working, plans to deploy armaments in space, which we oppose actively, the wish to build global missile defense systems, and the imbalance of conventional armaments. It is possible to hold further negotiations only with due account of all these factors…." The United States has no interest in including these types of limits in the next agreement. Hence, it is not clear that the two sides would be able to agree on which issues and what weapons systems to include in a next round of arms control negotiations. Moreover, although President Medvedev agreed, in April 2009, that the United States and Russia should pursue more arms control reductions after completing New START, Russia may have little interest in limits on nonstrategic nuclear weapons. Russian officials have denied that their weapons pose a safety and security problem, and they still consider these weapons essential to Russian military strategy and national security. Prospects for Arms Control Most analysts agree that the United States and Russia are unlikely to make any progress on either limits or transparency measures related to nonstrategic nuclear weapons in the current environment. Russia's annexation of Crimea, aggression against Ukraine, and violation of the INF Treaty have altered the security atmosphere in Europe and quieted calls among officials in NATO nations for reductions in these weapons. According to Obama Administration officials, the U.S. offer for further negotiations remained on the table through the end of the Administration, but "progress requires a willing partner and a conducive strategic environment." The Trump Administration reiterated this point in the 2018 Nuclear Posture Review, noting that "progress in arms control is not an end in and of itself, and depends on the security environment and the participation of willing partners." It emphasized, further, that neither of these conditions exist today, in light of Russia's violation of numerous arms control agreements and its efforts to "change borders and overturn existing norms" in Crimea and eastern Ukraine. Nevertheless, the 2018 NPR suggests the contours of a possible future arms control agreement between the United States and Russia. When discussing the need for a new sea-launched cruise missile, the NPR notes that this missile would not only provide a "non-strategic regional presence" and "an assured response capability" to bolster the U.S. commitment to its allies' defense, but would also provide "an INF-Treaty compliant response to Russia's continuing Treaty violation." Moreover, it seems to view the SLCM as a bargaining chip for a future negotiation: If Russia returns to compliance with its arms control obligations, reduces its non-strategic nuclear arsenal, and corrects its other destabilizing behaviors, the United States may reconsider the pursuit of a SLCM. Indeed, U.S. pursuit of a SLCM may provide the necessary incentive for Russia to negotiate seriously a reduction of its non-strategic nuclear weapons, just as the prior Western deployment of intermediate-range nuclear forces in Europe led to the 1987 INF Treaty. As then Secretary of State George P. Shultz stated, "If the West did not deploy Pershing II and cruise missiles, there would be no incentive for the Soviets to negotiate seriously for nuclear weapons reductions. This last sentence is a reference to NATO's 1979 Dual Track decision, which paved the way for the negotiation of the INF Treaty. In the late 1970s, the Soviet Union began to deploy a new intermediate-range ballistic missile—known as the SS-20—that threatened to upset stability in Europe and raised questions about the cohesion of NATO. As a result, in December 1979, NATO adopted a "dual-track" decision that sought to link the modernization of U.S. nuclear weapons in Europe with an effort to spur the Soviets to negotiate reductions in INF systems. In the first track, the United States and its NATO partners agreed to replace aging medium-range Pershing I ballistic missiles with a more accurate and longer-range Pershing II (P-II) while adding new ground-launched cruise missiles. In the second track, NATO agreed that the United States should attempt to negotiate limits with the Soviet Union on intermediate-range nuclear systems. The allies recognized that the Soviet Union was unlikely to negotiate limits on its missiles unless it faced a similar threat from intermediate-range systems based in Western Europe. Initially, the United States sought an agreement that would impose equal limits on both sides' intermediate-range missiles, but after several years of negotiations and significant changes in the global security environment, both nations agreed to a global ban on all land-based intermediate-range ballistic and cruise missiles. This agreement serves as an imperfect model for the offer contained in the 2018 NPR. The "dual-track" decision envisioned limits on similar systems—U.S. and Soviet intermediate-range missiles. The NPR offers to forgo the new U.S. SLCM in exchange for a longer list of Russian weapons and behaviors—it indicates that the United States may reconsider the SLCM program if Russia "returns to compliance with its arms control obligations, reduces its non-strategic nuclear arsenal, and corrects its other destabilizing behaviors." In addition, the 1979 dual track decision sought to deploy new U.S. missiles in Europe, to balance an emerging Soviet threat to Europe. A U.S. offer to forgo the SLCM in negotiations with Russia could be inconsistent with the NPR's insistence that this missile is critical to extended deterrence in Asia. Even if the United States sought to limit the agreement to missiles deployed in Europe, Russia might object by noting that the United States could easily move sea-launched cruise missiles deployed in Asia to locations closer to Russia (the INF Treaty addressed the problem of mobility by adopting a global ban on these missiles). Finally, as the United States and Soviet Union discovered when they negotiated the INF Treaty, the complexity of distinguishing between nuclear and conventional cruise missiles could necessitate a ban on all cruise missiles of a designated range. This would likely be inconsistent with the U.S. reliance on conventional SLCMs in conflicts around the world. Consequently, even with the potential opening for arms control in the 2018 NPR, it seems unlikely that the United States and Russia will pursue or conclude an agreement limiting nonstrategic nuclear weapons in the near future.

Recent debates about U.S. nuclear weapons have questioned what role weapons with shorter ranges and lower yields can play in addressing emerging threats in Europe and Asia. These weapons, often referred to as nonstrategic nuclear weapons, have not been limited by past U.S.-Russian arms control agreements, although some analysts argue such limits would be of value, particularly in addressing Russia's greater numbers of these types of weapons. Others have argued that the United States should expand its deployments of these weapons, in both Europe and Asia, to address new risks of war conducted under a nuclear shadow. The Trump Administration addressed these questions in the Nuclear Posture Review released in February 2018, and determined that the United States should acquire two new types of nonstrategic nuclear weapons: a new low-yield warhead for submarine-launched ballistic missiles and a new sea-launched cruise missile. During the Cold War, the United States and Soviet Union both deployed nonstrategic nuclear weapons for use in the field during a conflict. While there are several ways to distinguish between strategic and nonstrategic nuclear weapons, most analysts consider nonstrategic weapons to be shorter-range delivery systems with lower-yield warheads that might be used to attack troops or facilities on the battlefield. They have included nuclear mines; artillery; short-, medium-, and long-range ballistic missiles; cruise missiles; and gravity bombs. In contrast with the longer-range "strategic" nuclear weapons, these weapons had a lower profile in policy debates and arms control negotiations, possibly because they did not pose a direct threat to the continental United States. At the end of the 1980s, each nation still had thousands of these weapons deployed with their troops in the field, aboard naval vessels, and on aircraft. In 1991, the United States and Soviet Union both withdrew from deployment most and eliminated from their arsenals many of their nonstrategic nuclear weapons. The United States now has approximately 500 nonstrategic nuclear weapons, with around 200 deployed with aircraft in Europe and the remaining stored in the United States. Estimates vary, but experts believe Russia still has between 1,000 and 6,000 warheads for nonstrategic nuclear weapons in its arsenal. The Bush Administration quietly redeployed some U.S. weapons deployed in Europe, while the Obama Administration retired older sea-launched cruise missiles. Russia, however seems to have increased its reliance on nuclear weapons in its national security concept. Analysts have identified a number of issues with the continued deployment of U.S. and Russian nonstrategic nuclear weapons. These include questions about the safety and security of Russia's weapons and the possibility that some might be lost, stolen, or sold to another nation or group; questions about the role of these weapons in U.S. and Russian security policy; questions about the role that these weapons play in NATO policy and whether there is a continuing need for the United States to deploy them at bases overseas; questions about the implications of the disparity in numbers between U.S. and Russian nonstrategic nuclear weapons; and questions about the relationship between nonstrategic nuclear weapons and U.S. nonproliferation policy. Some argue that these weapons do not create any problems and the United States should not alter its policy. Others argue that the United States should expand its deployments of these weapons in response to challenges from Russia, China, and North Korea. Some believe the United States should reduce its reliance on these weapons and encourage Russia to do the same. Many have suggested that the United States and Russia expand efforts to cooperate on ensuring the safe and secure storage and elimination of these weapons; others have suggested that they negotiate an arms control treaty that would limit these weapons and allow for increased transparency in monitoring their deployment and elimination. The 115th Congress may review some of these proposals.

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Introduction The Strategic Petroleum Reserve (SPR), administered by the Department of Energy (DOE), has been a part of U.S. oil security policy for over 40 years. Originally intended as a reserve to replace oil that might be withdrawn from the world market to forward political purposes and objectives, its rationale has evolved with the changing world oil market and the role of the United States in the market. In addition to replacing oil lost to political turmoil, as in Libya in 2011, in recent years it has been more commonly used to replace oil supplies curtailed due to natural disasters, mainly hurricanes. The effects of hurricanes, especially those of the magnitude of Katrina, Rita, and others, has threatened to disrupt oil production, refining, and distribution, creating potential economic dislocation. Use of oil from the SPR has helped to minimize the economic effect of those events. Since 2010, the oil market in the United States has been transformed. Low growth in petroleum product demand, rapidly increasing domestic oil production, and falling net imports of crude oil and petroleum products have reduced U.S. dependence on foreign oil suppliers. At the same time, export sources on the world market have expanded, reducing the ability of any one exporter, or group of exporters, to manipulate the market. As the U.S. oil position in the world oil market has strengthened, some have questioned whether the SPR should be either downsized to reflect current supply and demand balances, or even eliminated entirely. Since 2015, Congress has passed legislation which mandates the sale of SPR oil to fund a variety of government activities. For some, a question exists as to how much oil might be withdrawn from the Reserve while still maintaining an adequate oil "safety net." Others question whether the evolving world oil market requires the United States to maintain any government-owned reserve holdings. Enacted legislation to date has mandated the sale of over 250 million barrels of oil from the SPR, a situation that brings up another policy issue. If there is less oil in the SPR, what might be done with the "excess capacity" inevitably created? The government may be able to reduce the operating costs of the SPR by leasing reserve capacity freed by mandated sales. This report addresses the questions of mandated sales and "right sizing" the SPR, as well as strategies to make optimal use of the reduced need for oil storage capacity. A Brief History of the SPR The SPR was authorized by the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) of 1975. The intent was to establish a petroleum reserve of 1 billion barrels that could prevent the economic dislocation caused by the Organization of Arab Petroleum Exporting Countries (OAPEC) 1973/1974 embargo of oil sales to the United States and other countries. That event, in retaliation against the United States' support for Israel in the 1973 Arab-Israeli War, came at an important transition point in U.S. petroleum markets. U.S. production of crude oil had reached a then-peak in 1970 at about 9.4 million barrels per day (mm/d) and was considered likely to be in long-term decline. It was also believed that U.S. oil consumption would likely continue to increase. These supply and demand trends seemed to guarantee that U.S. oil dependence on the world oil market through increasing imports would continue to grow. Although the original intent of EPCA was to create a reserve of 1 billion barrels of crude oil, the SPR only reached its original design capacity of 750 million barrels in 1991. Available storage capacity was reduced to the current 726.7 million barrels with the closure of the Weeks Island facility due to structural damage in 1996. The SPR was filled to near its maximum capacity at 726.6 million barrels on December 27, 2009. That total represents the largest amount of oil ever held in the SPR. In 2011, 30 million barrels of oil was sold from the reserve in conjunction with the loss of Libyan oil exports due to the political and military upheaval in that country. Over its history, the SPR has expanded to include the Northeast Home Heating Oil Reserve (NEHHOR) as well as the 1-million-barrel Northeast Gasoline Supply Reserve (NGSR) located on the U.S. East Coast. The NEHHOR was created to support and stabilize the essentially regional demand for home heating oil in New England. The NGSR was set up in the wake of Hurricane Sandy in 2012. That hurricane caused disruption of gasoline supply deliveries due mainly to electric power disruption and flooding. Gasoline is less amenable to long-term storage than crude oil. While crude oil may be stored with little observed deterioration for periods in excess of five years, the storage life of gasoline is shorter. Typical gasoline blended with 10% ethanol may have a shelf life in storage of approximately three months. The short shelf life of gasoline requires active supply management of the NGSR. International Energy Agency (IEA) Obligations The IEA was established in November 1974, with a broad mandate on energy security and energy policy coordination among member countries during energy-related emergencies. Strategic stock holdings are one of the policies included in the agency's International Energy Program (IEP). IEA member countries, including the United States, have committed to maintaining stocks of crude oil and petroleum products equivalent to 90 days of their previous year's net imports; developing programs for demand restraint in the event of emergencies; and agreeing to participate in an allocation of oil deliveries program to balance shortages among IEA member nations. For example, in 2011, the United States participated in a coordinated IEA oil stock drawdown in response to the withdrawal of Libyan oil exports from the market as a result of political and military turmoil in that country. The SPR at its current holdings of 649.1 million barrels of crude oil satisfies the U.S. strategic stock holding requirement. Based on 2017 net import levels of 3.768 mmb/d, the SPR holds over 170 days of net imports of crude oil and petroleum products. Considered in another way, the net import level of 3.768 mmb/d, when multiplied by 90 days required stocks, implies a need for the United States to hold about 340 million barrels in the SPR. The difference between actual SPR holding and the implied holdings required to meet the IEA requirements has given rise to the viewpoint that U.S. reserve oil holdings are in excess of those needed and might be sold on the market. At the full drawdown rate, the SPR can deliver 4.4 mmb/d of crude oil for 90 days, dropping to a rate of 3.8 mmb/d for an additional 30 days, and dropping further in drawdown rate for up to 180 days as stocks deplete. These drawdown rates are those likely to be associated with a total, or major, curtailment of potential imports from the world market, an unlikely scenario given the large portion of U.S. imports obtained from Canada, Mexico, and Venezuela, until recently. According to the IEA, only the United States, the Czech Republic, and New Zealand meet their stock requirements using solely government-owned emergency oil and petroleum product stocks. Other nations meet their stock requirements through holding private industry or agency stocks or portions in combination. It is also possible, under IEA rules, for a nation to hold its IEA required oil reserves outside its borders. This could create a demand for SPR unused capacity by nations that have a shortage of domestic oil storage facilities. Total U.S. oil stocks, including both commercial and publicly held stocks, of both crude oil and petroleum products, are generally in excess of 1.9 billion barrels on a monthly basis, far in excess of IEA requirements. Recent SPR Exchange/Sales Activity The most recent emergency release of SPR oil was in 2011 due to the Libyan export curtailment. At that time, the United States and other members of the IEA decided to release 60 million barrels of oil onto the world market. The U.S. obligation was set at 30 million barrels. In June 2011, competitive offers were solicited for the purchase of selling oil to be delivered by the end of August 2011. In addition to selling oil, the SPR can enter into exchange agreements. Exchange agreements, which are similar to loans, allow for delivery of oil from the SPR with return of the oil in kind, plus a premium, by a set future date. For example, in August and September 2017, following Hurricane Harvey, 5.2 million barrels of oil was delivered to Gulf Coast refineries to offset fuel shortages as a result damage and flooding. All of the original 5.2 million barrels plus the premium was returned by February 2018. In 2014, a test sale was undertaken to evaluate SPR drawdown and sales procedure capabilities. Between March and May 2014, 4.62 million barrels was delivered by pipeline to successful bidders, and 0.38 million barrels was delivered via marine transportation. Mandated Sales Beginning in 2015, the debate over whether the SPR storage balance was too large given the evolving nature of U.S. oil production, consumption, and net imports resulted in Congress mandating the sale of SPR oil. The sales revenue accrued through SPR sales was allocated to a variety of uses; however, energy policy, or security, was not among them. The legislation that mandated SPR oil sales includes the Bipartisan Budget Act of 2015 ( P.L. 114-74 ), the FAST Act of 2015 ( P.L. 114-94 ), the 21 st Century Cures Act of 2016 ( P.L. 114-255 ), the 2017 Tax Revision ( P.L. 115-97 ), the Bipartisan Budget Act of 2018 ( P.L. 115-123 ), and the Consolidated Appropriations Act, 2018. Broadly considered, this legislation requires oil to be sold from the reserve over the period FY2017 through FY2027. Table 1 presents mandated SPR sales data. The data in Table 1 show that while the 21 st Century Cures Act draws revenues from SPR sales during the three-year period 2017 through 2019, and the Balanced Budget Act of 2015 mandates SPR sales from 2018 through 2025, and the Consolidated Appropriations Act, 2018, mandates SPR sales in 2020 and 2021, the remaining legislation is oriented toward out-year sales, 2023 to 2027. This pattern of SPR sales might be important, because while it is likely that the favorable position of the United States with respect to oil production and imports will continue in the near-term, less certainty can be associated with a long-term perspective. Forecasting oil demand and supply is far from accurate, and when expected demand or supply respectively exceeds, or falls short of, expectations, the result is likely to be price volatility. Price volatility in the oil market can result in economic disruptions and slowdowns. As per Section 510 of the 21 st Century Cures Act, the DOE offered 10 million barrels of SPR oil for sale in FY2017. A total of 9.89 million barrels of oil was delivered in FY2017, earning over $449 million, an average price of over $45 per barrel. DOE offered 9 million barrels of SPR oil sold in FY2018, earning approximately $522 million at an average price of over $58 per barrel. The Balanced Budget Act of 2015, Section 404, authorizes the DOE to sell up to $2 billion of SPR crude oil for fiscal years 2017 through 2020. A total of 6.28 million barrels was sold in FY2017, earning $323.2 million. In FY2018, DOE offered 5 million barrels of SPR oil for sale, yielding approximately $290 million. The legislation that directs sales from the SPR is not time coordinated. Possible problems could result from uncoordinated sales exceeding an amount consistent with energy security. However, the cited legislation generally has built-in "safety valve" language that ensures that SPR sales do not cause the United States to violate its international commitments, or allow the SPR holdings to fall below a specified value. In the case of P.L. 115-123 this value is set at 350 million barrels. Determining the optimal level of oil holdings in the SPR is likely to remain controversial. Analytical tools common in public policy analysis, such as cost-benefit analysis, dynamic programming, or other optimization techniques depend on determining the value of variables that are highly uncertain in this case. The responsiveness of the adjustment of oil quantities on both the demand and the supply sides of the market, the price volatility of oil, and the probabilities of different degrees of political/military disruption in the oil market are all uncertain. The SPR might be thought of as an insurance policy where fixed payments are made over time to avoid the large negative costs associated with low-probability events. For example, if conflict in the Persian Gulf resulted in the Strait of Hormuz being closed for a period of time, large volumes of Persian Gulf oil would likely be withdrawn from the world market. The reality of reduced oil supply coupled with expectations and speculation on the futures markets would likely result in an increasing and volatile oil price. Significant price increases, coupled with supply shortages could result in significant disruption of consuming and importing nations' economies. Reduced economic growth, rising unemployment, and inflation are likely consequences. With respect to this example, an analysis of the appropriate size of the SPR might focus on values such as the risk tolerance of society with respect to bearing the consequences of an event of a given particular magnitude. Set against these values might be the cost of maintaining the SPR, which might be taken as an "insurance premium." In this case, the optimal strategy might be to minimize the cost of insurance as well as the probability that the negative event might occur. However, complications might still arise in transforming the theoretical analysis into a consistent practical decision guide. Additional reform factors that could be considered, beyond the size of the SPR, might include the mix of crude oils held in reserve as well as the infrastructure available to deliver reserve crudes to the market. SPR Facilities Reform A consequence of the fixed capacity of the SPR in conjunction with mandated sales from the reserve is the appearance of underutilized capacity. In the 115 th Congress, the House passed legislation to reform the SPR to include commercial leasing of storage capacity as well as leasing of capacity to foreign governments. H.R. 6511 would have authorized the Secretary of Energy to develop a leasing program and establish a pilot program for the leasing of storage and related facilities. The most important benefit of leasing excess SPR capacity is the receipt of fees to "fully compensate the United States for all costs of storage, and removals of petroleum products (including the proportionate cost of replacement facilities necessitated as a result of withdrawals) incurred by the United States as a result of such lease." These fees can help offset the facilities operation and maintenance costs of the reserve, which were $233 million in FY2017. While leasing excess reserve capacity provides the United States the benefit of reducing the cost of the energy security insurance the reserve provides, potential problems might exist. Commercial clients' usage patterns may not match the physical capabilities of SPR facilities. The salt domes that contain SPR crude oil are suitable for long-term oil storage and they may be less suitable for short-term injections and withdrawals. Oil is drawn from the SPR storage caverns by injecting brine into the caverns and causing the contained oil to rise, and then exit, the facility. Frequent brine injection and withdrawal could result in accelerated structural deterioration of the caverns. Commercial oil companies are more likely to store oil for the short-term, rather than as a long-term security stock. Commercial stocks are typically part of a supply chain that holds stocks only until they can be shipped to refineries or other facilities for processing. In addition, emergency withdrawals of SPR oil may interfere with commercial withdrawals unless extraction and shipping infrastructure at the SPR is enhanced. Leasing of excess SPR capacity to foreign governments for oil reserve storage is less likely to be associated with the short-term problems identified with commercial leasing. In addition to the H.R. 6511 reform approach, some have called for partial, or total, elimination of the reserve. This approach usually cites the broader, more transparent nature of the world oil market compared to the 1970s, the large commercial stock holdings in the United States, or the existence of derivative market strategies available to firms, not available in the 1970s, which might be used to mitigate oil supply shocks. Beyond partial or total liquidation of the reserve, analysts have developed other alternatives. Inventory monetization is a generally risk-free approach, generating revenues to cover expenses by monetizing a portion of the idle oil balances in the SPR. This approach uses options markets to generate revenues. For example, suppose the oil futures market was in backwardation, a condition whereby the price of oil today is higher than the price a year from now by $3 per barrel. The government could sell crude oil paper contracts at today's price and purchase an equivalent number of barrels of crude a year from now at the lower future price. If this strategy were undertaken with perhaps 100 million barrels of SPR oil, the net revenue would be $300 million minus expenses and fees, an amount well in excess of yearly SPR operations and maintenance costs. If, in the example, the relative prices over time were reversed, and the future price was higher than the current price the government would buy oil now and simultaneously sell oil in the future, again profiting by the amount of the spread between the two prices. These purchases and sales are all on paper, no oil is actually required to leave the reserve, and the transactions are taken at the same time, locking in a profit with essentially potentially very low risk. A drawback of this approach is that the volume of government purchases and sales might be large enough to influence the market prices, or interfere with private sector traders. Conclusion The SPR has met many challenges. First conceived as protection against the "weaponization" of oil in the 1970s, it later became a safeguard against the disruption caused by domestic natural disasters. Most recently the Reserve has served as a source of funding for a variety of programs and activities. In each case, while its range of application has expanded, it still maintained its ability to respond to its original requirements. Evolving oil market conditions have raised the question of whether the SPR can be further downsized, or even eliminated. Even if changing market conditions have made the reserve's rationale less compelling in the current environment than in the past, the SPR can provide a component of energy security policy as well as meeting other policy needs.

The Strategic Petroleum Reserve (SPR), administered by the Department of Energy (DOE), has played a role in U.S. energy policy for over 40 years. Over that time, its primary focus has changed from its original intent as world oil market conditions have changed. Originally intended to offset the market power of cartels and prevent economic damage from oil supply disruption, it has become primarily a tool for combatting the fuel market effects of domestic natural disasters like hurricanes. Most recently, U.S. net imports of oil and petroleum products have decreased as a result of the increase in domestic oil production. Because of lower reliance on imports, some stakeholders see less need for an oil stockpile, and view the SPR more as a mechanism for providing funding for a wide variety of legislative purposes, ranging from health care, to highways, and general purpose revenues. Over this period, the SPR has expanded its potential usefulness to cover all of these purposes. As a member of the International Energy Agency (IEA) and a participant in the International Energy Program established by the IEA, the United States, as are all net-importer nations in the IEA, is required to hold the equivalent of 90 days of its net imports of oil and petroleum products as a reserve stock. As a result of relatively stable U.S. oil consumption and rapidly increasing production, and declining net imports, available oil stocks held in the SPR now are almost double the 90-day requirement. While the SPR has recently seen relatively little use in combatting oil supply disruptions caused by political and military instability, or even natural disasters, it has provided a source of funding for a variety of legislative initiatives. These mandated sales from the SPR have committed almost 260 million barrels of oil for sale by FY2027, leaving less than 400 million barrels of uncommitted oil reserves. Determining whether further reductions can be made from the reserve while maintaining its ability to carry out its designed purpose is a key energy policy question. The extreme variant of this question is whether a reserve is required at all, or whether privately held stocks, as practiced by most European countries, are adequate to meet international commitments. Legislation in the 115th Congress, H.R. 6511, sought to maintain the SPR facility and infrastructure, while reducing operating and maintenance costs, by renting unused storage capacity in the reserve to private companies and foreign nations. As of this writing, no bills have been introduced in the 116th Congress modifying the SPR.

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Three Commonly Used Concepts of Tax Rates and How They Differ In analyzing the effects of U.S. individual income tax rates, it is important to be clear about which rates are being discussed. Among tax analysts, the three most widely used measures are statutory rates (STRs), marginal effective rates (MERs), and average effective rates (AERs). Each has its own applications. Those interested in how individual income taxes affect the economic behavior of households should have a clear understanding of the ways in which the three rates differ and the implications of these differences for the economic analysis of income taxes. STRs are the rates prescribed by law that apply to specified ranges of taxable income. For any individual, the applicable rate depends on her/his taxable income. Since the federal income tax is progressive in nature, taxpayers with relatively low taxable incomes face lower STRs than do taxpayers with relatively high taxable incomes. Effective rates, by contrast, whether marginal or average, measure how STRs are affected by tax provisions that modify someone's taxable income or tax liability. A taxpayer's MER shows the percentage of an additional dollar of income that is taxed, while her/his AER indicates how much of her/his total income is taxed. In general, someone's average tax rate is lower than her/his marginal tax rate. Still, for many individuals, the interaction between special provisions in the tax code and their specific financial circumstances leads to differences between their effective and statutory rates. Among the provisions that can drive a wedge between the two rates are the earned income tax credit (EITC), the alternative minimum tax (AMT), and personal exemptions and deductions. Personal circumstances that can cause MERs to diverge from STRs include the sources of income, itemized deductions, the number of children (if any) eligible for the child tax credit and the EITC, and filing status. Most economists believe that taxpayers change their economic behavior in response to MERs, not to statutory rates. Drawing on a standard model of consumer behavior, they argue that a person's MER influences important decisions concerning whether and how much to work, how much to spend, and how much to save. For example, someone's MER may help determine whether he takes on an overtime shift, bargains for wages and benefits, takes a second job, or even enters the labor force. The idea that MERs help shape an individual's economic behavior can be extended to an entire tax system, including federal payroll and excise taxes and state and local taxes. A broader analysis along these lines, however, goes beyond the scope of this report. Major Legislation Affecting Individual Statutory Rates Since 1986 The current income tax is largely a product of the Tax Reform Act of 1986 (TRA86; P.L. 99-514 ). Among other things, the act reduced the individual tax rate structure to two statutory rates: 15% and 28%. TRA86 also imposed a 5% surcharge on the taxable income of certain upper-income households, effectively adding a third marginal tax rate of 33%. Since the enactment of TRA86, several other major changes in the federal individual income tax rate structure have been made. The Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ) eliminated the 5% surcharge and replaced it with a statutory rate of 31%. In addition, OBRA90 imposed a limit on the amount of itemized deductions upper-income households could claim and accelerated the phaseout of personal exemptions for upper-income households. These provisions had the effect of raising effective tax rates above statutory tax rates for affected taxpayers. The Omnibus Budget Reconciliation Act of 1993 (OBRA93; P.L. 103-66 ) added two new statutory rates at the upper end of the income scale: 36% and 39.6%. It also delayed the indexation of the two new tax brackets for one year and permanently extended the limitation on itemized deductions and the accelerated phaseout of the personal exemption from OBRA90. Eight years later, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) added a new 10% statutory rate. It also included a phased-in reduction in the top four statutory rates to 25%, 28%, 33%, and 35%. Several other provisions of the act modified the tax brackets and limitations on personal exemptions and deductions for higher-income taxpayers. The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27 ), the Working Families Tax Relief Act of 2004 (WFTRA; P.L. 108-311 ), and the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA; P.L. 109-222 ) collectively accelerated and extended the tax rate reductions enacted under EGTRRA through 2010. Under a last-minute agreement between President Obama and congressional leaders from both parties, Congress extended the Bush-era individual income tax cuts through 2012 under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUC; P.L. 111-312 ). Facing the unwanted prospect of an across-the-board increase in all STRs, the 112 th Congress permanently extended (through the American Taxpayer Relief Act of 2012 [ATRA; P.L. 112-240 ]) each of the Bush-era STRs, with one exception: the top rate increased from 35% to 39.6%. Six years passed before Congress made another significant change in individual income tax rates. Through P.L. 115-97 , often referred to as the Tax Cuts and Jobs Act, Congress temporarily reduced five of the seven individual income tax rates under prior law. For tax years beginning after December 31, 2017, and before January 1, 2026, individual income tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%; they are set to return to the levels that applied in 2017, for tax years beginning on or after January 1, 2026. Each act is described in greater detail below. Tax Reform Act of 1986 Among its many changes, TRA86 simplified the individual income tax rate structure for tax years after 1987 by replacing the 14 nonzero statutory rates that applied to the 1985 and 1986 tax years with two such rates: 15% and 28%. Table 3 shows the key elements of the 1988 tax rate structure. These rates applied to capital income as well as to labor income. Although TRA86 established only two statutory individual marginal income tax rates, it included a 5% surcharge on the taxable income of certain upper-income households. This surcharge effectively created a third statutory tax rate of 33% (a 28% statutory tax rate plus a 5% surcharge). Because the surcharge phased in over a certain range of income and then phased out as income increased, statutory tax rates rose to 33% but then fell back to 28%, producing what was known as an income tax rate "bubble." The intent of the surcharge was two-fold: (1) to prevent TRA86 from changing the distribution of the income tax burden among income groups, relative to the distribution under pre-1986 tax law, and (2) to meet specific revenue targets. More specifically, the surcharge was designed to eliminate the tax benefits of both the 15% tax bracket and the personal exemption for upper-income households. For joint returns in 1988, the phaseout of the 15% tax rate started when taxable income exceeded $71,900 and ended when it reached $149,250. For single returns, the 15% tax bracket phased out when taxable income was between $47,050 and $97,620. For heads of households, the phaseout occurred when taxable income fell in the range of $67,200 to $134,930. The phaseout of the personal exemption started immediately after the phaseout of the 15% tax bracket and occurred sequentially for each exemption. This meant that the taxable income range over which the 5% surcharge offset personal exemptions depended on the number of personal exemptions claimed on the tax return. For example, on a joint return claiming two personal exemptions, the 5% surcharge would apply to taxable income between $149,250 and $171,090 ($149,250 plus two times $10,920). On a joint return with four personal exemptions, the 5% surcharge would apply to taxable income between $149,250 and $192,930 ($149,250 plus four times $10,920). To demonstrate how the 5% surcharge worked to "phase out" the tax benefits of the 15% tax bracket, consider the following example based on joint returns for 1988. The difference between taxing the first $29,750 of taxable income at 28% instead of 15% was $3,867.50 (obtained as $29,750 multiplied by 13%, the difference between 28% and 15%). Five percent of the difference between the upper and lower phaseout limits also equaled $3,867.50 ($149,250 less $71,900 multiplied by 5%). Hence, assessing the 5% surcharge on taxable income between $78,400 and $162,770 was equivalent to taxing the first $32,450 of taxable income at 28% rather than 15%. Omnibus Budget Reconciliation Act of 1990 OBRA90 created a three-tiered statutory marginal income tax rate structure. The rates were 15%, 28%, and 31% and applied to tax years beginning in 1991 and thereafter (see Table 5 ). OBRA90 eliminated the tax rate bubble created by TRA86, and replaced it with a limitation on itemized deductions and a new approach to phasing out the tax benefits of the personal exemption for upper-income households. OBRA90 also reintroduced a tax-rate differential for capital gains income. The act limited the tax on capital gains income to a maximum of 28%, starting in 1991. Under TRA86, capital gains was treated as ordinary income and taxed at regular rates that peaked at 33%. OBRA90's limitation on itemized deductions was based on a taxpayer's adjusted gross income (AGI). For tax years starting in 1991 to 1995, allowable deductions were reduced by 3% of the amount by which a taxpayer's AGI exceeded $100,000 (or $50,000 in the case of married couples filing separate returns). For example, if a taxpayer's AGI in 1991 was $110,000, then his itemized deductions would have been reduced by $300 ($110,000 less $100,000 multiplied by .03). This provision effectively raised the marginal income tax rate of affected taxpayers by approximately one percentage point. A dollar of income in excess of $100,000 was taxed as if it were $1.03, since in addition to the tax on an extra dollar of income, the taxpayer lost a tax deduction by giving up $0.03 of itemized deductions. This limitation was scheduled to expire after tax year 1995 under OBRA90, but was later extended. Allowable deductions for medical expenses, casualty and theft losses, and investment interest were not subject to this limitation. For tax years after 1991, the $100,000 threshold was indexed for inflation. OBRA90 phased out the tax benefits of the personal exemption for higher-income households. Each personal exemption was phased out by a factor of 2% for each $2,500 (or fraction thereof) by which a taxpayer's AGI exceeded a given threshold amount. In 1991, the threshold amounts were $150,000 for a joint return, $100,000 for a single return, and $125,000 for a head-of- household return. Starting in 1992, these amounts were indexed for inflation. The phaseout provision was scheduled to expire at the end of 1995. A simple example illustrated how the personal exemption phaseout increased the tax burden on affected taxpayers. In 1991, a joint household whose AGI was $183,000 would have lost 28% of their total personal exemptions. The AGI amount in excess of the threshold in this instance would have been $33,000, or $183,000 AGI minus the $150,000 threshold limit. The $33,000 excess divided by $2,500 would produce a factor of 13.2, which when rounded up would equal 14. This figure is multiplied by 2% to arrive at the final disallowance amount of 28%. Hence, if the family had claimed two personal exemptions, which at $2,150 each would have totaled $4,300, they would have been allowed to deduct $3,096 ($4,300 total personal exemptions less the $1,204 disallowance, which is 28% of the total). Omnibus Budget Reconciliation Act of 1993 OBRA93 made several changes in the individual marginal income tax rate structure. First, it added two new marginal tax rates, 36% and 39.6%, at the upper end of the income spectrum. The 39.6% tax bracket was the result of adding a 10% surtax to the 36% rate for taxpayers with taxable incomes over $250,000 in 1993. Although OBRA93 was enacted in August 1993, the increase in the top marginal tax rates was made effective retroactively to January 1, 1993. Affected taxpayers, however, were not assessed penalties for underpayment of 1993 taxes resulting from the tax rate increase. Taxpayers were also allowed to pay any additional 1993 taxes in three equal installments over a two-year period. Second, OBRA93 delayed indexation of the new top marginal income tax brackets for one year. Hence, the nominal dollar tax brackets for the 36% and 39.6% marginal tax rates remained at the same level for both tax years 1993 and 1994. Finally, OBRA93 made permanent both the itemized deduction limitation and the phaseout of the tax benefits from personal exemptions. Economic Growth and Tax Relief Reconciliation Act of 2001 EGTRRA made several major changes to the marginal tax rate structure. Many of the act's provisions were set to phase in over a period of time, but subsequent legislation, described in the next section, overrode the schedule originally set by EGTRRA. All of the EGTRRA provisions, as amended, were set to expire at the end of 2010. First, the 2001 act created a new 10% bracket. It applied, beginning in tax year 2002, to the first $12,000 of taxable income for married couples filing jointly, the first $10,000 of taxable income for heads of households, and the first $6,000 of taxable income for single individuals. For tax year 2001, the act created a "rate reduction tax credit," mimicking the effects of the 10% tax rate bracket for most taxpayers. EGTRRA gradually phased in and expanded the bracket over several years, but in 2003-2007, these provisions of EGTRRA were accelerated by subsequent legislation. In 2008, EGTRRA became effective again, setting the 10% marginal tax rate bracket at $7,000 for single filers and $14,000 for joint filers. Starting with tax year 2009, these bracket amounts were indexed for inflation. Second, the 2001 act gradually reduced the top four marginal income tax rates. Under prior income tax law, the top four marginal tax rates were 28%, 31%, 36%, and 39.6%. When fully phased in, the 2001 act reduced the top four marginal income tax rates to 25%, 28%, 33%, and 35%. Once again, under EGTRRA the reductions were scheduled to take place in 2001 through 2006, but subsequent legislation accelerated the EGTRRA phase-in schedule. Third, EGTRRA also repealed the limitation on itemized deductions and personal exemptions for high-income taxpayers. The repeal was phased in between 2006 and 2009. The limitation was completely repealed for 2010, but it was scheduled to reappear again in 2011, once the EGTRRA's tax cuts expire. Fourth, some of the act's measures designed to reduce the marriage penalty affected the rate bracket structure. The act increased the income range of the 15% tax bracket for married couples filing joint returns to twice the income range of the 15% tax bracket for single returns. Under EGTRRA, this provision was scheduled to phase in from 2005 to 2008, but subsequent legislation accelerated the phase-in. Under EGTRRA, the upper dollar limit of the 15% tax bracket for joint returns was set at 180% of the upper dollar limit of the 15% tax bracket for single returns in 2005, 187% of that limit in 2006, 193% of that limit in 2007, and 200% of that limit in 2008 and subsequent years. Finally, the 2001 act increased the standard deduction for joint returns to twice the size of the standard deduction for single returns. The change was scheduled to be phased in over a five-year period, 2005 to 2009, but it was accelerated by the subsequent bills as well. This had the effect of raising the lower income threshold of the lowest tax bracket for married taxpayers. Jobs and Growth Tax Relief Reconciliation Act of 2003 JGTRRA accelerated several changes to the individual income tax rate structure that were first enacted under EGTRRA. It moved forward to 2003 the tax rate reductions, the expansion of the 10% tax bracket, and the widening of the 15% tax bracket for joint returns to make it double the width of the 15% tax bracket for single returns. Under EGTRRA, some of these changes would not have been fully phased in until 2009. JGTRRA also lowered the tax rates for long-term capital gains and dividends. It reduced the top rate to 15%, and allowed a rate of 0% for certain low-income taxpayers. Working Families Tax Relief Act of 2004 WFTRA extended several tax provisions of JGTRRA that were scheduled to expire at the end of 2004. It extended the expansion of the 10% income tax bracket through 2007, at which point EGTRRA's relevant provisions would be fully phased in, maintaining a constant amount of tax relief. WFTRA also extended marriage penalty relief under EGTRRA from 2005 to 2008. The standard deduction for a married couple filing jointly was set to be equal to double the standard deduction for an unmarried single filer over that period. In addition, the act made the size of the 15% tax bracket for joint filers double that of the tax bracket for single filers from 2005 to 2007. As a result, in both cases, the marriage penalty relief extended from 2005 to 2010, before ending under the EGTRRA sunset provision. Tax Increase Prevention and Reconciliation Act of 2005 The reductions in tax rates for long-term capital gains and dividends under JGTRRA were set to expire at the end of 2008; TIPRA extended them through the end of 2010. Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 A last-minute agreement in 2010 between President Obama and congressional leaders of both parties cleared the way for an extension of all the Bush-era individual tax cuts through the end of 2012. TRUC served as the legislative vehicle for the extension. American Taxpayer Relief Act of 2012 Facing a reversion of each statutory individual income tax rate to its level before the enactment of EGTRRA starting January 1, 2013, Congress and President Obama agreed on legislation (ATRA) to extend permanently each of the Bush-era rates and restore the top marginal tax rate to its pre-EGTRRA level of 39.6%. The act also permanently extended the repeal of the phaseout of the personal exemption included in EGTRRA, but it restricted the repeal of the phaseout to taxpayers with AGIs of $250,000 or less for single filers and $300,000 or less for married couples filing jointly. Taxpayers with AGIs above these inflation-adjusted amounts were subject to the phaseout. The same rule applied to the repeal under EGTRRA of the Pease limitation on the amount of itemized deductions an upper-income taxpayer could take. P.L. 115-97 Individual marginal income tax rates did not change after ATRA until the enactment of P.L. 115-97 in December 2017. The act made significant changes to a number of individual income tax provisions, including individual tax rates and the standard deduction. For tax years beginning in 2018 and ending before 2027, the individual income tax rate structure consists of seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. (The rates are scheduled to revert to their levels in 2017 starting in 2026.) For individuals receiving income from passthrough businesses (i.e., partnerships, S corporations, and sole proprietorships), the current rates can be adjusted downward as a result of a new deduction under Section 199A; the deduction is equal to up to 20% of a noncorporate business owner's qualified income from a qualified trade or business. The 2017 tax revision also made the following changes in these key elements of the individual income tax for the 2018 to 2025 tax years: It terminated the personal exemption (which was $4,050 in 2017). It increased the standard deduction (which is indexed for inflation using the chained consumer price index for urban consumers) for nonitemizers to $24,000 for joint filers and $18,000 for head-of-household filers, and $12,000 for single filers, from 2018 to 2025. It eliminated the deduction for miscellaneous expenses from 2018 through 2025. It suspended the overall limit on itemized deductions for certain high-income taxpayers. Effects of Inflation on Income Tax Liabilities During periods of relatively high inflation, a progressive income tax based on tax brackets set in nominal dollars can lead to automatic tax increases, and these increases can lead to unintended changes in the overall distribution of the tax burden by income class. This is because nominal incomes rise faster than real incomes, all other things being equal. As a result, tax burdens for taxpayers become larger than what lawmakers had intended when they established existing statutory tax rates. In the absence of indexation of the elements of the tax code determining the tax burdens of individuals, an increasing share of taxpayers will face growing tax liabilities because their nominal incomes are rising, irrespective of what happens to their real incomes. The effects of inflation on income tax liabilities can be substantial, even in periods of low inflation, such as the last two decades. According to the Bureau of Labor Statistics, $1,000 in November 1988 had the buying power of $2,095.08 in November 2018. Year-to-year changes can be negligible, but over a decade or so, those changes can add up to make a substantial difference through the power of compounding. A simplified hypothetical example illustrates the impact that a lack of indexation can have over time for the tax burdens (as measured by the average income tax rate) of individual taxpayers. The results are summarized in Table 1 . Assume that the individual income tax structure from 1988 applied without indexation (or any other changes) in 2017. Also assume that a household with a husband, wife, and two children had an adjusted gross income (AGI) of $35,000 in 1988, was eligible for no tax credits, and filed a joint tax return. If the family took the standard deduction, then its taxable income would have been $22,200 ($35,000 minus the standard deduction of $5,000 and four personal exemptions at $1,950 apiece), and its tax liability would have been $3,330. As a result, the household's average tax rate was 9.5% ($3,330 divided by $35,000 income) in 1988. Next consider what would happen to the household's tax burden in 2017 if the family's income had kept up with inflation but the 1988 tax structure had remained in place, with no indexation for inflation. The family's AGI would have been $71,766: $35,000 x 2.05 (the rise in the general price level as measured by the Consumer Price Index for all Urban Consumers (CPI-U) from 1988 to 2017). Its taxable income would have been $58,966; its tax liability would have totaled $12,643; and its average tax rate would have reached 17.6%. So in the absence of the indexation of the key income tax elements when the family's AGI rose in step with the rate of consumer inflation, keeping the buying power of its income constant, the family's income tax burden increased by 85% from 1988 to 2017. This difference exemplifies what is known as "bracket creep," an effect that is accelerated during periods of high inflation. Under an indexed individual income tax, however, the household would have experienced no change in their tax burden. With an inflation adjustment equal to the rise in the CPI-U, the value of the standard deduction for a joint return would have increased from $5,000 in 1988 to $10,252 in 2017, and the personal exemption for each family member would have increased from $1,950 to $3,998. Under these circumstances, the family's 2017 taxable income would have been $45,522 ($71,766 in income less the inflation-adjusted standard deduction and four personal exemptions). Tax brackets would have adjusted as well. Based on this taxable income and the adjusted brackets, their income tax liability would have been $6,828, yielding an average tax rate of 9.5%, the same as in 1988. While the nominal household's amount of income and tax owed rose, the value of both in 1988 dollars stayed approximately the same. Congress added indexation to the individual income tax as a part of the package of statutory tax rate reductions included in the Economic Recovery Tax Act of 1981. The U.S. rate of inflation was exceptionally high at the time, and this condition influenced congressional deliberations on the benefits of tax indexation. As the Joint Committee on Taxation noted in its explanation of the act: The Congress believed that "automatic" tax increases resulting from the effects of inflation were unfair to taxpayers, since their tax burden as a percentage of income could increase during intervals between tax reduction legislation, with an adverse effect on incentives to work and invest. In addition, the Federal Government was provided with an automatic increase in its aggregate revenue, which in turn created pressure for further spending. Since 1981, the list of indexed elements has gradually expanded and now includes more than three dozen tax items. TRA86 extended indexation to some newly created tax provisions, including the standard deductions for the elderly and the blind and the EITC. EGTRRA indexed the phaseout amounts for the EITC, starting in 2008. Table 2 lists the major indexed tax items and notes the first year of the adjustment. Indexing may compound the complexity of the individual income tax, but, given its benefits to taxpayers over time, this effect is arguably a minor matter. The year-to-year changes in dollar amounts are usually small, so taxpayers seldom, if ever, face unexpected changes that might materially affect them. On the revenue side, of course, indexing results in lower government receipts. But some key elements of the tax remain unadjusted for inflation. One such element is the child tax credit. Under current law, the amount of the credit itself and the phaseout thresholds for higher-income taxpayers are not adjusted for inflation. But the earned income threshold used in calculating the credit's refundable amount has been adjusted for inflation since 2001. Consequently, under current law, inflation erodes the value of the credit and reduces the number of eligible taxpayers over time. Another element not indexed for inflation is the threshold amounts for determining who pays the 3.8% tax on net investment income that was added in 2013. The Mechanics of Indexation Most elements are indexed using the technical calculation described below. In some instances, the calculation methodology differs somewhat. Examples include the EITC or transportation benefits. The variations are insignificant, as long as they do not lead to systematic deviations from the actual rate of inflation. The adjustment for tax years before 2019 was based on the percentage by which the average Consumer Price Index for All Urban Consumers (CPI-U) in the 12 months ending on August 31 of the preceding year exceeded the average CPI-U during a 12-month base period. Not all indexed tax elements used the same base period, as shown in Table 2 . With the exception of the EITC, inflation adjustments were rounded down to the nearest multiple of $50. Although rounding down affected the accuracy of any given year's inflation adjustment, the effect was not cumulative since each year's adjustment reflected the total inflation that occurred between the adjustment year and the base period. For example, the adjustment factor for the personal exemption in 2017 was calculated as follows. By law, the base period for this factor was September 1987 through August 1988, when the average CPI-U was 116.6. The average CPI-U for September 2015 through August 2016, on which the 2017 value is based, was 238.6. Thus, the inflation adjustment factor in 2017 was 2.05 (238.6/116.6). This factor was then applied to $2,000, the value of the exemption in 1989, resulting in a personal exemption of $4,080 for the 2017 tax year. Rounding this number down to the nearest multiple of $50 produced the final value of the exemption in 2017: $4,050. For tax years beginning after December 31, 2018, a different consumer price index will be used to adjust the values of income tax elements subject to indexation. Under a provision of P.L. 115-97 , the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) replaces the CPI-U for this purpose. Both indices were designed by the Bureau of Labor Statistics (BLS) to measure price changes faced by the average urban consumer. Each of them tracks the prices of about 80,000 goods and services each month in cities throughout the United States. The BLS bases the indices on a fixed basket of goods and services obtained from a survey of the spending patterns of 7,000 American families. The survey determines which goods and services go into the basket and how much weight should be assigned to each item in calculating the overall change in prices. The market basket for the CPI-U is revised every two years. Many analysts have argued that the CPI-U overstates rises in the cost of living because it does not fully account for the changes consumers make in their buying patterns when the price of one item in the market basket goes up or the price of another goes down. When this tendency to substitute lower-priced items for other items whose prices have increased is ignored, the impact on consumers of inflation is overstated. The chained CPI-U is better at capturing changes in consumer spending patterns tied to price increases or decreases. This is because it compares details about what a consumer buys in the period before a price change with details about what he/she buys in the period after the change. In essence, the BLS calculates one measure of inflation for the first-period basket and a second measure of inflation for the second-period basket and then takes the average. The basket after the price change may contain different amounts of some items, as consumers respond to increases or decreases in the prices of other items in the same categories. For instance, the second-period basket may include more chicken than the first-period basket did when the price of beef increases while the price of chicken remains unchanged. This substitution softens the impact of the price rise for beef on the overall measure of inflation. The chained CPI-U does this every month, creating an index that links these changes from month to month. As a result, the index reflects shifts in consumer buying patterns between months and between basket items. It also leads to lower estimates of the rate of increase in the cost of living over time, since the chained CPI-U is built around the tendency of consumers in general to purchase lower-priced items that can be substituted for items whose prices have risen. From 2000 to 2012, the annual average for the chained CPI-U rose by 29.4%. In the same period, the CPI-U's annual average increased by 33.3%. Many analysts have noted that using the chained CPI-U to adjust the amount of individual income tax elements for inflation has one significant drawback: the index is revised several times, while the CPI-U is never revised. A final reading for the chained CPI-U is released between 10 and 16 months after its initial release. Consequently, starting in 2018, tax elements that are adjusted for inflation are indexed to a preliminary estimate that could be significantly revised. Switching to the chained CPI-U to adjust key tax elements for inflation is likely to result in more bracket creep than would occur if the elements were still adjusted for inflation using the CPI-U. Since the chained CPI-U increases more slowly than the CPI-U, tax bracket thresholds are likely to rise by smaller amounts from one year to the next. More individual taxpayers will be pushed into higher tax brackets than they would be if the CPI-U were still used for inflation adjustment. One significant result is an increase in federal tax revenue over time. The Joint Committee on Taxation has estimated that the revenue gain from switching to the chained CPI-U will total $134 billion from FY2018 to FY2027. Since the onset of the Great Recession in late 2007, the annual U.S. inflation rate has fluctuated between -0.4% and 3.2%, as measured by the CPI-U. Negative inflation, or deflation, occurred in 2009 relative to 2008. Deflation denotes a decrease in the general price level. As a result, the inflation adjustments in 2010 were very small or nonexistent. Several other federal programs experienced similar situations, even though they do not use the same indexing methodology. For example, there was no cost-of-living adjustment for Social Security benefits in 2010. If the United States were to experience a period of sustained deflation, the income tax elements could decline in constant dollars. By law, however, the elements cannot fall below their base-year values. Since their current values are much higher than their base values, which were established years ago in some cases, and the near-term outlook for inflation is projecting rates below 3%, this limitation is unlikely to come into play anytime soon for most indexed elements. Tax Rate Schedules for the 1988 Through 2019 Tax Years The following tables present the personal exemption amounts, standard deductions, and statutory marginal tax rates schedules for each tax year from 1988 through 2019.

Statutory individual income tax rates are the tax rates that apply by law to various amounts of taxable income. Statutory rates form the basis of marginal effective and average effective tax rates, which most economists believe have a greater impact on the economic behavior of companies and individuals than do statutory rates. Marginal effective rates capture the net effect of special tax provisions on statutory rates. They differ from average effective rates, which measure someone's overall income tax burden. Current statutory and effective individual tax rates are the result of the Tax Reform Act of 1986 (TRA86; P.L. 99-514) and several tax laws that have been enacted since then. Of particular importance among the latter are the Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508), the Omnibus Budget Reconciliation Act of 1993 (OBRA93; P.L. 103-66), the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16), the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUC; P.L. 111-312), the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240), and the tax rate changes contained in the 2017 tax revision (P.L. 115-97). TRA86 altered the income tax rate structure. EGTRRA established what are referred to as the Bush-era tax cuts for individuals. TRUC extended those cuts for another two years, through 2012. ATRA permanently extended the Bush-era tax rates for taxpayers with taxable incomes below $400,000 for single filers and $450,000 for joint filers but reinstated the 39.6% top rate established by OBRA93 for taxpayers with taxable incomes equal to or above those amounts. And P.L. 115-97 lowered individual tax rates for all income groups except those subject to the 10% and 35% brackets under previous law. Ordinary income is taxed at seven statutory individual income tax rates, from 2018 to 2026: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. (Starting in 2026, these rates will revert to their levels in 2017.) Income from long-term capital gains and dividends is taxed at 0% for single filers with capital gains below $39,375 (below $78,750 for joint filers), 15% for single filers with capital gains between $39,375 and $434,550 (between $78,750 and $488,850 for joint filers), and 20% for single filers with capital gains above $434,550 (above $488,850 for joint filers). Since 2013, a 3.8% tax has been imposed on the lesser of net investment income received by individuals, estates, or trusts, or the amount of their modified adjusted gross incomes above $250,000 for joint filers and $125,000 for single filers. In addition, the individual alternative minimum tax (AMT), which functions like a separate income tax in that its rate structure is narrower and tax base broader than those of the regular income tax, applies to income above exemption amounts in 2019 of $111,700 for joint filers and $71,700 for single filers; the AMT taxes income at two rates: 26% and 28%. Tax rates and the income brackets to which they apply are not the only elements of the individual income tax that determine the tax liabilities of taxpayers. Personal exemptions, exclusions, deductions, credits, and certain other elements have an effect as well. Some of these elements are indexed for inflation. Congress added annual indexation to the individual income tax in 1981, using the Consumer Price Index for All Urban Consumers. Such a mechanism helps prevent tax increases and unintended shifts in the distribution of the tax burden that are driven by inflation alone. The indexed elements are tax rate brackets, personal exemptions and their phaseout threshold, standard deductions, the itemized deduction limitation threshold, and the exemption amounts for the AMT. Starting in 2018, these items are indexed for inflation with the Chained Consumer Price Index for All Urban Consumers. This report summarizes the tax brackets and other key elements of the individual income tax that help determine taxpayers' marginal and average effective tax rates going back to 1988. It will be updated to reflect indexation adjustments and changes in the taxation of individual income.

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SBIC Program Overview The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; programs to increase small business opportunities in federal contracting; direct loans for businesses, homeowners, and renters to assist their recovery from natural disasters; and access to entrepreneurial education to assist with business formation and expansion. It also administers the Small Business Investment Company (SBIC) program. Authorized by P.L. 85-699, the Small Business Investment Act of 1958, as amended, the SBIC program is designed to "improve and stimulate the national economy in general and the small-business segment thereof in particular" by stimulating and supplementing "the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply." The SBIC program was created to address concerns raised in a Federal Reserve Board report to Congress that identified a gap in the capital markets for long-term funding for growth-oriented small businesses. The report noted that the SBA's loan programs were "limited to providing short-term and intermediate-term credit when such loans are unavailable from private institutions" and that the SBA "did not provide equity financing." Equity financing (or equity capital) is money raised by a company in exchange for a share of ownership in the business. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time. The Federal Reserve Board's report concluded there was a need for a federal government program to "stimulate the availability of capital funds to small business" to assist these businesses in gaining access to long-term financing and equity financing. Facilitating the flow of capital to small businesses to stimulate the national economy was, and remains, the SBIC program's primary objective. The SBA does not make direct investments in small businesses. It partners with privately owned and managed SBICs licensed by the SBA to provide financing to small businesses with private capital the SBIC has raised (called regulatory capital) and with funds (called leverage) the SBIC borrows at favorable rates because the SBA guarantees the debenture (loan obligation). As of December 31, 2018, there were 305 licensed SBICs participating in the SBIC program. In FY2018, the SBA provided $2.52 billion in leverage to SBICs. In recent years, some Members of Congress have argued that the program should be expanded as a means to stimulate economic activity and create jobs. For example, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased the annual amount of leverage the SBA is authorized to provide to SBICs to $4 billion from $3 billion and P.L. 114-113 , the Consolidated Appropriations Act, 2016, increased the amount of outstanding leverage allowed for two or more SBIC licenses under common control (the multiple licenses/family of funds limit) to $350 million from $225 million. In addition, P.L. 115-187 , the Small Business Investment Opportunity Act of 2017, increased the amount of outstanding leverage allowed for individual SBICs to $175 million from $150 million. Others worry that an expanded SBIC program could result in losses and increase the federal deficit. In their view, the best means to assist small business, promote economic growth, and create jobs is to reduce business taxes and exercise federal fiscal restraint. Some Members and small business advocates have also proposed that the program target additional assistance to startup and early stage small businesses, which are generally viewed as relatively risky investments but also as having a relatively high potential for job creation. For example, during the 113 th Congress, S. 1285 and H.R. 30 , the Small Business Investment Enhancement and Tax Relief Act, would have authorized the Administration to establish a separate SBIC program for early stage small businesses. In addition, as part of the Obama Administration's Startup America Initiative, the SBA established a five-year, $1 billion early stage SBIC initiative in 2012. Early stage SBICs are required to allocate at least 50% of their investments in early stage small businesses, defined as small businesses that have never achieved positive cash flow from operations in any fiscal year. The SBA stopped accepting new applicants for the early stage SBIC initiative in 2017. In addition, on June 11, 2018, the SBA withdrew a proposed rule published on September 19, 2016, to amend the initiative to make it "more attractive and ... a permanent part of the SBIC program." The SBA indicated that it withdrew the proposed rule "because very few qualified funds applied to the Early Stage SBIC initiative, the costs were not commensurate with the results, and the comments to the proposed rule did not demonstrate broad support for a permanent Early Stage SBIC program." This report examines the SBIC program's structure and operations, focusing on SBIC eligibility requirements, investment activity, and program statistics. It includes information concerning the SBA's debenture SBIC program, participating securities SBIC program, impact investment SBIC program (targeting underserved markets and communities facing barriers to access to credit and capital), and early stage SBIC initiative. This report also discusses legislative efforts that led to an increase in (1) the maximum annual leverage the SBA is authorized to provide to SBICs and (2) the maximum amount of outstanding leverage allowed for two or more SBIC licenses under common control. SBIC Types There are two types of SBICs. Investment companies licensed under Section 301(c) of the Small Business Investment Act of 1958, as amended, are referred to as original , or regular, SBICs. Investment companies licensed under Section 301(d) of the act, called Specialized Small Business Investment Companies (SSBICs), focus on providing financing to small business entrepreneurs "whose participation in the free enterprise system is hampered because of social or economic disadvantage." Section 301(d) was repealed by P.L. 104-208 , the Omnibus Consolidated Appropriations Act, 1997 (Title II of Division D, the Small Business Programs Improvement Act of 1996). As a result, no new SSBIC licenses have been issued since October 1, 1996. However, existing SSBICs were "grandfathered" and allowed to remain in the program. With few exceptions, SBICs and SSBICs are subject to the same eligibility requirements and operating rules and regulations. Therefore, the term SBIC is usually used to refer to both SBICs and SSBICs. Five types of regular SBICs exist. Debenture SBICs, impact investment SBICs, and early stage SBICs receive leverage through the issuance of debentures. Debentures are debt obligations issued by SBICs and held or guaranteed by the SBA. P articipating securities SBICs receive leverage through the issuance of participating securities. Participating securities are redeemable, preferred, equity-type securities, often in the form of limited partnership interests, preferred stock, or debentures with interest payable only to the extent of earnings. Bank-owned , non-leveraged SBICs do not receive leverage. This report focuses on the four types of regular SBICs that receive leverage from the SBA. SBIC Eligibility Requirements A SBIC can be organized in any state as either a corporation, a limited partnership (LP), or a limited liability company (LLCs must be organized under Delaware law). Most SBICs are owned by relatively small groups of local investors, although many are partially owned, and some (47 of 305) are wholly owned, by commercial banks. A few SBICs are corporations with publicly traded stock. One of the primary criteria for licensure as a SBIC is having qualified management. The SBA reviews and approves a prospective SBIC's management team based upon its professional capabilities and character. Specifically, the SBA examines the SBIC's management team and looks for at least two principals with substantive and analogous principal investment experience; realized track record of superior returns, based on an overall evaluation of appropriate quantitative performance measures; evidence of a strong rate of business proposals and investment offers (deal flow) in the investment area proposed for the new fund; a cohesive management team, with complementary skills and a history of working together; managerial, operational, or technical experience that can add value at the portfolio company level; and a demonstrated ability to manage cash flows so as to provide assurance the SBA will be repaid on a timely basis. SBIC Application Process Applying for a SBIC debenture license is a multi-step process, beginning with the submission of the SBA Management Assessment Questionnaire (MAQ) and an initial, nonrefundable licensing fee of $10,000. The questionnaire includes, among others, questions concerning the fund's legal name and the name and addresses of its principals and control persons; the fund's investment strategy (including geographic focus, industry focus, diversification strategy, primary types of securities to be used, whether it plans to be primarily an equity or debt investor, etc.); the management team's history and professional experience; the fund's investment decisionmaking process, from deal origination to portfolio monitoring; the fund's economics (including a description of the fund's carried interest, the formula used to calculate management fees and the fund's policy on the allocation of fees between the fund and any management or other affiliated entities, details concerning compensation the principals earn outside of this partnership, etc.); the fund's capitalization (including investment strategy, whether a placement agent has been or will be hired, information concerning any third-party borrowing arrangements, etc.); the fund's governance structure (including an organizational chart); and a 10-year financial forecast for the fund. After receiving the firm's application, a member of the SBA's Program Development Office reviews the MAQ; assesses the investment company's proposal in light of the program's minimum requirements and management qualifications; performs initial due diligence, including making reference telephone calls; and prepares a written recommendation to the SBA's Investment Division's Investment Committee (composed of senior members of the division). If, after reviewing the MAQ and the SBA's Program Development Office's evaluation, the Investment Committee concludes, by majority vote at a regularly scheduled meeting, that the investment company's management team may be qualified for a license, that management team is invited to the SBA's headquarters in Washington, DC, for an in-person interview. If, following the interview, the Investment Committee votes to proceed, the investment company is provided a "Green Light" letter formally inviting it to proceed to the final licensing phase of the application process. Once an applicant receives a Green Light letter, the applicant typically has up to 18 months to raise the requisite private capital. During this time frame, the SBA "keeps in touch with the applicant, conducts SBIC training classes, and provides guidance as needed." Final licensing occurs when the SBA accepts an applicant's complete licensing application (consisting of an updated SBA Form 2181 and complete SBA Forms 2182 and 2183), which is submitted after raising sufficient private capital, and receives a final licensing fee, currently $20,000. Obtaining a SBIC license for the first time usually takes six to eight months from the initial MAQ submission to the license issuance. As discussed below, new applications for the participating securities program, impact investment program, and early stage SBIC initiative are no longer being accepted. The eligibility requirements and application process for small businesses requesting financial assistance from a SBIC is provided in the Appendix . SBIC Capital Investment Requirements Debenture SBICs P.L. 85-699 authorized the SBA to select companies to participate in the SBIC program and to purchase debentures from those companies to provide additional funds to invest in small businesses. Initially, debenture SBICs were required to have a private capital investment of at least $300,000 to participate in the SBIC program. Debenture SBICs are now required to have a private capital investment of at least $5 million (called regulatory capital). The SBA has discretion to license an applicant with regulatory capital of $3 million if the applicant has satisfied all licensing standards and requirements, has a viable business plan reasonably projecting profitable operations, and has a reasonable timetable for achieving regulatory capital of at least $5 million. At least 30% of a debenture SBIC's regulatory and leverageable capital must come from three people unaffiliated with the fund's management and unaffiliated with each other. Also, no more than 33% of a SBIC's regulatory capital may come from state or local government entities. Participating Securities SBICs P.L. 102-366 , the Small Business Credit and Business Opportunity Enhancement Act of 1992 (Title IV, the Small Business Equity Enhancement Act of 1992), authorized the SBA to guarantee participating securities. Participating securities are redeemable, preferred, equity-type securities issued by SBICs in the form of limited partnership interests, preferred stock, or debentures with interest payable only to the extent of earnings. In 1994, the SBA established the SBIC Participating Securities Program (SBIC PSP) to encourage the formation of participating securities SBICs that would make equity investments in startup and early stage small businesses. The SBA created the program to fill a perceived investment gap created by the SBIC debenture program's focus on mid- and later-stage small businesses. The SBA stopped issuing new commitments for participation securities on October 1, 2004, beginning a process to end the program, which continues. The SBA stopped issuing new commitments for participating securities primarily because the program experienced a projected loss of $2.7 billion during the early 2000s as investments in technology startup and early stage small businesses lost much of their stock value at that time. The SBA found that "the fees payable by SBICs for participating securities leverage are not sufficient to cover the projected net losses in the participating securities program." The SBA continued to honor its existing commitments to participating securities SBICs, which were allowed to continue operations. However, these securities SBICs were required to comply with special rules concerning minimum capital, liquidity, non-SBA borrowing, and equity investing. In recent years, some Members have expressed interest in either revising the program or starting a new program modeled on certain aspects of the SBIC PSP to assist startup and early stage small businesses. The SBA is no longer issuing new commitments for participating securities, and each year several participating securities SBICs leave the program because their leverage commitments are retired. As of December 31, 2018, there were 25 participating securities SBICs in the SBIC program, with $18.0 million in outstanding capital at risk. Participating securities SBIC are required to have regulatory capital of at least $10 million. The SBA has discretion to require less than $10 million in regulatory capital if the licensee can demonstrate that it can be financially viable over the long term with a lower amount. In this circumstance, the regulatory amount required may not be lower than $5 million. At least 30% of a participating securities SBIC's regulatory and leverageable capital must come from three people unaffiliated with the fund's management and unaffiliated with each other. Also, no more than 33% of a SBIC's regulatory capital can come from state or local government entities. Impact Investment SBICs On April 7, 2011, the SBA announced it was establishing a $1 billion impact investment SBIC initiative (up to $150 million in leverage in FY2012 and up to $200 million in leverage per fiscal year thereafter until the limit is reached). SBA-licensed impact investment SBICs are required to invest at least 50% of their financings, "which target areas of critical national priority including underserved markets and communities facing barriers to access to credit and capital." These areas initially included businesses located in underserved communities (as defined by the SBA), the education sector, and the clean energy sector. Impact investment SBICs are required to have a minimum private capital investment of at least $5 million and are subject to the same conditions as debenture SBICs concerning the source of the funds. Initially, an impact investment SBIC could receive up to $80 million in SBA leverage. On June 6, 2013, the SBA announced that it was increasing the maximum leverage available to impact investment SBICs to $150 million. Nine impact investment SBICs were licensed (two in 2011, one in 2012, two in 2014, two in 2015, and two in 2016). As of September 30, 2018, they managed more than $905 million in assets and had investments in 81 small businesses. In FY2018, impact investment SBICs invested $106.8 million in 35 small businesses. On September 28, 2017, the SBA provided notice to program stakeholders that it would no longer accept new applications to be a licensed impact investment SBIC on or after November 1, 2017. The SBA also announced that it was withdrawing a proposed rule, published on February 3, 2016, that would have provided impact investment SBICs additional benefits "to encourage qualified private equity fund managers with a focus on social impact to apply to the SBIC program." The SBA indicated that the cost of the proposed additional benefits was "not commensurate" with the benefits. The SBA also indicated that few qualified SBICs had applied to participate in the program, and that many of the program's participants would have applied to the SBIC program "regardless of the existence of the [impact investment program]." Early Stage SBICs On April 27, 2012, the SBA published a final rule in the Federal Register establishing a $1 billion early stage SBIC initiative (up to $150 million in leverage in FY2012 and up to $200 million in leverage per fiscal year thereafter until the limit is reached). As mentioned previously, the SBA is no longer seeking new applicants for the early stage SBIC initiative. Early stage SBICs are required to invest at least 50% of their financings in early stage small businesses, defined as small businesses that have never achieved positive cash flow from operations in any fiscal year. In recognition of the higher risk associated with investments in early stage small businesses, the initiative included "several new regulatory provisions intended to reduce the risk that an early stage SBIC would default on its leverage and to improve SBA's recovery prospects should a default occur." For example, early stage SBICs are required to raise more regulatory capital (at least $20 million) than debenture SBICs, impact investment SBICs (at least $5 million), and participating securities SBICs (at least $10 million). They are also subject to special distribution rules to require pro rata repayment of SBA leverage when making distributions of profits to their investors. In addition, early stage SBICs are provided less leverage (up to 100% of regulatory capital, $50 million maximum) than debenture SBICs and participating securities SBICs (up to 200% of regulatory capital, $175 million maximum per SBIC and $350 million for two or more SBICs under common control) and impact investment SBICs (up to 200% of regulatory capital, $175 million maximum). On May 1, 2012, the SBA published a notice in the Federal Register announcing its first annual call for venture capital fund managers to submit an application to become a licensed early stage SBIC. Thirty-three venture capital funds submitted preliminary application materials. After these materials were examined and interviews held, the SBA announced on October 23, 2012, that it had issued Green Light letters to six funds, formally inviting them to file license applications. The SBA's second, third, fourth, and fifth annual calls for venture capital fund managers to submit an application to become a licensed early stage SBIC took place on December 18, 2012, February 4, 2014, January 12, 2015, and February 2, 2016, respectively. Five of the 63 investment funds that applied to participate in the program were granted an early stage SBIC license. As of September 30, 2018, the five early stage SBICs had raised $251.3 million in private capital, received $138.4 million in SBA-guaranteed leverage, had $43.7 million in outstanding commitments, and invested $267.5 million in 82 small businesses. In FY2018, early stage SBICs invested $47.1 million in 36 small businesses. On September 19, 2016, the SBA published a notice of proposed rulemaking in the Federal Register , which included proposed changes to the early stage SBIC initiative to "make material improvements to the program" and "attract more qualified early stage fund managers." The SBA, at that time, indicated its intention to continue the initiative beyond its initial five-year term. As mentioned previously, the SBA stopped accepting new applications for the early stage SBIC initiative in 2017. In addition, on June 11, 2018, the SBA withdrew the September 19, 2016 proposed rule that included provisions designed to encourage qualified SBICs to participate in the initiative. Key Features of Regular SBIC Types Table 1 provides five key features distinguishing the SBA's debenture SBICs, participating securities SBICs, impact investment SBICs, and early stage SBICs the minimum amount of capital required to obtain a license; the amount of SBA leverage that can be received; the nature of the investments provided; a description of the requirements for repaying the SBA's leverage; and any profit participation requirements. SBIC Investments in Small Businesses SBICs provide equity capital to small businesses in various ways, including by purchasing small business equity securities (e.g., stock, stock options, warrants, limited partnership interests, membership interests in a limited liability company, or joint venture interests); making loans to small businesses, either independently or in cooperation with other private or public lenders, that have a maturity of no more than 20 years; purchasing debt securities from small businesses, which may be convertible into, or have rights to purchase, equity in the small business; and providing small businesses, subject to limitations, a guarantee of their monetary obligations to creditors not associated with the SBIC. SBICs are subject to statutory and regulatory restrictions concerning the nature of their approved investments. For example, SBICs are not allowed to directly or indirectly provide financing to any of their associates (e.g., officers, directors, and employees); control, either directly or indirectly, any small business on a permanent basis; invest, without SBA approval, more than specified percentages of their private (regulatory) capital in securities, commitments, or guarantees in any one small business (e.g., SBICs are not allowed to invest more than 30% of their private capital in any one small business if their investment plan includes two or more tiers of SBA leverage); invest in farmland, unimproved land, or any small business classified under Major Group 65 (Real Estate) of the Standard Industrial Classification (SIC) Manual, with the exception of title abstract companies, real estate agents, brokers, and managers; provide funds for small businesses whose primary business activity involves directly or indirectly providing funds to others, purchasing debt obligations, factoring, or leasing equipment on a long-term basis with no provision for maintenance or repair; or provide funds to a small business if the funds will be used substantially for a foreign operation. The SBA also regulates the interest rates and fees SBICs are allowed to charge small businesses on loans, debt securities, and equity financing. In 1999, the SBA introduced the low and moderate income investments (LMI) initiative to encourage SBICs to invest in small businesses located in inner cities and rural areas "that have severe shortages of equity capital" because investments in those areas "often are of a type that will not have the potential for yielding returns that are high enough to justify the use of participating securities." This ongoing initiative provides incentives to SBICs that invest in small businesses that have at least 50% of their employees or tangible assets located in a low-to-moderate income area (LMI Zone) or have at least 35% of their full-time employees with their primary residence in an LMI Zone. For example, unlike regular SBIC debentures that typically have a 10-year maturity, LMI debentures are available in two maturities, for 5 years and 10 years, plus the stub period. The stub period is the time between the debenture's issuance date and the next March 1 or September 1. The stub period allows all LMI debentures to have common March 1 or September 1 maturity dates to simplify administration of the program. In addition, LMI debentures are issued at a discount so that the proceeds that a SBIC receives for the sale of a debenture is reduced by (1) the debenture's interest costs for the first five years, plus the stub period; (2) the SBA's annual fee for the debenture's first five years, plus the stub period; and (3) the SBA's 2% leverage fee. As a result, these interest costs and fees are effectively deferred, freeing SBICs from the requirement to make interest payments on LMI debentures or pay the SBA's annual fees on LMI debentures for the first five years of a debenture, plus the stub period. In FY2018, SBICs made 609 investments in small businesses located in a LMI Zone, totaling nearly $1.03 billion—about 18.6% of the total amount invested. In 2007, P.L. 110-140 , the Energy Independence and Security Act of 2007, authorized the SBA to issue Energy Saving Debentures for the purpose of making "Energy Saving Qualified Investments," defined in the act as an investment "in a small business concern that is primarily engaged in researching, manufacturing, developing, or providing products, goods, or services that reduce the use or consumption of non-renewable energy resources." Energy Saving Debentures are structured as a discount debenture similar to LMI debentures. For example, there are no interest payments or SBA annual charge for the first five years of the Energy Saving Debenture, plus the stub period between the debenture's issuance date and the next March 1 or September 1 payment date. Leverage Leverage Drawdown A SBIC applies to the SBA for financial assistance (leverage) to secure the "SBA's conditional commitment to reserve a specific amount of leverage" for the SBIC's future use. If the application is approved, a SBIC draws down the leverage as it makes financial commitments. The SBA accepts draw applications from SBICs twice a month. When the SBA approves the draw, it issues a payment voucher to a SBIC (called an approval notice). The payment voucher has a term of approximately 60 days and provides a SBIC with the ability to draw funds on a daily basis. A debenture is executed in conjunction with each draw and held by an agent of a bank selected by the SBA (Federal Home Loan Bank of Chicago), which provides interim funding to the SBIC until a "SBIC's debenture(s) can be pooled with others and sold to the public, a process that occurs every six months [each March and September]." During the interim period, the bank charges a SBIC the London Interbank Offered Rate (LIBOR), plus a 30 basis point premium. The SBA determines the size of the debenture pool two weeks prior to each scheduled pooling date. All of "the debentures scheduled to be pooled are purchased and pooled together by an entity called the Investment Trust which is managed by the Bank of New York Mellon," and, as the pooling occurs, "the SBA signs an agreement with the Trust to guarantee all the interest and principal payments due on each of the debentures in the pool." The trust then securitizes the pool of debentures and issues new securities called trust certificates. Underwriters are hired to sell the trust certificates to investors in the public market. An offering circular is issued to notify investors of the trust certificates' availability, the terms of the securities, and information concerning how they can be purchased. The SBA operates the SBIC program on a zero-subsidy basis. To recoup its expenses should defaults occur, the SBA is authorized to charge SBICs a 3% origination fee for each debenture and for each participating security issued (1% at commitment and 2% at draw), an annual fee (not to exceed 1.38% for debentures and 1.46% for participating securities) on the leverage drawn, which is fixed at the time of the leverage commitment, and other administrative and underwriting fees that are adjusted annually. Debenture SBIC Leverage Requirements A licensed debenture SBIC in good standing with a demonstrated need for funds may apply to the SBA for financial assistance (leverage) of up to 300% of its private capital. However, the SBA has traditionally approved debenture SBICs for a maximum of 200% of their private capital, and no fund management team may exceed the allowable maximum amount of leverage of $175 million per SBIC and $350 million for two or more licenses under common control. Debenture SBICs obtain leverage from the sale of SBA-guaranteed debenture participation trust certificates. SBA-guaranteed debenture participation trust certificates may have a term of up to 15 years, although only one outstanding SBA-guaranteed debenture participation trust certificate has a term exceeding 10 years and all recent public offerings have specified a term of 10 years. Debenture SBICs are required to make semiannual payments on the interest due on the debenture, semiannual payments on the SBA's annual charge, and a lump sum principal payment to investors at maturity. SBICs are allowed to prepay SBA-guaranteed debentures without penalty. However, a SBA-guaranteed debenture must be prepaid in whole and not in part and can only be prepaid on a semiannual payment date. The debenture's coupon (interest) rate is determined by market conditions and the interest rate of 10-year Treasury securities at the time of the sale. Also, as mentioned previously, LMI debentures are available in two maturities, for 5 years and 10 years (plus the stub period). Because the SBA guarantees the debenture, investors are more likely to purchase a debenture participation trust certificate as opposed to others available on the market. They are also more likely to accept a lower coupon (interest) rate than what would be expected without the SBA's guarantee. As a result, the SBIC program enhances a SBIC's access to venture capital and reduces its cost of raising additional financial resources. Because debenture SBICs are required to make semiannual interest payments on the debenture and semiannual payments on the SBA's annual charge, they tend to focus their investments on mid- and later-stage small businesses that have a positive cash flow. Businesses with a positive cash flow have resources available to make payments to the debenture SBIC, either in the form of interest payments or dividends. In many instances, small businesses with positive cash flow are seeking capital for expansion. Participating Securities SBIC Leverage Requirements Although the SBA is no longer issuing new commitments for participating securities, the SBA is authorized to accept an application from licensed participating securities SBICs for leverage of up to 200% of their private capital. Also, no fund management team may exceed the allowable maximum amount of leverage of $175 million per SBIC and $350 million for two or more licenses under common control. Participating securities SBICs obtained leverage by issuing SBA-guaranteed participating securities. The SBA pooled these participating securities and sold SBA-guaranteed participating securities certificates, representing an undivided interest in the pool, to investors through periodic public offerings. SBA participating securities may have a term of up to 15 years, but all recent public offerings had a specified a term of 10 years. There were 35 public offerings of SBA-guaranteed participating securities certificates since the start of the participating securities program, amounting to just under $10.3 billion. The final SBA-guaranteed participating securities certificate, for $332 million, had a term of 10 years and was offered to investors on February 19, 2009, with delivery of the certificates on February 25, 2009. SBIC participating securities certificates provide for quarterly payments to investors from dividends on preferred stock, interest on an income bond, or a priority return on a preferred limited partnership equal to a specified interest rate on the principal amount and a lump sum principal payment at maturity. A participating securities SBIC is obligated to make these quarterly payments "only to the extent it has sufficient profits available to make such payments." If a participating securities SBIC is unable to make any required payment, the SBA will make the payment on its behalf. Because startup and early stage small businesses often are not initially profitable, the SBA included language in its participating securities' offering circulars that it "anticipates that it will be called upon routinely to make such … payments for the SBICs in the early years of the lives of such SBICs" and that it "expects to be reimbursed [by the SBIC] any amounts paid … under its guarantee over the life of a participating security." Because the SBA guaranteed the certificate, investors were more likely to purchase a SBIC participating securities certificate as opposed to others available on the market. They were also more likely to accept a lower payment rate than what would be expected without the SBA's guarantee. In addition, participating securities SBICs are more likely than debenture SBICs to invest in startup and early stage small businesses because the SBA is willing to make a participating securities SBIC's required quarterly payments to investors, at least during the early years of the investment. Because participating securities SBICs are not required to make these quarterly payments, they are encouraged to focus on a small business's long-term prospects for growth and profitability rather than on its prospects for having immediate, positive cash flow. As of December 31, 2018, the SBA had a guarantee on an outstanding unpaid principal balance of $11.3 billion in SBIC debentures, $18.0 million in SBIC participating securities, and $56.7 million in other, primarily SSBIC, financings. The SBA also had an outstanding commitment on $3.4 billion in SBIC debentures and $2.6 million in other, primarily SSBIC, financings. Impact Investment SBIC Leverage Requirements The SBA established the Impact Investment SBIC Initiative in 2011 to "target areas of critical national priority including underserved markets and communities facing barriers to access to credit and capital." On July 26, 2011, the SBA announced that the first impact investment SBIC license had been awarded to InvestMichigan! Mezzanine Fund. Licensed impact investment SBICs may apply to the SBA for leverage of up to 300% of their private capital, limited to $175 million. In addition, they may receive leverage amounting to no more than 100% of their private capital during any fiscal year (subject to the $175 million limit). The SBA generally limits impact investment SBICs to a maximum of 200% of their private capital, up to $175 million. Impact investment SBICs obtain leverage in the same way debenture SBICs obtain leverage—through the issuance of SBA-guaranteed debentures with a term of up to 10 years. They are also subject to the same terms and conditions as debenture SBICs, except they were provided an expedited application review process when new applications to the impact investment program were being accepted. Early Stage SBIC Leverage Requirements The SBA established the Early Stage Innovation SBIC Initiative in 2012 to "expand access to capital for early stage small businesses throughout the United States." A licensed early stage SBIC may apply to the SBA for leverage of up to 100% of its private capital, limited to $50 million. The SBA does not consider applications for leverage from an early stage SBIC applicant that is under common control with another early stage SBIC applicant or an existing early stage SBIC (unless the existing early stage SBIC has no outstanding leverage or leverage commitments and will not seek additional leverage in the future). Early stage SBICs obtain leverage in the same way that debenture SBICs obtain leverage—through the issuance of SBA-guaranteed debentures with a term of up to 10 years. However, early stage debentures come in two forms: early stage standard debentures and early stage discounted debentures. Early stage standard SBIC debentures are similar to standard SBIC debentures, but, instead of requiring semiannual payments on the debenture's interest and on the SBA's annual charge, they require quarterly payments on the debenture's interest and on the SBA's annual charge. In addition, early stage SBICs must maintain a reserve sufficient to pay the interest on the debenture and on the SBA's annual charges for the first 21 payment dates following the date of issuance (five years plus the length of time between the issue date and the next March 1, June 1, September 1, or December 1). Because early stage standard debentures require early stage SBICs to make quarterly payments, they are most appropriate for investments in small businesses that have established a positive cash flow enabling them to pay interest or dividends to the early stage SBIC. Early stage discounted debentures are issued at a discount (less than face value) equal to the first five years of interest on the debenture and the first five years of annual SBA charges. The discount eliminates the need for early stage SBICs to make interest payments on the debenture and to make payments on the SBA's annual charge for five years from the date of issuance, plus the stub period.  Early stage SBICs make quarterly payments on the debenture's interest and on the SBA's annual charge during years 6 through 10. They are also responsible for paying the debenture's principal amount when the debenture reaches its maturity date. Because early stage discounted debentures do not require interest payments or payments on the SBA's annual charge for five years, they are most appropriate for investments in small businesses that have not established a positive cash flow to pay interest or dividends to the early stage SBIC. As a result, early stage discounted debentures are designed to encourage investments in early stage small businesses, which by definition have not established a positive cash flow. Reporting Requirements Once licensed, each SBIC is required to file with the SBA an annual financial report that includes an audit by a SBA-approved independent public accountant. SBICs are also subject to annual on-site regulatory compliance examinations and required to provide the SBA a portfolio financing report within 30 days of the closing date for each financing of a small business; the value of their loans and investments within 90 days of the end of the fiscal year in the case of annual valuations and within 30 days following the close of other reporting periods; any material adverse changes in valuations at least quarterly (within 30 days following the close of the quarter); and copies of reports provided to investors, documents filed with the Securities and Exchange Commission, and documents pertaining to litigation or other legal proceedings, including criminal charges against any person required by the SBA complete a personal history statement in connection with the SBIC's license. SBIC Program Statistics As of December 31, 2018, there were 305 licensed SBICs in operation (227 debenture SBICs, 25 participating securities SBICs, 47 bank-owned, non-leveraged SBICs, and 6 SSBICs). As shown in Table 2 , the number of debenture SBICs has generally increased in recent years. However, the total number of licensed SBICs has stayed relatively the same in recent years, primarily due to the planned reduction in the number of participating securities SBICs and SSBICs. The SBA has made it a goal to increase the number of new SBIC licenses issued each year, with an emphasis on new debenture SBICs licenses, "to position the program for continued growth." Overall, SBICs pursue investments in a broad range of industries, geographic areas, and stages of investment. Some individual SBICs specialize in a particular field or industry and others invest more generally. Most SBICs concentrate on a particular stage of investment (i.e., startup, expansion, or turnaround) and identify a geographic area in which to focus. Total Financing From the inception of the SBIC program to December 31, 2018, SBICs have invested approximately $97.6 billion in approximately 181,185 financings to small businesses. As mentioned previously, as of December 31, 2018, the SBA had a guarantee on an outstanding unpaid principal balance of $11.3 billion in SBIC debentures, $18.0 million in SBIC participating securities, and $56.7 million in other, primarily SSBIC, financings. The SBA also had an outstanding commitment on $3.2 billion in SBIC debentures and $2.6 million in other, primarily SSBIC, financings. Including private investment, as of December 30, 2018, the SBIC program had invested or committed about $30.3 billion in small businesses, with the SBA's share of capital at risk about $14.5 billion. In FY2018, SBICs made 2,711 financings. The average financing amount was $2,029,730. In FY2018, SBIC funds were used primarily for acquiring an existing business (57.9%) and also for operating capital (18.0%), refinancing or refunding debt (13.0%), a new building or plant construction (0.9%), research and development (0.8%), purchasing machinery or equipment (0.6%), marketing activities (0.6%), plant modernization (0.4%) and other uses (7.8%). As shown in Table 3 , the total amount of SBIC financing declined during the recession (December 2007-June 2009), reached prerecession levels in FY2011, and has generally increased since then. In FY2018, the SBA committed to guarantee $2.52 billion in SBIC small business investments. SBICs invested another $2.98 billion from private capital for a total of $5.50 billion in financing for 1,151 small businesses. In addition, the amount of SBA leverage as a share of total financing provided has generally increased in recent years. For example, the SBA's leverage commitments accounted for 26.7% of total financing in FY2007, compared with 46.6% in FY2014, 40.6% in FY2015, 42.0% during FY2016, 34.2% in FY2017, and 45.8% in FY2018. The SBA was authorized to issue up to $3.0 billion in SBIC leverage from FY2006 through FY2013. As mentioned previously, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased that annual SBIC-leverage amount to $4 billion. For comparative purposes, private venture capital firms invested $26.0 billion in 3,417 deals in 2010, $36.3 billion in 4,234 deals in 2011, $33.1 billion in 4,680 deals in 2012, $36.4 billion in 5,176 deals in 2013, $60.0 billion in 5,998 deals in 2014, $78.1 billion in 6,098 deals in 2015, $63.8 billion in 5,679 deals in 2016, $76.4 billion in 5,824 deals in 2017, and $99.5 billion in 5,536 deals in 2018. In 2008, the Urban Institute released an analysis comparing debenture SBIC investments made from 1997 to 2005 to private-sector venture capital investments made during that time period in second stage business loans, third stage business loans, and bridge loans "because these investments are likely to be of the same character (debt with equity features) as those made by debenture SBICs." The Urban Institute found that debenture SBIC investments accounted for more than 62% of all venture capital financings in second stage business loans, third stage business loans, and bridge loans in the United States during that time period. However, because the average amount of a SBIC debenture investment was much smaller than the industry average, SBIC debenture investments accounted for "only 8% of total dollars invested." Financing to Specific Demographic Groups As shown in Table 4 , in FY2018, SBICs made 130 financings (4.8% of all financings) amounting to $132.4 million (2.4% of the total amount of financings) to minority-owned and -controlled small businesses. In addition, in FY2018, SBICs made 59 financings (2.2% of all financings) totaling $96.0 million (1.7% of the total amount financed) to women-owned small businesses and 25 financings (0.9% of all financings) totaling nearly $16.1 million (0.3% of the total amount financed) to veteran-owned small businesses. Research concerning private venture capital investment in minority-owned or women-owned small businesses is limited. As a result, it is difficult to find the data necessary to compare the SBIC program's investment in minority-owned or women-owned small businesses to the private sector's investment in these firms. In 2007, the SBA acknowledged at a congressional hearing on its investment programs that "women and minority representation in [the SBIC program] is low" and has been for many years. The SBA reported at that time that it did not control the investments made by SBICs, but it has tried to increase women and minority representation in the SBIC program by reaching out to venture capital firms, trade organizations, and others to better understand why women and minority representation in the SBIC program is low and by "finding debenture firms with minority representation on their investment committees and in senior management." However, despite these efforts, in 2009, the Small Business Investor Alliance (then called the National Association of Small Business Investment Companies) asserted at a congressional hearing on the SBA's capital access programs that the SBA's SBIC licensing process "has done an abysmal job at attracting and licensing funds led by women and minorities." During the 111 th Congress, S. 1831 , the Small Business Venture Capital Act of 2009, was introduced on October 21, 2009, and referred to the Senate Committee on Small Business and Entrepreneurship. No further action was taken on the bill. It would have encouraged SBIC investments in women-owned small businesses and socially and economically disadvantaged small business concerns by increasing the amount of leverage available to SBICs that invest at least 50% of their financings in small business concerns owned and controlled by women or socially and economically disadvantaged small business concerns. Financing by State As shown in Table 5 , in FY2018, SBICs provided financing to small businesses located in 48 states, the District of Columbia and Puerto Rico, with the most financing taking place in California (392 financings totaling over $1.0 billion), Texas (276 financings totaling $427.6 million), and New York (233 financings totaling $482.6 million). The previously mentioned 2008 Urban Institute comparative analysis of debenture SBIC financing from 1997 to 2005 found that the dollar volume of investments from debenture SBICs was more evenly distributed across the nation than from comparable private venture capital funds. For example, the Urban Institute found that California (45.8%) and Massachusetts (12.9%) received the largest share of the total dollar volume invested by private venture capital funds from 1997 to 2005. The two states accounted for more than half (58.7%) of the total dollar volume invested by private venture capital funds. In contrast, New York (18.7%) and California (11.1%) received the largest share of the total dollar volume invested by debenture SBICs from 1997 to 2005. The two states accounted for less than one-third (29.8%) of the total dollar volume invested by debenture SBICs. In addition, the top 10 states in terms of their share of the total dollar volume invested accounted for nearly 84% of the total invested by private venture capital funds, compared with 64% for debenture SBICs. A comparison of the state-by-state distribution of private-sector venture capital fund investments in 2018 and SBIC financings in FY2018 (see Table 5 ) suggests the Urban Institute's finding that SBICs investments were more evenly distributed across the nation than private-sector venture capital fund investments from 1997 to 2005 continues to be the case today. For example, during 2018, California (55.3%), New York (13.2%), Massachusetts (9.4%), and Texas (2.2%) received the largest shares of the total dollar volume invested by private venture capital funds. The four states accounted for more than four-fifths (80.1%) of the total dollar volume invested by private venture capital funds during that time period. In contrast, the four states with the largest share of the total volume invested by SBICs in FY2018 (California at 19.1%, New York, New York at 8.8%, Texas at 7.8%, and Illinois at 6.2%) accounted for 41.9% of the total dollar volume invested by SBICs. Legislative Activity P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), included provisions designed to increase the amount of leverage issued under the SBIC program by increasing the maximum amount of leverage available to an individual SBIC to 300% of its private capital or $150 million, whichever is less, and by increasing the maximum amount of leverage available for two or more licenses under common control to $225 million. It also encouraged SBIC investment in smaller enterprises by requiring SBICs licensed after the date of its enactment (February 17, 2009) to certify that at least 25% of all future financing dollars are invested in smaller enterprises. ARRA defined smaller enterprises as firms having either a net worth of no more than $6 million and average after-tax net income for the preceding two years of no more than $2 million or meeting the SBA's size standard for its industry classification. ARRA also encouraged SBIC investments in low-income areas by allowing a SBIC licensed on or after October 1, 2009, to elect to have a maximum leverage amount of $175 million, and $250 million for two or more licenses under common control, if the SBIC has invested at least 50% of its financings in low-income geographic areas and certified that at least 50% of its future investments will be in low-income geographic areas. As part of its Startup America Initiative, on January 31, 2012, the Obama Administration recommended that the SBIC program's annual authorization be increased to $4 billion from $3 billion and that the amount of SBA leverage available to licensees under common control (the multiple licenses/family of funds limit) be increased to $350 million from $225 million. On April 27, 2012, the SBA also published a final rule in the Federal Register establishing the $1 billion Early Stage Innovation SBIC Initiative (up to $150 million in SBA leverage in FY2012 and up to $200 million in SBA leverage per fiscal year thereafter until the limit is reached) to encourage SBIC program investments in early stage small businesses. As will be discussed, several bills have been introduced during recent Congresses to expand the SBIC program by increasing its annual authorization to $4 billion (enacted), increasing the multiple licenses/family of funds limit to $350 million (enacted), increasing the individual SBIC fund limit to $175 million (enacted), or authorizing a SBIC program specifically designed to encourage SBIC investments in business startups and other early stage small businesses (introduced). Legislation to Target Additional Assistance to Startup and Early Stage Small Businesses Some Members and small business advocates have proposed legislation to establish a "permanent" congressionally authorized SBIC program to target additional assistance to startup and early stage small businesses, which are generally viewed as relatively risky investments but also as having a relatively high potential for job creation. Advocates of targeting additional assistance to startup and early stage small businesses argue that the SBA's participating securities program was created to fill a perceived investment gap resulting from the SBA's debenture program's focus on mid- and later-stage small businesses. Because the SBA is no longer providing new licenses or leverage for participating securities SBICs, several Members have introduced legislation to create a new SBA program that would focus on the investment needs of startup and early stage small businesses. For example, during the 111 th Congress, the House passed, by a vote of 241-182, H.R. 5297 , the Small Business Jobs and Credit Act of 2010. Among its provisions, as passed by the House, H.R. 5297 would have authorized a $1 billion Small Business Early Stage Investment Program. The proposed program would have provided equity investment financing of up to $100 million in matching funds to each participating investment company. It would have required participating investment companies to invest in small businesses, with at least 50% of the financing in early stage small businesses, defined as those small businesses not having "gross annual sales revenues exceeding $15 million in any of the previous three years." The proposed program emphasized venture capital investments in startup companies operating in nine targeted industries. H.R. 5297 , as subsequently approved by Congress and signed into law by President Obama on September 27, 2010 ( P.L. 111-240 , the Small Business Jobs Act of 2010), did not include legislative language authorizing a Small Business Early Stage Investment Program. However, it authorized a three-year Intermediary Lending Pilot Program to provide direct loans to not more than 20 eligible nonprofit lending intermediaries each year, totaling not more than $20 million and $1 million per intermediary at an interest rate of 1%. The intermediaries, in turn, may make loans to new or growing small businesses, not to exceed $200,000 per business. The Intermediary Lending Pilot Program was funded for two years. Thirty-six lenders currently participate in the program. As mentioned previously, in 2012, the SBA established the early stage SBIC initiative to encourage SBIC investments in early stage small businesses. Also, during the 113 th Congress, H.R. 30 , the Small Business Investment Enhancement and Tax Relief Act, and S. 1285 , the Small Business Innovation Act of 2013, would have authorized the Administration to establish a separate SBIC program for early stage small businesses. The Small Business Innovation Act (of 2016) was reintroduced ( S. 3375 ) during the 114 th Congress. Discussion Advocates of efforts to encourage capital investment in startup and early stage small businesses, including Members of Congress who have served on the House or Senate Small Business Committees, have argued that the SBA's elimination of the SBIC participating securities program has created a gap "in the SBA's existing array of capital access programs, particularly in the provision of capital to early stage small businesses in capital-intensive industries." As Representative Nydia Velázquez argued on the House floor during congressional consideration of H.R. 5297 : This legislation, Mr. Chairman, also recognizes that capital markets are changing dramatically. Credit standards are stricter, and small businesses are now looking not only to loans and to credit cards to finance their operations, but they are also looking to equity investment to turn their ideas into reality. This has become even more pronounced as asset values have declined, leaving entrepreneurs with less collateral to borrow against. Unfortunately, small firms' access to venture capital and to equity investment has declined. Last year, such investments plummeted from $28 billion in 2008 to only $17 billion last year. This is due, in part, to the previous administration's decision to terminate the SBA's largest pure equity financing program—the Small Business Investment Company Participating Securities program. This has left many entrepreneurs who need equity investment to fulfill their business plans without a source of such financing. Opponents of efforts to encourage capital investment in startup and early stage small businesses have argued that such efforts could "pile unnecessary risk or costs onto taxpayers at a time when we're dealing with record debt and unsustainable deficit spending." During consideration of the proposed Small Business Early Stage Investment Program, opponents argued that it was untested, that it would likely encourage risky investments, and that the legislation required "only 50% of the funding … to be invested" in early stage small businesses. Legislation to Increase SBIC Financing Levels In 2009, the Small Business Investor Alliance characterized the SBIC program as "dramatically underused." It argued that the program's financing levels would increase if (1) the SBA further improved its licensing processing procedures to make them more timely and objective, (2) the percentage of SBIC regulatory capital allowed from state or local government entities was increased from its present maximum of 33%, and (3) the SBIC program's multiple licenses/family of funds limit (at that time $225 million for two or more licenses under common control) was increased to allow SBICs to have a series of investment funds in place, in which, for example, "one fund could be winding down, another could be at peak, and another could just be ramping up." During the 111 th Congress, H.R. 3854 , the Small Business Financing and Investment Act of 2009, which was passed by the House on October 29, 2009, and H.R. 5554 , the Small Business Assistance and Relief Act of 2010, which was not reported after being referred to five committees for consideration, proposed to encourage greater use of the SBIC program by increasing the maximum percentage of SBIC regulatory capital allowed from state or local government entities to 45% from 33%. Both measures would have also increased the SBIC program's multiple licenses/family of funds limit to $350 million from $225 million; increased the SBIC program's limit of $250 million to $400 million for multiple funds under common control that were licensed after September 30, 2009, and invested 50% of their dollars in low-income geographic areas; and increased the SBIC program's authorization level from to $5.5 billion from $3.0 billion in FY2011. The Obama Administration also recommended, as part of its Startup America Initiative (which included the SBA's $1 billion early stage SBIC initiative and $1 billion impact investment SBIC initiative), that the 112 th Congress adopt legislation to increase the SBIC program's annual authorization to $4 billion from $3 billion. The Administration recommended as well that the 112 th Congress adopt legislation to increase the amount of SBA leverage available to licensees under common control to $350 million from $225 million. During the 112 th Congress, H.R. 3219 , the Small Business Investment Company Modernization Act of 2011, would have encouraged greater utilization of the SBIC program by increasing the maximum amount of outstanding SBA leverage available to any single licensed SBIC from the lesser of 300% of its private capital or $150 million to the lesser of 300% of its private capital or $200 million if a majority of the managers of the company are experienced in managing one or more SBIC licensed companies. It would also have increased the maximum amount of outstanding SBA leverage available to two or more licenses under common control to $350 million from $225 million. S. 2136 , a bill to increase the maximum amount of leverage permitted under title III of the Small Business Investment Act of 1958, would have encouraged greater use of the SBIC program by increasing the maximum amount of outstanding SBA leverage available to two or more licenses under common control to $350 million from $225 million. It also would have increased the SBIC program's authorization level to $4 billion from $3 billion. On March 15, 2012, S.Amdt. 1833 , the INVEST in America Act of 2012, was offered on the Senate floor as an amendment in the nature of a substitute to H.R. 3606 , the Jumpstart Our Business Startups Act, which had previously passed the House. Two of the provisions in the amendment proposed to encourage greater use of the SBIC program by (1) increasing the maximum amount of outstanding SBA leverage available to two or more licenses under common control to $350 million from $225 million and (2) increasing the SBIC program's authorization level to $4 billion from $3 billion. The Senate later passed H.R. 3606 with amendments, which did not address the SBIC program. The House accepted the Senate amendments and passed the bill, which President Obama signed into law ( P.L. 112-106 ). S. 3442 , the SUCCESS Act of 2012, and S. 3572 , the Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012, would have, among other provisions, increased the SBIC program's authorization amount to $4 billion from $3 billion, increased the multiple licenses/family of funds limit to $350 million from $225 million, and annually adjusted the maximum outstanding leverage amount available to both individual SBICs and SBICs under common control to account for inflation. In addition, H.R. 6504 , the Small Business Investment Company Modernization Act of 2012, which was passed by the House on December 18, 2012, would have increased the SBIC program's multiple licenses/family of funds limit to $350 million from $225 million. During the 113 th Congress, as mentioned previously, P.L. 113-76 increased the annual leverage amount the SBA is authorized to provide to SBICs to $4 billion from $3 billion. In addition to increasing the program's authorization amount to $4 billion, S. 511 , the Expanding Access to Capital for Entrepreneurial Leaders Act (EXCEL Act) would have increased the program's multiple licenses/family of funds limit to $350 million from $225 million. S. 1285 , would have, among other provisions, also increased the program's multiple licenses/family of funds limit to $350 million. During the 114 th Congress, P.L. 114-113 , the Consolidated Appropriations Act, 2016, increased the SBIC program's multiple licenses/family of funds limit to $350 million. In addition, H.R. 5968 , the Small Business Investment Opportunity Act of 2016, introduced on September 8, 2016, and referred to the House Committee on Small Business, would have increased the maximum amount of leverage available to SBICs to 300% of the SBIC's private capital (200% in practice) or $170 million, whichever is less, from the current maximum of 300% of the SBIC's private capital (200% in practice) or $150 million, whichever is less. During the 115 th Congress, P.L. 115-187 , the Small Business Investment Opportunity Act of 2017, increased the maximum amount of leverage for individual SBICs to $175 million from $150 million. Discussion In 2010, the SBA announced that one of its goals for the SBIC program was to increase its "acceptance in the marketplace and increase the number of funds licensed and the amount of leverage issued so as to improve capital access for small businesses." The SBA asserted that ARRA's changes to the SBIC program would help it to achieve this goal. ARRA increased the maximum leverage available to SBICs to up "to three times the private capital raised by the SBIC, or $150 million, whichever is less, and $225 million for multiple licensees under common control" and increased "the maximum leverage amounts to $175 million for single funds and $250 million for multiple funds under common control who are licensed after September 30, 2009, and invest 50% of their dollars in low income geographic areas." As mentioned previously, P.L. 113-76 increased the annual leverage amount the SBA is authorized to provide to SBICs to $4 billion from $3 billion, P.L. 114-113 , the Consolidated Appropriations Act, 2016, increased the SBIC program's multiple licenses/family of funds limit to $350 million, and P.L. 115-187 , the Small Business Investment Opportunity Act of 2017, increased the maximum amount of leverage for individual SBICs to $175 million. Advocates of increasing the SBIC program's leverage limits have argued that these actions are necessary to help fill a perceived gap in the SBA's "array of capital access programs." In addition, they argue that the demise of the SBIC participating securities program and the current "underutilization" of the SBIC debentures program is preventing many small firms from accessing the capital necessary to fully realize their economic potential and assist in the national economic recovery. On the other hand, others worry about the potential risk that an expanded SBIC program has for the taxpayer, especially if investments are targeted at startup and early stage small businesses which, by definition, have a more limited credit history and a higher risk for default than businesses that have established positive cash flow. Concluding Observations Some Members of Congress have argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. In their view, encouraging greater utilization of the SBIC program will increase small business access to capital, result in higher levels of job creation and retention, and promote economic growth. For example, on March 19, 2012, during Senate consideration of the INVEST in America Act of 2012, then-Senator Olympia Snowe argued The amendment [ S.Amdt. 1833 ] I and Senator Landrieu introduced would also help small companies access capital by modifying the Small Business Investment Company, SBIC, Program to raise the amount of SBIC debt the Small Business Administration, SBA, can guarantee from $3 billion to $4 billion. It would also increase the amount of SBA guaranteed debt a team of SBIC fund managers who operate multiple funds can borrow. The SBIC provisions in this amendment have bipartisan support, are noncontroversial, come at no cost to taxpayers and will create jobs. We do not get many bills of this kind in the Senate anymore. One of the most difficult challenges facing new small businesses today is access to capital. The SBIC Program has helped companies like Apple, FedEx, Callaway Golf, and Outback Steakhouse become household names. As entrepreneurs and other aspiring small business owners well know, it takes money to make money. This legislation ensures that our entrepreneurs and high-growth companies have access to the resources they need so they can continue to drive America's economic growth and job creation in these challenging times. There is no reason why Congress should not approve this amendment to ensure capital is getting into the hands of America's job creators. This amendment will spur investment in capital-starved startup small businesses, which will play a critical role in leading the Nation of the devastating economic downturn from which we have yet to emerge. For those who may be unfamiliar, despite significant entrepreneurial demand for small amounts of capital, because of their substantial size, most private investment funds cannot dedicate resources to transactions below $5 million. The Nation's SBICs are working to fill that gap, especially even during these challenging times. Others worry about the potential risk an expanded SBIC program may have for increasing the federal deficit. In their view, the best means to assist small business, promote economic growth, and create jobs is to reduce business taxes and exercise federal fiscal restraint. For example, Representative Sam Graves, then-chair of the House Committee on Small Business, indicated in the Small Business Committee's FY2013 "views and estimates" letter to the House Budget Committee that the House Small Business Committee supported an increase in the SBIC program's authorization to $4 billion from $3 billion. However, he indicated that the committee opposed funding for the SBA's early stage SBIC initiative and impact investment SBIC initiative because of their potential to generate losses that could lead to higher SBIC fees or to the need to provide federal funds to subsidize the SBIC program. Representative Graves wrote in the FY2013 views and estimates letter that The debenture SBIC program is designed to provide equity injections to small businesses that have been operational and have a track record of cash-flow and profits. … The program is financially sound because the structure of repayments ensures that the government will not suffer significant losses. Thus, no changes are needed to the program and it operates on a zero subsidy basis without an appropriation. The SBA budget is fully supportive of this program and we concur in that recommendation, including raising the program level from $3 billion to $4 billion. Presumably, some of the additional program level (which will cost the federal government no money) will be used to support two new variations in the Debenture SBIC Program [the early stage SBIC initiative and the impact investment SBIC initiative] … Neither initiative has received authority from Congress nor had its operational principles assessed by the Committee prior to implementation. The Committee reiterates its recommendation from last year's views and estimates – no funds should be allocated from the additional debenture program levels for these two programs. The Committee on the Budget also should provide further protection to the existing debenture SBIC program by requiring any modifications to the program, whether a pilot program or not, be based on a new subsidy calculation that ensures the current debenture program will operate at zero subsidy without any increase in fees due to losses stemming from the Impact and Early Stage Innovation programs. The House Committee on Small Business's FY2016 views and estimates letter reiterated the committee's opposition to the funding of these two initiatives and recommended that any modifications to the SBIC program "whether a pilot program or not, be based on a new subsidy calculation that ensures the current debenture program will operate at zero subsidy without any increase in fees." As these quotations attest, congressional debate concerning the SBIC program has primarily involved assessments of the ability of small businesses to access capital from the private sector and evaluations of the program's risk, the effect of proposed changes on the program's risk, and the potential impact of the program's risk on the federal deficit. Empirical analysis of economic data can help inform debate concerning the ability of small businesses to access capital from the private sector and the extent of the program's risk, the effect of proposed changes on the program's risk, and the potential impact of the program's risk on the federal deficit. Additional data concerning SBIC investment impact on recipient job creation and firm survival might also prove useful. Appendix. Small Business Eligibility Requirements and Application Process Small Business Eligibility Requirements Only businesses that meet the SBA's definition of "small" may participate in the SBIC program. Businesses must meet either the SBA's size standard for the industry in which they are primarily engaged or the SBA's alternative size standard for the SBIC program. SBICs use the size standard that is most likely to qualify the company, typically the alternative size standard for the SBIC program. The current SBIC alternative size standard, which became effective on July 14, 2014, is tangible net worth not in excess of $19.5 million and average net income after federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $6.5 million. All of a company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. In addition, since 1997, the SBA has required SBICs to set aside a specified percentage of their financing for "businesses at the lower end of the permitted size range," primarily because "the financial size standards applicable to the SBIC program are considerably higher than those used in other SBA programs." P.L. 111-5 requires SBICs licensed after the date of its enactment (February 17, 2009) to certify that at least 25% of their future financing is invested in smaller enterprises. A smaller enterprise is a company that, together with any affiliates, either has net worth of no more than $6 million and average after-tax net income for the preceding two years of no more than $2 million or meets the SBA's size standard in the industry in which the applicant is primarily engaged. A SBIC licensed on or before February 17, 2009, that has not received any SBA leverage commitments after February 17, 2009, must have at least 20% of its aggregate financing dollars (plus 100% for leverage commitments over $90 million) invested in smaller enterprises. A SBIC licensed on or before February 17, 2009, that has received a SBA leverage commitment after February 17, 2009, must meet the 20% threshold (plus 100% for leverage commitments over $90 million) for financing provided before the date of the first leverage commitment issued after February 17, 2009, and the 25% threshold for financing made after such date. SBICs are not allowed to invest in the following: other SBICs, finance and investment companies or finance-type leasing companies, unimproved real estate, companies with less than 51% of their assets and employees in the United States, passive or casual businesses (those not engaged in a regular and continuous business operation), or companies that will use the proceeds to acquire farmland. In addition, SBICs may not provide funds for a small business whose primary business activity is deemed contrary to the public interest or if the funds will be used substantially for a foreign operation. Small Business Application Process Small business owners interested in receiving SBIC financing can search for active SBICs using the SBA's SBIC directory. The directory provides contact information for all licensed SBICs, sorted by state. It also includes the SBIC's preferred minimum and maximum financing size range, the type of capital provided (e.g., equity, mezzanine, subordinated debt, 1 st and 2 nd lien secured term, or preferred stock), funding stage preference (e.g., early stage, growing and expansion stage, or later stage), industry preference (e.g., business services, manufacturing, environmental services, or distribution), geographic preference (e.g., national, regional, or specific state or states), and a description of the firm's focus (e.g., equity capital to later stage companies for expansion and acquisition or targeting companies with revenues of at least $5 million and profitability at the time of financing). After locating a suitable SBIC, the small business owner presents the SBIC a business plan that addresses the business's operations, management, financial condition, and funding requirements. The typical business plan includes the following information: the name of the business as it appears on the official records of the state or community in which it operates; the city, county, and state of the principal location and any branch offices or facilities; the form of business organization and, if a corporation, the date and state of incorporation; a description of the business, including the principal products sold or services rendered; a history of the general development of the products or services during the past five years (or since inception); information about the relative importance of each principal product or service to the volume of the business and its profits; a description of the business's real and physical property and adaptability to other business ventures; a description of technical attributes of its products and facilities; detailed information about the business's customer base, including potential customers; a marketing survey or economic feasibility study; a description of the distribution system for the business's products or services; a descriptive summary of the competitive conditions in the industry in which the business is engaged, including its competitive position relative to its largest and smallest competitors; a full explanation and summary of the business's pricing policies; brief resumes of the business's management personnel and principal owners, including their ages, education, and business experience; banking, business, and personal references for each member of management and for the principal owners; balance sheets and profit and loss statements for the last three fiscal years (or from inception); detailed projections of revenues, expenses, and net earnings for the coming year; a statement of the amount of funding requested and the time requirements for the funds; the reasons for the request for funds and a description of the proposed uses; and a description of the benefits the business expects to gain from the financing (e.g., expansion, improvement in financial position, expense reduction, or increase in efficiency). Because SBICs typically receive hundreds of business plans per year, the SBA recommends that small business owners seek a personal referral or introduction to the particular SBIC fund manager being targeted to increase "the likelihood that the business plan will be carefully considered." According to the Small Business Investor Alliance, "a thorough study an SBIC must undertake before it can make a final decision could take several weeks or longer."

The Small Business Administration's (SBA's) Small Business Investment Company (SBIC) program is designed to enhance small business access to venture capital by stimulating and supplementing "the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply." Facilitating the flow of capital to small businesses to stimulate the national economy was, and remains, the SBIC program's primary objective. As of December 31, 2018, there were 305 privately owned and managed SBA-licensed SBICs providing small businesses private capital the SBIC has raised (called regulatory capital) and funds the SBIC borrows at favorable rates (called leverage) because the SBA guarantees the debenture (loan obligation). SBICs pursue investments in a broad range of industries, geographic areas, and stages of investment. Some SBICs specialize in a particular field or industry, and others invest more generally. Most SBICs concentrate on a particular stage of investment (i.e., startup, expansion, or turnaround) and geographic area. The SBIC program currently has invested or committed about $30.3 billion in small businesses, with the SBA's share of capital at risk about $14.5 billion. In FY2018, the SBA committed to guarantee $2.52 billion in SBIC small business investments. SBICs invested another $2.98 billion from private capital for a total of $5.50 billion in financing for 1,151 small businesses. In recent years, some Members of Congress have argued that the program should be expanded as a means to stimulate economic activity and create jobs. For example, P.L. 113-76, the Consolidated Appropriations Act, 2014, increased the annual amount of leverage the SBA is authorized to provide to SBICs to $4 billion from $3 billion. P.L. 114-113, the Consolidated Appropriations Act, 2016, increased the amount of outstanding leverage allowed for two or more SBIC licenses under common control (the multiple licenses/family of funds limit) to $350 million from $225 million. P.L. 115-187, the Small Business Investment Opportunity Act of 2017, increased the amount of outstanding leverage allowed for individual SBICs to $175 million from $150 million. Others worry that an expanded SBIC program could result in losses and increase the federal deficit. In their view, the best means to assist small business, promote economic growth, and create jobs is to reduce business taxes and exercise federal fiscal restraint. Some Members have also proposed that the program target additional assistance to startup and early stage small businesses, which are generally viewed as relatively risky investments but also as having a relatively high potential for job creation. During the Obama Administration, the SBA established a five-year, early stage SBIC initiative. Early stage SBICs are required to invest at least 50% of their investments in early stage small businesses, defined as small businesses that have never achieved positive cash flow from operations in any fiscal year. The SBA stopped accepting new applicants for the early stage SBIC initiative in 2017. This report describes the SBIC program's structure and operations, focusing on SBIC eligibility requirements, investment activity, and program statistics. It also includes information concerning the SBIC program's debenture SBIC program, participating securities SBIC program, impact investment SBIC program (targeting underserved markets and communities facing barriers to access to credit and capital), and early stage SBIC initiative.

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Introduction and Overview The Energy and Water Development appropriations bill includes funding for civil works projects of the U.S. Army Corps of Engineers (USACE), the Department of the Interior's Central Utah Project (CUP) and Bureau of Reclamation (Reclamation), the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). Figure 1 compares the major components of the Energy and Water Development bill from FY2017 through the FY2020 request. President Trump submitted his FY2020 detailed budget proposal to Congress on March 18, 2019 (after submitting a general budget overview on March 11). The budget requests for agencies included in the Energy and Water Development appropriations bill total $38.02 billion—$6.64 billion (15%) below the FY2019 appropriation. (See Table 3 .) A $1.309 billion increase (12%) is proposed for DOE nuclear weapons activities. For FY2019, the conference agreement on H.R. 5895 ( H.Rept. 115-929 ) provided total Energy and Water Development appropriations of $44.66 billion—3% above the FY2018 level and 23% above the FY2019 request. The bill was signed by the President on September 21, 2018 ( P.L. 115-244 ). Figures for FY2019 exclude emergency supplemental appropriations totaling $17.419 billion provided to USACE and DOE for natural disaster response by the Bipartisan Budget Act of 2018 ( P.L. 115-123 ), signed February 9, 2018. For more details, see CRS Report R45258, Energy and Water Development: FY2019 Appropriations , by Mark Holt and Corrie E. Clark, and CRS Report R45326, Army Corps of Engineers Annual and Supplemental Appropriations: Issues for Congress , by Nicole T. Carter. The FY2020 budget request proposes substantial reductions from the FY2019 enacted level for DOE energy research and development (R&D) programs, including a reduction of $178 million (-24%) in fossil fuels and $502 million (-38%) in nuclear energy. Energy efficiency and renewable energy R&D would decline by $1.724 billion (-83%). DOE science programs would be reduced by $1.039 billion (-16%). Programs targeted by the budget for elimination or phaseout include energy efficiency grants, the Advanced Research Projects Agency—Energy (ARPA-E), and loan guarantee programs. Funding would be reduced for USACE by $2.172 billion (-31%), and Reclamation and CUP by $462 million (-29%). Congress did not enact similar reductions included in the FY2018 and FY2019 budget requests. Budgetary Limits Congressional consideration of the annual Energy and Water Development appropriations bill is affected by certain procedural and statutory budget enforcement measures. These consist primarily of limits associated with the budget resolution on total discretionary spending and allocations of this amount that apply to spending under the jurisdiction of each appropriations subcommittee. Statutory budget enforcement is derived from the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The BCA established separate limits on defense and nondefense discretionary spending. These limits are in effect for each of the fiscal years from FY2012 through FY2021, and are primarily enforced by an automatic spending reduction process called sequestration, in which a breach of a spending limit would trigger across-the-board cuts within that spending category. The BCA's statutory discretionary spending limits were increased for FY2018 and FY2019 by the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), enacted February 9, 2018. However, the BCA discretionary spending limits have not been increased for FY2020. As a result, the limits currently in place for FY2020 are substantially lower than the limits that were in place for FY2019. For discretionary defense spending, the FY2020 limit drops from $647 billion to $576 billion (-11%), while the nondefense limit drops from $597 billion to $542 billion (-9%). A bill to raise the defense and nondefense spending limits for FY2020 and FY2021 was reported by the House Budget Committee April 5, 2019 ( H.R. 2021 , H.Rept. 116-35 ). (For more information, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions , by Grant A. Driessen and Megan S. Lynch.) Funding Issues and Initiatives Several issues raised by the Administration's budget request could generate controversy during congressional consideration of Energy and Water Development appropriations for FY2020. The issues described in this section—listed approximately in the order the affected agencies appear in the Energy and Water Development bill—were selected based on the total funding involved, the percentage of proposed increases or decreases, and potential impact on broader public policy considerations. USACE and Reclamation Budgets For USACE, the Trump Administration requested $4.827 billion for FY2020, which is $2.172 billion (-31%) below the FY2019 appropriation. The request includes no funding for initiating new studies and construction projects (referred to as new starts). The FY2020 request seeks to limit funding for ongoing navigation and flood risk-reduction construction projects to those whose benefits are at least 2.5 times their costs, or projects that address safety concerns. Many congressionally authorized USACE projects would not meet that standard. The Administration also proposes to transfer the Formerly Utilized Sites Remedial Action Program from USACE to DOE. For Reclamation, FY2020 funding would be reduced by $461.6 million (29%) from the FY2019 level, to $1.11 billion. For more details, see CRS In Focus IF11137, Army Corps of Engineers: FY2020 Appropriations , by Nicole T. Carter and Anna E. Normand; CRS In Focus IF11158, Bureau of Reclamation: FY2020 Appropriations , by Charles V. Stern; and CRS Report R45326, Army Corps of Engineers Annual and Supplemental Appropriations: Issues for Congress , by Nicole T. Carter. Power Marketing Administration Reforms: Divestiture, Rate Reform, and Repeal of Borrowing Authority DOE's FY2020 budget request includes three mandatory proposals related to the Power Marketing Administrations (PMAs)—Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA). PMAs sell the power generated by the dams operated by Reclamation and USACE. The Administration proposes to divest the assets of the three PMAs that own transmission infrastructure: BPA, SWPA, and WAPA. These assets consist of thousands of miles of high voltage transmission lines and hundreds of power substations. The budget request projects that mandatory savings from the sale of these assets would total approximately $5.8 billion over a 10-year period. The FY2020 budget request includes a proposal to repeal the borrowing authority for WAPA's Transmission Infrastructure Program, which facilitates the delivery of renewable energy resources. The FY2020 budget also proposes eliminating the statutory requirement that PMAs limit rates to amounts necessary to recover only construction, operations, and maintenance costs; the budget proposes that the PMAs instead transition to a market-based approach to setting rates. The Administration has estimated that this proposal would yield $1.9 billion in new revenues over 10 years. The budget also calls for repealing $3.25 billion in borrowing authority provided to WAPA for transmission projects enacted under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). The proposal is estimated to save $640 million over 10 years. All of these proposals would need to be enacted in authorizing legislation, and no congressional action has been taken on them to date. The proposals have been opposed by groups such as the American Public Power Association and the National Rural Electrical Cooperative Association, and they have been the subject of opposition letters to the Administration from several regionally based bipartisan groups of Members of Congress. PMA reforms have been supported by some policy research institutes, such as the Heritage Foundation. For further information, see CRS Report R45548, The Power Marketing Administrations: Background and Current Issues , by Richard J. Campbell. Termination of Energy Efficiency Grants The FY2020 budget request proposes to terminate both the DOE Weatherization Assistance Program and the State Energy Program (SEP). The Weatherization Assistance Program provides formula grants to states to fund energy efficiency improvements for low-income housing units to reduce their energy costs and save energy. The SEP provides grants and technical assistance to states for planning and implementation of their energy programs. Both the weatherization and SEP programs are under DOE's Office of Energy Efficiency and Renewable Energy (EERE). The weatherization program received $257 million and SEP $55 million for FY2019, after also having been proposed for elimination in that year's budget request, as well as in FY2018. According to DOE, the proposed elimination of the grant programs is "due to a departmental shift in focus away from deployment activities and towards early-stage R&D." Proposed Cuts in Energy R&D Appropriations for DOE R&D on energy efficiency, renewable energy, nuclear energy, and fossil energy would be reduced from $4.133 billion in FY2019 to $1.729 billion (-58%) under the Administration's FY2020 budget request. Major proposed reductions include bioenergy technologies (-82%), vehicle technologies (-79%), natural gas technologies (-79%), advanced manufacturing (-75%), building technologies (-75%), wind energy (-74%), solar energy (-73%), geothermal technologies (-67%), and nuclear fuel cycle R&D (-66%). DOE says the proposed reductions would primarily affect the later stages of energy research, which tend to be the most costly. "The Budget focuses DOE resources toward early-stage R&D, where the Federal role is strongest, and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies," according to the FY2020 DOE request. Similar reductions proposed by the Administration for FY2019 were not enacted. Nuclear Waste Management The Administration's FY2020 budget request, for the first time since FY2010, would provide new funding for a proposed nuclear waste repository at Yucca Mountain, NV; similar Administration requests for the repository project were not included in the enacted funding measures for FY2018 and FY2019. Under the FY2020 request, DOE would receive $116 million to seek an NRC license for the repository and to develop interim nuclear waste storage capacity. NRC would receive $38.5 million to consider DOE's application. DOE's total of $116 million in nuclear waste funding would come from two appropriations accounts: $90 million from Nuclear Waste Disposal and $26 million from Defense Nuclear Waste Disposal (to pay for defense-related nuclear waste that would be disposed of at Yucca Mountain). DOE submitted a license application for the Yucca Mountain repository in 2008, but NRC suspended consideration in 2011 for lack of funding. The Obama Administration had declared the Yucca Mountain site "unworkable" because of opposition from the state of Nevada. The House voted to provide the Yucca Mountain funding requested for FY2018 and a $100 million increase for FY2019, but the Senate Appropriations Committee did not include it for FY2018, and it was not included in the Senate-passed bill for FY2019. Also as in FY2018, the FY2019 Senate bill included an authorization for a pilot program to develop an interim nuclear waste storage facility at a voluntary site (§304). The enacted FY2019 appropriations measure did not include the House-passed funding for Yucca Mountain or the Senate's nuclear waste pilot program provisions. For more background, see CRS Report RL33461, Civilian Nuclear Waste Disposal , by Mark Holt. Elimination of Energy Loans and Loan Guarantees The FY2020 budget request would halt further loans and loan guarantees under DOE's Advanced Technology Vehicles Manufacturing Loan Program and the Title 17 Innovative Technology Loan Guarantee Program. Similar proposals to eliminate the programs in FY2018 and FY2019 were not enacted. The FY2020 budget request would also halt further loan guarantees under DOE's Tribal Energy Loan Guarantee Program. Under the FY2020 budget proposal, DOE would continue to administer its existing portfolio of loans and loan guarantees. Unused prior-year authority, or ceiling levels, for loan guarantee commitments would be rescinded, as well as $169.5 million in unspent appropriations to cover loan guarantee "subsidy costs" (which are primarily intended to cover potential losses). On March 22, 2019, after the FY2020 budget request had been submitted, DOE provided $3.7 billion in additional Title 17 loan guarantees for two new reactors under construction at the Vogtle nuclear plant in Georgia. The Vogtle project had previously received $8.3 billion in loan guarantees under the DOE program. International Thermonuclear Experimental Reactor The Administration's request for DOE includes $107 million in FY2020 for the U.S. contribution to the International Thermonuclear Experimental Reactor (ITER), which is under construction in France by a multinational consortium. "ITER will be the first fusion device to maintain fusion for long periods of time" and is to lay the technical foundation "for the commercial production of fusion-based electricity," according to the consortium's website. The FY2020 DOE appropriation request, 19% below the FY2020 level, would pay for components supplied by U.S. companies for the project, such as central solenoid superconducting magnet modules. ITER has long attracted congressional concern about management, schedule, and cost. The United States is to pay 9% of the project's construction costs, including contributions of components, cash, and personnel. Other collaborators in the project include the European Union, Russia, Japan, India, South Korea, and China. The total U.S. share of the cost was estimated in 2015 at between $4.0 billion and $6.5 billion, up from $1.45 billion to $2.2 billion in 2008. DOE funding for the project was $122 million in FY2018 and $132 million in FY2019. Elimination of Advanced Research Projects Agency—Energy The Trump Administration's FY2020 budget would eliminate the Advanced Research Projects Agency—Energy (ARPA-E) and rescind $287 million of the agency's unobligated balances. ARPA-E funds research on technologies that are determined to have potential to transform energy production, storage, and use. "This elimination facilitates opportunities to integrate the positive aspects of ARPA-E into DOE's applied energy research programs," according to the DOE request. The Administration also proposed to terminate ARPA-E in its FY2018 and FY2019 budget requests, but Congress increased the program's funding in both years. Because ARPA-E provides advance funding for projects for up to three years, oversight and management of the program would still be required during a phaseout period. According to the Administration budget request, "ARPA-E will utilize the remainder of its unobligated balances to execute the multi-year termination of the program, with all operations ceasing by FY 2022." Weapons Activities The FY2020 budget request for DOE Weapons Activities is 12% greater than the FY2019 enacted level ($12.4 billion vs. $11.1 billion). Weapons Activities programs are carried out by the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE. Under Weapons Activities, FY2020 funding for nuclear warhead life-extension programs (LEPs) would increase by 10% ($2.1 billion vs $1.9 billion). The two most notable increases within that account are the funding request for W80-4 LEP, which increases by 37% ($898.6 million vs. $654.8 million) and the initiation of funding for the W87-1 LEP. The increase in the request for the W80-4 warhead, which is due to be carried on the new long-range standoff weapon (a new cruise missile), apparently is the result of a new budget estimate, as the Department of Defense is not accelerating development of the missile. The FY2020 request seeks $112 million for the W87-1 warhead (formerly the Interoperable Warhead 1, or IW-I), which received $53 million in FY2019. This warhead is to be carried by the Ground Based Strategic Deterrent, a new land-based missile that is scheduled to enter the force in the 2030s. The FY2020 budget request seeks $10 million for the W76-2 LEP, down from $65 million in FY2019. Work on this warhead is nearly complete. It is a low-yield modification of the current W76 warhead carried by U.S. submarine-launched ballistic missiles. It remains controversial in Congress despite its relatively low price tag. In FY2020, NNSA is seeking $51.5 million, in the Stockpile Systems account, for surveillance efforts for the B83 gravity bomb, the most powerful bomb in the U.S. inventory. This effort represents a 47% increase over the $35 million request in FY2019. The Obama Administration had planned to retire this bomb, but the Trump Administration reversed that decision in its 2018 Nuclear Posture Review. This decision may also prove controversial, as several Senators have been vocal supporters of the plan to retire the bomb. Within the Strategic Materials account in the NNSA budget, funding for Plutonium Sustainment would increase 97%, from $361 million enacted for FY2019 to $712 million requested for FY2020. This increase would support the Administration's plans to produce plutonium pits (or cores) for nuclear warheads at two facilities—Los Alamos National Laboratory in New Mexico and the Savannah River Site in South Carolina. The Administration is seeking $410 million to begin conceptual design and pre-Critical Decision (CD)-1 activities at Savannah River. For more information, see CRS Report R44442, Energy and Water Development Appropriations: Nuclear Weapons Activities , by Amy F. Woolf. Cleanup of Former Nuclear Sites DOE's Office of Environmental Management (EM) is responsible for environmental cleanup and waste management at the department's nuclear facilities. The total FY2020 appropriations request for EM activities of $6.469 billion would be a decrease of $706 million (-10%) from FY2019. The budgetary components of the EM program are Defense Environmental Cleanup (-9%), Non-Defense Environmental Cleanup (-20%), and the Uranium Enrichment Decontamination and Decommissioning Fund (-15%). The FY2020 request includes a proposal to transfer management of the Formerly Utilized Sites Remedial Action Program (FUSRAP) from USACE to the Office of Legacy Management (LM), the DOE office responsible for long-term stewardship of remediated sites. The FY2020 LM budget request includes $141 million for FUSRAP, down from $150 million appropriated to USACE for the program in FY2019. According to the DOE budget justification, "USACE will continue to conduct cleanup of FUSRAP sites on a reimbursable basis." Bill Status and Recent Funding History Table 1 indicates the steps during consideration of FY2020 Energy and Water Development appropriations. (For more details, see the CRS Appropriations Status Table at http://www.crs.gov/AppropriationsStatusTable/Index .) As of the publication date of this report, no markups had been held. Table 2 includes budget totals for energy and water development appropriations enacted for FY2011 through FY2019, plus the FY2020 request. Description of Major Energy and Water Programs The annual Energy and Water Development appropriations bill includes four titles: Title I—Corps of Engineers—Civil; Title II—Department of the Interior (Central Utah Project and Bureau of Reclamation); Title III—Department of Energy; and Title IV—Independent Agencies, as shown in Table 3 . Major programs in the bill are described in this section in the approximate order they appear in the bill. Previous appropriations and budget recommendations for FY2020 are shown in the accompanying tables, and additional details about many of these programs are provided in separate CRS reports as indicated. For a discussion of current funding issues related to these programs, see " Funding Issues and Initiatives ," above. Congressional clients may obtain more detailed information by contacting CRS analysts listed in CRS Report R42638, Appropriations: CRS Experts , by James M. Specht and Justin Murray. Agency Budget Justifications FY2020 budget justifications for the largest agencies funded by the annual Energy and Water Development appropriations bill can be found through the following links: Title I, U.S. Army Corps of Engineers, Civil Works, http://www.usace.army.mil/Missions/CivilWorks/Budget Title II Bureau of Reclamation, https://www.usbr.gov/budget/ Central Utah Project, https://www.doi.gov/sites/doi.gov/files/uploads/fy2020_cupca_budget_justification.pdf Title III, Department of Energy, https://www.energy.gov/cfo/downloads/fy-2020-budget-justification Title IV, Independent Agencies Appalachian Regional Commission, http://www.arc.gov/images/newsroom/publications/fy2020budget/FY2020PerformanceBudgetMar2019.pdf Nuclear Regulatory Commission, https://www.nrc.gov/docs/ML1906/ML19065A279.pdf Defense Nuclear Facilities Safety Board, https://www.dnfsb.gov/about/congressional-budget-requests Nuclear Waste Technical Review Board, http://www.nwtrb.gov/about-us/plans Army Corps of Engineers USACE is an agency in the Department of Defense with both military and civilian responsibilities. Under its civil works program, which is funded by the Energy and Water appropriations bill, USACE plans, builds, operates, and in some cases maintains water resources facilities for coastal and inland navigation, riverine and coastal flood risk reduction, and aquatic ecosystem restoration. In recent decades, Congress has generally authorized Corps studies, construction projects, and other activities in omnibus water authorization bills, typically titled Water Resources Development Acts (WRDA), prior to funding them through appropriations legislation. Recent Congresses enacted the following omnibus water resources authorization acts: in June 2014, the Water Resources Reform and Development Act of 2014 (WRRDA, P.L. 113-121 ); in December 2016, the Water Resources Development Act of 2016 (Title I of P.L. 114-322 , the Water Infrastructure Improvements for the Nation Act [WIIN]); and in October 2018, the Water Resources Development Act of 2018 (Title I of P.L. 115-270 , America's Water Infrastructure Act of 2018 [AWIA 2018]). These acts consisted largely of authorizations for new USACE projects, and they altered numerous USACE policies and procedures. Unlike in highways and municipal water infrastructure programs, federal funds for USACE are not distributed to states or projects based on formulas or delivered via competitive grants. Instead, USACE generally is directly involved in planning, designing, and managing the construction of projects that are cost-shared with nonfederal project sponsors. Prior to FY2010, in addition to site-specific project funding included in the President's annual budget request for USACE, Congress, during the discretionary appropriations process, had identified many additional USACE projects to receive funding or had adjusted the funding levels for the projects identified in the President's request. Starting in the 112 th Congress, site-specific project line items added or increased by Congress (i.e., earmarks) became subject to House and Senate earmark moratorium policies. As a result, Congress generally has not added funding at the project level since FY2010. In lieu of the project-based increases, Congress has included "additional funding" for select categories of USACE projects and provided direction and limitations on the use of these funds. For more information, CRS In Focus IF11137, Army Corps of Engineers: FY2020 Appropriations , by Nicole T. Carter and Anna E. Normand. Previous appropriations and the President's request for FY2020 are shown in Table 4 . Bureau of Reclamation and Central Utah Project Most of the large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau of Reclamation. While the Corps of Engineers built hundreds of flood control and navigation projects, Reclamation's original mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West for farming and ranching. Reclamation has evolved into an agency that assists in meeting the water demands in the West while working to protect the environment and the public's investment in Reclamation infrastructure. The agency's municipal and industrial water deliveries have more than doubled since 1970. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs, in 17 western states. These projects provide water to approximately 10 million acres of farmland and 31 million people. Reclamation is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control, recreation, and other benefits. Reclamation facility operations are often controversial, particularly for their effect on fish and wildlife species and because of conflicts among competing water users during drought conditions. As with the Corps of Engineers, the Reclamation budget is made up largely of individual project funding lines, rather than general programs that would not be covered by congressional earmark requirements. Therefore, as with USACE, these Reclamation projects have often been subject to earmark disclosure rules. The current moratorium on earmarks restricts congressional steering of money directly toward specific Reclamation projects. Reclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, dam safety, and ecosystem restoration, among others. Reclamation also typically requests funds in a number of smaller accounts, and has proposed additional accounts in recent years. Implementation and oversight of the Central Utah Project (CUP), also funded by Title II, is conducted by a separate office within the Department of the Interior. For more information, see CRS In Focus IF11158, Bureau of Reclamation: FY2020 Appropriations , by Charles V. Stern. Previous appropriations and recommendations for FY2020 are shown in Table 5 . Department of Energy The Energy and Water Development bill has funded all DOE programs since FY2005. Major DOE activities include (1) research and development (R&D) on renewable energy, energy efficiency, nuclear power, fossil energy, and electricity; (2) the Strategic Petroleum Reserve; (3) energy statistics; (4) general science; (5) environmental cleanup; and (6) nuclear weapons and nonproliferation programs. Table 6 provides the recent funding history for DOE programs, which are briefly described further below. Energy Efficiency and Renewable Energy DOE's Office of Energy Efficiency and Renewable Energy (EERE) conducts research and development on transportation energy technology, energy efficiency in buildings and manufacturing processes, and the production of solar, wind, geothermal, and other renewable energy. EERE also administers formula grants to states for making energy efficiency improvements to low-income housing units and for state energy planning. The Sustainable Transportation program area includes electric vehicles, vehicle efficiency, and alternative fuels. DOE's electric vehicle program aims to "reduce the cost of electric vehicle batteries by more than half, to less than $100/kWh [kilowatt-hour] (ultimate goal is $80/kWh), increase range to 300 miles, and decrease charge time to 15 minutes or less." DOE's vehicle fuel cell program is focusing on the costs of fuel cells and their hydrogen fuel. According to the FY2020 budget request, "To be cost competitive with gasoline-powered internal combustion engines on a cents-per-mile driven basis, the cost of hydrogen delivered and dispensed needs to be less than $4/gge [gasoline gallon equivalent] (untaxed), and the cost of a durable fuel cell system to be less than $40/kW." Bioenergy goals include the development of "drop-in" fuels—fuels that would be largely compatible with existing energy infrastructure and vehicles, with a goal of $3/gge. Renewable power programs focus on electricity generation from solar, wind, water, and geothermal sources. The solar energy program has a goal of achieving, by 2030, costs of 3 cents per kWh for unsubsidized, utility-scale photovoltaics (PV). Wind R&D is to focus on early-stage research and testing to reduce costs and improve performance and reliability. The geothermal program is to focus on developing "enhanced geothermal systems" with an electricity generation cost target of 20.8 cents/kWh by 2022. In the energy efficiency program area, the advanced manufacturing program focuses on improving the energy efficiency of manufacturing processes and on the manufacturing of energy-related products. The building technologies program includes R&D on lighting, space conditioning, windows, and control technologies to reduce building energy-use intensity. The energy efficiency program also provides weatherization grants to states for improving the energy efficiency of low-income housing units and state energy planning grants. For more details, see CRS Report R44980, DOE's Office of Energy Efficiency and Renewable Energy (EERE): Appropriations Status , by Corrie E. Clark. Electricity Delivery, Cybersecurity, Energy Security, and Energy Reliability The Office of Cybersecurity, Energy Security, and Emergency Response (CESER) was created from programs that were previously part of the Office of Electricity Delivery and Energy Reliability. The programs that were not moved into CESER became part of the DOE Office of Electricity (OE). OE's mission is to lead DOE efforts "to strengthen, transform, and improve energy infrastructure so that consumers have access to secure and resilient sources of energy." Major priorities of OE are developing a model of North American energy vulnerabilities, pursuing megawatt-scale electricity storage, integrating electric power system sensing technology, and analyzing electricity policy issues. The office also includes the DOE power marketing administrations, which are funded from separate appropriations accounts. CESER is the federal government's lead entity for energy sector-specific responses to energy security emergencies—whether caused by physical infrastructure problems or by cybersecurity issues. The office conducts R&D on energy infrastructure security technology; provides energy sector security guidelines, training, and technical assistance; and enhances energy sector emergency preparedness and response. DOE's Multiyear Plan for Energy Sector Cybersecurity describes the department's strategy to "strengthen today's energy delivery systems by working with our partners to address growing threats and promote continuous improvement, and develop game-changing solutions that will create inherently secure, resilient, and self-defending energy systems for tomorrow." The plan includes three goals that DOE has established for energy sector cybersecurity: strengthen energy sector cybersecurity preparedness; coordinate cyber incident response and recovery; and accelerate game-changing research, development, and demonstration (RD&D) of resilient energy delivery systems. Nuclear Energy DOE's Office of Nuclear Energy (NE) "focuses on three major mission areas: the nation's existing nuclear fleet, the development of advanced nuclear reactor concepts, and fuel cycle technologies," according to DOE's FY2020 budget justification. It calls nuclear energy "a key element of United States energy independence, energy dominance, electricity grid resiliency, national security, and clean baseload power." The Reactor Concepts program area includes research on advanced reactors, including advanced small modular reactors, and research to enhance the "sustainability" of existing commercial light water reactors. Advanced reactor research focuses on "Generation IV" reactors, as opposed to the existing fleet of commercial light water reactors, which are generally classified as generations II and III. R&D under this program focuses on advanced coolants, fuels, materials, and other technology areas that could apply to a variety of advanced reactors. To help develop those technologies, the Reactor Concepts program is developing a Versatile Test Reactor that would allow fuels and materials to be tested in a fast neutron environment (in which neutrons would not be slowed by water, graphite, or other "moderators"). Research on extending the life of existing commercial light water reactors beyond 60 years, the maximum operating period currently licensed by NRC, is being conducted by this program with industry cost-sharing. The Fuel Cycle Research and Development program includes generic research on nuclear waste management and disposal. One of the program's primary activities is the development of technologies to separate the radioactive constituents of spent fuel for reuse or solidifying into stable waste forms. Other major research areas in the Fuel Cycle R&D program include the development of accident-tolerant fuels for existing commercial reactors, evaluation of fuel cycle options, and development of improved technologies to prevent diversion of nuclear materials for weapons. The program is also developing sources of high-assay low enriched uranium (HALEU), in which uranium is enriched to between 5% and 20% in the fissile isotope U-235, for potential use in advanced reactors. For more information, see CRS Report R45706, Advanced Nuclear Reactors: Technology Overview and Current Issues , by Danielle A. Arostegui and Mark Holt. Fossil Energy Research and Development Much of DOE's Fossil Energy R&D Program focuses on carbon capture and storage for power plants fueled by coal and natural gas. Major activities include Advanced Coal Energy Systems and Carbon Capture, Utilization, and Storage (CCUS); Natural Gas Technologies; and Unconventional Fossil Energy Technologies from Petroleum—Oil Technologies. Advanced Coal Energy Systems includes R&D on modular coal-gasification systems, advanced turbines, solid oxide fuel cells, advanced sensors and controls, and power generation efficiency. Elements of the CCUS program include the following: Carbon Capture subprogram for separating CO 2 in both precombustion and postcombustion systems; Carbon Utilization subprogram for R&D on technologies to convert carbon to marketable products, such as chemicals and polymers; and Carbon Storage subprogram on long-term geologic storage of CO 2 , focusing on saline formations, oil and natural gas reservoirs, unmineable coal seams, basalts, and organic shales. For more information, see CRS In Focus IF10589, FY2019 Funding for CCS and Other DOE Fossil Energy R&D , by Peter Folger, and CRS Report R44472, Funding for Carbon Capture and Sequestration (CCS) at DOE: In Brief , by Peter Folger. Strategic Petroleum Reserve The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in 1975, consists of caverns built within naturally occurring salt domes in Louisiana and Texas. The SPR provides strategic and economic security against foreign and domestic disruptions in U.S. oil supplies via an emergency stockpile of crude oil. The program fulfills U.S. obligations under the International Energy Program, which avails the United States of International Energy Agency (IEA) assistance through its coordinated energy emergency response plans, and provides a deterrent against energy supply disruptions. DOE has been conducting a major maintenance program to address aging infrastructure and a deferred maintenance backlog at SPR facilities. The federal government has not purchased oil for the SPR since 1994. Beginning in 2000, additions to the SPR were made with royalty-in-kind (RIK) oil acquired by DOE in lieu of cash royalties paid on production from federal offshore leases. In September 2009, the Secretary of the Interior announced a phaseout of the RIK Program. By early 2010, the SPR's capacity reached 727 million barrels. A series of oil sales and purchases since then have resulted in a net reduction of the SPR inventory. Currently, the SPR contains about 649 million barrels. Congress has enacted several laws since 2015 that mandate sales of SPR oil, including the Bipartisan Budget Act of 2015 ( P.L. 114-74 ), the Fixing America's Surface Transportation Act ( P.L. 114-94 ), the 21 st Century Cures Act of 2016 ( P.L. 114-255 ), the 2017 Tax Revision ( P.L. 115-97 ), the Bipartisan Budget Act of 2018 ( P.L. 115-123 ), and the Consolidated Appropriations Act, 2018. Broadly considered, this legislation requires oil to be sold from the reserve over the period FY2017 through FY2027, totaling 266 million barrels. For more information, see CRS Report R45577, Strategic Petroleum Reserve: Mandated Sales and Reform , by Robert Pirog, and CRS In Focus IF10869, Reconsidering the Strategic Petroleum Reserve , by Robert Pirog. Science and ARPA-E The DOE Office of Science conducts basic research in six program areas: advanced scientific computing research, basic energy sciences, biological and environmental research, fusion energy sciences, high-energy physics, and nuclear physics. According to DOE's FY2020 budget justification, the Office of Science "is the Nation's largest Federal sponsor of basic research in the physical sciences and the lead Federal agency supporting fundamental scientific research for our Nation's energy future." DOE's Advanced Scientific Computing Research (ASCR) program focuses on developing and maintaining computing and networking capabilities for science and research in applied mathematics, computer science, and advanced networking. The program plays a key role in the DOE-wide effort to advance the development of exascale computing, which seeks to build a computer that can solve scientific problems 1,000 times faster than today's best machines. DOE has asserted that the department is on a path to have a capable exascale machine by the early 2020s. Basic Energy Sciences (BES), the largest program area in the Office of Science, focuses on understanding, predicting, and ultimately controlling matter and energy at the electronic, atomic, and molecular levels. The program supports research in disciplines such as condensed matter and materials physics, chemistry, and geosciences. BES also provides funding for scientific user facilities (e.g., the National Synchrotron Light Source II, and the Linac Coherent Light Source-II), and certain DOE research centers and hubs (e.g., Energy Frontier Research Centers, as well as the Batteries and Energy Storage and Fuels from Sunlight Energy Innovation Hubs). Biological and Environmental Research (BER) seeks a predictive understanding of complex biological, climate, and environmental systems across a continuum from the small scale (e.g., genomic research) to the large (e.g., Earth systems and climate). Within BER, Biological Systems Science focuses on plant and microbial systems, while Biological and Environmental Research supports climate-relevant atmospheric and ecosystem modeling and research. BER facilities and centers include four Bioenergy Research Centers and the Environmental Molecular Science Laboratory at Pacific Northwest National Laboratory. Fusion Energy Sciences (FES) seeks to increase understanding of the behavior of matter at very high temperatures and to establish the science needed to develop a fusion energy source. FES provides funding for the International Thermonuclear Experimental Reactor (ITER) project, a multinational effort to design and build an experimental fusion reactor. According to DOE, ITER "aims to provide fusion power output approaching reactor levels of hundreds of megawatts, for hundreds of seconds." However, many U.S. analysts have expressed concern about ITER's cost, schedule, and management, as well as the budgetary impact on domestic fusion research. The High Energy Physics (HEP) program conducts research on the fundamental constituents of matter and energy, including studies of dark energy and the search for dark matter. Nuclear Physics supports research on the nature of matter, including its basic constituents and their interactions. A major project in the Nuclear Physics program is the construction of the Facility for Rare Isotope Beams at Michigan State University. A separate DOE office, the Advanced Research Projects Agency—Energy (ARPA-E), was authorized by the America COMPETES Act ( P.L. 110-69 ) to support transformational energy technology research projects. DOE budget documents describe ARPA-E's mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. For more details, see CRS Report R45150, Federal Research and Development (R&D) Funding: FY2019 , coordinated by John F. Sargent Jr. Loan Guarantees and Direct Loans DOE's Loan Programs Office provides loan guarantees for projects that deploy specified energy technologies, as authorized by Title 17 of the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ), direct loans for advanced vehicle manufacturing technologies, and loan guarantees for tribal energy projects. Section 1703 of the act authorizes loan guarantees for advanced energy technologies that reduce greenhouse gas emissions, and Section 1705 established a temporary program for renewable energy and energy efficiency projects. Title 17 allows DOE to provide loan guarantees for up to 80% of construction costs for eligible energy projects. Successful applicants must pay an up-front fee, or "subsidy cost," to cover potential losses under the loan guarantee program. Under the loan guarantee agreements, the federal government would repay all covered loans if the borrower defaulted. Such guarantees would reduce the risk to lenders and allow them to provide financing at below-market interest rates. The following is a summary of loan guarantee amounts that have been authorized (loan guarantee ceilings) for various technologies: $8.3 billion for nonnuclear technologies under Section 1703; $2.0 billion for unspecified projects from FY2007 under Section 1703; $18.5 billion for nuclear power plants ($12.0 billion committed); $4 billion for loan guarantees for uranium enrichment plants; $1.18 billion for renewable energy and energy efficiency projects under Section 1703, in addition to other loan guarantee ceilings, which can include applications that were pending under Section 1705 before it expired; and In addition to the loan guarantee ceilings above, an appropriation of $161 million was provided for subsidy costs for renewable energy and energy efficiency loan guarantees under Section 1703. If the subsidy costs averaged 10% of the loan guarantees, this funding could leverage loan guarantees totaling about $1.6 billion. The only loan guarantees under Section 1703 were $8.3 billion in guarantees provided to the consortium building two new reactors at the Vogtle plant in Georgia. DOE committed an additional $3.7 billion in loan guarantees for the Vogtle project on March 22, 2019. Another nuclear loan guarantee is being sought by NuScale Power to build a small modular reactor in Idaho. Nuclear Weapons Activities In the absence of explosive testing of nuclear weapons, the United States has adopted a science-based program to maintain and sustain confidence in the reliability of the U.S. nuclear stockpile. Congress established the Stockpile Stewardship Program in the National Defense Authorization Act for Fiscal Year 1994 ( P.L. 103-160 ). The goal of the program, as amended by the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 , §3111), is to ensure "that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing." The program is operated by NNSA, a semiautonomous agency within DOE established by the National Defense Authorization Act for Fiscal Year 2000 ( P.L. 106-65 , Title XXXII). NNSA implements the Stockpile Stewardship Program through the activities funded by the Weapons Activities account in the NNSA budget. Most of NNSA's weapons activities take place at the nuclear weapons complex, which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City National Security Campus, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 National Security Complex, TN); and the Nevada National Security Site (formerly the Nevada Test Site). NNSA manages and sets policy for the weapons complex; contractors to NNSA operate the eight sites. Radiological activities at these sites are subject to oversight and recommendations by the independent Defense Nuclear Facilities Safety Board, funded by Title IV of the annual Energy and Water Development appropriations bill. There are three major program areas in the Weapons Activities account. Directed Stockpile Work includes the life extension programs (LEPs) on existing warheads and stockpile services programs that monitor their condition; and maintaining warheads through repairs, refurbishment, and modifications. It also includes funding for research and development in support of specific warheads, and dismantlement of warheads that have been removed from the stockpile. This last activity received more significant funding as the number of warheads in the U.S. stockpile declined after the Cold War; it also provides a source for critical components for warheads remaining in the stockpile. Directed Stockpile Work also involves programs that work on the materials needed for nuclear warheads, including the plutonium pits that are the core of the weapons. Research, Development, Test, and Evaluation (RDT&E) includes five programs that focus on "efforts to develop and maintain critical capabilities, tools, and processes needed to support science based stockpile stewardship, refurbishment, and continued certification of the stockpile over the long-term in the absence of underground nuclear testing." This area includes operation of some large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory. Infrastructure and Operations has, as its main funding elements, material recycle and recovery, recapitalization of facilities, and construction of facilities. The latter include two major projects that have generated congressional controversy: the Uranium Processing Facility (UPF) at the Y-12 National Security Complex and the Chemistry and Metallurgy Research Replacement (CMRR) Project, which deals with plutonium, at Los Alamos National Laboratory. Nuclear Weapons Activities also has several smaller programs, including the following: Secure Transportation Asset, providing for safe and secure transport of nuclear weapons, components, and materials; Defense Nuclear Security, providing operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and related activities; and Information Technology and Cybersecurity, whose elements include cybersecurity, secure enterprise computing, and Federal Unclassified Information Technology. For more information, see CRS Report R44442, Energy and Water Development Appropriations: Nuclear Weapons Activities , by Amy F. Woolf, and CRS Report R45306, The U.S. Nuclear Weapons Complex: Overview of Department of Energy Sites , by Amy F. Woolf and James D. Werner. Defense Nuclear Nonproliferation DOE's nonproliferation and national security programs provide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weapons worldwide. These programs are administered by NNSA's Office of Defense Nuclear Nonproliferation. The Materials Management and Minimization program conducts activities to minimize and, where possible, eliminate stockpiles of weapons-useable material around the world. Major activities include conversion of reactors that use highly enriched uranium (useable for weapons) to low-enriched uranium, removal and consolidation of nuclear material stockpiles, and disposition of excess nuclear materials. Global Materials Security has three major program elements. International Nuclear Security focuses on increasing the security of vulnerable stockpiles of nuclear material in other countries. Radiological Security promotes the worldwide reduction and security of radioactive sources, including the removal of surplus sources and substitution of technologies that do not use radioactive materials. Nuclear Smuggling Detection and Deterrence works to improve the capability of other countries to halt illicit trafficking of nuclear materials. Nonproliferation and Arms Control works to "to support U.S. nonproliferation and arms control objectives to prevent proliferation, ensure peaceful nuclear uses, and enable verifiable nuclear reductions," according to the FY2020 DOE justification. This program conducts reviews of nuclear export applications and technology transfer authorizations, implements treaty obligations, and analyzes nonproliferation policies and proposals. Other programs under Defense Nuclear Nonproliferation include research and development and construction, which advances nuclear detection and nuclear forensics technologies. Nuclear Counterterrorism and Incident Response provides "interagency policy, contingency planning, training, and capacity building" to counter nuclear terrorism and strengthen incident response capabilities, according to the FY2020 budget justification. Cleanup of Former Nuclear Weapons Production and Research Sites The development and production of nuclear weapons during half a century since the beginning of the Manhattan Project resulted in a waste and contamination legacy managed by DOE that continues to present substantial challenges today. DOE also manages legacy environmental contamination at sites used for nondefense nuclear research. In 1989, DOE established the Office of Environmental Management primarily to consolidate its responsibilities for the cleanup of former nuclear weapons production sites that had been administered under multiple offices. DOE's nuclear cleanup efforts are broad in scope and include the disposal of large quantities of radioactive and other hazardous wastes generated over decades; management and disposal of surplus nuclear materials; remediation of extensive contamination in soil and groundwater; decontamination and decommissioning of excess buildings and facilities; and safeguarding, securing, and maintaining facilities while cleanup is underway. DOE's cleanup of nuclear research sites adds a nondefense component to the EM's mission, albeit smaller in terms of the scope of their cleanup and associated funding. DOE has identified more than 100 separate sites in over 30 states that historically were involved in the production of nuclear weapons and nuclear energy research for civilian purposes. The geographic scope of these sites is substantial, collectively encompassing a land area of approximately 2 million acres. Cleanup remedies are in place and operational at the majority of these sites. Responsibility for the long-term stewardship of them has been transferred to the Office of Legacy Management and other offices within DOE for the operation and maintenance of cleanup remedies and monitoring. Some of the smaller sites for which DOE initially was responsible were transferred to the Army Corps of Engineers in 1997 under the Formerly Utilized Sites Remedial Action Program (FUSRAP). Once USACE completes the cleanup of a FUSRAP site, it is transferred back to DOE for long-term stewardship under the Office of Legacy Management, which is separate from EM and has its own funding account. Three appropriations accounts fund the Office of Environmental Management. The Defense Environmental Cleanup account is the largest in terms of funding, and it finances the cleanup of former nuclear weapons production sites. The Non-Defense Environmental Cleanup account funds the cleanup of federal nuclear energy research sites. Title XI of the Energy Policy Act of 1992 ( P.L. 102-486 ) established the Uranium Enrichment Decontamination and Decommissioning Fund to pay for the cleanup of three federal facilities that enriched uranium for national defense and civilian purposes. Those facilities are located near Paducah, KY; Piketon, OH (Portsmouth plant); and Oak Ridge, TN. Title X of P.L. 102-486 authorized the reimbursement of uranium and thorium producers for their costs of cleaning up contamination attributable to uranium and thorium sold to the federal government. The adequacy of funding for the Office of Environmental Management to attain cleanup milestones across the entire site inventory has been a recurring issue. Cleanup milestones are enforceable measures incorporated into compliance agreements negotiated among DOE, the Environmental Protection Agency, and the states. These milestones establish time frames for the completion of specific actions to satisfy applicable requirements at individual sites. Power Marketing Administrations DOE's four Power Marketing Administrations were established to sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers. Preference in the sale of power is given to publicly owned and cooperatively owned utilities. The PMAs operate in 34 states; their assets consist primarily of transmission infrastructure in the form of more than 33,000 miles of high voltage transmission lines and 587 substations. PMA customers are responsible for repaying all power program expenses, plus the interest on capital projects. Since FY2011, power revenues associated with the PMAs have been classified as discretionary offsetting receipts (i.e., receipts that are available for spending by the PMAs), thus the agencies are sometimes noted as having a "net-zero" spending authority. Only the capital expenses of WAPA and SWPA require appropriations from Congress. For more information, see CRS Report R45548, The Power Marketing Administrations: Background and Current Issues , by Richard J. Campbell. Independent Agencies Independent agencies that receive funding in Title IV of the Energy and Water Development bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Defense Nuclear Facilities Safety Board. NRC is by far the largest of the independent agencies, with a total budget of more than $900 million. However, as noted in the description of NRC below, about 90% of NRC's budget is offset by fees, so that the agency's net appropriation is less than half of the total funding in Title IV. The recent appropriations history for all the Title IV agencies is shown in Table 7 . Appalachian Regional Commission Established in 1965, the Appalachian Regional Commission (ARC) is a regional economic development agency. It awards grants and contracts to state and local governments and nonprofit organizations to foster economic opportunities, improve workforce skills, build critical infrastructure, strengthen natural and cultural assets, and improve leadership skills and capacity in the region. ARC's authorizing statute defines the Appalachian Region as including all of West Virginia and parts of Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, and Virginia. More than 25 million people currently live in the region as defined. ARC provides funding to several hundred projects each year, with particular focus on the region's most economically distressed counties. Major areas of infrastructure support broadband communication systems, transportation, and water and wastewater systems. ARC has supported development of the Appalachian Development Highway System (ADHS), a planned 3,000-mile system of highways that connect with the U.S. Interstate Highway System. According to ARC, 90.5% of ADHS is currently "complete, open to traffic, or under construction." Nuclear Regulatory Commission NRC is an independent agency that establishes and enforces safety and security standards for nuclear power plants and users of nuclear materials. Major appropriations categories for NRC are shown in Table 8 . Nuclear Reactor Safety is NRC's largest program and is responsible for licensing and regulating the U.S. fleet of 98 power reactors, plus two under construction. NRC is also responsible for licensing and regulating nuclear waste facilities, such as the proposed underground nuclear waste repository at Yucca Mountain, NV. NRC is required by law to offset about 90% of its total budget, excluding specified items, through fees charged to nuclear reactor owners and other holders of NRC licenses. As a result, NRC's net appropriation can be as low as 10% of its total funding level, depending on the activities that Congress excludes from fee recovery. For example, excluded items in NRC's FY2019 enacted appropriation are prior-year balances, development of advanced reactor regulations, and international activities. Congressional Hearings The following hearings have been held by the Energy and Water Development subcommittees of the House and Senate Appropriations Committees on the FY2020 budget request. Testimony and opening statements are posted on most of the web pages cited for each hearing, along with webcasts in many cases. House Department of Energy , March 26, 2019, https://appropriations.house.gov/legislation/hearings/budget-department-of-energy . Corps of Engineers (Civil Works) and the Bureau of Reclamation , March 27, 2019, https://appropriations.house.gov/legislation/hearings/budget-us-army-corps-of-engineers-and-bureau-of-reclamation . National Nuclear Security Administration , April 2, 2019, https://appropriations.house.gov/legislation/hearings/budget-department-of-energy-national-nuclear-security-administration. DOE Science, Energy, and Environmental Management Programs , April 3, 2019, https://appropriations.house.gov/legislation/hearings/budget-science-energy-and-environmental-management-programs. Senate Department of Energy , March 27, 2019, https://www.appropriations.senate.gov/hearings/review-of-the-fy2020-budget-request-for-the-us-department-of-energy . National Nuclear Security Administration , April 3, 2019, https://www.appropriations.senate.gov/hearings/review-of-the-fy2020-budget-request-for-the-national-nuclear-security-administration . U.S. Army Corps of Engineers and the Bureau of Reclamation , April 10, 2019, https://www.appropriations.senate.gov/hearings/review-of-the-fy2020-budget-requests-for-army-corps-of-engineers-and-bureau-of-reclamation .

The Energy and Water Development appropriations bill provides funding for civil works projects of the U.S. Army Corps of Engineers (USACE); the Department of the Interior's Bureau of Reclamation (Reclamation) and Central Utah Project (CUP); the Department of Energy (DOE); the Nuclear Regulatory Commission (NRC); and several other independent agencies. DOE typically accounts for about 80% of the bill's funding. President Trump submitted his FY2020 detailed budget proposal to Congress on March 18, 2019 (after submitting a general budget overview on March 11). The budget requests for agencies included in the Energy and Water Development appropriations bill total $38.02 billion—$6.64 billion (15%) below the FY2019 appropriation. The largest exception to the overall decrease proposed for energy and water programs is a $1.309 billion increase (12%) for DOE nuclear weapons activities. For FY2019, the conference agreement on H.R. 5895 (H.Rept. 115-929) provided total Energy and Water Development appropriations of $44.66 billion—3% above the FY2018 level, excluding supplemental funding, and 23% above the FY2019 request. It was signed by the President on September 21, 2018 (P.L. 115-244). Emergency supplemental appropriations totaling $17.419 billion were provided to USACE and DOE for hurricane response by the Bipartisan Budget Act of 2018 (P.L. 115-123), signed February 9, 2018. Major Energy and Water Development funding issues for FY2020 are listed below. They were selected based on the total funding involved, the percentage of proposed increases or decreases, and potential impact on broader public policy considerations. Water Agency Funding Reductions. The Trump Administration requested reductions of 31% for USACE and 29% for Reclamation for FY2020 from the FY2019 enacted levels. The largest reductions would be from USACE Operation and Maintenance (-48%) and Reclamation's Water and Related Resources account (-31%). Similar reductions proposed by the Administration for FY2019 were not enacted. Power Marketing Administration (PMA) Reforms. DOE's FY2020 budget request includes mandatory proposals to sell PMA electricity transmission lines and other assets, repeal certain PMA borrowing authority, and eliminate cost-based limits on the electricity rates charged by the PMAs. The proposals would need to be enacted in authorizing legislation. Termination of Energy Efficiency Grants. DOE's Weatherization Assistance Program and State Energy Program would be terminated under the FY2020 budget request. The Administration had proposed to eliminate the grants in FY2018 and FY2019, but Congress continued funding. Reductions in Energy Research and Development. Under the FY2020 budget request, DOE research and development appropriations would be reduced for energy efficiency and renewable energy (EERE) by 83%, nuclear energy by 38%, and fossil energy by 24%. Similar reductions proposed by the Administration for FY2019 were not enacted. Nuclear Waste Repository. The Administration's budget request would provide new funding for the first time since FY2010 for a proposed nuclear waste repository at Yucca Mountain, NV. DOE would receive $116 million to seek an NRC license for the repository and develop interim waste storage capacity. NRC would receive $38.5 million to consider DOE's repository license application. Similar Administration funding requests for FY2018 and FY2019 were not enacted. Elimination of Advanced Research Projects Agency—Energy (ARPA-E). The Trump Administration proposes no new appropriations for ARPA-E in FY2020 and to cancel $287 million in unobligated balances from previous appropriations. Similar proposals to terminate ARPA-E in FY2018 and FY2019 were not enacted. Loan Programs Termination. The FY2020 budget request would terminate DOE's Title 17 Innovative Technology Loan Guarantee Program, the Advanced Technology Vehicles Manufacturing Loan Program, and the Tribal Energy Loan Guarantee Program. Administration proposals to eliminate the programs were not included in the enacted appropriations measures for FY2018 and FY2019. Weapons Activities. The FY2020 budget request for DOE Weapons Activities is 12% greater than it was in FY2019 ($12.4 billion vs. $11.1 billion), in contrast to a proposed 10% reduction in DOE's total funding. Notable proposed increases would be used for warhead life extension programs and preparations for increase production of plutonium pits (warhead cores).

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T he Public Safety Officers' Benefits (PSOB) program provides cash benefits to federal, state, and local law enforcement officers; firefighters; employees of emergency management agencies; and members of emergency medical services agencies who are killed or permanently and totally disabled as the result of personal injuries sustained in the line of duty. The Public Safety Officers' Educational Assistance (PSOEA) program, a component of the PSOB program, provides higher-education assistance to the children and spouses of public safety officers killed or permanently disabled in the line of duty. Both programs are administered by the PSOB Office of the Department of Justice (DOJ), Bureau of Justice Assistance (BJA). Congress appropriates funds for these programs in the annual Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act. For FY2019, the one-time lump-sum PSOB benefit is $359,316 and the monthly full-time attendance PSOEA assistance is $1,224. The PSOB and PSOEA benefit amounts are indexed to reflect changes in the cost of living. Table 1 shows PSOB and PSOEA claims and approvals as reported by DOJ. Public Safety Officers' Benefits Program Eligible Public Safety Officers To be eligible for PSOB benefits for death or disability, a person must have served in one of the following categories of public safety officers: law enforcement officer, firefighter, or chaplain in a public agency; FEMA employee or a state, local, or tribal emergency management agency employee; or emergency medical services member. There is no minimum amount of time a person must have served to be eligible for benefits. Law Enforcement Officer, Firefighter, or Chaplain To be eligible for PSOB benefits as a law enforcement officer, firefighter, or chaplain, a person must have served in a "public agency" in an official capacity, with or without compensation. For the purposes of PSOB eligibility, a public agency is defined as the federal government and any department, agency, or instrumentality of the federal government; and any state government, the District of Columbia government, and any U.S. territory or possession; and any local government, department, agency, or instrumentality of a state, the District of Columbia, or any U.S. territory or possession. Law Enforcement Officer For the purposes of PSOB eligibility, a law enforcement officer is defined as "an individual involved in crime and juvenile delinquency control or reduction, or enforcement of the criminal laws (including juvenile delinquency), including, but not limited to, police, corrections, probation, parole, and judicial officers." Firefighter For the purposes of PSOB eligibility, the definition of firefighter includes both professional firefighters and persons serving as an "officially recognized or designated member of a legally organized volunteer fire department." Chaplain A chaplain is eligible for PSOB benefits (1) if he or she is either an "officially recognized or designated member of a legally organized volunteer fire department or legally organized police department" or public employee of a police or fire department and (2) only if he or she was performing the duties of a chaplain in an official capacity while responding to a police, fire, or rescue emergency. Emergency Management Agency Employee Employees of the Federal Emergency Management Agency (FEMA) and state, local, or tribal emergency management agencies may be eligible for PSOB benefits under certain conditions provided in statute. A FEMA employee or an employee of a state, local, or tribal emergency management agency working with FEMA is eligible for PSOB benefits if he or she is performing official duties that are related to a major disaster or an emergency declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) and that are considered hazardous by the FEMA Administrator or the head of the state, local, or tribal agency. Emergency Medical Services Member A member, including a volunteer member, of a rescue squad or "ambulance crew" who is authorized or licensed by law and the applicable agency and is engaging in rescue services or providing emergency medical services may be eligible for PSOB benefits. The rescue squad or ambulance service may provide ground or air ambulance services and may be either a public agency or a nonprofit entity authorized to provide rescue or emergency medical services. By PSOB regulation, eligible emergency medical services workers include rescue workers, ambulance drivers, paramedics, health care responders, emergency medical technicians, or others who are trained in rescue activity or emergency medical services and have the legal authority and responsibility to provide such services. Injury and Line of Duty Requirements The PSOB program pays benefits if a public safety officer becomes permanently and totally disabled or dies "as the direct and proximate result of a personal injury sustained in the line of duty." Injury Requirement To qualify for coverage under the PSOB program, a public safety officer's disability or death must have been the result of a personal injury. The PSOB regulation defines an injury for the purposes of benefit eligibility as a traumatic physical wound (or a traumatized physical condition of the body) directly and proximately caused by external force (such as bullets, explosives, sharp instruments, blunt objects, or physical blows), chemicals, electricity, climatic conditions, infectious disease, radiation, virii, or bacteria ... The regulation also provides that the definition of an injury does not include an occupational disease or a condition of the body caused by stress or strain, including psychological conditions such as post-traumatic stress disorder. However, the PSOB statute specifically provides for deaths caused by certain cardiovascular conditions. Presumption of Injury Status for Heart Attack, Stroke, or Vascular Rupture The death of a public safety officer due to a heart attack, stroke, or vascular rupture shall be presumed to be a death from a personal injury for the purposes of PSOB eligibility if the officer engaged in nonroutine stressful or strenuous physical activity as part of an emergency response or training exercise; and if the condition began during the physical activity, while the officer remained on duty after the physical activity, or within 24 hours of the physical activity. Line of Duty Requirement The PSOB program covers a public safety officer's death or disability if it occurred as the result of an injury incurred in the line of duty. The PSOB regulations provide that an injury occurs in the line of duty if it (1) is the result of the public safety officer's authorized activities while on duty, (2) occurs while responding to an emergency or request for assistance, or (3) occurs while commuting to or from duty in an authorized department or personal vehicle. In addition, if there is convincing evidence that the injury was the result of the individual's status as a public safety officer, that injury is covered by the PSOB program. Benefit Amounts The lump-sum PSOB death and disability benefit for FY2019 is $359,316. The benefit amount is adjusted annually to reflect changes in the cost of living using the annual percentage change in the Consumer Price Index for Urban Consumers (CPI-U) for the one-year period ending in the previous June. If a public safety officer receives a disability benefit and later dies from the same injury, the officer's survivors may not receive a PSOB death benefit. The payable benefit amount is based on the date of the public safety officer's death or the date of the injury that caused the disability, rather than on the date of application for benefits or disability determination. Thus, if a benefit increase occurs while an application is pending, the benefit is payable at the previous, lower, benefit level. Death and disability benefits are not subject to the federal income tax. In general, PSOB death and disability benefits are paid in addition to any other workers' compensation, life insurance, or other benefits paid for the death of a public safety officer. However, the PSOB death benefit is offset by the following benefits: benefits under the Federal Employees' Compensation Act (FECA) payable to state and local law enforcement officers injured or killed while enforcing federal law; benefits under the D.C. Retirement and Disability Act of 1916 for certain police officers and firefighters in the District of Columbia; and payments from the September 11 th Victim Compensation Fund (VCF). Payments to Survivors PSOB death benefits are payable to the eligible spouse and children of a public safety officer. A spouse is the person to whom the officer is legally married, even if physically separated, under the marriage laws of the jurisdiction where the marriage took place. Pursuant to regulations issued after the Supreme Court struck down the federal Defense of Marriage Act in United States v. Windsor , the legally married spouse of a public safety office may be of the same sex as the officer. A child is defined as any "natural, illegitimate, adopted, or posthumous child or stepchild" of the public safety officer who, at the time of the public safety officer's fatal or catastrophic injury, is 18 years of age or under; between 18 and 23 years of age and a full-time student in high school or undergraduate higher education; or over 18 years of age and incapable of self-support because of physical or mental disability. PSOB death benefits are paid to eligible survivors in the following order: 1. if the officer is survived by only a spouse, 100% of the death benefits are payable to the spouse; 2. if the officer is survived by a spouse and children, 50% of the death benefits are payable to the spouse and the remaining 50% is distributed equally among the officer's children; 3. if the officer is survived by only children, the death benefits are equally distributed among the officer's children; 4. if the officer has no surviving spouse or children, the death benefits are paid to the individual or individuals designated by the officer in the most recently executed designation of beneficiary on file at the time of the officer's death; or if the officer does not have a designation of beneficiary on file, the benefits are paid to the individual or individuals designated by the officer in the most recently executed life insurance policy on file at the time of the officer's death; 5. if the officer has no surviving spouse or eligible children, and the officer does not have a life insurance policy, the death benefits are equally distributed between the officer's surviving parents; or 6. if the officer has no surviving spouse, eligible children, or parents, and the officer did not have a designation of beneficiary or a life insurance policy on file at the time of his or her death, the death benefits are payable to surviving adult, nondependent, children of the officer. Definition of Disability PSOB disability benefits are paid only in cases of permanent and total disability. There are no benefits payable for partial or short-term disabilities. A disability is considered permanent for the purposes of PSOB eligibility if, given the current state of medicine in the United States, there is a degree of medical certainty that the condition will remain constant or deteriorate over the person's lifetime or that the public safety officer has reached maximum medical improvement. A public safety officer is considered to be totally disabled for the purposes of PSOB eligibility if given the current state of medicine in the United States, there is a degree of medical certainty that the officer is unable to perform any gainful work. PSOB regulation defines gainful work as "full- or part-time activity that is compensated or commonly compensated." Application Process Applications for PSOB death and disability benefits are filed with the PSOB office, which determines benefit eligibility and commences benefit payment. Unless extended for good cause, application deadlines must be met. Complete benefit applications must be filed no later than for death benefits: three years after the death; one year after the determination of the officer's employing agency to award or deny death benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any death benefits; and for disability benefits: three years after the date of the injury; one year after the determination of the officer's employing agency to award or deny workers' compensation or disability benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any workers' compensation or disability benefits. A lump-sum interim payment of up to $3,000 may be made if a PSOB death benefit will "probably be paid." The interim payment amount reduces the final PSOB payment amount. If the ultimate decision is to deny death benefits, the interim payment must be returned to the federal government, unless this repayment is waived because it would create a hardship for the beneficiary. Expedited Benefits in Terrorism Cases Section 611 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act; P.L. 107-56 ) provides for expedited payment of PSOB death and disability benefits if the officer's injury occurred "in connection with prevention, investigation, rescue, or recovery efforts related to a terrorist attack." In such cases, PSOB benefits must be paid within 30 days of certification from the officer's employing agency that the officer's death or disability was related to terrorism. Public Safety Officers' Educational Assistance Program The Public Safety Officers' Education Assistance (PSOEA) program provides financial assistance with costs associated with higher education to the spouse or children of a public safety officer who is eligible for PSOB death or disability benefits. Eligibility The spouse or child of a public safety officer who is eligible for PSOB death or disability benefits may be eligible for PSOEA benefits. To be eligible for PSOEA benefits, a spouse must have been married to an eligible public safety officer at the time of the officer's death or injury. A child is eligible for PSOEA benefits until the age of 27. This age limit can be extended by the Attorney General in extraordinary circumstances, or, pursuant to Section 3 of the Public Safety Officers' Benefits Improvement Act of 2017 ( P.L. 115-36 ), if there is a delay of more than one year in approving PSOB or PSOEA benefits. In addition, to be eligible for PSOEA benefits, the spouse or child must be enrolled at an eligible educational institution. For the purposes of PSOEA eligibility, an eligible education institution is one that meets the definition of an "institution of higher education" as provided by Section 102 of the Higher Education Act of 1965 and that is eligible for federal student aid. Amount of Benefits PSOEA benefits are payable to the claimant and may be used only to defray costs associated with higher education attendance, including tuition, room, board, book and supplies, and education-related fees. The monthly PSOEA benefit amount is equal to the monthly benefit amount payable under the GI Bill Survivors' and Dependents' Educational Assistance (DEA) program, which is administered by the Department of Veterans Affairs (VA) for spouses and dependents of veterans with disabilities or who died as a result of service-connected conditions. The PSOEA benefit amounts are adjusted annually to reflect changes in the cost of living in accordance with changes to the GI Bill DEA benefit amounts. For FY2019, the PSOEA monthly benefit for a student attending an educational institution full-time is $1,224. The PSOEA benefit rates are prorated for less than full-time attendance. Duration of Benefits The maximum duration of PSOEA benefits for any person is 45 months of full-time education or a proportionate duration of part-time education. A person is ineligible for PSOEA if he or she is in default on a federal student loan or is ineligible for federal benefits due to a drug trafficking or drug possession conviction. In addition, the Attorney General may discontinue PSOEA benefits for a student that fails to make satisfactory progress in his or her course of study as defined by Section 484(c) of the Higher Education Act of 1965. PSOB and PSOEA Appeals Process A claimant who is dissatisfied with a PSOB disability benefit denial may request a reconsideration. There is no reconsideration offered for denials of PSOB death or PSOEA benefits. A claimant who is dissatisfied with a PSOB or PSOEA benefit denial may request a de novo hearing before a hearing officer assigned by the director of the DOJ PSOB Office. The determination of a hearing officer may be appealed to the PSOB Office director. The director's determination is considered the final agency determination and is not subject to any further agency administrative review or appeal. However, provided all administrative appeals remedies have been exhausted, the PSOB Office director's determination may be appealed to the United States Court of Appeals for the Federal Circuit. The PSOB statute authorizes the BJA to prescribe the maximum fee that an attorney or other representative may charge a claimant for services rendered in connection with a claim, with attorney fees generally limited to between 3% and 6% of the total benefit paid, depending on the level in the administrative appeals process the claim is approved. Program regulation prohibits stipulated-fee and contingency-fee arrangements for PSOB representation. Budget and Appropriations Congress provides funding for PSOB and PSOE benefits and associated administrative expenses in the annual Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act. Funding for PSOB death benefits and associated administrative expenses is considered mandatory spending and Congress appropriates "such sums as may be necessary" for the payment of these benefits. Funding for PSOB disability and PSOEA benefits is considered discretionary and is subject to specific congressional appropriations. Annual appropriations language grants the Attorney General the authority to transfer from any available appropriations to the DOJ the funds necessary to respond to emergent circumstances that require additional funding for PSOB disability benefits and PSOEA benefits.

The Public Safety Officers' Benefits (PSOB) program provides cash benefits to federal, state, and local law enforcement officers; firefighters; employees of emergency management agencies; and members of emergency medical services agencies who are killed or permanently and totally disabled as the result of personal injuries sustained in the line of duty. The Public Safety Officers' Educational Assistance (PSOEA) program, a component of the PSOB program, provides higher-education assistance to the children and spouses of public safety officers killed or permanently disabled in the line of duty. The PSOB and PSOEA programs are administered by the Department of Justice (DOJ), Bureau of Justice Assistance (BJA). However, claimants dissatisfied with denials of benefits may pursue administrative appeals within DOJ and may seek judicial review before the United States Court of Appeals for the Federal Circuit. Each year, Congress appropriates funding for PSOB death benefits, which is considered mandatory spending, and for PSOB disability benefits and PSOEA benefits, which is subject to annual appropriations. For FY2019, the one-time lump-sum PSOB death and disability benefit is $359,316 and the PSOEA monthly benefit for a student attending an educational institution full-time is $1,224. In FY2017, the DOJ approved 399 claims for PSOB death benefits, 82 claims for PSOB disability benefits, and 601 claims for PSOEA benefits.

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Introduction This report provides background information for Congress on the levels of Department of Defense (DOD) military servicemembers and contractor personnel deployed in support of prior and ongoing military operations in Iraq and Afghanistan. For more information on DOD's use of contractor personnel, see CRS In Focus IF10600, Defense Primer: Department of Defense Contractors , by Heidi M. Peters and Moshe Schwartz and CRS Report R43074, Department of Defense's Use of Contractors to Support Military Operations: Background, Analysis, and Issues for Congress , by Moshe Schwartz. The Role of Contractors in Military Operations Throughout its history, DOD has relied on contractors to support a wide range of military operations. Operations over the past 30 years have highlighted the critical role that contractors play in supporting U.S. military servicemembers, both in terms of the number of contractors and the type of work being performed. During recent U.S. military operations in Iraq and Afghanistan, contractors frequently averaged 50% or more of the total DOD presence in-country. Tracking Contractors During Contingency Operations Since 2008, U.S. Central Command (CENTCOM) has published quarterly contractor census reports that provide aggregated data – including elements such as mission category and nationality – on contractors employed through DOD-funded contracts who are physically located within the CENTCOM area of responsibility. Analysts and observers have previously raised questions about the reliability of the data gathered by DOD regarding the number of contractors it employs in theater in support of military operations. DOD officials, however, have stated that since 2009, the DOD has implemented a variety of mechanisms to improve the reliability of contractor data it gathers, including modifications to information technology systems, such as data collection systems like the joint Synchronized Predeployment and Operational Tracker (SPOT) database; updates and changes to related departmental policies; and changes in "leadership emphasis" within DOD and the combatant commands. For the fourth quarter of Fiscal Year (FY) 2018, CENTCOM reported 49,451 contractor personnel working for DOD within its area of responsibility, which included 28,189 individuals located in Afghanistan, Iraq, and Syria (see Figure 1 and Figure 2 ). From FY2009 to FY2018, obligations for all DOD-funded contracts performed within the Iraq and Afghanistan areas of operation totaled approximately $208 billion in FY2019 dollars (see Table 5 ). Force Management Levels for Deployed U.S. Armed Forces Force management levels, sometimes also described as troop caps, troop ceilings, or force manning levels, have historically been used by the United States to establish bounds on the number of military personnel that may be deployed in a country or region. The executive and legislative branches of the U.S. government have used force management levels to guide the execution of certain overseas U.S. military operations, as well as the associated presence of DOD personnel. During the 1980s, for example, Congress used provisions within annual appropriations legislation to establish force management levels limiting the number of active duty U.S. military personnel stationed ashore in Europe. The Obama Administration used force management levels to manage its drawdown of the U.S. military presence in Afghanistan, and to manage the U.S. military presence in Iraq and Syria under Operation Inherent Resolve. The Trump Administration has reportedly delegated the authority to establish force management levels for Afghanistan, Iraq, and Syria to the Secretary of Defense. In August 2017, the DOD announced that it was revising its force management level accounting and reporting practices for Afghanistan to also include U.S. Armed Forces personnel in-country for short-duration missions, personnel in a temporary duty status, personnel assigned to combat support agencies, and forces assigned to the material recovery element and the Resolute Support sustainment brigade in reported totals. In late 2017, the Defense Department stopped reporting the number of U.S. military personnel deployed in support of operations in Afghanistan, Iraq, and Syria as part of its quarterly manpower reports and in other official releases. These data remain withheld, leading to criticism from some observers and Members of Congress. DOD Usage of Contractors During Ongoing Military Operations Some observers and experts argued that external "resource limits" of force management levels may have increased DOD's "reliance on…contractor and temporary duty personnel" to effectively execute ongoing military operations in Afghanistan, Iraq, and Syria. In February 2017, U.S. Army General John Nicholson, then Commander of the NATO Resolute Support Mission and United States Forces–Afghanistan, testified before the Senate Armed Services Committee that DOD had to "substitute contractors for soldiers in order to meet the force manning levels" in Afghanistan. While the drawdown of U.S. forces contributed to a demonstrable increase in the ratio of contractors to uniformed servicemembers in Afghanistan between 2012 and 2017, it is difficult to assess if the increased ratio supported General Nicholson's assertion. The House-passed version of the FY2018 National Defense Authorization Act (NDAA, H.R. 2810 ) contained a provision (Section 923) that would have expressed the sense of Congress that the DOD should discourage the practice of substituting contractor personnel for available members of the Armed Forces when a unit deploys overseas. This section also would have required the Secretary of Defense to provide a related briefing to the congressional defense committees. A similar provision was not included in the Senate amendment to H.R. 2810 . While the House receded in conference, the conferees directed the Secretary of Defense to provide a briefing detailing steps taken by DOD to revise deployment guidelines to ensure readiness, unit cohesion, and maintenance were prioritized, as well as the Secretary of Defense's plan to establish a policy to avoid the practice of directly substituting contractor personnel for U.S. military personnel when practicable in the future. Concern about DOD's use of contractors in contingency operations predates the recent usage of force management levels. For example, the Commission on Wartime Contracting in Iraq and Afghanistan, in its 2011 final report to Congress, expressed its view that operations in Iraq and Afghanistan between FY2002 and FY2011 had led to an "unhealthy over-reliance" on contractors by DOD, Department of State, and USAID. Private Security Contractors in Afghanistan and Iraq In Iraq and Afghanistan, armed and unarmed private security contractors have been employed to provide services such as protecting fixed locations; guarding traveling convoys; providing security escorts; and training police and military personnel. The number of private security contractor employees working for DOD in Iraq and Afghanistan has fluctuated significantly over time, and is dependent on a variety of factors, including current force management levels in-country and U.S. operational needs. The presence of private security contractors peaked in Afghanistan in 2012 at more than 28,000 individuals and in Iraq in 2009 at more than 15,000 individuals. For the fourth quarter of FY2018, DOD reported 4,172 private security contractors in Afghanistan, with 2,397 categorized as armed private security contractors (see Table 2 ). DOD reported 418 security contractor personnel in Iraq and Syria during the same period, none of whom were identified as armed private security contractors (see Table 4 ). U.S. Armed Forces and Contractor Personnel in Afghanistan As of the fourth quarter of FY2018, 25,239 DOD contractor personnel were located in Afghanistan (see Table 1 ). Approximately 44% of DOD's reported individual contractors were U.S. citizens (10,989), approximately 42% were third-country nationals (10,628), and roughly 14% were local nationals (3,622). Of the 25,239 DOD contractor personnel, about 9% were armed private security contractors (2,397). As of May 2019, observers and analysts estimated the number of U.S. Armed Forces personnel in Afghanistan to be between 14,000 and 15,000. Reports in early 2019 indicate the Trump Administration may be contemplating withdrawing some portion of in-country U.S. forces (a subject of ongoing U.S.-Taliban negotiations). U.S. officials have stated that no final policy decision has been made. U.S. Armed Forces and Contractor Personnel in Iraq DOD ceased publicly reporting numbers of DOD contractor personnel working in Iraq in December 2013, following the conclusion of the U.S. combat mission in Iraq (Operation Iraqi Freedom and Operation New Dawn), and the subsequent drawdown of DOD contractor personnel levels in Iraq. In late 2014, in response in part to developing operations in the region, DOD reinitiated reporting broad estimates of DOD contractor personnel deployed in Iraq in support of Operation Inherent Resolve (OIR). As the number of DOD contractor personnel in Iraq increased over the first six months of 2015, DOD resumed reporting exact numbers and primary mission categories of OIR contractor personnel in June 2015. In the second quarter of FY2018, DOD began reporting a combined total of contractor personnel physically located in Iraq and Syria. As of the fourth quarter of FY2018, there were 6,318 DOD contractor personnel in Iraq and Syria (see Table 3 ). Approximately 49% of DOD's reported individual contractors were U.S. citizens (3,086), approximately 38% were third-country nationals (2,405); and roughly 13% were local/host-country nationals. As of FY2018, CENTCOM has not resumed reporting data on DOD-funded private security personnel in Iraq. In December 2017, DOD indicated the number of U.S. Armed Forces personnel in Iraq was roughly 5,200, and indicated the number of U.S. Armed Forces personnel in Syria was approximately 2,000. In December 2018, President Donald J. Trump announced that U.S. forces had defeated the Islamic State and would leave Syria; however, in February 2019, the White House indicated that several hundred U.S. troops would remain in Syria.

Throughout its history, the Department of Defense (DOD) has relied on contractors to support a wide range of military operations. Operations over the last thirty years have highlighted the critical role that contractors play in supporting U.S. troops—both in terms of the number of contractors and the type of work being performed. During recent U.S. military operations in Iraq and Afghanistan, contractors often accounted for 50% or more of the total DOD presence in-country. For the fourth quarter of fiscal year (FY) 2018, U.S. Central Command (CENTCOM) reported 49,451 contractor personnel working for DOD within its area of responsibility, which included 28,189 individuals located in Afghanistan, Iraq, and Syria. From FY2009 to FY2018, obligations for all DOD-funded contracts performed within the Iraq and Afghanistan areas of operation totaled approximately $208 billion in FY2019 dollars. In late 2017, the DOD stopped reporting the number of U.S. military personnel deployed in support of operations in Afghanistan, Iraq, and Syria as part of its quarterly manpower reports and in other official releases. These data remain withheld.

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Introduction The Social Security program pays benefits to retired or disabled workers and their family members and to the family members of deceased workers. As of March 2019, there were 63.3 million Social Security beneficiaries. Approximately 70% of those beneficiaries were retired workers and 13% were disabled workers. The remaining beneficiaries were the survivors of deceased insured workers or the spouses and children of retired or disabled workers. Social Security is financed primarily by payroll taxes paid by covered workers and their employers. The program is also credited with federal income taxes paid by some beneficiaries on a portion of their benefits, reimbursements from the General Fund of the Treasury for various purposes, and interest income from investments held by the Social Security trust funds. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds. The Secretary of the Treasury (the Managing Trustee of the Social Security trust funds) is required by law to invest Social Security revenues in securities backed by the U.S. government. The purchase of U.S. government securities allows any surplus Social Security revenues to be used by the federal government for other (non-Social Security) spending needs at the time. This trust fund financing mechanism allows the General Fund of the Treasury to borrow from the Social Security trust funds. In turn, the General Fund pays back the trust funds (with interest) when the trust funds redeem the securities. The process of investing Social Security revenues in securities and redeeming the securities as needed to pay benefits is ongoing. The Social Security trust funds are both designated accounts within the U.S. Tr easury and the accumulated holdings of special U.S. government obligations. Both represent the funds designated to pay current and future Social Security benefits. How the Social Security Program Is Financed The Social Security program is financed primarily by revenues from Federal Insurance Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA) taxes. FICA taxes are paid by both employers and employees, but it is employers who remit the taxes to the U.S. Treasury. Employers remit FICA taxes on a regular basis throughout the year (e.g., weekly, monthly, quarterly or annually), depending on the employer's level of total employment taxes (including FICA and federal personal income tax withholding). The FICA tax rate of 7.65% each for employers and employees has two components: 6.2% for Social Security and 1.45% for Medicare Hospital Insurance. The SECA tax rate is 15.3% for self-employed individuals, with 12.4% for Social Security and 2.9% for Medicare Hospital Insurance. The respective Social Security contribution rates are levied on covered wages and net self-employment income up to $132,900 in 2019. Self-employed individuals may deduct one-half of the SECA taxes for federal income tax purposes. SECA taxes are normally paid once a year as part of filing an annual individual income tax return. In 2018, Social Security payroll taxes totaled $885.1 billion and accounted for 88.2% of the program's total income. In addition to payroll taxes, the Social Security program receives income from other sources. First, certain Social Security beneficiaries must include a portion of their Social Security benefits in taxable income for the federal income tax, and the Social Security program receives a portion of those taxes. In 2018, revenue from the taxation of benefits totaled $35.0 billion, accounting for 3.5% of the program's total income. Second, the program receives reimbursements from the General Fund of the Treasury for a variety of purposes. General Fund reimbursements totaled $0.2 billion, accounting for less than 0.1% of the program's total income. Finally, the Social Security program receives interest income from the U.S. Treasury on its investments in special U.S. government obligations. Interest income totaled $83.3 billion, accounting for 8.3% of the program's total income. The Internal Revenue Service (IRS) processes the tax returns and tax payments for federal employment taxes and federal individual income taxes. All of the tax payments are deposited in the U.S. Treasury along with all other receipts from the public for the federal government. The Social Security Trust Funds as Designated Accounts Within the U.S. Treasury, there are numerous accounts established for internal accounting purposes. Although all of the monies within the U.S. Treasury are federal monies, the designation of an account as a trust fund allows the government to track revenues dedicated for specific purposes (as well as expenditures). In addition, the government can affect the level of revenues and expenditures associated with a trust fund through changes in the law. Social Security program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: (1) the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and (2) the Federal Disability Insurance (DI) Trust Fund. Under current law, the two trust funds are legally distinct and do not have authority to borrow from each other. This is important given projections showing that the asset reserves held by the OASI fund will be depleted in 2034, whereas the asset reserves held by the DI fund will be depleted in 2052. Following the depletion of trust fund reserves (2052 for DI and 2034 for OASI), continuing income is projected to cover 91% of DI scheduled benefits and 77% of OASI scheduled benefits. In the past, Congress has authorized temporary interfund borrowing and payroll tax reallocations between OASI and DI to address funding imbalances. This CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds . On a combined basis, the trust funds are projected to remain solvent until 2035, at which point continuing income is projected to cover 80% of program costs. (For a discussion of the status of the DI trust fund, see CRS Report R43318, The Social Security Disability Insurance (DI) Trust Fund: Background and Current Status .) Social Security Trust Fund Revenues The Social Security trust funds receive a credit equal to the Social Security payroll taxes deposited in the U.S. Treasury by the IRS. The payroll taxes are allocated between the OASI and DI trust funds based on a proportion specified by law. A provision included in the Bipartisan Budget Act of 2015 ( P.L. 114-74 ) temporarily directs a larger share of total payroll tax revenues to the DI fund. For 2016 to 2018, the 12.4% payroll tax rate is allocated as follows: 10.03% for the OASI fund and 2.37% for the DI fund. Beginning in 2019, the allocation reverts back to 10.6% for the OASI fund and 1.8% for the DI fund. Social Security Trust Fund Costs The U.S. Treasury makes Social Security benefit payments to individuals on a monthly basis, as directed by the Social Security Administration (SSA) as to whom to pay and the amount of the payment. When benefit payments are made by the U.S. Treasury, the Social Security trust funds are debited for the payments. Periodically, the Social Security trust funds are also debited for the administrative costs of the Social Security program. These administrative costs are incurred by several government agencies, including SSA, the U.S. Treasury, and the IRS. Social Security Trust Fund Operations The annual revenues to the Social Security trust funds are used to pay current Social Security benefits and administrative expenses. If, in any year, revenues are greater than costs, the surplus Social Security revenues in the U.S. Treasury are available for spending by the federal government on other (non-Social Security) spending needs at the time. If, in any year, costs are greater than revenues, the cash flow deficit is offset by selling some of the accumulated holdings of the trust funds (U.S. government securities) to help pay benefits and administrative expenses. There are two measures of Social Security trust fund operations: the annual cash flow operations and the accumulated holdings (or trust fund balance). The annual cash flow operations of the Social Security trust funds are a measure of current revenues and current costs. The cash flow operations are positive when current revenues exceed costs (a cash flow surplus) and negative when current costs exceed revenues (a cash flow deficit). In years with cash flow deficits, the Social Security program (unlike other federal programs that operate without a trust fund) may use the accumulated holdings of the Social Security trust funds from prior years to help pay benefits and administrative expenses. Although Social Security is a pay-as-you-go system, meaning that current revenues are used to pay current costs, changes made to the Social Security program in 1983 began a sustained period of annual cash flow surpluses through 2009. Since 2010, however, Social Security has had annual cash flow deficits (program costs have exceeded tax revenues). The 2019 Annual Report of the Social Security Board of Trustees projects that, under their intermediate assumptions, annual cash flow deficits will continue throughout the 75-year projection period (2019-2093). At the end of 2018, the Social Security trust funds had accumulated holdings (asset reserves) of more than $2.9 trillion. The 2019 Annual Report projects that the trust funds will have asset reserves (a positive balance) until 2035, meaning that Social Security benefits scheduled under current law can be paid in full and on time until then. This is the same year projected in last year's report. In addition, the 2019 Annual Report shows the 75-year actuarial deficit for the Social Security trust funds. The actuarial deficit is the difference between the present discounted value of scheduled benefits and the present discounted value of future taxes plus asset reserves held by the trust funds. It can be viewed as the amount by which the payroll tax rate would have to be increased to support the level of benefits scheduled under current law throughout the 75-year projection period (or, roughly the amount by which the payroll tax rate would have to be increased for the trust funds to remain fully solvent throughout the 75-year period). The 2019 Annual Report projects that the 75-year actuarial deficit for the trust funds is equal to 2.78% of taxable payroll. With respect to the change in the projected 75-year actuarial deficit, the trustees state, A 0.05 percentage point increase in the OASDI actuarial deficit would have been expected if nothing had changed other than the one-year shift in the valuation period from 2018 through 2092 to 2019 through 2093. The effects of updated demographic, economic, and programmatic data, and improved methodologies, collectively reduced the actuarial deficit by 0.11 percent of taxable payroll, offsetting most of the effect of changing the valuation period. As noted above, on a combined basis, the Social Security trust funds are projected to have asset reserves sufficient to pay full scheduled benefits until 2035 . Considered separately, the OASI Trust Fund is projected to have sufficient asset reserves until 2034 (last year's report also projected 2034 as the depletion year) and the DI Trust Fund is projected to have sufficient asset reserves until 2052 (20 years later than projected in last year's report). The trustees note, In last year's report, the projected reserve depletion year was the same for OASI and 20 years earlier (2032) for DI. The change in the reserve depletion for DI is largely due to continuing favorable experience for DI applications and benefit awards. Disability applications have been declining steadily since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014. Relative to last year's Trustees Report, disability incidence rates are lower in 2018. They are also assumed to rise more gradually from current levels to reach ultimate levels at the end of 10 years that are slightly lower. Accordingly, the projected Trust Fund depletion date is 20 years later and the 75-year actuarial deficit (0.12 percent of taxable payroll) is 0.09 percentage points lower than was projected last year. Table 1 shows the annual cash flow operations of the Social Security trust funds (noninterest income, cost, and cash flow surplus/deficit) for the historical period 1957 to 2018. From 1957 to 1983, the last time Congress enacted major amendments to the program, the Social Security trust funds operated with cash flow deficits (cost exceeded noninterest income) in 20 of the 28 years. Since 1984, the trust funds have operated with cash flow deficits in nine of the past 35 years (2010 to 2018). Table 2 shows projected cash flow operations of the Social Security trust funds (noninterest income, cost, and cash flow deficits) for the 2019 to 2034 period, as projected by the trustees in the 2019 Annual Report (under the intermediate assumptions). One way to measure the cash flow operations of the trust funds is to take the ratio of noninterest income to cost for each year. A ratio greater than 100% indicates positive cash flow (a cash flow surplus); a ratio less than 100% indicates negative cash flow (a cash flow deficit). Figure 1 shows the ratio of current noninterest income to current cost for the Social Security trust funds each year over the historical period 1957 to 2018 and over the 2019 to 2034 period, as projected by the trustees in the 2019 Annual Report (under the intermediate assumptions). As shown in the figure, in 2009, noninterest income of $689.2 billion divided by a cost of $685.8 billion results in a ratio just over 100% (100.5%), indicating a cash flow surplus for the Social Security trust funds that year. By comparison, in 2018, noninterest income of $920.1 billion divided by a cost of $1,000.2 billion results in a ratio of 92.0%, indicating a cash flow deficit. In the 2019 Annual Report, the Social Security trustees project that the ratio of current noninterest income to current cost will remain below 100% for the 75-year projection period (2019-2093), with the gap between noninterest income and cost increasing over time (under the intermediate assumptions). When the Social Security trust funds operate with annual cash flow deficits, the U.S. Treasury can continue to pay benefits scheduled under current law as long as the accumulated balance in the trust funds is sufficient to cover the costs. This is because the Social Security program has budget authority to pay benefits in full and on time as long as there is an adequate balance in the Social Security trust funds (the designated accounts). When current Social Security revenues are not sufficient to pay benefits, however, the U.S. government must raise the funds necessary to honor the redemption of U.S. government obligations held by the Social Security trust funds as they are needed to pay benefits. If there are no surplus governmental receipts, the U.S. government may raise the necessary funds by increasing taxes or other income, reducing non-Social Security spending, borrowing from the public (i.e., replacing bonds held by the trust funds with bonds held by the public), or a combination of these measures. Investment of the Social Security Trust Funds The Secretary of the Treasury is required by law to invest Social Security revenues in securities backed by the U.S. government. In addition, the Social Security trust funds receive interest on its holdings of special U.S. government obligations. Each U.S. government security issued by the U.S. Treasury for purchase by the Social Security trust funds must be a paper instrument in the form of a bond, note, or certificate of indebtedness. Specifically, Section 201(d) of the Social Security Act states, Each obligation issued for purchase by the Trust Funds under this subsection shall be evidenced by a paper instrument in the form of a bond, note, or certificate of indebtedness issued by the Secretary of the Treasury setting forth the principal amount, date of maturity, and interest rate of the obligation, and stating on its face that the obligation shall be incontestable in the hands of the Trust Fund to which it is issued, that the obligation is supported by the full faith and credit of the United States, and that the United States is pledged to the payment of the obligation with respect to both principal and interest. The Managing Trustee may purchase other interest-bearing obligations of the United States or obligations guaranteed as to both principal and interest by the United States, on original issue or at the market price, only where he determines that the purchase of such other obligations is in the public interest. Any interest or proceeds from the sale of U.S. government securities held by the Social Security trust funds must be paid in the form of paper checks from the General Fund of the Treasury to the Social Security trust funds. The interest rates paid on the securities issued to the Social Security trust funds are tied to market rates. For internal federal accounting purposes, when special U.S. government obligations are purchased by the Social Security trust funds, the U.S. Treasury is shifting surplus Social Security revenues from one government account (the Social Security trust funds) to another government account (the General Fund). The special U.S. government obligations are physical documents held by SSA, not the U.S. Treasury. The securities held by the Social Security trust funds are redeemed on a regular basis. These special U.S. government obligations, however, are not resources for the federal government because they represent both an asset and a liability for the government. Off-Budget Status of the Social Security Trust Funds For federal budget purposes, on-budget status generally refers to programs that are included in the annual congressional budget process, whereas off-budget status generally refers to programs that are not included in the annual congressional budget process. Social Security is a federal government program that, like the Postal Service, has had its receipts and (most) outlays designated by law as off budget. The off-budget designation, however, has no practical effect on program funding, spending, or operations. The annual congressional budget resolution, in its legislative language, separates the off-budget totals (receipts and outlays) from the on-budget totals (receipts and outlays). The report language accompanying the congressional budget resolution usually shows the unified budget totals (which combine the on- and off-budget amounts) as well as the separate on- and off-budget totals. The President's budget tends to use the unified budget measures in discussing the budget totals. The President's budget documents also include the totals for the on- and off-budget components, as required by law. The Congressional Budget Office uses the unified budget numbers in its analyses of the budget; it generally does not include on- and off-budget data in its regular annual reports. The unified budget framework is important because it includes all federal receipts and outlays, providing a more comprehensive picture of the size of the federal government and the federal budget's impact on the economy. In the unified budget, the Social Security program is a large source of both federal receipts (35.2% in FY2018) and federal outlays (25.1% in FY2018). For purposes of the unified budget, the annual Social Security cash flow surplus or deficit is counted in determining the overall federal budget surplus or deficit. The Social Security Trust Funds as Accumulated Holdings The Social Security trust funds can be viewed as trust funds, similar to any private trust funds, that are to be used for paying current and future benefits (and administrative expenses). By law, the Social Security revenues credited to the trust funds (within the U.S. Treasury) are invested in non-marketable U.S. government obligations. These obligations are physical (paper) documents issued to the trust funds and held by SSA. When the obligations are redeemed, the U.S. Treasury must issue a check (a physical document) to the Social Security trust funds for the interest earned on the obligations. Unlike a private trust that may hold a variety of assets and obligations of different borrowers, the Social Security trust funds can hold only U.S. government obligations. The sale of these obligations by the U.S. government to the Social Security trust funds is federal government borrowing (from itself) and counts against the federal debt limit. The requirement that the Social Security trust funds purchase U.S. government obligations serves several purposes, such as offering a mechanism for the Social Security program to recoup the surplus revenues loaned to the rest of the government; paying interest so that the loan of the surplus revenues does not lose value over time; ensuring that the Social Security trust funds (and not other government accounts) receives credit for the interest earnings; ensuring a level of return (interest) to the Social Security trust funds; and providing a means outside of the securities market for the U.S. government to borrow funds. The accumulated holdings of the Social Security trust funds represent the sum of annual surplus Social Security revenues (for all past years) that were invested in U.S. government obligations, plus the interest earned on those obligations. As a result of surplus Social Security revenues from 1984 to 2009 and the interest income credited to the Social Security trust funds, the accumulated holdings of the Social Security trust funds totaled about $2.9 trillion at the end of calendar year 2018. It is the accumulated holdings of the Social Security trust funds (or the trust fund balance) that many people refer to when discussing the Social Security trust funds. Table 3 shows the accumulated holdings of the Social Security trust funds for the historical period 1957 to 2018. Table 4 shows the projected accumulated holdings of the Social Security trust funds for the 2019 to 2034 period, as projected by the Social Security trustees in the 2019 Annual Report (under the intermediate assumptions). The Social Security trustees project that in 2020 the program's total cost will exceed its total income. Under intermediate assumptions, this relationship is projected to continue until the trust funds are depleted in 2034. The Social Security trustees project that, on average over the next 75 years (2019 to 2093), program costs will exceed income by an amount equal to 2.78% of taxable payroll (on average, costs are projected to exceed income by at least 20%). The gap between income and costs, however, is projected to increase over the 75-year period. For example, in 2035, the cost of the program is projected to exceed income by an amount equal to 3.15% of taxable payroll (costs are projected to exceed income by about 19%). By 2093, the cost of the program is projected to exceed income by an amount equal to 4.11% of taxable payroll (costs are projected to exceed income by about 24%). For illustration purposes, the trustees project that the Social Security trust funds would remain solvent throughout the 75-year projection period if, for example, revenues were increased by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.70 percentage points (from 12.40% to 15.10%; a relative increase of 21.8%); or benefits scheduled under current law were reduced by an amount equivalent to an immediate and permanent reduction of (1) about 17% if applied to all current and future beneficiaries, or (2) about 20% if applied only to those who become eligible for benefits in 2019 or later; or some combination of these approaches were adopted. The Social Security Trust Funds and the Level of Federal Debt As part of the annual congressional budget process, the level of federal debt (the federal debt limit) is established for the budget by Congress. The federal debt limit includes debt held by the public, as well as the internal debt of the U.S. government (i.e., debt held by government accounts). Borrowing from the public and the investment of the Social Security trust funds in special U.S. government obligations both fall under the restrictions of the federal debt limit. This means that the balance of the Social Security trust funds has implications for the federal debt limit. The Social Security Trust Funds and Benefit Payments The accumulated holdings of the Social Security trust funds represent funds designated to pay current and future benefits. When current Social Security tax revenues fall below the level needed to pay benefits, however, these funds become available only as the federal government raises the resources needed to redeem the securities held by the trust funds. The securities are a promise by the federal government to raise the necessary funds. In past years, when Social Security was operating with annual cash flow surpluses, Social Security's surplus revenues were invested in U.S. government securities and used at the time to pay for other federal government activities. Social Security's past surplus revenues, therefore, are not available to finance benefits directly when Social Security is operating with annual cash flow deficits, as it does today. The securities held by the trust funds must be redeemed for Social Security benefits to be paid. Stated another way, when Social Security is operating with a cash flow deficit, the program relies in part on the accumulated holdings of the trust funds to pay benefits and administrative expenses. Because the trust funds hold U.S. government securities that are redeemed with general revenues, there is increased reliance on the General Fund of the Treasury. With respect to reliance on the General Fund when Social Security is operating with a cash flow deficit, it is important to note that Social Security does not have authority to borrow from the General Fund. Social Security cannot draw upon general revenues to make up for any current funding shortfall. Rather, Social Security relies on revenues that were collected for the program in previous years and used by the federal government at the time for other (non-Social Security) spending needs, plus the interest earned on its trust fund investments. Social Security draws on its own previously collected tax revenues and interest income (accumulated trust fund holdings) when current Social Security tax revenues fall below current program expenditures. As the trustees point out, over the program's history, Social Security has collected approximately $21.9 trillion and paid out $19.0 trillion, leaving asset reserves of $2.9 trillion at the end of 2018. The accumulated trust fund holdings of $2.9 trillion represent the amount of money that the General Fund of the Treasury owes to the Social Security trust funds. The General Fund could be said to have fully paid back the Social Security trust funds if the trust fund balance were to reach zero (i.e., if all of the trust funds' asset reserves were depleted). The trustees project that the asset reserves held by the Social Security trust funds will be depleted in 2035. At that point, the program will continue to operate with incoming receipts to the trust funds. Incoming receipts are projected to be sufficient to pay about 80% of scheduled benefits through the end of the projection period in 2093 (under the intermediate assumptions of the 2019 Annual Report). Title II of the Social Security Act, which governs the program, does not specify what would happen to the payment of benefits in the event that the trust funds' asset reserves are depleted and incoming receipts to the trust funds are not sufficient to pay scheduled benefits in full and on time. Two possible scenarios are (1) the payment of full monthly benefits on a delayed basis or (2) the payment of partial monthly benefits on time. Appendix. Projected Trust Fund Dates, 1983-2019 The following table shows the key dates projected for the Social Security trust funds by the Social Security Board of Trustees (based on their intermediate set of assumptions) in each of their annual reports from 1983 to 2019.

The Social Security program pays monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. Program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. Projections show that the OASI fund will remain solvent until 2034, whereas the DI fund will remain solvent until 2052, meaning that each trust fund is projected to be able to pay benefits scheduled under current law in full and on time up to that point. Following the depletion of trust fund reserves (2052 for DI and 2034 for OASI), continuing income to each fund is projected to cover 91% of DI scheduled benefits and 77% of OASI scheduled benefits. The two trust funds are legally distinct and do not have authority to borrow from each other. However, Congress has authorized the shifting of funds between OASI and DI in the past to address shortfalls in a particular fund. Therefore, this CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds. On a combined basis, the trust funds are projected to remain solvent until 2035. Following depletion of combined trust fund reserves at that point, continuing income is projected to cover 80% of scheduled benefits. Social Security is financed by payroll taxes paid by covered workers and their employers, federal income taxes paid by some beneficiaries on a portion of their benefits, and interest income from the Social Security trust fund investments. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds. The Social Security trust funds represent funds dedicated to pay current and future Social Security benefits. However, it is useful to view the trust funds in two ways: (1) as an internal federal accounting concept and (2) as the accumulated holdings of the Social Security program. By law, Social Security tax revenues must be invested in U.S. government obligations (debt instruments of the U.S. government). The accumulated holdings of U.S. government obligations are often viewed as being similar to assets held by any other trust on behalf of the beneficiaries. However, the holdings of the Social Security trust funds differ from those of private trusts because (1) the types of investments the trust funds may hold are limited and (2) the U.S. government is both the buyer and seller of the investments. This report covers how the Social Security program is financed and how the Social Security trust funds work.

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T he U.S. Department of Agriculture (USDA) offers several programs designed to help farmers and ranchers recover from the financial effects of natural disasters, including (1) federal crop insurance, (2) the Noninsured Crop Disaster Assistance Program (NAP), (3) livestock and fruit tree disaster programs, and (4) emergency disaster loans for both crop and livestock producers. All have permanent authorization, while the emergency loan program is the only one requiring a federal disaster designation (see Table 1 ). Most programs receive mandatory funding amounts of "such sums as necessary" and are not subject to annual discretionary appropriations. The Agricultural Improvement Act of 2018 (2018 farm bill, P.L. 115-334 ) made a number of amendments to these programs, generally to expand availability and support. Prior to the creation of many of the permanently authorized programs at USDA, Congress had historically provided farmers and ranchers with ad hoc disaster assistance payments authorized through supplemental appropriations. Subsequently, policies shifted away from the temporary forms of assistance in favor of enacting more permanent forms of support. More recently, policies have shifted to supplement permanent programs with ad hoc assistance for select agriculture losses. The Bipartisan Budget Act of 2018 ( P.L. 115-123 ) amended existing disaster assistance programs and authorized $2.36 billion for production losses from hurricanes and wildfires in 2017 that were not covered by existing programs. This report provides an overview of permanently authorized federal disaster assistance programs for agricultural losses as well as discretionary authority that USDA may use to provide assistance. Recent amendments in the 2018 farm bill and ad hoc assistance authorized by Congress in the Bipartisan Budget Act of 2018 are also discussed. Federal Crop Insurance The federal crop insurance program is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq. ), and is administered by USDA's Risk Management Agency (RMA). The program is designed to protect crop producers from risks associated with adverse weather, as well as weather-related plant diseases and insect infestations and declines in commodity prices. Crop insurance is available for most major crops and many specialty crops (including fruit, tree nut, vegetable, and nursery crops), as well as forage and pastureland for livestock producers. A producer who chooses to purchase an insurance policy must do so by an administratively determined deadline date, which varies by crop and usually coincides with the planting season. Insurance products that protect against loss in revenue and profit margins are also available. Policies are typically available in major growing regions. The federal crop insurance program was instituted in the 1930s and was subject to major legislative reforms in 1980 and again in 1994 and 2000. The Agriculture Risk Protection Act of 2000 ( P.L. 106-224 ) authorized new federal spending for the program primarily through more generous premium subsidies to help make the program more affordable to farmers and enhance farmer participation levels in an effort to preclude the need for ad hoc emergency disaster payments. Under the current crop insurance program, a producer who grows an insurable crop selects a level of crop yield and price coverage and pays a premium that increases as the levels of yield and price coverage rise. However, all eligible producers can receive catastrophic (CAT) coverage without paying a premium. The premium for this portion of coverage is completely subsidized by the federal government. Under CAT coverage, participating producers can receive a payment equal to 55% of the estimated market price of the commodity on crop losses in excess of 50% of normal yield—referred to as 50/55 coverage. Although eligible producers do not have to pay a premium for CAT coverage, they are required to pay upon enrollment a $655 administrative fee per covered crop for each county where they grow the crop. USDA can waive the fee for financial hardship cases. In addition to the administrative fee, producers can elect to pay a premium, which is partially subsidized by the government, to increase the 50/55 CAT coverage to any equivalent level of coverage between 50/100 and 85/100 (i.e., 85% of yield and 100% of the estimated market price) in increments of 5%. These higher levels of coverage are known as "buy up" coverage. For many insurable commodities, an eligible producer can purchase revenue insurance. Under such a policy, a farmer could receive an indemnity payment when actual farm revenue for a crop falls below the target level of revenue, regardless of whether the shortfall in revenue was caused by poor production or low farm commodity prices. Insured producers are also eligible for reduced coverage if they are late or prevented from planting because of flooding. The annual agriculture appropriations bill traditionally makes two separate appropriations for the federal crop insurance program. It provides discretionary funding for the salaries and expenses of the RMA. It also provides "such sums as are necessary" for the Federal Crop Insurance Corporation, which finances all other expenses of the program, including premium subsidies, indemnity payments, and reimbursements to the private insurance companies. The total cost of the program varies by year, primarily due to fluctuating levels of indemnity payments from changes in commodity prices, planting decisions, and weather conditions. Across all policies, the average premium subsidy was about 63% of total premiums in 2017. The federal government also subsidizes the costs of selling and servicing the policies (as delivery subsidies to Approved Insurance Providers) and absorbs underwriting losses (indemnities in excess of premiums received) in years when indemnities are high. For a more detailed analysis of the federal crop insurance program, see CRS Report R45193, Federal Crop Insurance: Program Overview for the 115th Congress . Noninsured Crop Disaster Assistance Program (NAP) Producers who grow a crop that is currently ineligible for crop insurance may apply for NAP. NAP has permanent authority under Section 196 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333) and is administered by USDA's Farm Service Agency (FSA). It was first authorized under the Federal Crop Insurance Reform Act of 1994 ( P.L. 103-354 ). NAP is not subject to annual appropriations. Instead, it receives such sums as are necessary through USDA's Commodity Credit Corporation (CCC), which has a line of credit with the U.S. Treasury to fund an array of farm programs. Eligible crops under NAP include any commercial crops grown for food, fiber, or livestock consumption for which there is no CAT coverage available under the federal crop insurance program, with limited exceptions. These crops include mushrooms, floriculture, ornamental nursery, Christmas trees, turfgrass sod, aquaculture, honey, maple sap, ginseng, and industrial crops used in manufacturing or grown as a feedstock for energy production, among others. Trees grown for wood, paper, or pulp products are not eligible. To be eligible for a NAP payment, a producer first must apply for coverage by the application closing date, which varies by crop but is generally about 30 days prior to the final planting date for an annual crop. Like CAT coverage under crop insurance, NAP applicants must also pay an administrative fee at the time of application. The NAP service fee is the lesser of $325 per crop or $825 per producer per administrative county, not to exceed a total of $1,950 for farms in multiple counties. In order to receive a NAP payment, a producer must experience at least a 50% crop loss caused by a natural disaster or be prevented from planting more than 35% of intended crop acreage. For any losses in excess of the minimum loss threshold, a producer can receive 55% of the average market price for the covered commodity. Hence, NAP is similar to CAT coverage in that it pays 55% of the market price for losses in excess of 50% of normal historical production. Additional coverage (referred to as buy-up coverage) may be purchased at 50% to 65% (in 5% increments) of established yield and 100% of average market price, contract price, or other premium price. The farmer-paid fee for additional coverage is 5.25% times the product of the selected coverage level and value of production (acreage times yield times average market price times the producer's share of the crop). Grazing land is not eligible for buy-up coverage. A producer of a noninsured crop is subject to an annual payment limit of $125,000 per person for catastrophic coverage and $300,000 for buy-up coverage. A producer is ineligible under NAP if the producer's total adjusted gross income (AGI) exceeds $900,000. The total federal cost of NAP was $165 million in FY2014, $125 million in FY2015, $137 million in FY2016, $157 million in FY2017, and $164.3 million in FY2018. Supplemental Agricultural Disaster Assistance Programs Four agricultural disaster assistance programs are permanently authorized for livestock and fruit trees: (1) the Livestock Indemnity Program (LIP); (2) the Livestock Forage Disaster Program (LFP); (3) the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP); and (4) the Tree Assistance Program (TAP). They operate nationwide and are administered by FSA. Producers do not pay fees to participate and can apply at their local FSA offices. All programs receive "such sums as necessary" in mandatory funding via the CCC to reimburse eligible producers for their losses. Total payments vary each year based on eligible loss conditions. For FY2018, LFP payments totaled $487.5 million, LIP payments totaled $36.6 million, TAP payments totaled $11.3 million, and ELAP payments totaled $47 million. All payments are reduced by sequestration. For individual producers, payments under LFP may not exceed $125,000 per year. There are no limits on the amount of payments received under LIP, ELAP, and TAP. To be eligible for a payment under any of these programs, a producer's total AGI cannot exceed $900,000. Livestock Indemnity Program (LIP) LIP provides payments to eligible livestock owners and contract growers for livestock deaths in excess of normal mortality caused by an eligible loss condition (e.g., adverse weather, disease, or animal attack). Payments may also be made when the animal is injured as a direct result of an eligible loss condition but does not die and is sold at a reduced price. Eligible loss conditions may include (1) extreme or abnormal damaging weather that is not expected to occur during the loss period for which it occurred, (2) disease that is caused or transmitted by a vector and is not susceptible to control by vaccination, and (3) an attack by animals reintroduced into the wild by the federal government or protected by federal law. Eligibility is predicated on not only the occurrence of an eligible loss condition but direct causation to the death of the animal. Eligible livestock include beef and dairy cattle, bison, hogs, chickens, ducks, geese, turkeys, sheep, goats, alpacas, deer, elk, emus, llamas, reindeer, caribou, and equine. The livestock must have been maintained for commercial use and not produced for reasons other than commercial use as part of a farming operation. The program excludes wild free-roaming animals, pets, and animals used for recreational purposes, such as hunting, roping, or for show. Poultry and swine are the only eligible livestock for contract growers. The LIP payment rate is equal to 75% of the average fair market value of the deceased animal type. USDA publishes a payment rate for each type of livestock for each year (e.g., $983.90 per adult beef cow and $4.39 per duck in 2018). For eligible livestock contract growers, the payment rate is based on 75% of the national average input costs for the applicable livestock. For livestock sold at a reduced sale price, payments are calculated by multiplying the national payment rate for the livestock category minus the amount the owner received at sale times the owner's share. Livestock Forage Disaster Program (LFP) LFP makes payments to eligible livestock producers who have suffered grazing losses on drought-affected pastureland (including cropland planted specifically for grazing), or on rangeland managed by a federal agency due to a qualifying fire. Eligible producers must own, cash or share lease, or be a contract grower of covered livestock during the 60 calendar days before the beginning date of a qualifying drought or fire. They must also provide pastureland or grazing land for covered livestock that is either (a) physically located in a county affected by a qualifying drought during the normal grazing period for the county or (b) managed by a federal agency where grazing is not permitted due to fire. Eligible livestock types are livestock that have been grazing on eligible grazing land or pastureland or would have been had a disaster not struck. These include alpacas, beef cattle, buffalo, beefalo, dairy cattle, sheep, deer, elk, emus, equine, goats, llamas, poultry, reindeer, and swine. Livestock must be maintained for commercial use as part of a farming operation. Livestock owned for noncommercial uses, or livestock that is in (or would have been in) feedlots, are excluded. Payments are generally triggered by the drought intensity level for an individual county as published in the U.S. Drought Monitor, a federal report published each week. The number of monthly payments depends on the drought severity and length of time the county has been designated as such ( Table 2 ). For drought, the payment amount is equal to the number of monthly payments times 60% of estimated monthly feed cost. For producers who sold livestock because of drought conditions, the payment rate is equal to 80% of the estimated monthly feed cost. Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP) ELAP provides payments to producers of livestock, honey bees, and farm-raised fish as compensation for losses due to disease, adverse weather, feed or water shortages, or other conditions (such as wildfires) that are not covered under LIP or LFP. ELAP specifically provides assistance for the loss of honey bee colonies in excess of normal mortality. In order to meet the eligibility requirements for honey bee colony losses, they must be the direct result of an eligible adverse weather or loss condition such as colony collapse disorder, eligible winter storm, excessive wind, and flood. For livestock losses, ELAP covers four categories: (1) livestock death losses caused by an eligible loss condition, (2) livestock feed and grazing losses that are not due to drought or wildfires on federally managed lands, (3) losses resulting from the additional cost of transporting water to livestock due to an eligible drought, and (4) losses resulting from the additional cost associated with gathering livestock for inspection and treatment related to cattle tick fever. Tree Assistance Program (TAP) TAP makes payments to qualifying orchardists and nursery tree growers to replant or rehabilitate trees, bushes, and vines damaged by natural disasters. Losses in crop production—as opposed to the tree, bush, or vine itself—are generally covered by federal crop insurance or NAP. Eligible trees, bushes, and vines are those from which an annual crop is produced for commercial purposes. Nursery trees include ornamental, fruit, nut, and Christmas trees produced for commercial sale. Trees used for pulp or timber are ineligible. To be considered an eligible loss, the individual stand must have sustained a mortality loss or damage loss in excess of 15% after adjustment for normal mortality or damage. Normal mortality or damage is determined based on (a) each eligible disaster event, except for losses due to plant disease, or (b) for plant disease, the time period for which the stand is infected. Also, the loss could not have been prevented through reasonable and available measures. For replacement, replanting, and/or rehabilitation of trees, bushes, or vines, the payment calculation is the lesser of (a) 65% of the actual cost of replanting (in excess of 15% mortality) and/or 50% of the actual cost of rehabilitation (in excess of 15% damage), or (b) the maximum eligible amount established for the practice by FSA. The total quantity of acres planted to trees, bushes, or vines for which a producer can receive TAP payments cannot exceed 1,000 acres annually. Emergency Disaster Loans When either the President or the Secretary of Agriculture declares a county a disaster area or quarantine area, agricultural producers in that county may become eligible for low-interest emergency disaster (EM) loans available through FSA. Producers in counties that are contiguous to a county with a disaster designation also become eligible for EM loans. EM loan funds may be used to help eligible farmers, ranchers, and aquaculture producers recover from production losses (when the producer suffers a significant loss of an annual crop) or from physical losses (such as repairing or replacing damaged or destroyed structures or equipment or for the replanting of permanent crops such as orchards). A qualified applicant can then borrow up to 100% of actual production or physical losses (not to exceed $500,000). Once a county is declared eligible, an individual producer within the county (or a contiguous county) must also meet the following requirements for an EM loan: A producer must (1) be an established family farmer and a citizen or permanent resident of the United States; (2) experience a crop loss of more than 30% or a physical loss of livestock, livestock products, real estate, or property; and (3) be unable to obtain credit from a commercial lender but still show the potential to repay the loan, including having acceptable credit history and collateral to secure the loan. Applications must be received within eight months of the county's disaster designation date. Loans for nonreal-estate purposes must generally be repaid within seven years. Loans for physical losses to real estate have terms up to 20 years. Depending on the repayment ability of the producer and other circumstances, these terms can be extended to 20 years for nonreal-estate losses and up to 40 years for real estate losses. The EM loan program is permanently authorized by Title III of the Consolidated Farm and Rural Development Act (P.L. 87-128), as amended, and is subject to annual appropriations. In FY2018, the program received $25.6 million of new loan authority. Unused funds are carried over and available in the next fiscal year. Therefore, the total loan authority can vary greatly depending on appropriated levels, annual use, and total carryover. In FY2019, the total loan authority is $99.5 million. Also in counties with disaster designations, producers who have existing direct loans with FSA may be eligible for Disaster Set-Aside. If, as a result of disaster, a borrower is unable to pay all expenses and make loan payments that are coming due, up to one full year's payment can be moved to the end of the loan. Other USDA Assistance USDA also has several permanent disaster assistance programs that help producers repair damaged land following natural disasters. It also has authority to issue disaster payments to farmers with "Section 32" or "CCC" funds and can use a variety of existing programs to address disaster issues as they arise. Emergency Agricultural Land Assistance Programs Several USDA programs offer financial and technical assistance to producers to repair, restore, and mitigate damage by a natural disaster on private land. The Emergency Conservation Program (ECP) and the Emergency Forest Restoration Program (EFRP) are administered by FSA. For both programs, FSA pays participants a percentage of the cost to restore the land to a productive state. ECP also funds water for livestock and installing water conserving measures during times of drought. EFRP was created to assist private forestland owners with losses caused by a natural disaster on nonindustrial private forest land. The Emergency Watershed Protection (EWP) program and the EWP floodplain easement program are administered by USDA's Natural Resources Conservation Service and the U.S. Forest Service. EWP assists sponsors, landowners, and operators in implementing emergency recovery measures for runoff retardation and erosion prevention to relieve imminent hazards to life and property created by a natural disaster. The EWP floodplain easement program is a mitigation program that pays for permanent easements on private land meant to safeguard lives and property from future floods and drought and the products of erosion. For more information on these programs, see CRS Report R42854, Emergency Assistance for Agricultural Land Rehabilitation . "Section 32" and "CCC" Funds for Farm Disaster Payments USDA has discretionary authority to distribute emergency payments to farmers with "Section 32" and CCC funds. While both Section 32 and CCC have broad authority to support U.S. agriculture, the majority of their activities are required under various statutes, such as omnibus farm bills. Beginning in FY2012, annual appropriations acts limited USDA's discretionary use of CCC and Section 32. The FY2018 omnibus appropriation removed this limitation for CCC and allowed for limited carryover funding under Section 32 to be used pending congressional notification. USDA's Section 32 program is funded by a permanent appropriation of 30% of the previous year's customs receipts, and funds are used for a variety of activities, including child nutrition programs, the purchase of commodities for domestic food programs, and farm disaster assistance. The statutory authority is Section 32 of the Agricultural Adjustment Act Amendment of 1935 (P.L. 74-320, 7 U.S.C. 612c). The authority to provide disaster assistance is attributed to clause 3 of Section 32, which provides that funds "shall be used to re-establish farmers' purchasing power by making payments in connections with the normal production." The FY2019 omnibus (§714, P.L. 116-6 ) limits clause 3 to carryover funding of no more than $350 million following a two-week advance notice to Congress. The CCC serves as the funding institution for carrying out federal farm support programs, such as commodity price support and production programs, conservation programs, disaster assistance, agricultural research, and bioenergy development. It is federally chartered by the CCC Charter Act of 1948 (P.L. 80-806), as amended. The authority to provide disaster assistance is attributed to Section 5 of the act (15 U.S.C. 714c), which, among other activities, authorizes the CCC to support the prices of agricultural commodities through loans, purchases, payments, and other operations. Adjustments to Existing USDA Programs In addition to implementing the disaster assistance programs discussed above, USDA can use authority under other existing programs to help producers recover from natural disasters. For example, in response to the major drought affecting a large part of the United States in recent years, USDA took a number of administrative actions to assist producers, including extending emergency grazing and haying on Conservation Reserve Program (CRP) acres; reducing the emergency loan interest rate and making emergency loans available earlier in the season; targeting conservation assistance through the Environmental Quality Incentives Program for the most extreme and exceptional drought areas; additional funding helps farmers and ranchers implement conservation practices that conserve water resources, reduce wind erosion on drought-impacted fields, and improve livestock access to water (farmers and ranchers contribute about half the cost of implementing the practices); and directing Emergency Community Water Assistance Grants for rural water systems experiencing emergencies resulting from a significant decline in quantity or quality of drinking water. Assistance to Prevent Spread of Animal Diseases Under the Animal Health Protection Act (7 U.S.C. 8301, et seq. ), USDA is authorized to take protective actions against the spread of livestock disease, including seizing, treating, or destroying animals if USDA determines that an extraordinary emergency exists because of the presence of a pest or disease of livestock. As part of its animal health program, USDA's Animal and Plant Health Inspection Service compensates producers for animals that must be euthanized, for their disposition, and for infected materials that must also be destroyed. Funding is provided by annual appropriations or through the CCC for larger amounts. The most recent example of a large-scale outbreak that resulted in payments to producers was in 2015 and 2016 during outbreaks of highly pathogenic avian influenza affecting the U.S. poultry industry. Amendments in the 2018 Farm Bill The 2018 farm bill amended the supplemental disaster assistance programs as well as NAP, crop insurance, and emergency loans. The following provides a summary of changes to select programs included in this report. For a more comprehensive review of amendments under the 2018 farm bill, see CRS Report R45525, The 2018 Farm Bill (P.L. 115-334): Summary and Side-by-Side Comparison . Federal Crop Insurance Amendments The 2018 farm bill generally expands coverage under the federal crop insurance program, including for forage, grazing, and hemp. Amendments authorize catastrophic level coverage for insurance plans covering grazing crops and grasses. It also allows producers to purchase separate crop insurance policies for crops that can be both grazed and mechanically harvested on the same acres during the same growing season and to receive independent indemnities for each intended use. A number of amendments were also made related to hemp, including eligibility, post-harvest losses, and waivers that allow for the development of policies for hemp. For all crops, the administrative fee for catastrophic coverage was increased from $300 to $655 per crop per county. NAP Amendments The 2018 farm bill expands crop eligibility to include crops that may be covered by select forms of crop insurance but only under whole farm plans or weather index policies. It also amends the payment calculation to consider the producer's share of the crop, raises the service fees, and creates separate payment limits for catastrophic ($125,000/person) and buy-up ($300,000/person) coverage. Payments under buy-up coverage are also expanded to include other premium prices (e.g., local, organic, or direct market price), which may be higher than the average market price. The law makes buy-up coverage permanent and adds data collection and program coordination requirements. Supplemental Agriculture Disaster Assistance Program Amendments The 2018 farm bill expands payments for livestock losses caused by disease and for losses of unweaned livestock that occur before vaccination. The law also expands the definition of eligible producer to include Indian tribes or tribal organizations and increases replanting and rehabilitation payment rates for beginning and veteran orchardists. The law amends the limits on payments received under select disaster assistance programs: Of the four disaster assistance programs, only LFP is now subject to the $125,000/person payment limit. Emergency Loan Amendments Eligibility is expanded to allow borrowers who have received a debt write-down or restructuring of a farm loan (due to circumstances beyond the control of the borrower) to maintain eligibility for an emergency loan. Ad Hoc Assistance The U.S. farm policy mix that provides assistance to agricultural producers for damage and loss following a natural disaster continues to shift between permanent and temporary authorized support. The authorization of permanent disaster assistance programs in the 2008 and 2014 farm bills, as well as expanded crop insurance and NAP policies, were designed to reduce the need for ad hoc disaster assistance. Following enactment of the 2008 farm bill, Congress appropriated little in the way of supplemental disaster assistance for agriculture, most of which was for land rehabilitation efforts under EWP and ECP. This changed in 2018, when an active hurricane and wildfire season in 2017 resulted in the authorization of supplemental assistance in the Bipartisan Budget Act of 2018. In addition to the programmatic changes discussed in the " Supplemental Agricultural Disaster Assistance Programs " section of this report, the Bipartisan Budget Act of 2018 also authorized $2.36 billion for production losses not covered under NAP or crop insurance. 2017 Wildfires and Hurricanes Indemnity Program On July 16, 2018, USDA announced the availability of the bulk of the 2018 Bipartisan Budget Act funding through the Wildfires and Hurricanes Indemnity Program (WHIP). Only crop, tree, bush, and vine losses from a wildfire or hurricane in 2017 are eligible for assistance under WHIP. Payments to producers who purchased crop insurance or NAP coverage range from 70% to 95% of the expected value of the crop, depending on the level of coverage purchased. For producers who did not purchase crop insurance or NAP in advance of the natural disaster, payments under WHIP are limited to 65% of expected value of the crop. All payments are reduced by the value of the crop harvested, if any, and any insurance indemnity paid through crop insurance or NAP. All participants are required to purchase crop insurance or NAP for the next two years. Payments are limited to $125,000 if less than 75% of the participant's AGI is from farming. If more than 75% of the participant's AGI is from farming, then payments are limited to a maximum of $900,000. USDA's initial announcement stated that only 50% of the participant's payment rate will be made up front, with additional payments possible depending on fund availability. Florida Citrus Block Grant USDA used a portion of the 2018 Bipartisan Budget Act funding for a $340 million block grant to the state of Florida. Under the grant, the state is expected to assist the citrus industry with the cost of buying and planting replacement trees—including resetting and grove rehabilitation—and for repairing damage to irrigation systems, among other activities. Pecan Trees The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), also provided supplemental assistance but through an existing program—TAP. The act authorized $15 million for payments to eligible pecan orchardists or pecan nursery tree growers for mortality losses incurred during calendar year 2017. The act lowers the mortality loss threshold under TAP to cover losses in excess of 7.5% but not more than 15%, adjusted for normal mortality. If losses exceeded 15%, then the loss is already eligible for TAP. If applications for these losses (i.e., between 7.5% and 15%) exceed the available $15 million, then payments would be proportionally reduced.

The U.S. Department of Agriculture (USDA) offers several programs to help farmers recover financially from natural disasters, including drought and floods. All the programs have permanent authorization, and one requires a federal disaster designation (the emergency loan program). Most programs receive mandatory funding amounts that are "such sums as necessary" and are not subject to annual discretionary appropriations. The federal crop insurance program offers subsidized policies designed to protect crop producers from risks associated with adverse weather, as well as weather-related plant diseases and insect infestations and declines in commodity prices. Policies must be purchased prior to the planting season. Eligible commodities include most major crops and many specialty crops (including fruit, tree nut, vegetable, and nursery crops), as well as forage and pastureland for livestock producers. Producers who grow a crop that is currently ineligible for crop insurance may apply for the Noninsured Crop Disaster Assistance Program (NAP). NAP provides a catastrophic level of coverage, as well as options to purchase additional coverage. Similar to crop insurance, policies must be purchased prior to the planting season. There are four permanently reauthorized disaster programs for livestock and trees. Producers do not pay a fee to participate, and advanced sign-up is not required. The programs are: 1. the Livestock Indemnity Program (LIP), which provides payments to eligible livestock owners and contract growers at a rate of 75% of market value for livestock deaths in excess of normal mortality or sold at a reduced sale price caused by adverse weather, attacks by reintroduced wild animals, and disease; 2. the Livestock Forage Disaster Program (LFP), which makes payments to eligible livestock producers who have suffered grazing losses on drought-affected pasture or grazing land or on rangeland managed by a federal agency due to a qualifying fire; 3. the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP), which provides payments to producers of livestock, honey bees, and farm-raised fish as compensation for losses due to disease, adverse weather, and feed or water shortages; and 4. the Tree Assistance Program (TAP), which makes payments to orchardists/nursery tree growers for losses in excess of 15% to replant trees, bushes, and vines damaged by natural disasters. Separately, for all types of farms and ranches, when a county has been declared a disaster area by either the President or the Secretary of Agriculture, producers in that county may become eligible for low-interest emergency disaster loans. USDA has several permanent disaster assistance programs designed to help producers repair damaged land following natural disasters. It also has authority to issue disaster payments to farmers with funds from "Section 32," or the Commodity Credit Corporation (CCC). Finally, USDA can use a variety of existing programs to address disaster issues as they arise, such as allowing emergency grazing on land enrolled in the Conservation Reserve Program. The Agricultural Improvement Act of 2018 (P.L. 115-334) made a number of amendments to the permanent farm bill disaster assistance programs, NAP, and crop insurance, including changes to payment limits, definitions, eligibility, and coverage.

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Introduction Congress created offices of inspector general (OIGs) in 1978 (via P.L. 95-452 , the Inspector General Act of 1978, or the IG Act) to assist in its oversight of the executive branch. At that time, Congress determined that there were serious deficiencies in the executive branch's auditing and investigative activities designed to curb waste, fraud, and abuse and promote agency operational and program efficiency. For example, the House and Senate reports accompanying the bill that became the IG Act argued that auditing and investigative activities were scattered throughout the various federal departments and were often conducted in response to a complaint as opposed to having in place "affirmative programs to look for possible fraud or abuse"; investigators in some agencies (including the Small Business Administration, SBA) were not allowed to initiate investigations without clearance from officials responsible for the programs involved; many agency representatives engaged in auditing and investigative activities (including those within the SBA) reported that their office lacked sufficient budgets to do its job, many of the auditing and investigative offices (including those at the SBA) often reported to those who were responsible for the program being audited or investigated; and some auditors and investigators were unable to devote full time to their audit or investigative responsibilities. The House report concluded that independent OIGs "are urgently needed." The Senate report concluded that "with rare exceptions, the agencies have not adequately policed their own operations and programs." OIGs were designed to provide Congress and federal agency heads independent, nonpartisan analysis, conducted in accordance with generally accepted government auditing standards, to identify and recommend ways to limit waste, fraud, and abuse in federal programs and enhance operational and program efficiency and effectiveness. OIGs' activities were to supplement and complement those of the Government Accountability Office (GAO), which serves a similar, though not identical, role in assisting Congress fulfill its oversight function. Together, OIGs and GAO (along with the Congressional Research Service [CRS] and the Congressional Budget Office [CBO]) provide Congress with information and analysis needed to conduct effective oversight and, in the process, help Congress maintain its balance of power with the presidency. OIGs currently exist in more than 70 federal agencies, including all departments and larger agencies, numerous boards and commissions, and other entities. They are predominantly located in executive branch agencies, but several legislative branch entities—for example, the Library of Congress (LOC), GAO, and the Government Publishing Office (GPO)—also have OIGs. The overwhelming majority of OIGs, including the U.S. Small Business Administration OIG (SBA OIG), are governed by the IG Act. It structures inspector general (IG) appointments and removals, powers and authorities, and duties and responsibilities. Other laws have established or amended IG powers and authorities in specified agencies or programs. As a result, IG statutory powers and authorities are not identical across the federal government and, in certain cases, these differences are significant. Nonetheless, in general, statutory OIGs follow the IG Act's standards, guidelines, and directives. For example, the IG Act provides IGs five statutory duties and responsibilities as follows: 1. Conduct, supervise, and coordinate audits and investigations of their agency's programs and operations. 2. Review existing and proposed legislation and regulations relating to their agency and make recommendations in mandated semiannual reports concerning the impact of such legislation or regulations on their agency's programs and operations or on the prevention and detection of fraud and abuse in those programs and operations. 3. Recommend policies to improve their agency's administration of its programs and operations and prevent and detect fraud and abuse in those programs and operations. 4. Recommend policies to facilitate relationships between their agency and other federal, state, and local government agencies and nongovernmental entities to promote the economy and efficiency of their agency's administration of its programs and operations and prevent and detect fraud and abuse in those programs and operations. 5. Keep both their agency head and Congress fully and currently informed concerning fraud and other serious problems, abuses, and deficiencies relating to their agency's administration of its programs and operations and to report on the progress made in implementing recommended corrective action. This report examines the SBA OIG's statutory authorities; reporting requirements; funding; staffing and organizational structure; and recent activities (audits, investigations, etc.). The SBA OIG's impact on monetary savings, SBA programs and operations, and legislation affecting the agency is also examined. The report concludes with some observations concerning the SBA OIG's relationship with Congress. Some areas of possible congressional interest, other than SBA OIG funding and staffing issues, include exploring ways to more accurately quantify the SBA OIG's claims of monetary savings and to determine if the SBA OIG should undertake additional tracking and monitoring activities to more accurately quantify the office's impact on SBA programs, operations, and legislation. SBA's OIG The SBA OIG is a separate, independent office that provides "independent, objective oversight to improve the integrity, accountability, and performance of the SBA and its programs for the benefit of the American people." The SBA IG (Hannibal "Mike" Ware) directs the office and is "appointed by the President, by and with the advice and consent of the Senate, without regard to political affiliation and solely on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations." The SBA is a Cabinet-level agency. Although the SBA is one of the smaller Cabinet-level agencies (with an annual budget of $715.4 billion in FY2019), it administers a relatively wide range of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. The SBA OIG is responsible for examining these programs and the various SBA offices that administer them. IGs report to the head of their agency or establishment, but are provided various powers and protections that support their independence. For example, the SBA IG reports to the SBA Administrator, but may be removed from office only by the President, or through the impeachment process in Congress. has the authority to hire staff. determines priorities and projects (e.g., audits, reviews and investigations) without outside direction. cannot be prevented or prohibited "from initiating, carrying out, or completing any audit or investigation, or from issuing any subpoena during the course of any audit or investigation." must be provided "access to all records, reports, audits, reviews, documents, papers, recommendations, or other material available ... which relate to programs and operations with respect to which [the SBA] Inspector General has responsibilities under this Act." must be provided "appropriate and adequate office space" and "such equipment, office supplies, and communications facilities and services as may be necessary for the operation of" the SBA OIG, including any "necessary maintenance services for such offices and the equipment and facilities located therein." Statutory Authorities The IG Act provides all IGs nine statutory authorities: 1. Access to all records, reports, audits, reviews, documents, papers, recommendations, or other material available relating to the IG's responsibilities under the IG Act. 2. Make such investigations and reports relating to their agency's administration of its programs and operations as are, in the judgment of the IG, necessary or desirable. 3. Request such information or assistance as may be necessary for carrying out the duties and responsibilities provided by the IG Act from any federal, state, or local governmental agency or unit thereof. 4. Require by subpoena the production of all information, documents, reports, answers, records, accounts, papers, and other data in any medium necessary in the performance of the functions assigned by the IG Act; provided that procedures other than subpoenas shall be used by the IG to obtain documents and information from federal agencies. 5. Administer to or take from any person an oath, affirmation, or affidavit, whenever necessary in the performance of the functions assigned by the IG Act. 6. Have direct and prompt access to their agency head when necessary for any purpose pertaining to the performance of functions and responsibilities under the IG Act. 7. Select, appoint, and employ such officers and employees as may be necessary for carrying out the functions, powers, and duties of the Office subject to the provisions of title 5, United States Code , governing appointments in the competitive service, and the provisions of chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates. 8. Obtain services as authorized by Section 3109 of title 5, United States Code , at daily rates not to exceed the equivalent rate prescribed for grade GS-18 of the General Schedule by Section 5332 of title 5, United States Code . 9. To the extent and in such amounts as may be provided in advance by appropriations acts, to enter into contracts and other arrangements for audits, studies, analyses, and other services with public agencies and with private persons, and to make such payments as may be necessary to carry out the provisions of the IG Act. In addition, the IG Act provides 25 OIGs, including the SBA OIG, direct law enforcement authority. It also authorizes the U.S. Attorney General to delegate law enforcement authority to other OIGs under specified circumstances. Reporting Requirements The IG Act requires IGs to prepare and transmit semiannual reports (two per year) to their agency's head, not later than April 30 and October 31 of each year, summarizing the OIG's activities during the immediately preceding six-month periods ending on March 31 and September 30. Agency heads are to transmit these reports to the appropriate committees or subcommittees of Congress in unaltered form within 30 days after receipt. Agency heads may provide any additional comments deemed appropriate. Agency heads must also provide specified information, such as statistical tables showing the total number of audit reports, inspection reports, and evaluation reports for which final action had not been taken by the commencement of the reporting period; on which management decisions were made during the reporting period; and for which no final action had been taken by the end of the reporting period. Copies of the semiannual reports must be made available to the public upon request and at a reasonable cost within 60 days of their transmission to Congress. The OIG's semiannual reports are required to include, but not limited to, 16 informational items. For example, the SBA OIG's report must include, among other items, the following: A description of significant problems, abuses, and deficiencies relating to the SBA's administration of programs and operations identified during the reporting period. A description of the SBA OIG's recommendations for corrective action. An identification of each significant recommendation described in previous semiannual reports on which corrective action has not been completed. A summary of matters referred to prosecutive authorities and the prosecutions and convictions that have resulted. A summary of each report made to the SBA Administrator relating to instances when information or assistance requested has, in the IG's judgment, been unreasonably refused or not provided during the reporting period. A listing of each audit report, inspection report, and evaluation report issued during the reporting period and for each report, where applicable, the total dollar value of questioned costs (including a separate category for the dollar value of unsupported costs) and the dollar value of recommendations that funds be put to better use. A summary of each audit report, inspection report, and evaluation report issued before the commencement of the reporting period for which no management decision has been made by the end of the reporting period (including the date and title of each such report), an explanation of the reasons such management decision has not been made, and a statement concerning the desired timetable for achieving a management decision on each such report. Information concerning any significant management decision with which the SBA IG is in disagreement. IGs are also required to report suspected violations of federal criminal law directly and expeditiously to the U.S. Attorney General, and any "particularly serious or flagrant problems, abuses, or deficiencies" relating to their agency's operations and administration of programs immediately to the agency's head. In addition, pursuant to P.L. 106-531 , the Records Consolidation Act of 2000, and the Office of Management and Budget (OMB) Circular A-136, the SBA OIG issues an annual Report on the Most Serious Management and Performance Challenges Facing the SBA . This report is, arguably, the SBA OIG's signature oversight document, focusing attention "on areas that are particularly vulnerable to fraud, waste, error, and mismanagement, or otherwise pose a significant risk and generally have been subject to one or more OIG or GAO reports." Funding The IG Act provides presidentially appointed IGs a separate appropriations account, known colloquially as a "line item," for their offices. This provision prevents federal administrators from limiting, transferring, or otherwise reducing OIG funding once it has been specified in law. IGs are authorized to transmit a budget estimate and request to their respective agency head each fiscal year. Each IG's request must include amounts for operations, training, and for the support of the Council of the Inspectors General on Integrity and Efficiency (CIGIE). The agency's budget request to the President must include the OIG's original budget request and any comments the affected IG has regarding the proposal. The President must include in the Administration's budget submission to Congress the IG's original request; the amount requested by the President for the OIG's operations, training, and support for CIGIE; and any comments the affected IG has regarding the proposal if the IG concludes that the President's budget would substantially inhibit the IG from performing the duties of the office. Each year, the SBA OIG transmits a budget justification document to the SBA Administrator, which is available online. That document includes the SBA OIG's budget request, an overview of the SBA OIG's mission and authorities, a list of critical risks facing the SBA, an accounting of the office's oversight activities during the previous fiscal year, areas of emphasis for the coming fiscal year, and a table of statistical highlights and accomplishments for the previous fiscal year (such as the number of reports and recommendations issued, estimated amounts saved or recouped, number of indictments and convictions). Table 1 shows the SBA OIG's appropriations over the FY2010-FY2019 period. The SBA OIG received an appropriation of $22.9 million for FY2019. Staffing and Organizational Structure As shown in Table 2 , the SBA OIG's FTEs have remained relatively stable since FY2000, ranging from a low of 93 FTEs in FY2014 to a high of 113 FTEs in FY2019. Approximately 85% of the SBA OIG's expenditures are attributed to payroll expenses. In 2013, then-SBA IG Peggy Gustafson testified that "resource constraints do sometime preclude us from initiating or continuing a number of investigations" and if she were provided additional resources, she would "target early defaulted loans, fraud, and lender negligence, and ... increase the capacity of our existing investigative personnel." The SBA OIG's staff is organized into three divisions and several support offices The Auditing Division performs and oversees audits and reviews of SBA programs and operations, focusing on SBA business and disaster loans, business development and government contracting programs, as well as mandatory and other statutory audit requirements involving computer security, financial reporting, and other work. The Investigations Division manages a program to detect and deter illegal and improper activities involving SBA's programs, operations, and personnel. The division has c riminal investigations staff who carry out a full range of traditional law enforcement functions and security operations staff who conduct name checks and, where appropriate, fingerprint checks on program applicants to prevent known criminals and wrongdoers from participating in SBA programs. Security operations staff also conduct required employee background investigations. The Management and Administration Division provides business support (e.g., budget and financial management, human resources, IT, and procurement) for the various OIG functions and activities. The Office of Counsel provides legal and ethics advice to all OIG components; represents the OIG in litigation arising out of or affecting OIG operations; assists with the prosecution of criminal, civil, and administrative enforcement matters; processes subpoenas; responds to Freedom of Information and Privacy Act requests; and reviews and comments on proposed policies, regulations, legislation, and procedures. The OIG Hotline, under the purview of the Chief of Staff , reviews allegations of waste, fraud, abuse, or serious mismanagement within the SBA or its programs from employees, contractors, and the public. The SBA OIG's headquarters is located in Washington, DC. The SBA OIG's Investigations Division has 12 field offices located across the United States. The SBA OIG's structure is shown in its organizational chart (see Figure 1 ). Recent Activities As mentioned previously, the SBA OIG conducts and supervises audits and investigations of the SBA's programs and operations. As a complement to its criminal and civil fraud investigations, the SBA OIG also recommends to the SBA suspensions, debarment, and other administrative enforcement actions against SBA lenders, borrowers, contractors, and others who have engaged in fraud or have otherwise exhibited a lack of business integrity. The SBA OIG also conducts, supervises, and participates in various training activities to counter fraud in SBA programs. Audit Reports During FY2018, the SBA OIG issued 26 audit reports containing 111 recommendations for improving the SBA's operations. The SBA's OIG provided several examples in its FY2018 semi-annual reports to Congress of what it considered to be among its more noteworthy audits, including the following: The State Trade Expansion Program An audit of the SBA's State Trade Expansion Program (STEP) determined that "while SBA has made significant progress in improving the overall management and effectiveness of STEP since the audit of the pilot program in 2012, SBA needs to improve its performance measures and its program oversight" or be "at risk of not fully realizing the impact of the program in increasing the number of small businesses exploring significant new trade opportunities." The OIG made six recommendations to improve the program. The SBA planned actions to resolve five of the six recommendations and had already implemented actions to resolve one of the recommendations by the audit's completion. 7(a) Loans to Poultry Farmers The OIG examined a sample of 11 7(a) loans (out of about 1,500 7(a) loans) made to poultry farmers from FY2012 to FY2016 and determined that these loans did not meet regulatory and SBA requirements for eligibility because the large chicken companies (integrators) in their sample "exercised such comprehensive control over the growers [through a series of contractual restrictions, management agreements, oversight inspections, and market controls] that SBA OIG believes the concerns appear affiliative under SBA regulations." The OIG concluded that "therefore, SBA and lenders approved 7(a) loans that were apparently ineligible under SBA size standard regulations and requirements." The OIG found that integrator controls overcame practically all of a grower's ability to operate their business independent of integrator mandates and concluded that, as a result, "from FY2012 to FY2016, SBA guaranteed approximately $1.8 billion in loans that may be ineligible." The OIG recommended that (1) the SBA review the loans cited in the evaluation sample to determine their eligibility and take appropriate corrective action and (2) review the arrangements between integrators and growers and "establish and implement controls, such as supplemental guidance, to ensure SBA loan specialists and lenders make appropriate affiliation determinations." The SBA agreed with both recommendations. Soon after the OIG's report was released, the SBA issued a statement indicating that it had reviewed the 11 loans cited in the report and confirmed that the loans "were correctly made in accordance with agency policy at the time." The SBA also assured borrowers and lenders that existing 7(a) loan guarantees to poultry famers would continue to be honored and that the SBA is "examining the policies and procedures around poultry loans to ensure SBA loans continue to be directed towards those small businesses most in need of assistance." The SBA subsequently held several public forums "to better understand the use of SBA guaranteed loans by small farmers in the poultry industry." Oversight of 8(a) Program Continuing Eligibility Processes The OIG audited the SBA's oversight of the Minority Small Business and Capital Ownership Development Program (commonly known as the "8(a) program") continuing eligibility processes "to determine whether SBA's oversight ensured 8(a) program participants met continuing eligibility requirements." The 8(a) program is designed to assist small businesses unconditionally owned and controlled by one or more socially and economically disadvantaged individuals with training, technical assistance, and contracting opportunities. The OIG found that 20 of the 25 firms it reviewed should have been removed from the 8(a) program and that these firms received $126.8 million in new 8(a) set-aside contract obligations in FY2017 "at the expense of eligible disadvantaged firms." The OIG concluded that the SBA "did not consistently identify ineligible firms in the 8(a) program," "did not always act to remove firms it determined were no longer eligible for the program," "did not perform required continuing eligibility reviews when it received specific and credible complaints regarding firms' eligibility," and "did not log all complaints." The OIG made 11 recommendations to improve the overall management of the 8(a) program continuing eligibility processes. The SBA agreed with 7 of the recommendations, partially agreed with the other 4 recommendations, and reported that it planned to conduct continuing eligibility reviews for the firms that the OIG identified as ineligible and take appropriate action. Investigations, Debarment Referrals, and Training Activities In FY2018, the SBA OIG's investigations resulted in 62 indictments or informations and 43 convictions. For example, A Missouri man was sentenced in federal court to 30 months in prison and five years of supervised release and ordered to pay $1,675,495 in restitution following an OIG investigation that revealed that the man committed bank fraud and made false statements to a financial institution in connection with his role in defrauding the SBA and a bank. The man was involved in a scheme to obtain a $2.9 million SBA loan through the use of straw companies and false business records. A co-conspirator had previously entered into a settlement agreement with the bank wherein he agreed to pay back $1.8 million of misappropriated SBA loan proceeds. An employee of a large defense contractor was sentenced in federal court to five years of imprisonment and three years of supervised release, was fined $50,000, and ordered to forfeit $1,273,440 after an OIG investigation revealed that he "had utilized a retired U.S. Army colonel's Section 8(a) communications and engineering firm as a front company to obtain government contracts." The retired colonel (and owner) was sentenced in federal court to five years of imprisonment and three years of supervised release, was fined $100,000, and forfeited $3 million in proceeds earned by his now defunct 8(a) firm. A Missouri veteran pled guilty to wire fraud and major program fraud following an OIG investigation that revealed that he was involved in a scheme to fraudulently claim service-disabled veteran-owned small business status for a firm to enable that firm to obtain a $40 million DOD contract. The veteran posed as a figurehead for the firm in exchange for monetary compensation for his participation in the scheme. The SBA OIG also sent 84 present responsibility actions (suspension and debarment referrals) to the SBA that resulted in 25 proposed debarments and 17 final debarments. As will be discussed later, the SBA OIG also annually provides training and outreach sessions, attended by more than 1,000 government employees, lending officials, and law enforcement representatives, on topics related to fraud in government lending and contracting programs. Monetary Savings and Recoveries The SBA OIG reports that its audits and investigations resulted in monetary savings and recoveries of nearly $224.5 million in FY2018 ($55.4 million from potential investigative recoveries and fines, $22.9 million from asset forfeitures, $0.73 million for loans or contracts not approved or canceled, and $145.4 million in disallowed costs agreed to by management). Most OIGs, including the SBA OIG, quantify their monetary savings by identifying and reporting amounts affected by their activities. This methodological approach, arguably, provides a fairly good overview of the OIG's activities' scope, nature, and impact. However, this approach has limitations. For example, precise data concerning monetary savings are not always readily available. Also, from a budgetary perspective, the monetary savings identified is sometimes less than the actual monetary savings realized. For example, Savings from potential recoveries and fines ($55.4 million in FY2018) is derived from the actual amount imposed by courts in criminal sentencings (including fines and restitution), criminal settlements, and civil settlements. These recoveries are deemed "potential" because the court ordered them in FY2018, but they may not have been collected yet. The SBA OIG does not track collections resulting from these orders. As a result, the SBA OIG is not able to report the final amount of money actually recovered. Savings from loans or contracts not approved or cancelled ($0.73 million in FY2018) is "comprised of the sum of the amounts that would have been borrowed as loans or awarded via contracts had there been no involvement by the OIG Investigations Division." From a budgetary perspective, the actual monetary savings generated by these actions is less than the amount cited. When a SBA loan is not approved, no funds are returned to the SBA because the loan amount has not been issued yet. When a SBA business loan is cancelled, the loan amount is ultimately returned to the lender, not to the SBA, because the SBA did not make the loan, it guaranteed a portion of it. When a small business contract is not approved, no funds are returned to the agency sponsoring the contract because the contracted amount has not been awarded yet. When a small business contract is cancelled, the contracted amount is typically made available to other contractors. Savings from disallowed costs agreed to by management ($145.4 million in FY2018) could result in actual budgetary savings, but the recovery process typically takes time. As a result, the final savings for disallowed costs is often not known during the fiscal year in which it is reported. Finally, estimating the monetary savings from the SBA OIG's activities is challenging because it is difficult, if not impossible, to determine what changes the SBA might have made to its programs and operations if the SBA OIG did not exist. Perhaps indicative of these methodological challenges, the SBA OIG's semiannual reports and annual congressional budget justification document's statistical highlights sections refer to these figures as "office-wide dollar accomplishments" as opposed to monetary savings. Most Serious Management and Performance Challenges Facing the SBA Pursuant to P.L. 106-531 , the Records Consolidation Act of 2000, and OMB Circular A-136, the SBA OIG issues an annual Report on the Most Serious Management and Performance Challenges Facing the SBA . This report is, arguably, the SBA OIG's signature oversight document, focusing attention "on areas that are particularly vulnerable to fraud, waste, error, and mismanagement, or otherwise pose a significant risk and generally have been subject to one or more OIG or GAO reports." The FY2019 Report on the Most Serious Management and Performance Challenges Facing the SBA lists the following eight challenges: 1. Weaknesses in small business contracting programs and inaccurate procurement data undermine the reliability of contracting goals achievements. 2. SBA needs to continue to improve information technology controls to address operational risks. 3. SBA needs effective human capital strategies to carry out its mission successfully and become a high-performing organization. 4. SBA needs to improve its risk management and oversight practices to ensure its loan programs operate effectively and will continue to benefit small businesses. 5. SBA needs to ensure that the Section 8(a) business development program identifies and addresses the needs of program participants, only eligible firms are admitted into the program, and standards for determining economic disadvantage are justifiable. 6. SBA can improve its loan programs by ensuring quality deliverables and reducing improper payments at SBA loan operation centers. 7. SBA's disaster assistance programs must balance competing priorities to deliver timely assistance and reduce improper payments. 8. SBA needs robust oversight of its grant management. The SBA OIG provides a series of recommended actions within each of the reported challenges to enhance the effectiveness of the SBA's programs and operations. The management challenges are "driven by SBA's current needs" and based on the SBA OIG's understanding of the SBA's programs and operations, as well as challenges presented in other agency reports, principally GAO reports. Accordingly, the challenges presented each year may change based on the SBA's actions or inactions "to remedy past weaknesses." For example, in its FY2019 report, the SBA OIG reported that the SBA had "increased its oversight of the acquisition program, updated its policies and procedures, and implemented a requirement for management to conduct annual reviews of the acquisition process controls." As a result, the SBA OIG removed SBA's acquisition process from the list of the SBA's most serious challenges and added a new challenge regarding SBA's grant management oversight. Impact on Program Efficiency and Effectiveness OIGs are, arguably, best known for investigations addressing waste, fraud, and abuse and audits containing recommendations to enhance programmatic and operational efficiencies. However, a full and complete assessment of an OIG's impact should address all of the office's statutory responsibilities, including its efforts to enhance programmatic and operational efficiencies and the OIG's agency's effectiveness in achieving program goals through audits; reduce waste, fraud, and abuse through investigations; assist Congress and the OIG's agency by making recommendations concerning the impact of legislation and regulations on programmatic and operational efficiencies and waste, fraud, and abuse; assist the OIG's agency by making recommendations to facilitate the agency's relationships with other governmental and nongovernmental entities; and keep the OIG's agency head and Congress fully and currently informed of its findings and the agency's progress in implementing recommended corrective actions. Enhancing Programmatic and Operational Efficiency and the Achievement of Program Goals Through Audits As shown in Table 3 , over the past nine fiscal years, the SBA OIG issued 204 audit reports (an average of 22.66 audit reports per fiscal year); provided 1,011 recommendations for improving SBA operations, identifying improper payments, and strengthening controls to reduce fraud and unnecessary losses in SBA programs (an average of 112.3 recommendations per fiscal year), with the SBA taking action on 992 recommendations (an average of 110.2 recommendations addressed per fiscal year); generated $372.3 million in savings and efficiencies (an average of $41.4 million per fiscal year) in disallowed costs agreed to by SBA management and recommendations that funds be put to better use agreed to by SBA management; questioned $571.3 million in costs (an average of $63.5 million per fiscal year); and recommended that $141.1 million be put to better use (an average of $15.7 million per fiscal year). In terms of impact, the data presented in Table 3 suggest that the SBA has made hundreds of changes to its internal operating procedures and programs as a direct result of the SBA OIG's audits. In addition, comments by members of the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship during congressional oversight hearings suggest that they view the SBA OIG's audits as helpful in their oversight of the SBA, especially in terms of identifying management weaknesses and recommending solutions to remedy those weaknesses. For example, in his opening remarks at a March 2016 congressional oversight hearing concerning the SBA's management and performance challenges, Representative Steve Chabot, then-chair of the House Committee on Small Business, stated It is clear that the Inspector General plays a critical role in ensuring effective management of the SBA. By conducting audits to identify program mismanagement, by investigating fraud or other wrongdoing, or by recommending changes to increase the efficiency of SBA operations, she has provided independent and objective reviews of agency actions. However, some Members have also noted that the SBA OIG's impact is limited because the SBA OIG has no enforcement authority and the SBA has chosen to ignore many of its recommendations. As Representative Nydia Velazquez noted during that March 2016 congressional oversight hearing, some of the management challenges reported in the SBA OIG's annual Report on the Most Serious Management and Performance Challenges Facing the SBA "were first highlighted over a decade ago." In addition, Peggy Gustafson (SBA IG from October 2, 2009 to January 9, 2017) testified at that hearing that the SBA currently "has 144 open OIG recommendations pertaining to reviews conducted in recent years and not so recent years across SBA programs." She also testified that the SBA did demonstrate positive progress in resolving recommendations associated with five of the identified challenges [in the annual report on the most serious challenges facing the SBA]. However, they remained at status quo on four of the challenges and demonstrated no progress on one recommendation in an area related to information technology. Now, clearly these results I would say paint a mixed picture relative to SBA's commitment to addressing these challenges in earnest and their ability to overcome these challenges. Having said that, I think it also has to be acknowledged that SBA has shown that with a sustained, committed effort over time, they can achieve successful results in these challenges. For example, they moved to green [implemented the SBA OIG's recommendations concerning] … the very large challenge related to their LMAS [Loan Management and Accounting System Modernization] IT system. So I think that really shows that these are challenges that with the right effort can really be conquered and met. Others have suggested that OIGs in general, including the SBA OIG, focus their auditing efforts on identifying and addressing programmatic and operational inefficiencies and spend less time addressing "whether the agency program operations were providing the outputs intended by Congress." In their view, Congress passed P.L. 103-62 , the Government Performance and Results Act of 1993, and P.L. 111-352 , the Government Performance and Results Act Modernization Act of 2010, to provide mechanisms to assess the effectiveness of federal programs in a way that supplements the efforts of OIGs (e.g., by establishing statutory requirements for most agencies to set goals, measure performance, and submit related plans and reports to Congress for its potential use). In sum, the evidence suggests that the SBA OIG's audits have helped to increase the efficiency of the SBA's programs and operations. However, it could also be argued that the SBA OIG's impact is muted because OIGs lack enforcement authority, meaning that the SBA may proceed with, or without, taking into account the recommendations presented in the SBA OIG's audits. Reducing Waste, Fraud, and Abuse Through Investigations As shown in Table 4 , over the past nine fiscal years, the SBA OIG opened 672 cases (an average of 74.7 cases opened per fiscal year); issued 570 indictments or informations (an average of 63.3 indictments or informations per fiscal year), with 431 convictions (an average of 47.8 convictions per fiscal year); generated $1,057.4 million in investigative recoveries and fines, asset forfeitures attributed to OIG investigations, and loans or contracts not approved or cancelled as a result of investigations (an average of $117.5 million per fiscal year); and recommended 571 suspensions or disbarments (an average of 63.4 per fiscal year), with the SBA suspending or disbarring 273 of these firms or owners (an average of 30.3 firms/owners per fiscal year). The SBA OIG also reported that it has an active, annual caseload of about 255 criminal and civil fraud investigations of potential loan and contracting fraud and other wrongdoing and that "many of these investigations involve complex, multi-million-dollar fraudulent financial schemes perpetrated by multiple suspects." The data presented in Table 4 suggest that the SBA OIG's investigations have resulted in hundreds of criminal convictions and millions of dollars in recovered funds. In addition, comments by members of the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship suggest that, generally speaking, they acknowledge and value the SBA OIG's investigations as a means to identify and reduce waste, fraud, and abuse. However, the SBA's former IG, Peggy Gustafson, has testified that the SBA OIG's investigative efforts, in initiating and continuing investigations, are constrained by resource limitations. Recommendations Concerning the Impact of Legislation and Regulations The SBA OIG reports that it routinely reviews and comments on proposed changes to the SBA's program directives. These changes "include regulations, internal operating procedures, agency policy notices, and SBA forms completed by the public." The SBA OIG also tracks, reviews, and comments on legislation affecting the SBA and participates in OMB's Legislative Referral Memoranda (LRM) process for reviewing and coordinating agency recommendations on proposed, pending, and enrolled legislation. The SBA OIG also "receives, through the SBA Office of Congressional and Legislative Affairs, congress-related documents being circulated by OMB, including pending legislation for consideration of Administration views and perspectives." When the SBA OIG identifies "material weaknesses" in changes proposed by the SBA, it "works with the Agency to implement recommended revisions to promote controls that are more effective and deter waste, fraud, or abuse." The SBA OIG provides the SBA with both formal and informal comments. Formal comments are provided "through the Agency's internal document control process, the Correspondence Management System (CMS), and as a reviewing party in the Agency's Paperwork Reduction Act (PRA) process." Informal comments "occur in the context of program officials seeking SBA OIG guidance when preparing new guidance." In terms of legislation, the SBA OIG provides comments and suggestions "directly with congressional stakeholders" and shares its views with SBA officials and OMB if the legislation is being "circulated for solicited views by OMB through its LRM process, or if determined by the OIG to be a necessary course of action." As shown in Table 5 , over the past nine fiscal years, the SBA OIG conducted 1,035 reviews of legislation, regulations, standard operating procedures, and other issuances (an average of 115.0 reviews per fiscal year); and submitted comments on 515 of these initiatives (an average of 57.2 initiatives commented on per fiscal year). The data in Table 5 suggest that the SBA OIG actively reviews and comments on legislation and SBA program directives. However, it is difficult to determine the impact of these reviews and comments because the SBA OIG does not track or report data concerning the SBA's response to these comments. The SBA OIG indicated that neither the dynamic nature of the informal comment process nor the collaborative follow-up procedures from formal comments are conducive to quantification.... Our sense of these comments is that the Agency will generally act upon SBA OIG comments. Typically, the Agency modifies clearances and PRA packages in response to material SBA OIG concerns. An accurate tracking and quantification of these clearances, however, is unlikely to yield particularly useful data relative to the resource expenditure necessary for that collection. Facilitating the SBA's Relationships with Other Governmental and Nongovernmental Entities The SBA OIG provides training and outreach sessions on topics related to fraud in government lending and contracting programs. These training and outreach sessions are designed to facilitate the SBA's relationships with other governmental and nongovernmental entities in identifying and ameliorating fraud. The SBA OIG's outreach and training sessions are attended by SBA and other government employees, lending officials, and law enforcement representatives. Topics include "types of fraud, fraud indicators and trends; how to report suspicious activity that may be fraudulent; suspension and debarment, the Program Fraud Civil Remedies Act, and other topics related to deterring and detecting fraud in government lending and contracting programs." As shown in Table 6 , the SBA OIG provided 609 outreach and training sessions from FY2010 to FY2018 (an average of 67.7 sessions per fiscal year) to 13,278 attendees (an average of 1,475 attendees per fiscal year). The data presented in Table 6 suggest that the SBA OIG actively provides training and outreach sessions related to identifying and addressing fraud. The office also participates in a number of activities involving federal agencies and others with an interest in fraud prevention activities. It is difficult to measure the impact of these training and outreach activities on the SBA's interaction with other federal agencies. The SBA OIG reports that these sessions are well-attended, and receive high ratings from attendees. Keeping the SBA Administrator and Congress Fully and Currently Informed As mentioned previously, the IG Act requires IGs to keep their agency's administrator and Congress fully and currently informed concerning fraud and other serious problems, abuses, and deficiencies relating to the agency's administration of its programs and operations and to report on the progress made in implementing recommended corrective action. The SBA OIG's informational role is conducted through both formal and informal communication. Formal communication occurs through (1) the publication of audits, investigations, semiannual reports, and the annual Report on the Most Serious Management and Performance Challenges Facing the SBA ; (2) correspondence with SBA officials, congressional staff, and Members of Congress; (3) briefings with SBA officials, congressional staff, and Members of Congress (as needed or as requested); (4) press releases; and occasionally (5) congressional testimony. Informal communication occurs primarily through telephone consultation or by email with SBA officials, congressional staff, and Members of Congress (often facilitated by the SBA OIG's chief of staff). In terms of communication with Congress, the SBA OIG reports that it "has regular communications and meetings (as needed or requested) to keep the Congress apprised of significant findings or issues identified during our oversight of SBA " and that the "OIG has a staff member that is responsible for congressional relations." In addition, because its semiannual reports to Congress are published every six months, the SBA OIG finds that those reports' "utility as a viable means to make a recommendation for legislation advancing through the legislative process is limited in the context of current legislative affairs." As a result, because "the legislative process is very dynamic," the SBA OIG often relies on "frequent and informal" communication with congressional staff and Members of Congress to provide its input on legislation and other matters affecting the SBA, often by telephone and email. The SBA OIG reports frequent and, in its view, meaningful consultation with both the SBA and Congress in an attempt to keep them fully informed of its activities and recommendations. It is difficult to determine the impact and/or extent of the SBA OIG's communication with SBA officials, congressional staff, and Members of Congress because much of that communication occurs through informal means, is not tracked, and data concerning the SBA's or congressional response to the provided comments and recommendations are not compiled or reported. However, at the aforementioned March 2016 congressional hearing on the SBA's management and performance challenges, Representative Steve Chabot stated that, By clarifying the specific areas in which improvement is needed and highlighting possible paths forward for the agency, the insights offered by the Inspector General are invaluable as the Committee continues to work with the SBA to develop meaningful solutions to its management and performance challenges. Relationship with Congress Generally speaking, OIGs' relationships with Congress tend to ebb and flow over time, varying with the personalities, interests, needs, and actions of the principals involved. One constant has been a genuine interest from Members of Congress of both political parties in OIGs' efforts to identify and reduce waste, fraud, and abuse and enhance program efficiency and effectiveness. The congressional interest in these issues can take on a partisan, contentious tone, especially during periods of divided government. The House and Senate Committees on Small Business, however, have traditionally tried to avoid partisanship. For example, at a potentially contentious Senate Committee on Small Business and Entrepreneurship hearing in 2007, then-Senate Committee Chair John Kerry stated, "Senator Snowe [then-ranking Member] and I and all Members of this Committee manage a Committee that works in a very bipartisan way and try very hard to keep the politics off the table." More recently, Representative Steve Chabot stated the following during House floor consideration of H.R. 208 , the Recovery Improvements for Small Entities After Disaster Act of 2015: I want to offer a special thanks to our committee's ranking member, Ms. Velazquez, for her insight and leadership on this issue and for working in a bipartisan, bicameral manner, as she does. I have seen that as chair of the Small Business Committee that I chair now, but I have also been the ranking member under her when she was chair, and it was always bipartisan. We have worked together in a very collegial manner, and I thank her for that. The extent to which the small business committees have been able to avoid partisan conflict has varied somewhat over time, reflecting the personalities of committee leaders and the nature of the issues that have presented themselves at any given time. Nonetheless, the small business committees' tradition of valuing bipartisanship has served to reduce the potential for conflict with the SBA OIG, primarily because committee members generally do not feel a need to question the SBA OIG's motives when its investigations and audits find perceived weaknesses in the Administration's implementation of the SBA's programs or in the Administration's efforts to identify and address waste, fraud, and abuse. The expectation that both committee members and the SBA IG do not, and should not, pursue a political agenda may help to explain why small business committee members rarely ask the SBA OIG to undertake specific studies. In their view, the SBA IG is expected to aggressively pursue perceived weaknesses in the SBA's programs and operations regardless of potential political consequences. Requesting specific studies could be seen as suggesting that the SBA OIG is not doing its job well, or as a partisan effort to embarrass the Administration. The SBA OIG's relationship with Congress has not always been without controversy. For example, in October 2008, then-Senator John Kerry, chair of the Senate Committee on Small Business and Entrepreneurship, criticized the SBA OIG on the Senate floor for issuing what he described as "a heavily redacted report" concerning the SBA's oversight of one of the agency's largest 7(a) lenders. Speaking on behalf of himself and then-Ranking Member Senator Olympia Snowe, he accused the SBA OIG of not exercising "independent authority on what was redacted and instead let the agency it was investigating dictate that large sections of the report be redacted ... contrary to the usual process that occurs with SBA OIG reports." He argued that the SBA OIG's action had "the potential to render the OIG useless," and "prevented accountability in Government by keeping from the public information about the oversight capabilities of an agency that, though comparatively small, can have a huge impact on our economy." Senator Kerry's comments illustrate how quickly an OIG's relationship with Congress can change. Prior to the publication of that redacted report, the SBA OIG was generally praised by Members of both political parties for its efforts concerning the oversight of the SBA's response to the 2005 Gulf Coast hurricanes, audits of the SBA's oversight of lenders, and investigations leading to numerous indictments and convictions of fraudulent SBA lenders and borrowers. In sum, comments by House and Senate small business committee leaders seem to suggest that they view the SBA OIG and GAO as two valuable assets that can assist and enhance the committees' oversight role. However, history has shown that an apparent harmonious relationship between an OIG and congressional committees can change quickly as circumstances change. Some areas of possible congressional interest concerning the SBA OIG, other than funding and staffing issues, include exploring ways to more accurately quantify the SBA OIG's claims of monetary savings and determining if the SBA OIG should undertake additional tracking and monitoring activities to more accurately quantify the office's impact on SBA programs and operations and legislation.

Congress created offices of inspector general (OIGs) to assist in its oversight of the executive branch. OIGs provide independent, nonpartisan analysis, conducted in accordance with generally accepted government auditing standards, to identify and recommend ways to limit waste, fraud, and abuse in federal programs and enhance program and operational efficiency and effectiveness. OIGs' activities supplement and complement those of the Government Accountability Office (GAO), which serves a similar, though not identical, role in assisting congressional oversight of the executive branch. Together, OIGs and GAO provide Congress with information and analysis needed to conduct effective oversight and, in the process, help Congress maintain its balance of power with the presidency. OIGs exist in more than 70 federal agencies, including all departments and larger agencies, numerous boards and commissions, and other entities. The U.S. Small Business Administration's Office of Inspector General (SBA OIG) was created under authority of the Inspector General Act of 1978 (P.L. 95-452, as amended). Its three primary statutory purposes are to 1. conduct and supervise audits and investigations of the SBA's programs and operations; 2. recommend policies designed to promote the economy, efficiency, and effectiveness of the SBA's programs and operations and to prevent and detect fraud and abuse; and 3. keep both the SBA Administrator and Congress "fully and currently informed about problems and deficiencies relating to the administration of such programs and operations and the necessity for and progress of corrective action." During FY2018, the SBA OIG issued 26 audit reports containing 111 recommendations for improving the SBA's programs and operations, and its investigations resulted in 62 indictments or informations and 43 convictions. The SBA OIG claimed that its recommendations resulted in monetary savings and recoveries of nearly $224.5 million in FY2018. In addition, the SBA OIG's annual Report on the Most Serious Management and Performance Challenges Facing the SBA focuses attention "on areas that are particularly vulnerable to fraud, waste, error, and mismanagement, or otherwise pose a significant risk and generally have been subject to one or more OIG or GAO reports." This report examines the SBA OIG's statutory authorities; reporting requirements; funding ($22.9 million in FY2018); staffing and organizational structure; and recent activities (audits, investigations, etc.). It also examines the SBA OIG's impact on monetary savings, SBA programs and operations, and legislation affecting the agency. The report concludes with observations concerning the SBA OIG's relationship with Congress. Some areas of possible congressional interest, other than SBA OIG funding and staffing issues, include exploring ways to more accurately quantify the SBA OIG's claims of monetary savings and to determine if the SBA OIG should undertake additional tracking and monitoring activities to more accurately quantify the office's impact on SBA programs, operations, and legislation.

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T he farm bill is an omnibus, multiyear law that governs an array of agricultural and food programs. It provides an opportunity for Congress to choose how much support to provide for agriculture and nutrition and how to allocate it among competing constituencies. The farm bill has typically undergone reauthorization about every five years. The current farm bill—the Agriculture Improvement Act of 2018 ( P.L. 115-334 , H.R. 2 ), often called the "2018 farm bill"—was enacted in December 2018 and expires in 2023. From its beginning in the 1930s, farm bills have focused primarily on farm commodity programs to support a handful of staple commodities—corn, soybeans, wheat, cotton, rice, dairy, and sugar. In recent decades, farm bills have expanded in scope to include a Nutrition title since 1973 and since then Conservation, Horticulture, Bioenergy, Credit, Research, and Rural Development titles. Budget matters increasingly influence the development of the farm bill. While other reports discuss policy issues, this report focuses on the budgetary effects across the whole farm bill. Farm Bills from a Budget Perspective One way to compare the activities covered by a farm bill is by the allocation of federal spending and, more specifically, by how much is spent in total and how a new law changes allocations or policy. Congressional Budget Office (CBO) estimates are the official measures when bills are considered and are grounded in long-standing budget laws and rules. Recent Historical Perspective Recent farm bills have faced various budget situations, including spending more under a budget surplus, cutting spending for deficit reduction, and remaining budget neutral. For example The 2002 farm bill (the Farm Security and Rural Investment Act of 2002, P.L. 107-171 ) was enacted under a budget surplus that allowed it to make changes that were projected to increase spending by $73 billion, or 22%, over a 10-year budget window—more than half of which was for the farm commodity programs. The 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ) was officially budget neutral, though it included $10 billion of offsets over 10 years from tax-related and other provisions that allowed it to increase spending on the Nutrition, Conservation, and Disaster titles. The 2014 farm bill (the Agricultural Act of 2014, P.L. 113-79 ) was enacted under deficit reduction and budget sequestration that influenced its legislative development. It made changes that projected a net reduction of $17 billion, or 1.7%, over 10 years ($23 billion including sequestration). The 2018 farm bill (the Agriculture Improvement Act of 2018, P.L. 115-334 ) was held to a budget-neutral position over its 10-year budget window. Some budget amounts were reallocated across programs within issue areas and across titles of the farm bill, as discussed throughout this report. Types of Spending Authorizations Generally, farm bills authorize spending in two categories: mandatory and discretionary. From a budgetary perspective, many of the larger programs are assumed to continue beyond the end of a farm bill, even though their authorizations to operate may expire. That projection for mandatory programs, as explained below, provides funding to reauthorize programs, reallocate funding to other programs, or take offsets for deficit reduction. For other programs, funding must come by other means. This includes new programs, those without baseline, or discretionary programs. The Supplemental Nutrition Assistance Program (SNAP) and crop insurance have their own mandatory spending sources, but most other mandatory outlays are paid through the U.S. Department of Agriculture's (USDA) Commodity Credit Corporation (CCC). Discretionary spending is authorized throughout the farm bill, including most rural development, credit, and research programs, among others. Some smaller research, bioenergy, and rural development programs are authorized to receive both mandatory and discretionary funding. Most agency operations (salaries and expenses) are financed with discretionary funds. Discretionary appropriations are made separately through an annual agriculture appropriations act. While both types of programs are significant, mandatory programs often dominate the farm bill debate. Therefore, the majority of this report focuses on mandatory spending Summary of Projected Outlays in the 2018 Farm Bill Figure 1 illustrates the distribution of the $428 billion five-year total of projected mandatory outlays at enactment for the life of the 2018 farm bill (FY2019-FY2023). Figure 2 shows program-level detail for agriculture-specific programs, particularly the Farm Commodity and Conservation titles. Table 1 presents these outlays (the fifth and 10 th columns), and how budgetary resources were reallocated across titles of the farm bill, for both the five- and 10-year budget windows. The terms baseline and score are explained in later sections of this report. Mandatory spending is authorized throughout the farm bill, but four titles presently account for about 99% of the mandatory farm bill spending: Commodities (7.3%), Nutrition (76%), Crop Insurance (8.9%), and Conservation (6.8%). Importance of Baseline to the Farm Bill The Congressional Budget Office (CBO) baseline is a projection at a particular point in time of future federal spending on mandatory programs under current law. The baseline is the benchmark against which proposed changes in law are measured. The CBO develops the budget baseline under various laws and follows the supervision of the House and Senate Budget Committees. When a new bill is proposed that would affect mandatory spending, the score (cost impact) is measured in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Having a baseline essentially gives programs built-in future funding if policymakers decide that the programs should continue—that is, straightforward reauthorization would not have a scoring effect (budget neutral). Once a new law is passed, the projected outlays at enactment equal the baseline plus the score . This sum becomes the budget foundation of the new law. Development of the Baseline CBO periodically projects future government spending via its budget baselines, and evaluates proposed bills via scoring estimates. The baseline incorporates domestic and international economic conditions at the time the baseline is projected. Generally, a program with estimated mandatory spending in the last year of its authorization may be assumed to continue in the baseline as if there were no change in policy and it did not expire. This is the situation for most of the major, long-standing farm bill provisions such as the farm commodity programs or supplemental nutrition assistance. However, some programs do not continue in the baseline beyond the end of a farm bill because they are either programs with estimated mandatory spending less than a minimum $50 million scoring threshold in the last year of the farm bill, or new programs established after 1997 for which the Budget Committees have determined that mandatory spending shall not extend beyond expiration. This decision may have been made in consultation with the Agriculture Committees for a number of reasons, such as to reduce the program's 10-year cost when a farm bill is written or to prevent the program from having a continuing baseline. The 2014 farm bill had 39 programs without baseline beyond FY2018 that received $2.824 billion in mandatory funding over five years. CBO Baseline: April 2018 The CBO baseline that was used to develop the 2018 farm bill was released in April 2018 (the first and sixth data columns in Table 1 ). It projected that if the 2014 farm bill were extended, as amended as of April 2018, farm bill programs would cost $426 billion over the next five years (FY2019-FY2023) and $867 billion over the next 10 years (FY2019-2028). Most of the 10-year amount, 77%, was in the Nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining 23%, $203 billion baseline, was for agricultural programs, mostly in crop insurance, farm commodity programs, and conservation. Other titles of the farm bill contributed about 1% of the baseline, some of which are funded primarily with discretionary spending. Table 2 presents the April 2018 baseline by farm bill title with some program-level details for select titles. Scores of the 2018 Farm Bill The CBO score measures the budgetary impact of changes made by the 2018 farm bill. It is measured relative to its benchmark—the CBO baseline. Budget enforcement procedures follow an array of federal budget rules, such as "PayGo," which required budgetary offsets to balance new spending to avoid increasing the federal deficit. Although the farm bill is a five-year authorization—the 2018 farm bill covers FY2019-FY2023—budget rules required it to be scored over a 10-year budget window. Thus, when the farm bill is discussed during legislative development, it may be more often presented by its effect over the 10-year budget window than the five-year duration of the law. Separately, statements about the total cost of the farm bill may be in terms of its five-year outlays (i.e., projected spending over the five-year life of the farm bill). Both can be accurate measures of the farm bill budget depending on the context. CBO released several interim scores of the 2018 farm bill during the various stages of its development. These include scores of the effects of the House-introduced bill ( H.R. 2 ), House-reported bill ( H.R. 2 ), Senate-reported bill ( S. 3042 ), House-passed bill ( H.R. 2 ) and the Senate-passed Amendment to H.R. 2 (the second, third, seventh and eighth columns in Table 1 ; see also the more detailed section-level scores in Appendix A ), Conference agreement for H.R. 2 (the fourth and ninth columns in Table 1 ; see also the more detailed section-level scores in Table 3 ). Subsequent to the House-passed score, CBO released a more detailed assessment of the farm commodity program payment limit provisions in the House-passed bill. This score did not change the amounts but explained background for the score of those provisions in greater detail. Summary of Title-Level Scores Figure 3 shows the distribution of the title-level changes (scores) in the 2018 farm bill conference agreement and the House- and Senate-passed bills that preceded it. Relative to the baseline, the overall score of the 2018 farm bill is budget neutral over a 10-year period. The House-passed bill would have decreased 10-year outlays by $1.8 billion, and the Senate-passed bill was budget neutral. The overall relatively small or budget-neutral net scores are the result of sometimes relatively larger increases and reductions across titles. Generally, the enacted farm bill follows the scoring approach of the Senate bill more closely than the House bill. In the new law, as in the Senate-passed bill, most of the reductions are from the Rural Development title. Six titles in the law have increased outlays over the 10-year period, including Commodities, Trade, Research, Energy, Horticulture, and Miscellaneous. The House-passed bill would have made 10-year reductions in outlays in the Conservation, Nutrition, Energy, and Crop Insurance titles that the conference agreement did not adopt. Net Increases in Five-Year Outlays Are Followed by Net Decreases When separated into the five- and 10-year budget windows, each version of the 2018 farm bill shows a similar pattern of changes in projected outlays. Figure 4 show the scores for the first five years, the second five years, and the 10-year total for the enacted conference agreement. The enacted farm bill increases net outlays in the first five years by $1.8 billion, which is offset by the same amount of net reductions in outlays during the second five years. Therefore, the 10-year net score is budget neutral. In the enacted law, the Conservation and Nutrition titles—which have increases in outlays over the first five years—have decreases during the second five years. Both titles are budget-neutral over the 10-year period. This may occur because of the time needed to implement changes or to make provisions more appealing in the early years despite having less baseline for a future farm bill. A similar pattern held for the House-passed bill ( Figure 5 ) and the Senate-passed bill ( Figure 6 ). In both of those versions, the Conservation and Nutrition titles had increases in the first five years followed by decreases in the second five years. The House-passed bill had reductions in the Nutrition title that were not retained in the conference agreement. The Senate-passed bill would have reduced baseline for the Commodities title, whereas the conference agreement is projected to increase it. Section-by-Section Scores for Some Titles Exceed Their Net Scores Some of the net scores for single titles presented above are the net result of increases and decreases by provisions within the same title. Sometimes, these increases or decreases are relatively large compared to the net title-level effect. These budget effects may reflect policy proposals that may not be apparent in the net title-level scores that are shown in the previous figures. For example In the enacted law, the Conservation title has one section with a $12.4 billion reduction over 10 years (reducing the Conservation Stewardship Program) and seven sections that add to $12.4 billion in increased spending ( Figure 7 ). In the House-passed bill, the Nutrition title had six sections that summed to a $22.0 billion reduction over 10 years (including those for work requirements) and 18 sections that added to $20.6 billion in increased spending. Similarly, the Conservation title had two sections that summed to a $12.6 billion reduction and eight sections that added to $11.8 billion in increased spending ( Figure 8 ). In the Senate-passed bill, none of the titles' section-by-section scores were as large as for the Nutrition and Conservation titles in the House bill. Nonetheless, the section-by-section scores of the Senate-passed bill showed both increases and decreases in the Conservation, Nutrition, Commodities and Miscellaneous titles ( Figure 9 ). Outcome for the Programs Without Baseline For 23 of the 39 of the "programs without baseline" from the 2014 farm bill, the 2018 farm bill provides continuing funding and, in some cases, permanent baseline for future farm bills (see the footnotes in Table 3 ). Fourteen of the programs without baseline received mandatory funding during FY2019-FY2023 but no baseline beyond the end of the farm bill. Nine of the programs without baseline received mandatory funding and permanent baseline beyond the end of the farm bill. Three of these programs were combined with six others into six provisions in the 2018 farm bill. In addition, five provisions in the 2018 farm bill created new programs without baseline for the next farm bill. Projected Outlays at Enactment When a new law is passed, the projected cost at enactment equals the baseline plus the score . This sum becomes the foundation of the new law and may be compared to future CBO baselines as an indicator of how actual costs develop as the law is implemented and conditions change. Table 4 shows the result of this calculation by updating the farm bill baseline ( Table 2 ) by adding the score for programs that were changed by the farm bill ( Table 3 ). The $428 billion projected five-year total for the life of the 2018 farm bill (FY2019-FY2023) is illustrated in Figure 1 . Agriculture program-level detail is illustrated in Figure 2 . Table 1 summarizes these amounts by title for the five- and 10-year budget windows (the fifth and 10 th columns). SNAP accounts for 76% of the $428 billion five-year total. The remaining 24%, $102 billion of projected outlays, is for agricultural programs, mostly in crop insurance (8.9%), farm commodity programs (7.3%), and conservation (6.8%). Relative to historical farm bill spending, Figure 10 shows mandatory outlays for the four largest titles—Nutrition, Crop Insurance, Farm Commodity Programs, and Conservation—that account for 99% of projected spending in the 2018 farm bill. The figure shows the following trends: SNAP outlays, which compose most of the Nutrition title, increased markedly after the recession in 2009 and have been gradually decreasing since 2012. Crop insurance outlays increased steadily over the period, especially as higher market prices and program participation over the past decade have raised the value of insurable commodities. Farm commodity programs outlays generally rise and fall inversely with commodity markets. They were high after losses in the early 2000s, generally trended lower under the direct payment program, and tended to increase after a return to counter-cyclical programs in the 2014 farm bill. Conservation program outlays have grown steadily but have leveled off in recent years. Appendix A. Scores of House-Passed and Senate-Passed Versions of H.R. 2 Appendix B. Discretionary Authorizations In addition to providing mandatory spending, various sections of the farm bill authorize appropriations that may be provided in future discretionary appropriations acts. Such "authorizations for appropriation" are not actual funding but are essentially an indication from the authorizing committees to the appropriations committees about funding intentions. They are subject to budget enforcement via future appropriations bills. Although the score of the farm bill is primarily about mandatory spending, some CBO scoring documents include an estimate of the discretionary spending that would be needed to implement provisions that have authorizations of appropriations. The CBO score of the conference agreement did not address discretionary authorizations. However, earlier CBO scores of the House- and Senate-passed bills did summarize the authorizations for appropriation. Overall, the similarity between the scores of these bills may be an indicator of the authorization levels in the enacted farm bill. For the House-passed version of the farm bill, CBO estimated that implementing the provisions of H.R. 2 that specified authorizations of appropriations would cost $24.5 billion over the five-year period FY2019-FY2023, assuming appropriation of the specified amounts. For the Senate-passed version, the amount was slightly smaller at $23.7 billion. These projections were for the whole bill and not by title. However, the earlier committee-reported scores did estimate the authorizations by title, as shown in Table B-1 . Because the totals of the chamber-passed versions remain nearly the same as the committee-reported totals, the earlier title-level estimates may be indicative of the conference agreement. Three titles account for about 85% of the discretionary authorizations for appropriation in the House and Senate committee-reported farm bill scores: Trade, Research, and Rural Development ( Table B-1 ). Actual funding in annual Agriculture appropriations acts does not necessarily correlate to the authorization for appropriation in the farm bill. The annual authorization for appropriation provided in the 2018 farm bill is between $2 billion and $6 billion ( Table B-1 ), which for this comparison is broadly similar to nearly $7 billion in authorizations for appropriation that were in the 2014 farm bill. However, actual discretionary funding in recent Agricultural appropriations acts total in excess of $20 billion. The difference is because not all of the actual appropriations have their authorization in each farm bill. For example, the Agriculture appropriations act includes funding for salaries and expenses of USDA agencies that may be permanently authorized or is not necessarily reauthorized in the farm bill. Also, jurisdiction for appropriations acts may include agencies or programs that are not in the jurisdiction of the farm bill authorizing committees (such as the roughly $6 billion appropriation for the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children that is not in House Agriculture Committee jurisdiction).

The farm bill is an omnibus, multiyear law that governs an array of agricultural and food programs. The farm bill has typically undergone reauthorization about every five years. The current farm bill—the Agriculture Improvement Act of 2018 (P.L. 115-334), often called the "2018 farm bill"—was enacted in December 2018 and expires in 2023. The farm bill provides an opportunity for Congress to choose how much support, if any, to provide for various agriculture and nutrition programs and how to allocate it among competing constituencies. Under congressional budgeting rules, many programs are assumed to continue beyond the end of a farm bill. From a budgetary perspective, this provides a baseline for comparing future spending reauthorizations, reallocations to other programs, and reductions to projected spending. Since 2000, congressional goals for the farm bill's budget have varied: The 2002 farm bill increased spending over 10 years, the 2008 farm bill was essentially budget neutral, the 2014 farm bill reduced spending, and the 2018 farm bill is budget neutral, according to the Congressional Budget Office (CBO). The farm bill authorizes programs in two spending categories: mandatory spending and discretionary spending. Mandatory spending is not only authorized but also actually provided via budget enforcement rules. Discretionary spending may be authorized in a farm bill but is not actually provided until budget decisions are made in a future annual appropriations act. The CBO baseline is a projection at a particular point in time of future federal spending on mandatory programs under current law. When a new bill is proposed that would affect mandatory spending, the cost impact (score) is measured in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Federal budget rules such as "PayGo" may require budgetary offsets to balance new spending so that there is no increase in the federal deficit. The April 2018 CBO baseline was the official benchmark to measure changes made by the 2018 farm bill. The five-year baseline was $426 billion over FY2019-FY2023 (what the 2014 farm bill would have spent had it been continued). The budgetary impact of the 2018 farm bill is measured relative to that baseline. Among its impacts are these four points: 1. The enacted farm bill increases net outlays in the first five years by $1.8 billion, which is offset by the same amount of net reductions in outlays during the second five years. Therefore, over 10 years, the net impact is budget neutral. 2. Eight titles in the enacted law have increased outlays over the five-year period, including Farm Commodities, Conservation, Trade, Nutrition, Research, Energy, Horticulture, and Miscellaneous. Two of those titles—Conservation and Nutrition—have reductions in the second five years of the budget window that make them budget neutral over 10 years. 3. Most of the budget reductions at the title level that provide offsets for the increases above, especially in the 10-year budget window, are from changes in the rural development title. 4. The 2018 farm bill provides continuing funding and, in some cases, permanent baseline, for 23 of the 39 so-called programs without baseline from the 2014 farm bill. Projected outlays for the 2018 farm bill at enactment are $428 billion over the FY2019-FY2023 five-year life of the act. The Nutrition title and its largest program, the Supplemental Nutrition Assistance Program (SNAP), account for $326 billion (76%) of those projected outlays. The remaining 24%, $102 billion, is for agricultural programs, mostly in crop insurance (8.9%), farm commodity programs (7.3%), and conservation (6.8%). Other titles of the farm bill account for 1% of the mandatory spending, some of which are funded primarily with discretionary spending. Historical trends in farm bill spending show increased SNAP outlays after the 2009 recession, increased crop insurance outlays based on insurable coverage, farm commodity programs outlays that vary inversely with markets, and steadily increasing conservation program outlays that have leveled off in recent years.

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Background and Genesis of SAFER Firefighting and the provision of fire protection services to the public is traditionally a local responsibility, funded primarily by state, county, and municipal governments. During the 1990s, however, shortfalls in state and local budgets—coupled with increased responsibilities (i.e., counterterrorism) of local fire departments—led many in the fire community to call for additional financial support from the federal government. Since enactment of the FIRE Act in the 106 th Congress, the Assistance to Firefighters Grants (AFG) program (also known as "fire grants" and "FIRE Act grants") has provided funding for equipment and training directly from the federal government to local fire departments. Since the fire grant program commenced in FY2001, funding has been used by fire departments to purchase firefighting equipment, personal protective equipment, and firefighting vehicles. Many in the fire-service community argued that notwithstanding the fire grant program, there remained a pressing need for an additional federal grant program to assist fire departments in the hiring of firefighters and the recruitment and retention of volunteer firefighters. They asserted that without federal assistance, many local fire departments would continue to be unable to meet national consensus standards for minimum staffing levels, which specify at least four firefighters per responding fire vehicle (or five or six firefighters in hazardous or high-risk areas). Fire-service advocates also pointed to the Community Oriented Policing Services (COPS) program as a compelling precedent of federal assistance for the hiring of local public safety personnel. In support of SAFER, fire-service advocates cited studies performed by the U.S. Fire Administration and the National Fire Protection Association, the Boston Globe , and the National Institute for Occupational Safety and Health (NIOSH) which concluded that many fire departments fall below minimum standards for personnel levels. According to these studies, the result of this shortfall can lead to inadequate response to different types of emergency incidents, substandard response times, and an increased risk of firefighter fatalities. On the other hand, those opposed to SAFER grants have contended that funding for basic local government functions—such as paying for firefighter salaries—should not be assumed by the federal government, particularly at a time of high budget deficits. Also, some SAFER opponents disagree that below-standard levels in firefighting personnel are necessarily problematic, and point to statistics indicating that the number of structural fires in the United States has continued to decline over the past 20 years. The SAFER Act In response to concerns over the adequacy of firefighter staffing, the Staffing for Adequate Fire and Emergency Response Act—popularly called the "SAFER Act"—was introduced into the 107 th and 108 th Congresses. The 108 th Congress enacted the SAFER Act as Section 1057 of the FY2004 National Defense Authorization Act ( P.L. 108-136 ; signed into law November 24, 2003). The SAFER provision was added as an amendment to S. 1050 on the Senate floor ( S.Amdt. 785 , sponsored by Senator Dodd) and modified in the FY2004 Defense Authorization conference report ( H.Rept. 108-354 ). The SAFER grant program is codified as Section 34 of the Federal Fire Prevention and Control Act of 1974 (15 U.S.C. 2229a). The SAFER Act authorizes grants to career, volunteer, and combination fire departments for the purpose of increasing the number of firefighters to help communities meet industry-minimum standards and attain 24-hour staffing to provide adequate protection from fire and fire-related hazards. Also authorized are grants to volunteer fire departments for activities related to the recruitment and retention of volunteers. Fire Grants Reauthorization Act of 2012 On January 2, 2013, the President signed P.L. 112-239 , the FY2013 National Defense Authorization Act. Title XVIII, Subtitle A is the Fire Grants Reauthorization Act of 2012, which significantly amended the SAFER statute (15 U.S.C. 2229a) and authorized the SAFER program through FY2017. Table 1 provides a summary of key SAFER provisions in the 2012 reauthorization, and provides a comparison with the previous version of the SAFER statute. Two types of grants are authorized by the SAFER Act: hiring grants and recruitment and retention grants. Hiring grants cover a three-year term and are cost shared with the local jurisdiction. According to the amended statute, the federal share shall not exceed 75% in the first year of the grant, 75% in the second year, and 35% in the third year. While the majority of hiring grants will be awarded to career and combination fire departments, the SAFER Act specifies that 10% of the total SAFER appropriation be awarded to volunteer or majority-volunteer departments for the hiring of personnel. Additionally, at least 10% of the total SAFER appropriation is set aside for recruitment and retention grants , which are available to volunteer and combination fire departments for activities related to the recruitment and retention of volunteer firefighters. Also eligible for recruitment and retention grants are local and statewide organizations that represent the interests of volunteer firefighters. No local cost sharing is required for recruitment and retention grants. Fire Grants Reauthorization in the 115th Congress With the authorizations of both the AFG and SAFER programs expiring on September 30, 2017, and with sunset dates for both programs of January 2, 2018, the 115 th Congress considered reauthorization legislation. Senate On April 5, 2017, S. 829 , the AFG and SAFER Program Reauthorization Act of 2017, was introduced by Senator McCain and referred to the Committee on Homeland Security and Governmental Affairs. On May 17, 2017, the committee ordered S. 829 to be reported ( S.Rept. 115-128 ) with an amendment in the nature of a substitute. On August 2, 2017, the Senate passed S. 829 by unanimous consent. House On July 12, 2017, the House Subcommittee on Research and Technology, Committee on Science, Space and Technology, held a hearing entitled U.S. Fire Administration and Fire Grant Programs Reauthorization: Examining Effectiveness and Priorities . Testimony was heard from the USFA acting administrator and from fire service organizations. On December 15, 2017, H.R. 4661 , the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017, was introduced by Representative Comstock. H.R. 4661 was identical to the Senate-passed S. 829 , except that while S. 829 repealed the sunset provisions for AFG and SAFER, H.R. 4661 extended the sunset dates to September 30, 2024. Additionally, H.R. 4661 reauthorized the USFA through FY2023. On December 18, 2017, the House passed H.R. 4661 by voice vote under suspension of the rules. On December 21, 2017, the Senate passed H.R. 4661 without amendment by unanimous consent. Other legislation related to SAFER reauthorization included H.R. 3881 , the AFG and SAFER Program Reauthorization Act of 2017, introduced by Representative Pascrell, which was identical to S. 829 as passed by the Senate. United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 (P.L. 115-98) On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 ( P.L. 115-98 ). P.L. 115-98 extends the SAFER and AFG authorizations through FY2023; extends the sunset provisions for SAFER and AFG through September 30, 2024; extends the USFA authorization through FY2023; provides that the U.S. Fire Administration in FEMA may develop and make widely available an online training course on SAFER and AFG grant administration; expands SAFER hiring grant eligibility to cover the conversion of part-time or paid-on-call firefighters to full-time firefighters; directs FEMA, acting through the Administrator of USFA, to develop and implement a grant monitoring and oversight framework to mitigate and minimize risks of fraud, waste, abuse, and mismanagement related to the SAFER and AFG grant programs; and makes various technical corrections to the SAFER and AFG statute. Appropriations The SAFER grant program receives its annual appropriation through the House and Senate Appropriations Subcommittees on Homeland Security. Within the appropriations bills, SAFER is listed under the line item, "Firefighter Assistance Grants," which is located in Title III—Protection, Preparedness, Response, and Recovery. "Firefighter Assistance Grants" also includes the Assistance to Firefighters Grant Program. Although authorized for FY2004, SAFER did not receive an appropriation in FY2004. Table 2 shows the appropriations history for firefighter assistance, including SAFER, AFG, and the Fire Station Construction Grants (SCG) grants provided in the American Recovery and Reinvestment Act (ARRA). Table 3 shows recent and proposed appropriated funding for the SAFER and AFG grant programs. FY2017 For FY2017, the Administration requested $335 million for SAFER and $335 million for AFG, a reduction of $10 million for each program from the FY2016 enacted level. According to the budget request, the proposed reduction in SAFER and AFG "reflects FEMA's successful investments in prior year grants awarded." The Administration's FY2017 budget did not request SAFER waiver authority for FY2017. Under the proposed budget, the SAFER and AFG grant accounts would be transferred to the Preparedness and Protection activity under FEMA's broader "Federal Assistance" account. According to the budget request, Federal Assistance programs will "assist Federal agencies, States, Local, Tribal, and Territorial jurisdictions to mitigate, prepare for and recover from terrorism and natural disasters." On May 26, 2016, the Senate Appropriations Committee approved S. 3001 , the Department of Homeland Security Act, 2017. The Senate bill would provide $680 million for firefighter assistance, including $340 million for SAFER and $340 million for AFG. The committee maintained a separate budget account for Firefighter Assistance and did not transfer that budget account to the Federal Assistance account as proposed in the Administration budget request. In the accompanying report ( S.Rept. 114-68 ), the committee directed DHS to continue the present practice of funding applications according to local priorities and those established by the USFA, and to continue direct funding to fire departments and the peer review process. The committee stated its expectation that funding for rural fire departments remain consistent with their previous five-year history, and encouraged FEMA to consider the need for resources for staffing grants to rural departments that meet both local and regional needs. On June 22, 2016, the House Appropriations Committee approved its version of the Department of Homeland Security Appropriations Act, 2017. Unlike the Senate, the House committee did transfer the Firefighter Assistance budget account into a broader Federal Assistance account in FEMA. The bill provided $690 million for firefighter assistance, including $345 million for SAFER and $345 million for AFG. In the committee report, the committee directed FEMA to continue administering the fire grants programs as directed in prior year committee reports. The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provided $690 million for firefighter assistance in FY2017, including $345 million for SAFER and $345 million for AFG. The firefighter assistance account is transferred to FEMA's broader Federal Assistance account. FY2018 For FY2018, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG, slightly below the FY2017 level. SAFER and AFG are under Grants in the Federal Assistance budget account. On July 18, 2017, the House Appropriations Committee approved the Department of Homeland Security Appropriations Act, 2018 ( H.R. 3355 ; H.Rept. 115-239 ). The bill provided $690 million for firefighter assistance under the Federal Assistance budget account, including $345 million for SAFER and $345 million for AFG. In the bill report, the committee encouraged FEMA to give high-priority consideration to grants providing for planning, training, and equipment to firefighters for crude oil-by-rail and ethanol-by-rail derailment and incident response. On September 14, 2017, the House passed H.R. 3354 , a FY2018 omnibus appropriations bill that includes funding for SAFER and AFG. During floor consideration, the House adopted an amendment offered by Representative Kildee that added $20 million to SAFER; thus H.R. 3354 would provide $365 million for SAFER and $345 million for AFG. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided $700 million for firefighter assistance in FY2018, including $350 million for SAFER and $350 million for AFG. Money is to remain available through September 30, 2019. FY2019 For FY2019, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG. On June 21, 2018, the Senate Appropriations Committee approved S. 3109 , the Department of Homeland Security Appropriations Act, 2019 ( S.Rept. 115-283 ). The Senate bill would provide $700 million for firefighter assistance, including $350 million for SAFER and $350 million for AFG. On July 25, 2018, the House Appropriations Committee approved its version of the FY2019 Homeland Security appropriations bill ( H.R. 6776 ; H.Rept. 115-676 ). The House bill would also provide $700 million for firefighter assistance, including $350 million for SAFER and $350 million for AFG. Unlike the Senate bill, the House bill would continue SAFER waiver authority. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $700 million for firefighter assistance in FY2019, including $350 million for SAFER and $350 million for AFG, with funds to remain available through September 30, 2020. Division A, Title III, Section 307 of P.L. 116-6 includes SAFER waiver authority which FEMA would be able to implement (if it so chose) for the FY2019 round of SAFER awards. FY2020 For FY2020, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG. This is the same amount the Administration requested in its FY2019 budget proposal and a 1.6% reduction from the FY2019 appropriation. The Administration's FY2020 budget proposal does not request SAFER waiver authority. Waiver of SAFER Requirements In 2009, with the economic turndown adversely affecting budgets of local governments, concerns arose that modifications to the SAFER statute may be necessary to enable fire departments to more effectively participate in the program. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included a provision (§603) that waived the matching requirements for SAFER grants awarded in FY2009 and FY2010. Subsequently, the FY2009 Supplemental Appropriations Act ( P.L. 111-32 ) included a provision (§605) giving the Secretary of Homeland Security authority to waive certain limitations and restrictions in the SAFER statute. For grants awarded in FY2009 and FY2010, waivers permitted grantees to use SAFER funds to rehire laid-off firefighters and fill positions eliminated through attrition, allow grants to extend longer than the five-year duration, and permit the amount of funding per position at levels exceeding the limit of $100,000. The Department of Defense and Continuing Appropriations Act, 2011 ( P.L. 112-10 ) contained language that removed cost-share requirements and allowed SAFER grants to be used to rehire laid-off firefighters and fill positions eliminated through attrition. However, the law did not remove the requirement that SAFER grants fund a firefighter position for four years, with the fifth year funded wholly by the grant recipient. P.L. 112-10 also did not waive the cap of $100,000 per firefighter hired by a SAFER grant. According to fire service advocates, these unwaived SAFER requirements (the mandatory five-year position duration, the $100,000 cap) would be a disincentive for many communities to apply for SAFER grants, because localities would be reluctant to apply for grants that would require future expenditure of local funds. P.L. 112-74 , the Consolidated Appropriations Act, FY2012, included language (§561) prohibiting using any funds to enforce all of the SAFER restrictions that have been lifted since FY2009. Additionally, Section 562 of P.L. 112-74 reinstated DHS waiver authority for the restrictions that were not lifted in the FY2011 appropriations bill ( P.L. 112-10 ). Meanwhile, the SAFER reauthorization language in the Fire Grants Reauthorization Act of 2012 ( P.L. 112-239 ) removed the $100,000 cap per firefighter hired, shortened the grant period from four to three years, removed the requirement to retain SAFER-hired firefighters for one year past the termination of federal grant support, and provided economic hardship waivers that will give DHS the authority to waive matching requirements and prohibitions on using SAFER funds for rehiring laid-off firefighters and filling positions eliminated through attrition. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) and the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) continued to grant DHS waiver authority from SAFER requirements. Specifically, DHS was allowed to waive cost sharing requirements, the three-year grant term, cost limits per firefighter hired, and the prohibition on using SAFER funds for rehiring laid-off firefighters and filling positions eliminated through attrition. The same SAFER waiver authority was included in the Administration's FY2015 budget proposal and in the FY2015 House and Senate Department of Homeland Security Appropriations bills. In the bill report accompanying H.R. 4903 ( H.Rept. 113-481 ), the House Appropriations Committee noted that this annual waiver authority has been available since FY2009, and that the reauthorization of the SAFER program by the 112 th Congress ( P.L. 112-239 ) provided FEMA with permanent authority to waive certain matching and nonsupplantation requirements for grantees based on a determination that a grantee meets economic hardship criteria. Given that FEMA had been working with stakeholders to develop these criteria and that the agency hoped to soon be able to implement its new waiver authority, the committee expected that FY2015 would be the last instance in which annual waiver authority would be provided, and that any waivers in future fiscal years would be limited to the authorization provided in P.L. 112-239 . The Department of Homeland Security Appropriations Act, 2015 ( P.L. 114-4 ) was signed by the President on March 4, 2015. Section 557 of P.L. 114-4 provided SAFER waiver authority for FY2015. The Administration's FY2016 budget would have maintained SAFER waiver authority for FY2016. S. 1619 , the Department of Homeland Security Act, 2016, would also have continued waiver authority. The accompanying bill report ( S.Rept. 114-68 ) directed FEMA to work with stakeholders and present a recommendation to the Senate Appropriations Committee on the feasibility of removing these waivers in future appropriations. However, neither the House bill ( H.R. 3128 ), nor the final Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) contained the SAFER waiver provision for FY2016. The Administration's FY2017, FY2018, and FY2019 budgets did not request SAFER waiver authority, and neither the House nor Senate Appropriations Committee bills contained SAFER waiver provisions. However, Section 307 of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) again contained the previous waiver authority provision, stating that FEMA "may" grant SAFER waiver authority to allow SAFER funds for retaining and rehiring firefighters. However, for the 2018 round of SAFER awards, FEMA chose not to exercise that authority, and thus will not provide SAFER hiring grants for retaining or rehiring firefighters. The House FY2019 Homeland Security appropriations bill would have continued the waiver authority in FY2019, while the Senate FY2019 Homeland security appropriations bill did not include the SAFER waiver authority provision. Ultimately, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) included SAFER waiver authority for the FY2019 round of SAFER awards. The Administration's FY2020 budget proposal does not request SAFER waiver authority. Implementation of the SAFER Program For the latest information and updates on the application for and awarding of SAFER grants, see the official SAFER grant program website at https://www.fema.gov/staffing-adequate-fire-emergency-response-grants . Table 4 shows the state-by-state distribution of SAFER grant funds, from FY2005 through FY2017. Table 5 shows the percentage distribution of SAFER grant funds by type of department (career, combination, volunteer) for FY2009 through FY2014, while Table 6 shows the percentage distribution of SAFER grant funds by community service area (urban, suburban, rural) for FY2009 through FY2014. Of the FY2014 SAFER awards, grants for hiring accounted for 90% of the total federal share of dollars awarded, while recruitment and retention accounted for 10%. During 2014 and 2015, the DHS Office of the Inspector General (OIG) conducted an audit of SAFER grants for fiscal years 2010 through 2012. On June 8, 2016, the DHS OIG released its report finding that 63% of SAFER grant recipients over that period did not comply with grant guidance and requirements to prevent waste, fraud, and abuse of grant funds. The report recommended that FEMA's Grant Programs Directorate develop and implement an organizational framework to manage the risk of fraud, waste, abuse, and mismanagement. According to the report, FEMA has concurred with the OIG findings and has taken corrective actions to resolve the recommendations. Meanwhile, the Fire Grants Reauthorization Act of 2012 ( P.L. 112-239 ) directed GAO to prepare a report to Congress that includes an assessment of the effect of the changes made by P.L. 112-239 on the effectiveness, relative allocation, accountability, and administration of the fire grants. GAO was also directed to evaluate the extent to which those changes have enabled grant recipients to mitigate fire and fire-related and other hazards more effectively. In September 2016, GAO released its report, entitled Fire Grants: FEMA Could Enhance Program Administration and Performance Assessment. The report concluded that FEMA's fire grant policies and the awards made in FY2013 and FY2014 generally reflected the changes to the fire grant statute made by P.L. 112-239 , and that FEMA enhanced its assessment of program performance by establishing and reporting on measures of effectiveness of the grants. However, GAO also concluded that those performance measures do not include measurable performance targets linked to SAFER and AFG program goals, and that "aligning the fire grants programs' use of data on, and definitions of, critical infrastructure to award fire grants and assess program performance with the more objective, quantitative approach used by DHS and GPD [the Grants Program Directorate] for other programs and non-fire preparedness grants could enhance GPD's efforts to integrate the fire grants program into larger national preparedness efforts and more objectively assess the impact of fire grants." Impact of 2018-2019 Government Shutdown Firefighter assistance grants were impacted by the partial government shutdown. FEMA personnel who administer the grants were furloughed. For all three grant programs (AFG, SAFER, and FP&S) the application and awards process was delayed. For the 2018 awards round, the application windows for AFG and FP&S closed in October and December 2018, respectively, but the processing of those applications could not move forward. The opening of the 2018 round application window for SAFER grants was also delayed. For grants already awarded (in the 2017 and previous rounds), grant recipients periodically draw down funds, either to reimburse expenditures already incurred, or in immediate advance of those expenditures. Grant recipients were unable to draw down funds during the shutdown, which may have disrupted the ability of the grantees to continue grant-funded activities, including personnel costs covered by SAFER grant awards, which extend for three years. This disruption may continue after the government shutdown has resolved due to a backlog of payment requests that need to be processed once furloughed FEMA grant personnel return to work. Issues in the 116th Congress SAFER grants are distributed to career, volunteer, combination, and paid-on-call fire departments serving urban, suburban, and rural areas. A continuing issue is how equitably and effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. Another continuing issue is budget appropriations for SAFER and AFG. As is the case with many federal programs, concerns over the federal budget deficit could impact budget levels for SAFER and AFG. At the same time, firefighter assistance budgets will likely receive heightened scrutiny from the fire service community, given the local budgetary shortfalls that many fire departments may face.

In response to concerns over the adequacy of firefighter staffing, the Staffing for Adequate Fire and Emergency Response Act, known as the SAFER Act, was enacted by the 108th Congress as Section 1057 of the FY2004 National Defense Authorization Act (P.L. 108-136). The SAFER Act authorizes grants to career, volunteer, and combination local fire departments for the purpose of increasing the number of firefighters to help communities meet industry-minimum standards and attain 24-hour staffing to provide adequate protection from fire and fire-related hazards. Also authorized are grants to volunteer fire departments for recruitment and retention of volunteers. SAFER is administered by the Federal Emergency Management Agency (FEMA) of the Department of Homeland Security (DHS). On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 (P.L. 115-98). P.L. 115-98 extends the SAFER and AFG authorizations through FY2023; extends the sunset provisions for SAFER and AFG through September 30, 2024; provides that the U.S. Fire Administration (USFA) may develop and make widely available an online training course on SAFER and AFG grant administration; expands SAFER hiring grant eligibility to cover the conversion of part-time or paid-on-call firefighters to full-time firefighters; directs FEMA, acting through the Administrator of USFA, to develop and implement a grant monitoring and oversight framework to mitigate and minimize risks of fraud, waste, abuse, and mismanagement related to the AFG and SAFER grant programs; and makes various technical corrections to the SAFER and AFG statute. The Consolidated Appropriations Act, 2019 (P.L. 116-6) provided $700 million for firefighter assistance in FY2019, including $350 million for SAFER and $350 million for AFG. For FY2020, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG. This is the same amount the Administration requested in its FY2019 budget proposal and a 1.6% reduction from the FY2019 appropriation. An overall issue for the 116th Congress is how equitably and effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. Another continuing issue is budget appropriations for SAFER and AFG. As is the case with many federal programs, concerns over the federal budget deficit could impact budget levels for SAFER and AFG. At the same time, firefighter assistance budgets will likely receive heightened scrutiny from the fire service community, given the local budgetary shortfalls that many fire departments may face. Additionally, a continuing issue related to SAFER hiring grants has been whether SAFER statutory restrictions should be waived to permit grantees to use SAFER funds for retention and rehiring. Division F, Title III, Section 307 of the Consolidated Appropriations Act, 2018 stated that FEMA "may" grant SAFER waiver authority. However, for the 2018 round of SAFER awards, FEMA has chosen not to exercise that authority, and thus will not provide SAFER hiring grants for retaining or rehiring firefighters. The Consolidated Appropriations Act, 2019 (P.L. 116-6) also includes SAFER waiver authority for the FY2019 round of SAFER awards. The Administration's FY2020 budget proposal does not request SAFER waiver authority.

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Introduction The minority leader of the modern House is the head of the "loyal opposition." As the minority party's nominee for Speaker at the start of a new Congress, the minority leader traditionally hands the gavel to the Speaker-elect, who is usually elected on a straight party-line vote. The speakership election illustrates the main problem that confronts the minority leader: the subordinate status of the minority party in an institution noted for majority rule. As David Bonior, D-MI, explained: "This body, unlike the other, operates under the principle that a determined majority should be allowed to work its will while protecting the rights of the minority to be heard." Minority party lawmakers are certain to be heard, but whether they will be heeded is sometimes another matter. Thus, the uppermost goal of any minority leader is to recapture majority control of the House. The minority leader is elected every two years by secret ballot of his or her party caucus or conference. These party leaders are typically experienced lawmakers when they win election to this position. The current minority leader, Kevin McCarthy, R-CA, served 12 years in the House, including as majority leader, prior to assuming his current role (a position he also held during his time in the California state assembly). Speaker Nancy Pelosi, D-CA, served in the House for 16 years when she first became minority leader in the 108 th Congress (2003-2004). Following her first tenure as Speaker from 2007 to 2010, Pelosi was again elected minority leader in the 112 th Congress (2011-2012), at which point she was a 24-year veteran of the House. When her predecessor, John Boehner, R-OH, was elected minority leader in the 110 th Congress (2007-2008), he had served in the House for 18 years including as majority leader, committee chair (Education and the Workforce), and, prior to that, chair of the Republican Conference. Richard Gephardt, D-MO, began his tenure as minority leader in the 104 th Congress (1995-1996) as an 18-year House veteran and a former majority leader and chair of the Democratic Caucus. Gephardt's predecessor, Robert Michel, R-IL, became minority leader in 1981 after 24 years in the House. Much like his successors, John Rhodes, R-AZ, had served in the House for 20 years when he was elected minority leader in 1973. While the position itself is usually occupied by Members with significant House experience, the roles and responsibilities of the minority leader are not well-defined. To a large extent, the duties of the minority leader are based on tradition and custom. Representative Bertrand Snell, R-NY, minority leader from 1931 to 1938, described the position in the following way: He is spokesman for his party and enunciates its policies. He is required to be alert and vigilant in defense of the minority's rights. It is his function and duty to criticize constructively the policies and programs of the majority, and to this end employ parliamentary tactics and give close attention to all proposed legislation. Since Snell's description, other responsibilities have been added to the job. Broadly speaking, the role of the minority leader in the contemporary Congress is twofold: to serve as the leader and spokesperson for the minority party, and to participate in certain institutional prerogatives afforded to Members in the minority. How the minority leader handles these responsibilities is likely to depend on a variety of elements, including personality and contextual factors; the size and cohesion of the minority party; whether or not the party controls the White House; the general political climate both inside and outside the House; and expectations of the party's performance in upcoming elections. The next section of the report discusses the historical origin of this position, and the sections that follow take account of the various party and institutional responsibilities of the minority leader. Origin of the Minority Leader's Post To a large extent, the position of minority leader is a late-19 th -century innovation. Prior to this time congressional parties were often relatively disorganized, so it was not always evident who functioned as the opposition floor leader. Decades went by before anything like our modern two-party congressional system emerged on Capitol Hill with official titles for those who were selected as party leaders. However, from the beginning days of Congress, various House Members intermittently assumed the role of "opposition leader." Some scholars suggest that Representative James Madison of Virginia informally functioned as the first "minority leader" because in the First Congress he led the opposition to Treasury Secretary Alexander Hamilton's fiscal policies. During this early period, it was common for neither major party grouping (Federalists and Republicans) to have an official leader. In 1813, for instance, a scholar recounts that the Federalist minority of 36 Members needed a committee of 13 "to represent a party comprising a distinct minority" and "to coordinate the actions of men who were already partisans in the same cause." In 1828, a foreign observer of the House offered this perspective on the absence of formal party leadership on Capitol Hill: I found there were absolutely no persons holding the stations of what are called, in England, Leaders, on either side of the House.... It is true, that certain members do take charge of administration questions, and certain others of opposition questions; but all this so obviously without concert among themselves, actual or tacit, that nothing can be conceived less systematic or more completely desultory, disjointed. Internal party disunity compounded the difficulty of identifying lawmakers who might have informally functioned as a minority leader. For instance, "seven of the fourteen speakership elections from 1834 through 1859 had at least twenty different candidates in the field. Thirty-six competed in 1839, ninety-seven in 1849, ninety-one in 1859, and 138 in 1855." With so many candidates competing for the speakership, it is not at all clear that one of the defeated lawmakers then assumed the mantle of "minority leader." The Democratic minority from 1861 to 1875 was so completely disorganized that they did not "nominate a candidate for Speaker in two of these seven Congresses and nominated no man more than once in the other five. The defeated candidates were not automatically looked to for leadership." In the judgment of one congressional scholar, since 1883 "the candidate for Speaker nominated by the minority party has clearly been the Minority Leader." However, this assertion is subject to dispute. On December 3, 1883, the House elected Democrat John G. Carlisle of Kentucky as Speaker. Republicans nominated J. Warren Keifer of Ohio, who was Speaker the previous Congress. But Keifer was viewed by his colleagues as a discredited leader in part because as Speaker he arbitrarily handed out "choice jobs to close relatives ... all at handsome salaries." Keifer received "the empty honor of the minority nomination. But with it came a sting—for while this naturally involves the floor leadership, he was deserted by his [party] associates and his career as a national figure terminated ingloriously." Representative Thomas Reed, R-ME, who later became Speaker, assumed the de facto role of minority floor leader in Keifer's stead. "[A]lthough Keifer was the minority's candidate for Speaker, Reed became its acknowledged leader, and ever after, so long as he served in the House, remained the most conspicuous member of his party." Although congressional historians disagree as to the exact time period when the minority leadership emerged officially as a party position, it seems safe to conclude that the position was established during the latter part of the 19 th century. This era was "marked by strong partisan attachments, resilient patronage-based party organizations, and ... high levels of party voting in Congress." These conditions were conducive to the establishment of a more highly differentiated House leadership structure in which Members assumed more specialized roles within the institution. (See the Appendix for a list of House minority leaders selected since 1899.) One other historical point merits brief mention. Until the 61 st Congress (1909-1910), "it was the custom to have the minority leader also serve as the ranking minority member on the two most powerful committees, Rules and Ways and Means." Today, the minority leader no longer serves on these committees but does chair the Republican Steering Committee, a party leadership committee responsible for making recommendations to the Conference regarding the committee assignments of House Republicans. Party Functions The minority leader has a number of formal and informal party responsibilities. Formally, the rules of each party specify certain roles and responsibilities for their leader. For example, under Republican Conference rules for the 116 th Congress (2019-2020), the minority leader nominates party members to the Committees on Rules and House Administration, subject to Conference approval. Republican Conference rules also authorize the minority leader to appoint a "Leadership Member" to the Committee on the Budget who "will serve as the second highest-ranking Republican on the committee," and to "recommend to the House all Republican Members of such joint, select, and ad hoc committees as shall be created by the House, in accordance with law." Beyond their formal responsibilities, minority leaders are expected to handle a wide range of informal party assignments. Lewis Deschler, a former House Parliamentarian (1928-1974), summarized the diverse duties of a party's floor leader: A party's floor leader, in conjunction with other party leaders, plays an influential role in the formulation of party policy and programs. He is instrumental in guiding legislation favored by his party through the House, or in resisting those programs of the other party that are considered undesirable by his own party. He is instrumental in devising and implementing his party's strategy on the floor with respect to promoting or opposing legislation. He is kept constantly informed as to the status of legislative business and as to the sentiment of his party respecting particular legislation under consideration. Such information is derived in part from the floor leader's contacts with his party's members serving on House committees, and with the members of the party's whip organization. These and several other party roles merit further discussion because they influence significantly the minority leader's overarching objective: to retake majority control of the House. "I want to get [my] members elected and win more seats," said former Minority Leader Richard Gephardt, D-MO. "That's what [my party colleagues] want to do, and that's what they want me to do." Five activities illustrate how minority leaders seek to accomplish this primary goal. Provide Campaign Assistance Minority leaders are typically energetic and aggressive campaigners for party incumbents and challengers. For example, they assist in recruiting qualified and competitive candidates; they establish "leadership PACs" to raise and distribute funds to House candidates of their party; they encourage party colleagues not to retire or run for other offices so as to limit the number of open seats the party would need to defend; they coordinate their campaign activities with congressional and national party campaign committees; they encourage outside groups to back their candidates; they travel around the country to speak on behalf of party candidates; and they encourage incumbent colleagues to make significant financial contributions to the party's campaign committee. In the weeks leading up to the 2018 congressional elections, for instance, Minority Leader Pelosi was actively campaigning for Democratic incumbents and challengers: With 21 days until the midterm elections, the California Democrat and House minority leader is crisscrossing the country fundraising and rallying the Democratic troops—and plotting her return to the speakership.... In the third quarter [of 2018], Pelosi will report raising $34.2 million for Democrats, including $30.5 million for the DCCC [Democratic Congressional Campaign Committee]. She is by far the biggest source of cash for House Democrats and House Democratic candidates. Devise Minority Party Strategies The minority leader, in consultation with other party colleagues, has a range of strategic options that can be employed to advance minority party objectives. The options selected depend on a wide range of circumstances, such as the visibility or significance of the issue and the relative degree of cohesion within the majority and minority parties. For instance, a majority party riven by internal dissension—as occurred during the early 1900s when "progressive" and "regular" Republicans were at loggerheads, or beginning in the late 1930s when a "conservative coalition" of Southern Democrats and like-minded Republicans emerged—may provide the minority leader with greater opportunities to achieve party priorities than if the majority party exhibited high degrees of party cohesion (and could simply outvote the minority). Among the variable strategies available to the minority party, which can vary from bill to bill and be used in combination or at different stages of the lawmaking process, are the following: Cooperation . The minority party supports and cooperates with the majority party in building winning coalitions on the floor. Inconsequential Opposition . The minority party offers opposition, but it is of marginal significance, typically because the minority is so small. Withdrawal . The minority party chooses not to take a position on an issue, perhaps because of intraparty divisions or to spotlight divisions within the majority party. Innovation . The minority party develops alternatives and agendas of its own and attempts to construct winning coalitions on their behalf. Partisan Opposition . The minority party offers strong opposition to majority party initiatives, but does not counter with policy alternatives of their own. Participation . The minority party is in the position of having to consider the views and proposals of a same-party President and to assess their majority-building role with respect to the President's priorities. A look at one minority leadership strategy—partisan opposition—may suggest why it might be employed in specific circumstances. The purposes of obstruction are several, such as frustrating the majority party's ability to govern or attracting media attention to the alleged ineffectiveness of the majority party. "We know how to delay," remarked Minority Leader Gephardt. Dilatory motions to adjourn, appeals of the presiding officer's ruling, or numerous requests for roll call votes, including on noncontroversial items like approving the House Jou rnal , are standard time-consuming parliamentary tactics. By stalling action on the majority party's agenda, the minority leader may be able to launch a campaign against a "do-nothing Congress" and convince enough voters to elevate the party to the House majority. To be sure, the minority leader recognizes that outright opposition carries risks. As a congressional scholar explains, "A program of consistent opposition to majority party proposals and a refusal to engage in compromise, while electorally valuable, means forsaking policy gains that may otherwise have been achieved." Promote and Publicize the Party's Agenda Another important aim of the minority leader is to develop an electorally attractive agenda of ideas and proposals that unites party members and appeals to core electoral supporters as well as independents and swing voters. Despite the minority leader's limited ability to set the House's agenda, there are still opportunities to raise minority priorities. For example, the minority leader may file discharge petitions in an effort to bring minority priorities to the floor. If the required 218 signatures on a discharge petition can be obtained—a number that demands at least some support from the majority—minority initiatives can be brought to the floor even despite opposition from the majority leadership or the committee(s) of jurisdiction (or both). As a GOP minority leader explained, the challenge here is to "keep our people together, and to look for votes on the other side." Minority leaders may engage in a range of activities to publicize their party's priorities and to criticize those of the opposition. For instance, to keep their party colleagues "on message," they ensure that their party colleagues are sent packets of suggested press releases or "talking points" for constituent meetings in their districts; they help to organize "town hall meetings" in Members' districts around the country to publicize the party's agenda or a specific priority, such as health care or tax reform; they sponsor party "retreats" to discuss issues and assess the party's public image; they create "theme teams" to craft party messages that might be conveyed during the one-minute, morning hour, or special order period in the House; they conduct surveys of party colleagues to discern their policy preferences; they establish websites and Twitter feeds to highlight party priorities; they organize task forces or issue teams to formulate party programs and to develop strategies for communicating these programs to the public; and they appear on various media programs or write newspaper articles to win public support for the party's agenda. House minority leaders also hold joint news conferences with party colleagues and consult with their counterparts in the Senate. The overall objectives are to develop a coordinated communications strategy, to share ideas and information, and to present a united front on issues. Minority leaders also make floor speeches and may close debate for their side on major issues before the House. They must also be prepared "to debate on the floor, ad lib , no notes, on a moment's notice," remarked Minority Leader Michel. In brief, minority leaders are key strategists in developing and promoting the party's agenda and in outlining ways to respond to the opposition's arguments and proposals. A "Dear Colleague" letter delivered to House Democratic offices ahead of the August 2018 recess illustrates the point. In the letter, Minority Leader Pelosi outlined the party's agenda and provided this guidance to her Democratic colleagues: A key part of our For The People agenda is to clean up corruption to make Washington work for the American people.... To honor the pledge of our For The People agenda, a Democratic majority will swiftly act to pass tougher ethics and campaign finance laws and crack down on the conduct that has poisoned the GOP Congress and the Trump Administration.... In district events and on social media, we must drive home the clear contrast between the corruption of the GOP Congress and the better deal that Democrats are offering the American people. We will own August with strength, confidence and clarity, as we make our case to the American people. Confer with the White House If his or her party controls the White House, the minority leader confers regularly with the President and his aides about issues before Congress, the Administration's agenda, and political events generally. Strategically, the role of the minority leader will vary depending on whether the President is of the same party or the other party. In general, minority leaders will work to advance the goals and aspirations of their party's President in Congress. When Robert Michel, R-IL, was minority leader (1981-1994), he typically functioned as the "point man" for Republican Presidents. President Ronald Reagan's 1981 policy successes in the Democratic-controlled House were due in no small measure to Minority Leader Michel's effectiveness in wooing so-called "Reagan Democrats" to support, for instance, the Administration's landmark budget reconciliation bill. There are occasions, of course, when minority leaders will fault the legislative initiatives of their President. On an Administration proposal that could adversely affect his district, Michel stated that he might "abdicate my leadership role [on this issue] since I can't harmonize my own views with the administration's." Minority Leader Gephardt publicly opposed a number of President Clinton's legislative initiatives, from "fast track" trade authority to various budget issues, and Minority Leader Pelosi came out against a multilateral trade agreement with Asian-Pacific countries negotiated by the Obama White House. When the President and House majority are of the same party, then the House minority leader assumes a larger role in formulating alternatives to executive branch initiatives and in acting as a national spokesperson for his or her party. "As Minority Leader during [President Lyndon Johnson's] Democratic administration, my responsibility has been to propose Republican alternatives," said Minority Leader Gerald Ford, R-MI. Greatly outnumbered in the House, Minority Leader Ford devised a political strategy that allowed Republicans to offer their alternatives in a manner that provided them political protection. As Ford explained, We used a technique of laying our program out in general debate. When we got to the amendment phase, we would offer our program as a substitute for the Johnson proposal. If we lost in the Committee of the Whole, then we would usually offer it as a motion to recommit and get a vote on that. And if we lost on the motion to recommit, our Republican members had a choice: They could vote against the Johnson program and say we did our best to come up with a better alternative. Or they could vote for it and make the same argument. Usually we lost; but when you're only 140 out of 435, you don't expect to win many. Ford also teamed with Senate Minority Leader Everett McKinley Dirksen, R-IL, to act as national spokesmen for their party. They held a press conference every Thursday following the weekly joint leadership meeting, a tradition that began with Ford's predecessor as minority leader, Charles Halleck, R-IN. When Minority Leaders Dirksen and Halleck appeared together they were dubbed the "Ev and Charlie Show" by the press, and the "Republican National Committee budgeted $30,000 annually to produce the weekly news conference." Foster Party Harmony Minority status, by itself, is often an important inducement for minority party members to stay together, to accommodate different interests, and to submerge intraparty factional disagreements. To hold a diverse membership together often requires extensive consultations and discussions with rank-and-file Members and with different factional groupings. As Minority Leader Gephardt said, We have weekly caucus meetings. We have daily leadership meetings. We have weekly ranking Member meetings. We have party effectiveness meetings. There's a lot more communication. I believe leadership is bottom up, not top down. I think you have to build policy and strategy and vision from the bottom up, and involve people in figuring out what that is. Gephardt added that "inclusion and empowerment of the people on the line have to be done to get the best performance" from the minority party. Other techniques for fostering party harmony include the appointment of task forces composed of party colleagues with conflicting views to reach consensus on issues; daily meetings in the l eader's office (or at breakfast, lunch, or dinner) to lay out floor strategy or political objectives for the minority party; periodic retreats to allow party members to discuss issues and interact with one another outside the confines of Capitol Hill; and the creation of new leadership positions as a way to reach out and involve a greater diversity of party members in the leadership structure. Institutional Functions Beyond the party responsibilities of the minority leader are a number of institutional obligations associated with their position as a top House official. Many of these assignments or roles are spelled out in the standing rules of the House, while others have devolved upon the position in other ways. To be sure, the minority leader is provided with extra staff resources—beyond those accorded him or her as a Representative—to assist in carrying out diverse leadership functions. There are limits on the institutional role of the minority leader, because the majority party exercises disproportionate influence over the legislative agenda, partisan ratios on committees, staff resources, administrative operations, and the day-to-day schedule and management of floor activities. Under the rules of the House, the minority leader has certain roles and responsibilities. They include, among others, the following: Motion to Recommit with Instructions Under Rule XIII, clause 6(c), the Rules Committee may not issue a "rule" that prevents the minority leader or a designee from offering a motion to recommit with instructions during initial House consideration of a bill or joint resolution. This motion allows the minority leader (or a designee) to offer a policy alternative to what the majority is proposing and obtain a floor vote on the minority's preferred solution. Questions of Privilege Under Rule IX, clause 2, a resolution "offered as a question of privilege by the Majority Leader or the Minority Leader ... shall have precedence of all other questions except motions to adjourn." This rule further references the minority leader with respect to the division of time for debate of these resolutions. If offered by the majority or minority leader, a valid question of privilege—one that involves "the rights of the House collectively, its safety, dignity and the integrity of its proceedings"—receives immediate consideration by the House. Inspector General Rule II, clause 6, states that the "Inspector General shall be appointed for a Congress by the Speaker, the Majority Leader, and the Minority Leader, acting jointly." This rule further states that the minority leader and other specified House leaders shall be notified of any financial irregularity involving the House and receive audit reports of the inspector general. Oversight Plans Under Rule X, clause 2, not later "than March 31 in the first session of a Congress, after consultation with the Speaker, the Majority Leader, and the Minority Leader, the Committee on Oversight and Government Reform shall report to the House the authorization and oversight plans" of the standing committees along with any recommendations it or the House leaders have proposed to ensure the effective coordination of committees' oversight plans. Committee on Ethics: Investigative Subcommittees Rule X, clause 5, stipulates, "At the beginning of a Congress, the Speaker or a designee and the Minority Leader or a designee each shall name 10 Members, Delegates, or the Resident Commissioner from the respective party of such individual who are not members of the Committee on Ethics to be available to serve on investigative subcommittees of that committee during that Congress." Permanent Select Committee on Intelligence Another institutional prerogative of the minority leader is attendance at meetings of the Intelligence Committee. Rule X, clause 11, provides, "The Speaker and the Minority Leader shall be ex officio members of the select committee but shall have no vote in the select committee and may not be counted for purposes of determining a quorum thereof." In addition, each leader "may designate a respective leadership staff member to assist in the capacity of the Speaker or Minority Leader as ex officio member." Other Institutional Responsibilities In addition, the minority leader has a number of other institutional functions. For instance, the minority leader is sometimes statutorily authorized to appoint individuals to certain federal entities. The minority leader also selects three Members to serve as Private Calendar objectors—the majority leader names the other three—and serves on various commissions and groups, including the House Office Building Commission, the United States Capitol Preservation Commission, and the Bipartisan Legal Advisory Group. After consultation with the Speaker the minority leader may convene an early organizational party caucus or conference. Informally, the minority leader maintains ties with majority party leaders to learn about the schedule and other House matters, consults with the majority with respect to reconvening the House per the usual formulation of conditional concurrent adjournment resolutions, and forges agreements or understandings with them insofar as feasible. By House tradition, time is not charged to their side when party leaders, including the minority leader, make extended remarks on the floor. Concluding Observations Given the concentration of agenda control and other institutional resources in the majority leadership, the minority leader faces real challenges in promoting and publicizing the party's priorities, serving the interests of his rank-and-file Members, managing intraparty conflict, and forging party unity. The ultimate goal of the minority leader is to lead the party into majority status. Yet there is no set formula on how this is to be done. "If the history of elections is any guide," wrote a congressional scholar, "it seems apparent that the congressional record of the minority party is only one of many factors that may result in majority status. Most of the other factors cannot be controlled by the minority party and its leaders ." There is one central dilemma that confronts the minority leader: inferior numbers. This limitation can be overcome on occasion with the right strategic approach, but on many issues this might not be possible. One study of the House minority party summarizes the strategic challenge succinctly: The minority party in the House faces a strategic problem: how do you respond when given only a small slice of the legislative pie? Do you accept the slice you've been given, bargain for more, or use every means at your disposal to win the right to cut the pie yourself? It is this problem, and how the minority party chooses to solve it, that underlies the logic of minority party politics in the House of Representatives. Appendix. House Minority Leaders, 1899-2019

The House minority leader, the head of the "loyal opposition," is elected every two years by secret ballot of his or her party caucus or conference. The minority leader occupies a number of important institutional and party roles and responsibilities, and his or her fundamental goal is to recapture majority control of the House. From a party perspective, the minority leader has a wide range of assignments, all geared toward retaking majority control of the House. Five principal party activities direct the work of the minority leader. First, he or she provides campaign assistance to party incumbents and challengers. Second, the minority leader devises strategies, in consultation with like-minded colleagues, to advance party objectives. Third, the minority leader works to promote and publicize the party's agenda. Fourth, the minority leader, if his or her party controls the White House, confers regularly with the President and his aides about issues before Congress, the Administration's agenda, and political events generally. Fifth, the minority leader strives to promote party harmony so as to maximize the chances for legislative and political success. From an institutional perspective, the rules of the House assign a number of specific responsibilities to the minority leader. For example, Rule XIII, clause 6, grants the minority leader (or a designee) the right to offer a motion to recommit with instructions; and Rule II, clause 6, states that the Inspector General shall be appointed by joint recommendation of the Speaker, majority leader, and minority leader. The minority leader also has other institutional duties, such as appointing individuals to certain federal or congressional entities.

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Introduction and Background The federal child nutrition programs provide assistance to schools and other institutions in the form of cash, commodity food, and administrative support (such as technical assistance and administrative funding) based on the provision of meals and snacks to children. In general, these programs were created (and amended over time) to both improve children's nutrition and provide support to the agriculture economy. Today, the child nutrition programs refer primarily to the following meal, snack, and milk reimbursement programs (these and other acronyms are listed in Appendix A ): National School Lunch Program (NSLP) (Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.)); School Breakfast Program (SBP) (Child Nutrition Act, Section 4 (42 U.S.C. 1773)); Child and Adult Care Food Program (CACFP) (Richard B. Russell National School Lunch Act, Section 17 (42 U.S.C. 1766)); Summer Food Service Program (SFSP) (Richard B. Russell National School Lunch Act, Section 13 (42 U.S.C. 1761)); and Special Milk Program (SMP) (Child Nutrition Act, Section 3 (42 U.S.C. 1772)). The programs provide financial support and/or foods to the institutions that prepare meals and snacks served outside of the home (unlike other food assistance programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) where benefits are used to purchase food for home consumption). Though exact eligibility rules and pricing vary by program, in general the amount of federal reimbursement is greater for meals served to qualifying low-income individuals or at qualifying institutions, although most programs provide some subsidy for all food served. Participating children receive subsidized meals and snacks, which may be free or at reduced price. Forthcoming sections discuss how program-specific eligibility rules and funding operate. This report describes how each program operates under current law, focusing on eligibility rules, participation, and funding. This introductory section describes some of the background and principles that generally apply to all of the programs; subsequent sections go into further detail on the workings of each. Unless stated otherwise, participation and funding data come from USDA-FNS's "Keydata Reports." Authorization and Reauthorization The child nutrition programs are most often dated back to the 1946 enactment of the National School Lunch Act, which created the National School Lunch Program, albeit in a different form than it operates today. Most of the child nutrition programs do not date back to 1946; they were added and amended in the decades to follow as policymakers expanded child nutrition programs' institutional settings and meals provided: The Special Milk Program was created in 1954, regularly extended, and made permanent in 1970. The School Breakfast Program was piloted in 1966, regularly extended, and eventually made permanent in 1975. A program for child care settings and summer programs was piloted in 1968, with separate programs authorized in 1975 and then made permanent in 1978. These are now the Child and Adult Care Food Program and Summer Food Service Program. The Fresh Fruit and Vegetable Program began as a pilot in 2002, was made permanent in 2004, and was expanded nationwide in 2008. The programs are now authorized under three major federal statutes: the Richard B. Russell National School Lunch Act (originally enacted as the National School Lunch Act in 1946), the Child Nutrition Act (originally enacted in 1966), and Section 32 of the act of August 24, 1935 (7 U.S.C. 612c). Congressional jurisdiction over the underlying three laws has typically been exercised by the Senate Agriculture, Nutrition, and Forestry Committee; the House Education and the Workforce Committee; and, to a limited extent (relating to commodity food assistance and Section 32 issues), the House Agriculture Committee. Congress periodically reviews and reauthorizes expiring authorities under these laws. The child nutrition programs were most recently reauthorized in 2010 through the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ); some of the authorities created or extended in that law expired on September 30, 2015. WIC (the Special Supplemental Nutrition Program for Women, Infants, and Children) is also typically reauthorized with the child nutrition programs. WIC is not one of the child nutrition programs and is not discussed in this report. The 114 th Congress began but did not complete a 2016 child nutrition reauthorization (see CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview ). There was no significant legislative activity with regard to reauthorization in the 115 th Congress. Program Administration: Federal, State, and Local The U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) administers the programs at the federal level. The programs are operated by a wide variety of local public and private providers and the degree of direct state involvement differs by program and state. At the state level, education, health, social services, and agriculture departments all have roles; at a minimum, they are responsible for approving and overseeing local providers such as schools, summer program sponsors, and child care centers and day care homes, as well as making sure they receive the federal support they are due. At the local level, program benefits are provided to millions of children (e.g., there were 30.0 million in the National School Lunch Program, the largest of the programs, in FY2017), through some 100,000 public and private schools and residential child care institutions, nearly 170,000 child care centers and family day care homes, and just over 50,000 summer program sites. All programs are available in the 50 states and the District of Columbia. Virtually all operate in Puerto Rico, Guam, and the Virgin Islands (and, in differing versions, in the Northern Marianas and American Samoa). Funding Overview This section summarizes the nature and extent to which the programs' funding is mandatory and discretionary, including a discussion of appropriated entitlement status. Table 3 lists child nutrition program and related expenditures. Open-Ended, Appropriated Entitlement Funding Most spending for child nutrition programs is provided in annual appropriations acts to fulfill the legal financial obligation established by the authorizing laws. That is, the level of spending for such programs, referred to as appropriated mandatory spending, is not controlled through the annual appropriations process, but instead is derived from the benefit and eligibility criteria specified in the authorizing laws. The appropriated mandatory funding is treated as mandatory spending. Further, if Congress does not appropriate the funds necessary to fund the program, eligible entities may have legal recourse. Congress typically considers the Administration's forecast for program needs in its appropriations decisions. For the majority of funding discussed in this report, the formula that controls the funding is not capped and fluctuates based on the reimbursement rates and the number of meals/snacks served in the programs. Cash Reimbursements and Commodity Foods In the meal service programs, such as the National School Lunch Program, School Breakfast Program, summer programs, and assistance for child care centers and day care homes, federal aid is provided in the form of statutorily set subsidies (reimbursements) paid for each meal/snack served that meets federal nutrition guidelines. Although all (including full-price) meals/snacks served by participating providers are subsidized, those served free or at a reduced price to lower-income children are supported at higher rates. All federal meal/snack subsidy rates are indexed annually (each July) for inflation, as are the income eligibility thresholds for free and reduced-price meals/snacks. Subsequent sections discuss how a specific program's eligibility and reimbursements work. Most subsidies are cash payments to schools or other providers, but a smaller portion of aid is provided in the form of USDA-purchased commodity foods . Laws for three child nutrition programs (NSLP, CACFP, and SFSP) require the provision of commodity foods (or in some cases allow cash in lieu of commodity foods). Meal and snack service entails nonfood costs. Federal child nutrition per-meal/snack subsidies may be used to cover local providers' administrative and operating costs. However, the separate direct federal payments for administrative/operating costs ("State Administrative Expenses," discussed in the " Related Programs, Initiatives, and Support Activities " section) are limited. Other Federal Funding In addition to the open-ended, appropriated entitlement funds summarized above, the child nutrition programs' funding also includes certain other mandatory funding and a limited amount of discretionary funding. Some of the activities discussed in " Related Programs, Initiatives, and Support Activities ," such as Team Nutrition, are provided for with discretionary funding. Aside from the annually appropriated funding, the child nutrition programs are also supported by certain permanent appropriations and transfers. Notably, funding for the Fresh Fruit and Vegetable Program is funded by a transfer from USDA's Section 32 program, a permanent appropriation of 30% of the previous year's customs receipts. State, Local, and Participant Funds Federal subsidies do not necessarily cover the full cost of the meals and snacks offered by providers. States and localities help cover program costs, as do children's families by paying charges for nonfree or reduced-price meals/snacks. There is a nonfederal cost-sharing requirement for the school meals programs (discussed below), and some states supplement school funding through additional state per-meal reimbursements or other prescribed financing arrangements. Child Nutrition Programs at a Glance Subsequent sections of this report delve into the details of how each of the child nutrition programs support the service of meals and snacks in institutional settings; first, it is useful to take a broader perspective of primary program elements. Table 1 is a top-level look at the different programs that displays distinguishing characteristics (what meals are provided, in what settings, to what ages) and recent program spending. Links to Resources Other relevant CRS reports in this area include CRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R45486, Child Nutrition Programs: Current Issues CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 (summarizes the Healthy, Hunger-Free Kids Act of 2010) CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview CRS Report R44588, Agriculture and Related Agencies: FY2017 Appropriations CRS Report RL34081, Farm and Food Support Under USDA's Section 32 Program Other relevant resources include USDA-FNS's website, https://www.fns.usda.gov/school-meals/child-nutrition-programs USDA-FNS's Healthy, Hunger-Free Kids Act page, http://www.fns.usda.gov/school-meals/healthy-hunger-free-kids-act The FNS page of the Federal Register , https://www.federalregister.gov/agencies/food-and-nutrition-service School Meals Programs This section discusses the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). Principles and concepts common to both programs are discussed first; subsections then discuss features and data unique to the NSLP and SBP, respectively. General Characteristics The federal school meals programs provide federal support in the form of cash assistance and USDA commodity foods; both are provided according to statutory formulas based on the number of reimbursable meals served in schools. The subsidized meals are served by both public and private nonprofit elementary and secondary schools and residential child care institutions (RCCIs) that opt to enroll and guarantee to offer free or reduced-price meals to eligible low-income children. Both cash and commodity support to participating schools are calculated based on the number and price of meals served (e.g., lunch or breakfast, free or full price), but once the aid is received by the school it is used to support the overall school meal service budget, as determined by the school. This report focuses on the federal reimbursements and funding, but it should be noted that some states have provided state financing through additional state-specific funding. Federal law does not require schools to participate in the school meals programs. However, some states have mandated that schools provide lunch and/or breakfast, and some of these states require that their schools do so through NSLP and/or SBP. The program is open to public and private schools. A reimbursable meal requires compliance with federal school nutrition standards, which have changed throughout the history of the program based on nutritional science and children's nutritional needs. Food items not served as a complete meal meeting nutrition standards (e.g., a la carte offerings) are not reimbursable meals, and therefore are not eligible for federal per-meal, per-snack reimbursements. Following rulemaking to implement provisions in the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ), USDA updated the nutrition standards for reimbursable meals in January 2012 (see " Nutrition Standards " for more information). Schools serving meals that meet the updated nutrition standards are eligible for an increased reimbursement of 6 cents per lunch. USDA-FNS administers the school meals programs federally, and state agencies (typically state departments of education) oversee and transmit reimbursements through agreements with school food authorities (SFAs) (typically local educational agencies (LEAs); usually these are school districts). Figure 1 provides an overview of the roles and relationships between these levels of government. There is a cost-sharing requirement for the programs, which amounts to a contribution of approximately $200 million from the states. There also are states that choose to supplement federal reimbursements with their own state reimbursements. School Meals Eligibility Rules The school meals programs and related funding do not serve only low-income children. All students can receive a meal at a NSLP- or SBP-participating school, but how much the child pays for the meal and/or how much of a federal reimbursement the state receives will depend largely on whether the child qualifies for a "free," "reduced-price," or "paid" (i.e., advertised price) meal. Both NSLP and SBP use the same household income eligibility criteria and categorical eligibility rules. States and schools receive the largest reimbursements for free meals, smaller reimbursements for reduced-price meals, and the smallest (but still some federal financial support) for the full-price meals. There are three pathways through which a child can become certified to receive a free or reduced-price meal: 1. Household income eligibility for free and reduced-price meals (information typically collected via household application), 2. Categorical (or automatic) eligibility for free meals (information collected via household application or a direct certification process), and 3. School-wide free meals under the Community Eligibility Provision (CEP) , an option for eligible schools that is based on the share of students identified as eligible for free meals. Each of these pathways is discussed in more detail below. Income Eligibility The income eligibility thresholds (shown in Table 2 ) are based on multipliers of the federal poverty guidelines. As the poverty guidelines are updated every year, so are the eligibility thresholds for NSLP and SBP. Free Meals: Children receive free meals if they have household income at or below 130% of the federal poverty guidelines; these meals receive the highest subsidy rate. (Reimbursements are approximately $3.30 per lunch served, less for breakfast.) Reduced-Price Meals: Children may receive reduced-price meals (charges of no more than 40 cents for a lunch or 30 cents for a breakfast) if their household income is above 130% and less than or equal to 185% of the federal poverty guidelines; these meals receive a subsidy rate that is 40 cents (NSLP) or 30 cents (SBP) below the free meal rate. (Reimbursements are approximately $2.90 per lunch served.) Paid Meals: A comparatively small per-meal reimbursement is provided for full-price or paid meals served to children whose families do not apply for assistance or whose family income does not qualify them for free or reduced-price meals. The paid meal price is set by the school but must comply with federal regulations. (Reimbursements are approximately 30 cents per lunch served.) The above reimbursement rates are approximate; exact current-year federal reimbursement rates for NSLP and SBP are listed in Table B -1 and Table B -3 , respectively. Households complete paper or online applications that collect relevant income and household size data, so that the school district can determine if children in the household are eligible for free meals, reduced-price meals, or neither. Though these income guidelines primarily influence funding and administration of NSLP and SBP, they also affect the eligibility rules for the SFSP, CACFP, and SMP (described further in subsequent sections). Categorical Eligibility In addition to the eligibility thresholds listed above, the school meals programs also convey eligibility for free meals based on household participation in certain other need-tested programs or children's specified vulnerabilities (e.g., foster children). Per Section 12 of the National School Lunch Act, "a child shall be considered automatically eligible for a free lunch and breakfast ... without further application or eligibility determination, if the child is" in a household receiving benefits through SNAP (Supplemental Nutrition Assistance Program); FDPIR (Food Distribution Program on Indian Reservations, a program that operates in lieu of SNAP on some Indian reservations) benefits; or TANF (Temporary Assistance for Needy Families) cash assistance; enrolled in Head Start; in foster care; a migrant; a runaway; or homeless. For meals served to students certified in the above categories, the state/school receive a reimbursement at the free meal amount and children receive a free meal. (See Table B -1 and Table B -3 for school year 2018-2019 rates.) Some school districts collect information for these categorical eligibility rules via paper application. Others conduct a process called direct certification —a proactive process where government agencies typically cross-check their program rolls and certify a household's children for free school meals without the household having to complete a school meals application. Prior to 2004, states had the option to conduct direct certification of SNAP (then, the Food Stamp Program), TANF, and FDPIR participants. In the 2004 child nutrition reauthorization ( P.L. 108-265 ), states were required under federal law to conduct direct certification for SNAP participants, with nationwide implementation taking effect in school year 2008-2009. Conducting direct certification for TANF and FDPIR remains at the state's discretion. The Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) made further policy changes to expand direct certification (discussed further in the next section). One of those changes was the initiation of a demonstration project to look at expanding categorical eligibility and direct certification to some Medicaid households. The law also funded performance incentive grants for high-performing states and authorized correcting action planning for low-performing states in direct certification activities. Under SNAP direct certification rules generally, schools enter into agreements with SNAP agencies to certify children in SNAP households as eligible for free school meals without requiring a separate application from the family. Direct certification systems match student enrollment lists against SNAP agency records, eliminating the need for action by the child's parents or guardians. Direct certification allows schools to make use of SNAP's more in-depth eligibility certification process; this can reduce errors that may occur in school lunch application eligibility procedures that are otherwise used. From a program access perspective, direct certification also reduces the number of applications a household must complete. Figure 2 , created by GAO and published in a May 2014 report, provides an overview of how school districts certify students for free and reduced-price meals under the income-based and category-based rules, via applications and direct certification. A USDA-FNS study of school year 2014-2015 estimates that 11.1 million students receiving free meals were directly certified—68% of all categorically eligible students receiving free meals. Community Eligibility Provision (CEP) HHFKA also authorized the school meals Community Eligibility Provision (CEP), an option in NSLP and SBP law that allows eligible schools and school districts to offer free meals to all enrolled students based on the percentage of their students who are identified as automatically eligible from nonhousehold application sources (primarily direct certification through other programs). Based on the statutory parameters, USDA-FNS piloted CEP in various states over three school years and it expanded nationwide in school year 2014-2015. Eligible LEAs have until June 30 of each year to notify USDA-FNS if they will participate in CEP. According to a database maintained by the Food Research and Action Center, just over 20,700 schools in more than 3,500 school districts (LEAs) participated in CEP in SY2016-2017, an increase of approximately 2,500 schools compared to SY2015-2016. For a school (or school district, or group of schools within a district) to provide free meals to all children the school(s) must be eligible for CEP based on the share (40% or greater) of enrolled children that can be identified as categorically (or automatically) eligible for free meals, and the school must opt-in to CEP. Though CEP schools serve free meals to all students, they are not reimbursed at the "free meal" rate for every meal. Instead, the law provides a funding formula: the percentage of students identified as automatically eligible (the "identified student percentage" or ISP) is multiplied by a factor of 1.6 to estimate the proportion of students who would be eligible for free or reduced-price meals had they been certified via application. The result is the percentage of meals served that will be reimbursed at the free meal rate, with the remainder reimbursed at the far lower paid meal rate. For example, if a CEP school identifies that 40% of students are eligible for free meals, then 64% of the meals served will be reimbursed at the free meal rate and 36% at the paid meal rate. Schools that identify 62.5% or more students as eligible for free meals receive the free meal reimbursement for all meals served. Some of the considerations that may impact a school's decision to participate in CEP include whether the new funding formula would be beneficial for their school meal budget; an interest in reducing paperwork for families and schools; and an interest in providing more free meals, including meals to students who have not participated in the program before. Nutrition Standards School Meals The Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) set in motion changes to the nutrition standards for school meals, requiring USDA to update the standards within a certain timeframe. The law required that the revised standards be based on recommendations from the Institute of Medicine (IOM) (now the Health and Medicine Division) at the National Academy of Sciences. The law also provided increased federal subsidies (6 cents per lunch) for schools meeting the new requirements and funding for technical assistance related to implementation. USDA published the final regulations in January 2012. The final rule sought to align school meal patterns with the 2010 Dietary Guidelines for Americans, and, generally consistent with IOM's recommendations, increased the amount of fruits, vegetables, whole grains, and low-fat or fat-free milk in school meals. The regulations also included calorie maximums and sodium limits to phase in over time, among other requirements. The nutrition standards largely took effect in SY2012-2013 for lunches and in SY2013-2014 for breakfasts. A few other requirements were scheduled to phase in over multiple school years. Some schools experienced difficulty implementing the new guidelines, and Congress and USDA have made changes to the 2012 final rule's whole grain, sodium, and milk requirements. For SY2019-2020 and onwards, schools are operating under a final rule published December 12, 2018. Competitive Foods The HHFKA also gave USDA the authority to regulate other foods in the school nutrition environment. Sometimes called "competitive foods," these include foods and drinks sold in a la carte lines, vending machines, snack bars and concession stands, and fundraisers. Relying on recommendations made by a 2007 IOM report, USDA-FNS promulgated a proposed rule and then an interim final rule in June 2013, which went into effect for SY2014-2015. The interim final rule created nutrition guidelines for all non-meal foods and beverages that are sold during the school day (defined as midnight until 30 minutes after dismissal). The final rule, published on July 29, 2016, maintained the interim final rules with minor modifications. Under the final standards, these foods must meet whole-grain requirements; have certain primary ingredients; and meet calorie, sodium, and fat limits, among other requirements. Schools are limited to a list of no- and low-calorie beverages they may sell (with larger portion sizes and caffeine allowed in high schools). There are no limits on fundraisers selling foods that meet the interim final rule's guidelines. Fundraisers outside of the school day are not subject to the guidelines. HHFKA and the interim final rule provide states with discretion to exempt infrequent fundraisers selling foods or beverages that do not meet the nutrition standards. The rule does not limit foods brought from home, only foods sold at school during the school day. The federal standards are minimum standards; states and school districts are permitted to issue more stringent policies. National School Lunch Program (NSLP) In FY2017, NSLP subsidized 4.9 billion lunches to children in close to 96,000 schools and 3,200 residential child care institutions (RCCIs). Average daily participation was 30.0 million students (58% of children enrolled in participating schools and RCCIs). Of the participating students, 66.7% (20.0 million) received free lunches and 6.5% (2.0 million) received reduced-price lunches. The remainder were served full-price meals, though schools still receive a reimbursement for these meals. Figure 3 shows FY2017 participation data. FY2017 federal school lunch costs totaled approximately $13.6 billion (see Table 3 for the various components of this total). The vast majority of this funding is for per-meal reimbursements for free and reduced-price lunches. The HHFKA also provided an additional 6-cent per-lunch reimbursement to schools that provide meals that meet the updated nutritional guidelines requirements. This bonus is not provided for breakfast, but funds may be used to support schools' breakfast programs. NSLP lunch reimbursement rates are listed in Table B -1 . In addition to federal cash subsidies, schools participating in NSLP receive USDA-acquired commodity food s . Schools are entitled to a specific, inflation-indexed value of USDA commodity foods for each lunch they serve. Also, schools may receive donations of bonus commodities acquired by USDA in support of the farm economy. In FY2017, the value of federal commodity food aid to schools totaled nearly $1.4 billion. The per-meal rate for commodity food assistance is included in Table B-4 . While the vast majority of NSLP funding is for lunches served during the school day, NSLP may also be used to support snack service during the school year and to serve meals during the summer. These features are discussed in subsequent sections, " Summer Meals " and " After-School Meals and Snacks: CACFP, NSLP Options ." Reimbursement rates for snacks are listed in Table B -2 . School Breakfast Program (SBP) The School Breakfast Program (SBP) provides per-meal cash subsidies for breakfasts served in schools. Participating schools receive subsidies based on their status as a severe need or nonsevere need institution. Schools can qualify as a severe need school if 40% or more of their lunches are served free or at reduced prices. See Table B -3 for SBP reimbursement rates. Figure 4 displays SBP participation data for FY2017. In that year, SBP subsidized over 2.4 billion breakfasts in over 88,000 schools and nearly 3,200 RCCIs. Average daily participation was 14.7 million children (30.1% of the students enrolled in participating schools and RCCIs). The majority of meals served through SBP are free or reduced-price. Of the participating students, 79.1% (11.6 million) received free meals and 5.7% (835,000) purchased reduced-price meals. Federal school breakfast costs for the fiscal year totaled approximately $4.3 billion (see Table 3 for the various components of this total). Significantly fewer schools and students participate in SBP than in NSLP. Participation in SBP tends to be lower for several reasons, including the traditionally required early arrival by students in order to receive a meal and eat before school starts. Some schools offer (and anti-hunger groups have encouraged) models of breakfast service that can result in greater SBP participation, such as Breakfast in the Classroom, where meals are delivered in the classroom; "grab and go" carts, where students receive a bagged breakfast that they bring to class, or serving breakfast later in the day in middle and high schools. Unlike NSLP, commodity food assistance is not a formal part of SBP funding; however, commodities provided through NSLP may be used for school breakfasts as well. Other Child Nutrition Programs In addition to the school meals programs discussed above, other federal child nutrition programs provide federal subsidies and commodity food assistance for schools and other institutions that offer meals and snacks to children in early childhood, summer, and after-school settings. This assistance is provided to (1) schools and other governmental institutions, (2) private for-profit and nonprofit child care centers, (3) family/group day care homes, and (4) nongovernmental institutions/organizations that offer outside-of-school programs for children. (Although this report focuses on the programs that serve children, one child nutrition program (CACFP) also serves day care centers for chronically impaired adults and elderly persons under the same general per-meal/snack subsidy terms.) The programs in the sections to follow serve comparatively fewer children and spend comparatively fewer federal funds than the school meal programs. Child and Adult Care Food Program (CACFP) CACFP subsidizes meals and snacks served in early childhood, day care, and after-school settings. CACFP provides subsidies for meals and snacks served at participating nonresidential child care centers, family day care homes, and (to a lesser extent) adult day care centers. The program also provides assistance for meals served at after-school programs. CACFP reimbursements are available for meals and snacks served to children age 12 or under, migrant children age 15 or under, children with disabilities of any age, and, in the case of adult care centers, chronically impaired and elderly adults. Children in early childhood settings are the overwhelming majority of those served by the program. CACFP provides federal reimbursements for breakfasts, lunches, suppers, and snacks served in participating centers (facilities or institutions) or day care homes (private homes). The eligibility and funding rules for CACFP meals and snacks depend first on whether the participating institution is a center or a day care home (the next two sections discuss the rules specific to centers and day care homes). According to FY2017 CACFP data, child care centers have an average daily attendance of about 56 children per center, day care homes have an average daily attendance of approximately 7 children per home, and adult day care centers typically care for an average of 48 chronically ill or elderly adults per center. Providers must demonstrate that they comply with government-established standards for other child care programs. Like in school meals, federal assistance is made up overwhelmingly of cash reimbursements calculated based on the number of meals/snacks served and federal per-meal/snack reimbursements rates, but a far smaller share of federal aid (4.3% in FY2017) is in the form of federal USDA commodity foods (or cash in lieu of foods). Federal CACFP reimbursements flow to individual providers either directly from the administering state agency (this is the case with many child/adult care centers able to handle their own CACFP administrative functions) or through "sponsors" who oversee and provide administrative support for a number of local providers (this is the case with some child/adult care centers and with all day care homes). In FY2017, total CACFP spending was over $3.5 billion, including cash reimbursement, commodity food assistance, and costs for sponsor audits. (See Table 3 for a further breakdown of CACFP costs.) This total also includes the after-school meals and snacks provided through CACFP's "at-risk after-school" pathway; this aspect of the program is discussed later in " After-School Meals and Snacks: CACFP, NSLP Options ." CACFP Nutrition Standards As with school foods, the HHFKA required USDA to update CACFP's meal patterns. USDA's final rule revised the meal patterns for both meals served in child care centers and day care homes, as well as preschool meals served through the NSLP and SBP, effective October 1, 2017. For infants (under 12 months of age), the new meal patterns eliminated juice, supported breastfeeding, and set guidelines for the introduction of solid foods, among other changes. For children ages one and older, the new meal patterns increased whole grains, fruits and vegetables, and low-fat and fat-free milk; limited sugar in cereals and yogurts; and prohibited frying, among other requirements. CACFP at Centers Participation Child care centers in CACFP can be (1) public or private nonprofit centers, (2) Head Start centers, (3) for-profit proprietary centers (if they meet certain requirements as to the proportion of low-income children they enroll), and (4) shelters for homeless families. Adult day care centers include public or private nonprofit centers and for-profit proprietary centers (if they meet minimum requirements related to serving low-income disabled and elderly adults). In FY2017, over 65,000 child care centers with an average daily attendance of over 3.6 million children participated in CACFP. Over 2,700 adult care centers served nearly 132,000 adults through CACFP. Eligibility and Administration Participating centers may receive daily reimbursements for up to either two meals and one snack or one meal and two snacks for each participant, so long as the meals and snacks meet federal nutrition standards. The eligibility rules for CACFP centers largely track those of NSLP: children in households at or below 130% of the current poverty line qualify for free meals/snacks while those between 130% and 185% of poverty qualify for reduced-price meals/snacks (see Table 2 ). In addition, participation in the same categorical eligibility programs as NSLP as well as foster child status convey eligibility for free meals in CACFP. Like school meals, eligibility is determined through paper applications or direct certification processes. Like school meals, all meals and snacks served in the centers are federally subsidized to some degree, even those that are paid. Different reimbursement amounts are provided for breakfasts, lunches/suppers, and snacks, and reimbursement rates are set in law and indexed for inflation annually. The largest subsidies are paid for meals and snacks served to participants with family income below 130% of the federal poverty income guidelines (the income limit for free school meals), and the smallest to those who have not met a means test. See Table B -5 for current CACFP center reimbursement rates. Unlike school meals, CACFP institutions are less likely to collect per-meal payments. Although federal assistance for day care centers differentiates by household income, centers have discretion on their pricing of meals. Centers may adjust their regular fees (tuition) to account for federal payments, but CACFP itself does not regulate these fees. In addition, centers can charge families separately for meals/snacks, so long as there are no charges for children meeting free-meal/snack income tests and limited charges for those meeting reduced-price income tests. Independent centers are those without sponsors handling administrative responsibilities. These centers must pay for administrative costs associated with CACFP out of nonfederal funds or a portion of their meal subsidy payments. For centers with sponsors, the sponsors may retain a proportion of the meal reimbursement payments they receive on behalf of their centers to cover such costs. CACFP for Day Care Homes Participation CACFP-supported day care homes serve a smaller number of children than CACFP-supported centers , both in terms of the total number of children served and the average number of children per facility. Roughly 17% of children in CACFP (approximately 757,000 in FY2017 average daily attendance) are served through day care homes. In FY2017, approximately 103,000 homes (with just over 700 sponsors) received CACFP support. Eligibility and Reimbursement As with centers, payments to day care homes are provided for up to either two meals and one snack or one meal and two snacks a day for each child. Unlike centers, day care homes must participate under the auspices of a public or, more often, private nonprofit sponsor that typically has 100 or more homes under its supervision. CACFP day care home sponsors receive monthly administrative payments based on the number of homes for which they are responsible. Federal reimbursements for family day care homes differ by the home's status as "Tier I" or "Tier II." Unlike centers, day care homes receive cash reimbursements (but not commodity foods) that generally are not based on the child participants' household income. Instead, there are two distinct, annually indexed reimbursement rates that are based on area or operator eligibility criteria Tier I homes are located in low-income areas (defined as areas in which at least 50% of school-age and enrolled children qualify for free or reduced-price meals) or operated by low-income providers whose household income meets the free or reduced-price income standards. They receive higher subsidies for each meal/snack they serve. Tier II (lower) rates are by default those for homes that do not qualify for Tier I rates; however, Tier II providers may seek the higher Tier I subsidy rates for individual low-income children for whom financial information is collected and verified. (See Table B-6 for current Tier I and Tier II reimbursement rates.) Additionally, HHFKA introduced a number of additional ways (as compared to prior law) by which family day care homes can qualify as low-income and get Tier I rates for the entire home or for individual children. As with centers, there is no requirement that meals/snacks specifically identified as free or reduced-price be offered; however, unlike centers, federal rules prohibit any separate meal charges. Summer Meals Current law SFSP and the NSLP/SBP Seamless Summer Option provide meals in congregate settings nationwide; the related Summer Electronic Benefits Transfer (SEBTC or Summer EBT) demonstration project is an alternative to congregate settings. Summer Food Service Program (SFSP) SFSP supports meals for children during the summer months. The program provides assistance to local public institutions and private nonprofit service institutions running summer youth/recreation programs, summer feeding projects, and camps. Assistance is primarily in the form of cash reimbursements for each meal or snack served; however, federally donated commodity foods are also offered. Participating service institutions are often entities that provide ongoing year-round service to the community including schools, local governments, camps, colleges and universities in the National Youth Sports program, and private nonprofit organizations like churches. Similar to the CACFP model, sponsors are institutions that manage the food preparation, financial, and administrative responsibilities of SFSP. Sites are the places where food is served and eaten. At times, a sponsor may also be a site. State agencies authorize sponsors, monitor and inspect sponsors and sites, and implement USDA policy. Unlike CACFP, sponsors are required for an institution's participation in SFSP as a site. Participation In FY2017, nearly 5,500 sponsors with 50,000 food service sites participated in the SFSP and served an average of approximately 2.7 million children daily (according to July data). Participation of sites and children in SFSP has increased in recent years. Program costs for FY2017 totaled over $485 million, including cash assistance, commodity foods, administrative cost assistance, and health inspection costs. Eligibility and Administration There are several options for eligibility and meal/snack service for SFSP sponsors (and their sites) Open sites provide summer food to all children in the community. These sites are certified based on area eligibility measures, where 50% or more of area children have family income that would make them eligible for free or reduced-price school meals (see Table 2 ). Closed or Enrolled sites provide summer meals/snacks free to all children enrolled at the site. The eligibility test for these sites is that 50% or more of the children enrolled in the sponsor's program must be eligible for free or reduced-price school meals based on household income. Closed/enrolled sites may also become eligible based on area eligibility measures noted above. Summer camps (that are not enrolled sites) receive subsidies only for those children with household eligibility for free or reduced-price school meals. Other programs specified in law , such as the National Youth Sports Program and centers for homeless or migrant children. Summer sponsors get operating cost (food, storage, labor) subsidies for all meals/snacks they serve—up to one meal and one snack, or two meals per child per day. In addition, sponsors receive payments for administrative costs, and states are provided with subsidies for administrative costs and health and meal-quality inspections. See Table B -7 for current SFSP reimbursement rates. Actual payments vary slightly (e.g., by about 5 cents for lunches) depending on the location of the site (e.g., rural vs. urban) and whether meals are prepared on-site or by a vendor. School Meals' Seamless Summer Option64 Although SFSP is the child nutrition program most associated with providing meals during summer months, it is not the only program option for providing these meals and snacks. The Seamless Summer Option, run through NSLP or SBP programs, is also a means through which food can be provided to students during summer months. Much like SFSP, Seamless Summer operates in summer sites (summer camps, sports programs, churches, private nonprofit organizations, etc.) and for a similar duration of time. Unlike SFSP, schools are the only eligible sponsors , although schools may operate the program at other sites. Reimbursement rates for Seamless Summer meals are the same as current NSLP/SBP rates. Summer EBT for Children Demonstration Beginning in summer 2011 and (as of the date of this report) each summer since, USDA-FNS has operated Summer Electronic Benefit Transfer for Children (SEBTC or "Summer EBT") demonstration projects in a limited number of states and Indian Tribal Organizations (ITOs). These Summer EBT projects provide electronic food benefits over summer months to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided, through a WIC or SNAP EBT card model. In the demonstration projects, these benefits were provided as a supplement to the Summer Food Service Program (SFSP) meals available in congregate settings. Summer EBT and other alternatives to congregate meals through SFSP were first authorized and funded by the FY2010 appropriations law ( P.L. 111-80 ). Although a number of alternatives were tested and evaluated, findings from Summer EBT were among the most promising, and Congress provided subsequent funding. Summer EBT evaluations showed significant impacts on reducing child food insecurity and improving nutritional intake.  Summer EBT was funded by P.L. 111-80 in the summers from 2011 to 2014. Projects have continued to operate and were annually funded by FY2015-FY2018 appropriations; most recently, the FY2018 appropriations law ( P.L. 115-141 ) provided $28 million. According to USDA-FNS, in summer 2016 Summer EBT served over 209,000 children in nine states and two tribal nations—an increase from the 11,400 children served when the demonstration began in summer 2011. Special Milk Program (SMP) Schools (and institutions like summer camps and child care facilities) that are not already participating in the other child nutrition programs can participate in the Special Milk Program. Schools may also administer SMP for their part-day sessions for kindergartners or pre-kindergartners. Under SMP, participating institutions provide milk to children for free and/or at a subsidized paid price, depending on how the enrolled institution opts to administer the program (see Table B -8 for current Special Milk reimbursement rates for each of these options) An institution that only sells milk will receive the same per-half pint federal reimbursement for each milk sold (approximately 20 cents). An institution that sells milk and provides free milk to eligible children (income eligibility is the same as free school meals, see Table 2 ), receives a reimbursement for the milk sold (approximately 20 cents) and a higher reimbursement for the free milks. An institution that does not sell milk provides milk free to all children and receives the same reimbursement for all milk (approximately 20 cents). This option is sometimes called nonpricing. In FY2017, over 41 million half-pints were subsidized, 9.5% of which were served free. Federal expenditures for this program were approximately $8.3 million in FY2017. Fresh Fruit and Vegetable Program (FFVP) States receive formula grants through the Fresh Fruit and Vegetable Program, under which state-selected schools receive funds to purchase and distribute fresh fruit and vegetable snacks to all children in attendance (regardless of family income). Money is distributed by a formula under which about half the funding is distributed equally to each state and the remainder is allocated by state population. States select participating schools (with an emphasis on those with a higher proportion of low-income children) and set annual per-student grant amounts (between $50 and $75). Funding is set by law at $150 million for school year 2011-2012 and inflation-indexed for every year after. In FY2017, states used approximately $184 million in FFVP funds. FFVP is funded by a mandatory transfer of funds from USDA's Section 32 program—a permanent appropriation of 30% of the previous year's customs receipts. This transfer is required by FFVP's authorizing laws (Section 19 of the Richard B. Russell National School Lunch Act and Section 4304 of P.L. 110-246 ). Up until FY2018's law, annual appropriations laws delayed a portion of the funds to the next fiscal year. After a pilot period, the Child Nutrition and WIC Reauthorization Act of 2004 ( P.L. 108-265 ) permanently authorized and funded FFVP for a limited number of states and Indian reservations. In recent years, FFVP has been amended by omnibus farm bill laws rather than through child nutrition reauthorizations. The 2008 farm bill ( P.L. 110-246 ) expanded FFVP's mandatory funding, specifically providing funds through Section 32, and enabled all states to participate in the program. The 2014 farm bill ( P.L. 113-79 ) essentially made no changes to this program but did include, and fund at $5 million in FY2014, a pilot project that requires USDA to test offering frozen, dried, and canned fruits and vegetables and publish an evaluation of the pilot. Four states (Alaska, Delaware, Kansas, and Maine) participated in the pilot in SY2014-2015 and the evaluation was published in 2017. Other proposals to expand fruits and vegetables offered in FFVP have been introduced in both the 114 th and 115 th Congress. Other Topics After-School Meals and Snacks: CACFP, NSLP Options Two of the child nutrition programs discussed in previous sections, the National School Lunch Program (NSLP) and Child and Adult Care Food Program (CACFP), provide federal support for snacks and meals served during after-school programs. NSLP provides reimbursements for after-school snacks; however, this option is open only to schools that already participate in NSLP. These schools may operate after-school snack-only programs during the school year, and can do so in two ways: (1) if low-income area eligibility criteria are met, provide free snacks in lower-income areas; or (2) if area eligibility criteria are not met, offer free, reduced-price, or fully paid-for snacks, based on household income eligibility (like lunches in NSLP). The vast majority of snacks provided through this program are through the first option. Through this program, approximately 206 million snacks were served in FY2017 (a daily average of nearly 1.3 million). This compares with nearly 4.9 billion lunches served (a daily average of 27.8 million). CACFP provides assistance for after-school food in two ways. First, centers and homes that participate in CACFP and provide after-school care may participate in traditional CACFP (the eligibility and administration described earlier). Second, centers in areas where at least half the children in the community are eligible for free or reduced-price school meals can opt to participate in the CACFP At-Risk Afterschool program, which provides free snacks and suppers. Expansion of the At-Risk After-School meals program was a major policy change included in HHFKA. Prior to the law, 13 states were permitted to offer CACFP At-Risk After-School meals (instead of just a snack); the law allowed all CACFP state agencies to offer such meals. In FY2017, the At-Risk Afterschool program served a total of approximately 242.6 million free meals and snacks to a daily average of more than 1.7 million children. Related Programs, Initiatives, and Support Activities Federal child nutrition laws authorize and program funding supports a range of additional programs, initiatives, and activities. Through State Administrative Expenses funding, states are entitled to federal grants to help cover administrative and oversight/monitoring costs associated with child nutrition programs. The national amount each year is equal to about 2% of child nutrition reimbursements. The majority of this money is allocated to states based on their share of spending on the covered programs; about 15% is allocated under a discretionary formula granting each state additional amounts for CACFP, commodity distribution, and Administrative Review efforts. In addition, states receive payments for their role in overseeing summer programs (about 2.5% of their summer program aid). States are free to apportion their federal administrative expense payments among child nutrition initiatives (including commodity distribution activities) as they see fit, and appropriated funding is available to states for two years. State Administrative Expense spending in FY2017 totaled approximately $279 million. Team Nutrition is a USDA-FNS program that includes a variety of school meals initiatives around nutrition education and the nutritional content of the foods children eat in schools. This includes Team Nutrition Training Grants, which provide funding to state agencies for training and technical assistance, such as help implementing USDA's nutrition requirements and the Dietary Guidelines for Americans. From 2004 to 2018, Team Nutrition also included the HealthierUS Schools Challenge (HUSSC), which originated in the 2004 reauthorization of the Child Nutrition Act. HUSSC was a voluntary certification initiative designed to recognize schools that have created a healthy school environment through the promotion of nutrition and physical activity. Farm-to-school programs broadly refer to "efforts that bring regionally and locally produced foods into school cafeterias," with a focus on enhancing child nutrition. The goals of these efforts include increasing fruit and vegetable consumption among students, supporting local farmers and rural communities, and providing nutrition and agriculture education to school districts and farmers. HHFKA amended existing child nutrition programs to establish mandatory funding of $5 million per year for competitive farm-to-school grants that support schools and nonprofit entities in establishing farm-to-school programs that improve a school's access to locally produced foods. The FY2018 appropriations law provided an additional $5 million in discretionary funding to remain available until expended. Grants may be used for training, supporting operations, planning, purchasing equipment, developing school gardens, developing partnerships, and implementing farm-to-school programs. USDA's Office of Community Food Systems provides additional resources on farm-to-school issues. Through an Administrative Review process (formerly referred to as Coordinated Review Effort (CRE)), USDA-FNS, in cooperation with state agencies, conducts periodic on-site NSLP school compliance and accountability evaluations to improve management and identify administrative, subsidy claim, and meal quality problems. State agencies are required to conduct administrative reviews of all school food authorities (SFAs) that operate the NSLP under their jurisdiction at least once during a three-year review cycle. Federal Administrative Review expenditures were approximately $9.9 million in FY2017. USDA-FNS and state agencies conduct many other child nutrition program support activities for which dedicated funding is provided. Among other examples, there is the Institute of Child Nutrition (ICN), which provides technical assistance, instruction, and materials related to nutrition and food service management; it receives $5 million a year in mandatory funding appropriated in statute. ICN is located at the University of Mississippi. USDA-FNS provides training on food safety education. Funding is also provided for USDA-FNS to conduct studies, provide training and technical assistance, and oversee payment accuracy. Appendix A. Acronyms Used in This Report Appendix B. Per-meal or Per-snack Reimbursement Rates for Child Nutrition Programs This appendix lists the specific reimbursement rates discussed in the earlier sections of the report. Reimbursement rates are adjusted for inflation for each school or calendar year according to terms laid out in the programs' authorizing laws. Each year, the new rates are announced in the Federal Register .

The "child nutrition programs" refer to the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) programs that provide food for children in school or institutional settings. The best known programs, which serve the largest number of children, are the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). The child nutrition programs also include the Child and Adult Care Food Program (CACFP), which provides meals and snacks in day care and after school settings; the Summer Food Service Program (SFSP), which provides food during the summer months; the Special Milk Program (SMP), which supports milk for schools that do not participate in NSLP or SBP; and the Fresh Fruit and Vegetable Program (FFVP), which funds fruit and vegetable snacks in select elementary schools. Funding: The vast majority of the child nutrition programs account is considered mandatory spending, with trace amounts of discretionary funding for certain related activities. Referred to as open-ended, "appropriated entitlements," funding is provided through the annual appropriations process; however, the level of spending is controlled by benefit and eligibility criteria in federal law and dependent on the resulting levels of participation. Federal cash funding (in the form of per-meal reimbursements) and USDA commodity food support is guaranteed to schools and other providers based on the number of meals or snacks served and participant category (e.g., free meals for poor children get higher subsidies). Participation: The child nutrition programs serve children of varying ages and in different institutional settings. The NSLP and SBP have the broadest reach, serving qualifying children of all ages in school settings. Other child nutrition programs serve more-narrow populations. CACFP, for example, provides meals and snacks to children in early childhood and after-school settings among other venues. Programs generally provide some subsidy for all food served but a larger federal reimbursement for food served to children from low-income households. Administration: Responsibility for child nutrition programs is divided between the federal government, states, and localities. The state agency and type of local provider differs by program. In the NSLP and SBP, schools and school districts ("school food authorities") administer the program. Meanwhile, SFSP (and sometimes CACFP) uses a model in which sponsor organizations handle administrative responsibilities for a number of sites that serve meals. Reauthorization: The underlying laws covering the child nutrition programs were last reauthorized in the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296, enacted December 13, 2010). This law made significant changes to child nutrition programs, including increasing federal financing for school lunches, expanding access to community eligibility and direct certification options for schools, and expanding eligibility options for home child care providers. The law also required an update to school meal nutrition guidelines as well as new guidelines for food served outside the meal programs (e.g., snacks sold in vending machines and cafeteria a la carte lines). Current Issues: The 114th Congress began but did not complete a 2016 child nutrition reauthorization, and there was no significant legislative activity with regard to reauthorization in the 115th Congress. However, the vast majority of operations and activities continue with funding provided by appropriations laws. Current issues in the child nutrition programs are discussed in CRS Report R45486, Child Nutrition Programs: Current Issues.

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Introduction Streamgages measure water level and related streamflow at streams, rivers, lakes, and reservoirs across the country. Streamgages provide foundational information for diverse applications that affect a variety of constituents. Congress has supported a national streamgage program for 130 years. These streamgages operate in every state, the District of Columbia, and the territories of Puerto Rico and Guam; therefore, national streamgage operations garner interest from many Members of Congress. Data fro m streamgages informs real-time decisionmaking and long-term planning on issues such as hazard preparations and response, infrastructure design, water use allocations, ecosystem management, and recreation. Direct users of streamgage data include a variety of agencies from all levels of government, utility companies, consulting firms, scientific institutions, and recreationists. Streamgages are operated across the globe with national programs in North America, Europe, Australia, and Brazil, among others. In the United States, the U.S. Geological Survey (USGS), the Department of the Interior's (DOI's) lead scientific agency, manages the USGS Streamgaging Network ( Figure 1 ). The network encompasses 10,300 streamgages that record water height or streamflow for at least a portion of the year. Approximately 8,200 of these streamgages measure streamflow year-round and are part of the National Streamflow Network. This subnetwork includes 3,640 Federal Priority Streamgages (FPSs), which Congress and the USGS designated as national priorities (see section on " Federal Priority Streamgages "). Some entities, such as state governments, operate their own streamgages separate from the USGS Streamgaging Network. Congressional appropriations and agreements with approximately 1,400 nonfederal partners funded the USGS Streamgaging Network at $189.5 million in FY2018. Some streamgages are funded solely through congressional appropriations for the USGS and other federal agencies, such as the U.S. Army Corps of Engineers (USACE), Bureau of Reclamation (Reclamation), and Department of Defense (DOD). Much of the USGS Streamgaging Network is funded cooperatively. Interested parties sign funding agreements with the USGS to share the cost of streamgages and data collection. The USGS Cooperative Matching Funds Program (CMF) provides up to a 50% match with tribal, regional, state, and local partners (see section on " Cooperative Matching Funds Program "). Other federal agencies, nonfederal governments, and nongovernmental entities may provide reimbursable funding for streamgages in the USGS Streamgaging Network without contributed funds from the USGS. Evolving federal policies and user needs from diverse stakeholders have shaped the size, organization, and function of the USGS streamgage program. This report provides an overview of federal streamgages by describing the function of a streamgage, the data available from streamgage measurements, and the uses of streamgage information. The report also outlines the structure and funding of the USGS Streamgaging Network and discusses potential issues for Congress, such as funding priorities and the future structure of the nation's streamgage network. What Is a Streamgage? A streamgage's primary purpose is to collect data on water levels and streamflow (the amount of water flowing through a river or stream over time). Streamgages estimate streamflow based on (1) continuous measurements of stage height (the height of the water surface) and (2) periodic measurements of streamflow, or discharge, in the channel and floodplains. USGS measurements are used to create rating curves, in order to convert continuously measured stage heights into estimates of streamflow. Selected streamgages may provide additional measurements, such as measurements of water quality (see box on "Supergages"). Streamgages house instruments to measure, store, and transmit stream stage height ( Figure 2 ). Stage height is usually transmitted every hour, or more frequently at 5 to 15 minute intervals for emergency or priority streamgages. Most streamgages transmit data by satellite to USGS computers; the data then are provided online to the public. Numerous streamgages also have cameras that capture and transmit photos of streamflow conditions. Periodic streamflow measurements require USGS personnel to measure discharge at various sections across the stream. Streamflow measurements are made every six to eight weeks to capture a range of stage heights and streamflows, especially at high and low stage heights. Repeated measurements allow scientists to capture changes to the channel from vegetation growth, sedimentation, or erosion, which can affect the relationship between stage height and streamflow. The USGS National Water Information System (NWIS) receives and converts all stream height data from USGS streamgages into streamflow estimates. An example of streamgage data from NWIS is shown in Figure 3 for a site capturing peak streamflow during a hurricane event. The free and publicly accessible data are frequently accessed online or by request to users. For example, the agency responded to over 670 million requests for streamflow and water level information in 2018. The NWIS website is the main repository for current and historical streamflow data, in addition to other water information. Tools such as WaterWatch summarize the current conditions of the nation's streams and watersheds through maps, graphs, and tables by comparing real-time streamflow conditions to historic streamflow from streamgages with records of 30 years or more. Streamgage Uses The USGS Streamgaging Network provides streamflow information to assist during natural and man-made disasters, such as flooding and drought, and to inform economic and statutory water management decisions, such as the allocation of water supplies for irrigation. Individual streamgages in the network also can serve multiple uses. For example, a streamgage intentionally established for the purpose of reservoir management may provide data to inform water quality standards, habitat assessments, and recreational activities. Additionally, the value of a single streamgage is enhanced by the operation of the entire network, particularly for research, modeling, and forecasting. Streamgages were first established in the United States to inform water use and infrastructure planning—applications that benefit from continuous, long-term hydrologic records (see box on "Evolution of Streamgage Uses"). Long and continuous periods of data are used to construct baselines for water conditions and to identify deviations in the amount and timing of streamflow caused by changes in land use, water use, and climate. Some stakeholders contend that the value of streamflow records increases over time, with at least 20 years of continuous coverage needed for many applications. Technological advances allowing access to streamflow information in real time have expanded the uses of streamgages. Real-time forecasting and operational decisionmaking are used in many applications of streamflow data. Web and phone applications also have facilitated increased public use of water information. Examples of Streamgage Uses Streamgage data is used for a wide range of applications, including supporting activities of federal agencies. There are also a variety of streamgages tailored for specific purposes. The following is a noncomprehensive selection of streamgage uses to illustrate the scope of applications. W ater M anagement and Energy D evelopment . USACE, Reclamation, and various state and local water management agencies use streamgages to inform the design and operation of thousands of water management projects across the nation. Timely streamflow information helps water managers make daily operational decisions as they balance water requirements for municipal, industrial, and agricultural uses. Energy production and mineral extraction operations also rely on continuous streamflow measurements to comply with environmental, water quality, or temperature requirements. For example, the Federal Energy Regulatory Commission (FERC) requires hydropower companies to support USGS streamflow and water-level monitoring as part of their FERC licensing process. Infrastructure Design . Transportation agencies use streamflow data to develop regional flow frequency curves for the design of bridges and culverts, stream stability measures, and analysis of bridge scour—the leading cause of bridge failure. Without adequate information, some observers contend that engineers may overdesign structures, resulting in greater costs, or may not make proper allowances for floods, compromising public safety. Interstate and International Water Rights . Federal streamgages are used to collect streamflow information at U.S. borders and between states. Streamgage data informs interstate compacts, Supreme Court decrees, and international treaties (e.g., under the purview of the International Boundary and Water Commission and the International Joint Commission). Water Science Research . Many federal agencies depend on consistent, long-term data from streamgages to conduct water research and modeling (e.g., USACE, National Oceanic and Atmospheric Administration [NOAA], Environmental Protection Agency [EPA], DOI, U.S. Department of Agriculture [USDA], and National Aeronautic and Space Administration [NASA]). To monitor climate trends and ecological patterns, the USGS distinguishes a subset of streamgages that are largely unaffected by development to serve as benchmarks for natural conditions. Flood Mapping . The Federal Emergency Management Agency (FEMA) uses floodplain maps to establish flood risk zones and requires flood insurance through the National Flood Insurance Program (NFIP) for properties with a 1% annual chance of flooding. Long-term streamflow records are used to determine 1% annual chance flood flows and to develop water surface profiles to map areas at risk of flooding. The USGS often works with FEMA to produce new inundation maps after streamgages record new streamflow peaks from weather events such as hurricanes. Emergency F orecasting and Response. Streamgages inform flood forecasting and emergency response to protect lives and property. Real-time data from more than 3,600 streamgages allow NOAA's National Weather Service (NWS) river forecasters to model watershed response, project future streamflows, forecast monthly to seasonal water availability, and issue appropriate flood watches and warnings (see box on "National Water Model"). Flood warnings provide lead time for emergency response agencies, such as FEMA, to take effective action in advance of rising waters. In addition, the USDA National Resource Conservation Service (NRCS) uses streamgages to forecast flows for water supply, drought management and response, hydroelectric production, irrigation, and navigation in western states. Water Q uality . Streamflow data is important for measuring water quality and developing water quality standards for sediments, pathogens, metals, nutrients (e.g., nitrogen and phosphorus), and organic compounds (e.g., pesticides). At select streamgages, the USGS also operates instruments recording water quality data (see box on "Supergages"). Section 303(d) of the Clean Water Act requires states to develop total maximum daily load (TMDL) management plans for water bodies determined to be water quality impaired by one or more pollutants. When determining TMDL levels for specific pollutants, agencies may consider historic streamflow data, along with other factors, in their evaluations. Agencies may use current flow conditions when determining the proper release of wastewater to ensure compliance with TMDL standards and National Discharge Elimination System permitting. Ecosystem Management and Species . Some water users and resource agencies use streamflow data to meet the flow requirements needed to protect endangered or threatened fish and wildlife under the Endangered Species Act (16 U.S.C. §1531 et seq.). Natural resource agencies, such as the U.S. Fish and Wildlife Service (FWS), collect streamflow data to understand how threatened and endangered species respond to flow variations. The USGS operates streamgages to monitor ecosystem restoration progress, such as restoration of the Chesapeake Bay watershed. Recreation . Real-time streamgage data can help individuals and tourism businesses assess stream conditions for recreational outings. USGS data can be used to decide if conditions are suitable for recreational activities such as fishing, boating, and rafting. The USGS also partners with the National Park Service (NPS) to provide water science and data to help manage parks and to enhance interpretive programs. Network Structure The USGS Streamgaging Network is part of the Groundwater and Streamflow Information Program under the USGS Water Resources mission area. The President's budget request for FY2020 proposes a restructuring of the mission area to create a Water Observing Systems Program that would combine the USGS Streamgaging Network and other water observation programs. The primary operators of streamgages are the regional and state USGS Water Science Centers, which maintain hydrologic data collection and conduct water research in the region. Approximately 8,200 of the 10,300 USGS streamgages measure year-round streamflow (National Streamflow Network; see Figure 4 ), with the rest only measuring stage height or measuring streamflow on a seasonal basis. USGS streamgages are also differentiated based on cooperative funding (CMF) and federal interest (FPSs). Cooperative Matching Funds Program Much of the streamgaging program has been cooperative in nature as interested parties sign funding agreements to share the cost of streamgages and data collection. Through CMF, the USGS funds up to a 50% match with tribal, regional, state, and local partners. In 2018, CMF supported 5,345 streamgages (52% of the USGS Streamgaging Network). The first cooperative agreement began in 1895 with the Kansas Board of Irrigation Survey and Experiment (now known as the Division of Water Resources of the Kansas Department of Agriculture). Funds from cooperative entities steadily increased in the early 20 th century. Congress passed legislation in 1928 stipulating that the USGS can share up to 50% of the costs for water resources investigations carried out in cooperation with tribes, states, and municipalities (see Figure 5 ). In 2016, this Federal-State Cooperative Water Program was renamed the Cooperative Matching Funds Program (CMF), which provides cooperative funding for programs across the USGS Water Mission Area. To participate in the CMF, potential partners approach the USGS to discuss the need for a specific streamgage. The USGS determines its feasibility based on available funds and program priorities. If the USGS deems establishing the streamgage is feasible, the USGS and cooperator sign a joint funding agreement (JFA), which is a standard agreement that specifies how much each party will contribute to funding the streamgage and the payment schedule for the cooperator. These agreements span five years or less. During the agreement, the cost-share generally remains the same, but there is flexibility to alter the cost-share on an annual basis for multi-year agreements. Once a streamgage is operating, if a partner can no longer contribute funds, the USGS seeks to work with other partners that use the streamgage to augment funding. The USGS provides a website identifying streamgages that are in danger of being discontinued or converted to a reduced level of service due to lack of funding. The website also identifies streamgages that have been discontinued or are being supported by a new funding source. Approximately 3,700 of the 10,300 USGS streamgages (36%) are funded by nonfederal and federal partners without matching funds from the USGS (i.e., not with CMF). Nonfederal partners sign JFAs, and federal partners share interagency agreements with the USGS (except USACE which uses a military interdepartmental purchase request). These gages are part of the USGS Streamgaging Network and are operated in accordance with the quality control and public access standards created by the USGS, with the agency assuming liability responsibility for the streamgages. Public and private entities may also elect to own and operate streamgages tailored to their specific needs and not affiliated with the USGS. These independent streamgages may differ in various ways compared to streamgages in the USGS Streamgaging Network (e.g., capital and operating costs, operating periods, measurement capabilities, and data standards and platforms). Federal Priority Streamgages The SECURE Water Act of 2009 (Title IX, Subtitle F of P.L. 111-11 ) directs the USGS to operate a reliable set of federally funded streamgages. The law requires the USGS to fund no fewer than 4,700 sites complete with flood-hardened infrastructure, water quality sensors, and modernized telemetry by FY2019. Originally titled the National Streamflow Information Program (NSIP), the USGS now designates these streamgages as FPSs. Out of the 4,760 FPS locations identified by the USGS, 3,640 sites were operational in 2018. In FY2018, the USGS share of funding was $24.7 million for FPSs. The idea of a federally sustained set of streamgages arose in the late 20 th century when audits revealed the number of streamgages declining after peaking in the 1970s (see decrease in Figure 5 ). In a 1998 report to Congress, the USGS stated that the streamgage program was in decline because of an absolute loss of streamgages, especially those with a long record, and asserted that the loss was due to partners discontinuing funding. Partners also had developed different needs for streamflow information. The USGS proposed the creation of an entirely federally funded NSIP to ensure a stable "backbone" network of streamgages to meet national needs. The USGS used five national needs to determine the number and location of these streamgage sites: 1. Meeting legal and treaty obligations on interstate and international waters. 2. Forecasting flow for NWS and NRCS. 3. Measuring river basin outflows to calculate regional water balances. 4. Monitoring benchmark watersheds for long-term trends in natural flows. 5. Measuring flow for water quality needs. The original design included 4,300 active, previously discontinued, or proposed streamgage locations. The proposed program was to be fully federally funded, conduct intense data collection during floods and droughts, provide regional and national assessments of streamflow characteristics, enhance information delivery, and conduct methods development and research. The SECURE Water Act of 2009 authorized the NSIP to conform to the USGS plan as reviewed by the National Research Council. The law required the program to fund no fewer than 4,700 sites by FY2019. The law also directed the program to determine the relationship between long-term streamflow dynamics and climate change, to incorporate principals of adaptive management to assess program objectives, and to integrate data collection activities of other federal agencies (i.e., NOAA's National Drought Information System) and appropriate state water resource agencies. Network Funding In FY2018, congressional appropriations and nonfederal partners provided $189.5 million for the USGS Streamgaging Network ( Figure 6 ). The USGS share included $24.7 million for FPSs and $29.8 million for CMF. Other federal agencies provided $40.7 million ( Table 1 ). Nonfederal partners, mostly affiliated with the CMF program, provided $94.3 million. The appropriations bill for the Interior, Environment, and Related Agencies funds the USGS share of the USGS Streamgaging Network. Funding for streamgages is included in the Groundwater and Streamflow Information Program under the USGS Water Resources Mission Area. The line item includes funding for the streamgage network and groundwater monitoring activities, as well as other activities. Congress provided $74.2 million in FY2018 and $82.7 million in FY2019 for the Groundwater and Streamflow Information Program. While maintaining level funding for FPS and CMF streamgages in FY2019, Congress directed increased funding of $8.5 million for the deployment and operation of NextGen water observing equipment. The President's budget request for FY2020 proposes creating a new Water Observing Systems Program combining the Groundwater and Streamflow Information Program and elements of the National Water Quality program focused on observations of surface water and groundwater. The President's FY2020 budget requests $105.1 million for the proposed program, a decrease of $7.5 million compared to $112.5 million of FY2018 funding for a similar structure. The budget request would maintain funding for active FPS locations and provide no funding for the NextGen system. For CMF, the request proposes a decrease of $500,000 for Tribal Water, which would result in a loss of $250,000 for CMF streamgages, and a decrease of $717,000 for Urban Waters Federal Partnership, which would reduce water quality monitoring at select streamgages. Other federal agencies contribute to whole or partial funding of streamgages for agency purposes ( Table 1 ). Since FY2012, funding from other federal agencies has doubled from $19.9 million to $40.7 million in nominal dollars. This increase may be due to meeting inflation and other streamgage cost increases; to new needs for monitoring data with existing cooperators (e.g., USACE in the Savannah and Jacksonville Harbor expansion projects); and to the introduction of additional funding partners (e.g., the EPA) that are supporting new streamgages. Nonfederal partners funded approximately half the costs of the USGS Streamgaging Network from FY2012 to FY2018. Cooperative partners include tribal, regional, state, and local agencies related to natural resources, water management, environmental quality, transportation, and regional and city planning. Irrigation districts, riverkeeper partnerships, and utility agencies and companies also fund the program. Contributions by nongovernmental partners to streamgages are very limited (1% in FY2018) and are not eligible for cost-sharing through the USGS CMF program. USGS Funding Trends From FY2003 to FY2019, USGS funding for FPS streamgages increased from $11.7 million to $24.7 million (in 2018 dollars; Figure 7 ). However, USGS funding has not met the SECURE Water Act of 2009 mandate for an entirely federally funded suite of not fewer than 4,700 streamgage sites. In FY2018, 35% of FPSs were funded solely by the USGS FPS program funds. The USGS must rely on other federal agencies or nonfederal partners to fund the rest of the FPSs: 27% were funded by a combination of USGS CMF and partner funds, 24% were funded by a combination of other federal agencies and nonfederal partners, and 14% were funded solely by other federal agencies (not the USGS). USGS funding for CMF has remained relatively level, ranging from $27.5 million to $30.7 million (in 2018 dollars) over 15 years, aside from a drop in FY2007 ( Figure 7 ). For the entire USGS Streamgaging Network, the nonfederal cost-share contribution has increased from near 50% in the early 1990s to an average of about 63% in FY2018. With CMF appropriations remaining level, and demand for streamgages from stakeholders rising, the USGS cost-share available has declined. Cost-share commitments for long-term streamgages are generally renewed at consistent percentages, but JFAs for newer streamgages may include less contribution from the USGS. Increasingly, the USGS may opt to only provide matching funds for installation and operation in the first year, with the agreement that the partner provides full funding in subsequent years. Issues for Congress Congress may consider funding levels and policy priorities for the USGS Streamgaging Network. Congressional appropriations may affect the size of the network and the design of streamgages. Congress may provide direction regarding the policy priorities when considering the mandates of the SECURE Water Act of 2009 and initiating the NextGen system. Funding Considerations Congress determines the amount of federal funding for the USGS Streamgaging Network and may direct its allocation to FPS, CMF, and other initiatives. The USGS and numerous stakeholders have raised funding considerations including user needs, priorities of partners, federal coverage, infrastructure repair, disaster response, inflation, and technological advances. Congress may consider whether to maintain, decrease, or expand the network, and whether to invest in streamgage restoration and modernization. Addressing the Size of the Network The USGS uses appropriated funding to develop and maintain the USGS Streamgaging Network. While some stakeholders advocate for maintaining or expanding the network, others may argue that Congress should consider reducing the network in order to prioritize other activities. Maintaining the Network Congress may provide funding to maintain existing streamgages. The Administration continues to request funding for the Groundwater and Streamflow Information Program, which funds the USGS Streamgaging Network. The FY2020 budget request states that "one of the highest goals of the USGS is to maintain long-term stability of a 'Federal needs backbone network' for long-term tracking and forecasting/modeling of streamflow conditions." Some stakeholders may advocate to maintain the current network as it provides hydrologic information for diverse applications (see section on " Streamgage Uses "). The FY2020 budget requests FPS funding at FY2019 enacted levels. If inflation increases costs, level funding may not fully maintain the current operations of FPSs. In addition, 71% of the network, including some FPSs, are funded by other federal and nonfederal partners, which makes those streamgages potentially vulnerable for discontinuation. According to the Government Accountability Office, maintaining streamgages through partners can be a challenge due to both the changing priorities and financial limitations of the partners. Reducing the Network Size Congress may consider reducing the network, either for FPSs, cooperative streamgages, or both. The USGS has discontinued some streamgages because of other funding priorities or because cooperators decided to no longer fund them and alternative funding was not available for the operating costs. Closures may affect individual streamgages or a collection of streamgages. The Administration requested reductions for the Groundwater and Streamflow Information Program in FY2018, FY2019, and FY2020 compared to previous congressional appropriations. For FY2018, the Administration requested a decrease of $742,000 for the Groundwater and Streamflow Information Program, which the budget justification said would diminish the USGS's ability to execute its core activities including strengthening the national streamgaging and groundwater monitoring networks. For FY2019, the proposed reduction included a decrease of $160,000 for U.S.-Canada Transboundary Streamgages. The FY2019 and FY2020 requests proposed a decrease for Tribal Water CMF, which would result in a loss of CMF funding for select streamgages. Congress did not make these cuts in FY2018 and FY2019, and is considering appropriations for FY2020. Reducing the USGS Streamgaging Network could alleviate federal spending on streamgages and allow other entities to operate streamgages tailored to their needs. On the other hand, discontinuing currently operational streamgages may result loss of data acquisition, discontinuation of long-term datasets, and decreased coverage in some basins. Some stakeholders have proposed that entities with specific needs build and operate their own streamgages separate from the USGS network. Some states, such as California and Oregon, already operate their own streamgaging networks. This approach may contain some challenges (e.g., the data may be of higher or lower quality, the data be restricted for public use, or the host may use different standards). However, if individual streamgages were operated at the same level of quality as USGS streamgages, the USGS could incorporate such data into the NWIS network. Some also argue that disparate data sets could be available on a shared platform with USGS streamgages; such a platform could include information on methods of collection, quality, and accuracy. Network Expansion Congress may increase funding to expand the network, which could include establishing the remaining locations for FPS, providing more funds for cooperative streamgages, or pursuing new initiatives like the NextGen system. Congress mandated completion of a national network of no less than 4,700 streamgages in the SECURE Water Act of 2009. At the close of FY2018, 3,640 of the 4,760 FPSs designated by the USGS were operational, with 52% of their funding coming from the USGS. The USGS estimates that $125 million in additional funding each year would be needed to complete the network; however, an average of only about $25 million (in 2018 dollars) was appropriated annually for FPSs between FY2014 and FY2019. While some stakeholders have advocated for Congress to provide full appropriations for FPSs to meet the mandate based on network needs, Congress may consider other funding priorities (e.g., the NextGen system). Congress may also consider if other federal agencies and nonfederal cooperative partners could provide more funding for FPSs. These entities may not be interested in financing some of the designated streamgages in the FPS network, particularly those in isolated river basins with little anthropogenic activity. Some stakeholders advocate for more federal funding to expand the cooperative part of the network, which addresses more localized needs. Some may argue against more federal funding for cooperative streamgages as it lacks a direct statutory mandate (unlike FPSs). Others have proposed increasing nontraditional funding sources for streamgages. They suggest that businesses, homeowner associations, non-for-profit organizations, academic institutions, and other nontraditional entities could provide funding for streamgaging; therefore, increasing the amount of nonfederal investment. Contributions by nongovernmental partners to streamgages are currently relatively limited (1% in FY2018) and are not eligible for federal matching funds. Congress could potentially encourage wider participation by nontraditional partners through such means as authorizing cooperative matching opportunities for public-private partnerships. Traditional stakeholders may oppose making matching funds available to entities not currently eligible, which could result in more competition for limited funds. Congress increased the Groundwater and Streamflow Information Program appropriations by $1.5 million in FY2018 and $8.5 million in FY2019. These increases were directed to streamgages for the NextGen system (see section on " NextGen System "). Congress may consider expanding the network through the NextGen system based on results from the pilot project. Increases solely directed to the NextGen system may intensify funding constraints for FPSs and CMF streamgages. Restoration of Streamgages Streamgages are vulnerable to hazards if not properly hardened. The SECURE Water Act directed the USGS to ensure all FPSs were flood hardened by FY2019. According to the USGS, structural restoration is usually funded because of emergencies; for example, disaster supplemental appropriations may provide funds for hardening streamgages, or funds are diverted from operational budgets to repair affected streamgages. The 2017 hurricane season resulted in damage to more than 100 streamgages. In response, Congress provided $4.6 million in the Bipartisan Budget Act of 2018 to repair, replace, and restore these streamgages and recover their data, and for hydrologists to reconstruct stream channel measurements. When the USGS does not receive disaster supplemental funding from Congress, the agency is not reimbursed for funding it redirects in order to provide around-the-clock monitoring during the events and equipment repair during and after the events. Some stakeholders have advocated for Congress to provide funds specifically for strengthening and restoring infrastructure, especially to withstand natural disasters. These stakeholders estimate that $238 million is needed to update half of the streamgages in the network to enable them to withstand major flood events and to meet new data transmitting requirements. Under budget constraints, increases in congressional appropriations are often prioritized to maintain or expand the network instead of restoration. Modernizing the USGS Streamgaging Network Congress might consider investments in new technologies for the USGS Streamgaging Network. While regarded as reliable, many of the current streamgage operations are based on labor-intensive and more expensive techniques. Some stakeholders suggest that investing in modern technological and computational capabilities could provide enhanced streamflow information with reduced costs. Others raise that these approaches may not provide the quality and consistency of data expected of USGS streamgages and may reduce funds available for existing operations. Telemetry and Information Infrastructure The SECURE Water Act of 2009 directed the USGS to equip all FPSs with modernized telemetry systems by FY2019. According to stakeholders, the current U.S. streamgage telemetry and information infrastructure may be vulnerable to failure, and the existing data collection platforms and computer networks might eventually be inefficient for real-time and detailed data. In September 2018, an error in telemetry equipment resulted in an outage of 11% of the network. The USGS stated that redundancy in telemetry using cellular signals or camera streaming could have alleviated the problem, which affected the network for weeks. The IMAGES Act of 2018 ( H.R. 4905 ) introduced in the 115 th Congress would have directed FEMA to work with USGS to modernize hardware and increase the speed of data transmittal, but the legislation did not specify funding amounts. Some stakeholders have suggested a figure of $112 million as the amount needed to upgrade the enterprise data management systems, information technology infrastructure, and real-time data delivery capabilities. Past increases of appropriations for streamgages have prioritized continued operation and network expansion over technological improvements. To mitigate costs for such upgrades, federal science agencies are considering cloud computing that could also benefit cloud providers if other users develop applications on the cloud network using the data already hosted there. The FY2020 budget request for the USGS outlines enhancement and modernization of NWIS with a centralized platform meeting the Federal Cloud First Computing Strategy. Some argue that Congress should fund alternative data infrastructure to ensure capacity and reliability of increased data while reducing the cost, though others may argue these strategies are not ready for full implementation. NextGen System The USGS suggests that modern models and computational methods to estimate streamflow in ungaged or sparsely gaged basins may provide an alternative approach to conventional streamgaging. These methods require more observational data, particularly for reference river basins, than that provided by the current streamgage network. In an effort to assess this approach, the USGS initiated a NextGen system pilot project in the Delaware River Basin with $1.5 million in FY2018 ( Figure 8 ), and the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $8.5 million for the NextGen system. Reports accompanying FY2019 Interior appropriations bills by the House and Senate in the 115 th Congress addressed the NextGen system. The Senate committee report encouraged the USGS to have a cost-effective strategy for the NextGen system ( S.Rept. 115-276 ), and the House committee report directed the USGS to provide the committee with a report on the NextGen system, explaining the limitations of the current water monitoring system, the enhancements and modernization needed, and costs to implement the system over a 10-year period and operate and maintain the system ( H.Rept. 115-765 ). The USGS says the funding will allow further the NextGen system implementation in the Delaware River Basin; continued progress in modernizing USGS data infrastructure; and the selection of the next basin. Advances by the NextGen system to estimate streamflow at ungagged locations based on modeling of highly measured reference basins could also result in reduced need for streamgages, lower costs, and expansion of coverage of streamflow data. Others may suggest that modeling streamflow may not provide adequate data as physical measurements, and initiating the NextGen system may result in decreased funding available for traditional operations. Innovation Congress may also consider directing the USGS to pursue innovative observation technologies: satellite-based or airborne platforms, ultrasound sensors for river stage-height measurement, radar technology for stream velocity, and autonomous vehicles for Light Detection and Ranging (LIDAR) and other types of remote sensing. The USGS is currently evaluating combining cameras and radars with advanced imagery analysis and installing these combined technologies on drone platforms to collect streamflow in difficult or inaccessible areas. Data coverage could also potentially increase with high-density sensing and sensor networks that use miniaturization, artificial intelligence, and economy of scale. Statistical advances to estimate streamflow at locations without streamgages could also result in reduced need for streamgages. Some suggest that such technologies may eventually satisfy streamflow information needs at lower cost, while others caution that advanced technologies may not provide as robust and reliable data as traditional methods. Balancing Policy Options Congress may consider outlining the future direction for the USGS Streamgaging Network through oversight or legislation. At the close of FY2018, 3,640 of the 4,760 FPS locations designated by the USGS were operational, with 52% of their funding coming from the USGS. As the USGS faces a deadline by the SECURE Water Act of 2009 to operate no less than 4,700 FPSs by FY2019, Congress directed the USGS through appropriations legislation to invest in the NextGen system. Congress may consider pursuing both the FPS mandate and the NextGen system, amending the SECURE Water Act of 2009 to facilitate completion of FPSs, or replacing the FPS mandate with the Next Gen system. Pursuing Both the FPS Mandate and the NextGen System Congress may consider pursuing both FPS coverage and the NextGen system. This approach could allow the USGS to meet the SECURE Water Act mandate while fully exploring new methods to obtain streamflow information. Financial constraints may limit this approach and pursuing both initiatives simultaneously may result in duplication of resources and coverage. Amending the SECURE Water Act of 2009 Congress may consider revising the SECURE Water Act of 2009 to facilitate completion of FPSs (i.e., extending the deadline for FPSs, reassessing the program goals, and changing the number of FPSs). Extending the mandate may provide more time to complete the FPS network. Some suggest that the national interests have evolved and the national goals and FPS locations should be reassessed. For example, monitoring streamflow for ecological purposes was not considered in the original design but has become an increased priority. The SECURE Water Act of 2009 directed the USGS to incorporate principles of adaptive management by conducting period reviews of the FPSs to assess whether the law's objectives were being adequately addressed. An analysis of the network could reveal whether some currently funded FPS sites are no longer in the national interest and funding could be reallocated to complete other sites. Changes in the national goals may also result in the discontinuation of long-term streamgages or the need for new streamgages, and coverage may increase or decrease in various river basins. Replacing the FPS Network with NextGen System Congress may consider replacing FPSs with the NextGen system by authorizing the NextGen system as a pilot program or broader program. For example, the Weather Research and Forecasting Innovation Act of 2017 ( P.L. 115-25 ) required NOAA to conduct a pilot program for commercial weather data. The act stipulated program criteria, authorization of appropriations, reporting requirements, and future directs for NOAA based on the success of the pilot program. Congress could provide similar mandates in legislation including which basins are chosen for NextGen system improvements and whether the basins are determined by an external study, the Administration, or Congress. While some acknowledge new streamgaging approaches are forthcoming, others may suggest that modeling streamflow may not provide as adequate data compared to traditional streamgages and altering the network design may result in loss of coverage at specific sites or across basins.

Streamgages are fixed structures at streams, rivers, lakes, and reservoirs that measure water level and related streamflow—the amount of water flowing through a water body over time. The U.S. Geological Survey (USGS) in the Department of the Interior operates streamgages in every state, the District of Columbia, and the territories of Puerto Rico and Guam. The USGS Streamgaging Network encompasses 10,300 streamgages, which record water levels or streamflow for at least a portion of the year. Approximately 8,200 of these streamgages measure streamflow year round as part of the National Streamflow Network. The USGS also deploys temporary rapid deployment gages to measure water levels during storm events, and select streamgages measure water quality. Streamgages provide foundational information for diverse applications that affect a variety of constituents. The USGS disseminates streamgage data free to the public and responds to over 670 million requests annually. Direct users of streamgage data include a variety of agencies at all levels of government, private companies, scientific institutions, and recreationists. Data from streamgages inform real-time decisionmaking and long-term planning on issues such as water management and energy development, infrastructure design, water compacts, water science research, flood mapping and forecasting, water quality, ecosystem management, and recreational safety. Congress has provided the USGS with authority and appropriations to conduct surveys of streamflow since establishing the first hydrological survey in 1889. Many streamgages are operated cooperatively with nonfederal partners, who approach the USGS and sign joint-funding agreements to share the cost of streamgages and data collection. The USGS Cooperative Matching Funds (CMF) Program provides up to a 50% match with tribal, regional, state, and local partners, as authorized by 43 U.S.C. §50. The average nonfederal cost-share contribution has increased from 50% in the early 1990s to 63% in FY2018. In the early 2000s, the USGS designated federal priority streamgage (FPS) locations based on five identified national needs. The SECURE Water Act of 2009 (Title IX, Subtitle F, of P.L. 111-11) directed the USGS to operate by FY2019 no less than 4,700 federally funded streamgages. In FY2018, 3,640 of the 4,760 FPSs designated by the USGS were operational, with 52% of their funding from the USGS. Congressional appropriations and agreements with 1,400 nonfederal partners funded USGS streamgages at $189.5 million in FY2018. The USGS share included $24.7 million for FPSs and $29.8 million for cooperative streamgages through CMF. A dozen other federal agencies provided $40.7 million. Nonfederal partners, mostly affiliated with CMF, provided $94.3 million. In FY2019, Congress appropriated level funding for FPS and CMF streamgages. Congress directed an additional $8.5 million to pilot a Next Generation Integrated Water Observing System (NextGen), establishing dense networks of streamgages in representative watersheds in order to model streamflow in analogous watersheds. The President's budget request for FY2020 does not include NextGen system funding and would reduce CMF for streamgages by $250,000. The USGS uses appropriated funding to develop and maintain the USGS Streamgaging Network. The USGS and numerous stakeholders have raised funding considerations including user needs, priorities of partners, federal coverage, infrastructure repair, disaster response, inflation, and technological advances. Some stakeholders advocate for maintaining or expanding the network. Others may argue that Congress should consider reducing the network in order to prioritize other activities and that other entities operate streamgages tailored to localized needs. Congress might also consider whether to invest in streamgage restoration and new technologies. Congress may consider outlining the future direction for the USGS Streamgaging Network through oversight or legislation. As the USGS faces a deadline by the SECURE Water Act of 2009 to operate no less than 4,700 FPSs by FY2019, Congress directed the USGS through appropriations legislation to invest in the NextGen system. Congress may consider such policy options as pursuing both the FPS mandate and the NextGen system simultaneously, amending the SECURE Water Act of 2009, and the relative emphasis of the NextGen system.

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Introduction Requirements for military awards and decorations can change over time. New events and changes in military, political, or social conditions can generate debate over who is eligible for various military awards. These changes tend to be controversial, especially with veterans groups. Congress has considered several pieces of legislation that would change who would be eligible to receive the Purple Heart, and under what conditions. The wars in Iraq and Afghanistan have greatly increased the number of servicemembers receiving the Purple Heart award as well as the potential conditions under which they receive the award. Increasingly acknowledged conditions, such as traumatic brain injuries (TBI) and post-traumatic stress disorder (PTSD), as well as accidents and other events while deployed, bring up new questions as to when a servicemember deserves a Purple Heart. The July 17, 2015, shooting of servicemembers at a Marine recruiting office and a naval reserve center in Chattanooga, TN, again prompted questions about applying the Purple Heart to terrorist attacks versus criminal acts. Veterans groups often voice their views when Congress or the President proposes making changes to expand eligibility for the Purple Heart. These groups argue, for example, that a servicemember who acquires PTSD may not always deserve the same recognition as a servicemember killed or wounded in direct combat, while others contend that these medical conditions can debilitate servicemembers just as much as physical injuries and can have lasting effects on servicemembers' lives. Determining which actions and events make a servicemember qualified for receiving a Purple Heart, and whether expanding eligibility does a disservice to those who have already earned the award, are contentious elements of this debate. Although Congress has traditionally left many military award requirements to the executive branch, the Constitution does allow Congress to act in this area, and events have prompted changes regarding eligibility for the Purple Heart. On December 19, 2014, Congress passed The Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act (NDAA) for Fiscal Year 2015. Section 571 of the NDAA for FY2015 expanded eligibility by redefining what should be considered an attack by a "foreign terrorist organization" for purposes of determining eligibility for the Purple Heart. As a result, servicemembers wounded and killed in the 2009 shootings in Little Rock, AR, and at Fort Hood, TX, were awarded Purple Hearts in 2015. Congressional offices often receive questions about Purple Heart eligibility from constituents, especially when eligibility rules change. The number of these questions is likely to increase as servicemembers return from conflicts around the world and if eligibility requirements are again changed. This report will examine the history of the Purple Heart and changes in eligibility over time as well as current issues facing Congress. Original Conception In 1782, George Washington created the Badge of Military Merit to reward "any singularly meritorious action" displayed by a soldier, noncommissioned officer, or officer in the Continental Army. This award was intended to encourage gallantry and fidelity among soldiers, and would later become known as the Purple Heart. The Badge of Military Merit was designed as a purple heart of cloth edged with a narrow lace. Records are incomplete and researchers debate how many soldiers received this award. According to Military Order of the Purple Heart, three soldiers from Connecticut were the first to receive the Badge of Military Merit during the American Revolutionary War. All three were noncommissioned officers and the only recipients who received the award from General Washington. The soldiers were Sergeant William Brown, 5 th Connecticut Regiment of the Connecticut Line on May 3, 1783; Sergeant Elijah Churchill, 2 nd Continental Light Dragoons on May 3, 1783; and Sergeant Daniel Bissell, 2 nd Connecticut Regiment of the Connecticut Line, on June 10, 1783. However, the Badge of Military Merit fell into disuse shortly after its conception. History of the Purple Heart The Badge of Military Merit was not seriously considered again until General Douglas MacArthur (then Army Chief of Staff) revived the award on February 22, 1932, the 200 th anniversary of George Washington's birth. This award, renamed the "Purple Heart," was redesigned to its modern appearance: a purple heart-shaped medal with bronze border and George Washington's coat of arms between two green spray leaves. See Figure 1 . General MacArthur also redefined the eligibility requirements to those who received Meritorious Service Citation certificates from World War I or those authorized to wear wound chevrons by Army Regulation (AR) 600-8-22, Military Awards . It was at this point that the Purple Heart became focused on soldiers killed and wounded in combat, rather than "any singularly meritorious act." In 1942, President Franklin Roosevelt extended the Purple Heart award, which to this point was exclusively an Army award, to Navy, Marine Corps, and Coast Guard members serving in World War II. In 1952, President Truman retroactively awarded Purple Hearts to personnel in the Navy, Marine Corps, and Coast Guard that qualified after April 5, 1917, thus including World War I veterans of all services. From 1962 until 1998, eligibility for the Purple Hearts was changed on several occasions. President Kennedy authorized Purple Hearts to all servicemembers, and civilians serving with the Armed Forces, who were engaged in armed conflict against an opposing military or hostile foreign force. This expansion was written to permit U.S. servicemembers, and the civilians that accompanied them, who were killed or wounded in Vietnam to receive the Purple Heart, as many of those servicemembers were officially considered advisors to the Republic of Vietnam, rather than combatants. Purple Heart eligibility was expanded again by President Reagan to include military personnel and government civilians killed or wounded in international terrorist attacks after March 28, 1973, or those serving in peacekeeping operations outside of the United States. This expansion was in response to increased terrorist attacks against U.S. servicemembers abroad, namely the Marine Corps Barracks bombing in Beirut, Lebanon, in 1983. The NDAA for Fiscal Year 1996 expanded eligibility to prisoners of war injured or wounded in captivity prior to 1962, a group of servicemembers previously not covered for Purple Heart eligibility by President Kennedy's executive order. In 1997, President Clinton signed the NDAA for Fiscal Year 1998, which limited future awards of the Purple Heart to military personnel. It has since remained a military-only award. The Department of Defense does not maintain a record of the number of Purple Heart recipients. However, some military historians estimated more than 1 million Purple Hearts have been awarded mostly to soldiers since 1932. Likewise, the National Purple Heart Hall of Honor estimates 1.8 million Purple Hearts have been awarded since the medal was established by the Army in 1932. During the 115 th Congress (2017-2018), H.R. 7097 was introduced as the "Find our Hearts Act." It would have amended Title 10, United States Code, to require the establishment of a searchable database containing the names and citations of members of the Armed Forces who have been awarded the Purple Heart. H.R. 7097 was referred to the House Armed Services Committee but saw no further action. See Table 1 for current Purple Heart legislation. Current Eligibility Currently, the Purple Heart is authorized for any member of the U.S. Armed Forces who has been wounded or died from wounds sustained under one of the following conditions: (1) In accordance with E.O. 11016, subject to the provisions of Sections 1129, 1129a, and 1131 of Title 10, U.S.C., and P.L. 104-106 , the Secretary of a Military Department, will, in the name of the President of the United States, award the PH, with suitable ribbons and appurtenances, to any Service member under the jurisdiction of that Department who, after April 5, 1917, has been wounded, killed, or who has died or may hereafter die of wounds received under any of the following circumstances: (a) In action against an opposing armed force of a foreign country in which U.S. Armed Forces are or have been engaged. (b) In any action with an opposing armed force of a foreign country in which the Military Services are or have been engaged. (c) While serving with friendly foreign forces engaged in armed conflict against an opposing armed force in which the United States is not a belligerent party. (d) As a result of an act of any such enemy or opposing armed forces. (e) As the result of an act of any hostile foreign force. (f) After March 28, 1973, as a result of an international terrorist attack against the United States or a foreign nation friendly to the United States, recognized as such an attack for purposes of award of the PH by the Secretary of the Military Department concerned, or jointly by the Secretaries of the Military Departments concerned if members from more than one Military Department are wounded in the attack. The Secretary of the Military Department concerned shall notify the Under Secretary for Personnel and Readiness USD(P&R) prior to awarding the PH for an international terrorist attack that occurs in the United States or its territories. (g) After March 28, 1973, as a result of military operations while serving outside the territory of the United States as part of a peacekeeping force. (h) On or after December 7, 1941, pursuant to Section 1129 of Title 10, U.S.C., a service member who is killed or wounded in action as the result of action by friendly weapon fire while directly engaged in combat, other than as a result of an act of an enemy of the United States, unless (in the case of a wound) the wound is the result of willful misconduct of the member. (i) Before April 25, 1962, pursuant to Section 521 of P.L. 104-106 which held as a prisoner of war (POW), or while being taken captive in the same manner as a former POW who is wounded on or after that date while held as a POW. A person will be considered to be a former POW if the person is eligible for the POW Medal under Section 1128 of Title 10, U.S.C. (j) On or after December 7, 1941, to a Service member who is killed or dies while in captivity as a prisoner of war (POW) under circumstances establishing eligibility for the POW medal pursuant to section 1128 of Title 10, U.S.C., and Volume 2 of DoD Manual 1348.33, Manual of Military Decorations and Awards , unless compelling evidence is presented that shows that the member's death was not the result of enemy action. (k) After September 11, 2001, pursuant to section 1129a of Title 10, U.S.C., to a Service member on active duty who is killed or wounded in an attack by a foreign terrorist organizations in circumstances where the death or wound is the result of an attack targeted on the member due to such member's status as a member of the armed forces. An attack by an individual or entity shall be considered to be a foreign terrorist attack if the individual or entity was in communication with the foreign terrorist organization before the attack and the attack was inspired or motivated by the foreign terrorist organization. An award is not authorized if the death or wound was the result of the willful misconduct of the Service member. To assist in making a PH determination pursuant to section 1129a of Title 10, U.S.C., the Military Department Secretary concerned may request an intelligence assessment from the Defense Intelligence Agencies' Defense Combating Terrorism Center (DCTC). The DCTC assessment of potential foreign terrorist attacks by an individual or entity will assess whether the individual or entity was in communication with the foreign terrorist organization before the attack, and if the attack was inspired or motivated by the foreign terrorist organization. The assessment shall include supporting citations and rationale. (2) A wound for which the award is made must have been of such severity that it required treatment, not just examination, by a military medical officer. (a) Treatment must be noted in the Servicemember's medical record. (b) Award may be made of wounds treated by a medical professional other than a medical officer provided a medical officer issues a statement in the Service member's medical record that the extent of the wounds were such that the wounds would have required treatment from a medical officer if one had one been available to treat the wounds. (3) After May 17, 1998, pursuant to Section 1131 of Title 10, U.S.C., the PH may only be awarded to a person who is a Service member at the time the person is killed or wounded under circumstances otherwise qualifying that person for award of the PH. Before this date, the Secretary of the Military Department concerned was authorized to award the PH to U.S. civilian nationals who were serving under competent authority in any capacity with the armed forces of that department. For deceased servicemembers, the Purple Heart may be given to the representatives of the deceased as the individual Service Secretary considers appropriate. Servicemembers can be awarded multiple Purple Hearts for separate incidents. The servicemember receives the Purple Heart medal for the first award. Subsequent awards are indicated with oak leaf clusters or 5/16 inch service stars, depending on the rules of the recipient's service. Purple Hearts may not be awarded to foreign military personnel. Issues for Congress Although the decision to award medals and other military decorations traditionally rests with the executive branch, Congress has been expanding its role in this area in recent decades, exercising its constitutional power "To Make Rules for the Government and Regulation of the land and naval forces." Previously, Congress took the lead and adjusted Purple Heart eligibility in both the NDAA for FY1996 and the NDAA for FY1998. See Appendix A . In response to some mass shootings in recent years, Congress passed a provision in the NDAA for FY2015 that expanded the Purple Heart's eligibility requirements. Domestic Terrorism and the FY2015 NDAA (P.L. 113-291) Little Rock, Arkansas, and Fort Hood, Texas, 2009 On June 1, 2009, a man who was allegedly angry over the killing of Muslims in Iraq and Afghanistan opened fire on two U.S. Army soldiers near a recruiting station in Little Rock, AR, killing one and wounding the other. On November 5, 2009, an Army major opened fire at Ft. Hood, TX, killing 13 and wounding 29, many of them servicemembers. Both men were charged with murder and other crimes. Federal and local law enforcement authorities initially considered these acts to be crimes, and the Defense Department reports the Fort Hood shooting as "workplace violence," not acts perpetrated by an enemy or hostile force, which made them ineligible for the Purple Heart. However, some believed these acts should be viewed as acts of war or domestic terrorism because they involved Muslim perpetrators angered over U.S. actions in Iraq and Afghanistan. Section 571 of the NDAA for FY2015 ( P.L. 113-291 ) expanded the eligibility for the Purple Heart by redefining what should be considered an attack by a "foreign terrorist organization" for purposes of determining eligibility for the Purple Heart. The law states that an event should be considered an attack by a foreign terrorist organization if the perpetrator of the attack "was in communication with the foreign terrorist organization before the attack" and "the attack was inspired or motivated by the foreign terrorist organization." Still, some are opposed to awarding the Purple Heart for terrorist acts that were initially deemed "workplace violence" by the Department of Defense (DOD) or a criminal act, and not earned on a battlefield. This act arguably sets a precedent for the future and could make Purple Heart eligibility more subjective, allowing public sentiment to determine what events are worthy of a Purple Heart. On April 10, 2015, then-Army Secretary John McHugh and Army Lieutenant General Sean MacFarland, 3 rd Corps and Fort Hood commanding general, presented Purple Hearts to the families of the 10 servicemembers killed and to the 26 servicemembers wounded during the attack. Defense of Freedom Medals were also awarded to DOD civilians killed and wounded during the attack. In a memorandum, Secretary McHugh directed the Army to "expedite certain other benefits for which soldiers receiving the Purple Heart are traditionally eligible." In addition to the victims of the Fort Hood shooting, the two victims of the June 2009, shooting at a recruiting station in Little Rock, Arkansas, received Purple Hearts on July 1, 2015. Army Private William Andrew "Andy" Long was killed and Army Private Quinton Ezeagwula was wounded in that attack by Abdulhakim Muhammad, who was convicted and sentenced to life in prison without the possibility of parole. NDAA for FY2016 (H.R. 1735) Encouraged by the expanded eligibility provision in the NDAA for FY2015, legislation was introduced during the 114 th Congress to award Purple Hearts to other military victims of domestic terrorism. Section 583 of the House-passed version of H.R. 1735 , the NDAA for FY2016, would have awarded the Purple Heart to servicemembers who were victims of the April 19, 1995, Oklahoma City, Oklahoma bombing. Supporters for awarding the Purple Heart to the victims of the Oklahoma City bombing refer to the FY2015 NDAA as precedent. However, critics contend that the bombing was an act of domestic terrorism and does not meet the current eligibility requirements of the assailant being inspired by or motivated by an international terrorist organization. The final version of the FY2016 NDAA ( P.L. 114-92 ) did not include this provision. Chattanooga Shooting on July 16, 2015 On July 16, 2015, Muhammad Youssef Abdulazeez shot at a Marine Corps recruiting center and Naval Reserve Center in Chattanooga, TN. This incident again raised congressional interest regarding the eligibility for the Purple Heart for servicemembers killed and wounded during an attack inspired by or motivated by international terrorist organizations. Four marines were killed and one was injured during the rampage, and the lone sailor later died from his injuries. The FBI investigation later concluded that Abdulazeez was "motivated by foreign terrorist organization propaganda," but that it was difficult to determine which terrorist group may have inspired him. On December 16, 2015, then-Secretary of the Navy Ray Mabus announced that the Purple Heart would be awarded to five servicemembers killed and one wounded in the July 2015 shootings at two naval centers in Chattanooga, Tennessee. Secretary Mabus stated that "following an extensive investigation, the FBI and NCIS have determined that this attack was inspired by a foreign terrorist group, the final criteria required for the awarding of the Purple Heart to this Sailor and these Marines." On January 14, 2016, then-Navy Vice Admiral Robin Braun presented the Purple Heart to the family of Logistics Specialist 2 nd Class Randall Smith at the Navy Operational Support Center Chattanooga. Brigadier General Terry V. Williams presented the Purple Heart on January 26, 2016, to Sergeant DeMonte R. Cheeley, who survived the attack, at a ceremony in Chattanooga. On April 20, 2016, Lieutenant General Rex McMillian, then-head of Marine Corps Forces Reserve, presented Purple Hearts to the families of Gunnery Sergeant Thomas Sullivan, Staff Sergeant David Wyatt, Sergeant Carson Holmquist, and Lance Corporal Squire "Skip" Wells in a ceremony at the Hunter Museum of American Art in Chattanooga. Attack on Paris-Bound Train, August 21, 2015 U.S. Airman 1 st Class Spencer Stone was onboard a train from Amsterdam to Paris with two friends, Anthony Sadler and Alek Skarlatos, when they subdued a heavily armed gunman who attempted to fire an AK-47 at the passengers. Stone was stabbed in the face and neck by the gunman as the trio restrained him before he could discharge his weapon. The vacationing Americans were hailed as heroes and awarded the French Legion of Honor on August 24, 2015. On September 14, 2015, Air Force Secretary Deborah Lee James announced that Stone would receive the Purple Heart along with the Airman's Medal, the Air Force's highest noncombat award. At the Pentagon on September 17, 2015, then-Defense Secretary Ash Carter presented Stone the Purple Heart and Airman's Medal. During the ceremony, Carter presented the Soldier's Medal to Oregon National Guard Specialist Alek Skarlatos, and civilian Anthony Sadler received the Secretary of Defense Medal for Valor. Orlando Shooting on June 12, 2016 On June 12, 2016, a security guard, Omar Mateen, killed 49 people and wounded 53 others in an attack inside Pulse, a gay nightclub in Orlando, Florida. Army Reserve Captain Antonio Davon Brown was one of the 49 people killed and may be eligible for the Purple Heart depending on the outcome of the FBI investigation. According to the FBI, Mateen had pledged allegiance to the Islamic State group after his attack in a call to 911. At this time, it is unclear if the Army will make a decision regarding Captain Brown's eligibility for the Purple Heart. Private Corrado Piccoli Purple Heart Preservation Act Background On September 28, 2016, H.R. 6234 was introduced to amend Title 18, U.S.C., to provide for penalties for the sale of any Purple Heart awarded to a member of the Armed Forces. This legislation would have made selling the medal punishable by fines and up to six months in prison. H.R. 6234 would have placed the Purple Heart into a new protected category, keeping it away from not just con artists but also memorabilia collectors. The measure was named for Private Corrado Piccoli, a World War II infantryman killed in action in 1944, whose Purple Heart was found for sale at an antique store in 2009. This bill was referred to the House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations but saw no further action in the 114 th Congress. This legislation was reintroduced in the 115 th Congress on January 13, 2017, as H.R. 544 , the Private Corrado Piccoli Purple Heart Preservation Act of 2017, and a related bill, S. 765 , was passed by the Senate on August 3, 2017. Both bills were referred to committee in the House but saw no further action. On January 15, 2019, S. 122 , Private Corrado Piccoli Purple Heart Preservation Act, was introduced in the 116 th Congress. The bill was read twice and referred to the Senate Judiciary Committee. 115th Congress Legislation The House version of the National Defense Authorization Act (NDAA) for FY2019, H.R. 5515 , included a provision (Section 629) that would extend certain morale, welfare, and recreation (MWR) privileges to certain veterans, including Purple Hearts recipients, and their caregivers. This bill became P.L. 115-232 on August 13, 2018. Section 621 of the enacted bill adopted House Section 629, which extends eligibility of certain MWR and commissary privileges to certain veterans, including Purple Heart recipients, and their caregivers starting in 2020. For additional information see section, "Defense Commissary System," in CRS Report R45343, FY2019 National Defense Authorization Act: Selected Military Personnel Issues . 116th Congress Legislation For bill summaries of Purple Heart legislation in the 116 th Congress as introduced, see Table 1 . Traumatic Brain Injuries, Post-Traumatic Stress Disorder, and the Purple Heart The large number of veterans with invisible wounds returning from Iraq and Afghanistan has the Department of Defense (DOD) reevaluating Purple Heart eligibility for traumatic brain injuries (TBI) and mental conditions such as post-traumatic stress disorder (PTSD). DOD considers some TBIs eligible for the Purple Heart, as many of those injuries can be diagnosed using brain scans and other objective medical tests. However, there is continued debate on the inclusion of mental conditions, such as PTSD, as part of the appropriate criteria for the Purple Heart. Congress, as well as various executive agencies and departments, is funding and conducting studies regarding PTSD. The National Alliance on Mental Illness, a national grassroots advocacy group representing families and people affected by mental illness, is advocating that the Purple Heart be awarded for psychological wounds including PTSD to eliminate stigma and encourage servicemembers to seek care. At this time, DOD does not consider servicemembers with PTSD eligible for the Purple Heart. Army Regulation 600-8-22 allows "concussion injuries caused as a result of enemy generated explosions" but specifically disqualifies post-traumatic stress disorders. Army guidance emphasizes "the degree to which the enemy caused the injury" when determining eligibility and places PTSD in a column of noneligible injuries. The Marine Corps defines PTSD as a "severe combat stress injury" and says that combat stress injuries are "not directly caused by the enemy's intentional use of an outside force or agent," and thus do not qualify. Servicemembers are divided on this issue. Some servicemembers believe that mental injuries such as PTSD should be eligible for the Purple Heart, while others believe that it would dishonor those who have received Purple Hearts for physical injuries. Proponents argue that some veterans are less likely to seek help for their mental-health injuries because of the stigma associated with PTSD, and that stigma could be lessened by recognizing their injuries as real. Opponents, including some veterans from the Military Order of the Purple Heart and Veterans of Foreign Wars, are resistant to accepting PTSD as grounds for eligibility. A representative of The Military Order of the Purple Heart stated, "We believe strongly in and support the criteria that the wound or death should be sustained in combat at the hands of the enemies of the United States." In addition, the national spokesman for the Veterans of Foreign Wars, Joseph E. Davis, said, "Medals aren't awarded for illness or disease, but for 'achievement and valor.'" Appendix A. Timeline of Purple Heart Eligibility August 7, 1782: George Washington creates the Badge of Military Merit. Awarded to several Continental soldiers but it quickly falls from use. February 22, 1932: Army Chief of Staff General Douglas MacArthur revives the Badge of Military Merit as an Army award, renamed "the Purple Heart," and retroactively awarded to wounded WWI veterans. December 3, 1942: Executive Order 9277—President Franklin Roosevelt expands Purple Heart eligibility to include U.S. Navy, Marine Corps, and Coast Guard. Retroactively awards Purple Hearts to December 6, 1941. November 12, 1952: Executive Order 10409—President Truman retroactively awards Purple Hearts to U.S. Navy, Marine Corps, and Coast Guard veterans after April 5, 1917. April 25, 1962: Executive Order 11016—President Kennedy extends eligibility to civilians serving with military forces. February 23, 1984: Executive Order 12464—President Reagan awards Purple Hearts to those killed and wounded in terrorist attacks after March 28, 1973, or on peacekeeping missions outside the United States. February 10, 1996: National Defense Authorization Act for Fiscal Year 1996 (Section 521, P.L. 104-106 ) includes "prisoners of war wounded before April 25, 1962, while held as a prisoner of war (or while being taken captive) in the same manner as a former prisoner of war who is wounded on or after that date while held as a prisoner of war (or while being taken captive)." November 18, 1997: National Defense Authorization Act for Fiscal Year 1998 (Section 571, P.L. 105-85 ) limits future Purple Heart awards to members of the Armed Forces. October 17, 2006: National Defense Authorization Act for Fiscal Year 2007 (Section 556, P.L. 109-364 ) includes prisoners of war captured after December 7, 1941. April 30, 2008: Purple Heart Family Equity Act of 2007 ( P.L. 110-207 ) revises the congressional charter of the Military Order of the Purple Heart to authorize associate membership for the spouse and siblings of a recipient of the Purple Heart medal. December 19, 2014: National Defense Authorization Act for Fiscal Year 2015 (Section 571, P.L. 113-291 ) expands eligibility for the Purple Heart by redefining what should be considered an attack by a foreign terrorist organization, and awards Purple Heart medals to servicemembers wounded or killed during the 2009 shootings at Ft. Hood, Texas, and Little Rock, Arkansas. Appendix B. Staffer Instructions for Medal Requests Members of Congress are able to directly request that a Service Secretary consider awarding military decorations to individuals or groups. Upon receiving a request from a Member's office, the Service Secretary concerned will review the proposal for the award or presentation of a decoration (or the upgrading of a decoration). Based on that review, the Secretary shall determine the merits of approving the award or presentation of the decoration and other necessary determinations. The Secretary shall submit a notice to the requesting Member, the Senate Armed Services Committee, and the House Armed Services Committee with one of the following results: (1) The award or presentation of the decoration does not warrant approval on the merits. A statement explaining the Secretary's reason will be included. (2) The award or presentation of the decoration warrants approval and a waiver by law of time restrictions prescribed by law is recommended. (3) The award or presentation of the decoration warrants approval on the merits and has been approved as an exception to policy. (4) The award or presentation of the decoration warrants approval on the merits, but a waiver of the time restrictions prescribed in law is not recommended. A statement explaining the Secretary's reason will be included. Source: Compiled from the National Defense Authorization Act for Fiscal Year 1996 ( P.L. 104-106 , §526), February 10, 1996.

The Purple Heart is one of the oldest and most recognized American military medals, awarded to servicemembers who were killed or wounded by enemy action. The conflicts 2001 to the present have greatly increased the number of Purple Hearts awarded to servicemembers. Events over the past few years have spurred debate on the eligibility criteria for the Purple Heart. Shootings on U.S. soil and medical conditions such as traumatic brain injury (TBI) and post-traumatic stress disorder (PTSD) have prompted changes to the eligibility requirements for the Purple Heart. Some critics believe that these changes may lessen the value of the medal and the sacrifices of past recipients on the battlefield. In the past, efforts to modify the Purple Heart's eligibility requirements were contentious, and veterans groups were vocal concerning eligibility changes. While medal requirements are often left to the military and executive branch to decide, Congress is involved in Purple Heart eligibility, utilizing its constitutional power "To Make Rules for the Government and Regulation of the land and naval Forces" (U.S. Constitution, Article I, Section 8, clause 14). The Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015 (P.L. 113-291) included language that expands eligibility for the Purple Heart. Previous debates have raised several questions about the Purple Heart. In some respects, how an event is defined can determine eligibility: Is a servicemember the victim of a crime or a terrorist attack? Conversely, arguing that killed or wounded servicemembers "should" be eligible for the Purple Heart can redefine an event: Is the servicemember an advisor to a foreign military or a combatant? Are PTSD and other mental health conditions adequate injuries to warrant the Purple Heart? These are questions that Congress might consider if it chooses to act on this issue.

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Recent Developments On January 2, 2019, for the second year in a row, the Cuban Commission for Human Rights and National Reconciliation (CCDHRN) reported a significant decline in the annual number of short-term detentions for political reasons. In 2018, according to the CCDHRN, there were 2,873 short-term detentions, almost a 45% decline from 2017 and the lowest level since 2010. (See " Human Rights ," below.) On December 22, 2018, Cuba's National Assembly approved a draft constitution that will be subject to a national referendum planned for February 24, 2019. Due to public opposition orchestrated by religious groups, the draft eliminated a provision that eventually could have led to approval of same-sex marriage and instead remained silent on defining matrimony. (See discussion on constitutional changes in " Cuba's Transition to a New President ," below.) On December 20, 2018, President Trump signed into law the 2018 farm bill, P.L. 115-334 ( H.R. 2 ), with a provision that permits funding for two export promotion programs—the Market Access Program and the Foreign Market Development Cooperation Program—for U.S. agricultural products in Cuba. (See " U.S. Exports and Sanctions ," below.) On December 19, 2018, Major League Baseball announced it had reached an agreement with the Cuban Baseball Federation to allow baseball players from Cuba to sign contracts without defecting from Cuba. Some press reports indicate that the Trump Administration might take action to prevent the deal from moving forward. On November 15, 2018, the Trump Administration updated its list of restricted Cuban entities controlled by the Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit those services or personnel at the expense of the Cuban people or private enterprise in Cuba. Currently, there are 205 entities on the list, including 99 hotels. (See " Partial Rollback of Engagement and Increased Sanctions ," below.) On November 1, 2018, National Security Adviser John Bolton made a speech in Miami, FL, strongly criticizing the Cuban government on human rights. In a press interview, Bolton also maintained that the Administration was considering whether to continue to suspend Title III of the Cuban Liberty and Democratic Solidarity Act of 1996 (LIBERTAD Act; P.L. 104-114) to allow lawsuits in U.S. federal court against those "trafficking" in confiscated property in Cuba, an action that would significantly ratchet up U.S. sanctions on Cuba. (For more on Title III, see " U.S. Property Claims ," below.) On November 1, 2018, the United Nations General Assembly approved a resolution (as it has annually since 1991) opposing the U.S. embargo on Cuba. The vote was 189-2, with Israel joining the United States in opposing it. The United States also proposed eight amendments to the resolution criticizing Cuba's human rights record, but all these amendments were defeated by wide margins. (See " Cuba's Foreign Relations ," below.) On October 26, 2018, U.S. media reports highlighted a disturbing TV Martí program originally aired in May 2018 that disparaged U.S. businessman George Soros through anti-Semitic language and unfounded conspiracy theories. Subsequently, the Office of Cuba Broadcasting pulled the program from its website and the chief executive officer of the U.S. Agency for Global Media stated that the program was "inconsistent with our professional standards and ethics." (See " Radio and TV Martí ," below.) On October 16, 2018, the State Department's U.S. Mission to the United Nations launched a campaign to call attention to Cuba's estimated 130 political prisoners. (See " Human Rights ," below.) On October 15, 2018, the Cuban government released Cuban political opposition activist Tomás Núñez Magdariaga from prison after a 62-day hunger strike. The State Department had called for his release, maintaining that he was imprisoned on false charges and convicted in a sham trial. (See " Human Rights ," below.) On October 6, 2018, President Trump signed into law the FAA Reauthorization Act of 2018 ( P.L. 115-254 ) with a provision requiring the Transportation Security Administration to brief Congress on certain aspects of Cuban airport security, develop and implement a mechanism to better track public air charter flights between the United States and Cuba, and direct public air charters to provide updated data on such flights. (See " U.S. Travel to Cuba ," below.) Introduction Political and economic developments in Cuba and U.S. policy toward the island nation, located just 90 miles from the United States, have been significant congressional concerns for many years. Especially since the end of the Cold War, Congress has played an active role in shaping U.S. policy toward Cuba, first with the enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII) and then with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ). Both measures strengthened U.S. economic sanctions on Cuba that had first been imposed in the early 1960s but also provided road maps for a normalization of relations, dependent upon significant political and economic changes in Cuba. Congress partially modified its sanctions-based policy toward Cuba when it enacted the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX) allowing for U.S. agricultural exports to Cuba. Over the past decade, much of the debate in Congress over U.S. policy has focused on U.S. sanctions. In 2009, Congress took legislative action in an appropriations measure ( P.L. 111-8 ) to ease restrictions on family travel and travel for the marketing of agricultural exports, marking the first congressional action easing Cuba sanctions in almost a decade. The Obama Administration took further action in 2009 by lifting all restrictions on family travel and on cash remittances by family members to their relatives in Cuba. In 2011, the Obama Administration announced the further easing of restrictions on educational and religious travel to Cuba and on donative remittances to other than family members. In December 2014, just after the adjournment of the 113 th Congress, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba toward a policy of engagement and a normalization of relations. The policy shift led to the restoration of diplomatic relations, the rescission of Cuba's designation as a state sponsor of international terrorism, and the easing of some restrictions on travel and commerce with Cuba. There was mixed reaction in Congress, with some Members of Congress supporting the change and others opposing it. Legislative initiatives in the 114 th Congress reflected this policy divide, with some bills introduced that would have further eased U.S. economic sanctions and others that would have blocked the policy shift and introduced new sanctions. This report examines U.S. policy toward Cuba in the 115 th Congress. It is divided into three major sections analyzing Cuba's political and economic environment; U.S. policy toward Cuba; and selected issues in U.S.-Cuban relations, including restrictions on travel and trade, funding for democracy and human rights projects in Cuba and for U.S. government-sponsored radio and television broadcasting, migration, antidrug cooperation, U.S. property claims, and U.S. fugitives from justice in Cuba. Legislative initiatives in the 115 th Congress are noted throughout the report, and Appendix A lists enacted measures and other bills and resolutions. Appendix B provides links to U.S. government information and reports on Cuba. For more on Cuba from CRS, see CRS In Focus IF10045, Cuba: U.S. Policy Overview , by Mark P. Sullivan; CRS Report R43888, Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations , by Dianne E. Rennack and Mark P. Sullivan; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by Mark P. Sullivan; CRS Insight IN10798, U.S. Response to Injuries of U.S. Embassy Personnel in Havana, Cuba , by Mark P. Sullivan and Cory R. Gill; CRS Insight IN10788, Hurricanes Irma and Maria: Impact on Caribbean Countries and Foreign Territories , by Mark P. Sullivan; CRS Insight IN10722, Cuba: President Trump Partially Rolls Back Obama Engagement Policy , by Mark P. Sullivan; CRS Report R44119, U.S. Agricultural Trade with Cuba: Current Limitations and Future Prospects , by Mark A. McMinimy; CRS Report R44137, Naval Station Guantanamo Bay: History and Legal Issues Regarding Its Lease Agreements , by Jennifer K. Elsea and Daniel H. Else; and CRS Report R44714, U.S. Policy on Cuban Migrants: In Brief , by Andorra Bruno. Cuba's Political and Economic Environment Brief Historical Background1 Cuba became an independent nation in 1902. From its discovery by Columbus in 1492 until the Spanish-American War in 1898, Cuba was a Spanish colony. In the 19 th century, the country became a major sugar producer, with slaves from Africa arriving in increasing numbers to work the sugar plantations. The drive for independence from Spain grew stronger in the second half of the 19 th century, but independence came about only after the United States entered the conflict, when the USS Maine sank in Havana Harbor after an explosion of undetermined origin. In the aftermath of the Spanish-American War, the United States ruled Cuba for four years until Cuba was granted its independence in 1902. Nevertheless, the United States retained the right to intervene in Cuba to preserve Cuban independence and maintain stability in accordance with the Platt Amendment, which became part of the Cuban Constitution of 1901. The United States subsequently intervened militarily three times between 1906 and 1921 to restore order, but in 1934, the Platt Amendment was repealed. Cuba's political system as an independent nation often was dominated by authoritarian figures. Gerardo Machado (1925-1933), who served two terms as president, became increasingly dictatorial until he was ousted by the military. A short-lived reformist government gave way to a series of governments that were dominated behind the scenes by military leader Fulgencio Batista until he was elected president in 1940. Batista was voted out of office in 1944 and was followed by two successive presidents in a democratic era that ultimately became characterized by corruption and increasing political violence. Batista seized power in a bloodless coup in 1952, and his rule progressed into a brutal dictatorship that fueled popular unrest and set the stage for Fidel Castro's rise to power. Castro led an unsuccessful attack on military barracks in Santiago, Cuba, on July 26, 1953. He was jailed but subsequently freed. He went into exile in Mexico, where he formed the 26 th of July Movement. Castro returned to Cuba in 1956 with the goal of overthrowing the Batista dictatorship. His revolutionary movement was based in the Sierra Maestra Mountains in eastern Cuba, and it joined with other resistance groups seeking Batista's ouster. Batista ultimately fled the country on January 1, 1959, leading to 47 years of rule under Fidel Castro until he stepped down from power provisionally in July 2006 because of poor health and ceded power to his brother Raúl Castro. Although Fidel Castro had promised a return to democratic constitutional rule when he first took power, he instead moved to consolidate his rule, repress dissent, and imprison or execute thousands of opponents. Under the new revolutionary government, Castro's supporters gradually displaced members of less radical groups. Castro moved toward close relations with the Soviet Union, and relations with the United States deteriorated rapidly as the Cuban government expropriated U.S. properties. In April 1961, Castro declared that the Cuban revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. Over the next 30 years, Cuba was a close ally of the Soviet Union and depended on it for significant assistance until the dissolution of the Soviet Union in 1991. From 1959 until 1976, Castro ruled by decree. In 1976, however, the Cuban government enacted a new Constitution setting forth the Cuban Communist Party (PCC) as the leading force in state and society, with power centered in a Political Bureau headed by Fidel Castro. Cuba's Constitution also outlined national, provincial, and local governmental structures. Since then, legislative authority has been vested in a National Assembly of People's Power that meets twice annually for brief periods, although the Assembly has permanent commissions that work throughout the year. When the Assembly is not in session, a Council of State, elected by the Assembly, acts on its behalf. According to Cuba's Constitution, the president of the Council of State is the country's head of state and government. Executive power in Cuba is vested in a Council of Ministers, also headed by the country's head of state and government, that is, the president of the Council of State. Fidel Castro served as head of state and government through his position as president of the Council of State from 1976 until February 2008. Although he provisionally stepped down from power in July 2006 because of poor health and ceded power to his brother Raúl (who held the position of first vice president), Fidel still officially retained his position as head of state and government. National Assembly elections were held in January 2008, and Fidel was once again among the slate of candidates elected to the legislative body. But as the new Assembly was preparing to select the members of the Council of State from among its ranks in February 2008, Fidel announced that he would not accept the position as president of the Council of State. This announcement confirmed his departure as titular head of the Cuban government, and Raúl was selected as president. More than 10 years after stepping down from power, Fidel Castro died in November 2016 at 90 years of age. While out of power, Fidel had continued to author essays published in Cuban media that cast a shadow on Raúl Castro's rule, and many Cubans reportedly believed that he had encouraged so-called hard-liners in Cuba's Communist Party and government bureaucracy to slow the pace of economic reforms advanced by his brother. His death accentuated the generational change that has already begun in the Cuban government and a passing of the older generation of the 1959 revolution. Political Conditions Current President Miguel Díaz-Canel Bermúdez was selected by Cuba's National Assembly of People's Power to succeed 86-year-old Raúl Castro on April 19, 2018, after Castro completed his second five-year term as president. Most observers saw Díaz-Canel, who had been serving as first vice president since 2013, as the "heir apparent," but Raúl will continue in his position as first secretary of the PCC until 2021. Cuba does not have direct elections for president. Instead, Cuba's legislature, the National Assembly of People's Power, selects the president of the country's 31-member Council of State; the president, pursuant to Cuba's constitution (Article 74), serves as Cuba's head of state and government. Raúl Castro had succeeded his long-ruling brother Fidel Castro in 2006, serving provisionally until 2008 and then officially serving two five-year terms as president. He had announced in 2013 that he would not seek a third term, in line with his government's imposition of a two-term limit in 2012. Under Raúl, Cuba implemented gradual market-oriented economic policy changes over the past decade, but critics maintain that the government did not take enough action to foster sustainable economic growth. Elections for the 605 member-National Assembly (as well as for 15 provincial assemblies) had been expected to be held in January 2018, but the elections were postponed until March 2018. The delay was not unexpected since Cuba's municipal elections, scheduled for September 2017, had been postponed to November 2017 because of significant damage caused by Hurricane Irma. The municipal contests involved the direct election of more than 12,000 officials among 27,000 candidates, but the electoral process was tightly controlled, with the government preventing 175 independent candidates from being nominated. Candidates for the National Assembly and provincial assemblies were also tightly controlled by candidacy commissions, and voters were presented with one candidate for each position. Cuba's Transition to a New President President Díaz-Canel, who turned 58 a day after becoming president, is an engineer by training. His appointment as first vice president in 2013 made him the official constitutional successor in case Castro died or could not fulfill his duties. His appointment also represented a move toward bringing about generational change in Cuba's political system. Díaz-Canel became a member of the Politburo in 2003 (the PCC's highest decisionmaking body), held top PCC positions in two provinces, and was higher education minister from 2009 until 2012, when he was tapped to become a vice president on the Council of State. Although some observers believed Díaz-Canel to be a moderate and more open to reform, a leaked video released in August 2017 appears to contradict that characterization. The video shows him speaking at a closed Communist Party meeting earlier in the year in which he strongly criticized dissidents and independent voices (including those arguing for reform of the socialist system), criticized the expansion of Cuba's private sector, and characterized U.S. efforts toward normalization under President Obama as an attempt to destroy the Cuban revolution. Some observers believe that Díaz-Canel's rhetoric could have been aimed at increasing his acceptance by so-called hard-liners in Cuba's political system who are more resistant to change. Cuba's political transition is notable because it is the first time since the 1959 Cuban revolution that a Castro is not in charge of the government. A majority of Cubans today have lived under the rule only of the Castros. Raúl's departure can be viewed as a culmination of the generational leadership change that began several years ago in the government's lower ranks. It is also the first time that Cuba's head of government is not leader of the PCC. Although separating the roles of government and party leaders could elevate the role of government institutions over the PCC, Raúl Castro has indicated that he expects Díaz-Canel to take over as first secretary of the PCC when his term as party leader ends. Another element of the transition is the composition of the new 31-member Council of State. The National Assembly selected 72-year-old Salvador Valdés Mesa as First Vice President, not from the younger generation, but also not from the historical revolutionary period. Valdés Mesa, who already had been serving as one of five vice presidents and is on the Politburo, is the first Afro-Cuban to hold such a high government position. Of the Council of State's members, 45% are new, 48% are women, and 45% are Afro-Cuban or mixed race. Several older revolutionary-era leaders remained on the Council, including Ramiro Valdés, 86 years old, who continues as a vice president. Nevertheless, the average age of Council of State members was 54, with 77% born after the 1959 Cuban revolution. Challenges for President Díaz-Canel . Although most observers do not anticipate immediate major policy changes under President Díaz-Canel, his government will face two enormous challenges—reforming the economy and responding to desires for greater freedom. Raúl Castro managed the opening of Cuba's economy to the world, with diversified trade relations, increased foreign investment, and a growing private sector. Yet the slow pace of economic reform has stunted economic growth and disheartened Cubans yearning for more economic freedom. From mid-2017 through much of 2018, the government appeared to backtrack by restricting private-sector development and slowing reforms, and for several years the government has delayed a long-anticipated end to its dual-currency system that creates economic distortion (see " Economic Conditions " below). A challenge for Díaz-Canel will be moving forward with economic reforms opposed by some conservative elements in the party and state bureaucracy. Few observers expect the Díaz-Canel government to ease tight control over the political system, at least in the short to medium term, but it will need to contend with increasing calls for political reform and freedom of expression. The liberalization of some individual freedoms that occurred under Raúl Castro (such as legalization of cell phones and personal computers, and expansion of internet connectivity) has increased Cubans' appetite for access to information and the desire for more social and political expression. More broadly, if the next government continues to repress political dissidents and human rights activists, it will remain a point of contention in Cuba's foreign relations. An important question looking ahead is the extent of influence that Castro and other revolutionary figures will have on government policy. Some observers assert that Raúl will continue to have a role in the decisionmaking process because he will head the PCC until 2021.The former president also headed up a commission making changes to Cuba's 1976 constitution (see discussion below). In July 2018, President Díaz-Canel named his Council of Ministers or Cabinet, but a majority of ministers were holdovers from the Castro government, including those occupying key ministries such as defense, interior, finance, and foreign relations; just 9 of 26 ministers were new, including 2 vice presidents and 7 new ministers. After Díaz-Canel marked his first 100 days in office in July 2018, some observers maintained that little had changed politically or economically. By the end of 2018, however, President Díaz-Canel made several decisions that appeared to demonstrate his independence from the previous Castro government and indicate that he was more responsive to public concerns and criticisms. In early December, as described below in the section on " Economic Conditions ," Díaz-Canel eased forthcoming harsh regulations that were about to be implemented on the private sector; many observers believed these regulations would have shrunk the sector. Also in December, the Cuban government backed away from full implementation of controversial Decree 349 that had been issued in July 2018 to regulate artistic expression. After the unpopular decree triggered a flood of criticism from Cuba's artistic community, the government announced that the measure would be implemented gradually and applied with consensus (it remains to be seen, however, whether the government's action will satisfy those working in Cuba's vibrant arts community). In a third action in December, the government eliminated a proposed constitutional change that could have paved the way for same-sex marriage after strong public criticisms of the provision (see discussion below on constitutional changes). Constitutional Changes. As noted, Cuba is in the midst of a process to rewrite and update its 1976 constitution that will be subject to a referendum in February 2019. Drafted by a commission headed by Raúl Castro and approved by the National Assembly in July 2018, the proposed changes were subject to public debate in thousands of workplaces and community meetings into November. After considering public suggestions, the National Assembly made additional changes to the draft constitution, and the National Assembly approved this new version on December 22, 2018. Voters are now scheduled to go to the polls to approve the new constitution on February 24, 2019; it would then be approved in April 2019. One of the more controversial changes made by the commission in its new draft in December was the elimination of a provision that would have redefined matrimony as gender neutral compared to the current constitution, which refers to marriage as the union between a man and a woman. Cuba's evangelical churches orchestrated a campaign against the provision, and Cuban bishops issued a pastoral message against it. The commission chose to eliminate the proposed provision altogether, with the proposed constitution remaining silent on defining matrimony, and maintained that the issue would be addressed in future legislation within two years. Among other provisions of the draft constitution are the addition of an appointed prime minster to oversee government operations, an age limit of 60 to become president (Article 127) with a limit of two five-year terms (Article 126), and the right to own private property (Article 22). The draft constitution would still ensure the state's control over the economy and the role of centralized planning (Article 19), and the Communist Party still would be the only recognized party (Article 5). Human Rights The Cuban government has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights since the early years of the Cuban revolution. The government has continued to harass members of human rights and other dissident organizations. These organizations include the Ladies in White ( Las Damas de Blanco ), currently led by Berta Soler, formed in 2003 by the female relatives of the "group of 75" dissidents arrested that year, and the Patriotic Union of Cuba (UNPACU), led by José Daniel Ferrer García, established in 2011 by several dissident groups with the goal of fighting peacefully for civil liberties and human rights; in August 2018, the Cuban government imprisoned Ferrer arbitrarily for 11 days with no access to his family, according to Amnesty International. In recent years, several political prisoners have conducted hunger strikes; two hunger strikers died—Orlando Zapata Tamayo in 2010 and Wilman Villar Mendoza in 2012. In February 2017, Hamel Santiago Maz Hernández, a member of UNPACU who had been imprisoned since June 2016 after being accused of descato (lack of respect for the government), died in prison. Although the human rights situation in Cuba remains poor, the country has made some advances in recent years. In 2008, Cuba lifted a ban on Cubans staying in hotels that previously had been restricted to foreign tourists in a policy that had been pejoratively referred to as "tourist apartheid." In recent years, as the government has enacted limited economic reforms, it has been much more open to debate on economic issues. In 2013, Cuba eliminated its long-standing policy of requiring an exit permit and letter of invitation for Cubans to travel abroad. The change has allowed prominent dissidents and human rights activists to travel abroad and return to Cuba. In recent years, the Cuban government has moved to expand internet connectivity through "hotspots" first begun in 2015 and through the launching of internet capability on cellphones in late 2018. As noted below, short-term detentions for political reasons declined significantly in 2017 and 2018, although there were still almost 2,900 such detentions in 2018. Congressional Resolutions. On April 11, 2018, the Senate approved S.Res. 224 (Durbin), which commemorated the legacy of democracy activist Oswaldo Payá, called on the Cuban government to allow an impartial, third-party investigation into the circumstances surrounding Payá's death in a car accident in July 2012, and called on the Cuban government to cease violating human rights and begin providing democratic freedoms to Cuban citizens. In 2012, the Senate had approved S.Res. 525 (Nelson), which honored the life and legacy of Payá and also called for an impartial, third-party investigation. Payá had founded the Christian Liberation Movement in 1988, a civil society group advocating peaceful democratic change and respect for human rights. He founded the Varela Project in 1996, which collected thousands of signatures supporting a national plebiscite for political reform in Cuba. Two similar but not identical resolutions introduced in May 2018, S.Res. 511 (Rubio) and H.Res. 916 (Diaz-Balart), would have honored Las Damas de Blanco as the recipient of the 2018 Milton Friedman Prize for Advancing Liberty. The resolutions also would have expressed solidarity and commitment to the democratic aspirations of the Cuban people and call on the Cuban government to allow members of the group to travel freely. Political Prisoners. On October 16, 2018, the State Department's U.S. Mission to the United Nations launched a campaign to call attention to the plight of Cuba's "estimated 130 political prisoners." Cuban diplomats attempted to disrupt the event by making noise and shouting, although their actions appeared to call more attention to the event and, for some observers, demonstrated the Cuban government's disdain for freedom of expression. Secretary of State Mike Pompeo wrote an open letter to Cuban Foreign Minister Bruno Rodriguez on December 7, 2018, asking for a substantive explanation for the continued detention of eight specific political prisoners and an explanation of the charges and evidence against other individuals held as political prisoners. In January 2019, the Havana-based Cuban Commission for Human Rights and National Reconciliation (CCDHRN) estimated that Cuba held some 130-140 political prisoners in some 150 prisons and internment camps. In June 2018, the CCDHRN made public a list with 120 prisoners for political reasons, consisting of 96 opponents or those disaffected toward the regime (over 40 are members of UNPACU) and 24 accused of employing or planning some form of force or violence. According to the State Department's human rights report on Cuba covering 2017, issued in April 2018, the exact number of political prisoners was difficult to determine, but human rights organizations estimated that there were 65 to 100 political prisoners. The report noted the lack of governmental transparency, along with its systematic violations of due process rights, which masked the nature of criminal charges and prosecutions and allowed the government to prosecute peaceful human rights activists for criminal violations or "dangerousness." As noted in the report, the government refused international humanitarian organizations and the United Nations access to its prisons and detention centers, and closely monitored and often harassed domestic organizations that tracked political prisoner populations. Political activist Dr. Eduardo Cardet, designated by Amnesty International (AI) as a "prisoner of conscience," has been imprisoned since November 2016 for publicly criticizing Fidel Castro and was sentenced to three years in prison. AI maintains that Cardet, a leader in the dissident Christian Liberation Movement, was sent to prison solely for peacefully exercising his right to freedom of expression and has called for his immediate release. The human rights group issued an urgent action notice in January 2018 calling attention to Cardet's case after he was attacked by several prisoners in December 2017. In June 2018, AI issued another urgent action notice for Cardet, maintaining that Cuban authorities suspended family visiting rights for him because of his family's activism on the case. A second AI-designated prisoner of conscience, Cuban biologist Dr. Ariel Ruiz Urquiola, was sentenced to a year in prison in May 2018 for the crime of disrespecting authority ( desacato ). Urquiola reportedly had referred to several Cuban government forest rangers as "rural guards," a derogatory reference to a repressive agency before the Cuban revolution. The rangers had been checking whether Urquiola had proper permits to cut down several trees and build a fence, which reportedly he had. In June 2018, AI issued two urgent action notices on Urquiola calling for his release and for visits while imprisoned. He was conditionally released from prison on July 3, 2018, following a prolonged hunger strike. On October 15, 2018, the Cuban government released UNPACU activist Tomás Núñez Magdariaga from prison after a 62-day hunger strike. Magdariaga had been sentenced to a year in jail for allegedly making threats to a security agent. The State Department had called for his release, maintaining he was falsely charged and convicted in a sham trial. Amnesty International had expressed concern for his health and called on Cuba to make public evidence against him. Over the past decade, the Cuban government has released large numbers of political prisoners at various junctures. In 2010 and 2011, with the intercession of the Cuban Catholic Church, the government released some 125 political prisoners, including the remaining members of the "group of 75" arrested in 2003 who were still in prison. In the aftermath of the December 2014 shift in U.S. policy toward Cuba, the Cuban government released another 53 political prisoners, although several were subsequently rearrested. In 2017, the Cuban government released several political prisoners that had been dubbed "prisoners of conscience" by Amnesty International. This included graffiti artist Danilo Maldonado Machado (known as El Sexto) who subsequently testified before a Senate Foreign Relations Committee hearing in February 2017. Short- T erm Detentions. Short-term detentions for political reasons increased significantly from 2010 through 2016, a reflection of the government's change of tactics in repressing dissent away from long-term imprisonment. The CCDHRN reports that the number of such detentions grew annually from at least 2,074 in 2010 to at least 8,899 in 2014. The CCDHRN reported a very slight decrease to 8,616 short-term detentions in 2015, but this figure increased again to at least 9,940 detentions for political reasons in 2016, the highest level recorded by the human rights organization. Since 2017, however, the CCDHRN has reported a significant decline in short-term detentions. In 2017, the number of short-term detentions fell to 5,155, almost half the number detained in 2016 and the lowest level since 2011. The decline in short-term detentions continued in 2018, with 2,873 reported short-term detentions, almost a 45% decline from 2017 and the lowest level since 2010. Bloggers and Civil Society Groups. Over the past several years, numerous independent Cuban blogs have been established. Cuban blogger Yoani Sánchez has received considerable international attention since 2007 for her website, Generación Y , which includes commentary critical of the Cuban government. In May 2014, Sánchez launched an independent digital newspaper in Cuba, 14 y medio , available on the internet, distributed through a variety of methods in Cuba, including CDs, USB flash drives, and DVDs. The Catholic Church became active in broadening the debate on social and economic issues through its publications. The Church also has played a role in providing social services, including soup kitchens, services for the elderly and other vulnerable groups, after-school programs, job training, and even college coursework. Estado de SATS , a forum founded in 2010 by human rights activist Antonio Rodiles, has had the goal of encouraging open debate on cultural, social, and political issues. The group has hosted numerous events and human rights activities over the years, but it also has been the target of government harassment, as has its founder. Other notable online forums and independent or alternative media that have developed include Cuba Posible (founded by two former editors of the Catholic publication Espacio Laical ) , Periodismo del Barrio (focusing especially on environmental issues), El Toque , and O nCuba (a Miami-based digital magazine with a news bureau in Havana). Trafficking in Persons. The State Department released its 2018 Trafficking in Persons (TIP) Report on June 28, 2018, and for the fourth consecutive year Cuba was placed on the Tier 2 Watch List (in prior years, Cuba had Tier 3 status). Tier 3 status refers to countries whose governments do not fully comply with the minimum standards for combatting trafficking and are not making significant efforts to do so. In contrast, Tier 2 Watch List status refers to countries whose governments, despite making significant efforts, do not fully comply with the minimum standards and still have some specific problems (e.g., an increasing number of victims or failure to provide evidence of increasing antitrafficking efforts) or whose governments have made commitments to take additional antitrafficking steps over the next year. A country normally is automatically downgraded to Tier 3 status if it is on the Tier 2 Watch List for three consecutive years unless the Secretary of State authorizes a waiver. The State Department issued such a waiver for Cuba in 2017 because the government had devoted sufficient resources to a written plan that, if implemented, would constitute significant efforts to meet the minimum standards for the elimination of trafficking. In the 2018 TIP report, the State Department again issued a waiver for Cuba allowing it to remain on the Tier 2 Watch List for the fourth consecutive year. Such a waiver, however, is only permitted for two years. After the third year, the country must either go up to Tier 2 or down to Tier 3. The State Department initially upgraded Cuba from Tier 3 to Tier 2 Watch List status in its 2015 TIP report because of the country's progress in addressing and prosecuting sex trafficking, including the provision of services to sex-trafficking victims, and its continued efforts to address sex tourism and the demand for commercial sex. In its 2016 TIP report, the State Department maintained that Cuba remained on the Tier 2 Watch List for the second consecutive year because the country did not improve antitrafficking efforts compared to 2015. Nevertheless, the 2016 report noted that the Cuban government continued efforts to address sex trafficking, including prosecution and conviction, and the provision of services to victims. The State Department noted that the Cuban government released a report on its antitrafficking efforts in October 2015; that multiple government ministries were engaged in antitrafficking efforts; and that the government funded child protection centers and guidance centers for women and families, which served crime victims, including trafficking victims. However, the report also noted that the Cuban government did not prohibit forced labor, report efforts to prevent forced labor, or recognize forced labor as a possible issue affecting Cubans in medical missions abroad. In its 2017 TIP report, the State Department maintained that the Cuban government demonstrated significant efforts during the reporting period by prosecuting and convicting sex traffickers, providing services to sex trafficking victims, releasing a written report on its antitrafficking efforts, and coordinating antitrafficking efforts across government ministries. The State Department noted, however, that the Cuban penal code did not criminalize all forms of trafficking and did not prohibit forced labor, report efforts to prevent forced labor domestically, or recognize forced labor as a possible issue affecting Cubans working in medical missions abroad. In its 2018 TIP report, the State Department noted the Cuban government's significant efforts of prosecuting and convicting more traffickers, creating a directorate to provide specialized attention to child victims of crime and violence, including trafficking, and publishing its antitrafficking plan for 2017-2020. The State Department also noted, however, that the Cuban government did not demonstrate increasing efforts compared to the previous reporting period. It maintained that the government did not criminalize most forms of forced labor or sex trafficking for children ages 16 or 17, and did not report providing specialized services to identified victims. The State Department also made several recommendations for Cuba to improve its antitrafficking efforts, including the enactment of a comprehensive antitrafficking law that prohibits and sufficiently punishes all forms of trafficking. Engagement between U.S. and Cuban officials on antitrafficking issues has increased in recent years. In January 2017, U.S. officials met with Cuban counterparts in their fourth such exchange to discuss bilateral efforts to address human trafficking. Subsequently, on January 16, 2017, the United States and Cuba signed a broad memorandum of understanding on law enforcement cooperation in which the two countries stated their intention to collaborate on the prevention, interdiction, monitoring, and prosecution of transnational or serious crimes, including trafficking in persons. In February 2018, the State Department and the Department of Homeland Security hosted meetings in Washington, DC, with Cuban officials on efforts to combat trafficking in persons. Economic Conditions Cuba's economy continues to be largely state-controlled, with the government owning most means of production and employing a majority of the workforce. Key sectors of the economy that generate foreign exchange include the export of professional services (largely medical personnel to Venezuela); tourism, which has grown significantly since the mid-1990s, with an estimated 4.75 million tourists visiting Cuba in 2018; nickel mining, with the Canadian mining company Sherritt International involved in a joint investment project; and a biotechnology and pharmaceutical sector that supplies the domestic health care system and has fostered a significant export industry. Remittances from relatives living abroad, especially from the United States, also have become an important source of hard currency, amounting to some $3 billion in 2016. The once-dominant sugar industry has declined significantly over the past 20 years. Because of drought, damage from Hurricane Irma, and subsequent months of heavy rains, the 2017-2018 sugar harvest dropped by almost 44% to just over 1 million metric tons (MT), compared to 1.8 million MT the previous year. The outlook for the 2018-2019 harvest is 1.5 million MT, almost a 50% improvement; for comparison, in 1990, Cuba produced 8.4 million MT of sugar. For more than 15 years, Cuba has depended heavily on Venezuela for its oil needs. In 2000, the two countries signed a preferential oil agreement (essentially an oil-for-medical-personnel barter arrangement) that until recently provided Cuba with some 90,000-100,000 barrels of oil per day, about two-thirds of its consumption. Cuba's goal of becoming a net oil exporter with the development of its offshore deepwater oil reserves was set back in 2012, when the drilling of three exploratory oil wells was unsuccessful. This setback, combined with Venezuela's economic difficulties, has raised Cuban concerns about the security of the support received from Venezuela. Since 2015, Venezuela has cut the amount of oil that it sends to Cuba, and Cuba has increasingly turned to other suppliers for its oil needs, including Russia and Algeria. In the summer of 2018, from June through August, Venezuela reportedly resumed exporting a key crude oil to Venezuela that it had suspended in 2017 due to needs in Venezuela. The government of Raúl Castro implemented a number of economic policy changes, but economists were disappointed that more far-reaching reforms were not implemented. At the PCC's seventh party congress, held in April 2016, Raúl Castro reasserted that Cuba would move forward with updating its economic model "without haste, but without pause." A number of Cuba's economists have pressed the government to enact more far-reaching reforms and embrace competition for key parts of the economy and state-run enterprises. These economists criticize the government's continued reliance on central planning and its monopoly on foreign trade. Economic Growth. Cuba experienced severe economic contraction from 1990 to 1993, with an estimated decline in gross domestic product ranging from 35% to 50% when the Soviet Union collapsed and Russian financial assistance to Cuba practically ended. Growth resumed after that time, as Cuba moved forward with some limited market-oriented economic reforms, and growth was especially strong in the 2004-2007 period, averaging more than 9% annually. The economy benefitted from the growth of the tourism, nickel, and oil sectors and from support from Venezuela and China in terms of investment commitments and credit lines. The economy was hard-hit by several hurricanes and storms in 2008 and the global financial crisis in 2009, with the government forced to implement austerity measures that slowed growth. From 2010 to 2015, Cuba's economy experienced low to moderate economic growth, ranging from a low of 1% in 2014 to a high of 4.4% in 2015. In 2016, however, the economy grew by just 0.5% because of lower export earnings, reduced support from Venezuela, and austerity measures (preliminary Cuban government estimates had forecast an economic contraction of 0.9%, but this was revised to 0.5% growth in January 2018). In September 2017, Hurricane Irma struck in September, killing 10 people in Cuba and affecting more than 2 million people along 300 miles of the northern coast. The storm damaged infrastructure (electric power, water and sanitation systems), the agricultural sector, and tourism facilities, and it flooded low-lying areas of Havana. Nevertheless, the Cuban government reports that the economy grew 1.8% in 2017 and an estimated 1.2% in 2018, and it predicts 1.5% growth in 2019. President Díaz-Canel has said that austerity measures begun in 2016 will continue in 2019. The economy has been hurt by reduced support from Venezuela over the past several years and the unexpected December 2018 ending of Cuba's program sending medical professionals to Brazil, which had provided Cuba with some $400 million a year. The Economist Intelligence Unit (EIU) predicts economic growth will slow to 0.8% in 2019 and 0.4% in 2020, as tourism grows more moderately because of a slowdown in arrivals from the United States. According to the EIU, the biggest risk to Cuba's economic performance is the complete elimination of support from Venezuela. Private Sector. The Cuban government employs a majority of the labor force, but the government has been allowing more private-sector activities. In 2010, the government opened up a wide range of activities for self-employment and small businesses to almost 200 categories of work allowed; the number of self-employed or cuentapropistas rose from 144,000 in 2009 to about 588,000 as of October 2018. Analysts contend that the government needs to do more to aid the development of the private sector, including an expansion of authorized activities to include more white-collar occupations and state support for credit to support small businesses. Beginning in mid-2017, the government took several steps to restrict private-sector development. In August 2017, it stopped issuing new licenses for 27 private-sector occupations, including for private restaurants and for renting private residences; closed a fast-growing cooperative that had provided accounting and business consultancy services; and put restrictions on construction cooperatives. The government maintains that it took the actions to "perfect" the functioning of the private sector and curb illicit activities, such as the sale of stolen state property, tax evasion, and labor violations. In February 2018, press reports provided details about draft government regulations being considered that would increase state control over the private sector, limit business licenses to a single activity, reduce and consolidate the current 200 categories of work to 123 categories, and limit the size of private restaurants. The regulations ultimately were released in July 2018 and were to take effect in December, at the same time the government would resume issuing licenses for business activities that had been frozen since August 2017. The objectives of the new regulations were to increase taxation oversight of the private sector and to control the concentration of wealth and rising inequality, but many observers believed the regulations were aimed at stifling private-sector growth because of the government's concerns regarding that sector's independence from the government. Just two days before the regulations were to go into effect, President Díaz-Canel did an about-face and announced on December 5, 2018, that some aspects of the regulations viewed as especially egregious by the private sector would be eliminated or eased. Most significantly, individuals would not be limited to one licensed activity; restaurants, bars, and cafeterias would not be not subject to a limit of 50 seats; and the requirements for maintaining a minimum balance in bank accounts would be reduced from the equivalent of three months of tax payments to two months and would apply to just 6 of the 123 categories of employment. Analysts view the backtracking as an indication that President Díaz-Canel is willing to make policy changes in response to public opinion and as a sign that the government does not want to shrink the private sector. Currency Unification/Reform. A major challenge for the development of the private sector is the lack of money in circulation. Most Cubans do not make enough money to support the development of small businesses. Cuba has two official currencies—Cuban pesos (CUPs) and Cuban convertible pesos (CUCs); for personal transaction, the exchange rate for the two currencies is CUP24/CUC1. Most people are paid CUPs, and the minimum monthly wage in Cuba is 225 CUPs (just over $9), although this minimum wage does not apply to the nonstate sector. According to the State Department, even with other government support such as free education, housing, some food, and subsidized medical care, the average monthly wage of 700 CUPs ($29) does not provide for a reasonable standard of living. For increasing amounts of consumer goods, CUCs are used. Cubans with access to foreign remittances or who work in private-sector activities catering to tourists and foreign diplomats have fared better than those serving the Cuban market. The Cuban government announced in 2013 that it would end its dual-currency system and move toward monetary unification, but the action has been delayed for several years. Currency reform is ultimately expected to lead to productivity gains and improve the business climate, but an adjustment would create winners and losers. At the PCC's April 2016 Congress, Raúl Castro called for moving toward a single currency as soon as possible to resolve economic distortions. In January 2018, EU officials visiting Cuba offered technical assistance regarding currency reform and unification. Some economists assert, however, that Cuba is unlikely to go forward with currency reform this year because of the country's deep structural economic problems and because of the ongoing constitutional reform process. Agricultural Sector. A reform effort under Raúl Castro focused on the agricultural sector, a vital issue because Cuba reportedly imports some 70%-80% of its food needs, according to the World Food Programme. In an effort to boost food production, the government turned over idle land to farmers and given farmers more control over how to use their land and what supplies to buy. Despite these and other efforts, overall food production has been significantly below targets. In addition, as noted above, Hurricane Irma caused damage to the agricultural sector, particularly sugar, in September 2017. As a result, in the first six months of 2018, overall food production reportedly decreased about 10% to 15% compared to the same period in 2017. Foreign Investment. The Cuban government adopted a new foreign investment law in 2014 with the goal of attracting increased levels of foreign capital to the country. The law cuts taxes on profits by half, to 15%, and exempts companies from paying taxes for the first eight years of operation. The law also eliminates employment or labor taxes, although companies still must hire labor through state-run companies, with agreed wages. A fast-track procedure for small projects reportedly streamlines the approval process, and the government agreed to improve the transparency and time of the approval process for larger investments. A Mariel Special Development Zone (ZED Mariel) was established in 2014 near the port of Mariel to attract foreign investment. To date, ZED Mariel has approved some 43 investment projects, which are at various stages of development. In November 2017, Cuba approved a project for Rimco (the exclusive dealer for Caterpillar in Puerto Rico, the U.S. Virgin Islands, and the Eastern Caribbean) to become the first U.S. company to be located in the ZED Mariel. Rimco plans to set up a warehouse and distribution center in 2018 to distribute Caterpillar equipment. In September 2018, the Roswell Park Comprehensive Cancer Center of Buffalo, NY, announced it was entering into a joint venture with Cuba's Center for Molecular Immunology focused on the development of cancer therapies; the joint venture will be located in the ZED Mariel. According to Cuba's Minister of Foreign Trade and Investment Rodrigo Malmierca, Cuba has signed more than 200 investment projects valued at $5.5 billion since it made changes to its investment law in 2014, with $1.5 billion of that in 2018. The actual amount invested reportedly is much less, with about $500 million annually. In November 2018, the Cuban government updated its wish list for foreign investment, which includes 525 projects representing potential investment of $11.6 billion in such high-priority areas as tourism, agriculture and food production, oil, the industrial sector, and biotechnology. Cuba's Foreign Relations During the Cold War, Cuba had extensive relations with, and support from, the Soviet Union, which provided billions of dollars in annual subsidies to sustain the Cuban economy. This subsidy system helped to fund an activist foreign policy and support for guerrilla movements and revolutionary governments abroad in Latin America and Africa. With an end to the Cold War, the dissolution of the Soviet Union, and the loss of Soviet financial support, Cuba was forced to abandon its revolutionary activities abroad. As its economy reeled from the loss of Soviet support, Cuba was forced to open up its economy and engage in economic relations with countries worldwide. In ensuing years, Cuba diversified its trading partners, although Venezuela under populist leftist President Hugo Chávez (1999-2013) became one of Cuba's most important partners, leading to Cuba's dependence on Venezuela for oil imports. In 2017, the leading sources of Cuba's imports in terms of value were Venezuela (18.1%, down from 40% in 2014), China (16.3%), and Spain (10.8%); the leading destinations of Cuban exports were Canada (19.4%), Venezuela (15.6%), China (5.2%), and Spain (8.6%). Russia. Relations with Russia, which had diminished significantly in the aftermath of the Cold War, have strengthened somewhat over the past several years. Cuban President Díaz-Canel visited Russia for three days beginning November 1, 2018, after which he visited North Korea, China, Vietnam, and Laos. Russia's interest in the broader Latin America and Caribbean region appeared to increase in response to U.S. actions taken in the aftermath of Russia's intervention in Georgia in 2008 and Russia's annexation of the Crimea region and military intervention in Ukraine in 2014. For many observers, one of Russia's main objectives in the Latin American and Caribbean region is to demonstrate that it is a global power that can operate in the U.S. neighborhood, or "backyard." Just before a 2014 trip to Cuba, Russian President Vladimir Putin signed into law an agreement writing off 90% of Cuba's $32 billion Soviet-era debt, with some $3.5 billion to be paid back by Cuba over a 10-year period that would fund Russian investment projects in Cuba. In the aftermath of Putin's trip, press reports claimed that Russia would reopen its signals intelligence facility at Lourdes, Cuba, which had closed in 2002, but President Putin denied that his government would reopen the facility. Trade relations between Russia and Cuba have not been significant, although they grew in 2017 because of new Russian oil exports to Cuba. According to Russian trade statistics, total trade between the two countries was valued at $290 million in 2017, an almost 17% increase over 2016. This represented less than 2% of Cuba's trade worldwide. Russia's imports from Cuba amounted to almost $14 million in 2017, led by pharmaceutical products and rum, while Russia's exports to Cuba amounted to almost $277 million, led by motor vehicles (and parts) and oil. Russian energy companies have been involved in oil exploration in Cuba. Gazprom was in a partnership with the Malaysian state oil company, Petronas, which conducted unsuccessful deepwater oil drilling off Cuba's western coast in 2012. The Russian oil company Zarubezhneft began drilling in Cuba's shallow coastal waters east of Havana in late 2012 but stopped work in 2013 because of disappointing results. In 2014, Russian energy companies Zarubezhneft and Rosneft signed an agreement with Cuba's state oil company Unión Cuba- Petróleo (CUPET) for the development of an offshore exploration block, and Rosneft agreed to cooperate with Cuba in studying ways to optimize existing production at mature fields. In 2017, Rosneft began to ship oil to Cuba, a result of Cuba's efforts to diversify its sources of foreign oil because of Venezuela's diminished capacity. Russian officials publicly welcomed the improvement in U.S.-Cuban relations under the Obama Administration, although some viewed the change in U.S. policy as setback for Russian overtures in the region. As U.S.-Cuban normalization talks were beginning in Havana in January 2015, a Russian intelligence ship docked in Havana. In October 2016, a Russian military official maintained that Russia was reconsidering reestablishing a military presence in Cuba (and Vietnam), although there was no indication that Cuba would be open to the return of the Russian military. The two countries signed a bilateral cooperation agreement in December 2016 for Russia's support to help Cuba modernize its defense sector until 2020. In June 2017, when President Trump announced a partial rollback of the U.S. policy of engagement with Cuba, Russia's foreign ministry criticized the president for resorting to "Cold War" rhetoric. Some reports indicate that as U.S. relations with Cuba have deteriorated over the past year, Russia has been attempting to further increase its ties to Cuba, with high-level meetings between Cuban and Russian officials and increased economic, military, and cultural engagement. In March 2018, the same Russian intelligence ship noted above again stopped in Havana. For Cuba, a deepening of relations with Russia could help economically, especially regarding oil, and also could serve as a counterbalance to the partial rollback of U.S. engagement policy by the Trump Administration. However, President Díaz-Canel's November 2018 trip to Russia reportedly did not yield significant results. Press reports indicate that Cuba received a $50 million credit line for purchases of Russian military weapons and spare parts and contracts valued at more than $260 million (some that already were in the pipeline) to modernize three power plants and a metal processing plant and upgrade Cuba's railway system. The U.S. Southern Command's February 2018 posture statement presented to Congress expressed concern about Russia's increased role in the Western Hemisphere. It stated that Russia's expanded port and logistics access in Cuba (as well as Nicaragua and Venezuela) provide the country "with persistent, pernicious presence, including more frequent maritime intelligence collection and visible force projection in the Western Hemisphere." It stated that Russia's robust relationships with these three countries provide it "with a regional platform to target U.S. and partner nation facilities and assets, exert negative influence over undemocratic governments, and employ strategic options in the event of a global contingency." Along these lines, there has been concern in Congress about the role of Russia in Latin America, including in Cuba. The conference report to the John S. McCain National Defense Authorization Act for FY2019, P.L. 115-232 ( H.R. 5515 ), requires the Defense Intelligence Agency to submit a report on security cooperation between Russia, and Cuba, Nicaragua, and Venezuela, including a description of any military or intelligence infrastructure, facilities, and assets developed by Russia in the three countries and any associated agreements or understanding between Russia and the three countries. China. During the Cold War, Cuba and China did not have close relations because of Sino-Soviet tensions, but bilateral relations with China have grown closer over the past 15 years, including a notable increase in trade. Since 2004, Chinese leaders have made a series of visits to Cuba: then-President Hu Jintao visited in 2004 and 2008; President Xi Jinping visited in 2014 (and when he was vice president in 2011); and, most recently, Chinese Premier Li Keqiang visited in 2016, reportedly signing some 30 economic cooperation agreements. Raúl Castro also visited China in 2008 and 2012; during the 2012 trip, he signed cooperation agreements focusing on trade and investment issues. In January 2018, Raúl Castro met with Song Tong, a special envoy of President Xi Jinping, with discussion reportedly focused on strengthening ties. Castro noted that the Cuban Communist Party (PCC) would like to promote exchanges with its Chinese counterpart in an effort to help upgrade Cuba's social and economic model. More recently, as noted above, Cuban President Díaz-Canel visited China in early November 2018. According to Chinese state media, President Xi called for a long-term plan to promote the development of China-Cuba ties and said that China would welcome Cuba's participation in the Belt and Road Initiative, which is focused on infrastructure development around the world. President Xi called on both countries to enhance cooperation on trade, energy, agriculture, tourism, and biopharmaceutical manufacturing. While Cuba's relationship with China undoubtedly has an ideological component since both are the among the world's remaining communist regimes, economic linkages and cooperation appear to be the most significant component of bilateral relations. According to Cuban trade statistics, total Cuba-China trade in 2017 was valued at almost $2 billion (accounting for 16.1% of Cuba's trade worldwide), with Cuba exporting $364 million to China and importing almost $1.7 billion. This was a 21% drop from 2016, when total Cuba-China trade almost reached $2.6 billion, and an almost 30% drop in Cuba's imports from China in 2016. The fall in imports from China in reflects Cuba's difficult economic situation as Venezuelan support has diminished. In response to a cash crunch, the Cuban government has cut imports and reduced the use of fuel and electricity. In contrast to declining imports from China, Cuba's exports to China increased by about 42% in 2017, led by increased exports of seafood, nickel, and to a lesser extent cigars. According to Chinese trade statistics, the lion's share of Cuba's exports to China in 2017 were sugar (53%), nickel (35%), and fish (almost 9%), whereas Cuba's imports from China included electrical machinery and equipment (22%), motor vehicles (17%), machinery and appliances (15%), and a wide variety of other industrial and consumer products. China reportedly had been reluctant to invest in Cuba because of the uninviting business environment, but that has begun to change over the past several years. In 2015, the Chinese cellphone company Huawei reached an agreement with the Cuban telecommunications company ETECSA to set up Wi-Fi hotspots at public locations, and is helping to wire homes. In 2016, the Chinese company Haier set up a plant assembling laptops and tablets in Cuba. Over the past two years, Chinese financing has been supporting the modernization of a port in Santiago Cuba. Other planned Chinese investment projects reportedly include pharmaceuticals as well as the tourism sector involving two hotels and a golf course. European Union. The European Union (EU) and Cuba held seven rounds of talks from 2014 to 2016 on a Political Dialogue and Cooperation Agreement covering political, trade, and development issues; ultimately, a cooperation agreement was reached and initialed in Havana in March 2016 and the European Council signed the agreement in December 2016. The agreement was submitted to the European Parliament, which overwhelmingly endorsed the agreement in early July 2017, welcoming it as a framework for relations and emphasizing the importance of the human rights dialogue between the EU and Cuba. The agreement will enter into force in full after it has been ratified in all EU member states, but the provisional application of the agreement began in November 2017. The new cooperation agreement replaces the EU's 1996 Common Position on Cuba, which stated that the objective of EU relations with Cuba included encouraging "a process of transition to pluralist democracy and respect for human rights and fundamental freedoms." The position also had stipulated that full EU economic cooperation with Cuba would depend upon improvements in human rights and political freedom. Nevertheless, the new agreement states that a human rights dialogue will be established within the framework of the overall political dialogue and has numerous provisions related to democracy, human rights, and good governance. In October 2018, the EU and Cuba held their first human rights dialogue under the agreement, with the meeting addressing issues related to civil and political rights, economic, social and cultural rights, and multilateral cooperation. As noted above, EU officials visiting Cuba in January 2018 offered to provide Cuba with technical assistance regarding the country's long-awaited currency unification (see " Economic Conditions ," above). Venezuela and Other Latin American Countries. For more than 15 years, Venezuela has been a significant source of support for Cuba. Dating back to 2000 under populist President Hugo Chávez, Venezuela began providing subsidized oil and investment to Cuba. For its part, Cuba has sent thousands of personnel to Venezuela. Cuba has been concerned about the future of Venezuelan financial support, however, as a result of Chávez's death in 2013 and Venezuela's mounting economic and political challenges since 2014 due to the rapid decline in oil prices and the unpopularity of the increasingly authoritarian regime of President Nicolás Maduro. As noted above, oil imports from Venezuela have declined, leading to Cuba's imposition of austerity measures and contributing to economic contraction. Estimates of the number of Cuban personnel in Venezuela vary, but a 2014 Brookings study reported that "by most accounts there are 40,000 Cuban professionals in Venezuela," with 75% of those healthcare workers. The roughly 30,000 healthcare personnel include doctors and nurses, while the balance of Cuban personnel in Venezuela includes teachers, sports instructors, military advisers, and intelligence operatives. According to the Brookings study, various sources estimate that the number of Cuban military and intelligence advisers in Venezuela range from hundreds to thousands, coordinated by Cuba's military attaché in Venezuela. The extent to which the level of Cuban personnel in Venezuela has declined because of the drop in Venezuelan oil exports to Cuba and Venezuela's deepening economic crisis is uncertain, but Cuba may have withdrawn some personnel. Cuba also is engaged in Latin America beyond its close relations with Venezuela. Cuba is a member of the Bolivarian Alliance for the Americas, a Venezuelan-led integration and cooperation scheme founded in 2004 that has been weakened by Venezuela's economic and political decline. For several years, Cuba also hosted peace talks between the Colombian government and the Revolutionary Armed Forces of Colombia, which culminated in a peace agreement in 2016. Brazil was a major investor in the development of the port of Mariel, west of Havana, from 2009 to 2014, although in 2018 Cuba missed payments to Brazil's development bank on loans for the project. In 2013, Cuba began deploying thousands of doctors to rural Brazil in a program known as Mais Médicos , with Cuba earning hard currency for supplying the medical personnel. Even before his inauguration in January 2019, Brazil's new right-wing president, Jair Bolsonaro, espoused a more confrontational policy approach toward Cuba by warning in November 2018 that he may break diplomatic relations with Cuba and abolish the medical assistance program. Bolsonaro strongly criticized the medical program, maintaining that Cuban doctors should be able to receive 100% of the money Brazil pays Cuba for them (instead of the 25% they receive) and should be able to bring their families with them to Brazil. Cuba responding by ending the program and bringing its more than 8,000 medical personnel home by late December 2018. Although Bolsonaro and other critics have labeled the medical workers as "slave labor," others contend that the Cuban medical personnel understand the conditions they will be working in and sign contracts for the work. Cuba has a long history of providing medical personnel overseas. International and Regional Organizations. Cuba is an active participant in international forums, including the United Nations (U.N.) and the controversial United Nations Human Rights Council. Cuba also has received support over the years from the United Nations Development Programme and the United Nations Educational, Scientific, and Cultural Organization, both of which have offices in Havana. Cuba is also a member of the U.N. Economic Commission for Latin America and the Caribbean (ECLAC, also known by its Spanish acronym, CEPAL), one of the five regional commissions of the U.N., and hosted ECLAC's 37 th session in May 2018. U.N. Secretary-General António Guterres attended the opening of the conference. ECLAC's Executive Secretary Alicia Bárcena reaffirmed the organization's commitment to accompanying Cuba in its efforts toward achieving sustainable development. Bárcena referred to the U.S. embargo on Cuba as costing Cuba more than $130 billion at current prices, the same estimate as the Cuban government. Since 1991, the U.N. General Assembly (UNGA) has approved a resolution annually criticizing the U.S. embargo and urging the United States to lift it (see text box above). Among other international organizations, Cuba was a founding member of the World Trade Organization, but it is not a member of the International Monetary Fund, the World Bank, or the Inter-American Development Bank. In 2016, Cuba signed a memorandum of understanding with the Development Bank of Latin America (CAF) with the objective of supporting technical cooperation programs for Cuba's social and economic development and laying the foundation for Cuba's future membership in the CAF; the CAF's current membership includes 17 Latin American and Caribbean countries as well as Spain and Portugal. Cuba was excluded from participation in the Organization of American States (OAS) in 1962 because of its identification with Marxism-Leninism, but in 2009, the OAS overturned that policy in a move that eventually could lead to Cuba's reentry into the regional organization in accordance with the practices, purposes, and principles of the OAS. Although the Cuban government welcomed the OAS vote to overturn the 1962 resolution suspending Cuba's OAS participation, it asserted that it would not return to the OAS. In February 2017, Cuba denied OAS Secretary-General Luis Almagro entry into the country to accept a democracy award in honor of the late democracy activist Oswaldo Payá. Cuba became a full member of the Rio Group of Latin American and Caribbean nations in November 2008 and a member of the succeeding Community of Latin American and Caribbean States (CELAC) officially established in December 2011 to boost regional cooperation, but without the participation of the United States or Canada. In 2013, Cuba assumed the presidency of the organization for one year. Cuba also hosted the group's second summit in 2014, which was attended by leaders from across the hemisphere as well as by then-U.N. Secretary-General Ban Ki-moon, who reportedly raised human rights issues with Cuban officials. U.S. Policy Toward Cuba Background on U.S.-Cuban Relations94 In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis, in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantanamo Bay, Cuba, and Panama; and the 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban-American group Brothers to the Rescue, which resulted in the deaths of four U.S. crew members. Beginning in the early 1960s, U.S. policy toward Cuba consisted largely of isolating the island nation through comprehensive economic sanctions, including an embargo on trade and financial transactions. President Kennedy proclaimed an embargo on trade between the United States and Cuba in February 1962, citing Section 620(a) of the Foreign Assistance Act of 1961 (FAA), which authorizes the President "to establish and maintain a total embargo upon all trade between the United States and Cuba." At the same time, the Department of the Treasury issued the Cuban Import Regulations to deny the importation into the United States of all goods imported from or through Cuba. The authority for the embargo was later expanded in March 1962 to include the Trading with the Enemy Act (TWEA). In July 1963, the Department of the Treasury revoked the Cuban Import Regulations and replaced them with the more comprehensive Cuban Assets Control Regulations (CACR)—31 C.F.R. Part 515—under the authority of TWEA and Section 620(a) of the FAA. The CACR, which include a prohibition on most financial transactions with Cuba and a freeze of Cuban government assets in the United States, remain the main body of Cuba embargo regulations and have been amended many times over the years to reflect changes in policy. They are administered by the Department of the Treasury's Office of Foreign Assets Control (OFAC) and prohibit financial transactions as well as trade transactions with Cuba. The CACR also require that all exports to Cuba be licensed by the Department of Commerce, Bureau of Industry and Security (BIS), under the provisions of the Export Administration Act of 1979, as amended ( P.L. 96-72 ; 50 U.S.C. Appendix 2405(j)). The Export Administration Regulations (EAR) are found at 15 C.F.R. Sections 730-774. Congress subsequently strengthened sanctions on Cuba with enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX). Among its provisions, the CDA prohibits U.S. foreign subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any seaborne vessel to load or unload freight if it has been involved in trade with Cuba within the previous 180 days unless licensed by the Department of the Treasury. (In October 2016, OFAC issued a general license for vessels involved in trade with Cuba.) The LIBERTAD Act, enacted in the aftermath of Cuba's shooting down two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Most significantly, the act codified the Cuban embargo as permanent law, including all restrictions imposed by the executive branch under the CACR. This provision is noteworthy because of its long-lasting effect on U.S. policy options toward Cuba. The executive branch is prevented from lifting the economic embargo without congressional concurrence through legislation until certain democratic conditions set forth in the law are met, although the President retains broad authority to amend the regulations therein. Another significant sanction in Title III of the law holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Acting under provisions of the law, however, all Administrations (including the Trump Administration) have suspended the implementation of Title III at six-month intervals, most recently in June 2018 (effective August 1, 2018 through January 2019). In November 2018, National Security Adviser John Bolton maintained in a press interview that the Administration was exploring whether to continue to suspend Title III or to allow lawsuits to go forward. (For additional information, see section on " U.S. Property Claims ," below.) TSRA authorizes U.S. commercial agricultural exports to Cuba, but it also includes prohibitions on U.S. assistance and private financing and requires "payment of cash in advance" or third-country financing for the exports. The act also prohibits tourist travel to Cuba. In addition to these acts, Congress enacted numerous other provisions of law over the years that impose sanctions on Cuba, including restrictions on trade, foreign aid, and support from international financial institutions. The State Department also designated the government of Cuba as a state sponsor of international terrorism in 1982 under Section 6(j) of the Export Administration Act and other laws because of the country's alleged ties to international terrorism. Beyond sanctions, another component of U.S. policy has consisted of support measures for the Cuban people. This support includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the CDA, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. The enactment of TSRA by the 106 th Congress also led to the United States becoming one of Cuba's largest commercial suppliers of agricultural products. Authorization for purposeful travel to Cuba and cash remittances to Cuba has constituted an important means to support the Cuban people, although significant congressional debate has occurred over these issues for many years. Despite the poor state of U.S.-Cuban relations, several examples of bilateral cooperation took place over the years in areas of shared national interest. Three areas that stand out are alien migrant interdiction (with migration accords negotiated in 1994 and 1995), counternarcotics cooperation (with increased cooperation dating back to 1999), and cooperation on oil spill preparedness and prevention (since 2011). Obama Administration Policy During its first six years, the Obama Administration continued the dual-track policy approach toward Cuba that had been in place for many years. It maintained U.S. economic sanctions and continued measures to support the Cuban people, such as U.S. government-sponsored radio and television broadcasting and funding for democracy and human rights projects. At the same time, however, the Obama Administration instituted some changes in policy that advanced support for the Cuban people. In April 2009, at the Summit of the Americas held in Trinidad and Tobago, President Obama fulfilled a campaign pledge by lifting all restrictions on family travel and remittances (for more details, see " U.S. Travel to Cuba ," below). The President said that "the United States seeks a new beginning with Cuba." While recognizing that it would take time to "overcome decades of mistrust," the President said "there are critical steps we can take toward a new day." He stated that he was prepared to have his Administration "engage with the Cuban government on a wide range of issues—from drugs, migration, and economic issues, to human rights, free speech, and democratic reform." In 2011, the Obama Administration introduced new measures to further reach out to the Cuban people through increased purposeful travel (including people-to-people educational travel) and an easing of restrictions on nonfamily remittances. Overall, however, engagement with the Cuban government during the Administration's first six years was stymied because of Cuba's December 2009 imprisonment of an American subcontractor, Alan Gross, who had been working on democracy projects funded by the U.S. Agency for International Development. Securing the release of Alan Gross became a top U.S. priority, and the State Department maintained that it was using every appropriate channel to press for his release. Shift Toward Normalizing Relations On December 17, 2014, President Obama announced major developments in U.S.-Cuban relations and unveiled a new policy approach toward Cuba. First, he announced that the Cuban government had released Alan Gross on humanitarian grounds after five years of imprisonment. He also announced that, in a separate action, the Cuban government released an individual imprisoned since 1995 who had been an important U.S. intelligence asset in Cuba in exchange for three Cuban intelligence agents who had been imprisoned in the United States since 1998. In the aftermath of these releases, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba toward a policy of engagement. The President said that his Administration would "end an outdated approach that, for decades, has failed to advance our interests." He maintained that the United States would continue to raise concerns about democracy and human rights in Cuba but stated that "we can do more to support the Cuban people and promote our values through engagement." President Obama outlined three major steps to move toward normalization: (1) a review of Cuba's designation by the Department of State as a state sponsor of international terrorism; (2) the reestablishment of diplomatic relations with Cuba; and (3) an increase in travel, commerce, and the flow of information to and from Cuba. Rescission of Cuba's Designation as a State Sponsor of International Terrorism Cuba was first added to the so-called terrorism list in 1982 pursuant to Section 6(j) of the Export Administration Act of 1979 and other laws because of its alleged ties to international terrorism and support for terrorist groups in Latin America. President Obama directed the State Department to review Cuba's designation as a state sponsor of terrorism and stated that "at a time when we are focused on threats from al Qaeda to ISIL, a nation that meets our conditions and renounces the use of terrorism should not face this sanction." Following the State Department's review, the President transmitted a report to Congress in April 2015 justifying the rescission, which maintained that Cuba had provided assurances that it would not support acts of international terrorism. No resolutions of disapproval were introduced in Congress to block the rescission, which paved the way for then-Secretary of State John Kerry to rescind Cuba's designation on May 29, 2015, 45 days after the submission of the report to Congress. Subsequently, to reflect the rescission of Cuba's designation as a state sponsor of terrorism in U.S. regulations, the Department of the Treasury's OFAC amended the Cuban Assets Control Regulations (CACR) in June 2015 and the Department of Commerce's BIS amended the Export Administration Regulations (EAR) in July 2015. Reestablishment of Diplomatic Relations and Advancement of Engagement U.S.-Cuban diplomatic relations were severed by the Eisenhower Administration in January 1961 in response to the Cuban government's demand to decrease the number of U.S. Embassy staff within 48 hours. In 1977, under the Carter Administration, both countries established Interests Sections in each other's capitals to represent each country's interests. Beginning in January 2015, the United States and Cuba conducted four rounds of talks on reestablishing relations. Ultimately, the United States and Cuba reestablished diplomatic relations in July 2015 and embassies were reopened in Havana and Washington. With the restoration of diplomatic relations, government-to-government engagement increased significantly under the Obama Administration. U.S. and Cuban officials held five Bilateral Commission meetings to coordinate efforts to advance the normalization process. Officials negotiated numerous bilateral agreements after the restoration of relations, including those in the following areas: marine protected areas (November 2015); environmental cooperation on range of issues (November 2015); direct mail service (December 2015); civil aviation (February 2016); maritime issues related to hydrography and maritime navigation (February 2016); agriculture (March 2016); health cooperation (June 2016); counternarcotics cooperation (July 2016); federal air marshals (September 2016); cancer research (October 2016); seismology (December 2016); meteorology (December 2016); wildlife conservation (December 2016); animal and plant health (January 2017); oil spill preparedness and response (January 2017); law enforcement cooperation (January 2017); and search and rescue (January 2017). The United States and Cuba also signed a bilateral treaty in January 2017 delimiting their maritime boundary in the eastern Gulf of Mexico. Bilateral dialogues were held on all of these issues as well as on other issues including counterterrorism, claims (U.S. property, unsatisfied court judgments, and U.S. government claims), economic and regulatory issues, human rights, renewable energy and efficiency, trafficking in persons, and migration. In March 2016, President Obama traveled to Cuba, the first presidential visit since 1928, with the goals of building on progress toward normalizing relations and expressing support for human rights. In a press conference with Raúl Castro, President Obama said that the United States would "continue to speak up on behalf of democracy, including the right of the Cuban people to decide their own future." He also spoke out forcefully for advancing human rights during his televised speech to the Cuban nation. He stated his belief that citizens should be free to speak their minds without fear and that the rule of law should not include arbitrary detentions. In October 2016, President Obama issued a presidential policy directive on the normalization of relations with Cuba. The directive set forth the Administration's vision for normalization of relations and laid out six medium-term objectives: (1) government-to-government interaction; (2) engagement and connectivity; (3) expanded commerce; (4) economic reform; (5) respect for universal human rights, fundamental freedoms, and democratic values; and (6) Cuba's integration into international and regional systems. The directive also outlined the roles and responsibilities for various U.S. departments and agencies to move the normalization process forward. It noted that the Administration would seek to build support in Congress to lift the embargo and other statutory provisions constraining efforts to normalize economic relations with Cuba. The directive can be viewed as an attempt to keep up the momentum toward normalizing relations in the next Administration and to protect the changes that have been made to date in U.S. policy toward Cuba. (As noted below, however, President Trump issued a national security presidential memorandum on June 16, 2017, that superseded and replaced the October 2016 policy directive.) Increase in Travel, Commerce, and the Flow of Information The Obama Administration's third step of increasing travel, commerce, and the flow of information to and from Cuba required amendments to U.S. regulations—the CACR and EAR—administered, respectively, by the Department of the Treasury's OFAC and the Commerce Department's BIS. To implement the President's new policy, the two agencies issued five rounds of amendments to the CACR and EAR in January and September 2015 and in January, March, and October 2016. The Treasury and Commerce Department amendments to the regulations eased restrictions on travel, remittances, trade, telecommunications, and banking and financial services. They also authorized certain U.S. companies or other entities to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. These entities include news bureaus, exporters of authorized goods to Cuba, entities providing mail or parcel transmission services, telecommunication or internet-based service providers, entities organizing or conducting certain educational activities, religious organizations, and carrier and travel service providers. (For more on the regulatory changes, see " U.S. Travel to Cuba " and " U.S. Exports and Sanctions ," below.) Such changes fall within the scope of the President's discretionary licensing authority to make changes to the embargo regulations. When President Obama unveiled his policy shift, however, he acknowledged that he did not have the authority to lift the embargo because it was codified in permanent law (Section 102(h) of the LIBERTAD Act). As noted above, the LIBERTAD Act ties the lifting of the embargo to conditions in Cuba (including that a democratically elected government is in place). Lifting the overall economic embargo would require amending or repealing the LIBERTAD Act as well as other statutes that have provisions impeding normal economic relations with Cuba, such as the CDA and TSRA. Trump Administration Policy During the electoral campaign, then-candidate Trump said he would cancel or reverse President Obama's policy on Cuba unless Cuba took action to improve political and religious freedom and free political prisoners. After Fidel Castro's death in November 2016, then-President-elect Trump issued a statement referring to Castro as a "brutal dictator who oppressed his own people for nearly six decades." This statement was followed by a longer message maintaining that "If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate [the] deal." In February 2017, the White House maintained that the Trump Administration was conducting a full review of U.S. policy toward Cuba and that human rights would be at the forefront of those policy discussions. In May 2017, then-Acting Assistant Secretary of State for Western Hemisphere Affairs Francisco Palmieri emphasized that "one of the areas that is going to be a high priority is ensuring that Cuba makes more substantive progress toward a greater respect for human rights inside the country." On May 20, 2017, President Trump issued a statement to the Cuban American community and the people of Cuba in celebrating the anniversary of Cuban independence. That date is in commemoration of Cuba's independence from the United States in 1902 in the aftermath of the Spanish-American War in 1898, but is not celebrated in Cuba because of the continued U.S. intervention in Cuba under the Platt Amendment until its repeal in 1935 (see " Brief Historical Background " above). In the strongly worded statement, President Trump said, "The Cuban people deserve a government that peacefully upholds democratic values, economic liberties, religious freedoms, and human rights, and my Administration is committed to achieving that vision." Cuba's state television published an "official note" describing the statement as "controversial and ridiculous." Partial Rollback of Engagement and Increased Sanctions President Trump unveiled his Administration's policy on Cuba on June 16, 2017, which partially rolls back some of the Obama Administration's efforts to normalize relations with Cuba. President Trump set forth his Administration's policy in a speech in Miami, FL, where he signed a national security presidential memorandum (NSPM) on Cuba replacing President Obama's October 2016 presidential policy directive (discussed above), which had laid out objectives for the normalization process. The new policy leaves most of the Obama-era policy changes in place, including the reestablishment of diplomatic relations and a variety of eased sanctions to increase travel and commerce with Cuba. The new policy also keeps in place the Obama Administration's action ending the so-called wet foot/dry foot policy toward Cuban migrants, which, according to the NSPM, had "encouraged untold thousands of Cuban nationals to risk their lives to travel unlawfully to the United States." The most significant policy changes set forth in President Trump's NSPM included (1) restrictions on financial transactions with companies controlled by the Cuban military, intelligence, or security services or personnel and (2) the elimination of individual people-to-people travel. President Trump's memorandum directed the heads of departments (Treasury and Commerce, in coordination with the State Department) to initiate a process within 30 days to adjust current regulations. On November 8, 2017, the Treasury and Commerce Departments issued amended regulations (effective November 9) to implement the new policy, and, as discussed below, the State Department took complementary action in November 2017 and November 2018. On November 1, 2018, National Security Adviser John Bolton made a speech in Miami, FL, strongly criticizing the Cuban government on human rights and stating that that "we will only engage with a Cuban government that is willing to undertake necessary and tangible reforms—a government that respects the interests of the Cuban people." Bolton's speech was full of anti-communist rhetoric reminiscent of the Cold War era. Bolton referred to Cuba, Venezuela, and Nicaragua as a "troika of tyranny" and the "cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere." He referred to the three countries' leaders as "three stooges of socialism" and as "clownish pitiful figures." In a press interview before the speech, Bolton also maintained that the Administration was considering whether to continue to suspend Title III of the LIBERTAD Act to allow lawsuits in U.S. federal court against those "trafficking" in confiscated property in Cuba, an action that would significantly ratchet up U.S. sanctions on Cuba; since the enactment of the LIBERTAD Act in 1996, all Administrations have suspended, at six month intervals, the right to file such lawsuits. (For more on Title III, see " U.S. Property Claims ," below.) Restrictions on Transactions with the Cuban Military. Pursuant to the NSPM, the State Department was tasked with identifying entities controlled by the Cuban military, intelligence, or security services or personnel and publishing a list of those entities with which direct financial transactions would disproportionately benefit those services or personnel at the expense of the Cuban people or private enterprise in Cuba. The NSPM specifically identified the Grupo de Administración Empresarial S.A . (GAESA), a holding company of the Cuban military involved in most sectors of the Cuban economy, particularly the tourism sector. The State Department issued a list of "restricted entities" in November 2017 and updated the list with additional entries in November 2018. Currently, there are 205 entities on the list, including 2 ministries, 5 holding companies (including GAESA) and 43 of their subentities (including the Mariel Special Development Zone), 99 hotels (with 28 in Havana), 2 tourist agencies, 5 marinas, 10 stores in Old Havana, and 39 entities serving the defense and security sectors. The Treasury Department forbids financial transactions with those entities, with certain exceptions, including transactions related to air or sea operations supporting permissible travel, cargo, or trade; the sale of agricultural and medical commodities; direct telecommunications or internet access for the Cuban people; and authorized remittances. The new prohibitions limit U.S. economic engagement with Cuba, particularly in travel-related transactions and potential investment opportunities. Restrictions on People-to-People Travel. With regard to people-to-people travel, the Department of the Treasury amended the CACR to require that people-to-people educational travel take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization. Individuals are no longer authorized to engage in such travel on their own. The Obama Administration had authorized such individual travel in March 2016, which, combined with the beginning of regular commercial flights and cruise ship service, led to an increase in Americans visiting Cuba. With the new Treasury Department regulations issued, the level of U.S. travel to Cuba has fallen. (Also see " U.S. Travel to Cuba ," below.) Cuban Government Reaction. As expected, the Cuban government's reaction to President Trump's June 2017 speech announcing Cuba policy changes was critical. Foreign Minister Bruno Rodríguez asserted that the speech "was a grotesque spectacle straight from the Cold War." Nevertheless, the Cuban government also reiterated its willingness to continue a respectful and cooperative dialogue on issues of mutual interest and the negotiation of outstanding issues, although it maintained that Cuba would not make concessions to its sovereignty and independence. At a meeting of Cuba's National Assembly in July 2017, then-Cuban President Raúl Castro criticized the Trump Administration's new policy toward Cuba as a setback to bilateral relations and reaffirmed that any strategy with the goal of destroying the Cuban revolution would fail. Nevertheless, Castro also reiterated that Cuba has the will to continue negotiating outstanding bilateral issues with the United States. He maintained that "Cuba and the United States can cooperate and live side by side, respecting differences and promoting all that can benefit both countries and peoples," but he also asserted that no one should expect Cuba to make concessions inherent to its sovereignty and independence. Continued Focus on Human Rights When President Trump announced his Cuba policy, he asserted that he was "canceling the last administration's policy change with Cuba," which he labeled as "a terrible and misguided deal with the Castro regime." The President maintained that "the outcome of the last administration's executive action has been only more repression and a move to crush the peaceful democratic movement." Although the Cuban government's human rights record remained poor after the Obama Administration's policy of engagement was initiated in December 2014, President Obama continued to speak out strongly about human rights conditions in Cuba, including during his March 2016 visit to Havana; the two countries subsequently engaged in a bilateral human rights dialogue in October 2016. In his June 2017 Miami speech, President Trump called for the Cuban government to end the abuse of dissidents, release political prisoners, stop jailing innocent people, and return U.S. fugitives from justice in Cuba, all issues that the Obama Administration had raised with the Cuban government. The President stated that "any changes to the relationship between the United States and Cuba will depend on real progress toward these and other goals." Once Cuba takes concrete steps in these areas, President Trump said "we will be ready, willing and able to come to the table to negotiate that much better deal for Cubans, for Americans." The Trump Administration also cited concern about human rights for its November 1, 2017, vote against the annual UNGA resolution condemning the U.S. embargo. In October 2016, under the Obama Administration, the United States abstained for the first time on the resolution, but U.S. officials also took the opportunity to express profound concerns about the Cuban government's Cuba's poor human rights record. (For more on the U.N. votes, see " Cuba's Foreign Relations " above.) Trump Administration officials continued to speak out on Cuba's human rights situation in 2018. Vice President Mike Pence spoke out on the human rights situation in Cuba during an address to the OAS in May. Pence stated that "the longest-surviving dictatorship in the Western Hemisphere still clings to power" and that even though "the Castro name is now fading, the oppression and police state they imposed is as powerful as ever." He asserted, "Today, the United States once again stands with the Cuban people in their stand for freedom." As noted above, National Security Adviser John Bolton also spoke out on Cuba's poor human rights record in a November 1, 2018, speech in Miami, The State Department has continued to call attention to the plight of political prisoners in Cuba. In April 2018, then-Acting Secretary of State John Sullivan and USAID Administrator Mark Green met with members of Cuba's independent civil society on the margins of the Summit of the Americas held in Peru. According to the State Department, Sullivan called "for democratic reforms to Cuba's flawed electoral process and an end to arbitrary detention and intimidation of independent civil society." In June 2018, the State Department reiterated the U.S. call for the release of all political prisoners in Cuba and highlighted U.S. concern for two Cuban political prisoners declared "prisoners of conscience" by Amnesty International—Dr. Eduardo Cardet and Dr. Ariel Ruiz Urquiola, who was subsequently released in July 2018. In October 2018, the State Department called for the release of UNPACU activist Tomás Núñez Magdariaga, who had been on a hunger strike since August; the Cuban government subsequently released him on October 15, 2018. A day later, the U.S. Mission to the United Nations launched a campaign to call attention to Cuba's "estimated 130 political prisoners." Cuban diplomats attempted to disrupt the event by making noise, an action that Secretary of State Mike Pompeo dubbed "a childish tantrum." Secretary of State Pompeo subsequently wrote an open letter to Cuban Foreign Minister Bruno Rodriguez in early December 2018 asking for evidence against those held as political prisoners. (For more details, see " Human Rights " section, above.) Internet Task Force. In January 2018, the State Department announced the establishment of a Cuba Internet Task Force, composed of U.S. government and non-U.S. government representatives, to examine the technological challenges and opportunities for expanding internet access and independent media in Cuba. The task force was convened pursuant to President Trump's NSPM on Cuba and held its first meeting on February 7, 2018, with two subcommittees formed to develop recommendations—one to explore the role of media and freedom of information in Cuba and the other to explore internet access in Cuba. According to the State Department, the task force will review the subcommittees' recommendations and prepare a final report for the Secretary of State within a year. Cuban state media criticized the State Department's establishment of the task force, maintaining that the move "was aimed at subverting Cuba's internal order." Cuba's foreign ministry issued a note of diplomatic protest to the U.S. Embassy in Havana and called upon the U.S. government to respect Cuba sovereignty. Continued Engagement in Some Areas In a demonstration of continuity in U.S. policy between the Trump and Obama Administrations, the U.S. and Cuban governments have continued to engage on various bilateral issues through meetings and dialogues. The two countries have continued to hold semiannual migration talks, which, since 1995, have provided a forum to review and coordinate efforts to ensure safe, legal, and orderly migration between Cuba and the United States; talks were held in April and December 2017, and most recently in July 2018. The United States and Cuba also have continued to hold Bilateral Commission meetings that began under the Obama Administration in which the two government review priorities and areas for engagement. Officials held a sixth Bilateral Commission meeting in September 2017 and a seventh meeting in June 2018. According to the State Department, at the June 2018 meeting, the two countries reviewed such areas for engagement as trafficking in persons, civil aviation safety, law enforcement matters, agriculture, maritime safety and search and rescue, certified claims, and environmental challenges. The State Department maintained that the United States reiterated the urgent need to identify the source of the "attacks" on U.S. diplomats and to ensure they cease, expressed continued concerns about the arbitrary detention of independent journalists and human rights defenders, and acknowledged Cuba's progress in repatriating Cubans with final orders while also emphasizing that Cuba needs to accept greater numbers of returnees. Cuba's Ministry of Foreign Affairs maintained the meeting provided an opportunity to review areas of exchange and cooperation, but it also criticized several aspects of U.S. policy, including the "intensification" of the U.S. embargo and what Cuba viewed as the "political manipulation of the alleged health cases" that became a "pretext" to reduce staff and therefore affect embassy operations in both countries. Both countries also have continued engagement on other bilateral issues. The U.S. Coast Guard and the Cuban Border Guard participated in professional exchanges in July 2017 and January 2018 covering a variety of topics, including search and rescue. The U.S. Departments of State, Justice, and Homeland Security participated in law enforcement dialogues with Cuban counterparts in September 2017 and July 2018; the 2018 dialogue included such topics as fugitives and the return of Cuban nationals with final orders of removal. Additional bilateral meetings and exchanges have been held in 2018 on such topics as cybersecurity and cybercrime, counternarcotics efforts, and counterterrorism in January; anti-money laundering efforts and trafficking in persons in February; search and rescue in March; and agriculture and scientific cooperation related to environmental disaster in April. As noted below, for more than a decade, Cuba has returned some wanted fugitives to the United States on a case-by case basin. In 2018, this included the return of a man wanted on charges related to ecoterrorism in August and the return in November of a fugitive from New Jersey wanted for murder. In February, with assistance from U.S. law enforcement, Cuba prosecuted a Cuban national for the 2015 murder of a Florida doctor. (See " U.S. Fugitives from Justice ," below.) U.S. Response to Injuries of U.S. Personnel in Havana147 On September 29, 2017, the U.S. Department of State ordered the departure of nonemergency personnel assigned to the U.S. Embassy in Havana, as well as their families, to minimize the risk of their exposure to harm because of a series of unexplained injuries suffered by embassy personnel since November 2016. As a result, the embassy's U.S. staffing level, which numbered over 50, was reduced by about two-thirds. According to the State Department, the U.S. government personnel suffered from "attacks of an unknown nature," at U.S. diplomatic residences and hotels where temporary duty staff were staying, with symptoms including "ear complaints, hearing loss, dizziness, headache, fatigue, cognitive issues, and difficulty sleeping." U.S. officials maintain that they do not know the mechanism used to cause the health injuries, the source, who is responsible, or the motive behind the alleged "attacks." The State Department reports that 26 Americans have experienced health effects from the incidents. Twenty-four of the incidents occurred from as early as November 2016 to August 2017. In June 2018, two new cases stemming from occurrences in May 2018 were confirmed after medical evaluations, bringing the total to 26 cases. On October 3, 2017, the State Department ordered the departure of 15 Cuban diplomats from the Cuban Embassy in Washington, DC. According to then-Secretary of State Rex Tillerson, the decision was made because of Cuba's failure to protect U.S. diplomats in Havana and to ensure equity in the impact on respective diplomatic operations. Previously, in May 2017, the State Department had asked two Cuban diplomats to depart the United States because some U.S. diplomats in Cuba had returned to the United States for medical reasons. State Department officials maintain that the United States would need full assurances from the Cuban government that the "attacks" will not continue before contemplating the return of diplomatic personnel. On March 5, 2018, the State Department began a permanent staffing plan at the U.S. Embassy in Havana, operating it as an "unaccompanied post" without family members. The change took place because the temporary "ordered departure" status for the embassy had reached its maximum allowable days. According to the State Department, "the embassy will continue to operate with the minimum personnel necessary to perform core diplomatic and consular functions, similar to the level of emergency staffing maintained during ordered departure." Although responsibility for injuries to U.S. personnel in Cuba is unknown, speculation by some observers has focused on such possibilities as a rogue faction of Cuba's security services or a third country, such as Russia, with the apparent motivation of wanting to disrupt U.S.-Cuban relations. Some maintain that Cuba's strong security apparatus makes it unlikely that a third country would be involved without the Cuban government's acquiescence. Others stress that there has been no evidence implicating a third country and that it would be highly unusual for a rogue Cuban security faction to operate contrary to the interests of the Cuban government. Questions have revolved around what might cause such a variety of symptoms, including whether a faulty surveillance device could be responsible for some of the incidents. Since the incidents were first made public by the State Department in August 2017, numerous press reports have referred to them as being caused by some type of sonic device. Yet some scientists and experts in acoustics have cast doubt on this possibility, arguing that the laws of physics render it unlikely that the use of ultrasound, which they see as the most plausible type of acoustic employed, could be effectively used to harm personnel. They add that some of the reported symptoms individuals have encountered would not have resulted from the use of such a device. Some point to other possible scenarios, such as personnel coming into contact with toxins that damage hearing, or even the spread of anxiety or other psychogenic contributors capable of triggering symptoms. Some scientists assert that data regarding the potential effects of an ultrasound weapon on human health is currently slim. An article in the Journal of the American Medical Association ( JAMA ), published February 15, 2018, reported that University of Pennsylvania physicians who evaluated individuals from the U.S. Embassy community in Havana maintained that the individuals "appeared to have sustained injury to widespread brain networks without an associated history of head trauma." The study, however, found no conclusive evidence of the cause of the brain injuries. An accompanying editorial in JAMA cautioned about drawing conclusions from the study, noting that the evaluations were conducted an average of 203 days after the onset of the symptoms and that it was unclear whether individuals who developed symptoms were aware of earlier reports by others. In August 2018, JAMA published several letters that raised additional questions concerning the February 2018 study, including one that asserted mass psychogenic illness could not be discounted; the study's authors, however, pushed back against the criticism, maintaining that a complex constellation of neurological symptoms was consistent across the cohort that was studied. A March 2018 University of Michigan report by three computer scientists concluded that the sounds recorded in Cuba could have been caused by two eavesdropping devices placed in close proximity to each other. The study concluded that the sounds could have been inadvertently produced without malicious intent. In December 2018, a group of doctors from the University of Miami and the University of Pittsburgh published a study maintaining that those diplomats exhibiting symptoms suffered from ear damage as opposed to brain injury. In January 2019, a group of biologists from the University of California Berkeley and the U.K's University of Lincoln issued a study on a recording of the alleged sounds heard by some U.S. Embassy employees that had been released by the Associated Press in October 2017. The study maintains that the sound matched the echoing call of a Caribbean cricket. The Canadian government announced in April 2018, that it also was changing the designation of its embassy in Havana as an "unaccompanied post," meaning that diplomatic staff will not be accompanied by their family members. Since 2017, 13 Canadians reportedly experienced symptoms such as headaches, dizziness, nausea, and difficulty concentrating, with the most case confirmed in November 2018. Canadian medical specialists raised concerns about a possible new type of acquired brain injury, the cause of which is unknown, but the Canadian government maintains that there is no evidence to suggest that Canadian travelers to Cuba are at risk. Accountability Review Board and Health Incidents Task Force The State Department convened an Accountability Review Board (ARB) in January 2018 to examine the circumstances regarding unexplained injuries in Cuba. The State Department submitted a report to Congress on August 30, 2018, and at the same time released a fact sheet on its website. The ARB's mandate, according to the State Department, was not to determine the cause of the incidents but rather to examine the State Department's response and the adequacy of security and other related procedures. The ARB found that the department's security systems and procedures were adequate and properly implemented overall but that there were significant vacancies in security staffing and some challenges with information sharing and communication. The ARB issued 30 recommendations to the State Department concerning accountability, interagency coordination, medical issues, internal communication and information sharing, risk/benefit analysis, and diplomatic security. The State Department maintains that it accepted all of the recommendations. In May 2018, the State Department announced that a U.S. government employee serving in Guangzhou, China, experienced a health incident similar to that experienced by members of the U.S. diplomatic community in Havana. Secretary of State Michael Pompeo noted the incident in testimony before the House Foreign Affairs Committee on May 23. Subsequently, on June 5, Pompeo announced the establishment of a multiagency Health Incidents Response Task Force to serve as a coordinating body for State Department and interagency activities, including identification and treatment of affected personnel and family members abroad, investigation and risk mitigation, messaging, and diplomatic outreach. Vienna Convention Under the 1961 Vienna Convention on Diplomatic Relations and the 1963 Vienna Convention on Consular Relations, nearly all countries worldwide participate in reciprocal obligations regarding the diplomatic facilities of other countries in their territory. The United States and Cuba are both party to these conventions. U.S. officials have repeatedly noted the Cuban government's obligations under the Vienna Convention to protect U.S. diplomats in Cuba. Under the 1961 convention, the safety of diplomatic agents (Article 29), the private residences of diplomatic agents (Article 30), and the premises of diplomatic missions (Article 22) are protected, with the receiving state under special duty to guarantee such protection. Similarly, under the 1963 convention (Article 40), the receiving state is responsible for treating consular officers with due respect and taking "all appropriate steps to prevent any attack on their person, freedom or dignity." Cuba's Response The Cuban government denies responsibility for the injuries of U.S. personnel, maintaining that it would never allow its territory to be used for any action against accredited diplomats or their families. In the aftermath of the order expelling its diplomats, Cuba's Ministry of Foreign Affairs issued a statement strongly protesting the U.S. action, asserting that it was motivated by politics and arguing that ongoing investigations have reached no conclusion regarding the incidents or the causes of the health problems. The statement noted that Cuba had permitted U.S. investigators to visit Cuba and reiterated the government's willingness to continue cooperating on the issue. At a November 2, 2017, press conference in Washington, DC, Cuban Foreign Minister Rodríguez called for the U.S. government to "stop politicizing the issue," maintaining that it could "take bilateral relations further back" with "harmful consequences for both peoples and countries." Rodríguez reiterated that Cuban authorities "preliminarily concluded there is no evidence whatsoever of the occurrence of the alleged incidents or the cause and the origin of these ailments reported by U.S. diplomats and their relatives." The foreign minister also maintained that U.S. cooperation on the investigation has been very limited and raised a series of questions regarding the adequacy and timeliness of information provided to Cuban experts and medical personnel. In September 2018, a delegation of Cuban scientists visited the United States to have meetings with the State Department, the National Academy of Sciences, and on Capitol Hill. The director of the Cuban Neuroscience Center, Dr. Mitchell Joseph Valdés-Sosa, maintains that there could be various reasons why the diplomats became sick (such as hypertension, stress, other preexisting conditions, and psychogenesis) but that Cuban scientists have not seen any credible evidence that some type of high-tech weapon was used. The Cuban delegation expressed disappointment that U.S. officials have not shared more medical and clinical data on the illnesses experienced by the U.S. diplomats. In November 2018, Dr. Valdés-Sosa coauthored a letter in Science magazine with a professor from the University of Pennsylvania's Department of Bioengineering maintaining that some "scientists have allowed speculation about the causes of these health issue to outpace the evidence" and that "there is insufficient evidence to guess about the cause of the sounds." Cuba Travel Advisory The State Department issued a travel warning in September 2017, stating that due to the drawdown in staff, the U.S. Embassy in Havana had limited ability to assist U.S. citizens in Cuba. The warning advised U.S. citizens to avoid travel to Cuba because of the risk of being subject to injury, since some of the incidents occurred at hotels frequented by U.S. citizens. In January 2018, the State Department revamped its travel advisory system to include four advisory levels: Level 1, exercise normal precautions; Level 2, exercise increased caution; Level 3, reconsider travel; and Level 4, do not travel. At the time, the advisory for Cuba was set at Level 3, recommending that travelers should reconsider travel to Cuba but indicating that if the decision to travel was made, travelers should avoid the Hotel Nacional and Hotel Capri, where some of the injuries occurred. On August 23, 2018, however, the State Department eased its travel advisory for Cuba to Level 2, exercise increased caution, with a spokesman maintaining that the agency "undertook a thorough review of the risks to private U.S. citizens in Cuba and decided a Level 2 travel advisory was appropriate." According to the advisory, travelers are still advised to avoid the Hotel Nacional and the Hotel Capri and to immediately move to another area if they experience any acute auditory or sensory phenomena. Travel agencies and organizations sponsoring travel to Cuba lauded the State Department's easing of the travel advisory. Effect of Staff Reduction on U.S. Embassy Havana Operations The two-thirds staff reduction at the U.S. Embassy in Havana has had implications for bilateral relations. Most visa processing at the U.S. Embassy in Havana has been suspended. Most Cubans applying for nonimmigrant visas must go to a U.S. embassy or consulate in another country, and applications and interviews for immigrant visas are currently being handled at the U.S. Embassy in Georgetown, Guyana. The suspension of nonimmigrant visa processing has made it more difficult and increased costs for Cubans visiting family in the United States and for Cuban cuentapropistas (private sector workers) traveling to the United States to bring back inputs for their businesses. The suspension also has increased the costs for Cuban musicians, dancers, and other artists who now face a decision whether to travel to a third country to apply for a nonimmigrant visa if they want to perform in the United States; as a result, some have canceled tours in the United States. In 2013, the United States had begun granting multiple entry visas, good for five years, for Cubans visiting the United States. As those visas expire, Cubans will need to travel to a third country to request a new visa if they want to visit the United States. In a 1994 bilateral migration accord with Cuba, the United States committed to issue 20,000 travel documents annually. It met that commitment in FY2017, but the embassy staff reduction has negatively affected the United States' ability to meet its commitment in FY2018. The State Department acknowledged in April 2018 that it would not be able to issue 20,000 travel documents for this fiscal year. Ultimately in FY2018, according to the Department of State, the Department issued 4,060 travel documents in the categories specified under the migration accord. Since the staff reduction at the U.S. Embassy in Havana, information posted on the website of the U.S. Embassy in Havana has stated that the State Department and the Department of Homeland Security (DHS) are determining arrangements for continuing to process applications under the Cuban Family Reunification Parole Program (CFRP), a program administered by DHS's U.S. Citizenship and Immigration Services (USCIS). The CFRP was established in 2007 by USCIS to help the United States meet its annual obligation under the 1994 U.S.-Cuba migration accord. Staff reductions led USCIS to suspend operations at its field office in Havana in 2017 due to the drawdown in staff; USCIS permanently closed its offices in Havana on December 10, 2018. In past years, around 75% of the immigrant travel documents issued for Cuban nationals annually were issued under the CFRP. In October 2017, State Department officials indicated that they would work with DHS to ensure continued operation of the CFRP, but no plans have been announced since then. Given that a majority of immigrant travel documents issued for Cubans are from the CFRP program, it could be difficult for the United States to reach the annual 20,000 target level without the CFRP program being reactivated and without USCIS reestablishing its presence at the embassy. The staff reduction at the U.S. Embassy in Havana also led to the closure of the Refugee Section which had administered the U.S. Refugees Admission Program in Cuba. The embassy is not accepting any new applications or processing refugee cases. The section was run by the State Department's Bureau of Population, Refugees and Migration in conjunction with USCIS and the Office of Refugee Resettlement of the Department of Health and Human Services. In FY2017, at least 177 Cubans were admitted to the United States as refugees, whereas in FY2018, through August 4, 2018, no Cubans were admitted as refugees. The embassy staff reduction likely also has made it more difficult to cover significant economic and political developments in Cuba, including outreach to civil society and human rights activists. The Political Section used to have several officers covering economic and political issues, including human rights; due to the staff reduction, there is one U.S. official in the section. Debate on the Direction of U.S. Policy Over the years, although U.S. policymakers have agreed on the overall objectives of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there have been several schools of thought about how to achieve those objectives. Some have advocated a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing efforts to support the Cuban people. Others have argued for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people and would move toward engaging Cuba in dialogue. Still others have called for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. Legislative initiatives introduced over the past decade have reflected these three policy approaches. Dating back to 2000, there have been efforts in Congress to ease U.S. sanctions, with one or both houses at times approving amendments to appropriations measures that would have eased U.S. sanctions on Cuba. Until 2009, these provisions were stripped out of final enacted measures, in part because of presidential veto threats. In 2009, Congress took action to ease some restrictions on travel to Cuba, marking the first time that Congress had eased Cuba sanctions since the approval of the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX). In light of Fidel Castro's departure as head of government in 2006 and the gradual economic changes made by Raúl Castro, some observers had called for a reexamination of U.S. policy toward Cuba. In this new context, two broad policy approaches were advanced to contend with change in Cuba: an approach that called for maintaining the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people and an approach aimed at influencing the attitudes of the Cuban government and Cuban society through increased contact and engagement. The Obama Administration's December 2014 change of U.S. policy from one of isolation to one of engagement and movement toward the normalization of relations has highlighted divisions in Congress over Cuba policy. Some Members of Congress lauded the Administration's actions as in the best interests of the United States and a better way to support change in Cuba, whereas other Members strongly criticized the President for not obtaining concessions from Cuba to advance human rights. Some Members vowed to oppose the Administration's efforts toward normalization, whereas others have, as in the past, introduced legislation to normalize relations with Cuba by lifting the embargo in its entirety or in part by easing some aspects of it. The Trump Administration's policy of rolling back some of the Obama-era changes also highlights divisions in Congress over Cuba policy, with some Members supporting the President's action because of Cuba's lack of progress on human rights and others opposing it because of the potential negative effect on the Cuban people and U.S. business interests. Public opinion polls have showed a majority of Americans support normalizing relations with Cuba. Among the Cuban American community in South Florida, however, a 2018 poll by Florida International University showed an increase in those supporting a continuation of the U.S. embargo compared to a 2016 poll. In the 2018 poll, although a majority of Cuban Americans in South Florida supported diplomatic relations and unrestricted travel to Cuba by all Americans, 51% polled favored continuing the embargo and 49% opposed it. This contrasts with 2016, when 63% of Cuban Americans in South Florida favored ending the embargo and 37% opposed it. In general, those who advocate easing U.S. sanctions on Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba—through increased travel, trade, and dialogue—then the seeds of reform would be planted, which would stimulate forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States. They argue that since the demise of Cuba's communist government does not appear imminent (despite more than 50 years of sanctions), the United States should espouse a more pragmatic approach in trying to bring about change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities for U.S. businesses because of the unilateral nature of the embargo, and to the increased suffering of the Cuban people because of the embargo. In addition, proponents of change argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China and Vietnam. On the other side, opponents of lifting U.S. sanctions maintain that the two-track policy of isolating Cuba but reaching out to the Cuban people through measures of support is the best means for realizing political change in Cuba. They point out that the LIBERTAD Act sets forth the steps that Cuba must take for the United States to normalize relations. They argue that softening U.S. policy without concrete Cuban reforms boosts Cuba's communist regime, politically and economically, and facilitates its survival. Opponents of softening U.S. policy argue that the United States should stay the course in its commitment to democracy and human rights in Cuba and that sustained sanctions can work. Critics of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of Cuba's difficult living conditions. Selected Issues in U.S.-Cuban Relations For many years, Congress has played an active role in U.S. policy toward Cuba through the enactment of legislative initiatives and oversight on numerous issues. These issues include U.S. economic sanctions on Cuba, such as restrictions on travel, remittances, and agricultural and medical exports; terrorism issues, including Cuba's designation as a state sponsor of international terrorism; human rights issues, including funding and oversight of U.S.-government sponsored democracy and human rights projects; funding and oversight for U.S.-government sponsored broadcasting to Cuba (Radio and TV Martí); migration issues; bilateral antidrug cooperation; and U.S. claims for property confiscated by the Cuban government. U.S. Travel to Cuba189 Restrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate Cuba's communist government for more than 50 years. Numerous changes to the restrictions have occurred over time, and for five years, from 1977 until 1982, there were no restrictions on travel. Restrictions on travel are part of the CACR, the embargo regulations administered by the Department of the Treasury's OFAC. Under the George W. Bush Administration, enforcement of U.S. restrictions on Cuba travel increased and restrictions on travel were tightened. Under the Obama Administration, Congress took legislative action in March 2009 to ease restrictions on family travel and on travel related to U.S. agricultural and medical sales to Cuba ( P.L. 111-8 , Sections 620 and 621 of Division D). In April 2009, the Obama Administration went further when the President announced that he was lifting all restrictions on family travel. In January 2011, the Obama Administration made a series of changes further easing restrictions on travel. The measures increased purposeful travel to Cuba related to religious, educational, and journalistic activities, including people-to-people travel exchanges, and allowed U.S. international airports to become eligible to provide services to licensed charter flights to and from Cuba. In most respects, these new measures were similar to policies that were undertaken by the Clinton Administration in 1999 but subsequently curtailed by the George W. Bush Administration in 2003 and 2004. As discussed above, President Obama announced a major shift in U.S. policy toward Cuba in December 2014 that included an easing of U.S. restrictions on travel to Cuba. As part of the change in policy, OFAC amended the CACR in 2015 to include general licenses for the 12 existing categories of travel to Cuba set forth in the regulations: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities, including people-to-people travel; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects (now including microfinancing projects); (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or information materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines.  Before the policy change, travelers under several of these categories had to apply for a specific license from the Department of the Treasury before traveling. Under the new regulations, both travel agents and airlines are able to provide services for travel to Cuba without the need to obtain a specific license. Authorized travelers no longer have a per diem limit for expenditures, as in the past, and can bring back goods from Cuba as accompanied baggage for personal use, including alcohol and tobacco. Despite the easing of travel restrictions, travel to Cuba solely for tourist activities remains prohibited. Section 910(b) of TSRA prohibits travel-related transaction for tourist activities, which are defined as any activity not expressly authorized in the 12 categories of travel in the CACR (31 C.F.R. 515.560). In January 2016, the Department of the Treasury made additional changes to the travel regulations. Among the changes, authorization for travel and other transactions for transmission of informational materials now include professional media or artistic productions in Cuba (movies, television, music recordings, and creation of artworks). Authorization for travel and other transactions for professional meetings, public performances, clinics, workshops, athletic and nonathletic competitions, and exhibitions now includes permission to organize these events, not just participate in them. The Department of the Treasury amended the travel regulations in March 2016 to permit travel to Cuba for individual people-to-people educational travel, but as discussed above, President Trump, as part of his partial rollback of engagement with Cuba, directed the Department of the Treasury in June 2017 to eliminate the authorization for such travel for individuals. As set forth in amended regulations issued on November 9, 2017, people-to-people educational travel is required to take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization. U.S. Travelers to Cuba. According to Cuban government statistics, the number of U.S. travelers increased from 91,254 in 2014 to 619,523 in 2017. This figure is in addition to thousands of Cuban Americans who visit family in Cuba each year; in 2017, almost 454,000 Cubans living outside the country visited Cuba, the majority from the United States. The number of U.S. visitors began to slow in the latter half of 2017 in the aftermath of Hurricane Irma, which struck in September, the Trump Administration's tighter restrictions on people-to-people travel and restrictions on transactions with the Cuban military (which keeps a number of hotels off limits to U.S. visitors), and the U.S. travel warning issued in September 2017 related to the unexplained health injuries to U.S. diplomatic personnel in Cuba (see discussion above on " Cuba Travel Advisory "). In the first half of 2018, the number of U.S. visitors to Cuba, not including Cuban Americans, reportedly declined by 24% compared to the same period in 2017. By the end of 2018, however, U.S. travel to Cuba reportedly had recovered, with a growth of 1% over 2017. The recovery was spurred by a 48% increase in cruise ship arrivals (which bring in less revenue compared to land-based travelers). Another factor in the recovery in travel could be the August 2018 change in the U.S. travel advisory for Cuba from Level 3 (reconsider travel) to Level 2 (exercise increased caution) (see " Cuba Travel Advisory ," above). Some U.S. schools with academic exchange programs reportedly do not allow travel to a country with a Level 3 advisory, so the easing of the advisory to Level 2 allows schools to once again include Cuba as part of their exchange programs. Regular Air Service. U.S. and Cuban officials signed a bilateral arrangement (in a memorandum of understanding) in February 2016 permitting regularly scheduled air flights as opposed to charter flights, which have operated between the two countries for many years. The arrangement provided an opportunity for U.S. carriers to operate up to a total of 110 daily round-trip flights between the United States and Cuba, including up to 20 daily round-trip flights to and from Havana. In June 2016, the Department of Transportation announced that six U.S. airlines were authorized to provide air service for up to 90 daily flights between five U.S. cities (Miami, Fort Lauderdale, Chicago, Philadelphia, and Minneapolis-St. Paul) and nine Cuban cities other than Havana. JetBlue became the first U.S. airline to begin regularly scheduled flights in August 2016. In August 2016, the Department of Transportation announced a final decision for eight U.S. airlines to provide up to 20 regularly scheduled round-trip flights between Havana and 10 U.S. cities (Atlanta, Charlotte, Fort Lauderdale, Houston, Los Angeles, Miami, Newark, New York [JFK], Orlando, and Tampa). American Airlines became the first airline to begin regular direct flights to Havana from Miami in November 2016. Four U.S. airlines that had been awarded flights to Cuba—Silver Airways, Frontier Airlines, Spirit Airlines, and Alaska Airlines—have ended their air service to Cuba, citing competition from other airlines and low demand. In March 2018, the Department of Transportation awarded flights to Havana that had been given up (as well as a flight from Boston) to five U.S. airlines already serving Cuba—American Airlines, Delta Air Lines, JetBlue, Airways, Southwest Airlines, and United Airlines. The U.S. air cargo company FedEx was supposed to begin operations to Cuba in April 2017, but the company requested and granted several extensions to begin service until it finally canceled its plans in December 2018. In May 2016, the House Committee on Homeland Security, Subcommittee on Transportation Security, held a hearing on potential security risks from the resumption of regularly scheduled flights from Cuba. Some Members of Congress expressed concerns that Cuba's airport security equipment and practices were insufficient and that the Administration was rushing plans to establish regular air service to Cuba; other Members viewed such concerns as a pretext to slow down or block the Administration's efforts to normalize relations with Cuba. Officials from the Department of Homeland Security (including Customs and Border Protection and the Transportation Security Administration) testified at the hearing regarding their work to facilitate and ensure security of the increased volume of commercial air travelers from Cuba. Subsequently, in September 2016, the United States and Cuba finalized an aviation-security agreement for the deployment of U.S. In-Flight Security Officers, more commonly known as Federal Air Marshals, on board certain regularly scheduled flights to and from Cuba. Cruise Ship Service. The Carnival cruise ship company began direct cruises to Cuba from the United States in May 2016 using smaller ships, accommodating about 700 passengers, under its cruise brand Fathom, which targeted people-to-people educational travel. The Fathom cruises stopped in May 2017, but Carnival began using a larger ship for cruises to Cuba in June 2017. Since then, numerous other cruise ship companies—Royal Caribbean, Norwegian, Azamara Club Cruises, Oceania Cruises, Regent Seven Seas Cruises, Pearl Seas Cruises, Holland America Line, Viking, and Seabourn—began offering cruises to Cuba from the United States. Several companies began looking to establish ferry services between the United States and Cuba in 2015, but the services still require Cuban approval, and Cuban facilities need to be developed to handle the services. Pro/Con Arguments. Major arguments made for lifting the Cuba travel ban altogether are that the ban abridges the rights of ordinary Americans to travel, hinders efforts to influence conditions in Cuba, and may be aiding the Cuban government by helping restrict the flow of information. In addition, supporters of lifting the ban point to the fact that Americans can travel to other countries with communist or authoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are that more American travel would support the Cuban government with potentially millions of dollars in hard currency; that legal provisions allowing travel to Cuba for humanitarian purposes exist and are used by thousands of Americans each year; and that the President should be free to restrict travel for foreign policy reasons. Legislative Activity. In the 115 th Congress, six bills were introduced that would have lifted remaining restrictions on travel. H.R. 351 (Sanford) would have prohibited restrictions on travel to Cuba, directly or indirectly, or any transactions incident to such travel. S. 1287 (Flake) would have prohibited the President from restricting travel to Cuba or any transactions incident to Cuba. H.R. 572 (Serrano) would have facilitated the export of U.S. agricultural exports to Cuba and would have lifted travel restrictions. H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden) would have lifted the economic embargo on Cuba and prohibited restrictions on travel. In October 2017, the House approved (by voice vote) H.R. 3328 (Katko), the Cuban Airport Security Act of 2017. The bill would have required a congressional briefing regarding certain security measures and equipment at each of Cuba's 10 international airports. The measure also would have prohibited a U.S. air carrier from employing a Cuban national in Cuba unless the carrier had publicly disclosed the full text of the formal agreement between the air carrier and the Empresa Cubana de Aeropuertos y Servicios Aeronauticos or any other entity associated with the Cuban government. The bill would also have, to the extent practicable, prohibited U.S. air carriers from hiring Cuban nationals if they had been recruited, hired, or trained by entities owned, operated, or controlled in whole or in part by Cuba's Council of State, Council of Ministers, Communist Party, Ministry of the Revolutionary Armed Forces, Ministry of Foreign Affairs, or Ministry of the Interior. An identical bill, S. 2023 (Rubio), was introduced in the Senate on October 26, 2017. In October 2018, Congress completed action on the FAA Reauthorization Act of 2018, signed into law as P.L. 115-254 ( H.R. 302 ), which includes a provision in Section 1957 (similar, although not identical, to a provision in H.R. 3328 noted above) requiring the Transportation Security Administration (TSA) to provide Congress a briefing on certain aspects of security measures at airports in Cuba that have air service to the United States. The law also requires the TSA Administrator (1) to direct all public charters to provide updated flight data to more reliably track the public charter operations of air carriers between the United States and Cuba and (2) to develop and implement a mechanism that corroborates and validates flight schedule data to more reliably track the public charter operations of air carries between the United States and Cuba. This requirement relating to public air charters to and from Cuba stems from a recommendation made by the Government Accountability Office (GAO) in a July 2018 report examining TSA's assessments of Cuban aviation security. U.S. Exports and Sanctions205 U.S. commercial medical exports to Cuba have been authorized since the early 1990s pursuant to the Cuban Democracy Act of 1992 (CDA), and commercial agricultural exports have been authorized since 2001 pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), but with numerous restrictions and licensing requirements. For medical exports to Cuba, the CDA requires on-site verification that the exported item is to be used for the purpose for which it was intended and only for the use and benefit of the Cuban people. TSRA allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA also denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. Cuba purchased almost $5.8 billion in U.S. products from 2001 to 2017, largely agricultural products. For many of those years, the United States was Cuba's largest supplier of agricultural products. U.S. exports to Cuba rose from about $7 million in 2001 to a high of $712 million in 2008, far higher than in previous years. This increase was in part because of the rise in food prices and because of Cuba's increased food needs in the aftermath of several hurricanes and tropical storms that severely damaged the country's agricultural sector. U.S. exports to Cuba declined considerably from 2009 through 2011, rose again in 2012, and fell every year through 2015, when U.S. exports amounted to just $180 million. (See Figure 3 .) Reversing that trend, however, U.S. exports to Cuba increased to $245 million in 2016 and $283 million in 2017. In 2017, U.S. exports to Cuba increased by 15% over the previous year. In the first three quarters of 2018, through September, U.S. exports to Cuba amounted to almost $229 million, about the same amount over the same period in 2017. Looking at the composition of U.S. exports to Cuba from 2012 to 2017, the leading products were poultry, soybean oilcake and other solid residue, soybeans, corn, and soybean oil. Poultry has been the leading U.S. export to Cuba since 2012; in 2017, for example, it accounted for about 57% % of U.S. exports. Beyond agricultural products, other categories of products that have increased over the past several years are parts for steam turbines, pesticides, pharmaceutical products, and civilian aircraft, engines, and parts. President Obama's policy changes, as set forth in regulatory changes made to the CACR and EAR, included several measures designed to facilitate commercial exports to Cuba: U.S. financial institutions are permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions. U.S. private export financing is permitted for all authorized export trade to Cuba, except for agricultural goods exported pursuant to TSRA. The definition of the term cash in advance for payment for U.S. exports to Cuba was revised to specify that it means cash before transfer of title . In 2005, OFAC had clarified that payment of cash in advance meant that the payment for the goods had to be received prior to the shipment of the goods from the port at which they were loaded in the United States. The regulatory change means that payment can once again occur before an export shipment is offloaded in Cuba rather than before the shipment leaves a U.S. port. Commercial exports to Cuba of certain goods and services to empower Cuba's nascent private sector are authorized, including for certain building materials for private residential construction, goods for use by private-sector Cuban entrepreneurs, and agricultural equipment for small farmers. Licenses for certain categories of exports are included under a "general policy of approval." These categories include exports for civil aviation and commercial aircraft safety; telecommunications; U.S. news bureaus; human rights organizations and nongovernmental organizations; environmental protection of U.S. and international air quality, waters, and coastlines; and agricultural inputs (such as insecticides, pesticides, and herbicides) that fall outside the scope of those exports already allowed under TSRA. Licenses for exports that will be considered on a case-by-case basis include certain items exported to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of the Cuban people. These items include exports for agricultural production, artistic endeavors, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation, public transportation, wholesale and retail distribution for domestic consumption by the Cuban people, construction of facilities for treating public water supplies, facilities for supplying electricity or other energy to the Cuban people, sports and recreation facilities, and other infrastructure that directly benefits the Cuban people. Note: The Trump Administration's policy changes on Cuba, as set forth by amended Commerce Department regulations issued in November 2017, stipulate that export licenses for exports to state-owned enterprises will generally be denied to export items for use by entities or subentities on the State Department's list of restricted entities associated with the Cuban military, police, intelligence, or security services. The commercial export of certain consumer communication devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems is authorized; previously such exports were limited to donations. The export of items for telecommunications, including access to the internet, use of internet services, infrastructure creation, and upgrades, also is authorized. Companies exporting authorized goods to Cuba are authorized to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. Persons subject to U.S. jurisdiction generally are authorized to enter into certain contingent contracts for transactions currently prohibited by the embargo. Certain consumer goods sold directly to eligible individuals in Cuba for their personal use generally are authorized. USDA Reports. In a June 2015 report, the U.S. Department of Agriculture's (USDA's) Foreign Agricultural Service noted that "the U.S. share of the Cuban market has slipped dramatically, from a high of 42% in FY2009 to only 16% in FY2014." The report contended that the decline in U.S. market share in Cuba "is largely attributable to a decrease in bulk commodity exports from the United States in light of favorable credit terms offered by key competitors." It maintained that the United States had lost market share to those countries able to provide export credits to Cuba. The report concluded that lifting U.S. restrictions on travel and capital flow to Cuba and enabling USDA to conduct market development and credit guarantee programs in Cuba would help the United States recapture its market share in Cuba. Another USDA report published in June 2015 by its Economic Research Service maintained that a more normal economic relationship between the United States and Cuba would allow "U.S. agricultural exports to develop commercial ties in Cuba that approximate their business relationship in other parts of the world" (such as the Dominican Republic) and could "feature a much larger level of U.S. agricultural exports to Cuba." According to the report, increased U.S. exports could include such commodities as milk, wheat, rice, and dried beans, as well as intermediate and consumer-oriented commodities. U .S. International Trade Commission (U STIC ) Reports. The USITC has issued three studies since 2007 examining the effects of U.S. restrictions on trade with Cuba, with its most recent report issued in April 2016. According to the findings of its 2016 report, U.S. restrictions on trade and travel reportedly have shut U.S. suppliers out of a market in which they could be competitive on price, quality, and proximity. The most problematic U.S. restrictions cited are the inability to offer credit, travel to or invest in Cuba, and use funds sourced and administered by the U.S. government. Cuban nontariff measures and other factors also may limit U.S. exports to and investment in Cuba if U.S. restrictions are lifted, according to the report. These factors include Cuban government control of trade and distribution, legal limits on foreign investment and property ownership, and politically motivated decisionmaking regarding trade and investment. Absent U.S. restrictions, U.S. exports in several sectors likely would increase somewhat in the short term, with prospects for larger increases in the longer term, subject to changes in Cuban policy and economic growth. U.S. exports could increase further if Cuban import barriers were lowered. If U.S. restrictions were removed, U.S. agricultural and manufactured exports to Cuba could increase to almost $1.8 billion annually; if both U.S. restrictions were removed and Cuban barriers were lowered, U.S. exports could approach $2.2 billion annually. Legislative Activity. In the 115 th Congress, the 2018 farm bill, P.L. 115-334 ( H.R. 2 ) has a provision permitting funding for two U.S. agricultural export promotion programs. Several other introduced bills would have lifted or eased restrictions on U.S. exports to Cuba. In December 2018, both houses approved the conference report ( H.Rept. 115-1072 ) to the 2018 farm bill, P.L. 115-334 ( H.R. 2 ), which retains a Senate provision that permits funding for certain U.S. export promotion programs (Market Access Program and Foreign Market Development Cooperation Program) for U.S. agricultural products in Cuba. As stipulated, the funds cannot be used in contravention with directives set forth under the National Security Presidential Memorandum issued by President Trump in June 2017 that prohibits transactions with entities owned, controlled, or operated by or on behalf of military, intelligence, or security services of Cuba. The provision originated from a Heitkamp amendment to the original Senate version of the farm bill, S. 3042 , approved during markup of the bill by the Senate Committee on Agriculture, Nutrition, and Forestry. H.R. 442 (Emmer)/ S. 472 (Moran) would have repealed or amended various provisions of law restricting trade with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. The bills would have repealed restrictions on private financing for Cuba in TSRA but would have continued to prohibit U.S. government support for foreign assistance or financial assistance, loans, loan guarantees, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. The federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would have been allowed. H.R. 525 (Crawford) would have permitted U.S. government assistance for U.S. agricultural exports to Cuba as long as the recipient of the assistance was not controlled by the Cuban government; authorized the private financing by U.S. entities of sales of agricultural commodities; and authorized investment for the development of an agricultural business in Cuba as long as the business was not controlled by the Cuban government and did not traffic in property of U.S. nationals confiscated by the Cuban government. S. 275 (Heitkamp) would have amended TSRA to allow for the private financing by U.S. entities of agricultural commodities to Cuba. H.R. 572 (Serrano), among its various provisions, had the goal of facilitating the export of U.S. agricultural and medical exports to Cuba by permanently redefining the term payment of cash in advance to mean that payment is received before the transfer of title and release and control of the commodity to the purchaser; authorizing direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; establishing an export-promotion program for U.S. agricultural exports to Cuba; and repealing the on-site verification requirement for medical exports to Cuba under the CDA. H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden) would have lifted the overall economic embargo on Cuba, including restrictions on exports to Cuba in the CDA and TSRA. S. 1286 (Klobuchar) would have repealed or amended various provisions of law restricting trade with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. Trademark Sanction For more than 15 years, the United States has imposed a trademark sanction specifically related to Cuba. A provision in the FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 , signed into law October 21, 1998) prevents the United States from accepting payment from Cuban nationals for trademark registrations and renewals that were used in connection with a business or assets in Cuba that were confiscated, unless the original owner of the trademark has consented. U.S. officials maintain that the sanction prohibits a general license under the CACR for transactions or payments for such trademarks. The provision also prohibits U.S. courts from recognizing such trademarks without the consent of the original owner. The measure was enacted because of a dispute between the French spirits company Pernod Ricard and the Bermuda-based Bacardi Limited. Pernod Ricard entered into a joint venture in 1993 with Cubaexport, a Cuban state company, to produce and export Havana Club rum. Bacardi maintains that it holds the rights to the Havana Club name because in 1995 it entered into an agreement for the Havana Club trademark with the Arechabala family, who had originally produced the rum until its assets and property were confiscated by the Cuban government in 1960. The Arechabala family had let the trademark registration lapse in the United States in 1973, and Cubaexport successfully registered it in 1976. Although Pernod Ricard cannot market Havana Club in the United States because of the trade embargo, it wants to protect its future distribution rights should the embargo be lifted. The European Union initiated World Trade Organization (WTO) dispute settlement proceedings in June 2000, maintaining that the U.S. law violates the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In January 2002, the WTO ultimately found that the trademark sanction violated WTO provisions on national treatment and most-favored-nation obligations in the TRIPS agreement. In March 2002, the United States agreed that it would come into compliance with the WTO ruling through legislative action by January 2003. That deadline was extended several times because no legislative action had been taken to bring Section 211 into compliance with the WTO ruling. In July 2005, however, in an EU-U.S. understanding, the EU agreed that it would not request authorization to retaliate at that time, but reserved the right to do so at a future date, and the United States agreed not to block a future EU request. The U.S. Patent and Trademark Office (USPTO) did not process Cubaexport's 10-year renewal of the Havana Club trademark when it was due in 2006 because the Department of the Treasury's OFAC denied the company the specific license that it needed to pay the fee for renewing the trademark registration. In providing foreign policy guidance to OFAC at the time, the State Department recommended denial of the license, maintaining that doing so would be consistent with "the U.S. approach toward non-recognition of trademark rights associated with confiscated property" and consistent with U.S. policy to deny resources to the Cuban government to hasten a transition to democracy. Almost a decade later, in January 2016, OFAC issued a specific license to Cubaexport, allowing the company to pay fees to the USPTO for the renewal of the Havana Club trademark registration for the 2006-2016 period. Subsequently, in February 2016, USPTO renewed the trademark registration for 10 additional years, until 2026. OFAC had requested foreign policy guidance from the State Department in November 2015 for Cubaexport's request for a specific license. According to the State Department, in evaluating the case, it took into account the "landmark shift" in U.S. policy toward Cuba, U.S. foreign policy with respect to its key allies in Europe, and U.S. policy with regard to trademark rights associated with confiscated property. State Department and USPTO officials maintain that the renewal of the Havana Club trademark registration does not resolve the trademark dispute. The State Department notes that federal court proceedings are pending in which Bacardi has filed suit against Cubaexport to contest the Havana Club trademark ownership in the United States and that OFAC's issuance of a license permitting USPTO to renew the trademark registration will allow the two parties to proceed toward adjudication of the case. Legislative Activity. In Congress, two different approaches have been advocated for a number of years to bring Section 211 into compliance with the WTO ruling. Some Members want a narrow fix in which Section 211 would be amended so that it applies to all persons claiming rights in trademarks confiscated by Cuba, whatever their nationality, instead of being limited to designated nationals, meaning Cuban nationals. Advocates of this approach argue that it would treat all holders of U.S. trademarks equally. Other Members want Section 211 repealed altogether. They argue that the law endangers more than 5,000 trademarks of more than 400 U.S. companies registered in Cuba. The House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing in February 2016 on the trademark issue and on the issue of confiscated property, but this did not lead to any legislative action. In the 115 th Congress, S. 259 (Nelson)/ H.R. 1450 (Issa) would have applied the narrow fix so that the trademark sanction applied to all nationals, whereas four broader bills on Cuba sanctions, H.R. 572 (Serrano), H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden), had provisions that would have repealed Section 211. Two FY2018 House appropriations bills, H.R. 3267 (Commerce) and H.R. 3280 (Financial Services), had provisions that would have introduced new sanctions related to Cuba and trademarks, but neither of these were included in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). H.R. 3267 had a provision that would have prohibited funds to approve the registration or renewal, or the maintenance of the registration, of a mark, trade name, or commercial name used in connection with a business or assets that were confiscated by the Cuban government unless the original owner has expressly consented. H.R. 3280 had a provision that would have prohibited funding to approve or otherwise allow the licensing (general or specific) of a mark, trade name, or commercial name used in connection with a business or assets that were confiscated by the Cuban government unless the original owner has expressly consented. These provisions had also been included in the House-passed version of a FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017. Likewise for FY2019, two House Appropriations bill, H.R. 5952 (Commerce) and H.R. 6258 / H.R. 6147 (Financial Services), had provisions related to Cuba and trademarks similar to those that had been included in House bills for FY2018. H.R. 5952 had a provision that would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. H.R. 6258 / H.R. 6147 had a provision that would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that was substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The 115 th Congress did not complete action on either appropriations measure. Democracy and Human Rights Funding Since 1996, the United States has provided assistance—through the U.S. Agency for International Development (USAID), the State Department, and the National Endowment for Democracy (NED)—to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID and State Department efforts are funded largely through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. From FY1996 to FY2018, Congress appropriated some $344 million in funding for Cuba democracy efforts. In recent years, this funding included $20 million in each fiscal year from FY2014 through FY2018. For FY2018, however, the Trump Administration, as part of its attempt to cut foreign assistance levels, did not request any democracy and human rights assistance funding for Cuba, but Congress ultimately provided $20 million. For FY2019, the Trump Administration requested $10 million to provide democracy and civil society assistance for Cuba. Although USAID received the majority of this funding for many years, the State Department began to receive a portion of the funding in FY2004 and in recent years has been allocated more funding than USAID. The State Department generally has transferred a portion of the Cuba assistance that it administers to NED. USAID's Cuba program has supported a variety of U.S.-based nongovernmental organizations with the goals of promoting a rapid, peaceful transition to democracy, helping to develop civil society, and building solidarity with Cuba's human rights activists. NED is not a U.S. government agency but an independent nongovernmental organization that receives U.S. government funding. Its Cuba program is funded by the organization's regular appropriations by Congress as well as by funding from the State Department. Until FY2008, NED's democratization assistance for Cuba had been funded largely through the annual Commerce, Justice, and State appropriations measure, but it is now funded through the State Department, Foreign Operations and Related Programs appropriations measure. According to information provided by NED on its website, its Cuba funding from FY2014 through FY2017 amounted to $15.9 million. FY2017 Appropriations. For FY2017, the Obama Administration had requested $15 million in ESF for Cuba democracy and human rights programs, a 25% reduction from FY2016. According to the request, the assistance would support civil society initiatives that promote democracy, human rights, and fundamental freedoms, particularly freedoms of expression and association. The programs would "provide humanitarian assistance to victims of political repression and their families, strengthen independent civil society, support the Cuban people's desire to freely determine their future, reduce their dependence on the Cuban state, and promote the flow of uncensored information to, from and within the island." In the 114 th Congress, the House version of the FY2017 State Department, Foreign Operations, and Related Programs appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), reported July 15, 2016, would have provided $30 million for democracy promotion in Cuba, double the Administration's request. The bill also would have prohibited funding for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy building authorized by the LIBERTAD Act of 1996. In contrast, the Senate version of the FY2017 foreign operations appropriations bill, S. 3117 ( S.Rept. 114-290 ), reported June 29, 2016, would have recommended fully funding the Administration's request of $15 million. However, it also would have provided that $3 million be made available for USAID to support free enterprise and private business organizations and people-to-people educational and cultural activities. Because the 114 th Congress did not complete action on FY2017 appropriations, the 115 th Congress took final action in early May 2017 through enactment of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The explanatory statement to the measure provided $20 million in democracy assistance for Cuba, $5 million more than requested, and did not include any of the directives noted above in the House and Senate appropriations bills in the 114 th Congress. FY2018 Appropriations. For FY2018 appropriations, given the strong congressional record of appropriating such aid for many years, some Members of Congress strongly opposed the Trump Administration's proposal to cut all democracy and human rights funding for Cuba. The House Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, H.R. 3362 ( H.Rept. 115-253 ), would have provided $30 million in democracy assistance for Cuba but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. These provisions were included in the House-passed version of the FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017. The Senate Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, S. 1780 ( S.Rept. 115-152 ), would have provided $15 million for democracy programs in Cuba, with not less than $3 million to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. In final action in March 2018, Congress provided $20 million for democracy programs in Cuba in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ; explanatory statement, Division K) without any of the directives in the House and Senate appropriations bills and reports noted above. FY2019 Appropriations. For FY2019, the Trump Administration requested $10 million for democracy and civil society assistance in support of the Administration's Cuba policy. The House Appropriations Committee's State Department and Foreign Operations appropriations bill, H.R. 6385 , would have provided $30 million to promote democracy and strengthen civil society in Cuba, with, according to the report to the bill ( H.Rept. 115-829 ), not less than $8 million for the National Endowment for Democracy; the report would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building and stipulated that grants exceeding $1 million, or grants to be implemented over a period of 12 months, would be awarded only to organizations with experience promoting democracy inside Cuba. The Senate Appropriations version of the bill, S. 3108 , would have provided $15 million for democracy programs in Cuba. A series of continuing resolutions ( P.L. 115-245 and P.L. 115-298 ) continued FY2019 funding at FY2018 levels through December 21, 2018, but the 115 th Congress did not complete action on FY2019 appropriations, leaving the task to the 116 th Congress. Oversight of U.S. Democracy Assistance to Cuba. The GAO has issued three major reports since 2006 examining USAID and State Department democracy programs for Cuba. In the most recent report, issued in 2013, GAO concluded that USAID had improved its performance and financial monitoring of implementing partners' use of program funds, but found that the State Department's financial monitoring had gaps. Both agencies were reported to be taking steps to improve financial monitoring. In 2014, two investigative news reports alleged significant problems with U.S. democracy promotion efforts in Cuba. In April, an Associated Press (AP) investigative report alleged that USAID, as part of its democracy promotion efforts for Cuba, had established a "Cuban Twitter" known as ZunZuneo, a communications network designed as a "covert" program "to undermine" Cuba's communist government built with "secret shell companies" and financed through foreign banks. According to the press report, the project, which was used by thousands of Cubans, lasted more than two years until it ended in 2012. USAID, which strongly contested the report, issued a fact sheet about the ZunZuneo program. It maintained that program was not "covert" but rather that, just as in other places where USAID is not always welcome, the agency maintained a "discreet profile" on the project to minimize risk to staff and partners and to work safely. Some Members of Congress strongly criticized USAID for not providing sufficient information to Congress about the program when funding was appropriated, whereas other Members staunchly defended the agency and the program. In August 2014, the AP reported on another U.S.-funded democracy program for Cuba in which a USAID contractor sent about a dozen youth from several Latin American countries (Costa Rica, Peru, and Venezuela) in 2010 and 2011 to Cuba to participate in civic programs, including an HIV-prevention workshop, with the alleged goal to "identify potential social-change actors" in Cuba. The AP report alleged that "the assignment was to recruit young Cubans to anti-government activism under the guise of civic programs." USAID responded in a statement maintaining that the AP report "made sensational claims against aid workers for supporting civil society programs and striving to give voice to these democratic aspirations." In December 2015, USAID's Office of Inspector General issued a report on USAID's Cuban Civil Society Support Program that examined both the ZunZuneo and HIV-prevention projects. The report cited a number of problems with USAID's management controls of the civil society program and made a number of recommendations, including that USAID conduct an agency-wide analysis to determine whether a screening policy is needed to address intelligence and subversion threats and, if so, develop and implement one. Radio and TV Martí229 U.S.-government-sponsored radio and television broadcasting to Cuba—Radio and TV Martí—began in 1985 and 1990, respectively. Until October 1999, U.S.-government-funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions were merged into the Department of State at the beginning of FY2000, the Broadcasting Board of Governors (BBG) became an independent agency that included such entities as the Voice of America, Radio Free Europe/Radio Liberty, Radio Free Asia, and the Office of Cuba Broadcasting (OCB). In August 2018, the BBG officially changed its name to the U.S. Agency for Global Media (USAGM). Today, OCB, which has been headquartered in Miami, FL, since 1998, manages Radio and TV Martí and the Martínoticiaas.com website and its social media platforms on YouTube, Google, and Facebook. According to the BBG's 2019 Congressional Budget Justification , the Martís reach 11.1% of Cubans on a weekly basis with audio, video, and digital content delivered by radio, satellite TV, online, and on distinctly Cuban digital "packages" ( paquetes ). The largest audiences reportedly are for Radio Martí and TV Martí, with weekly audiences respectively reaching 8% and 6.8% of Cubans, while online content reaches a smaller audience of 5.3%. OCB also administers a shortwave transmitting station in Greenville, NC. Additional newer transmitters at Greenville reportedly have helped increase Radio Martí's presence in Cuba, and the increase in the number of frequencies has made it harder for the Cuban government to interfere with the radio broadcasts. Funding. From FY1984 through FY2018, Congress appropriated about $882 million for broadcasting to Cuba. In recent years, funding has amounted to some $27-$29 million in each fiscal year from FY2014 to FY2018. The Trump Administration's FY2019 request is for almost $13.7 million. For FY2017, the Obama Administration requested $27.1 million for the OCB, about the same amount appropriated in FY2016. The Administration also requested authority for the BBG to establish a new Spanish-language, nonfederal media organization that would receive a BBG grant and perform the functions of the current OCB. The House version of the FY2017 State Department, Foreign Operations, and Related Programs appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), had a provision that would have blocked the Administration's request by prohibiting funding to establish an independent grantee organization to carry out any and all broadcasting and related programs to the Latin American and Caribbean region or otherwise substantially alter the structure of the OCB unless specifically authorized by a subsequent act of Congress. The funding prohibition pertained to the merger of the OCB and the Voice of America Latin America Division. The Senate version of the bill, S. 3117 ( S.Rept. 114-290 ), would have provided $27.4 million for the OCB, $300,000 more than the Administration's request. The report to the bill stated that the committee did not support the proposed contractor reduction of $300,000 at the OCB. The 115 th Congress completed final action on FY2017 appropriations in early May 2017 through enactment of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The explanatory statement to the measure provided $28.056 million for the Office of Cuba Broadcasting, $1 million more than requested. According to the BBG, the actual amount provided for the OCB in FY2017 was $28.938 million. For FY2018, the Trump Administration requested $23.656 million for the OCB, $4.4 million less than the amount Congress appropriated for FY2017. According to the BBG's request, the funding reduction would be covered by a reduction in contractor support, elimination of most vacant staff positions and reduction of other government positions through attrition, elimination of ineffective leased broadcast transmissions, and a reduction of administrative costs. The report to the House Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill ( H.Rept. 115-253 to H.R. 3362 ) would have provided $28.1 million for broadcasting to Cuba, $4.4 million above the request; this also was included in the House-passed version of the FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017. The Senate Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, S. 1780 ( S.Rept. 115-152 ), would have provided not less than $28.6 million for broadcasting to Cuba. In final action Congress provided $28.936 million for Cuba broadcasting, $5.28 million more than requested, in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ; explanatory statement, Division K), signed into law in March 2018. For FY2019, the Trump Administration requested $13.656 million for the OCB, $10 less than the Administration's FY2018 request and $15.3 million less than the amount provided in FY2017. The rationale for the proposed cut in funding for the OCB was to find efficiencies between OCB and the Voice of America's Latin American division. The House Appropriations Committee's FY2019 State Department and Foreign Operations bill, H.R. 6385 , would have provided $29.1 million for Cuba broadcasting, while the Senate Appropriations Committee's bill, S. 3108 , would have provided $29.2 million. The report to the Senate bill, S.Rept. 115-282 , would also have called for a State Department Cuba report on Internet access, the use of cell phones to access data, the impact of access to telecommunications technology on increased political and economic opportunities, and the impact of telecommunications development on human rights. The 115 th Congress did not complete action on FY2019 appropriations, leaving the task to the 116 th Congress. Nevertheless, the 115 th Congress approved a series of continuing resolutions ( P.L. 115-245 and P.L. 115-298 ) that continued FY2019 funding at FY2018 levels through December 21, 2018. Oversight Issues. Both Radio and TV Martí have at times been the focus of controversies, including questions about adherence to broadcast standards. From 1990 through 2011, there were almost dozen government studies and audits of the OCB, including investigations by the GAO, by a 1994 congressionally established Advisory Panel on Radio and TV Martí, by the State Department Office Inspector General, and by the combined State Department/BBG Office Inspector General. In 2009, GAO issued a report on the issue of small audience levels for both Radio and TV Martí as well as concerns with adherence to relevant domestic laws and international standards, including the domestic dissemination of OCB programming, inappropriate advertisements during OCB programming, and TV Martí's interference with Cuban broadcasts. In 2010, the Senate Foreign Relations Committee majority issued a staff report that cited problems with adherence to broadcast standards, audience size, and Cuban government jamming. Among its recommendations, the report called for OCB to be moved to Washington, DC, and integrated fully into the Voice of America. A 2011 GAO report recommended that the BBG provide an analysis on the estimated costs and savings of sharing resources between OCB and the Voice of America's Latin America Division. Concerns About TV Martí Program in 2018. On October 26, 2018, media reports highlighted a disturbing TV Martí program originally aired in May 2018 (which remained on Radio and Television Martí's website) that referred to U.S. businessman and philanthropist George Soros as "the multimillionaire Jew of Hungarian origin" and as a "non-believing Jew of flexible morals." The program espoused a number of conspiracy theories about Soros, including that he was the architect of the 2008 financial crisis. Senator Jeff Flake spoke out against the TV Martí program, which he referred to as "taxpayer-funded anti-Semitism." He sent a letter to John Lansing, chief executive officer (CEO) of the USAGM, on October 29, 2018, asking for an investigation into the program, including its evolution, from initial inception to final approval; who produced the program; and what review process was in place to ensure it met VOA journalistic standards. Senator Flake also called for those approving anti-Semitic content to be removed from their positions immediately, asserting that "lack of action on this matter will further denigrate the United States as a credible voice overseas, the repercussion of which will be severe." Initially, OCB Director Tomás Regalado, who began his appointment in early June 2018, responded by pulling the original program and related shorter segments from the OCB's online website and acknowledging that the program "did not have the required balance." USAGM's CEO Lansing took further action on October 29, 2018, by issuing a statement that the program about Soros "is inconsistent with our professional standards and ethics." He stated that those deemed responsible for the production would be immediately placed on administrative leave pending an investigation into their apparent misconduct. Lansing also directed "an immediate, full content audit to identify any patterns of unethical reporting at the network" and asked Regalado to "require ethics and standards refresher training for all OCB journalists. " Lansing wrote a letter of apology to Soros in early November 2018 in which he said that the program "was based on extremely poor and unprofessional journalism," and "was utterly offensive in its anti-Semitism and clear bias." Lansing also stated in the letter that he had instructed OCB Director Regalado "to remove the offensive story from the TV Martí website and social media" and "to hire a full time "standards and practices" editor to oversee all outgoing content with strict adherence to the highest professional standards of journalism." The audit of reporting at the network reportedly uncovered an earlier story about Soros that included anti-Semitic language as well as an anti-Muslim opinion piece published in September 2018, that were also removed from the website. As of mid-December 2018, press reports maintain that four OCB employees have been placed on leave and two contract staffers have been fired because of the offensive programming. The TV Martí program raises significant concerns about the OCB's adherence to broadcast standards and questions about the program's intended audience. TV Martí's authorizing legislation, the Television Broadcasting to Cuba Act ( P.L. 101-246 , Title II, Part D, 22 U.S.C. 1465bb ) has a provision stating that television broadcasting to Cuba "shall be in accordance with all Voice of America standards to ensure the broadcast of programs which are objective, accurate, balance, and which present a variety of views." U.S. law sets forth the following principles for VOA broadcasts: (1) VOA will serve as a consistently reliable and authoritative source of news. VOA news will be accurate, objective, and comprehensive; (2) VOA will represent America, not any single segment of American society, and will therefore present a balanced and comprehensive projection of significant American thought and institutions; and (3) VOA will present the polices of the United States clearly and effectively and also will present responsible discussion and opinion on these policies. These VOA principles and broader U.S. international broadcasting standards and principles are set forth in 22 U.S.C. 6202 ( P.L. 103-236 , Title III, Section 303, and P.L. 103-415 ). The anti-Semitic program broadcast by TV Martí prompted the Senate Foreign Relations Committee to approve an amendment to S. 3654 , the U.S. Agency for Global Media Reform Act, during committee consideration of the bill on November 28, 2018. Offered by Senator Jeff Flake, the amendment was aimed at holding USAGM accountable for the incident. The provision would have required USAGM's CEO to brief or report to the appropriate congressional committees on any employee of the agency or an agency grantee network who has been suspended or placed on administrative leave without a formal disciplinary determination for writing or approving content in programming inconsistent with the agency's mission to "inform, engage, and connect people around the world in support of freedom and democracy." The briefing or report would have been required to include information on the employment status of the suspended employee and the "reasons for the Agency's failure to made a formal disciplinary determination." The Senate Foreign Relations Committee reported the bill on November 28, 2018, but no further action was taken on the measure before the end of the 115 th Congress. Migration Issues249 In its final days in office, the Obama Administration announced another major Cuba policy shift. On January 12, 2017, the United States ended the so-called "wet foot/dry foot" policy under which thousands of undocumented Cuban migrants entered the United States in recent years. (Under that policy, those Cuban migrants interdicted at sea generally were returned to Cuba whereas those reaching U.S. land were allowed entrance into the United States and generally permitted to stay.) Under the new policy, as announced by President Obama and then-Secretary of Homeland Security Jeh Johnson, Cuban nationals who attempt to enter the United States illegally and do not qualify for humanitarian relief are now subject to removal. The Cuban government also agreed to begin accepting the return of Cuban migrants who have been ordered removed. At the same time, the Obama Administration announced that it was ending the special Cuban Medical Professional Parole program, a 10-year-old program allowing Cuban medical professionals in third countries to be approved for entry into the United States. Background. Cuba and the United States reached two migration accords in 1994 and 1995 designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift, in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Fidel Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, on August 19, 1994, President Clinton abruptly changed U.S. immigration policy, under which Cubans attempting to flee their homeland were allowed into the United States, and announced that the U.S. Coast Guard and Navy would take Cubans rescued at sea to the U.S. Naval Station at Guantanamo Bay, Cuba. Despite the change in policy, Cubans continued to flee in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminated in a September 9, 1994, bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. (For information on the effect of the staff reduction at the U.S. Embassy in Havana on visa processing, see " Effect of Staff Reduction on U.S. Embassy Havana Operations " above.) In May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States but would intercept future Cuban migrants attempting to enter the United States by sea and would return them to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledged to ensure that no action would be taken against those migrants returned to Cuba as a consequence of their attempt to immigrate illegally. In January 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S. naval station, most having been paroled into the United States. Maritime Interdictions. Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country. Until early January 2017, those Cubans who reached the U.S. shore were allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). In short, most interdictions, even in U.S. coastal waters, resulted in a return to Cuba, whereas those Cubans who touched shore were allowed to stay in the United States. Some had criticized this so-called wet foot/dry foot policy as encouraging Cubans to risk their lives to make it to the United States and as encouraging alien smuggling. Cuba had long opposed the policy, which it viewed as encouraging illegal, unsafe, and disorderly migration, alien smuggling, and Cubans' irregular entry into the United States from third countries. Over the years, the number of Cubans interdicted at sea by the U.S. Coast Guard has fluctuated annually, influenced by several factors, including the economic situations in Cuba and the United States. The number of interdictions rose from 666 in FY2002 to 2,868 in FY2007 (see Figure 4 ). In the three subsequent years, maritime interdictions declined significantly to 422 by FY2010. Major reasons for the decline were reported to include the U.S. economic downturn, more efficient coastal patrolling, and more aggressive prosecution of migrant smugglers by both the United States and Cuba. From FY2011 through FY2016, however, the number of Cubans interdicted by the Coast Guard increased each year, from 1,047 in FY2011 to 5,230 in FY2016. The increase in the flow of maritime migrants in 2015 and 2016 was driven by concerns among Cubans that the favorable treatment granted to Cuban migrants would end. With the change in U.S. immigration policy toward Cuba in January 2017, the number of Cubans interdicted by the Coast Guard dropped to a trickle. For FY2017, the Coast Guard interdicted 2,109 Cubans, with the majority of these interdictions occurring before the policy change. For FY2018, as of August 14, 2018, the Coast Guard interdicted 200 Cubans at sea. Arrival of Undocumented Cuban Migrants. According to statistics from the Department of Homeland Security, the number of undocumented Cubans entering the United States both at U.S. ports of entry and between ports of entry rose from almost 8,170 in FY2010 to 58,269 in FY2016 (see Table 1 ). Beginning around FY2013, according to the State Department, undocumented Cuban migrants began to favor land-based routes to enter the United States, especially via ports of entry from Mexico. Since that time and the change in U.S. immigration policy in early 2017, the number of undocumented Cubans entering by land increased significantly, with a majority entering through the southwestern border. Just as the number of Cubans interdicted by the U.S. Coast Guard at sea has dropped precipitously since the change in U.S. immigration policy toward Cuba, the number of undocumented Cuban migrants entering the United States at ports of entry and between ports of entry has fallen considerably. In FY2017, 20,955 undocumented Cubans entered the United States at and between ports of entry, with the majority of these, almost 18,000, entering before the change in U.S. immigration policy. In FY2018, as of August 21, 2018, 6,044 undocumented Cubans arrived in the United States at or between ports of entry, about a 70% decline from all of FY2017. Antidrug Cooperation Cuba is not a major producer or consumer of illicit drugs, but its extensive shoreline and geographic location make it susceptible to narcotics-smuggling operations. Drugs that enter the Cuban market are largely the result of onshore wash-ups from smuggling by high-speed boats moving drugs from Jamaica to the Bahamas, Haiti, and the United States or by small aircraft from clandestine airfields in Jamaica. For a number of years, Cuban officials have expressed concerns about the use of their waters and airspace for drug transit and about increased domestic drug use. The Cuban government has taken a number of measures to deal with the drug problem, including legislation to stiffen penalties for traffickers, increased training for counternarcotics personnel, and cooperation with a number of countries on antidrug efforts. Since 1999, Cuba's Operation Hatchet has focused on maritime and air interdiction and the recovery of narcotics washed up on Cuban shores. Since 2003, Cuba has aggressively pursued an internal enforcement and investigation program against its incipient drug market with an effective nationwide drug prevention and awareness campaign. Over the years, there have been varying levels of U.S.-Cuban cooperation on antidrug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of almost 6 metric tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of two defendants in the case in the United States. Cooperation has increased since 1999, when U.S. and Cuban officials met in Havana to discuss ways of improving antidrug cooperation. Cuba accepted an upgrading of the communications link between the Cuban Border Guard and the U.S. Coast Guard as well as the stationing of a U.S. Coast Guard drug interdiction specialist at the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000. Since the reestablishment of diplomatic relations with Cuba in 2015, U.S. antidrug cooperation has increased further, with several dialogues and exchanges on counternarcotics issues. In December 2015, U.S. and Cuban officials held talks at the headquarters of the Drug Enforcement Administration (DEA) in Washington, DC, with delegations discussing ways to stop the illegal flow of narcotics and exploring ways to cooperate on the issue. In April 2016, Cuban security officials toured the U.S. Joint Interagency Task Force South (JIATF-South) based in Key West, FL. JIATF-South has responsibility for detecting and monitoring illicit drug trafficking in the region and for facilitating international and interagency interdiction efforts. At a July 2016 dialogue in Havana with U.S. officials from the State Department, DEA, the U.S. Coast Guard, and Immigration and Customs Enforcement/Homeland Security Investigations, Cuba and the United States signed a counternarcotics arrangement to facilitate cooperation and information sharing. Technical exchanges between the U.S. Coast Guard and Cuba's Border Guard on antidrug efforts and other areas of cooperation occur periodically. According to the State Department's 2018 International Narcotics Control Strategy Report (INCSR), issued in March 2018, Cuba has 40 bilateral agreements for antidrug cooperation with countries worldwide, including the 2016 U.S.-Cuban agreement noted above. The report also stated that Cuban authorities and the U.S. Coast Guard share tactical information related to vessels transiting through Cuban territorial waters suspected of trafficking and coordinate responses. In addition, as noted in the report, direct communications were established in July 2016 between the U.S. DEA and Cuban counterparts within the Ministry of Interior's National Anti-Drug Directorate. Since then, according to the INCSR, the DEA has received approximately 20 requests for information related to drug investigations in addition to cooperation leading to Cuba's arrest of a fugitive wanted in the United States. More broadly, the INCR reports that Cuba has provided assistance to U.S. state and federal prosecutions by providing evidence and information, and has demonstrated a willingness to cooperate on law enforcement matters. As in the past, the State Department contended in the 2018 INCSR that "enhanced communication and cooperation between the United States, international partners, and Cuba, particularly in terms of real-time information-sharing, would likely lead to increased interdictions and disruptions of illegal drug trafficking." As noted in the INCSR, Cuba reported maritime seizures of 2.72 metric tons (MT) of illicit drugs in 2016 (2.5 MT of marijuana and 225 kilograms of cocaine). This compares to 906 kilograms of maritime seizures in 2015. U.S. Property Claims An issue in the process of normalizing relations is Cuba's compensation for the expropriation of thousands of properties of U.S. companies and citizens in Cuba. The Foreign Claim Settlement Commission (FCSC), an independent agency within the Department of Justice, has certified 5,913 claims for expropriated U.S. properties in Cuba valued at $1.9 billion in two different claims programs; with accrued interest, the properties' value would be some $8 billion. In 1972, the FCSC certified 5,911 claims of U.S. citizens and companies that had their property confiscated by the Cuban government through April 1967, with 30 U.S. companies accounting for almost 60% of the claims. In 2006, the FCSC certified two additional claims in a second claims program covering property confiscated after April 1967. Many of the companies that originally filed claims have been bought and sold numerous times. There are a variety of potential alternatives for restitution or compensation schemes to resolve the outstanding claims, but resolving the issue likely would entail considerable negotiation and cooperation between the two governments. Although Cuba has maintained that it would negotiate compensation for the U.S. claims, it does not recognize the FCSC valuation of the claims or accrued interest. Instead, Cuba has emphasized using declared taxable value as an appraisal basis for expropriated U.S. properties, which would amount to almost $1 billion, instead of the $1.9 billion certified by the FCSC. Moreover, Cuba generally has maintained that any negotiation should consider losses that Cuba has accrued from U.S. economic sanctions. Cuba estimates cumulative damages of the U.S. embargo at $134.5 billion in current prices as of 2018. Several provisions in U.S. law specifically address the issue of compensation for properties expropriated by the Cuban government. Section 620(a)(2) of the Foreign Assistance Act of 1961 prohibits foreign assistance, a sugar quota authorizing the importation of Cuban sugar into the United States, or any other benefit under U.S. law until the President determines that the Cuban government has taken appropriate steps to return properties expropriated by the Cuban government to U.S. citizens and entities not less than 50% owned by U.S. citizens, or to provide equitable compensation for the properties. The provision, however, authorizes the President to waive its restrictions if he deems it necessary in the interest of the United States. The LIBERTAD Act includes the property claims issue as one of the many factors that the President needs to consider in determining when a transition government is in power in Cuba and when a democratically elected government is in power. These determinations are linked, respectively, to the suspension and termination of the economic embargo on Cuba. For a transition government, as set forth in Section 205(b)(2) of the law, the President shall take into account the extent to which the government has made public commitments and is making demonstrable progress in taking steps to return property taken by the Cuban government on or after January 1, 1959, to U.S. citizens (and entities that are 50% or more beneficially owned by U.S. citizens) or to provide equitable compensation for such property. A democratically elected government, as set forth in Section 206 of the law, is one that, among other conditions, has made demonstrable progress in returning such property or providing full compensation for such property, in accordance with international law standards and practice. Section 103 of the LIBERTAD Act also prohibits a U.S. person or entity from financing any transaction that involves confiscated property in Cuba where the claim is owned by a U.S. national. The sanction may be suspended once the President makes a determination that a transition government is in power and shall be terminated when the President makes a determination that a democratically elected government is in power. In the 114 th Congress, two House hearings focused on the property claims issue. The House Western Hemisphere Subcommittee of the Committee on Foreign Affairs held a hearing in June 2015, and the House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing in February 2016. Since the reestablishment of diplomatic relations with Cuba in 2015, U.S. and Cuban officials have held three meetings on claims issues. The first meeting took place in December 2015 in Havana, with talks including discussions of the FCSC-certified claims of U.S. nationals, claims related to unsatisfied U.S. court judgments against Cuba (reportedly 10 U.S. state and federal judgments totaling about $2 billion), and some claims of the U.S. government. The Cuban delegation raised the issue of claims against the United States related to the U.S. embargo. A second claims meeting was held in July 2016, in Washington, DC. According to the State Department, the talks allowed for an exchange of views on historical claims-settlement practices and processes going forward. A third claims meeting was held in Havana in January 2017. As noted above, Title III of the LIBERTAD Act holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. To date, however, pursuant to provisions of the law, all Administrations have suspended the right to file law suits at six-month intervals, For the suspension, the President (since 2013, the Secretary of State) must determine that it is necessary to the national interests of the United States and will expedite a transition to democracy in Cuba. Secretary of State Pompeo made the most recent determination in June 2018, which is effective from August 1, 2018, through January 2019. In November 2018, National Security Adviser John Bolton maintained in a press interview that the Administration was exploring whether to continue to suspend Title III or to allow lawsuits to go forward. If the right to file lawsuits was not suspended, Title III would permit those U.S. nationals with claims certified by the FCSC to file suit against those trafficking in confiscated property. Significantly, Title III also would permit U.S. nationals who were not U.S. nationals at the time of the confiscation to file suit. A 1996 report to Congress by the State Department required by the LIBERTAD Act estimated that there could be some 75,000 to 200,000 claims by Cuban Americans with the value running into the tens of billions of dollars. When the LIBERTAD Act was enacted in 1996, the intent of Title III was to prevent foreign investment in properties confiscated by the Cuban government. However, since some U.S. companies have entered into transactions or investment projects with Cuban companies in recent years as a result of the U.S. engagement process with Cuba, some potentially could be susceptible to legal action if the Administration did not continue to suspend the right to file lawsuits. Lifting the suspension of the right to file lawsuits under Title III could have a significant effect on foreign companies conducting business in Cuba because of the potential risk emanating from such lawsuits. When the LIBERTAD Act was passed in 1996, several foreign governments strongly objected, and some (Canada, EU, and Mexico) enacted countermeasures to block enforcement of the U.S. sanctions. The EU could revive a WTO dispute against the LIBERTAD Act, which it suspended in 1998 when it reached an understanding on the issue with the United States that included the presumption of continued suspension of Title III. U.S. Fugitives from Justice An issue that had been mentioned for many years in the State Department's annual terrorism report was Cuba's harboring of fugitives wanted in the United States. The most recent mention of the issue was in the 2014 terrorism report (issued in April 2015), which stated that Cuba "does continue to harbor fugitives wanted to stand trial or to serve sentences in the United States for committing serious violations of U.S. criminal laws, and provides some of these individuals limited support, such as housing, food ration books, and medical care." With the resumption of diplomatic relations with Cuba, the United States have held several law enforcement dialogues in that reportedly has included the issue of fugitives from justice. U.S. fugitives from justice in Cuba include convicted murderers and numerous hijackers, most of whom entered Cuba in the 1970s and early 1980s. For example, Joanne Chesimard, also known as Assata Shakur, was added to the Federal Bureau of Investigation's (FBI's) Most Wanted Terrorist list in May 2013. Chesimard was part of militant group known as the Black Liberation Army. In 1977, she was convicted for the 1973 murder of a New Jersey State Police officer and sentenced to life in prison. Chesimard escaped from prison in 1979 and, according to the FBI, lived underground before fleeing to Cuba in 1984. Another fugitive, William "Guillermo" Morales, who was a member of the Puerto Rican militant group known as the Armed Forces of National Liberation, reportedly has been in Cuba since 1988 after being imprisoned in Mexico for several years. In 1978, both of his hands were maimed by a bomb he was making. He was convicted in New York on weapons charges in 1979 and sentenced to 10 years in prison and 5 years' probation, but he escaped from prison the same year. In addition to Chesimard and other fugitives from the past, a number of U.S. fugitives from justice wanted for Medicare and other types of insurance fraud have fled to Cuba in recent years. Although the United States and Cuba have an extradition treaty in place dating to 1905, in practice the treaty has not been utilized. Instead, for more than a decade, Cuba has returned wanted fugitives to the United States on a case-by-case basis. For example, in 2011, U.S. Marshals picked up a husband and wife in Cuba who were wanted for a 2010 murder in New Jersey, and in April 2013, Cuba returned a Florida couple who allegedly had kidnapped their own children (who were in the custody of the mother's parents) and fled to Havana. In August 2018, Cuba arrested and returned to the United States a long-sought U.S. fugitive from justice wanted in connection with ecoterrorism who had stopped in Cuba on his way to Russia. In November 2018, Cuba returned to the United States a New Jersey man wanted on murder charges. In another case demonstrating U.S.-Cuban law enforcement cooperation, Cuba successfully prosecuted a Cuban national in February 2018 who had fled to Cuba after murdering a doctor in Florida in 2015—the main witness was a Palm Beach detective. Cuba generally, however, has refused to render to U.S. justice any fugitive judged by Cuba to be "political," such as Chesimard, who they believe could not receive a fair trial in the United States. Moreover, in the past Cuba has responded to U.S. extradition requests by stating that approval would be contingent upon the United States returning wanted Cuban criminals from the United States. When President Trump announced his policy toward Cuba on June 16, 2017, he called for Cuba to return to the United States U.S. fugitives from justice and specifically called for the return of Joanne Chesimard. Cuban Foreign Minister Rodríguez rejected the return of certain political refugees, such as Chesimard, who had received asylum from the Cuban government. In the 115 th Congress, the explanatory statement (Division K) to the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) directed the Secretary of State to engage the government of Cuba "to resolve cases of fugitives from justice, including persons sought by the United States Department of Justice for such crimes committed in the United States, such as Joanne Chesimard." Two resolutions also were introduced, H.Res. 664 (King) and S.Res. 391 (Menendez), that would have called for the immediate extradition or rendering to the United States of all fugitives from justice in Cuba receiving safe harbor to escape prosecution or confinement for criminal offenses committed in the United States. Another initiative, H.R. 1744 (Smith, New Jersey), would have require a report on fugitives from U.S. justice in Cuba and U.S. efforts to secure the return of such fugitives. No further action was taken on these measures. Outlook First Vice President Miguel Díaz-Canel succeeded Raúl Castro as president in April 2018, but any near-term change to the government's one-party communist political system is unlikely. Cuba is now in the midst of rewriting its 1976 constitution, with a planned national referendum on February 24, 2019. Among the changes are the addition of a new appointed prime minister to oversee government operations, age and term limits on the president, and some market-oriented economic reforms, including the right to private property. However, the new constitution still would ensure the state sector's dominance over the economy and the role of the Communist Party in the political system as the only official party. Raúl Castro is continuing as first secretary of the party until 2021, and he played a key role heading the commission rewriting the constitution. Nevertheless, the government of Díaz-Canel, who is 58 years of age, brings to power a leader from a new generation and can be viewed as the culmination of generational change in Cuba's governmental institutions that began several years ago. The government of Raúl Castro began the implementation of significant economic policy changes, moving toward a more mixed economy with a stronger private sector, but its slow gradualist approach did not produce major improvements to the Cuban economy. In December 2018, President Díaz-Canel backtracked on implementing regulations that likely would have shrunk the private sector, and he slowed down implementation of a controversial decree regulating artistic expression, actions that appeared to demonstrate his responsiveness to public criticism and concerns and his independence from the previous Castro government. Looking ahead, President Díaz-Canel continues to faces two significant challenges—moving forward with economic reforms that produce results and responding to desires for greater freedom. The Obama Administration's shift in U.S. policy toward Cuba opened up engagement with the Cuban government in a variety of areas. Economic linkages with Cuba increased because of the policy changes, although to what extent they will continue to increase is uncertain given that the overall embargo and numerous other sanctions against Cuba remain in place. President Trump's partial rollback of Obama-era changes and introduction of new economic sanctions has limited opportunities for U.S. business engagement and contributed to a downturn in American travel to Cuba in the second half of 2017 and first part of 2018, although reports indicate that travel increased in the second part of the year because of a large increase in those visiting via cruise ships. The U.S. decision to downsize the diplomatic staff of the U.S. Embassy in Havana in response to unexplained injuries to U.S. diplomatic personnel in Cuba resulted in the suspension of most visa processing at the embassy and reduced other embassy operations, which has made bilateral engagement and existing areas of government-to-government cooperation more difficult. Just as there were diverse opinions in the 114 th Congress over U.S. policy toward Cuba, debate over Cuba policy continued in the 115 th Congress, especially with regard to U.S. economic sanctions. Most significantly, in the 2018 farm bill, P.L. 115-334 , enacted in December 2018, Congress approved a provision permitting funding for two U.S. agricultural export promotion programs in Cuba. Although any such future funding likely would be small, this was the first congressional action easing U.S. economic sanctions on Cuba in almost a decade. The human rights situation in Cuba remained a key congressional concern in the 115 th Congress and likely will remain a key concern in the future, although there are diverse views regarding the best approach to influence the Cuban government. Appendix A. Legislative Initiatives in the 115 th Congress Enacted Legislation and Approved Resolutions P.L. 115-31 ( H.R. 244 ). Consolidated Appropriations Act, 2017. Introduced January 4, 2017, as the Honoring Investments in Recruiting and Employing American Military Veterans Act of 2017; subsequently, the bill became the vehicle for the FY2017 appropriations measure known as the Consolidated Appropriations Act, 2017. House agreed to Senate amendments (309-118) May 3, 2017; Senate agreed to House amendment to Senate amendments (79-18) May 4, 2017. President signed into law May 5, 2017. Division C (Department of Defense), Section 8127, provided that none of the funds made available in the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division J (State Department and Foreign Operations), Section 7007, continued a long-standing provision prohibiting direct funding for the government of Cuba (including direct loans, credits, insurance, and guarantees of the Export-Import Bank). Section 7015(f) continues to require that foreign aid for Cuba not be obligated or expended except as provided through the regular notification procedures of the Committees on Appropriations. The explanatory statement to the measure provided $20 million in democracy assistance for Cuba ($5 million more than requested) and $28.056 million for the Office of Cuba Broadcasting ($1 million more than requested). P.L. 115-91 ( H.R. 2810 ) . National Defense Authorization Act (NDAA) for Fiscal Year 2018. H.R. 2810 introduced June 7, 2017; reported ( H.Rept. 115-200 ) by House Committee on Armed Services July 6, 2017. S. 1519 introduced and reported ( S.Rept. 115-125 ) by the Senate Committee on Armed Services July 10, 2017. House passed H.R. 2810 , amended, July 14, 2017. Senate passed H.R. 2810 , amended, September 18, 2017. Section 1026 of the House-approved version H.R. 2810 would continue a provision in the FY2017 NDAA ( P.L. 114-328 , Section 1035) prohibiting funds made available for the Department of Defense (DOD) for FY2018 from being used to close or abandon the U.S. Naval Station at Guantanamo Bay, Cuba, relinquish control of Guantanamo Bay to Cuba, or implement a material modification to a 1934 treaty between the United States and Cuba that constructively closes the naval station. Section 1034 of the Senate-approved version of H.R. 2810 would have extended the provision regarding the realignment or closure of the U.S. naval station in P.L. 114-328 from FY2017 through FY2021. Conference report ( H.Rept. 115-404 ) filed November 9, 2017. In the conference report, the Senate receded and accepted the House language on the provision regarding the U.S. Naval Station. Section 1036 continues to prohibit funds made available for DOD for FY2018 from being used to close or abandon the U.S. Naval Station at Guantanamo Bay, Cuba, relinquish control of Guantanamo Bay to Cuba, or implement a material modification to a 1934 treaty between the United States and Cuba that constructively closes the naval station. The House agreed (356-70) to the conference report November 14, and the Senate agreed (voice vote) to it on November 16, 2017. Signed into law December 12, 2017. P.L. 115-141 ( H.R. 1625 ). Consolidated Appropriations Act, 2018. Originally introduced March 20, 2017, as the Targeted Rewards for the Global Eradication of Human Trafficking Act, in March 2018, the bill became the vehicle for the FY2018 omnibus appropriations measure known as the Consolidated Appropriations Act, 2018. House agreed (256-167) to an amendment to the Senate amendment March 22, 2018; Senate agreed (65-32) to the House amendment to the Senate amendment March 23, 2018. President signed into law March 23, 2018. The measure did not include policy provisions tightening sanctions or limiting funding for a U.S. diplomatic presence that had been included in several FY2018 House appropriations bills (Commerce, H.R. 3267 ; Financial Services, H.R. 3280 ; Homeland Security, H.R. 3355 ; and State Department and Foreign Operations, H.R. 3362 —all of which had been incorporated into House-passed H.R. 3354 ). Division C (Department of Defense), Section 8123, carries over a prior-year provision providing that none of the funds made available by the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division J (Military Construction, Veterans Affairs, and Related Agencies), Section 128, provides that none of the funds made available by the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division K (State, Foreign Operations, and Related Programs), Section 7007, continues a long-standing provision prohibiting direct funding for the government of Cuba, including direct loans, credits, insurance, and guarantees of the Export-Import Bank or its agents. Section 7015(f) continues a long-standing provision prohibiting the obligation or expending of assistance for Cuba except through the regular notification procedures of the Committees on Appropriations. The explanatory statement to H.R. 1625 , Division K, provided $28.936 million for Cuba broadcasting, $5.28 million more than requested. This compared to $28.1 million recommended by the House appropriations bill ( H.R. 3362 , H.Rept. 115-253 ) and not less than $28.6 million recommended by the Senate appropriations bill ( S. 1780 , S.Rept. 115-152 ). The explanatory statement provided $20 million for democracy programs in Cuba, compared to the Administration's zeroing out of the assistance. The House appropriations bill would have provided $30 million in democracy assistance and the Senate bill would have provided $15 million, with not less than $3 million to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. In the explanatory statement, the Secretary of State is directed to engage with foreign governments, such as the government of Cuba, not covered by Section 7067 of the act, "to resolve cases of fugitives from justice, including persons sought by the United States Department of Justice for such crimes committed in the United States, such as Joanne Chesimard." P.L. 115-232 ( H.R. 5515 ). John S. McCain National Defense Authorization Act for Fiscal Year 2019. Introduced April 13, 2018. House passed (351-66) May 24, 2018. Senate passed (85-10) June 18, 2018, substituting the language of S. 2987 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019. As approved by the Senate, H.R. 5515 had two Cuba-related provisions: Section 1024 would extend the prohibition on the use of funds in FY2019 to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba; Section 1027 would require the Defense Intelligence Agency to submit a report to the appropriate congressional committees within 180 days on security cooperation between Russia and Cuba, Nicaragua, and Venezuela. Conference report ( H.Rept. 115-874 ) filed July 25, 2018; House agreed (359-54) to the conference July 26 and Senate agreed (86-10) August 1, 2018. Signed into law August 13, 2018. As signed into law, Section 1032 extends the prohibition on the use of funds in FY2019 to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba. In the conference report, the conferees expressed concern about Russian military and intelligence activity in the Western Hemisphere, urged the Department of Defense to engage in dialogue and cooperation on security partners and allies in the region, and directed the Director of the Defense Intelligence Agency to submit a report to several key committees on security cooperation between the Russian Federation and Cuba, Nicaragua, and Venezuela. P.L. 115-244 ( H.R. 5895 ). Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019. Originally introduced as the Energy and Water Appropriations bill on May 21, 2018, the bill subsequently also became the vehicle for the Legislative Branch and Military Construction appropriations bills. House passed (235-179) June 8, 2018. Senate passed (235-179) June 25, 2018. Section 128 (Division C) of the House version and Section 127 (Division C) of the Senate version would continue a provision prohibiting funding to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. Conference report, H.Rept. 115-929 , filed September 10, 2018; Senate agreed to the conference report September 12, and House agreed September 13. Signed into law September 21, 2018. In the final acted measure, Section 128 (Division C) would continue the funding prohibition for FY2019 to carry out the closure or realignment of the naval station. (Also see H.R. 5786 and S. 3024 below.) P.L. 115-245 ( H.R. 6157 ). Department of Defense and Labor, Health, and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019. H.R. 6157 introduced and reported by House Committee on Appropriations ( H.Rept. 115-769 ) June 20, 2018, as the Department of Defense Appropriations Act, 2019. House passed (359-49) June 28, 2018. S. 3159 introduced and reported ( S.Rept. 115-290 ) by the Senate Appropriations Committee June 28, 2018. Senate passed (85-7) H.R. 6157 on August 23, 2018, substituting the language of S. 3159 (defense) and S. 3158 , covering the Departments of Labor, Health and Human Services, and Education. Both the House and Senate versions of H.R. 6157 (Section 8115 in the House version and Section 8109 in the Senate version) had a provision to continue a prohibition against FY2019 funds being used to carry out the closure or realignment of the U.S. Naval Station, Guantánamo Bay, Cuba. Conference report, H.Rept. 115-952 , filed September 13, 2018; Senate agreed to the conference September 18, and House agreed on September 26. Signed into law September 28, 2018. In the final enacted measure, Section 8125 of Division A continues the prohibition against FY2019 funds from being used to carry out the closure or realignment of the naval station. P.L. 115-254 ( H.R. 302 ). FAA Reauthorization Act of 2018. Originally introduced as the Sports Medicine Licensure Clarity Act of 2017 in January 2017, the bill became the legislative vehicle for the FAA Reauthorization Act of 2018 in September 2018. As signed into law October 5, 2018, the measure includes a provision in section 1957 requiring the Administrator of the Transportation Security Administration (1) to direct all public charters to provide updated flight data to more reliably track the public charter operations of air carriers between the United States and Cuba and (2) to develop and implement a mechanism that corroborates and validates flight schedule data to more reliably track the public charter operations of air carries between the United States and Cuba. The provision also requires the TSA Administrator to provide to Congress a confidential briefing on certain aspects of security measure at airports in Cuba that have air service to the United States. P.L. 115-334 ( H.R. 2 ) . 2018 Farm bill, Agriculture Improvement Act of 2018. H.R. 2 introduced May 3, 2018. S. 3042 introduced June 11, 2018; reported by Senate Committee on Agriculture, Nutrition, and Forestry June 18, 2018. House passed H.R. 2 (213-211) June 21, 2018. Senate passed (86-11) June 28, 2018, substituting the language of S. 3042 , as amended. As approved by the Senate, H.R. 2 had a provision, as amended by S.Amdt. 3364 (Rubio), that would permit funding for certain U.S. export promotion programs (Market Access Program and Foreign Market Development Cooperation Program) for U.S. agricultural products in Cuba, with the caveat that funds could not be used in contravention with directives under the National Security Presidential Memorandum issued by President Trump in June 2017 that prohibits transactions with entities owned, controlled, or operated by or on behalf of military, intelligence, or security services of Cuba. The conference report ( H.Rept. 115-1072 ) to the bill, filed December 10, 2018, retained the Senate provision on Cuba and appears in Title III, Subtitle B, Section 3201(a) of the bill. Senate agreed (87-13) to the conference report December 11, 2018, and the House agreed (369-47) December 12. Signed into law December 20, 2018. S.Res. 224 ( Durbin). The resolution recognizes the sixth anniversary of the death of Oswaldo Payá Sardiñas (July 2012) and commemorates his legacy and commitment to democratic values and principles. The resolution also calls on the Cuban government to allow an impartial, third-party investigation into the circumstances of Payá's death and to cease violating human rights, begin providing democratic freedoms to Cuban citizens, and provide amnesty for political prisoners. It urges the Inter-American Commission on Human Rights to continue reporting on human rights issues in Cuba and to request a visit to Cuba in order to investigate the circumstances surrounding the death of Oswaldo Payá. It also urges the United States to continue to support policies and programs that promote respect for human rights and democratic principles in Cuba in a manner consistent with the aspirations of the Cuban people. Introduced July 19, 2017; reported by the Senate Foreign Relations Committee, amended, March 21, 2018. Senate agreed to the resolution by Unanimous Consent on April 11, 2018. Additional Legislative Initiatives H.Res. 664 (King)/ S.Res. 391 (Menendez). Similar resolutions would have called for the immediate extradition or rendering to the United States of convicted felons William Morales, Joanne Chesimard, and all other fugitives from justices who are receiving safe harbor in Cuba to escape prosecution or confinement for criminal offenses committed in the United States. H.Res. 664 introduced December 13, 2017; referred to the House Committee on Foreign Affairs. S.Res. 391 introduced February 5, 2018; referred to the Senate Committee on Foreign Relations. H.R. 351 (Sanford). Freedom to Travel Act of 2017. The bill would have prohibited the President from prohibiting or regulating travel to or from Cuba by U.S. citizens or legal residents. Introduced January 6, 2017; referred to House Committee on Foreign Affairs. H.R. 442 (Emmer)/ S. 472 (Moran). Cuba Trade Act of 2017. Among its provisions, the initiative would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including in the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX). It would have repealed restrictions on private financing for Cuba but would have continued to prohibit U.S. government foreign assistance or financial assistance, loans, loan guarantees, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. The federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would be allowed. H.R. 442 introduced January 11, 2017; referred to House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Financial Services, and Agriculture. S. 472 introduced February 28, 2017; referred to the Senate Committee on Banking, Housing, and Urban Affairs. H.R. 498 (Cramer). Cuba Digital and Telecommunications Advancement Act of 2017, or the Cuba DATA Act. Among its provisions, the bill would have authorized the exportation of consumer communications devices to Cuba and the provision of telecommunications services to Cuba and would have repealed certain provisions of the CDA and the LIBERTAD Act. Introduced January 12, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committee on Energy and Commerce. H.R. 525 (Crawford). Cuba Agricultural Exports Act. The bill would have amended TSRA to permit U.S. government assistance for agricultural exports under TSRA, but not if the recipient would be an entity controlled by the Cuban government. The bill also would have authorized both the private financing of sales of agricultural commodities and investment for the development of an agricultural business in Cuba as long as the business was not controlled by the Cuban government or did not traffic in property of U.S. nationals confiscated by the Cuban government. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committees on Financial Services and Agriculture. H.R. 572 (Serrano). Promoting American Agricultural and Medical Exports to Cuba Act of 2017. Among its provisions, the bill would have permanently redefined the term payment of cash in advance to mean that payment is received before the transfer of title and release and control of the commodity to the purchaser; authorized direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; established an export promotion program for U.S. agricultural exports to Cuba; permitted nonimmigrant visas for Cuban nationals for activities related to purchasing U.S. agricultural goods; repealed a trademark sanction related to Cuba in a FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 ); prohibited restrictions on travel to Cuba; repealed the on-site verification requirement for medical exports to Cuba under the CDA; and established an agricultural export promotion trust fund. Introduced January 13, 2017; referred to House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Judiciary, Agriculture, and Financial Services. H.R. 573 (Serrano). Baseball Diplomacy Act. The bill would have waived certain prohibitions with respect to nationals of Cuba coming to the United States to play organized professional baseball. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committee on the Judiciary. H.R. 574 (Serrano). Cuba Reconciliation Act. Among its provisions, the bill would have lifted the trade embargo on Cuba by removing provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba and otherwise provide telecommunications services between the United States and Cuba; and prohibited restrictions on travel to and from Cuba. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Energy and Commerce, Financial Services, Judiciary, Oversight and Government Reform, and Agriculture. H.R. 1301 (Frelinghuysen). Department of Defense Appropriations Act, 2017. Introduced March 2, 2017; referred to the House Committee on Appropriations and in addition to the Committee on the Budget. House passed (371-48) March 8, 2017. As passed, Section 8127 provides that no funds in the act may be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (For further action, see P.L. 115-31 above.) H.R. 1744 (Smith, New Jersey) . Walter Patterson and Werner Foerster Justice and Extradition Act. The bill would have called for a report on fugitives from U.S. justice in Cuba, U.S. efforts to secure the return of such fugitives, and other information on those cases. Introduced March 27, 2017; referred to Committee on Foreign Affairs. H.R. 2966 (Rush). United States-Cuba Normalization Act of 2017. The bill would have removed provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba, and otherwise provide telecommunications services between the United States and Cuba; prohibited restrictions on travel to and from Cuba and on transactions incident to such travel; called on the President to continue discussions with Cuba for the purpose of settling claims of U.S. nationals for the taking of property by the Cuban government and securing the protection of internationally recognized human rights; extended nondiscriminatory trade treatment to the products of Cuba; and prohibited limits on remittances to Cuba. Introduced June 20, 2017; referred to House Committee on Foreign Affairs, and in addition to the Committees on Ways and Means, Energy and Commerce, the Judiciary, Agriculture, and Financial Services. H.R. 2998 (Dent) / S. 1557 (Moran) . Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018. H.R. 2998 introduced and reported ( H.Rept. 115-188 ) by the House Appropriations Committee on Appropriations June 22, 2017. S. 1557 introduced and reported ( S.Rept. 115-130 ) by the Senate Committee on Appropriations July 13, 2017. Section 128 of the House bill and Section 127 of the Senate bill would provide that none of the funds made available by this act may be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. The provision would extend the current similar provision for FY2017 set forth in P.L. 115-31 (Division C, Section 8127). As stated in the House and Senate committee reports to the respective bills, "the provision is intended to prevent the closure or realignment of the installation out of the possession of the United States, and maintain the Naval Station's longstanding regional security and migrant operations missions." The bill became a part of a "minibus" appropriations package, H.R. 3219 , approved by the House in July 2017, and a full-year FY2018 omnibus appropriations bill, H.R. 3354 , approved by the House in September 2017. For final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3180 (Nunes). Intelligence Authorization Act for Fiscal Year 2018. Introduced July 11, 2017, and reported by the House Committee on Intelligence July 24, 2017 ( H.Rept. 115-251 ). House passed (380-35) July 28, 2017. As approved, Section 609 would have expressed the sense of Congress that, pursuant to the statutory requirement for the intelligence community (IC) to keep the congressional intelligence committees "fully and currently informed," about all "intelligence activities" of the United States, IC agencies must submit prompt written notification after becoming aware that an individual in the executive branch has disclosed certain classified information outside established intelligence channels to adversary foreign governments, which are defined in the provision as the governments of North Korea, Iran, China, Russia, and Cuba. The Senate companion bill, S. 1761 (Burr), did not include a similar provision. For additional action, see H.R. 6237 below. H.R. 3219 (Granger). Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018, or the Make America Secure Appropriations Act, 2018. Introduced and reported ( H.Rept. 115-219 ) July 13, 2017, by the House Committee on Appropriations as the Department of Defense Appropriations Act, 2018, the bill subsequently became the vehicle for four other appropriations measures. House approved (235-192) July 27, 2017. As approved, Section 8116 of Division A (Defense appropriations) would provide that no funds made available by the act could be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. The provision would extend the current similar provision for FY2017 set forth in P.L. 115-31 (Division C, Section 8127). Section 128 of Division C (Military Construction appropriations) also would provide that none of the funds made available by the act may be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3267 (Culberson). Commerce, Justice, Science, and Related Agencies Appropriations, 2018. Introduced and reported ( H.Rept. 115-231 ) July 17, 2017, by the House Committee on Appropriations. Section 536 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner has expressly consented. In the report to the bill, the minority expressed the view that the provision was an inappropriate rider that did not belong in the bill, which would place restrictions on the U.S. Patent and Trademark Office (USPTO's) ability to issue trademarks to Cuban nationals, even in cases in which a specific license has been issued by the Department of the Treasury's Office of Foreign Assets Control. The minority stated that the provision would meddle in foreign policy, harm diplomatic efforts with Cuba, and create a significant burden, and set an impossible standard for the USPTO. The Senate companion bill, S. 1662 , did not have a comparable provision. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3280 (Graves). Financial Services and General Government Appropriations Act, 2018. Introduced and reported ( H.Rept. 115-234 ) July 18, 2017, by the House Committee on Appropriations. Section 130 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 131 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3328 ( Katko ) / S. 2023 (Rubio) . Cuban Airport Security Act of 2017. Identical bills would have required, among other provisions, a briefing for the House Committee on Homeland Security, Senate Committee on Commerce, Science, and Transportation, and the Comptroller General of the United States regarding certain security measures and equipment at each of Cuba's 10 international airports. The bill also would have prohibited a U.S. air carrier from employing a Cuban national in Cuba (pursuant to 31 CFR 515.573) unless the air carrier has publicly disclosed the full text of the formal agreement between the air carrier and the Empresa Cubana de Aeropuertos y Servicios Aeronauticos or any other entity associated with the Cuban government. The bill would also, to the extent practicable, have prohibited U.S. air carriers from hiring Cuban nationals if they had been recruited, hired, or trained by entities that are owned, operated, or controlled in whole or in part by Cuba's Council of State, Council of Ministers, Communist Party, Ministry of the Revolutionary Armed Forces, Ministry of Foreign Affairs, or Ministry of the Interior. H.R. 3328 introduced July 20, 2017; reported by the Committee on Homeland Security ( H.Rept. 115-308 ) and discharged by Committees on Foreign Affairs and Transportation September 13, 2017. House passed (voice vote) October 23, 2017. S. 2023 introduced October 26, 2017; referred to the Committee on Commerce, Science, and Transportation. Also see action above on P.L. 115-254 , FAA Reauthorization Act of 2018. H.R. 3354 ( Calvert ). Make America Sure and Prosperous Appropriations Act, 2018. Introduced as the Department of the Interior, Environment, and Related Agencies Appropriation Act on July 21, 2017, the bill subsequently became the vehicle for the FY2018 omnibus appropriations measure covering 12 FY2018 appropriations bills. House passed (211-198) September 14, 2017. As approved by the House, the measure had numerous provisions on Cuba that were included in individual House Appropriations Committee-reported appropriations bills. For final action on FY2018 appropriations, see P.L. 115-141 above. Division C (Commerce, Justice, Science). Section 536 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. (See H.R. 3267 above.) Division D (Financial Services and General Government). Section 130 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 131 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. (See H.R. 3280 above.) Division E (Homeland Security). Section 208 would have prohibited funds from being used to approve, license, facilitate, authorize, or allow the trafficking or import of property confiscated by the Cuban government. (See H.R. 3355 below.) Division G (State Department and Foreign Operations). Section 7007 would have continued to prohibit direct funding for the government of Cuba. Section 7015(f) would have continued to require notification to the Committees on Appropriations for funds for assistance to Cuba. Section 7045(c)(1) would have prohibited funding in the act and prior appropriation measures for the establishment or operation of a U.S. diplomatic presence in Cuba beyond that which was in existence prior to December 17, 2014. Section 7045(c)(2) would have provided $30 million in Economic Support Fund assistance to promote democracy and strengthen civil society but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. (See H.R. 3362 below.) Division I (Defense). Section 8116 would have continued to provide that no funds made available by the act could be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (See H.R. 3219 above.) Division K (Military Construction). Section 128 would have continued to provide that none of the funds made available by this act could be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. (See H.R. 2998 and H.R. 3219 above.) H.R. 3355 (Carter). Department of Homeland Security Appropriations, 2018. Introduced and reported ( H.Rept. 115-239 ) July 21, 2017, by the House Committee on Appropriations. Section 208 would have prohibited funds from being used to approve, license, facilitate, authorize, or allow the trafficking or import of property confiscated by the Cuban government. Also see H.R. 3354 above, and for final action on FY2018 appropriations see P.L. 115-141 above. H.R. 3362 (Rogers) / S. 1780 ( Graham) . Department of State, Foreign Operations, and Related Programs Appropriations, 2018. H.R. 3362 introduced and reported ( H.Rept. 115-253 ) by the House Committee on Appropriations on July 24, 2017. S. 1780 introduced and reported ( S.Rept. 115-152 ) by the Senate Appropriations Committee September 7, 2017. Also see H.R. 3354 above, and for final action on FY2018 appropriations, see P.L. 115-141 above. Both bills would continue two long-standing provisions: Section 7007 would prohibit direct funding for the government of Cuba, and Section 7015(f) would require notification to the Committees on Appropriations for funds for assistance to Cuba. Section 7045(c)(1) of the House bill would have prohibited funding in the act and prior appropriation measures for the establishment or operation of a U.S. diplomatic presence in Cuba beyond that which was in existence prior to December 17, 2014, including the hiring of additional staff, unless such staff were necessary for protecting the health, safety, or security of diplomatic personnel or facilities in Cuba; the prohibition would not have applied to support for democracy-building efforts for Cuba or if the President determined that Cuba had met the requirements and factors specified in Section 205 of the LIBERTAD Act of 1996 for determining when a transition government is in power in Cuba. Section 7045(c)(2) of the House bill would have provided $30 million in Economic Support Funds (ESF) assistance to promote democracy and strengthen civil society but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. In the Senate bill, Section 7045(c) would have provided $15 million in ESF for democracy programs in Cuba; of this, the provision would have provided that not less than $3 million be made available to USAID to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. The report to the House bill would have provided not less than $28.056 million for the Office of Cuba Broadcasting, whereas the report to the Senate bill would have provided $28.569 million. H.R. 4583 (Wilson , Joe ). Ensuring Diplomats' Safety Act. The bill would have suspended all U.S. diplomatic presence in Cuba until the conclusion of any U.S. law enforcement investigation relating to "the attacks on 17 United States diplomats." Introduced December 7, 2017; referred to the House Committee on Foreign Affairs. H.R. 5786 (Dent ) / S. 3024 (Boozman). Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2019. H.R. 5786 introduced and reported ( H.Rept. 115-673 ) by the House Committee on Appropriations May 11, 2018. S. 3024 introduced and reported ( H.Rept. 115-269 ) by the Senate Appropriations Committee June 7, 2018. Section 128 of the House bill and Section 127 of the Senate bill would continue a provision prohibiting funding to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (For further action, see P.L. 115-244 above) H.R. 5952 (Culberson). Commerce, Justice, Science, and Related Agencies Appropriations, 2019. Introduced and reported ( H.Rept. 115-704 ) by the House Appropriations Committee May 24, 2018). Section 535 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. In the report to the bill, the minority expressed the view that the provision was an inappropriate rider that did not belong in the bill, which would place restrictions on the U.S. Patent and Trademark Office (USPTO's) ability to issue trademarks to Cuban nationals, even in cases in which a specific license has been issued by the Department of the Treasury's Office of Foreign Assets Control. The minority stated that the provision would meddle in foreign policy, harm diplomatic efforts with Cuba, and create a significant burden, and set an impossible standard for the USPTO. The Senate companion bill, S. 3072 , did not have a comparable provision. H.R. 6147 (Calvert). Interior, Environment, and Financial Services and General Government Appropriations, 2019. Originally introduced as the FY2019 Department of the Interior, Environment, and Related Agencies appropriations bill, the measure also became the House vehicle for Financial Services and General Government appropriations and incorporated the House version of H.R. 6258 as Division B; House passed (217-199) July 19, 2018. As approved by the House: Section 128 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government; Section 129 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The Senate version of the bill, approved (92-6) August 1, 2018, also became the vehicle for Financial Services and General Government, Agriculture, and Transportation, Housing and Urban Development appropriations; it did not include the two Cuba-related provisions in the House version. Also see H.R. 6258 below. H.R. 6237 (Nunes). Matthew Young Pollard Intelligence Authorization for Fiscal Years 2018 and 2019. Introduced June 27, 2018; reported ( H.Rept. 115-805 ) by the House Committee on Intelligence July 3, 2018. House passed (363-54) July 12, 2018. As approved, the bill included a provision that would have expressed the sense of Congress that, pursuant to the statutory requirement for the intelligence community (IC) to keep the congressional intelligence committees "fully and currently informed," about all "intelligence activities" of the United States, IC agencies must submit prompt written notification after becoming aware that an individual in the executive branch has disclosed certain classified information outside established intelligence channels to adversary foreign governments, which were defined in the provision as the governments of North Korea, Iran, China, Russia, and Cuba. The Senate companion bill, S. 3153 (Burr), did not include a similar provision. H.R. 6258 (Graves) . Financial Services and General Government Appropriations Act, 2019. Introduced and reported ( H.Rept. 115-792 ) by the House Committee on Appropriations June 28, 2018. Section 128 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 129 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that was substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The Senate companion bill, S. 3107 , did not have similar provisions. Also see H.R. 6147 for additional legislative action. H.R. 6385 (Rogers) / S. 3108 (Graham) . Department of State, Foreign Operations, and Related Programs Appropriations, 2019. House Appropriations Committee introduced and reported H.R. 6385 ( H.Rept. 115-829 ) on July 16, 2018. Senate Appropriations Committee introduced and reported S. 3108 ( S.Rept. 115-282 ) June 21, 2018. Both bills would continue long-standing provisions prohibiting direct funding for the government of Cuba and prohibiting the obligation or expending of assistance for Cuba except through the regular notification procedures of the Committees on Appropriations. The House bill would have provided $30 million to promote democracy and strengthen civil society in Cuba, with, according to the report to the bill ( H.Rept. 115-829 ), not less than $8 million for the National Endowment for Democracy; the report would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building and stipulate that grants exceeding $1 million or to be implemented over a period of 12 months would be awarded only to organizations with experience promoting democracy inside Cuba. In the Senate bill, Section 7045(c) would have provided $15 million for democracy programs in Cuba. With regard to Cuba broadcasting, the House report would have provided $29.1 million and the Senate report ( S.Rept. 115-282 ) would have provided $29.2 million. The report to the Senate bill would also have called for a State Department Cuba report on Internet access, the use of cell phones to access data, the impact of access to telecommunications technology on increased political and economic opportunities, and the impact of telecommunications development on human rights. S.Res. 511 (Rubio)/ H.Res. 916 (Diaz-Balart). Similar but not identical resolutions would have honored Las Damas de Blanco as the recipient of the 2018 Milton Friedman Prize for Advancing Liberty. S.Res. 511 introduced May 16, 2018; referred to the Committee on Foreign Relations. H.Res. 916 introduced May 25, 2018; referred to the Committee on Foreign Affairs. S. 259 (Nelson)/ H.R. 1450 (Issa). No Stolen Trademarks Honored in America Act. The initiative would have modified a 1998 prohibition (§211 of Division A, Tile II, P.L. 105-277 ) on recognition by U.S. courts of certain rights to certain marks, trade names, or commercial names. The bill would have applied a fix so that the sanction would apply to all nationals and would bring the sanction into compliance with a 2002 World Trade Organization dispute settlement ruling. S. 259 introduced February 1, 2017; referred to the Senate Committee on the Judiciary. H.R. 1450 introduced March 9, 2017; referred to House Committee on the Judiciary. S. 275 (Heitkamp). Agricultural Export Expansion Act of 2017. The bill would have amended TSRA to allow private financing by U.S. persons of sales of agricultural commodities to Cuba. Introduced February 2, 2017; referred to Senate Committee on Banking, Housing, and Urban Affairs. S. 539 (Cruz). The bill would have designated the area between the intersections of 16 th Street, Northwest and Fuller Street, Northwest, and 16 th Street, Northwest, and Euclid Street, Northwest, in Washington, DC, as "Oswaldo Paya Way." Introduced March 7, 2017; referred to the Committee on Homeland Security and Governmental Affairs. S. 1286 (Klobuchar). Freedom to Export to Cuba Act of 2017. The bill would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. Introduced May 25, 2016; referred to the Senate Committee on Banking, Housing, and Urban Affairs. S. 1287 (Flake). Freedom for Americans to Travel Act of 2017. The bill would have prohibited the President from regulating travel to or from Cuba by U.S. citizens or legal residents, or any of the transactions incident to such travel, including banking transactions. It would have provided for the President to regulate such travel or restrictions on a case-by-case basis if the President determined that such restriction was necessary to protect the national security of the United States or was necessary to protect the health or safety of U.S. citizens or legal residents resulting from traveling to or from Cuba; to implement such a restriction, the President would have been required to submit a written justification not later than seven days to several congressional committees. Introduced May 25, 2017; referred to the Committee on Foreign Relations. S. 1655 (Collins). Transportation, Housing, and Urban Development, and Related Agencies Appropriations Act, 2018. Introduced and reported ( S.Rept. 115-138 ) July 27, 2017. Section 119E would have allowed foreign air carriers traveling to or from Cuba to make transit stops in the United States for refueling and other technical services. S. 1699 (Wyden). United States-Cuba Trade Act of 2017. The bill, among its provisions, would have repealed or amended provisions of law restricting trade and other relations with Cuba; authorized common carriers to install, maintain, and repair telecommunications equipment and facilities in Cuba and provided telecommunications services between the United States and Cuba; prohibited restrictions on travel to Cuba; called for the President to take all necessary steps to advance negotiations with the Cuban government for settling property claims of U.S. nationals and for securing the protection of internationally recognized human rights; extended nondiscriminatory trade treatment to Cuba; prohibited restrictions on remittances to Cuba; and required a presidential report to Congress prior to the denial of foreign tax credit with respect to certain foreign countries. Introduced August 1, 2017; referred to the Senate Committee on Finance. S. 3654 (Menendez). U.S. Agency for Global Media Reform Act. Introduced November 15, 2018 and referred to the Senate Committee on Foreign Relations; reported by Senator Corker November 28, 2018, with an amendment in the nature of a substitute and without written report. As reported, Section 8(b), included a requirement for a briefing or report from the CEO of the United States Agency for Global Media on any employee of the agency or an agency grantee network who has been suspended or placed on administrative leave without a formal disciplinary determination for writing or approving content in programming inconsistent with the agency's mission to "inform, engage, and connect people around the world in support of freedom and democracy." The briefing or report would have been required to include information on the employment status of the suspended employee and the "reasons for the Agency's failure to made a formal disciplinary determination." The provision originated from an amendment offered by Senator Flake, adopted by Unanimous Consent, during Senate Foreign Relation Committee consideration of the bill on November 28, 2018. Appendix B. Links to U.S. Government Reports U.S. Relations with Cuba, Fact Sheet , Department of State Date: November 8, 2017 Full Text: https://www.state.gov/r/pa/ei/bgn/2886.htm Congressional Budget Justificati on for Foreign Operations FY2019 , Appendix 2 , pp. 474-475, Department of State Date: March 14, 2018 Full Text: https://www.state.gov/documents/organization/279517.pdf Country Report s on Human Rights Practices for 2017 , Cuba , Department of State Date: April 20, 2018 Full Text: https://www.state.gov/documents/organization/277567.pdf Cuba web page, Department of State Link: https://www.state.gov/p/wha/ci/cu/index.htm Cuba web page, Department of Commerce, Bureau of Industry and Security Link: https://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/cuba Cuba web page, Department of Agriculture, Foreign Agricultural Service Link: https://www.fas.usda.gov/regions/cuba Cuba Sanctions web page, Department of the Treasury, Office of Foreign Assets Control Link: https://www.treasury.gov/resource-center/sanctions/Programs/Pages/cuba.aspx International R eligious Freedom Report for 2017 , Cuba , Department of State Date: May 29, 2018 Full Text: https://www.state.gov/documents/organization/281308.pdf International Narcotics Control Strategy Report 2018 , Volume I, Drug and Chemical Control, p. 146, Department of State Date: March 2018 Link: http://www.state.gov/documents/organization/278759.pdf International Narcotics Control Strategy Report 2018, Volume II , Money Laundering, pp. 85-87, Department of State Date: March 2018 Link: http://www.state.gov/documents/organization/278760.pdf Overview of Cuban Imports of Goods and Services and Effects of U.S. Restrictions , U.S. International Trade Commission, Publication 4597 Date: March 2016 Link: https://www.usitc.gov/sites/default/files/publications/332/pub4597_0.pdf Trafficking in Persons Report 2018 , Cuba, Department of State Date: June 2018 Link: https://www.state.gov/j/tip/rls/tiprpt/countries/2018/282640.htm

Cuba remains a one-party authoritarian state with a poor human rights record. Current President Miguel Díaz-Canel succeeded Raúl Castro in April 2018, although Castro is continuing as first secretary of Cuba's Communist Party. Over the past decade, Cuba has implemented gradual market-oriented economic policy changes, but critics maintain that it has not taken enough action to foster sustainable economic growth. Most observers do not anticipate major policy changes under Díaz-Canel, at least in the short term; the president faces the enormous challenges of reforming the economy and responding to desires for greater freedom. U.S. Policy Congress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening and at times easing U.S. economic sanctions. Since the early 1960s, the centerpiece of U.S. policy has consisted of economic sanctions aimed at isolating the Cuban government. In 2014, however, the Obama Administration initiated a major policy shift, moving away from sanctions toward a policy of engagement. The policy change included the restoration of diplomatic relations (July 2015); the rescission of Cuba's designation as a state sponsor of international terrorism (May 2015); and an increase in travel, commerce, and the flow of information to Cuba implemented through regulatory changes. In June 2017, President Trump unveiled a new policy toward Cuba that increased sanctions and partially rolled back some of the Obama Administration's efforts to normalize relations. The most significant changes include restrictions on transactions with companies controlled by the Cuban military and the elimination of individual people-to-people travel. In response to unexplained injuries of members of the U.S. diplomatic community at the U.S. Embassy in Havana, the State Department reduced the staff of the U.S. Embassy by about two-thirds; the reduction has affected embassy operations, especially visa processing, and made bilateral engagement more difficult. Legislative Activity In the 115th Congress, debate over Cuba policy continued, especially with regard to economic sanctions. The 2018 farm bill, P.L. 115-334 (H.R. 2), enacted in December 2018, has a provision permitting funding for two U.S. agricultural export promotion programs in Cuba. Two FY2019 House appropriations bills, Commerce (H.R. 5952) and Financial Services (H.R. 6258 and H.R. 6147), had provisions that would have tightened economic sanctions, but final action was not completed by the end of the 115th Congress. Other bills were introduced, but not acted upon, that would have eased or lifted sanctions altogether: H.R. 351 and S. 1287 (travel); H.R. 442/S. 472 and S. 1286 (some economic sanctions); H.R. 498 (telecommunications); H.R. 525 (agricultural exports and investment); H.R. 572 (agricultural and medical exports and travel); H.R. 574, H.R. 2966, and S. 1699 (overall embargo); and S. 275 (private financing for U.S. agricultural exports). Congress continued to provide funding for democracy and human rights assistance in Cuba and for U.S.-government sponsored broadcasting. For FY2017, Congress provided $20 million in democracy assistance and $28.1 million for Cuba broadcasting (P.L. 115-31). For FY2018, it provided $20 million for democracy assistance and $28.9 million for Cuba broadcasting (P.L. 115-141; explanatory statement to H.R. 1625). For FY2019, the Trump Administration requested $10 million in democracy assistance and $13.7 million for Cuba broadcasting. The House Appropriations Committee's FY2019 State Department and Foreign Operations appropriations bill, H.R. 6385, would have provided $30 million for democracy programs, whereas the Senate version, S. 3108, would have provided $15 million; both bills would have provided $29 million for broadcasting. The 115th Congress approved a series of continuing resolutions (P.L. 115-245 and P.L. 115-298 ) that continued FY2019 funding at FY2018 levels through December 21, 2018, but did not complete action on FY2019 appropriations, leaving the task to the 116th Congress. In other action, several approved measures—P.L. 115-232, P.L. 115-244, and P.L. 115-245—have provisions extending a prohibition on FY2019 funding to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba; the conference report to P.L. 115-232 also requires a report on security cooperation between Russia and Cuba. The FAA Reauthorization Act of 2018 (P.L. 115-254) requires the Transportation Security Administration to brief Congress on certain aspects of Cuban airport security and efforts to better track public air charter flights between the United States and Cuba. In April 2018, the Senate approved S.Res. 224, commemorating the legacy of Cuban democracy activist Oswaldo Payá. For more on legislative initiatives in the 115th Congress, see Appendix A.

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O n December 21, 2018, President Trump signed into law the First Step Act of 2018 ( P.L. 115-391 ). The act was the culmination of several years of congressional debate about what Congress might do to reduce the size of the federal prison population while also creating mechanisms to maintain public safety. Correctional and sentencing reform was an issue that drew interest from many Members of Congress. Some Members took it up for fiscal reasons; they were concerned that the increase in the Bureau of Prisons' (BOP) budget would take resources away from the Department of Justice's (DOJ) other priorities. Other Members were interested in correctional reform due to concerns about the social consequences (e.g., the effects incarceration has on employment opportunities and the families of the incarcerated, or the normalizing of incarceration) of what some deem mass incarceration , or they wanted to roll back some of the tough on crime policy changes that Congress put in place during the 1980s and early 1990s. This report provides an overview of the provisions of the First Step Act. The act has three major components: (1) correctional reform via the establishment of a risk and needs assessment system at BOP, (2) sentencing reform that involved changes to penalties for some federal offenses, and (3) the reauthorization of the Second Chance Act of 2007 ( P.L. 110-199 ). The act also contains a series of other criminal justice-related provisions that include, for example, changes to the way good time credits are calculated for federal prisoners, prohibiting the use of restraints on pregnant inmates, expanding the market for products made by the Federal Prison Industries, and requiring BOP to aid prisoners with obtaining identification before they are released. Correctional Reforms The correctional reform component of the First Step Act involves the development and implementation of a risk and needs assessment system (system) at BOP. Development of the Risk and Needs Assessment System The act requires DOJ to develop the system to be used by BOP to assess the risk of recidivism of federal prisoners and assign prisoners to evidence-based recidivism reduction programs and productive activities to reduce this risk. DOJ is required to develop and release the system within 210 days of enactment of the First Step Act. The system is to be used to determine the risk of recidivism of each prisoner during the intake process and classify each prisoner as having a minimum, low, medium, or high risk; assess and determine, to the extent practicable, the risk of violent or serious prison misconduct of each prisoner; determine the type and amount of recidivism reduction programming that is appropriate for each prisoner and assign each prisoner to programming based on the prisoner's specific criminogenic needs ; periodically reassess the recidivism risk of each prisoner; reassign prisoners to appropriate recidivism reduction programs or productive activities based on their reassessed risk of recidivism to ensure that all prisoners have an opportunity to reduce their risk classification, that the programs address prisoners' criminogenic needs, and that all prisoners are able to successfully participate in such programs; determine when to provide incentives and rewards for successful participation in recidivism reduction programs or productive activities; determine when a prisoner is ready to transfer into prerelease custody or supervised release; and determine the appropriate use of audio technology for program course materials to accommodate prisoners with dyslexia. DOJ is authorized to use existing risk and needs assessment instruments, validated annually, to meet the requirements of the act. When developing the system, the Attorney General is required to consult with the Director of BOP; the Director of the Administrative Office of the United States Courts; the Director of the Office of Probation and Pretrial Services; the Director of the National Institute of Justice; the Director of the National Institute of Corrections; and the Independent Review Committee, which is established by the First Step Act. When developing the system, the Attorney General, with the assistance of the Independent Review Committee, is required to conduct a review of the existing risk and needs assessment systems; develop recommendations regarding recidivism reduction programs and productive activities; conduct ongoing research and data analysis on (1) evidence-based recidivism reduction programs related to the use of risk and needs assessment, (2) the most effective and efficient uses of such programs, (3) which programs are the most effective at reducing recidivism, and the type, amount, and intensity of programming that most effectively reduces the risk of recidivism, and (4) products purchased by federal agencies that are manufactured overseas and could be manufactured by prisoners participating in a prison work program without reducing job opportunities for other workers in the United States; annually review and validate the risk and needs assessment system, including an evaluation to ensure that assessments are based on dynamic risk factors (i.e., risk factors that can change); validate any tools that the system uses; and evaluate the recidivism rates among similarly classified prisoners to identify any unwarranted disparities, including disparities in such rates among similarly classified prisoners of different demographic groups, and make any changes to the system necessary to address any that are identified; and submit an annual report to Congress each year for five years starting in 2020 (see below). Also, prior to releasing the system, DOJ is required to consult with the Independent Review Committee to review the effectiveness of recidivism reduction programs in prisons operated by BOP; review available information regarding the effectiveness of recidivism reduction programs and productive activities provided in state prisons; review the policies for entering into recidivism reduction partnerships authorized by the act; and direct BOP regarding (1) evidence-based recidivism reduction programs, (2) the ability for faith-based organizations to provide educational programs outside of religious courses, and (3) the addition of any new effective recidivism reduction programs that DOJ finds. Under the act, the system is required to provide guidance on the type, amount, and intensity of recidivism reduction programming and productive activities to which each prisoner is assigned, including information on which programs prisoners should participate in based on their criminogenic needs and the ways that BOP can tailor programs to the specific criminogenic needs of each prisoner to reduce their risk of recidivism. The system is also required to provide guidance on how to group, to the extent practicable, prisoners with similar risk levels together in recidivism reduction programming and housing assignments. The act requires BOP, when developing the system, to take steps to screen prisoners for dyslexia and to provide programs to treat prisoners who have it. Implementation of the Risk and Needs Assessment System Within 180 days of DOJ releasing the system, BOP is required to complete the initial risk and needs assessment for each prisoner (including for prisoners who were incarcerated before the enactment of the First Step Act); begin to assign prisoners to appropriate recidivism reduction programs based on the initial assessment; begin to expand the recidivism reduction programs and productive activities available at BOP facilities and add any new recidivism reduction programs and productive activities necessary to effectively implement the system; and begin to implement any other risk and needs assessment tools necessary to effectively implement the system over time. BOP is required to expand recidivism reduction programming and productive activities capacity so that all prisoners have an opportunity to participate in risk reduction programs within two years of BOP completing initial risk and needs assessments for all prisoners. During the two-year period when BOP is expanding recidivism reduction programs and productive activities, prisoners who are nearing their release date are given priority for placement in such programs. BOP is required to provide all prisoners with the opportunity to participate in recidivism reduction programs that address their criminogenic needs or productive activities throughout their term of incarceration. High- and medium-risk prisoners are to have priority for placement in recidivism reduction programs, while the program focus for low-risk prisoners is on participation in productive activities. Prisoners who successfully participate in recidivism reduction programming or productive activities are required to be reassessed not less than annually, and high- and medium-risk prisoners who have less than five years remaining until their projected release date are required to have more frequent reassessments. If the reassessment shows that a prisoner's risk of recidivating or specific needs have changed, BOP is required to reassign the prisoner to recidivism reduction programs or productive activities consistent with those changes. DOJ is required to develop and administer a training program for BOP employees on how to use the system. This training program must include initial training to educate employees on how to use the system in an appropriate and consistent manner, continuing education, periodic training updates, and a requirement that employees biannually demonstrate competence in administering the system. To ensure that BOP is using the system in an appropriated and consistent manner, DOJ is required to monitor and assess how the system is used at BOP, including an annual audit of the system's use. Incentives and Rewards for Program Participation The First Step Act requires the use of incentives and rewards for prisoners to participate in recidivism reduction programs, including the following: additional phone privileges, and if available, video conferencing privileges, of up to 30 minutes a day, and up to 510 minutes a month; additional time for visitation at the prison, as determined by the warden of the prison; transfer to a facility closer to the prisoner's release residence, subject to the availability of bedspace, the prisoner's security designation, and the recommendation from the warden of the prison at which the prisoner is incarcerated at the time of making the request; and additional incentives and rewards as determined by BOP, to include not less than two of the following: (1) increased commissary spending limits and product offerings, (2) greater email access, (3) consideration for transfer to preferred housing units; and (4) other incentives solicited from prisoners and determined appropriate by BOP. Rewards or incentives prisoners earn are in addition to any other rewards or incentives for which they may be eligible (e.g., good time credit under 18 U.S.C. Section 3624(b)). Earned Time Credits for Program Participation Under the act, prisoners who successfully complete recidivism reduction programming are eligible to earn up to 10 days of time credits for every 30 days of program participation. Minimum and low-risk prisoners who successfully completed recidivism reduction or productive activities and whose assessed risk of recidivism has not increased over two consecutive assessments are eligible to earn up to an additional five days of time credits for every 30 days of successful participation. However, prisoners serving a sentence for a conviction of any one of multiple enumerated offenses are ineligible to earn additional time credits regardless of risk level, though these prisoners are eligible to earn the other incentives and rewards for program participation outlined above. Offenses that make prisoners ineligible to earn additional time credits can generally be categorized as violent, terrorism, espionage, human trafficking, sex and sexual exploitation, repeat felon in possession of firearm, certain fraud, or high-level drug offenses. Prisoners who are subject to a final order of removal under immigration law are ineligible for additional earned time credits provided by the First Step Act. Prisoners cannot retroactively earn time credits for programs they completed prior to the enactment of the First Step Act, and they cannot earn time credits for programs completed while detained pending adjudication of their cases. The act requires BOP to develop guidelines for reducing time credits prisoners earned under the system for violating institutional rules or the rules of recidivism reduction programs and productive activities. The guidelines must also include a description of a process for prisoners to earn back any time credits they lost due to misconduct. Prerelease Custody A prisoner is not eligible to be placed in prerelease custody until the amount of time credits the prisoner has earned is equal to the remainder of his/her imposed term of imprisonment; the prisoner has shown a reduced risk of recidivism or has maintained a minimum or low recidivism risk during his/her term of imprisonment; the remainder of his/her imposed term of imprisonment has been computed under applicable law (e.g., any good time credits the prisoner has earned have been credited to his/her sentence); and the prisoner has been determined to be a minimum or low risk to recidivate based on his/her last two assessments, or has had a petition to be transferred to prerelease custody approved by the warden, after the warden's determination that the prisoner (1) would not be a danger to society if transferred to prerelease custody, (2) has made a good faith effort to lower his/her recidivism risk through participation in recidivism reduction programs or productive activities, and (3) is unlikely to recidivate. A prisoner who is required to serve a period of supervised release after his/her term of incarceration and has earned time credits equivalent to the time remaining on his/her prison sentence can be transferred directly to supervised release if the prisoner's latest reassessment shows that he/she is a minimum or low risk to recidivate. However, BOP cannot allow a prisoner to start serving a period of supervised release more than 12 months before he/she would otherwise be eligible to do so. If a prisoner has earned more than 12 months of additional time credits, the amount in excess of 12 months would be served in prerelease custody. Prisoners who are placed on prerelease custody on home confinement are subject to a series of conditions. Per the act, prisoners on home confinement are required to have 24-hour electronic monitoring that enables the identification of their location and the time, and must remain in their residences, except to go to work or participate in job-seeking activities, participate in recidivism reduction programs or similar activities, perform community service, participate in crime victim restoration activities, receive medical treatment, attend religious activities, or participate in family-related activities that facilitate a prisoner's successful reentry. When monitoring adherence to the conditions of prerelease custody, BOP is required, to the extent practicable, to reduce the restrictiveness of those conditions for prisoners who demonstrate continued compliance with their conditions. If a prisoner violates the conditions of prerelease custody, BOP is authorized to place more conditions on the prisoner, or revoke prerelease custody and require the prisoner to serve the remainder of the sentence in prison. If the violation is nontechnical in nature (e.g., committing a new crime), BOP is required to revoke the prisoner's prerelease custody. BOP is required to expand its capacity, if necessary, so that all eligible prisoners can be placed in prerelease custody. Reporting Requirements The act requires the submission of several reports to help Congress oversee the implementation and assess the effects of the system. Department of Justice Report to Congress Two years after the enactment of the First Step Act, and each year thereafter for the next five years, DOJ is required to submit a report to the House and Senate Judiciary Committees and the House and Senate Subcommittees on Commerce, Justice, Science, and Related Agencies (CJS) Appropriations that includes information on the types and effectiveness of recidivism reduction programs and productive activities provided by BOP, including the capacity of each program and activity at each prison and any gaps or shortages in capacity of such programs and activities; the recidivism rates of prisoners released from federal prison, based on the following criteria: (1) the primary offense of conviction; (2) the length of the sentence imposed and served; (3) the facility or facilities in which the prisoner's sentence was served; (4) the type of recidivism reduction programming; (5) prisoners' assessed and reassessed risk of recidivism; and (6) the type of productive activities; the status of prison work programs offered by BOP, including a strategy to expanding prison work opportunities for prisoners without reducing job opportunities for nonincarcerated U.S. workers; and any budgetary savings that have resulted from the implementation of the act, and a strategy for investing those savings in other federal, state, and local law enforcement activities and expanding recidivism reduction programs and productive activities at BOP facilities. Report from the Independent Review Committee Within two years of the enactment of the First Step Act, the Independent Review Committee is required to submit a report to the House and Senate Judiciary Committees and the House and Senate CJS Appropriations Subcommittees that includes a list of all offenses that make prisoners ineligible for earned time credits under the system, and the number of prisoners excluded for each offense by age, race, and sex; the criminal history categories of prisoners ineligible to receive earned time credits under the system, and the number of prisoners excluded for each category by age, race, and sex; the number of prisoners ineligible for earned time credits under the system who did not participate in recidivism reduction programming or productive activities by age, race, and sex; and any recommendations for modifications to the list of offenses that make prisoners ineligible to earn time credits and any other recommendations regarding recidivism reduction. Government Accountability Office Audit Within two years of BOP implementing the system, and every two years thereafter, the Government Accountability Office is required to audit how the system is being used at BOP facilities. The audit must include an analysis of the following: whether prisoners are being assessed under the system with the required frequency; whether BOP is able to offer recidivism reduction programs and productive activities as defined in 18 U.S.C. Section 3632(f); whether BOP is offering the type, amount, and intensity of recidivism reduction programs and productive activities that allow prisoners to earn the maximum amount of additional time credits for which they are eligible; whether DOJ is carrying out the duties required by the First Step Act; whether employees of the BOP are receiving the training required by the act; whether BOP offers work assignments to all prisoners who might benefit from them; whether BOP transfers prisoners to prerelease custody or supervised release as soon as they are eligible; and the rates of recidivism among similarly classified prisoners to identify any unwarranted disparities, including disparities among similarly classified prisoners of different demographic groups. Authorization of Appropriations The First Step Act authorizes $75 million per fiscal year from FY2019 to FY2023 for DOJ to establish and implement the system; 80% of this funding is to be directed to BOP for implementation. Sentencing Reforms10 The First Step Act makes several changes to federal sentencing law. The act reduced the mandatory minimum sentences for certain drug offenses, expanded the scope of the safety valve, eliminated the stacking provision, and made the provisions of the Fair Sentencing Act of 2010 ( P.L. 111-220 ) retroactive. Changes to Mandatory Minimums for Certain Drug Offenders The act adjusts the mandatory minimum sentences for certain drug traffickers with prior drug convictions. The act reduces the 20-year mandatory minimum (applicable where the offender has one prior qualifying conviction) to a 15-year mandatory minimum and reduces the life sentence mandatory minimum (applicable where the offender has two or more prior qualifying convictions) to a 25-year mandatory minimum. The act also changes the prior conviction criteria under which these mandatory minimum penalties apply. In order for these mandatory minimums to apply, the offender's prior convictions must meet the new criteria of a serious drug felony or a serious violent felony rather than any felony drug offense . Expanding the Safety Valve The act makes drug offenders with minor criminal records eligible for the safety valve provision, which previously applied only to offenders with virtually spotless criminal records. The safety valve allows judges to sentence low-level, nonviolent drug offenders to a term of imprisonment that is less than the applicable mandatory minimum. Eliminating the Stacking Provision The act eliminates stacking by providing that the 25-year mandatory minimum for a "second or subsequent" conviction for use of a firearm in furtherance of a drug trafficking crime or a violent crime applies only where the offender has a prior conviction for use of a firearm that is already final. Under prior law, two violations that were charged concurrently triggered the enhanced mandatory minimum. Retroactivity of the Fair Sentencing Act The First Step Act authorizes courts to apply retroactively the Fair Sentencing Act of 2010, which increased the threshold quantities of crack cocaine sufficient to trigger mandatory minimum sentences, by resentencing qualified prisoners as if the Fair Sentencing Act had been in effect at the time of their offenses. The retroactive application of the Fair Sentencing Act is not automatic. A prisoner must petition the court in order to have his/her sentence reduced. Reauthorization of the Second Chance Act The Second Chance Reauthorization Act of 2018 (Title V of the First Step Act) reauthorizes many of the grant programs that were initially authorized by the Second Chance Act of 2007 ( P.L. 110-199 ). The Second Chance Reauthorization Act also reauthorized a BOP pilot program to provide early release to elderly prisoners. Reauthorization of the Adult and Juvenile State and Local Offender Demonstration Program The Second Chance Reauthorization Act amends the authorization for the Adult and Juvenile State and Local Offender Demonstration Program so grants can be awarded to states, local governments, territories, or Indian tribes, or any combination thereof, in partnership with interested persons (including federal correctional officials), service providers, and nonprofit organizations, for the strategic planning and implementation of reentry programs. The Second Chance Reauthorization Act amended the authorization for this program to allow grants to be used for reentry courts and promoting employment opportunities consistent with a transitional jobs strategy in addition to the purposes for which grants could already be awarded. The act also amended the Second Chance Act authorizing legislation for the program to allow DOJ to award both planning and implementation grants. DOJ is required to develop a procedure to allow applicants to submit a single grant application when applying for both planning and implementation grants. Under the amended program, DOJ is authorized to award up to $75,000 for planning grants and is prohibited from awarding more than $1 million in planning and implementation grants to any single entity. The program period for planning grants is limited to one year and implementation grants are limited to two years. DOJ is also required to make every effort to ensure the equitable geographic distribution of grants, taking into account the needs of underserved populations, including tribal and rural communities. Under the amended program, applicants for implementation grants are subject to several requirements, including demonstrating that the application has the explicit support of the chief executive, or the designee, of the state, unit of government, territory, or Indian tribe applying for the grant; discussing the role of federal and state corrections, community corrections, juvenile justice systems, and tribal and local jail systems in ensuring the successful reentry of ex-offenders into the applicants' communities; providing evidence of collaboration with state, local, and tribal agencies overseeing health, housing, child welfare, education, substance abuse, victim services, employment agencies, and local law enforcement agencies; providing a plan for analyzing the barriers (e.g., statutory, regulatory, rules-based, or practice-based) to reentry for ex-offenders in the applicants' communities; demonstrating that a state, local, territorial, or tribal reentry task force will be used to carry out the activities funded under the grant; providing a plan for continued collaboration with a local evaluator; and demonstrating that the applicant participated in the planning grant process, or engaged in a comparable reentry planning process. DOJ is also required to give priority consideration to applications for implementation grants that focus on areas with a disproportionate population of returning prisoners, received input from stakeholders and coordinated with prisoners families, demonstrate effective case assessment and management, review the process by which violation of community supervision are adjudicated, provide for an independent evaluation of reentry programs, target moderate and high-risk returning prisoners, and target returning prisoners with histories of homelessness, substance abuse, or mental illness. Under the amended program, applicants for implementation grants would be required to develop a strategic reentry plan that contains measurable three-year performance outcomes. Applicants would be required to develop a feasible goal for reducing recidivism using baseline data collected through the partnership with the local evaluator. Applicants are required to use, to the extent practicable, random assignment and controlled studies, or rigorous quasi-experimental studies with matched comparison groups, to determine the effectiveness of the program. As authorized by the Second Chance Act, grantees under the Adult and Juvenile State and Local Offender Demonstration program are required to submit annual reports to DOJ that identify the specific progress made toward achieving their strategic performance outcomes, which they are required to submit as a part of their reentry strategic plans. Data on performance measures only need to be submitted by grantees that receive an implementation grant. The act repeals some performance outcomes (i.e., increased housing opportunities, reduction in substance abuse, and increased participation in substance abuse and mental health services) and adds the following outcomes: increased number of staff trained to administer reentry services; increased proportion of eligible individuals served by the program; increased number of individuals receiving risk screening needs assessment and case planning services; increased enrollment in and completion of treatment services, including substance abuse and mental health services for offenders who need them; increased enrollment in and degrees earned from educational programs; increased number of individuals obtaining and maintaining employment; increased number of individuals obtaining and maintaining housing; increased self-reports of successful community living, including stability of living situation and positive family relationships; reduction in drug and alcohol use; and reduction in recidivism rates for individuals receiving reentry services after release, as compared to either baseline recidivism rates in the jurisdiction of the grantee or recidivism rates of the comparison or control group. The act allows applicants for implementation grants to include a cost-benefit analysis as a performance measure under their required reentry strategic plan. The act reauthorizes appropriations for the program at $35 million for each fiscal year from FY2019 to FY2023. Reauthorization of Grants for Family-Based Substance Abuse Treatment The Second Chance Act authorized DOJ to make grants to states, local governments, and Indian tribes to develop, implement, and expand the use of family-based substance abuse treatment programs as an alternative to incarceration for parents who were convicted of nonviolent drug offenses and to provide prison-based family treatment programs for incarcerated parents of minor children. The Second Chance Reauthorization Act amends the authorization for the program to allow grants to be awarded to nonprofit organizations and requires DOJ to give priority consideration to nonprofit organizations that demonstrate a relationship with state and local criminal justice agencies, including the judiciary and prosecutorial agencies or local correctional agencies. The act reauthorizes appropriations for the program at $10 million for each fiscal year from FY2019 to FY2023. Reauthorization of the Grant Program to Evaluate and Improve Educational Methods at Prisons, Jails, and Juvenile Facilities The Second Chance Act authorized a grant program to evaluate and improve academic and vocational education in prisons, jails, and juvenile facilities. This program authorizes DOJ to make grants to states, units of local government, territories, Indian tribes, and other public and private entities to identify and implement best practices related to the provision of academic and vocational education in prisons, jails, and juvenile facilities. Grantees are required to submit reports within 90 days of the end of the final fiscal year of a grant detailing the progress they have made, and to allow DOJ to evaluate improved academic and vocational education methods carried out with grants provided under this program. The Second Chance Reauthorization Act amends the authorizing legislation for this program to require DOJ to identify and publish best practices relating to academic and vocational education for offenders in prisons, jails, and juvenile facilities. In identifying best practices, the evaluations conducted under this program must be considered. The act reauthorizes appropriations for this program at $5 million for each fiscal year from FY2019 to FY2023. Reauthorization of the Careers Training Demonstration Grants The Second Chance Act authorized DOJ to make grants to states, units of local government, territories, and Indian tribes to provide technology career training for prisoners. Grants could be awarded for programs that establish technology careers training programs for inmates in a prison, jail, or juvenile detention facility. The Second Chance Reauthorization Act expanded the scope of the program to allow grant funds to be used to provide any career training to those who are soon to be released and during transition and reentry into the community. The act makes nonprofit organizations an eligible applicant under the program. Under the legislation, grants funds could be used to provide subsidized employment if it is a part of a career training program. The act also requires DOJ to give priority consideration to any application for a grant that provides an assessment of local demand for employees in the geographic area to which offenders are likely to return, conducts individualized reentry career planning upon admission to a correctional facility or post-release employment planning for each offender served under the grant, demonstrates connections to local employers, and evaluates employment outcomes. The act reauthorizes appropriations for this program at $10 million for each fiscal year from FY2019 to FY2023. Reauthorization of the Offender Reentry Substance Abuse and Criminal Justice Collaboration Program The Second Chance Act authorized DOJ to make grants to states, units of local governments, territories, and Indian tribes in order to improve drug treatment programs in prisons and reduce the post-prison use of alcohol and other drugs by long-term users under correctional supervision. Grants may be used to continue or improve existing drug treatment programs, develop and implement programs for long-term users, provide addiction recovery support services, or establish medication assisted treatment (MAT) services as part of any drug treatment program offered to prisoners. The Second Chance Reauthorization Act reauthorizes appropriations for this program at $15 million for each fiscal year from FY2019 to FY2023. Reauthorization of the Community-Based Mentoring and Transitional Service Grants to Nonprofit Organizations Program The Second Chance Act authorized DOJ to make grants to nonprofit organizations and Indian tribes to provide mentoring and other transitional services for offenders being released into the community. Funds could be used for mentoring programs in prisons or jails and during reentry, programs providing transition services during reentry, and programs providing training for mentors on the criminal justice system and victims issues. The Second Chance Reauthorization Act amends the authorization for the program to pivot the focus toward providing community-based transitional services to former inmates returning to the community. Reflecting the change in focus, the reauthorization changed the name of the program to "Community-based Mentoring and Transitional Services Grants to Nonprofit Organizations." The act specifies the transitional services that can be provided to returning inmates under the program, including educational, literacy, vocational, and the transitional jobs strategy; substance abuse treatment and services; coordinated supervision and services for offenders, including physical health care and comprehensive housing and mental health care; family services; and validated assessment tools to assess the risk factors of returning prisoners. The act reauthorizes appropriations for this program at $15 million for each fiscal year from FY2019 to FY2023. Reauthorization and Expansion of the BOP Early Release Pilot Program The Second Chance Reauthorization Act reauthorized and expanded the scope of a pilot program initially authorized under the Second Chance Act that allowed BOP to place certain elderly nonviolent offenders on home confinement to serve the remainder of their sentences. BOP was authorized to conduct this pilot program at one facility for FY2009 and FY2010. An offender eligible to be released through the program had to meet the following requirements: at least 65 years old; never have been convicted of a violent, sex-related, espionage, or terrorism offense; sentenced to less than life; served the greater of 10 years or 75% of his/her sentence; not received a determination by BOP to have a history of violence, or of engaging in conduct constituting a sex, espionage, or terrorism offense; not escaped or attempted to escape; received a determination that release to home detention would result in a substantial reduction in cost to the federal government; and received a determination that he/she is not a substantial risk of engaging in criminal conduct or of endangering any person or the public if released to home detention. The Second Chance Reauthorization Act reestablishes the pilot program and allows BOP to operate it at multiple facilities from FY2019 to FY2023. The act also modifies the eligibility criteria for elderly offenders so that any offenders who are at least 60 year old and have served two-thirds of their sentences can be placed on home confinement. The act also expands the program so that terminally ill offenders can be placed on home confinement. Eligibility criteria for home confinement for terminally ill offenders under the pilot program is the same as that for elderly offenders, except that terminally ill offenders of any age and who have served any portion of their sentences, even life sentences, are eligible for home confinement. Terminally ill prisoners are those who are deemed by a BOP medical doctor to need care at a nursing home, intermediate care facility, or assisted living facility, or those who have been diagnosed with a terminal illness. Reauthorization of Reentry Research The Second Chance Act authorized appropriations for a series of reentry-related research projects, including the following: a study by the National Institute of Justice (NIJ) identifying the number and characteristics of children with incarcerated parents and their likelihood of engaging in criminal activity; a study by NIJ identifying mechanisms to compare recidivism rates between states; a study by NIJ on the characteristics of individuals released from prison who do not recidivate; a study by the Bureau of Justice Statistics (BJS) analyzing the populations that present unique reentry challenges; studies by BJS to determine the characteristics of individuals who return to prison, jail, or a juvenile facility (including which individuals pose the highest risk to the community); annual reports by BJS on the profile of the population leaving prisons, jails, or juvenile facilities and entering the community; a national recidivism study by BJS every three years; a study by BJS of violations and revocation of community-based supervision (e.g., probation, parole, or other forms of post-incarceration supervision) violations; providing grants to states to fund studies aimed at improving data collection on former prisoners who have their post-incarceration supervision revoked in order to identify which such individuals pose the greatest risk to the community; and collecting data and developing best practices concerning the communication and coordination between state corrections and child welfare agencies, to ensure the safety and support of children of incarcerated parents. The Second Chance Reauthorization Act reauthorizes appropriations for these research projects at $5 million for each fiscal year from FY2019 to FY2023. Evaluation of the Second Chance Act Within five years of the enactment of the Second Chance Reauthorization Act, NIJ is required to evaluate grants used by DOJ to support reentry and recidivism reduction programs at the state, local, tribal, and federal levels. Specifically, NIJ is required to evaluate the following: whether the programs are cost-effective, including the extent to which the programs improved reentry outcomes; whether the programs effectively delivered services; the effects programs had on the communities and participants involved; the effects programs had on related programs and activities; the extent to which programs met the needs of various demographic groups; the quality and effectiveness of technical assistance provided by DOJ to grantees for implementing such programs; and other factors as may be appropriate. NIJ is required to identify outcome measures, including employment, housing, education, and public safety, that are the goals of programs authorized by the Second Chance Act and metrics for measuring whether those programs achieved the intended results. As a condition of receiving funding under programs authorized by the Second Chance Act, grantees are required to collect and report data to DOJ related to those metrics. NIJ is required to make data collected during evaluations of Second Chance Act programs publicly available in a manner that protects the confidentiality of program participants and is consistent with applicable law. NIJ is also required to make the final evaluation reports publicly available. Recidivism Reduction Partnerships The Second Chance Reauthorization Act requires BOP to develop policies for wardens of prisons and community-based facilities to enter into recidivism-reducing partnerships with nonprofit and other private organizations, including faith-based and community-based organizations to deliver recidivism reduction programming. Repealed Programs The Second Chance Reauthorization Act repealed the authorization for the State, Tribal, and Local Reentry Courts program (Section 111 of the Second Chance Act), the Responsible Reintegration of Offenders program (Section 212), and the Study on the Effectiveness of Depot Naltrexone for Heroin Addiction program (Section 244). Other Provisions In addition to correctional and sentencing reform and reauthorizing the Second Chance Act, the First Step Act contained a series of other criminal justice-related provisions. Modification of Good Time Credits The act amended 18 U.S.C. Section 3624(b) so that federal prisoners can earn up to 54 days of good time credit for every year of their imposed sentence rather than for every year of their sentenced served . Prior to the amendment, BOP interpreted the good time credit provision in Section 3624(b) to mean that prisoners are eligible to earn 54 days of good time credit for every year they serve. For example, this means that an offender who was sentenced to 10 years in prison and earned the maximum good time credits each year could be released after serving eight years and 260 days, having earned 54 days of good time credit for each year of the sentence served, but in effect, only 47 days of good time credit for every year of the imposed sentence. Bureau of Prisons Secure Firearm Storage The act requires BOP to provide a secure storage area outside of the secure perimeter of a correctional institution for qualified law enforcement officers employed by BOP to store firearms or allow this class of employees to store firearms in their personal vehicles in lockboxes approved by BOP. The act also requires BOP, notwithstanding any other provision of law, to allow these same employees to carry concealed firearms on prison grounds but outside of the secure perimeter of the correctional institution. Prohibition on the Use of Restraints on Pregnant Prisoners The act prohibits BOP or the U.S. Marshals Service (USMS) from using restraints on pregnant inmates in their custody. The prohibition on the use of restraints begins on the date that pregnancy is confirmed by a healthcare professional. The restriction ends when the inmate completes postpartum recovery. The prohibition on the use of restraints does not apply if the inmate is determined to be an immediate and credible flight risk or poses an immediate and serious threat of harm to herself or others that cannot be reasonably prevented by other means, or a healthcare professional determines that the use of restraints is appropriate for the medical safety of the inmate. Only the least restrictive restraints necessary to prevent escape or harm can be used. The exception to the use of restraints does not permit BOP or USMS to use them around the ankles, legs, or waist of an inmate; restrain an inmate's hands behind her back; use four-point restraints; or attach an inmate to another inmate. Upon the request of a healthcare professional, correctional officials or deputy marshals shall refrain from using restraints on an inmate or shall remove restraints used on an inmate. If restraints are used on a pregnant inmate, the correctional official or deputy marshal who used the restraints is required to submit a report within 30 days to BOP or USMS, and the healthcare provider responsible for the inmate's health and safety, that describes the facts and circumstances surrounding the use of the restraints, including the reason(s) for using them; the details of their use, including the type of restraint and length of time they were used; and any observable physical effects on the prisoner. BOP and USMS are required to develop training guidelines regarding the use of restraints on inmates during pregnancy, labor, and postpartum recovery. The guidelines are required to include the following: how to identify certain symptoms of pregnancy that require immediate referral to a healthcare professional; circumstances under which exceptions to the prohibition on the use of restraints would apply; in cases where an exception applies, how to use restraints in a way that does not harm the inmate, the fetus, or the newborn; the information required to be reported when restraints are used; and the right of a healthcare professional to request that restraints not be used and the requirement to comply with such a request. Placement of Prisoners Closer to Families The act amends 18 U.S.C. Section 3621(b) to require BOP to house prisoners in facilities as close to their primary residence as possible, and to the extent practicable, within 500 driving miles, subject to a series of considerations. When making decisions about where to house a prisoner, BOP must consider bedspace availability, the prisoner's security designation, the prisoner's programmatic needs, the prisoner's mental and medical health needs, any request made by the prisoner related to faith-based needs, recommendations of the sentencing court, and other security concerns. BOP is also required, subject to these considerations and a prisoner's preference for staying at his/her current facility or being transferred, to transfer a prisoner to a facility closer to his/her primary residence even if the prisoner is currently housed at a facility within 500 driving miles. Home Confinement for Low-Risk Prisoners The act amends 18 U.S.C. Section 3624(c)(2) to require BOP, to the extent practicable, to place prisoners with lower risk levels and lower needs on home confinement for the maximum amount of time permitted under this paragraph. Under Section 3624(c)(2), BOP is authorized to place prisoners in prerelease custody on home confinement for 10% of the term of imprisonment or six months, whichever is shorter. Increasing the Use and Transparency of Compassionate Release The act amends 18 U.S.C. Section 3582(c) regarding when a court can modify a term of imprisonment once it is imposed. Under Section 3582(c)(1)(A), a court, upon a petition from BOP, can reduce a prisoner's sentence and impose a term of probation or supervised release, with or without conditions, equal to the amount of time remaining on the prisoner's sentence if the court finds that "extraordinary and compelling reasons warrant such a reduction," or the prisoner is at least 70 years of age, the prisoner has served at least 30 years of his/her sentence, and a determination has been made by BOP that the prisoner is not a danger to the safety of any other person or the community. This is sometimes referred to as compassionate release . The amendments made by the act allow the court to reduce a prisoner's sentence under Section 3582(c)(1)(A) upon a petition from BOP or the prisoner if the prisoner has fully exhausted all administrative rights to appeal a failure by BOP to bring a motion on the prisoner's behalf or upon a lapse of 30 days from the receipt of such a request by the warden of the prisoner's facility, whichever is earlier. The act also requires BOP within 72 hours of a prisoner being diagnosed with a terminal illness to notify the prisoner's attorney, partner, and family about the diagnosis and inform them of their option to submit a petition for compassionate release on the prisoner's behalf. Within seven days, BOP is required to provide the prisoner's partner and family with an opportunity to visit. BOP is also required to provide assistance to the prisoner with drafting and submitting a petition for compassionate release if such assistance is requested by the prisoner or the prisoner's attorney, partner, or family. BOP is required to process requests for compassionate release within 14 days. If a prisoner is mentally or physically unable to submit a petition for compassionate release, BOP is required to notify the prisoner's attorney, partner, or family that they can submit a petition on the prisoner's behalf. BOP is required to accept and process requests for compassionate release that are drafted by the prisoner's attorney, partner, or family. BOP is also required to assist prisoners who are mentally or physically unable to prepare their own request if such assistance is requested by the prisoner's attorney, partner, or family. BOP is required to make available to prisoners information regarding their ability to request compassionate release, the timeline for submitting a request, and their right to appeal to a court the denial of a request after exhausting all administrative appeals BOP makes available to prisoners. This information is to appear in written materials for prisoners and staff, and be visibly posted The act also requires BOP to submit annual reports to the House and Senate Judiciary Committees that provides data on how BOP is processing applications for compassionate release. Identification for Returning Citizens The act amends the authorization for the federal prisoner reentry initiative (34 U.S.C. Section 60541(b)) to require BOP to assist prisoners and offenders who were sentenced to a period of community confinement with obtaining a social security card, driver's license or other official photo identification, and birth certificate prior to being released from custody. The act also amends 18 U.S.C. Section 4042(a) to require BOP to establish prerelease planning procedures to help prisoners apply for federal and state benefits and obtain identification, including a social security card, driver's license or other official photo identification, and birth certificate. BOP is required to help prisoners secure these benefits, subject to any limitations in law, prior to being released. The act also amends Section 4042(a) to require prerelease planning to include any individuals who only served a sentence of community confinement. Expanding Prisoner Employment Through the Federal Prison Industries The act authorizes the Federal Prison Industries (FPI, also known by its trade name, UNICOR) to sell products to public entities for use in correctional facilities, disaster relief, or emergency response; to the District of Columbia government; and to nonprofit organizations. However, FPI is not allowed to sell office furniture to nonprofit organizations. The act also requires BOP to set aside 15% of the wages paid to prisoners with FPI work assignments in a fund that will be payable to the prisoner upon release to aid with the cost of transitioning back into the community. De-escalation Training The act requires BOP to provide training to correctional officers and other BOP employees (including correctional officers and employees of facilities that contract with BOP to house prisoners) on how to de-escalate encounters between a law enforcement officer or an officer or employee of BOP and a civilian or a prisoner, and how to identify and appropriately respond to incidents that involve people with mental illness or other cognitive deficits. Evidence-Based Treatment for Opioid and Heroin Abuse Within 90 days of enactment of the act, BOP is required to submit a report to the House and Senate Judiciary and Appropriations Committees that assesses the availability of, and the capacity of BOP to provide, evidence-based treatment to prisoners with opioid and heroin abuse problems, including MAT, where appropriate. As a part of the report, BOP is required to provide a plan to expand access to evidence-based treatment for prisoners with heroin and opioid abuse problems, including MAT, where appropriate. After submitting the report, BOP is required to execute the plan it outlines in the report. The act places a similar requirement on the Administrative Office of the United States Courts (AOUSC) regarding evidence-based treatment for opioid and heroin abuse for prisoners serving a term of supervised release. AOUSC has 120 days after enactment to submit its report to the House and Senate Judiciary and Appropriations Committees. BOP Pilot Programs for Mentoring and Rescue Animals The act requires BOP to establish two pilot programs that are to run for five years in at least 20 facilities. The first is a mentoring program that is to pair youth with volunteer mentors from faith-based or community organizations. The other program is to use prisoners to provide training and therapy to animals seized by federal law enforcement officers and to abandoned or rescued animals in the care of organizations that provide shelter and similar services. National Prisoner Statistics Program The act requires BJS to expand data collected under its National Prisoner Statistics program to include 26 new data elements related to federal prisoners. Some of the data the act requires BJS to collect include the following: the number of prisoners who are veterans; the number of prisoners who have been placed in solitary confinement in the past year; the number of female prisoners who are known to be pregnant and the result of those pregnancies; the number of prisoners who received MAT to treat a substance abuse problem; the number of prisoners who are the parent or guardian of a minor child; the number of assaults on BOP staff by prisoners and the number of criminal prosecutions that resulted from those assaults; the capacity of recidivism reduction programs and productive activities to accommodate eligible prisoners at each BOP facility; and the number of prisoners enrolled in recidivism reduction programs and productive activities at each BOP facility, broken down by risk level and by program, and the number of those enrolled prisoners who successfully completed each program. Starting one year after the enactment of the act, BJS is required to submit an annual report to the House and Senate Judiciary Committees for a period of seven years that contains the data specified in the act. Healthcare Products The act requires BOP to provide tampons and sanitary napkins that meet industry standards to prisoners for free and in a quantity that meets the healthcare needs of each prisoner. Federal Interagency Reentry Coordination The act requires the Attorney General to coordinate with the Secretary of Housing and Urban Development, the Secretaries of Labor, Education, Health and Human Services, Veterans Affairs, and Agriculture, and the heads of other relevant federal agencies, as well as interested persons, service providers, nonprofit organizations, and state, tribal, and local governments, on federal reentry policies, programs, and activities, with an emphasis on evidence-based practices and the elimination of duplication of services. The Attorney General, in consultation with the secretaries specified in the act, is required to submit a report to Congress within two years of the enactment of the act that summarizes the achievements of the coordination, and includes recommendations for Congress on how to further reduce barriers to successful reentry. Juvenile Solitary Confinement The act prohibits juvenile facilities from using room confinement for discipline, punishment, retaliation, or any reason other than as a temporary response to a covered juvenile's behavior that poses a serious and immediate risk of physical harm to any individual. The provisions of the act only apply to juveniles who have been charged with an alleged act of juvenile delinquency; have been adjudicated as delinquent under Chapter 403, Title 18 of the U.S. Code; or are facing charges as an adult in a federal district court for an alleged criminal offense. Juvenile facilities are required to try to use less restrictive techniques, such as talking with the juvenile in an attempt to de-escalate the situation or allowing a mental health professional to talk to the juvenile, before placing the juvenile in room confinement. If the less restrictive techniques do not work and the juvenile is placed in room confinement, the staff of the juvenile facility is required to tell the juvenile why he/she is being placed in room confinement. Staff are also required to inform the juvenile that he/she will be released from room confinement as soon as he/she regains self-control and no longer poses a threat of physical harm to himself/herself or others. If a juvenile who poses a threat of harm to others does not sufficiently regain self-control, staff must inform the juvenile that he/she will be released within three hours of being placed in room confinement, or in the case of a juvenile who poses a threat of harm to himself/herself, that he/she will be released within 30 minutes of being placed in room confinement. If after the maximum period of confinement allowed the juvenile continues to pose a threat of physical harm to himself/herself or others, the juvenile is to be transferred to another juvenile facility or another location in the current facility where services can be provided to him/her. If a qualified mental health professional believes that the level of crisis services available to the juvenile are not adequate, the staff at the juvenile facility is to transfer the juvenile to a facility that can provide adequate services. The act prohibits juvenile facilities from using consecutive periods of room confinement on juveniles.

On December 21, 2018, President Trump signed into law the First Step Act of 2018 (P.L. 115-391). The act was the culmination of several years of congressional debate about what Congress might do to reduce the size of the federal prison population while also creating mechanisms to maintain public safety. This report provides an overview of the provisions of the act. The act has three major components: (1) correctional reform via the establishment of a risk and needs assessment system at the Bureau of Prisons (BOP), (2) sentencing reform via changes to penalties for some federal offenses, and (3) the reauthorization of the Second Chance Act of 2007 (P.L. 110-199). The act also contains a series of other criminal justice-related provisions. The First Step Act requires the Department of Justice (DOJ) to develop a risk and needs assessment system to be used by BOP to assess the recidivism risk of all federal prisoners and to place prisoners in programs and productive activities to reduce this risk. Prisoners who successfully complete recidivism reduction programming and productive activities can earn additional time credits that will allow them to be placed in prerelease custody (i.e., home confinement or a Residential Reentry Center) earlier than they were previously allowed. The act prohibits prisoners convicted of any one of dozens of offenses from earning additional time credits, though these prisoners can earn other benefits, such as additional visitation time, for successfully completing recidivism reduction programming. Offenses that make prisoners ineligible to earn additional time credits can generally be categorized as violent, terrorism, espionage, human trafficking, sex and sexual exploitation, repeat felon in possession of firearm, certain fraud, or high-level drug offenses. The act makes changes to the penalties for some federal offenses. The act modified mandatory minimum prison sentences for some drug traffickers with prior drug convictions by increasing the threshold for prior convictions that count toward triggering higher mandatory minimums for repeat offenders, reducing the 20-year mandatory minimum (applicable where the offender has one prior qualifying conviction) to a 15-year mandatory minimum, and reducing a life-in-prison mandatory minimum (applicable where the offender has two or more prior qualifying convictions) to a 25-year mandatory minimum. The act made the provisions of the Fair Sentencing Act of 2010 (P.L. 111-220) retroactive so that currently incarcerated offenders who received longer sentences for possession of crack cocaine than they would have received if sentenced for possession of the same amount of powder cocaine before the enactment of the Fair Sentencing Act can submit a petition in federal court to have their sentences reduced. The act also expands the safety valve provision, which allows courts to sentence low-level, nonviolent drug offenders with minor criminal histories to less than the required mandatory minimum for an offense. Finally, the act eliminated the stacking provision, which allowed prosecutors to charge offenders with a second and subsequent use of a firearm in furtherance of a drug trafficking or violent offense in the same criminal incident, which, if the offender is convicted, carries a 25-year mandatory minimum. Now, the mandatory minimum will only apply when the offender has a prior conviction for use of a firearm in furtherance of a drug trafficking or violent crime from a previous criminal prosecution. The First Step Act contains the Second Chance Reauthorization Act of 2018. This act reauthorizes appropriations for and expands the scope of some grant programs that were initially authorized under the Second Chance Act of 2007 (P.L. 110-199). The reauthorized programs include the Adult and Juvenile State and Local Offender Demonstration Program, Grants for Family-Based Substance Abuse Treatment, Careers Training Demonstration Grants, the Offender Reentry Substance Abuse and Criminal Justice Collaboration Program, and the Community-Based Mentoring and Transitional Service Grants to Nonprofit Organizations Program. The act also reauthorized and modified a pilot program that allows BOP to place certain elderly and terminally ill prisoners on home confinement to serve the remainder of their sentences. Finally, the First Step Act includes a series of other criminal justice-related provisions. These provisions include a prohibition on the use of restraints on pregnant inmates in the custody of BOP and the U.S. Marshals Service; a change to the way good time credit is calculated so prisoners can earn 54 days of good time credits for each year of imposed sentence rather than for each year of time served; a requirement for BOP to provide a way for employees to safely store firearms on BOP grounds; a requirement for BOP to try to place prisoners within 500 driving miles of their primary residences; authority for the Federal Prison Industries to sell products to public entities for use in correctional facilities, disaster relief, or emergency response, to the District of Columbia government, and to nonprofit organizations; a prohibition against the use of solitary confinement for juvenile delinquents in federal custody; and a requirement that BOP aid prisoners with obtaining identification before they are released.

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Introduction Social Security, which paid about $989 billion in benefits in 2018, is the largest program in the federal budget in term s of outlays. There are currently about 63 million Social Security beneficiaries. Most Social Security beneficiaries are retired or disabled workers, whose monthly benefits depend on their past earnings, their age, and other factors. Benefits are also paid to workers' dependents and survivors, based on the earnings of the workers upon whose work record they claim. Social Security has a significant impact on beneficiaries, both young and old, in terms of income support and poverty reduction. Under current law, Social Security's revenues are projected to be insufficient to pay full scheduled benefits after 2035. For both of those reasons, Social Security is of ongoing interest to policymakers. Most proposals to change Social Security outlays would change the benefit computation rules. Evaluating such proposals requires an understanding of how benefits are computed under current law. Eligibility A person who has a sufficient history of earnings in employment subject to Social Security payroll taxes becomes insured for Social Security, which makes the worker and qualified dependents eligible for benefits. Insured status is based on the number of quart ers of coverage (QCs) earned. In 2019, a worker earns one QC for each $1,360 of earnings, and a worker may earn up to four QCs per calendar year. The amount needed for a QC increases annually by the growth in average earnings in the economy, as measured by Social Security's average wage index. To be eligible for most benefits, workers must be fully insured , which requires one QC for each year elapsed after the worker turns 21 years old, with a minimum of 6 QCs and a maximum of 40 QCs. A worker is first eligible for Social Security retirement benefits at 62, so to be eligible for retirement benefits, a worker must generally have worked for 10 years. Workers are permanently insured when they are fully insured and will not lose fully insured status when they stop working under covered employment, for example, if a worker has the maximum 40 QCs. Benefits may be paid to eligible survivors of workers who were fully insured at the time of death. Some dependents are also eligible if the deceased worker was currently insured , which requires earning 6 QCs in the 13 quarters ending with the quarter of death. To be eligible for disability benefits, workers must also satisfy a recency of work requirement. Workers aged 31 and older must have earned 20 QCs in the 10 years before becoming disabled. Fewer QCs are required for younger workers. In the case of workers having work history in multiple countries, international totalization agreements allow workers who divide their careers between the United States and certain countries to fill gaps in Social Security coverage by combining work credits under each country's system to qualify for benefits under one or both systems. Average Indexed Monthly Earnings The first step of computing a benefit is determining a worker's average indexed monthly earnings (AIME), a measure of a worker's past earnings. Wage Indexing Rather than using the amounts earned in past years directly, the AIME computation process first updates past earnings to account for growth in overall economy-wide earnings. That is done by increasing each year of a worker's taxable earnings after 1950 by the growth in average earnings in the economy, as measured by the national average wage index, from the year of work until two years before eligibility for benefits, which for retired workers is at 62. For example, the Social Security average wage grew from $32,155 in 2000 to $41,674 in 2010. So if a worker earned $20,000 in 2000 and turned 60 in 2010, the indexed wage for 2000 would be $20,000 x ($41,674/$32,155), or $25,921. Earnings from later years—for retired workers, at ages 61 and above—are not indexed. Averaging Indexed Earnings For retired workers, the AIME equals the average of the 35 highest years of indexed earnings, divided by 12 (to change from an annual to a monthly measure). Those years of earnings are known as computation years . If the person worked fewer than 35 years in employment subject to Social Security payroll taxes, the computation includes some years of zero earnings. In the case of workers who die before turning 62 years old, the number of computation years is generally reduced below 35 by the number of years until he or she would have reached 62. For example, the AIME for a worker who died at 61 is based on 34 computation years. For disabled workers, the number of computation years depends primarily on the age at which they become disabled, increasing from 2 years for those aged 24 or younger to 35 years for those aged 62 or older. Primary Insurance Amount The next step in determining a benefit is to compute the primary insurance amount (PIA) by applying a benefit formula to the AIME. First, the AIME is sectioned into three brackets (or segments) of earnings, which are divided by dollar amounts known as bend points. In 2019, the bend points are $926 and $5,583. Those amounts are indexed to the national average wage index, so they generally increase each year. Three factors, which are fixed by law at 90%, 32%, and 15%, are applied to the three brackets of AIME. For workers with AIMEs of $926 or less in 2019, the PIA is 90% of the AIME. Because the other two factors are lower, that share declines as AIMEs increase, which makes the benefit formula progressive. For workers who become eligible for retirement benefits, become disabled, or die in 2019, the PIA is determined as shown in the example in Table 1 and in Figure 1 . Benefits are based on covered earnings. Earnings up to the maximum taxable amount ($132,900 in 2019) are subject to the Social Security payroll tax. If a worker earns the maximum taxable earnings in every year of a full work history and becomes eligible in 2019, the maximum PIA is $2,861. Wage Indexing Results in Stable Replacement Rates In the AIME computation, earnings are indexed to the average wage index, and the bend points in the benefit formula are indexed to growth in the average wage index. As a result, replacement rates—the portion of earnings that benefits replace—remain generally stable. That is, from year to year, the average benefits that new beneficiaries receive increase at approximately the same rate as average earnings in the economy. Cost-of-Living Adjustment A cost-of-living adjustment (COLA) is applied to the benefit beginning in the second year of eligibility, which for retired workers is age 63. The COLA applies even if a worker has not yet begun to receive benefits. The COLA usually equals the growth in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one calendar year to the third quarter of the next year. Beneficiaries will receive a COLA of 2.8% for benefits paid in January 2019. How Timing of Benefit Claim Affects Benefit Levels Full Retirement Age The full retirement age (FRA, also called the normal retirement age) is the age at which a worker can receive the full PIA, increased by any COLAs. The FRA was 65 for people born before 1938, but the Social Security Amendments of 1983 ( P.L. 98-21 ) raised the FRA for those born later, as shown in Table 2 . Adjustments for Early and Late Benefit Claim Retired workers may claim benefits when they turn 62 years old, but the longer that they wait, the higher their monthly benefit. The higher monthly benefit is intended to offset the fewer number of payments that people who delay claim will receive over their lifetimes, so that the total value of lifetime benefits is approximately the same regardless of when they claim based on average life expectancy. The permanent reduction in monthly benefits that applies to people who claim before the FRA is called an actuarial reduction. It equals 6⅔% per year for the first three years of early claim and 5% for additional years. The permanent increase in monthly benefits that applies to those who claim after the FRA is called the delayed retirement credit. For people born in 1943 and later, that credit is 8% for each year of delayed claim after the FRA, up to age 70. For people with an FRA of 66, therefore, monthly benefits are 75% of the PIA for those who claim benefits at the age of 62 and 132% of the PIA for people who wait until the age of 70 to claim (see Figure 2 ). Because people who claim earlier receive more payments over a lifetime, the overall effect of claiming at different ages depends on how long the beneficiary lives. For example, someone who dies at 71 years old would be better off claiming early, but someone who survives to 95 would be better off claiming late. An increase in the FRA can result in lower benefits in two ways. First, monthly benefits will be different for individuals who have identical work histories and the same age of claiming benefits, but who have different FRAs. For example, someone with an FRA of 66 and who claims at age 62 will receive a monthly benefit equal to 75% of the PIA. For someone with an FRA of 67, claiming at 62 will result in a monthly benefit that is 70% of the PIA. Depending on the claim age, the scheduled increase in the FRA from 66 to 67 will reduce monthly benefits by between 6.1% and 7.7%. Second, lifetime benefits will be different for workers who have identical work histories and identical age of death, but different FRAs. For example, consider two workers who have FRAs of 65 and 67, respectively, both of whom claim at their FRA, and thus receive identical monthly benefits. If both workers die at age 75, the worker with an FRA of 65 will have received monthly benefits for 10 years, compared with the worker with an FRA of 67, who will have received monthly benefits for 8 years. Dependent Benefits Social Security benefits are payable to the spouse, divorced spouse, or dependent child of a retired or disabled worker and to the widow(er), divorced widow(er), dependent child, or parent of a deceased worker. When dependent beneficiaries also earned worker benefits, they receive the larger of the worker or the dependent benefit. A spouse's base benefit (that is, before any adjustments) equals 50% of the worker's PIA. A widow(er)'s base benefit is 100% of the worker's PIA. The base benefit for children of a retired or disabled worker is 50% of the worker's PIA, and the base benefit for children of deceased workers is 75% of the worker's PIA. Other Adjustments to Benefits Other benefit adjustments apply in certain situations, notably the windfall elimination provision (WEP), which reduces benefits for worker beneficiaries who have pensions from employment that was not subject to Social Security payroll taxes; the government pension offset (GPO), which reduces Social Security spousal benefits paid to people who have pensions from employment that was not subject to Social Security payroll taxes; the retirement earnings test , which results in a withholding of monthly Social Security benefits paid to beneficiaries who are younger than the full retirement age and have earnings above a certain level; and the maximum family benefit , which limits the amount of benefits payable to a family based on a worker's record. In some cases, a portion of Social Security benefits may be subject to federal income tax. Taxation is not a benefit adjustment, but it does affect the net income of beneficiaries. For additional information, see CRS Report RL32552, Social Security: Calculation and History of Taxing Benefits .

Social Security, the largest program in the federal budget (in terms of outlays), provides monthly cash benefits to retired or disabled workers and their family members as well as to the family members of deceased workers. In 2018, benefit outlays were approximately $989 billion, with roughly 63 million beneficiaries and 176 million workers in Social Security-covered employment. Under current law, Social Security's revenues are projected to be insufficient to pay full scheduled benefits after 2035. Monthly benefit amounts are determined by federal law. Social Security is of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policymakers have considered numerous proposals to change its benefit computation rules. The Social Security benefits that are paid to worker beneficiaries and to workers' dependents and survivors are based on workers' past earnings. The computation process involves three main steps First, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME). Second, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings. Third, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA) and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits. Retired worker benefits can be affected by other adjustments. For example, the windfall elimination provision can reduce benefits for individuals who receive a pension from non-Social Security-covered earnings, and benefits can be withheld under the retirement earnings test if an individual continues to work and earns above a certain amount. Although not an adjustment, Social Security benefits can be subject to income tax, thereby affecting the beneficiary's net income. Benefits for eligible dependents and survivors are based on the worker's PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker's PIA, and a widow(er) receives a benefit equal to 100% of the worker's PIA. Dependent benefits may also be adjusted based on the age at which they are claimed and other factors.

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Introduction This report provides background information and analysis on the following topics: Various aspects of U.S.-Turkey relations, including (1) Turkey's strategic orientation; (2) U.S./NATO cooperation and how a Turkish purchase of an S-400 air defense system from Russia could endanger its acquisition of U.S.-origin F-35 aircraft; (3) the situation in northern Syria, including with Kurdish-led militias; (4) criminal cases of note since the failed 2016 coup attempt in Turkey; and (5) congressional proposals. Domestic Turkish developments, including politics under President Recep Tayyip Erdogan's largely authoritarian and polarizing rule (with local elections scheduled for March 2019), and significant economic concerns. For additional information, see CRS Report R41368, Turkey: Background and U.S. Relations , by Jim Zanotti and Clayton Thomas. U.S.-Turkey Relations Turkey's Strategic Orientation in Question Numerous points of bilateral tension have raised questions within the United States and Turkey about the two countries' alliance. Turkish actions and statements on a number of foreign policy issues have contributed to problems with the United States and its other NATO allies, fueling concern about Turkey's commitment to NATO and Western orientation. For its part, Turkey may bristle because it feels like it is treated as a junior partner, and may seek greater foreign policy diversification through stronger relationships with more countries. In the months since the apparent October 2018 killing of Saudi journalist Jamal Khashoggi in Saudi Arabia's Istanbul consulate, some observers speculate that President Erdogan has sought to use information from the event to gain leverage in Turkey's dealings with the United States, and to boost Turkey's regional and global profile. A number of considerations drive the complicated dynamics behind Turkey's international relationships. Turkey's history as both a regional power and an object of great power aggression translates into wide popularity for nationalistic political actions and discourse. This nationalistic sentiment might make some Turks wary of Turkey's partial reliance on other key countries (for example, the United States for security, European Union countries for trade and investment, and Russia and Iran for energy). Moreover, Turkey's cooperative relationships with countries whose respective interests may conflict involves a balancing act. Turkey's vulnerability to threats from Syria and Iraq increases the pressure on it to manage this balance. Involvement in Syria and Iraq by the United States, Russia, and Iran further complicates Turkey's situation. Additionally, grievances that President Erdogan and his supporters espouse against seemingly marginalized domestic foes (the military and secular elite who previously dominated Turkey, the Fethullah Gulen movement, Kurdish nationalists, and liberal activists) extend to the United States and Europe due to apparent suspicions of Western sympathies for these foes. Turkey's Middle Eastern profile expanded in the 2000s as Erdogan (while serving as prime minister) sought to build economic and political linkages—often emphasizing shared Muslim identity—with Turkey's neighbors. However, efforts to increase Turkey's influence and offer it as a "model" for other regional states appear to have been set back by a number of developments since 2011: (1) conflict and instability that engulfed the region and Turkey's own southern border, (2) Turkey's failed effort to help Muslim Brotherhood-aligned groups gain lasting power in Syria and North Africa, and (3) domestic polarization accompanied by government repression. Although Turkey shares some interests with traditional Sunni Arab powers Saudi Arabia and Egypt in countering Iran, these countries' leaders regard Turkey suspiciously because of the Turkish government's Islamist sympathies and close relationship with Qatar. Turkey maintains relations with Israel, but these have become distant and—at times—contentious during Erdogan's rule. U.S./NATO Cooperation with Turkey Overview Turkey's location near several global hotspots makes the continuing availability of its territory for the stationing and transport of arms, cargo, and personnel valuable for the United States and NATO. From Turkey's perspective, NATO's traditional value has been to mitigate its concerns about encroachment by neighbors. Turkey initially turned to the West largely as a reaction to aggressive post-World War II posturing by the Soviet Union. In addition to Incirlik air base near the southern Turkish city of Adana, other key U.S./NATO sites include an early warning missile defense radar in eastern Turkey and a NATO ground forces command in Izmir. Turkey also controls access to and from the Black Sea through its straits pursuant to the Montreux Convention of 1936. Current tensions have fueled discussion from the U.S. perspective about the advisability of continued U.S./NATO use of Turkish bases. Reports in 2018 suggested that some Trump Administration officials were contemplating significant reductions in the U.S. presence in Turkey. There are historical precedents for such changes. On a number of occasions, the United States has withdrawn military assets from Turkey or Turkey has restricted U.S. use of its territory or airspace. These include the following: 196 2— Cuban Missile Crisis . The United States withdrew its nuclear-tipped Jupiter missiles from Turkey as part of the secret deal to end this crisis with the Soviet Union. 1975— Cyprus. Turkey closed most U.S. defense and intelligence installations in Turkey during the U.S. arms embargo that Congress imposed in response to Turkey's military intervention in Cyprus. 2003— Iraq. A Turkish parliamentary vote did not allow the United States to open a second front from Turkey in the Iraq war. Some of the plotters of an unsuccessful coup attempt in Turkey in July 2016 apparently used Incirlik air base, causing temporary disruptions of some U.S. military operations. This may have eroded some trust between the two countries, while also raising U.S. questions about Turkey's stability and the safety and utility of Turkish territory for U.S. and NATO assets. As a result of these questions and U.S.-Turkey tensions, some observers have advocated exploring alternative basing arrangements in the region. The cost to the United States of finding a replacement for Incirlik and other sites in Turkey would likely depend on a number of variables including the functionality and location of alternatives, where future U.S. military engagements may happen, and the political and economic difficulty involved in moving or expanding U.S. military operations elsewhere. While an August 2018 report cited a Department of Defense (DOD) spokesperson as saying that the United States is not leaving Incirlik, some reports suggest that expanded or potentially expanded U.S. military presences in Greece and Jordan might be connected with concerns about Turkey. Calculating the costs and benefits to the United States of a U.S./NATO presence in Turkey, and of potential changes in U.S./NATO posture, revolves to a significant extent around three questions: To what extent does strengthening Turkey relative to other regional actors serve U.S. interests? To what extent does the United States rely on the use of Turkish territory or airspace to secure and protect U.S. interests? To what extent does Turkey rely on U.S./NATO support, both politically and functionally, for its security and regional influence? F-35 Aircraft Acquisition Endangered by Possible S-400 Acquisition from Russia Turkey's plans to take delivery of an S-400 air defense system from Russia sometime in 2019 could hamper its acquisition of U.S.-origin F-35 Joint Strike Fighter aircraft. Turkey is a member of the international consortium that has developed the F-35, and plans to purchase 100 of the aircraft. Training on the F-35 for Turkish pilots is now underway on U.S. soil, and the first aircraft is reportedly scheduled to leave the United States for Turkey sometime in 2020. S-400 Deal and Implications for NATO Turkey justified its preliminary decision to acquire S-400s instead of U.S. or European alternatives by claiming that it turned to Russia because NATO allies rebuffed its attempts to purchase an air defense system from them. Turkey has also cited various practical reasons, including cost, technology sharing, and territorial defense coverage. However, one analysis from December 2017 asserted that the S-400 deal would not involve technology transfer, would not defend Turkey from ballistic missiles (because the system would not have access to NATO early-warning systems), and could weaken rather than strengthen Turkey's geopolitical position by increasing Turkish dependence on Russia. For some observers, the S-400 issue raises the possibility that Russia could take advantage of U.S.-Turkey friction to undermine the NATO alliance. Previously, in 2013, Turkey reached a preliminary agreement to purchase a Chinese air and missile defense system, but later (in 2015) withdrew from the deal, perhaps partly due to concerns voiced within NATO, as well as China's reported reluctance to share technology. Possible Impact on F-35 Transaction While U.S. officials express desires to avoid disruptions to the F-35's manufacture and rollout, they also express concern that Turkey's potential operation of the S-400 alongside the F-35 could compromise sensitive technology. According to one analysis, "the Pentagon fears that Turkey's operation of the S-400 would allow the Russian military to study how the F-35 stealth fighters [show up on] Russian-built air defense radars, and potentially facilitate the infiltration of [the F-35] computer system. This could compromise the F-35's effectiveness around the world." According to one Turkish press report, Turkey has taken a step intended to assuage U.S. concerns by insisting on an arrangement that allows Turkish technicians to operate the S-400 without Russian involvement, and Turkey may also allow U.S. officials to examine the S-400. Congress has enacted legislation that has subjected the F-35 transfer to greater scrutiny. Under Section 1282 of the FY2019 John S. McCain National Defense Authorization Act ( P.L. 115-232 ), DOD submitted a report to Congress in November 2018 on a number of issues affecting U.S.-Turkey defense cooperation, including the S-400 and F-35. Much of the report was classified, but an unclassified summary said that the U.S. government has told Turkey that purchasing the S-400 would have "unavoidable negative consequences for U.S.-Turkey bilateral relations, as well as Turkey's role in NATO," including potential sanctions against Turkey under Section 231 of the Countering America's Adversaries Through Sanctions Act (CAATSA, P.L. 115-44 ); risk to Turkish participation in the F-35 program (both aircraft acquisition and industrial workshare); risk to other potential U.S. arms transfers to Turkey, and to broader bilateral defense industrial cooperation; reduction in NATO interoperability; and introduction of "new vulnerabilities from Turkey's increased dependence on Russia for sophisticated military equipment." U.S. Offer of Patriot System as Alternative to S-400 In July 2018, a State Department official confirmed ongoing U.S. efforts to persuade Turkey to purchase a Patriot air defense system instead of an S-400. However, in October 2018, Turkish Defense Minister Hulusi Akar said that talks with U.S. and European air defense system suppliers had "not yielded desired results," and announced plans for Turkey to begin deploying the S-400 in October 2019. Previously, Turkish officials had indicated some concern about whether Congress would approve a Patriot sale, perhaps because of some congressional opposition for other arms sales to Turkey. The unclassified summary of the November 2018 DOD report to Congress indicated that U.S. officials were continuing to offer a Patriot system to Turkey: The Administration has developed an alternative package to provide Turkey with a strong, capable, NATO-interoperable air and missile defense system that meets all of Turkey's defense requirements. Parts of the package require Congressional Notification. Congressional support for Foreign Military Sales and Direct Commercial Sales to Turkey is essential to provide a real alternative that would encourage Turkey to walk away from a damaging S-400 acquisition. In December 2018, the Defense Security Cooperation Agency (DSCA) notified Congress that "the State Department has made a determination approving a possible Foreign Military Sale [FMS] of eighty (80) Patriot MIM-104E Guidance Enhanced Missiles (GEM-T) missiles, sixty (60) PAC-3 Missile Segment Enhancement (MSE) missiles and related equipment for an estimated cost of $3.5 billion." Reportedly, discussions between U.S. and Turkish officials over a Patriot sale are ongoing. Turkish officials have stated their intention to proceed with the S-400 purchase regardless of how negotiations over the Patriot sale proceed. In 2009, DSCA notified Congress of a possible FMS to Turkey of Patriot missiles and associated equipment, but the countries did not enter into a transaction for that equipment. Since 2007, Turkey has solicited a number of outside bids to sell it an air defense system, but has not finalized a transaction to date. Syria Background Turkey's involvement in Syria's conflict since 2011 has been complicated and costly. During that time, Turkey's priorities in Syria appear to have evolved. While Turkey still officially calls for Syrian President Bashar al Asad to leave power, it has engaged in a mix of coordination and competition with Russia and Iran (Asad's supporters) on some matters since intervening militarily in Syria starting in August 2016. Turkey may be seeking to protect its borders, project influence, promote commerce, and counter other actors' regional ambitions. Turkey's chief objective has been to thwart the Syrian Kurdish People's Protection Units (YPG) from establishing an autonomous area along Syria's northern border with Turkey. The YPG has links with the PKK (Kurdistan Workers' Party), a U.S.-designated terrorist organization that for decades has waged an on-and-off insurgency against the Turkish government while using safe havens in both Syria and Iraq. Turkey appears to view the YPG and its political counterpart, the Democratic Union Party (PYD), as the top threat to its security, given the boost the YPG/PYD's military and political success could provide to the PKK's insurgency within Turkey. The YPG plays a leading role in the umbrella group known as the Syrian Democratic Forces (SDF), which also includes Arabs and other non-Kurdish elements. Since 2014, the SDF has been the main U.S. ground force partner against the Islamic State (IS, also known as ISIS/ISIL). Even though Turkey is also a part of the anti-IS coalition, U.S. operations in support of the SDF—largely based from Turkish territory—has fueled U.S.-Turkey tension because of Turkey's view of the YPG as a threat. As part of SDF operations to expel the Islamic State from the Syrian city of Raqqah in 2017, the U.S. government pursued a policy of arming the YPG directly while preventing the use of such arms against Turkey, and Secretary of Defense Jim Mattis announced an end to the direct arming of the YPG near the end of the year. Following the Raqqah operation, U.S. officials contrasted their long-standing alliance with Turkey with their current but temporary cooperation with the YPG. After Turkey moved against IS-held territory in northern Syria as a way to prevent the YPG from consolidating its rule across much of the border area between the two countries (Operation Euphrates Shield, August 2016-March 2017), Turkey launched an offensive directly against the YPG in the Afrin province in January 2018. In Afrin and the other areas Turkey has occupied since 2016 with the help of allied Syrian opposition militias (see Figure 2 below) , Turkey has organized local councils and invested in infrastructure . Q uestions persist about how deeply Turkey will influence future governance in these areas . Implications of Announced U.S. Withdrawal President Trump's announcement in December 2018 that the United States would withdraw approximately 2,000 U.S. troops stationed in Syria has major implications for Turkey and the YPG. The announcement came shortly after a call between Presidents Trump and Erdogan, during which Trump reportedly accepted Erdogan's offer to take responsibility for countering the Islamic State in Syria. U.S. officials have been cited as saying that U.S. troops will redeploy from Syria by summer 2019. How a U.S. withdrawal would happen remains unclear, as does how Turkey and the many other actors in Syria would respond. Turkey has refused to agree to a demand from National Security Advisor John Bolton to guarantee the YPG's safety, with Erdogan insisting that Turkey should have a free hand with the YPG and other groups it considers to be terrorists. In January, amid reports that the U.S. military had begun preparing for withdrawal, President Trump tweeted that he would "devastate Turkey economically" if it hit the Kurds, and at the same time proposed the creation of a 20-mile-deep "safe zone" on the Syria side of the border. Secretary of State Mike Pompeo later said that the U.S. "twin aims" are to make sure that those who helped take down the IS caliphate have security, and to prevent terrorists from attacking Turkey out of Syria. Some sources suggest that U.S. officials favor having a Western coalition patrol any kind of buffer zone inside the Syrian border, with some U.S. support, while Turkey wants its forces and Syrian rebel partners to take that role. Uncertainty surrounding the announced U.S. withdrawal from northeast Syria also applies to how Turkish forces might operate there. One analyst calculates that additional Turkish military intervention might focus on areas, such as Tal Abyad (aka Tell Abiad), that are less historically Kurdish than others, in an effort to reduce the YPG's control over territorially contiguous regions. Some observers express doubts that Turkish-supported militias would be able to counter the Islamic State as effectively as the YPG-led SDF, and one journalist has stated concerns about what could happen to the IS foreign fighters held by the SDF if Turkey clashes with the YPG. Turkish officials have requested U.S. air and logistical support for their potential operations, despite the two countries' different stances on the YPG. In a New York Times column in January, President Erdogan envisioned that if Turkish-backed forces gain control of predominantly Kurdish areas in Syria currently under YPG rule, these regions would be run by popularly elected local councils advised by Turkish officials. Various analyses surmise that a U.S. troop withdrawal would lead the YPG toward an accommodation with Russia and the Syrian government. A reference by Russian President Vladimir Putin to the 1998 Adana Protocol between Turkey and Syria suggests that Russia may seek to limit direct Turkish involvement in Syria under the premise that Syria's government would take greater responsibility for constraining YPG actions. How U.S.-Turkey coordination plays out in northeastern Syria could influence Turkey's presence in western Syria, particularly in key contested areas like the town of Manbij and Idlib province. Russia and the Syrian government have sent forces near Manbij, possibly as a check on Turkish personnel there who are intent on eradicating YPG influence from the town. In Idlib, Turkey-backed forces stationed at points around the province appear to have failed to prevent territorial gains by Al Qaeda-linked Hayat Tahrir al Sham (HTS) jihadists who also oppose the Syrian government. The HTS gains in Idlib may lead to a Russian-backed Syrian military operation there with the potential for new refugee flows to Turkey. Various Criminal Cases After 2016 Coup Attempt A number of cases involving criminal allegations or detentions have generated controversy between the United States and Turkey since the July 2016 coup attempt in Turkey. Shortly after the attempt, Turkey's government called for the extradition of Fethullah Gulen (the U.S.-based former cleric whom Turkey's government has accused of involvement in the plot), and the matter remains pending before U.S. officials. Since the coup attempt, sharp criticism of U.S. actions related to Gulen's case has significantly increased in Turkish media. Additionally, Turkey's government has dismissed around 130,000 Turks from government posts, detained more than 60,000, and taken over or closed various businesses, schools, and media outlets. The government's measures appear to have targeted many who are not connected with Gulen. As part of Turkish authorities' postcoup crackdown, they detained Pastor Andrew Brunson (who was released, after a two-year imprisonment, in October 2018) and a number of other U.S. citizens (most of them dual U.S.-Turkish citizens), along with Turkish employees of the U.S. government. Reports suggest that Congress and the State Department are trying to obtain the release of those currently detained, though the Administration lifted sanctions on senior Turkish officials following Pastor Brunson's release. Separately, two prominent Turkish citizens with government ties were arrested by U.S. authorities in 2016 and 2017 for conspiring to evade sanctions on Iran. One, Reza Zarrab, received immunity for cooperating with prosecutors, while the other, Mehmet Hakan Atilla, was convicted and sentenced in May 2018 to 32 months in prison. The case was repeatedly denounced by Turkish leaders, who reportedly expressed concern about the potential implications for Turkey's economy if the case led U.S. officials to impose penalties on Turkish banks. This has not yet happened. Congressional Proposals Bilateral tensions contributed to various legislative proposals by Members of Congress during the 115 th Congress. The most significant congressional action against Turkey to date has been an arms embargo that Congress enacted in response to Turkish military intervention in Cyprus. That embargo lasted from 1975 to 1978. In the 116 th Congress, the House-passed Consolidated Appropriations Act, 2019 ( H.R. 648 ) contains foreign aid provisions that also have been introduced in the Senate Appropriations Committee. Section 7046(d) of H.R. 648 includes the following proposals regarding Turkey: Requiring DOD to update its FY2019 NDAA report to Congress on Turkey's possible S-400 acquisition. The update, including a detailed description of plans to impose sanctions under CAATSA, is required by November 1, 2019. Until the report is submitted, funding cannot be used to transfer F-35 aircraft to Turkey. Restricting transfer of arms to Turkish P residential Protection Directorate (TPPD) . This restriction, which is subject to a few exceptions, would apply unless the State Department reports to Congress that members of the TPPD who were involved in a violent incident against protestors during a May 2017 Washington, DC, trip by President Erdogan have been "brought to justice." H.R. 648 is less stringent than an earlier FY2019 appropriations bill ( S. 3108 ) from the 115 th Congress that would have prohibited transferring F-35s to Turkey if it purchased the S-400, and would have denied entry to senior Turkish officials involved in detaining U.S. citizens. Domestic Turkish Developments Political Developments Under Erdogan's Rule President Erdogan has ruled Turkey since becoming prime minister in 2003. After Erdogan became president in August 2014 via Turkey's first-ever popular presidential election, he claimed a mandate for increasing his power and pursuing a "presidential system" of governance. Analyses of Erdogan sometimes characterize him as one or more of the following: a pragmatic populist, a protector of the vulnerable, a budding authoritarian, an indispensable figure, and an Islamic ideologue. Erdogan's consolidation of power has continued amid domestic and international concerns about growing authoritarianism in Turkey. He outlasted the July 2016 coup attempt, and then scored victories in the April 2017 constitutional referendum and the June 2018 presidential and parliamentary elections—emerging with the expanded powers he had sought. Some allegations of voter fraud and manipulation surfaced in both elections. U.S. and European Union officials have expressed a number of concerns about rule of law and civil liberties in Turkey, including the government's influence on media and Turkey's reported status as the country with the most journalists in prison. While there may be some similarities between Turkey under Erdogan and countries like Russia, Iran, or China, some factors distinguish Turkey from them. For example, unlike Russia or Iran, Turkey's economy cannot rely on significant rents from natural resources if foreign sources of revenue or investment dry up. Unlike Russia and China, Turkey does not have nuclear weapons under its command and control. Additionally, unlike all three others, Turkey's economic, political, and national security institutions and traditions have been closely connected with those of the West for decades. Erdogan is a polarizing figure, with about half the country supporting his rule, and half the country against it. To obtain a parliamentary majority in the June 2018 elections, Erdogan's Islamist-leaning Justice and Development Party ( Adalet ve Kalkinma Partisi , or AKP) relied on a coalition with the Nationalist Action Party ( Milliyet Halk Partisi , or MHP). The MHP is the country's traditional Turkish nationalist party, and is known for opposing political accommodation with the Kurds. Local elections scheduled for March 2019 could be a significant barometer of domestic support for Erdogan under the difficult economic circumstances described below. Economic Concerns The Turkish economy appears to be slowing down, with negative consequences both for consumer demand and for companies seeking or repaying loans in global markets. Economic growth was down from over 7% in 2017 to around 3% in 2018, with forecasts for 2019 at or below 1%. By the end of 2018, inflation had essentially doubled year-on-year to more than 20%. During 2018, the Turkish lira depreciated close to 30% against the dollar in an environment featuring a globally stronger dollar, rule of law concerns and political uncertainty, and significant corporate debt. In August 2018, amid U.S.-Turkey tensions on the Pastor Brunson matter, President Trump announced a doubling of tariffs on Turkish steel and aluminum imports. This prompted retaliatory action from Turkey. The lira plunged in value, but recovered somewhat in the final months of 2018 after Turkey's central bank raised its key interest rate by 6.25% in September. In November 2018, the United States granted Turkey (along with seven other countries) a six-month exception from U.S. sanctions on Iranian oil. Some observers speculate that Turkey may need to turn to the International Monetary Fund (IMF) for a financial assistance package. This would be a sensitive challenge for President Erdogan because his political success story is closely connected with helping Turkey become independent from its most recent IMF intervention in the early 2000s. Before the central bank's rate hike in September 2018, some commentators voiced concerns about the bank's independence as Erdogan publicly opposed increasing rates. In January 2019, Turkey's parliament voted to grant Erdogan broader emergency powers in case of a financial crisis. The government appears to be trying to stimulate growth via familiar measures to boost consumer demand. A former Turkish economic official has claimed that by offloading the "debt crisis of the real sector" onto the banking sector, the government has exacerbated the crisis. In his opinion, a "harsh belt-tightening policy" with or without the IMF is thus inevitable after the March 2018 local elections.

The United States and Turkey have been NATO allies since 1952 and share some vital interests, but harmonizing their priorities can be difficult. These priorities sometimes diverge irrespective of who leads the two countries, based on contrasting geography, threat perceptions, and regional roles. Turkey's core security and economic relationships and institutional links remain with Western nations, as reflected by some key U.S. military assets based in Turkey and Turkey's strong trade ties with the European Union. However, various factors complicate U.S.-Turkey relations. For example, Turkey relies to some degree on nations such as Russia and Iran for domestic energy needs and coordination on regional security, and therefore balances diplomatically between various actors. Additionally, Turkey's president and longtime leader Recep Tayyip Erdogan appears to be concerned that the United States and some other Western countries harbor sympathies for some of the groups that have been marginalized domestically under Erdogan. Also, Turkey has played a larger role in the Middle East since the 2000s, but has faced a number of setbacks and has problematic relations with Israel and most Sunni Arab countries other than Qatar. Bilateral relations between the Trump Administration and the Erdogan government have been difficult, but have improved somewhat since October 2018, when a Turkish court allowed Pastor Andrew Brunson to return to the United States after a two-year imprisonment. The following are current points of tension in the U.S.-Turkey relationship. F-35 aircraft acquisition endangered by possible S-400 acquisition from Russia. Turkey's planned purchase of an S-400 air defense system from Russia could trigger U.S. sanctions under existing law and decrease Turkey's chances of acquiring U.S.-origin F-35 aircraft. The possible S-400 transaction has sparked broader concern over Turkey's relationship with Russia and implications for NATO. U.S. officials seek to prevent the deal by offering Patriot air defense systems as an alternative to the S-400. Syria and the Kurds. Turkey's political stances and military operations in Syria have fed U.S.-Turkey tensions, particularly regarding Kurdish-led militias supported by the United States against the Islamic State over Turkey's strong objections. President Trump's announcement in December 2018 that U.S. troops would withdraw from Syria came after a call with President Erdogan in which Erdogan accepted responsibility for countering the Islamic State in Syria. Efforts to coordinate U.S. and Turkish actions related to a U.S. withdrawal have triggered debate about the possible consequences of Turkish intervention in northeast Syria, especially for those Kurdish-led militias, which have links with the PKK (Kurdistan Workers' Party). The PKK is a U.S.-designated terrorist organization that originated in Turkey and wages an on-and-off insurgency against the Turkish government while using safe havens in both Syria and Iraq. Congressional initiatives. Within the tense bilateral context, the 115th Congress required the Trump Administration—in the FY2019 John S. McCain National Defense Authorization Act (NDAA, P.L. 115-232)—to report on the status of U.S.-Turkey relations, with particular emphasis on the possible S-400 deal and its implications. The Department of Defense (DOD) submitted a mostly classified report to Congress in November 2018. Appropriations legislation proposed for FY2019 in the 116th Congress (H.R. 648) would require an update to the DOD report. Turkey's domestic trajectory and financial distress. President Erdogan rules in an increasingly authoritarian manner, with his power further consolidated in June 2018 presidential and parliamentary elections. A number of developments (a globally stronger dollar, rule of law concerns and political uncertainty, significant corporate debt) led to a precipitous drop in the value of Turkey's currency during 2018. A major September 2018 interest rate hike by Turkey's central bank helped reverse some of the currency's downward slide, but concerns remain about Turkey's financial position and the possible consequences that higher interest rates might have for economic growth. Local elections are scheduled for March 2018 against the backdrop of these economic concerns. The next steps in relations between the United States and Turkey will take place with Turkey facing a number of political and economic challenges. Given Erdogan's consolidation of power, observers now question how he will govern a polarized electorate and deal with the foreign actors who can affect Turkey's financial solvency, regional security, and political influence. U.S. officials and lawmakers can refer to Turkey's complex history, geography, domestic dynamics, and international relationships in evaluating how to encourage Turkey to align its policies with U.S. interests.

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What Is the Budget Resolution and How Is It Enforced? The Congressional Budget Act of 1974 (hereinafter referred to as the Budget Act) created the budget resolution and specifies that it be adopted annually. The budget resolution reflects an agreement between the House and Senate on spending and revenue levels. The budget resolution does not become law; therefore no money is spent or collected as a result of its adoption. Instead, it is meant to assist Congress in considering an overall budget plan. Once agreed to by both chambers in the exact same form, the budget resolution creates parameters that may be enforced in two primary ways: (1) by points of order, and (2) by using the budget reconciliation process. Enforcement Through Points of Order Once the budget resolution has been agreed to by both chambers, certain levels contained in it are enforceable through points of order. This means that if legislation is being considered on the House or Senate floor that would violate certain levels contained in the budget resolution, a Member may raise a point of order against the consideration of that legislation. Points of order can be raised against bills, resolutions, amendments, or conference reports. If such a point of order is raised against legislation for violating levels in the budget resolution, the presiding officer makes a ruling on the point of order based on estimates provided by the relevant Budget Committee. Points of order are not self-enforcing, meaning that if no Member raises a point of order, a chamber may consider and pass legislation that would violate levels established in the budget resolution. In addition, either chamber may waive the point of order. The process for waiving points of order, and the number of Members required to waive points of order, varies by chamber. Generally, such points of order can be waived in the House by a simple majority of Members and in the Senate by three-fifths of all Senators. The Budget Act requires that the budget resolution include the following budgetary levels for the upcoming fiscal year and at least four out years: total spending, total revenues, the surplus/deficit, new spending for each major functional category, the public debt, and (in the Senate only) Social Security spending and revenue levels. The Budget Act also requires that the aggregate amounts of spending recommended in the budget resolution be allocated among committees. The Budget Act provides that the House and Senate Appropriations Committees receive an allocation for only the upcoming fiscal year (referred to as the budget year), but the remaining House and Senate committees receive allocations for the entire period covered by the budget resolution. The Budget Act requires that the House and Senate Appropriations Committees subdivide their allocations by subcommittee and report these sub-allocations to their respective chambers. While the Budget Act requires that the budget resolutions include the levels described above, it does not require that all of these levels be enforceable by points of order. (Some levels in the budget resolution are, therefore, included only for informational purposes.) Budgetary levels that are enforceable include spending and revenue aggregates and committee spending allocations. The Budget Act prohibits the consideration of (1) any measure that would cause spending to exceed levels in the budget resolution, or (2) any measure that would cause total revenue levels to fall below the levels in the budget resolution. Likewise, the Budget Act prohibits the consideration of legislation that would violate the committee spending allocations. (Similarly, once the Appropriations Committees report their sub-allocations to their respective chambers, the Budget Act bars the consideration of any spending measures that would cause those sub-allocations to be violated.) Enforcement Through the Budget Reconciliation Process While points of order can be effective in enforcing the budgetary goals outlined in the budget resolution, they can be raised against legislation only when it is pending on the House or Senate floor. This can be effective for legislation such as appropriations measures, which typically provide funding for one year and are therefore considered on the House and Senate floor annually. Points of order cannot, however, limit direct spending or revenue levels resulting from current law. Often, for the budgetary levels in the budget resolution to be achieved, Congress must pass legislation to alter the levels of revenue and/or direct spending resulting from existing law. In this situation, Congress seeks to reconcile the levels of direct spending and revenue resulting from existing law with those budgetary levels expressed in the budget resolution. To assist in this process, the budget reconciliation process allows special consideration of legislation that would accomplish those budgetary levels expressed in the budget resolution. If Congress intends to use the reconciliation process, reconciliation directives (also referred to as reconciliation instructions) must be included in the annual budget resolution. These directives instruct individual committees to develop and report legislation that would change laws within their respective jurisdictions related to direct spending, revenue, or the debt limit. Once a specified committee develops legislation, the reconciliation directive may direct it to report the legislation for consideration in its chamber or submit it to the Budget Committee to be included in an omnibus reconciliation measure. Such reconciliation legislation is then eligible to be considered under special expedited procedures in both the House and Senate. What Complications Arise When the House and Senate Do Not Reach Agreement on a Budget Resolution? The budget resolution reflects an agreement between the House and Senate on a budgetary plan for the upcoming fiscal year. When the House and Senate do not reach final agreement on this plan, the budget process for the upcoming fiscal year may become complicated. Without an agreement on budgetary parameters, it may be more difficult for Congress to reach agreement on subsequent budgetary legislation, both within each chamber and between the chambers. If Congress agreed upon a budget resolution for the prior fiscal year, that resolution remains in effect and may provide some operative parameters, since a resolution includes multi-year enforceable levels. The usefulness of such levels may be limited, however, due to altered economic conditions and technical factors, not to mention any changes in congressional budgetary goals. Since a committee allocation to the Appropriations Committee is made for only the upcoming fiscal year, the House and Senate cannot rely on a prior year's budget resolution. This means that there is no allocation of spending made to the Appropriations Committees and no formal basis for them to make the required spending sub-allocations. Without such enforceable budgetary levels, the development and consideration of individual appropriations measures may encounter difficulties. Without agreement on a budget resolution, Congress also may not use the budget reconciliation process. This means that any budgetary changes to revenue or mandatory spending may not be considered under the special expedited procedures provided by the budget reconciliation process. The Budget Act sought to require adoption of a budget resolution before Congress could consider budgetary legislation for the upcoming year. Under Section 303(a) of the Budget Act, the House and Senate generally may not consider spending, revenue, or debt limit legislation for a fiscal year until the budget resolution for that fiscal year has been adopted. The Budget Act provides for exceptions, however, and in addition allows the point of order to be waived in both chambers by a simple majority. What Can Be Used for Budget Enforcement in the Absence of a Budget Resolution? In the absence of a budget resolution, other budget enforcement mechanisms are available to Congress comprising two general categories. First, there are types of budget enforcement that are entirely separate from the budget resolution, such as chamber rules and statutory spending caps. These mechanisms remain in effect in the absence of a budget resolution and place restrictions on certain types of budgetary legislation. Such enforcement is briefly described below in the section titled " What Types of Budgetary Enforcement Exist Outside of the Budget Resolution? " Second, in the absence of agreement on a budget resolution, Congress may employ alternative legislative tools to serve as a substitute for a budget resolution. When Congress has been late in reaching final agreement on a budget resolution, or has not reached agreement at all, it has relied on such substitutes. These substitutes are typically referred to as "deeming resolutions," because they are deemed to serve in place of an agreement between the two chambers on an annual budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year (or multiple fiscal years). Employing a deeming resolution, however, does not preclude Congress from subsequently agreeing to a budget resolution. While referred to as deeming resolutions, such mechanisms are not formally defined and have no specifically prescribed content. Instead, they denote the House and Senate, often separately, engaging legislative procedures to deal with enforcement issues on an ad hoc basis. As described below, the mechanisms vary in form and function, but they always (1) include or reference certain budgetary levels (e.g., aggregate spending limits and committee spending allocations) and (2) contain language stipulating that such levels are to be enforceable by points of order as if they had been included in a budget resolution. In Which Years Did Congress Rely on Deeming Resolutions in the Absence of Agreement on a Budget Resolution? As shown in Table 1 , since the creation of the budget resolution, dates of adoption have varied, and there have been 10 years in which Congress did not come to agreement on a budget resolution. As shown in Table 2 , in each of those years, one or both chambers employed at least one deeming resolution to serve as a substitute for a budget resolution. It should be noted that Table 2 includes only the deeming resolutions that pertain to the fiscal years for which Congress did not agree on a budget resolution. For example, for FY2017, the House and Senate ultimately agreed to a budget resolution, and so data pertaining to FY2017 is not included in this report even though the Senate utilized a deeming resolution before agreement on a budget resolution was reached. In What Ways Have Deeming Resolutions Varied? As described below, deeming resolutions have varied in several ways. Variations in Legislative Vehicle Congress initially used simple resolutions as the legislative vehicle for deeming resolutions (which is why they are referred to as resolutions). As shown in Table 2 , however, deeming resolutions have also been included as provisions in lawmaking vehicles, such as appropriations bills. Questions sometimes arise regarding whether the use of an alternative legislative vehicle has any impact on the enforceability of the budgetary levels. Article I of the Constitution, however, gives each house of Congress broad authority to determine its rules of procedure. The House and the Senate may include rulemaking provisions, such as enforceable budgetary levels, in any type of legislative vehicle. In each case, the rulemaking provisions have equal standing and effect. Under this constitutional rulemaking principle, each house has the authority to take parliamentary action that waives its own rules in certain circumstances if it sees fit. This power is not compromised by the fact that the rulemaking provision may be established in statute. Variations in Timing As shown in Figure 1 , timing of congressional action on deeming resolutions has varied, since deeming resolutions may be initiated any time Congress regards it as necessary. Chambers have often agreed to deeming resolutions several months after they have separately agreed to a budget resolution but have not come to agreement with each other. Also, chambers have agreed to a deeming resolution on the same day as agreeing to a budget resolution in situations when one chamber foresees difficulty resolving differences with the other chamber. For example, the Senate agreed to a budget resolution for FY1999 on April 2, 1998, and, anticipating an impasse with the House, agreed to a deeming resolution the same day. Similarly, the House passed a budget resolution for FY2007 on May 18, 2006, and agreed to a deeming resolution the same day. Further, deeming resolutions have been provided for far in advance of potential action on a budget resolution. For example, the Bipartisan Budget Act of 2015 ( P.L. 114-74 , enacted in November of 2015) included a provision directing the Senate Budget Committee chair to file in the Congressional Record levels that would then become enforceable in the Senate as if they had been included in a budget resolution for FY2017. Often, a chamber initiates action on a deeming resolution so that it can subsequently begin consideration of appropriations measures. In the House deeming resolutions are often included in the same resolution providing for consideration of the first appropriations measure for the upcoming fiscal year. Just as employing a deeming resolution does not preclude Congress from subsequently agreeing to a budget resolution, it also does not preclude Congress from acting on another deeming resolution that either expands or replaces the first deeming resolution. For example, in FY1999 the Senate agreed to a deeming resolution in April, and in October it agreed to a further deeming resolution that amended the previous deeming resolution. Likewise, the House agreed to a deeming resolution for FY2014 in June but in December passed the Bipartisan Budget Act, which included a deeming resolution that superseded parts of the initial deeming resolution. Variations in Content Deeming resolutions always include at least two things: (1) language setting forth or referencing specific budgetary levels (e.g., aggregate spending limits and/or committee spending allocations), and (2) language stipulating that such levels are to be enforceable as if they had been included in a budget resolution. Even so, significant variations exist in their content, as shown in Table 3 . Budget resolutions include budgetary levels in the form of explicit dollar amounts, and in some instances deeming resolutions have done the same. For example: Pending the adoption by the Congress of a concurrent resolution on the budget for FY1999, the following allocations contemplated by section 302(a) of the Congressional Budget Act of 1974 shall be considered as made to the Committee on Appropriations: (1) New discretionary budget authority: $531,961,000,000. (2) Discretionary outlays: $562,277,000,000. Some deeming resolutions, however, have not included the budgetary levels themselves but have incorporated them by reference, particularly in situations when that chamber has already passed a budget resolution but has not come to agreement with the other chamber. For example: Pending the adoption of a concurrent resolution on the budget for fiscal year 2003, the provisions of House Concurrent Resolution 353, as adopted by the House, shall have force and effect in the House as though Congress has adopted such concurrent resolution. In some cases, the deeming resolution has stated that the chairs of the House and Senate Budget Committees shall subsequently file in the Congressional Record levels that will then become enforceable as if they had been included in a budget resolution. The committee chairs are typically directed to file particular levels, such as those consistent with discretionary spending caps or those consistent with the baseline projections of the Congressional Budget Office. Such provisions have been used recently in both the Budget Control Act of 2011 and the Bipartisan Budget Act of 2013. For example: For the purpose of enforcing the Congressional Budget Act of 1974 for fiscal year 2014... the ... levels provided for in subsection (b) shall apply in the same manner as for a concurrent resolution on the budget for fiscal year 2014.... The Chairmen of the Committee on the Budget of the House of Representatives and the Senate shall each submit a statement for publication in the Congressional Record as soon as practicable after the date of enactment of this Act that includes ... committee allocations for fiscal year 2014 consistent with the discretionary spending limits set forth in this Act. As stated above, deeming resolutions will sometimes reference a budget resolution that has been previously adopted by that chamber and will deem that budget resolution to be enforceable. Alternatively, mechanisms may include or reference only certain levels normally included in a budget resolution. For example, in some cases deeming resolutions have included only committee allocations to the Appropriations Committee, while in other cases they have included allocations for all committees, as well as aggregate spending and revenue levels. While content has varied, deeming resolutions that have not referenced a previously passed budget resolution have typically included only levels to be enforced by points of order, such as aggregate spending and revenue levels as well as spending allocations for each committee. Deeming resolutions generally do not include all of the levels required to be in a budget resolution by the Budget Act. For example, the Budget Act requires that the budget resolution include the corresponding deficit level and public debt level under the enforceable budgetary framework. These have not typically been included in deeming resolutions. In addition, deeming resolutions have often included other matter, such as points of order. What Types of Budgetary Enforcement Exist Outside of the Budget Resolution? In addition to the budget resolution, Congress employs other types of budget enforcement. Some of these enforcement mechanisms are procedural (which are enforced through points of order), and some are statutory (which are enforced through sequestration). In the absence of a budget resolution, these additional budget enforcement mechanisms remain intact. This means that even without a budget resolution, there are still prohibitions and restrictions on different types of budgetary legislation. For example, a limit on defense and nondefense discretionary spending currently exists in the form of annual discretionary spending caps and in addition can act as a guide to appropriators in crafting appropriations measures. In addition, limits on new direct spending and revenue legislation exist through points of order and statutory enforcement such as Senate PAYGO, House CUTGO, and Statutory PAYGO. Budget Enforcement Through Points of Order The House and Senate have many budget-related points of order that seek to restrict or prohibit consideration of different types of budgetary legislation. These points of order are found in various places such as the Budget Act, House and Senate standing rules, and past budget resolutions. For example, for FY2017, Congress moved forward with appropriations in the absence of a budget resolution or deeming resolution. The House Appropriations Committee adopted "interim 302(b) sub-allocations" for some individual appropriations bills. Such levels did not act as an enforceable cap on appropriations measures when they were considered on the floor. A separate order adopted by the House as a part of H.Res. 5 (114 th Congress), however, prohibited floor amendments that would increase spending in a general appropriations bill, effectively creating a cap on individual appropriations bills when they were considered on the floor. In addition, in the Senate there exists a pay-as-you-go (PAYGO) rule that prohibits the consideration of direct spending or revenue legislation that is projected to increase the deficit. Another example is the House cut-as-you-go (CUTGO) rule that prohibits the consideration of direct spending legislation that is projected to increase the deficit. Numerous other points of order exist. A summary of many of these can be found in CRS Report 97-865, Points of Order in the Congressional Budget Process , by James V. Saturno. Budget Enforcement Through Statutory Means In addition to points of order, there are other types of budget enforcement mechanisms that employ statutory enforcement known as a sequester. A sequester provides for the automatic cancellation of previously enacted spending, making largely across-the-board reductions to nonexempt programs, activities, and accounts. A sequester is implemented through a sequestration order issued by the President as required by law. The purpose of a sequester is to enforce certain statutory budget requirements, such as enforcing statutory limits on discretionary spending or ensuring that new revenue and direct spending laws do not have the net effect of increasing the deficit. Generally, sequesters have been used as an enforcement mechanism that would either discourage Congress from enacting legislation violating a specific budgetary goal or encourage Congress to enact legislation that would fulfill a specific budgetary goal. Sequestration is currently employed as the enforcement mechanism for three budgetary policies: 1. The Budget Control Act of 2011 (BCA; P.L. 112-25 ) established annual statutory limits on each defense discretionary and non-defense discretionary spending that are in effect through 2021. If legislation is enacted breaching either the defense or non-defense discretionary spending cap, then a sequester will occur, making cuts to non-exempt programs within the corresponding category to make up for the breach. In this situation, the sequester will either deter enactment of legislation violating the spending limits or—in the event that legislation is enacted violating these limits—automatically reduce discretionary spending to the limit specified in law. 2. The BCA also created a Joint Select Committee on Deficit Reduction instructed to develop legislation to reduce the budget deficit by at least $1.5 trillion over the 10-year period FY2012-FY2021. The BCA stipulated that if a measure meeting specific requirements was not enacted by January 15, 2012, then a sequester would be triggered to enforce the budgetary goal established for the committee. In this situation the sequester was meant to either encourage agreement on deficit reduction legislation or, in the event that such agreement was not reached, automatically reduce spending so that an equivalent budgetary goal would be achieved. Because the agreement was not reached, this sequester is now in effect through 2024. 3. Another enforcement mechanism was created by the Statutory Pay-As-You-Go Act of 2010 ( P.L. 111-139 ). The budgetary goal of Statutory PAYGO is to ensure that new revenue and direct spending legislation enacted during a session of Congress does not have the net effect of increasing the deficit (or reducing a surplus) over either a 6- or 11-year period. The sequester enforces this requirement by either deterring enactment of such legislation or, in the event that legislation has such an effect, automatically reducing spending to achieve the required deficit neutrality.

The budget resolution reflects an agreement between the House and Senate on a budgetary plan for the upcoming fiscal year. Once agreed to by both chambers in the exact same form, the budget resolution creates parameters that may be enforced by (1) points of order and (2) using the budget reconciliation process. When the House and Senate do not reach final agreement on this plan, it may be more difficult for Congress to reach agreement on subsequent budgetary legislation, both within each chamber and between the chambers. In the absence of agreement on a budget resolution, Congress may employ alternative legislative tools to serve as a substitute for a budget resolution. These substitutes are typically referred to as "deeming resolutions," because they are deemed to serve in place of an annual budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year. Since the creation of the budget resolution, there have been 10 years in which Congress did not come to agreement on a budget resolution. In each of those years, one or both chambers employed at least one deeming resolution to serve as a substitute for a budget resolution. While referred to as deeming resolutions, such mechanisms are not formally defined and have no specifically prescribed content. Instead, they represent the House and Senate, often separately, engaging legislative procedures to deal with enforcement issues on an ad hoc basis. As described below, the mechanisms can vary significantly in content and timing. This report covers the use of deeming resolutions pertaining to fiscal years for which the House and Senate did not agree on a budget resolution. While neither the House nor Senate have yet adopted a budget resolution for FY2020, they may still do so. In the meantime, on April 9, 2019, the House passed a deeming resolution for FY2020, H.Res. 293.

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Introduction The growth of the national debt, which is considered unsustainable under current policies, continues to be one of the central issues of domestic federal policymaking. This report examines alternative approaches to reducing annual budget deficits and decisions about how to bring the national debt under control over the long term. To do this, the report first examines historical trends in federal spending and revenue policy to illustrate both the challenges and trade-offs inherent to making choices between (1) limiting the provision of defense and domestic public goods, (2) reducing transfers to persons including entitlements for the elderly and those with low income, (3) reducing support for state and local governments, and (4) raising taxes. Using projections of the debt and deficit, the report then addresses how limiting reliance on one source of deficit reduction creates pressure on other sources. The Long-Run Budget: An Overview The federal government incurs a budget deficit when total spending exceeds revenues over the course of a fiscal year. Over the past 50 years, the federal government has, on average, run budget deficits of 2.9% of gross domestic product (GDP), though as seen in Figure 1 , the amount has fluctuated from a surplus of 2.3% of GDP in 2000 to a deficit of 9.8% of GDP in 2009. A portion of the budget outcomes is a function of general economic conditions, and the remainder is a function of policy choices. For example, deficits tend to rise during recessions (through a combination of decreased revenues and increased spending on programs like unemployment), whereas the opposite is generally true during economic expansions. Policy choices, such as the decline in defense spending after the dissolution of the Soviet Union in 1991, may change the budget situation due to changes in national priorities. The accumulation of net deficits over time results in the federal debt. As shown in Table 1 , the cumulative federal debt in 2018 was 78% of GDP. Of concern is that the federal budget deficit has resulted in the growth of the federal debt that has regularly exceeded the growth rate of the economy. The debt can grow without increasing the ratio of debt to GDP as long as it rises at a rate less than or equal to GDP growth. For example, if the debt is 80% of GDP and the economy is growing at 1.6%, a deficit of 1.28% of GDP (1.6% of 80%) will maintain the debt-to-GDP ratio. The FY2018 deficit is 4% of GDP—a situation viewed by most economists as unsustainable. Long-Run Budget Issues: Overview Addressing a federal budget deficit that is unsustainable over the long run involves strategic choices. Fundamentally, the issues require deciding what government goods, services, and transfers are worth paying taxes for. Most people would agree that the country benefits from a wide range of government services—air traffic controllers, border security, courts and corrections, and so forth—provided by the federal government. Yet, as shown below, in 2007, the federal government provision of goods and services, outside of defense, constituted 10% of federal spending and 2% of GDP. Transfers, including interest payments, accounted for around 70% of the federal budget. Finding budget savings by reducing nondefense federal government services alone would fall short of what is needed to address the deficit. In 2018, transfers, including interest payments, accounted for 76% of the federal budget, up from 70% in 2007. Outside of the 9% provision for domestic goods, defense spending for goods and services constitutes about 15% of federal spending. In this area as well, there are limits to the savings that might be found without compromising national security. Therefore, to address the budget shortfalls facing the country over the long run, it is likely that (1) transfer payments, such as Social Security, Medicare, and Medicaid, to or on behalf of individuals (which already account for half of federal spending and are growing) must be reduced; (2) transfers to state and local governments must be reduced (which would shift the budget decisions to a different level of government); (3) taxes must be raised; or some combination of the three. The next section of this report examines the government's spending allocation, the method of its financing, and how these shares and sources have changed over time. It demonstrates that the surge in the debt is a recent phenomenon that has occurred with the recession and is inherently transitory. Going forward, however, as shown in the subsequent section, the growth in transfers to the elderly and spending for health care—a trend that has been under way for some time but was offset by a decline in spending for other purposes, relative to GDP—will increasingly contribute to unsustainable deficits. The following section addresses philosophies for approaching deficit reduction, as embodied in a number of proposals. It discusses how different approaches to and constraints imposed on deficit reduction will have consequences for the menus of other available choices. For example, if deficit reduction begins with a constraint that taxes will not rise, policy would almost certainly require significant cutbacks in Social Security and Medicare. If the benefits of these programs are to be maintained, an increase in taxes would likely be required. Central findings of this analysis include the following: A comparatively small share of federal spending is for the direct provision of domestic government goods and services. Transfers and payments to persons and to state and local governments constitute most of federal spending, about 75% of all federal spending. Defense spending, accounting for about 15% of federal spending, has declined as a share of output over the past 35 years, but it also tends to vary depending, in part, on the presence and magnitude of international conflicts. The problem with the debt lies not in the past but in the future, as spending growth for health and Social Security is projected to continue faster than the economy as a whole. The increase in debt, in turn, leads to a significant increase in interest payments. Because much of the pressure on future spending arises from imbalances in Social Security and Medicare Part A (Hospital Insurance) trust funds, keeping these funds and their sources of financing intact is a concern that could constrain choices. Preserving entitlements would likely require significant increases in taxes, such as raising rates, reducing tax expenditures, increasing other taxes, or introducing new revenue sources. Reductions in discretionary spending are insufficient to reduce the deficit to a sustainable level; thus, limiting taxes as a percentage of output or constraining the overall size of the government to current levels would likely require significant cuts in mandatory spending, including entitlement programs such as Social Security, Medicare, and Medicaid. Because the federal government provides about one-fifth of the revenue for state and local governments, cutbacks in transfers to these governments may, in part, shift the burden of providing services from the national to subnational governments rather than altering the overall size of government services. Federal Spending: Patterns over Time The objectives of government spending and taxes are generally viewed as providing for public and quasi-public goods, such as defense, law enforcement, infrastructure, and education; correcting market failures, including externalities (both negative, such as pollution, and positive, such as research and development); achieving distributive justice; and managing business cycles. Measured by the amount of spending, defense is the most important pure public good the federal government provides. Many public and quasi-public goods, as well as income-support programs, are provided by state and local governments, and some federal spending is through grants to state and local governments for these programs. For example, in FY2016, state governments received 29.1% of total revenues from federal transfers, and local governments received 3.8%. States also provide transfers to local governments, and local governments provide transfers among themselves as well. These intergovernmental transfers are important in evaluating budget proposals, because a reduction in transfers to state and local governments may in large part shift the burden to these governments rather than reduce the overall government role. Spending in the U.S. budget can be divided in various ways that are relevant to considering deficit reduction. In the discussion that follows, government spending is divided by whether the spending is to provide public goods or transfers, whether it is discretionary or mandatory (and the major categories within those divisions), and by function. The first approach to presenting spending distinguishes between the provision of goods and services (defense and nondefense) and transfers to persons or to state and local governments. This approach is not a typical way of presenting budget data. It is important to divide spending in this way, however, to address concerns about potential inefficiency in federal government operations, especially outside of defense, as it indicates the scope for cutbacks relative to the deficit. The second approach divides spending into discretionary (provided in annual appropriations acts) and mandatory (controlled by permanent laws, and including entitlements to benefits). It is associated with the procedures needed to alter spending. The third, a common way of presenting budget data, divides spending by function (defense, education, energy, health, etc.). Later, this section also discusses trends in federal taxes by source, tax structure, tax expenditures, and receipts and payments in the major trust funds. Distribution of Spending by Fundamental Economic Form: Government Goods and Services Versus Transfers One way to look at spending is to examine the extent to which spending involves actual government consumption or production (that is, spending on the direct provision of goods and services) as compared with transfers, subsidies, and interest. The discussion in this section indicates that although total spending as a percentage of GDP fluctuated around 20% of GDP between 1973 and 2007, government involvement in the economy—narrowly defined as using resources to provide public goods directly—had fallen by a third and outside of defense had remained roughly constant and small (at around 2% of GDP). At the same time, transfers to persons increased by more than 40%, and transfers to state and local governments increased by less than 5%. Spending rose nearly 2% of GDP by 2018, primarily due to transfers to persons, whereas consumption continued to decline. Figure 2 shows how the economic form of federal spending has shifted since 1968. In calendar year 2007, 28% of government spending was categorized as consumption and involved the direct provision of goods and services. Of the remaining amount, 44% were transfers to persons, 13% transfers to state and local governments, 14% interest payments, and 2% subsidies. Although federal government spending amounted to 19.9% of output in 2007, federal government spending on the provision of public and quasi-public goods was 5.5% of output. Based on budget data reported subsequently, 3.8% was for defense, leaving 1.7% for nondefense. Because total nondefense discretionary spending was 3.4% of GDP, half of this amount was transfers. By 2018, with the economy at or near full employment, federal government consumption spending had declined to 5% of output, whereas transfers had increased. Government spending on nondefense goods and services was 1.9% of GDP, and defense spending was 3.2% of GDP. Budget data for FY2017 indicate that discretionary spending was 6.3% of GDP, with defense spending at 3.1% of GDP and nondefense at 3.2% of GDP. Thus, roughly 60% of nondefense spending, about 1.9% of GDP, was transfers at that time. State and local government spending (netting out transfers between these remaining two levels of government spending) in 2007 was 14% of output, and total spending by all forms of government (after netting out federal transfers) was 31.5% of output. A larger share of state and local spending (which includes federal government transfers), 69%, was in government provision of goods and services (consumption), with 21% in transfers to persons, 9% in interest payments, and less than 1% in subsidies. In the third quarter of 2018, state and local spending net of federal transfers was 14%, for a total of 32.5% for all government spending. Provision of goods and services was 64%; transfers were 26%; and interest was 9%. Combining all levels of government, in 2007, government production of goods and services was 15.2% of output, thus the federal government share (5.5%) was about one-third of the total provided by all levels of government. Subtracting 3.8% from the federal government share and the total share to eliminate national defense spending (shown subsequently), the federal share of nondefense provision of goods and services by all levels of government was 11%. In 2018, the nondefense share had risen to 14%, with the federal share (5% of output) remaining at 36%. Similar results are found when examining employment levels. Total government civilian employment in 2007 was 16% of total nonagricultural employment, with the federal government accounting for 2%, the state government accounting for 3.7%, and local government accounting for the remaining 10.4%. By September 2018, the employment share remained at about 15%, and each level of government maintained approximately the same shares (with local government falling to 9.6%). The share of federal government spending that goes to the direct provision of public or quasi-public goods (consumption) has declined over time, as shown in Table 2 , which compares 1980 with 2007 and 2018. The decline from 7.2% of GDP in 1980 to 5.5% of GDP in 2007 is largely due to a reduction in defense spending. The discussion in this section indicates that although total spending as a percentage of GDP fluctuated around 20% of GDP between 1973 and 2007, government involvement in the economy—narrowly defined as using resources to provide public goods directly—had fallen by a third and outside of defense had remained roughly constant and small (at around 2% of output). At the same time, transfers to persons increased by more than 40% and transfers to state and local governments increased by less than 5%. Spending rose nearly 2% of GDP by 2018, primarily due to transfers to persons, whereas consumption continued to decline. Distribution of Federal Spending by Mandatory and Discretionary Categories10 Budget accounts often classify spending in budget documents as mandatory or discretionary spending, along with subcategories of spending. Though technically classified as mandatory spending, interest payments tend to be listed separately because they are a consequence of past spending and tax policies. Discretionary spending is controlled by the annual appropriations process and is normally divided into defense and nondefense categories. Discretionary spending is where most of the public provision of goods and services occurs, but some discretionary spending is in the form of transfers. Mandatory spending is generally governed by a set of permanent statutory provisions, and some of these programs (such as Social Security and Medicare) are referred to as entitlements. Since the late 1960s, as shown in Figure 3 , defense spending has declined as a share of output, first as a result of the ending of the Vietnam War (by FY1981, defense spending was 5.2% of output). It rose in the 1980s and then fell, reaching 3.0% by 2001, before rising again with the Afghanistan and (second) Iraq wars. This pattern suggests that although defense spending may generally grow with the economy and be affected by other factors (such as moving to an all-volunteer force or the peacetime buildup in the 1980s), it also fluctuates depending on whether the United States is engaged in prolonged international conflicts. Nondefense discretionary spending has fluctuated much less, although it rose in the late 1970s, then reverted to historical levels. Nondefense discretionary funding, although small as a share of the budget and of GDP, is largely the spending that many people think of when they think of the direct provision of goods and services by the federal government. Mandatory spending, although it varies over time, has generally increased as a share of the economy since the 1960s. The increase is most pronounced for health spending and has grown relative to GDP due to rising health care costs, certain other benefit changes, aging, and increased life spans. Table 3 further disaggregates mandatory spending for selected years since the FY1980 (FY1980, FY2007, and FY2018). Overall discretionary spending over this time period declined from 9.9% of GDP to 6.2% of GDP, or a change of 36.9% (with declines of 35.4% for defense and 37.3% for nondefense discretionary spending), whereas total mandatory spending has increased by 35.9% over the same time period. Within mandatory spending, health spending (Medicare and Medicaid)—which has increased 223.5% since FY1980—primarily drives the overall increase in mandatory spending. This increase is attributed to changes in demographics from an aging population and medical cost growth primarily, although benefit changes also contribute to the increase. Spending for Social Security also rose 16.7% over this period—primarily due to number of Social Security beneficiaries and increased life expectancies. Other mandatory programs that provide benefits for low-income individuals, the unemployed, retirement programs for federal workers, and other purposes (such as agricultural support payments) have remained relatively constant or declined since FY1980. Distribution of Spending by Function Another traditional way of viewing the budget is by budget function relating to the purpose of spending (education, health, etc.). Figure 4 shows federal spending by budget function since 1969. These comparisons, shown in Table 4 , provide a similar picture to the previous allocation: although total spending as a share of output has fluctuated somewhat from FY1980 to FY2018, the federal government has an increasing share of output in health and programs for the elderly, with declining shares for almost every other functional category. In FY2007, 64% of spending was for human resources, with 20% for defense, 9% for interest, and 5% for all other functions. In FY2018, the share devoted to human resources had further risen, whereas the share spent on national defense had declined. Table 4 presents these categories as a percentage of GDP and illustrates that the subcategories for many types of spending, which are those that represent direct provision of government goods and services, are small as a percentage of GDP. Federal Taxes: Patterns over Time This section discusses four issues related to taxes: (1) the sources of tax revenue and their growth over time; (2) the differences in structure and distribution of revenue sources; (3) the size and distribution of tax expenditures (special income tax provisions such as exclusions, deductions, and credits); and (4) taxes that are specified as the revenue source for certain spending. Tax Revenues The federal income tax system has several components. The largest component, in terms of revenue generated, is the individual income tax. For FY2018, an estimated $1.7 trillion, or 50% of the federal government's revenue, came from the individual income tax. The corporate income tax was estimated to generate another $218 billion in revenue in FY2018, or just under 7% of total revenue. Social insurance or payroll taxes generated an estimated $1.2 trillion, or 35% of revenue in FY2018. Estimates indicate that the remainder of federal revenue collected in FY2018 came from excise taxes (3%) or other sources (6%). The relative importance of these components can change over time, as seen in Figure 5 . The individual income tax, the largest single source of revenue as a percentage of GDP, has fluctuated considerably over time. Individual income tax revenues grew in the late 1970s due to bracket creep, reaching 9.4% in FY1981. The tax cuts in the Reagan Administration are the major reason revenues declined, falling to 7.9% in FY1990. Revenues increased slightly with the 1993 Clinton Administration tax increase ( P.L. 103-66 ), but the more significant growth occurred with the strong economic performance in the late 1990s, leading to a ratio of 9.9% in FY2000. They declined during the first decade of the 21 st century following the George W. Bush Administration tax cuts ( P.L. 107-16 ) and JGTRRA ( P.L. 108-27 ). Along with the individual income tax, total taxes have also fluctuated. Prior to the Bush tax cuts, total taxes dropped as low as 17.1% in FY1977 and rose as high as 20.6% in FY2001. During the 2007-2009 recession taxes fell to less than 15% of GDP. Corporate taxes have fluctuated as well, although largely due to economic conditions, whereas payroll taxes rose to around their current levels as a percentage of GDP by the mid-1980s, reached a peak of 6.8% in 2001, and have since declined slightly. Excise taxes have declined by two-thirds, and other revenue sources have remained about the same. Part of the decline in excise taxes is because these taxes are imposed on a per-unit basis and not indexed for inflation and, with the exception of tobacco taxes, have generally not been increased. Tax Structure These revenue sources differ in some important ways. Individual income taxes are progressive, have graduated rates, and can be revised in a variety of ways, including changing rates, deductions, exclusions, and credits. Income taxes are the main source of revenue for most federal spending outside of Social Security and Medicare Hospital Insurance (HI, whose benefits are less than half of Medicare spending). Corporate income taxes are levied at a flat rate after allowing for various deductions and credits. Estate taxes are also progressive, but they are a small share of government revenues and have been declining in magnitude over the past 20 years. Payroll taxes tend to fall more heavily on middle- and lower-income individuals. Payroll taxes, the next-largest source of revenue after individual income taxes, have flat rates (except for the Additional Medicare Tax) with an earnings cap for Social Security (but not Medicare). These taxes tend to be proportional, with a reduced burden on high-income taxpayers. Because of their simple structure, the main options for increasing revenues from this source are increasing rates and raising or eliminating the earnings cap. Social Security payroll taxes are the basic source of finance for Social Security, and they are linked to benefits so that larger taxes lead eventually to larger benefits, although there are progressive elements in the benefit formula. Medicare payroll taxes qualify individuals for Medicare HI coverage, but the Medicare benefits are the same for all recipients. Excise taxes , which largely apply to alcohol, tobacco, and transportation fuels, tend to be regressive and fall more heavily on middle- and lower-income individuals, but are also a smaller revenue source. Transportation fuel taxes are a major source of finance for highways, airports, and other transportation needs. Tax Expenditures Tax expenditures are revenue losses attributable to federal income tax laws that allow a special exclusion, exemption, deduction, credit, preferential tax rate, or deferred tax liability. The special tax credits and deductions in the income tax can also be viewed as a form of spending through the tax code. That is, one can view revenues as receipts without the special benefits and the special benefits from tax expenditures as spending. According to an FY1974-FY2004 Government Accountability Office (GAO) study, tax expenditures averaged 7.5% of GDP during that period. In FY2007, tax expenditures were 7.2% of GDP and about 36% of total government direct spending. In FY2018, tax expenditures were 7.2% of GDP and about 35% of government spending. From the perspective of dividing government activity between transfers and direct provision of public goods, as in Table 2 , tax expenditures are transfers and subsidies that go to persons, as is the case with the bulk of federal spending. From the perspective of discretionary versus mandatory spending, as in Table 3 , they are similar to a mandatory form of spending. Finally, from the perspective of budget function, as in Table 4 and as shown in Table 5 , which compares spending and tax expenditures by budget function for FY2018, the pattern of tax expenditures is quite different from that of spending. A much larger share of tax expenditures is for physical resources. For specific subcategories, the largest share of tax expenditures is for commerce and housing, a category that attracts a small share of spending. The size of this category reflects special benefits for earnings from capital income. It also reflects benefits for housing in the form of mortgage interest and property tax deductions and, to a lesser extent, exemption from capital gains tax on owner-occupied housing and the low-income housing credit. The relatively large share for general government reflects tax-exempt bonds and itemized deductions for state and local income and sales taxes. (These amounts could also be distributed across the functional categories of state spending and thus would be more broadly distributed.) Much of the benefit for tax-exempt bonds goes to education and highways, where funds are borrowed for capital improvements.) Tax expenditures also provide significant benefits for health through the exemption of employer-provided health insurance and for income security, largely through benefits for pensions and other retirement savings. Earmarked Revenues and Trust Funds As noted above, dedicated revenues finance spending on certain categories of services, some of which are termed trust funds and some special federal funds. There are about 200 trust funds, but only a few of them are important in terms of magnitude or for considering budgetary reform. In some cases, the trust funds lead to questions about addressing the deficit. Although some of these funds rely on contributions from general revenues, the Social Security and the Medicare HI trust funds primarily rely on payroll taxes. The largest trust funds relate to Social Security, which is divided into Old Age and Survivors Insurance (OASI) and Disability Insurance (DI), and Medicare, which is divided into Hospital Insurance Part A and Supplementary Medical Insurance (SMI) Parts B and D. Payroll taxes are the primary source of finance for Social Security and Medicare HI (also known as Medicare Part A). The funding of these programs is organized through trust funds that can also hold assets and earn interest. Medicare SMI, which pays for physician services and outpatient drugs, is financed primarily by a combination of premiums and general revenues. Table 6 shows the inflow of revenues and the payment of benefits in the three trust funds financed by payroll taxes. (This table does not include earnings from interest on government securities held by the funds and transfers of income taxes collected on Social Security benefits; it also does not reflect administrative costs.) As indicated in the table, OASI payroll tax revenue (as a percentage of GDP) has declined over the past 11 years, while payments have increased substantially. In contrast, DI and HI payroll tax revenues have been flat or increasing (as a percentage of GDP) over the same time period, while payments have been flat or increasing more modestly than OASI. By FY2018, payments for Social Security and Medicare benefits exceeded payroll tax collections. Because initial Social Security benefits are indexed to wages (and subsequently to prices), they tend to be a relatively constant share of output. Benefits have grown because of increasing longevity and an aging population. Revenues also tend to be a relatively constant share of output but were increased in the mid-1980s. Table 7 provides information on the income and outflow for the SMI trust fund. In FY1971, this fund was nearly equally financed by premiums paid by beneficiaries and federal contributions from general revenues. Although premiums have increased as a percentage of output, the vast majority of financing is now from general revenues. The premium share for Medicare Part B (physicians) fluctuated over time, but it is now set by law at 25% of the cost of funding Medicare Part B; the premiums share for Medicare Part D (drug) program is set at 25.5% of the estimated cost of the standard benefit. As these tables indicate, the size of these programs, particularly Medicare, has grown over time. SMI has grown faster than HI, and general revenue contributions have grown at a similar pace. SMI currently accounts for more than half the cost of Medicare. One open question surrounding the formulation of a long-run budget policy is whether to continue financing Social Security and Medicare HI from payroll taxes. In this case, both programs' future benefits are expected to outstrip future receipts and eventually draw down all the assets. The Social Security (OASI) trust fund is projected to run out of accumulated assets in 2034, and the HI trust fund is predicted to run out in 2026. Since its implementation in 1935, Social Security has been treated as a separate program, similar to a retirement plan, in which contributions (e.g., payroll taxes) during the working years create an entitlement to benefits in old age. A similar approach has been used for the more recently established Medicare HI. If these programs are to be kept separate, then they must be brought into balance separately and, to maintain the historic source of financing, any shortfall not addressed through benefit cuts or delayed eligibility must be addressed through increases in a specific tax—the payroll tax. Growth in the Debt Federal debt may be divided into two major categories: (1) debt held by the public, which is the sum of accrued net deficits and outstanding money from federal credit programs; and (2) intragovernmental debt, which is the amount of federal debt held by other federal agencies. As of February 28, 2019, the amount of federal debt outstanding was $22.116 trillion, with 73.5% of that debt held by the public and 26.5% held as intragovernmental debt. Figure 6 shows the federal debt as a share of the economy from FY1969 projected through FY2023. Individuals, firms, the Federal Reserve, state and local governments, and foreign governments are eligible to purchase publicly held debt. Such debt may be acquired directly through the auction process from which most publicly held debt is initially sold or on the secondary market if the debt is deemed "marketable," or eligible for resale. As of February 28, 2019, the total amount of publicly held debt outstanding was $16.251 trillion. Publicly held debt is the measure of concern for the sustainability of the debt since it measures debt owned outside of the government. This debt grew rapidly as a percent of GDP during the 2007-2009 recession and afterward and has continued to grow (while intergovernmental debt relative to GDP has declined). The majority of publicly held debt is marketable, and it includes all Treasury notes, bonds, bills, Treasury Inflation Protected Securities (TIPS), and Treasury-issued Floating Rate Notes (FRNs). Nonmarketable debt held by the public is composed of U.S. savings bonds, State and Local Government Securities (SLGS), and other, smaller issues. As of February 28, 2019, 96.6% of publicly held issues, or $15.741 trillion, was marketable. Unlike publicly held debt, intragovernmental debt issuances are almost exclusively nonmarketable. As of February 28, 2019, of the $5.865 trillion in total intragovernmental debt, $0.029 trillion (0.5%) was marketable debt. Intragovernmental debt is held by components of the federal government, with the majority of nonmarketable debt held by trust funds devoted to Social Security and military and federal worker retirements and marketable debt held by the Federal Financing Bank (a government corporation created to reduce the cost of federal borrowing). Intragovernmental debt has declined in recent years as major trust funds have begun to finance benefits from assets. Because intragovernmental debt is held only in federal government accounts, such debt cannot be accessed by the outside institutions. Conversely, the bonds that finance publicly held debt activity may compete for assets in private and financial markets. Public debt issues may be a particularly attractive collateral option on the secondary market if the federal government is perceived as a safe credit risk. Deficit Challenges Going Forward The CBO budget baseline projects that over the next 10 years, the deficit will average roughly 4.4% of GDP. This is 1.5% of GDP more than the average deficit (i.e., 2.9% of GDP) over the preceding 50 years. Figure 7 shows the federal budget deficit (surplus) from FY1968 through projected deficits in FY2048. Most economists agree that deficits are sustainable as long as the deficits as a share of the economy are less than the growth rate of the economy. The CBO budget baseline assumes that economic growth will be just under 1.8% over the next 10 years. This growth rate is less than both the average deficit over the preceding 50 years (2.9% of GDP) and the projected federal deficits over the next 10 years (4.4% of GDP). Although the budget situation over the next 10 years is challenging, the long-term outlook is even more daunting—with the budget deficit estimated to be an average of 8.4% of GDP from FY2039 to FY2048. As deficits are a result of the combination of spending and tax decisions, examining them separately may offer some insights. Figure 8 shows CBO's analysis of federal spending projected for FY2028 and FY2048 compared with the selected historical level of spending—showing total spending growing by 14.6% as a percentage of GDP in FY2028 and 42.2% in FY2048 compared with FY2018. Breaking down the categories shows projected spending increases on Social Security of 28.6% (1.4% of GDP), health programs of 76.9% (4.0% of GDP), and interest payments of 293.8% (4.7% of GDP) over the next 30 years. During the same period, other projected spending (including both defense and nondefense discretionary spending) is projected to decrease 14.6% (1.3% of GDP). The trend in the share of spending going toward Social Security and major health care programs and away from discretionary spending choices seen in Figure 8 is a continuation of the trend seen in Figure 3 . In FY1988, 30.6% of federal spending went to Social Security and major health program spending. By FY2018, the share was 49.0% of the federal budget and is estimated to be 52.9% of the federal budget in FY2048. In addition, there is significant growth in the share of federal spending used to pay interest on the debt due to the continuing deficits and growing debt. Similar to projected federal spending, federal revenue over the next 10 years is projected to grow above its 50-year average of 17.4% of GDP—assuming that the temporary provisions contained in P.L. 115-97 are allowed to expire as scheduled. As Figure 9 shows, CBO's projections of total federal revenue are projected to grow by 11.4% as a percentage of GDP in FY2028 and 19.3% in FY2048 compared with FY2018. The increasing reliance on personal income taxes as a revenue source, seen in Figure 9 , is a continuation of the trend seen in Figure 5 . In FY1988, 44.3% of federal revenue (8.2% of GDP) came from individual income taxes, and 10.2% of federal revenue (1.2% of GDP) came from corporate income taxes. By FY2018, the shares were 49.4% (9.8% of GDP) and 7.2% (1.5% of GDP) of federal revenue, respectively, and are estimated to be 55.1% (10.9% of GDP) and 7.1% (1.4% of GDP) of federal revenue in FY2048, respectively. Addressing the Long-Run Deficit The Timing of Deficit Reductions How much should be done to address the budget issues, and how quickly, is a topic of debate. The relative strength of the current U.S. economy makes a case for addressing the deficit in the near term. The faster the debt-to-GDP ratio grows, the more burdensome interest payments become and the more the debt compounds. CBO also projects that a sustained reduction in the deficit to 1.9% of GDP would be required to stabilize debt at 78% of GDP, its current level, under the standard baseline, whereas a 3.0% cut would be required to bring debt to the average of the past 50 years (41% of GDP). If the reduction is delayed for 5 years, the required decreases would be 2.3% and 3.6% of GDP; if delayed for 10 years, 2.9% and 4.6% of GDP. However, addressing the deficit quickly may temporarily dampen economic activity. In addition, if the measures to address the deficit are implemented too quickly, some people may not have sufficient time to plan or adjust to the new set of rules. The need to not move too slowly or quickly can also affect the optimal approaches to deficit reduction. For example, it is difficult to change current entitlements for the elderly (such as Social Security, Medicare, and part of Medicaid, which funds nursing home care). Many retired individuals have little leeway to adjust to such changes and could be particularly burdened by benefit reductions, which suggests that benefit changes be adopted in the near term but applicable to the future. Changing discretionary spending or increasing taxes can be achieved more quickly, although, as discussed below, the long-run gap between spending and taxes is too large to be addressed with discretionary spending revisions alone. Deficits Under Alternative Baselines In addition to its standard budget baseline, CBO also regularly analyzes the budgetary effects of different alternative baselines. One regularly estimated baseline maintains the current policies in place at the time of the estimate—referred to as a current policy baseline. This baseline is presented in Table 8 along with the standard—or current law—extended baseline. These baselines differ in a number of ways. Revenues are lower under the alternative baseline as it assumes an extension of the individual income tax provisions of P.L. 115-97 , which are scheduled to expire in 2026 under current law. In addition, noninterest spending is higher under the alternative baseline, which assumes limits on discretionary spending are not to take effect and the base for emergency spending is set at historical levels. Under the alternative baseline, deficit reduction becomes more difficult because debt and interest payments have grown more quickly. Deficit Reduction Strategies The Peter G. Peterson Foundation's 2015 Fiscal Summit (Solutions Initiative III) brought together the American Action Forum, the American Enterprise Institute, the Bipartisan Budget Center, the Center for American Progress, and the Economic Policy Institute to develop specific, "scoreable" policy proposals that would place the federal budget on a sustainable long-term path. Each plan provided a roadmap to reduce budget deficits and stabilize the debt, although they differed in the details. All of the plans aimed at reducing the debt-to-GDP ratio, but they varied in spending, taxes, and the deficit relative to output. For those plans in which measures were reported (for 2040), spending-to-GDP ratios ranged from 17.8% to 24.3%, whereas taxes-to-GDP ratios varied from 21.2% to 23.5%. The resulting fiscal outcomes ranged from a surplus of 4.5% to a deficit of 1.9%. A debt level can still be sustainable with some continuing deficit. The deficit causes the debt to grow, but as long as it is not large enough to cause debt to grow faster than GDP, the debt-to-GDP ratio will be stable or in decline. Although summarizing the plans is beyond the scope of this report, Table 9 shows the five plans along with the contemporaneous (2015) CBO baseline projections and the most recent (2018) CBO baseline projection. All of the proposed plans would have increased revenue collections relative to both CBO projections and reduced spending relative to the most recent CBO baseline. Challenges to Reducing Budget Deficits Discussions on how to reduce the budget deficit often begin narrowly, then expand to broader proposals. This section examines several of these more narrow beginnings to illustrate the challenges of reducing the deficit sufficiently to address the long-term challenge. How Much Can Discretionary Spending Cuts Reduce the Budget Deficit? Discretionary spending, as discussed above, whether for defense or nondefense purposes, does not cause long-run growth in spending and has historically been relatively constant or in decline as a percentage of GDP. Discretionary spending, however, is targeted as a source of budget savings in the proposals and, because it is easier to change in the short run, may be a source of initial savings. Caps on discretionary spending were the main source of projected deficit reduction enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The CBO baseline incorporates the reductions from the BCA through FY2021 and then assumes that discretionary spending will grow at the rate of inflation going forward. As shown in the historical analysis from Table 3 and Figure 3 , defense and nondefense discretionary spending has been higher in the past, and hence cuts would lead to a lower level of government services than has traditionally been the case. (Defense spending, as noted above, also fluctuates depending on international conflicts, although it has increased to respond to perceived threats or other changes such as an all-volunteer force.) At the same time, proposals presented in the Solutions Initiative III did not spell out the specific cuts proposed, an important issue given the diversity in the types of programs in defense and nondefense discretionary spending. That is, these plans generally directed agencies to cut spending without outlining the specifics. Thus, the plans did not indicate, for example, whether fewer prisons will exist, grants for special-needs children will be reduced, a smaller military was to be maintained, fewer highways will be built or repaired, etc. However, these reductions might have needed to be significant. For example, Solutions Initiative III plans proposed cuts to total discretionary spending that were on average 19% below the CBO baseline. Nevertheless, it is unlikely that reductions in discretionary spending could close much of the long-run deficit gap. The Solutions Initiative III plans' proposed cuts in discretionary spending would have reduced overall discretionary spending by about 1.4 percentage points of GDP on average. Yet, as seen in Table 9 , CBO estimated the gap between spending and taxes by FY2040 to be 5.9% of GDP, and it has subsequently grown to an estimated 7.6% of GDP. Thus, closing this gap is likely to require cuts in other spending, including entitlements, increases in tax revenues, or a combination thereof. CBO's 2018 study on budget options contained some specific options for cuts in discretionary spending, which might suggest the types of cuts that might be considered in these proposals, although most of these were small. For example, implementing the 10 largest discretionary options listed in the CBO report would reduce spending by up to $148.1 billion per year, or 0.7% of GDP. Doing so would, however, require reducing defense spending by 10%, eliminating the Section 8 housing voucher and the Head Start programs, and reducing federal highway funding by roughly 25% along with other program reductions. In contrast, the Solutions Initiative III plans would have on average required reductions twice as large. Are Social Security and Medicare Hospital Insurance Trust Funds to Be Preserved? Since its inception in the 1930s, Social Security has been financed through a trust fund mechanism in which benefits were financed from payroll tax contributions. Payroll taxes are imposed at a flat rate fixed in statute, with a cap on income covered that is indexed to wages. Because of increasing disparities in income, this ceiling falls lower in the income distribution than it has in the past. Benefits, although they are linked to contributions (e.g., lifetime payroll taxes), are progressive in that the replacement rate for wages falls as wages rise. Because of the link between wages and benefits, many view Social Security like a pension, with income in retirement earned through contributions. With Social Security, there is a link between contributions and benefits. Because the trust fund does not accumulate retirement contributions in the same way as a pension plan (but rather pays most benefits out of current contributions), the trust fund's financing was affected by demographics. Currently, the trust fund is spending more in benefits than it collects in payroll taxes and uses interest earnings to fill the gap. Benefits, as shown in Table 6 , are growing faster than payroll taxes. As a result, under current policy, the Social Security (OASI) trust fund has been using its assets and will become insolvent by 2034, at which point it will have income sufficient to pay about three-fourths of benefits. Moreover, if a position is taken that taxes cannot be increased (as discussed below) or that payroll tax collections are not to be increased, then either the close link between payroll contributions and earnings will have to be abandoned or the burden of restoring solvency will fall on cutting benefits (by roughly 25%). The plans presented in the Solutions Initiative III provide a range of alternatives. On average, they would have decreased Social Security spending by 3.2%, or 0.2% of GDP. While not quantified in the report, three of the five plans presented would have increased payroll taxes on higher earners. CBO's 2018 report identifies several options related to Social Security benefits and payroll taxes. The two largest options to reduce Social Security spending—lower initial benefit amounts and grow the benefits more slowly over time—were estimated to reduce Social Security spending by up to an average of 0.2% of GDP per year over the next 10 years. The two largest options to increase payroll tax collections—raise payroll tax rates and increase the contributions cap—were estimated to raise up to 1.2% of GDP per year of payroll tax revenue over the next 10 years. The Medicare HI trust fund has been affected over time (as has Medicare in general) by demographics and, more importantly, by the growth in health care expenditures per capita due to technical advances and cultural expectations. The plans presented in the Solutions Initiative III provide a varied selection of options—though all advocated for various forms of cost containment. CBO's 2018 report identifies several options related to Medicare benefits and payroll taxes. The largest option to reduce Medicare spending—by increasing cost sharing and restricting Medigap insurance—was estimated to reduce Medicare spending by up to an average of 0.05% of GDP per year over the next 10 years. The two largest options to raise revenue associated with Medicare—raising payroll tax rates and increasing premiums on Medicare Part B and D—were estimated to collectively raise up to 1.0% of GDP per year of payroll tax revenue over the next 10 years. Can Long-Run Budget Issues Be Addressed by Keeping Tax Levels Constant? One philosophy behind the viewpoint of keeping revenues fixed relative to GDP is that government spending takes away from private choices and creates inefficiency and that taxes impose distortions, inhibiting economic activity. (This viewpoint depends on strong assumptions about benefits generated by federal spending.) By limiting revenues available, the scope of the federal government would be constrained. An argument is also sometimes made that tax increases would inhibit economic activity so much that revenues would decline rather than rise. However, empirical evidence does not generally support this view. If revenues are limited, significant pressure would be placed on major entitlements. For example, Social Security, health spending, and interest alone are projected to total 19.2% of GDP in FY2040. If revenues are around 19.4% of GDP, 0.2% of GDP is left for everything else. (In the CBO 2018 baseline, this amount was 0.1% of GDP.) The budget situation would be more constrained if current policies scheduled to expire are extended. Defense, nondefense discretionary, and other mandatory programs are projected to amount to 6.9% of GDP in FY2040 (7.6% of GDP in the CBO 2018 baseline). Thus, it would appear that major reductions in Social Security and health spending would be required to constrain tax levels at current percentages of GDP. The Solutions Initiative III proposals all choose to raise additional revenue, which reduces the required cutbacks in Social Security and health spending to address the long-run deficit. As seen in Table 9 , the proposals would have increased taxes as a percentage of output relative to the CBO 2015 baseline to an average of 22.0% of GDP (an increase of 2.3% of GDP relative to the 2015 CBO baseline). This additional revenue allows the Solutions Initiative III proposals to achieve their policy goal with reductions in Social Security and health care spending of 0.9% of GDP. Although the Solutions Initiative III plans and their approaches are illustrative, they are also suggestive of what would likely be necessary to hold the tax revenues fixed and address the long-run deficit: major changes to government programs for health care and other entitlements. What Would Be Required to Protect Entitlements? A Review of Tax Options To examine the other side of this coin, consider what would be required to protect entitlements. Protecting entitlements reflects the view that government should maintain its social safety net for lower-income persons and programs for the elderly, including provisions for health care, because they are important components of maintaining a reasonable standard of living. The Social Security trust funds hold sizable assets, accumulated from prior years of cash surpluses that can be used to support the payment of future benefits. Medicare HI also has accumulated surpluses that will maintain benefits for some years to come. Nevertheless, neither of these plans is sustainable in its current formulation, and the shortfall in revenues relative to payments contributes to the overall deficit. If maintaining these programs is the policy goal, taxes would need to be increased—as it is unlikely that discretionary spending or other non-entitlement spending alone would fully address the long-run deficit. Justifications for Maintaining Entitlements Is there a justification for increasing the size of government to continue the present Social Security and health benefit payments? It is useful to consider separately Social Security, whose issues arise from demographics, and health care, whose issues arise from a combination of demographics and health care costs. Social Security benefits are expected to rise from the current 4.95% of output to 6.29% in FY2035. The problem with Social Security funding did not arise from the baby boom; it arose from the increase in life span whose pressures on the system were masked for a time by the growth in the labor force (both from the baby boom and the entry of women into the labor force). Unlike health care, Social Security benefits are not expected to grow continuously but to stabilize over time so that benefits and costs are relatively constant (with benefits around 6.3% and revenues about 4.4% of GDP). Therefore, a range of tax increases, as well as benefit cuts, could bring the program into permanent balance. Social Security has been justified due to a number of market failures, and given these justifications, a case can be made that solutions that raise taxes are more equitable than those that reduce benefits. A mixed option, which affects both taxes and benefits, would be to increase the retirement age, although such an increase would put pressure on the disability-insurance program because some individuals will find it more difficult to work longer and would disproportionally affect low-income workers. This assessment considers outcomes in the steady state. There is also the issue of which generation bears the burden during the transition. The more the system relies on tax increases as opposed to benefit cuts in the short and medium term, the more the burden is shifted to younger generations. Similar life-cycle arguments could be applied to any program for the elderly—including Medicare and nursing home costs under Medicaid—to the extent that the program's costs increase because of longevity. These programs are financed by a combination of payroll taxes and general revenues, but most of these taxes would be collected during most individuals' working years. Cost increases for health care are a different matter, in part because they seem to be growing continuously and in part because they can be viewed in different ways. To the extent that rising costs reflect better medical care that extends and improves the quality of life, spending more money on health care may appropriately reflect preferences of individuals whose higher incomes permit them to spend more of their resources in this area. However, to the extent that rising medical costs reflect serious inefficiencies in the system arising from failure to allocate resources by price and causing patients and their physicians to consume large and inefficient amounts of health care, then increased benefits may not be justified. Revenue Raising Options If benefits are to be largely maintained, and because it is relatively clear that cutting other forms of spending will probably not be adequate, what are the tax options? Basically, these options, some of which are discussed in a number of the budget proposals, are raising income tax rates, broadening the income tax base through reductions in tax expenditures, increasing other taxes (such as payroll and excise taxes), and introducing new taxes (such as a value-added tax or a carbon tax). Rates can easily be varied, and several of the proposals included in the CBO Budget Options incorporate rate changes. The barriers for rate increases might be viewed as largely political rather than technical, and top tax rates in the past have been much higher than they are today. Although tax expenditures have received much attention and eliminating or curtailing them have been included in various budget proposals, policymakers face significant political and technical barriers to implementing changes. Some tax expenditures are technically difficult to eliminate (especially employer fringe benefits), some are valued as part of the social safety net (such as the earned income credit or exclusion of transfers), some are desirable for other reasons, and some are so politically popular (e.g., the home mortgage interest deduction) that eliminating them or scaling them back could be difficult. For example, considering technical challenges alone, four of the Solutions Initiative III proposals would have eliminated or limited the exclusion of employer health insurance, the largest individual tax expenditure, which accounts for 11.9% of the total revenue forgone. If including these expenditures as income, fairly designing an inclusion is very difficult because the value of insurance varies, for example, with the employee's age and other characteristics. If not allowed to vary by age, young employees who work for firms with higher average employee ages will be imputed more income than employees working for firms with younger employees. Potentially more serious imputation problems arise with valuing the tax expenditure associated with defined benefit pension plans, which accounts for 7.2% of the total. Problems arise with regard to this tax expenditure because of defined benefit pension plans, whose benefits are difficult to allocate because they ultimately depend on future work history with the firm. At the same time, the Solutions Initiative III proposals also envision eliminating a broad array of tax expenditures. If used to generate additional revenue, reducing tax expenditures could result in significant progress toward reducing the deficit. One study, for example, suggests that a more realistic appraisal of tax expenditure options, taking into account technical barriers, political barriers, and justification for some provisions, would increase income-tax revenues by about 15%. Two other types of taxes that might be altered are the payroll and excise taxes. For example, some of the Solution Initiative III proposals would have raised or eliminated the cap on earnings for payroll taxes. Other options include raising rates and expanding the base to include fringe benefits, such as pension contributions and health care. (Imputing income, however, as noted above, may be problematic.) A number of options could significantly extend solvency to the Social Security trust fund. Revenue could also be raised by taxing Social Security benefits in the same way as pensions, and this revenue, although considered as part of tax expenditures, could be designated to finance Social Security benefits. In addition, proposals have included increases in gasoline taxes to provide additional funding for highways and increases in alcohol taxes, whose real value has been declining since 1991. Finally, there are options for additional types of taxes. Three new tax sources that have been included in the proposals are value-added taxes and carbon taxes (revenue could also be collected through an auction of carbon rights through a cap-and-trade system). Both value-added taxes and carbon taxes could raise significant amounts of additional revenues—$1.9 trillion and $1.1 trillion, respectively, over 10 years, according to CBO. These revenue sources differ in the incentives they create and also in their progressivity. Because income taxes tend to fall more heavily than other taxes on high-income individuals and tax expenditures tend to benefit higher-income individuals, these changes would likely add to the progressivity of the system. Changes in payroll rates would tend to be proportional and affect higher-income individuals less, although raising the wage cap would concentrate the effect on higher-income workers. Flat-rate consumption taxes, including value-added taxes, carbon taxes, and specific excise taxes (such as those on gasoline, alcohol, and sugared beverages) tend to be regressive. A combination of changes could, however, achieve approximately the same distribution as current revenues. Effects on State and Local Governments To what extent, if any, the Solutions Initiative III proposals would have reduced transfers to state and local governments was not generally specified. This is because the details of discretionary spending (other than caps and limits) was done at a highly aggregated level. As these were not generally spelled out, some of these reductions could have reduced transfers to state and local governments in areas such as education, transportation, and community development where states directly provide the services. In addition, the state and local governments administer many entitlements, for both health and income security, with federal transfers. Two of the Solutions Initiative III proposals would have reduced federal transfers to the state for Medicaid. As noted above, federal transfers to state and local governments are 2.8% of output and constitute 33% of the receipts of these governments. State and local governments also benefit from tax expenditures that allow itemized deductions for state and local taxes and exclusions for interest on state and local bonds. Depending on how these governments respond, restrictions that affect state and local transfers could largely shift the burden of spending from federal to subnational governments.

The growth of the national debt, which is considered unsustainable under current policies, continues to be one of the central issues of domestic federal policymaking. Addressing a federal budget deficit that is unsustainable over the long run involves choices. Fundamentally, the issues require deciding what government goods, services, and transfers are worth paying taxes for. Most people would agree that the country benefits from a wide range of government services—air traffic controllers, border security, courts and corrections, and so forth—provided by the federal government. Yet federal government provision of goods and services comprises only a modest portion of the federal budget. Transfers, including interest payments, accounted for around 75% of the federal budget. Central findings of this analysis include the following: A comparatively small share of federal spending is for the direct provision of domestic government goods and services. Transfers and payments to persons and to state and local governments constitute most of federal spending, about 75% of all federal spending. Defense spending, accounting for about 15% of federal spending, has declined as a share of output over the past 35 years, but it also tends to vary depending, in part, on the presence and magnitude of international conflicts. The problem with the debt lies not in the past but in the future, as growth in spending for health and Social Security is projected to continue faster than the economy as a whole. The increase in deficits and debt, in turn, leads to a significant increase in interest payments. Because much of the pressure on future spending arises from imbalances in Social Security and Medicare Part A (Hospital Insurance) trust funds, keeping these funds and their sources of financing intact is a concern that could constrain choices. Preserving entitlements would likely require significant increases in taxes, such as raising rates, reducing tax expenditures, increasing other taxes, or introducing new revenue sources. Reductions in discretionary spending are insufficient to reduce the deficit to a sustainable level, so limiting taxes as a percentage of output or constraining the overall size of the government to current levels would likely require significant cuts in mandatory spending, including entitlement programs such as Social Security, Medicare, and Medicaid. Because the federal government provides about one-fifth of the revenue for state and local governments, cutbacks in transfers to these governments may, in part, shift the burden of providing services from the national to subnational governments rather than altering the overall size of government services.

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T he term digital economy has fluid meaning in different policy contexts. Broadly speaking, this term can refer to any number of everyday economic activities that are connected over computers, mobile phones, or other internet-connected devices. In the realm of international tax policy, though, certain types of activities and markets have been singled out for selective taxation by some jurisdictions—primarily in Europe. Most of these digital economy business models operate in "two-sided markets" in which they provide services to individual users (sometimes at zero charge) and sell other services to businesses (e.g., advertising to users). Proponents of these "digital services taxes" (DSTs) justify them on a number of grounds, including the goal of having multinational corporations (MNCs) pay their "fair share" of taxes, taxing profits purportedly derived from consumers in their jurisdictions, or adapting traditional rules and systems of international taxation to account for new forms of "disruptive" business models that can be conducted virtually over the internet. U.S. opposition to these unilateral taxes has been voiced by several government officials. Robert Stack, while Treasury Deputy Assistant Secretary for International Tax Affairs under President Obama, said that such efforts are primarily political efforts to target U.S. corporations. More recently, Treasury Secretary Steven Mnuchin has issued multiple statements in opposition to unilateral taxation of digital economy businesses. Some Members of the tax-writing committees in Congress have also criticized these efforts. This report analyzes DST proposals from an economic and policy perspective as they have been introduced, discussed, and adapted in European countries. Tax Issues Highlighted by the Digital Economy Some commentators and policymakers argue that MNCs in the digital economy are "undertaxed" or are not paying a "fair share" of taxes in their jurisdictions. Two issues that often underlie these sentiments are (1) the ability of digital economy MNCs to provide services without establishing a physical presence (or "permanent establishment") in the country in which their customers reside and (2) the ability of digital economy MNCs to shift their profits away from countries where they conduct real economy activity (e.g., sales, development, production) toward low-tax jurisdictions where the MNCs are conducting little to no real economic activity. Even if a country is able to establish the right to tax an MNC's profits in the digital economy (via permanent establishment rules), the profits subject to tax in that jurisdiction could be reduced via transfer pricing rules. Permanent Establishments A commonly held principle across international tax law is that there must be a substantial enough connection between a country and a corporation's activities to establish "nexus" in that country, enabling the country the first right to tax the corporation's income or profits earned from sales in that country. Specific criteria for what constitutes a permanent establishment are written into bilateral tax treaties, but they often require a fixed, physical presence within the country. Once a right to tax has been created, a country can tax a portion of the MNC's cross-border profits that can be sourced to its jurisdiction. MNCs can earn income from local residents without creating a permanent establishment in that jurisdiction. Rules creating a permanent establishment based on physical nexus might not be triggered by digital activities over the internet because "the internet" is not physically located in any one country. The internet is a global network of computers. For example, Google can sell advertising space on its search results to a French business without creating a permanent establishment in France. The physical servers processing the payment and posting the advertisements do not have to be located in France. In response, different countries and intergovernmental organizations have tried or proposed modifying definitions and interpretations of permanent establishment rules to include "digital presence" criteria. These criteria include users, "clicks," or other digital activities with origins in the local jurisdiction. The " Select International Efforts to Tax the Digital Economy " section of this report discusses these proposals in more detail. Transfer Pricing Transfer pricing rules dictate how profits from transactions between related entities within the MNC should be divided among multiple countries for tax purposes. From the U.S. perspective, transfer pricing rules are intended to prevent taxpayers from shifting income properly attributable to the United States to a related foreign company (and vice versa) through pricing that does not reflect an arm's-length result. In practice, though, the arm's-length standard can be difficult to administer on intra-company transactions within an MNC in which there is no market where independent parties bargain over price. Sophisticated transfer pricing strategies can result in an MNC's global profits being subject to a low effective tax rate across multiple tax jurisdictions. MNCs in the digital economy, in particular, can use transfer pricing strategies to reduce the effective tax rate imposed on their cross-border income, because their primary sources of income are often derived from intangible assets (e.g., patents, algorithms, trademarks, and marketing licenses). These assets are more challenging for "arm's-length" pricing because it is difficult to determine the value of a comparable sale of such unique technologies and services. Additionally, intangible assets can be sold to a corporate entity in a low-tax jurisdiction at relatively low cost as they do not require the relocation of corporate headquarters or physical factories, workforces, etc. The exact tax planning methods used by MNCs can vary, but generally they involve the parent (e.g., located in the United States) selling the income-earning ownership rights to those intangible assets to a subsidiary corporation in a low-tax jurisdiction. Early on, a firm developing a potentially profitable intangible asset in a higher-tax jurisdiction might create a subsidiary in a low-tax jurisdiction and sell or assign the ownership rights to that subsidiary. Creation of this "shell corporation" is primarily a paper transaction for the purposes of holding ownership of the profit-generating intangible asset. One way that this could happen is through a cost-sharing agreement in which a U.S. corporate owner of an existing intangible asset agrees to make the rights available to a foreign affiliate in exchange for other resources and funds to be applied toward the joint development of a new marketable product or service. Under a cost-sharing agreement, a foreign affiliate makes an initial buy-in payment for existing technology that, in theory, should reflect an "arm's-length" price that would be paid by an unrelated party. It then receives the income accruing to that asset. Subsequently, the foreign affiliate shares in the cost of continuing technological development. The cost-sharing payments made by the foreign affiliate to the U.S. corporation are income to the U.S. parent, and the foreign affiliate gains the right to use the advance in technology in a specified foreign market. This results in two outcomes. First, the MNC can use transfer pricing rules to maximize costs attributable to subsidiaries in higher-tax jurisdictions. Thus, the taxable income earned by the subsidiaries in higher-tax jurisdictions is reduced to as close to zero as possible. And second, taxable income realized by the shell corporation in the lower-tax jurisdiction is increased. For example, a U.S. corporation establishes a subsidiary in Jersey, an island in the English Channel with a standard corporate tax rate of 0%. The subsidiary buys an existing mobile phone technology developed by its parent U.S. corporation. The subsidiary has bought the right to earnings from marketing that technology in phones throughout Europe. The original cost-sharing payment to the parent would be subject to U.S. tax. The agreement allows the Jersey subsidiary to use updated versions of that technology in the European market from research conducted in the United States. Although the intangible assets were originally developed and improved in the United States, earnings from the mobile phone sales in Europe flow to the Jersey subsidiary and are taxed at 0%. Select International Efforts to Tax the Digital Economy Concerns over the ability for MNCs to avoid corporate income taxes have led to much discussion within national governments and among developed countries in international economic settings. As some of these discussions have met impasse, for various reasons, some countries have unilaterally proposed or implemented policies to tax digital economy MNCs on specific grounds. This section of the report provides a brief historical overview of these recent discussions and select unilateral DST proposals in Europe. While efforts to tax the digital economy have not been limited to European countries, efforts to develop policy principles and justifications in support of these specific taxes on digital economy markets have primarily been driven by politicians and commentators in Europe, including the United Kingdom. This report will not provide a comprehensive account of each DST proposal or be updated to track the rapid pace of policy modifications and emerging proposals. OECD/G-20 BEPS Action Plan In 2013, members of the Organization for Economic Cooperation and Development (OECD) and G-20 initiated the Base Erosion and Profit Shifting (BEPS) Project. The result of this multiyear effort is the 2015 BEPS Action Plan, which represents the consensus of the member countries that participated in the BEPS Project. Article 1 of the BEPS Action Plan analyzes the implications that the digital economy could have for modern tax systems, including taxes on corporate profits (i.e., corporate income taxes), withholding taxes (e.g., on royalties), and value-added taxes (VATs). Article 1 acknowledges that "it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy for tax purposes" given the importance of digital platforms and business models in modern economies. In light of this finding, though, Article 1 discusses potential new tax principles to enable countries to tax the profits earned by firms in the digital economy. Specifically, Article 1 discusses expanding on the widely accepted principle that profits should be taxed "where value is created" to include the notion that value-creating activities include user interaction. For example, YouTube profits when users post their videos and create content on its channels and generates more revenue in advertisement sales based on increased viewer traffic. Additionally, Article 1 considers using "significant economic presence" rather than physical presence as the standard nexus for sourcing which jurisdiction has the right to tax. "Significant economic presence" could be measured by a corporation's revenues earned from customers in a country. The various DST proposals in Europe share many of the features of digital taxation options discussed in the OECD BEPS report. Following the release of the 2015 BEPS Action Plan, the OECD has continued work in this area with its Task Force on the Digital Economy. On March 16, 2018, the task force released an interim report reflecting three different perspectives by its members. One perspective is that user-value creation has led to a "misalignment between the location in which profits are taxed and the location in which value is created" in some digital economy business models. This user-created value argument, discussed more throughout this report, has been used by many proponents of DSTs. A second perspective is that the challenges of tax policy presented by the digital economy are not exclusive to specific business models and should be addressed within the existing international tax framework for business profits. A third perspective is generally satisfied with recent BEPS recommendations and the existing international tax system and does not see a need for significant reform. Despite divisions reflected in the interim report, the task force aims to create an international consensus on principles for taxing the digital economy with a goal of releasing a final report on conclusions and recommendations by 2020. EU's Proposed DST In March 2018, the European Commission announced a digital tax package containing two proposals. The first proposal would expand the definition of permanent establishment to include cases where a company had significant economic activity through a "digital presence," thereby allowing EU members to tax profits that are generated in their jurisdiction even if a firm does not have a physical presence. Under the proposal, a digital platform would be deemed to have established a "virtual permanent establishment" in an EU member state if it (1) exceeds a threshold of €7 million in annual revenues in a member state, (2) has more than 100,000 users in a member state in a taxable year, or (3) has over 3,000 business contracts for digital services business users in a taxable year. Until that more systemic change in permanent establishment rules is adopted, the second proposal would impose an "interim tax" on certain revenue from digital activities: selling online advertising, online marketplaces (facilitating the buying and selling of goods and services between users), and sales of data generated from user-provided information. The interim DST would apply only to companies with total annual worldwide revenues of at least €750 million and EU revenues of at least €50 million. The European Commission estimated that a 3% tax rate would raise €5 billion annually for member states. Media reports indicate that the EU-wide proposals have stalled partly due to disagreement among member states with different economic interests and questions as to whether the proposals would be legal under EU law. In support of its digital tax proposals, the European Commission argues that existing tax rules do not account for how value is "created by users" in the digital economy: Today's international corporate tax rules are not fit for the realities of the modern global economy and do not capture business models that can make profit from digital services in a country without being physically present. Current tax rules also fail to recognise the new ways in which profits are created in the digital world, in particular the role that users play in generating value for digital companies. As a result, there is a disconnect—or 'mismatch'—between where value is created and where taxes are paid. In discussing "value creation in the digital economy," the European Commission states: In the digital economy, value is often created from a combination of algorithms, user data, sales functions and knowledge. For example, a user contributes to value creation by sharing his/her preferences (e.g., liking a page) on a social media forum. This data will later be used and monetised for targeted advertising. The profits are not necessarily taxed in the country of the user (and viewer of the advert), but rather in the country where the advertising algorithms has been developed, for example. This means that the user contribution to the profits is not taken into account when the company is taxed. Despite the policy pronouncements of the European Commission, member states of the EU disagree on both the long-term (changes to the permanent establishment rules to include digital presence factors) and interim (an EU-wide DST) proposed policies regarding the digital economy. On December 4, 2018, the economics and finance ministers of various EU member states met as part of the EU's Economic and Financial Affairs (Ecofin) Council. As part of its agenda, the Ecofin Council was scheduled to consider a vote on the EU's DST proposal. According to media reports, a vote was not formally considered, as it was apparent that multiple members held out in opposition against the DST. As of the publication date of this report, the issues are still under consideration by the Ecofin Council. Even if opponents to the broad, EU-wide DST proposed by the European Commission successfully block adoption of such a tax, this does not mean that individual members states are also barred from imposing their own national-level DSTs. Policy and political pressure for DSTs still exist within many EU member states. According to one media report, approximately 11 of the 28 EU member states were considering or had adopted DSTs before the Ecofin meeting. Spain's DST (Effective 2019) In April 2018, Spain announced that it would introduce a DST of 3% to the gross income derived from certain digital services. According to a preliminary text of the proposal, beginning in 2019, the tax will be imposed on certain digital services, including online advertising, online marketplaces, and data transfer service (i.e., revenue from the sales of online user activities) determined from internet protocol (IP) addresses within Spain. The tax would apply only to companies with global revenues for the previous calendar year exceeding €750 million and €3 million in revenues earned in that current year from activities with users in Spain. The UK's Proposed DST (Effective April 2020) On October 29, 2018, the Conservative Party introduced a DST as part of its 2018 budget proposal. Specifically, the tax would be levied at 2% on the applicable revenues of "certain digital businesses which derive value from their UK users." Revenue subject to tax include search engines, social media platforms, and online marketplaces derived from the participation of UK users. Users is defined broadly and can include interactions (e.g., payments made or clicks) from UK participants on either side of a two-sided digital market. The tax would apply only to businesses whose revenues from covered business activities exceed £25 million per year and groups that generate global revenues from search engines, social media platforms, and online marketplaces in excess of £500 million annually. There would also be a safe harbor provision that exempts "loss-makers and reduces the effective rate of tax on businesses with very low profit margins." A "review clause" would be included in the DST to ensure that it is still required following further international tax reform discussions. The specifics of the DST are to be detailed in legislation to be considered by Parliament that is expected to be introduced in April 2020. The UK Treasury estimates that the DST will raise £400m by 2022-2023 and £440m by 2023-2024. According to the UK Treasury, the DST serves as "interim action" to "ensure that digital businesses pay tax that reflects the value they derive from UK users" until international corporate tax reform efforts determine a comprehensive method to tax income earned from these types of multinational corporate business models. France's DST (Effective 2019) On December 17, 2018, Bruno Le Maire, Finance Minister of France, announced that the government was going to impose a DST beginning on January 1, 2019. Le Maire said that the tax is estimated to raise around €500 million annually. Details on what activities would be covered and the rate of tax were not provided but may be addressed in legislative sessions. Le Maire's announcement came the week after EU finance ministers did not reach agreement on an EU-wide DST at the December 2018 Ecofin meeting and shortly after President Emmanuel Macron announced billions of euros in tax cuts and spending in response to domestic social unrest. According to media coverage of the announcement, the decision to impose a DST seems to be motivated at least in part by a perceived unfairness in the amount of taxes paid by foreign corporations compared to domestic corporations. Policy Analysis of DSTs This section of the report first identifies the fundamentals of a corporate profits tax before addressing justifications that some have offered for DSTs. DSTs have been characterized as extensions of different types of tax regimes ranging from a tax on corporate profits in the digital economy to something more like a selective or excise tax on specific types of activities that is standalone from income tax regimes. Based policy analysis, though, DSTs resemble a selective tax on revenue (akin to an excise tax) and not as a tax on corporate profits. Fundamentals of a Corporate Profits Tax A tax on corporate profits taxes the return to investment in the corporate sector. Investment is giving up income for consumption today for the promises of higher returns, or earnings, in the future. Investment can be made in tangible assets, such as factories or equipment, or intangible assets, such as patents or trade secrets. The earnings eventually generated by the assets owned by corporations are taxed under the corporate profits tax. As discussed in the "Permanent Establishment" section of this report, domestic tax laws and international agreements provide the first right to tax income at its physical source—that is, where the asset is owned. The locations of a corporation's customers do not determine which country has a right to tax its income. For example, if a U.S. firm manufactures goods in the United States and exports those goods to European countries, then those European countries do not have a right to tax the earnings of the U.S. firm just because of its sale to European customers. Under some tax regimes, countries retain the right to impose a residual tax by taxing foreign-source income (i.e., income earned from overseas) and allowing a foreign tax credit. But the right to impose that residual tax on income from foreign incorporated subsidiaries is based on a domestic corporation owning some minimum percentage of the foreign business entity (i.e., a controlled foreign corporation, or CFC). In the United States, income from foreign branches is taxed currently and eligible for a credit. For example, the United States could tax the income that a firm earned from overseas sales if that firm is owned in part or in full by a U.S. parent in the year that the foreign-source income was earned (i.e., "currently," or not subject to deferral). However, most countries do not exercise this residual right to tax foreign-source income outside of income that can be easily shifted to low-tax countries. Purported Justifications for a DST As a Tax on Corporate Profits in the Digital Economy European Commission authorities appear to be characterizing their DST proposal as an extension of national-level corporate income taxes. In contrast, the UK has framed its DST as a gross receipts tax and specifically says that it is not an income tax. Regardless of these mixed characterizations, a policy analysis of DSTs indicate that they do not resemble a tax on corporate profits. First, as explained above, international tax rules do not provide countries a right to tax an MNC's cross-border income solely because their residents purchase goods or services provided by that firm. Rather, ownership of assets justifies a country to tax that MNC's profits. Second, DSTs, as they have been introduced thus far, are not structured as taxes on corporate profits. Corporate accounting profit is equal to total revenue minus total cost. Many corporate income tax systems tax corporate profits (along some policy spectrum of resident-based or worldwide-based rules). In contrast, DSTs are structured as "turnover taxes" that apply to the revenue generated from taxable activities regardless of costs incurred to a firm. The first section of the Appendix provides an algebraic illustration to show that a DST may have different consequences for the after-tax accounting profits of a firm than an income tax levied at the same tax rate. Third, DSTs are economically equivalent to excise taxes on intermediate services in the supply chains of various markets. As explained in the "Economic Efficiency" section of this report, the economic incidence of a DST is likely to be borne by purchasers of taxable services (e.g., companies paying digital economy firms for advertising, marketplace listings, or user data) and possibly consumers downstream from those transactions, depending on supply-and-demand conditions in each stage of the supply chain. It could be possible under specific market conditions (i.e., in which firms subject to the statutory incidence of a DST earn supernormal economic profits or have monopoly power) that DSTs could reduce corporate profits of firms in the digital economy. Under this scenario, even though DSTs would not still be structured as a tax on profits (from a plain reading of the implementing law), they could have the economic effect of a tax on profits. For reasons discussed later in this report, though, it would be difficult to demonstrate that digital economy firms generate supernormal economic profits or are monopolies within the larger markets in which they operate. As a Measure to Counteract Tax Avoidance and Profit Shifting Proponents of DSTs argue that profits earned by MNCs in the digital economy are not adequately taxed on a worldwide basis, as many of these firms have reduced their effective tax rates through international tax planning strategies. As discussed earlier in the " Tax Issues Highlighted by the Digital Economy " section of this report, two prongs of these tax planning strategies include avoiding permanent establishments in higher-tax jurisdictions and using transfer pricing to shift profits to lower-tax jurisdictions. Other strategies that help MNCs, both inside the digital economy and outside, avoid income tax include debt and earnings stripping, avoiding withholding taxes, and contract manufacturing. Critics of basing DSTs on this position could make several arguments. First, revenues lost from profit shifting are lost revenues to the country with the right to tax the corporation that owns the asset, not the country that is home to the corporation's customers. Although many developed economies are concerned with ensuring that profits are taxed from their proper source under international tax laws, a country that imposes a DST on foreign MNCs' income (in which they have no right to tax) is not consistent with the rationale of recouping revenue lost from the profit-shifting practices of that country's firms. Second, tax strategies enabling MNCs to pay little to no tax have been used by a broad array of firms that rely on intangible assets for the majority of their profits, and these firms are not limited to industries in the "digital economy." For example, European Commission authorities recently opened investigations into tax benefits conferred by its members on McDonald's (over royalty payments made by franchisees for use of the company's brand) and Starbucks (over royalty payments for coffee roasting "know-how" and the price of its unroasted beans). Thus, it can be argued that DSTs arbitrarily target firms within the digital economy for allegedly excessive profit shifting. Third, tax policies in a number of countries have recently changed or are scheduled to change in ways that will reduce incentives for profit shifting. These changes will most likely affect firms with the most aggressive profit-shifting strategies, including some digital economy firms. In the United States, a number of provisions enacted in P.L. 115-97 have reduced or will likely reduce economic incentives for U.S. MNCs to engage in profit shifting and tax avoidance. In addition to reducing the top marginal corporate tax rate from 35% to 21% —and, thus, the potential tax savings from profit shifting— P.L. 115-97 contains several other policy changes discouraging profit shifting, such as "Thin capitalization" rules limiting the benefits to earnings and debt stripping, such as reducing the share deductions of interest from 50% to 30% of adjusted taxable income for businesses with gross receipts greater than $25 million and eliminating a safe harbor that exempted firms without high debt-to-equity ratios. A new tax on "global intangible low-taxed income" (GILTI), effectively imposing a 10.5% minimum tax rate on the intangible income of CFCs in years 2018-2025 and 13.125% after 2025. In other words, if U.S. corporations are largely the center of concerns about digital economy MNCs not paying a "fair share" of their worldwide profits in tax, then GILTI provides a "floor" in the amount of tax owed by firms that previously sought out tax homes for their intangible assets in countries that imposed low or zero income tax. A "deemed repatriation" tax on accumulated post-1986 earnings at rates of 15.5% (if held in cash) and 8% (other, noncash assets), with applicable foreign tax credits similarly reduced. In other words, retained earnings of U.S. MNCs that were held abroad (often in low-tax jurisdictions) are now subject to tax. U.S. firms that invert are subject to a number of penalties, such as higher tax rates on the stock compensation of the inverting company's executives, a recapture of the deemed repatriation rate on post-1986 earnings (subjecting these earnings instead to 35% instead of 8% or 15.5%), and application of ordinary individual income tax rates instead of lower qualified dividend/long-term capital gains rates on certain dividends issued from the new foreign parent of the inverting U.S. company. Some European countries have taken efforts to change policies that were characterized by some as enabling tax avoidance among digital economy MNCs. For example, Ireland is phasing out tax provisions by 2020 behind the "double Irish sandwich." Some digital economy firms reportedly used this tax planning strategy to reduce the effective rate of tax on their cross-border income (e.g., advertising sales in Europe) and shift their profits to "tax havens" that impose no tax on corporate income. Furthermore, the Netherlands is considering imposing a withholding tax on royalty payments to low-tax jurisdictions by 2021. Although tax-minimizing international tax planning still exists, policy changes have reduced the benefits of using past strategies that raised concerns of MNCs routing income through a complicated series of international business entities for the primary purpose of reducing tax owed. Fourth, DST proposals are unlikely to affect profit-shifting behavior. As explained above, a tax on corporate profits, in a very general sense, taxes corporate income minus the costs of production. In contrast, DSTs are imposed on gross revenue derived from certain business activities (or "turnover") and do not take into account costs or net profits earned by the taxable firm. Thus, economic incentives for MNCs to shift profits remain unchanged by DSTs as they do not affect profit-maximizing decisions at the margins. As a Method to Tax Local "User-Created Value" As discussed in the " Select International Efforts to Tax the Digital Economy " section of this report, statements by the European Commission and United Kingdom claim that tax regimes are not adequately taxing the "value" created by user contributions and behavioral data that forms a key part of the business models of firms in the digital economy. The user-based value creation argument says that some digital platforms benefit from "network effects," in which the contributions of one user benefit other users and draw more users to utilize the platform. For example, a UK user creates a video on YouTube that is widely shared or promoted among other UK users. The increased user traffic benefits YouTube because more users are seeing advertisements that it has placed on its site. Thus, the video content creator has created "value" to YouTube by generating more advertising revenue to the platform. As another example, Yelp is a website and mobile application that allows users to provide restaurant and business reviews. Yelp generates revenue primarily from targeted advertising placed on its website. As more users provide higher-quality reviews, more users will rely on Yelp. Thus, the quality of user contributions creates "value" for Yelp's business model by increasing advertising revenue. Critics of this user-based "value-creation" argument could make various rebuttals. First, business models in the digital economy do not raise novel or "disruptive" challenges to income tax frameworks. In the digital economy, it is common for firms to operate in two-sided markets, where they sell or provide services to two sets of customers. For example, a social media company could use revenue earned from customers on one side of the market (advertising sales to businesses) to subsidize the free provision of services to customers on the other side of the market (individual platform users). A company providing free health and athletic tracking services can charge lower prices for a wearable device if it can sell aggregated user data to another marketer. This method of earning income across two-sided markets, though, is not new. For example, the advent of radio and television broadcasting in the 1900s operated on the same business model, where individual users consumed free programming in exchange for listening or viewing advertisements from sponsors. Just because French households along the border with Italy listen to Italian advertisements on an Italian radio station does not give France the right to tax the Italian radio station's advertising revenues. By analogy, just because French households are able to view online advertisements placed by a U.S. company on a U.S.-owned social media platform does not give France the right to tax the U.S. social media firm's advertising revenue. Second, the "value created" in the digital economy is achieved by the innovations and assets of the companies themselves, not by the actions of a single user. The companies—not the customers—bear the risk associated with investments in innovative technologies and platforms. They hire the workers, conduct the research, and develop the software, algorithms, and patentable innovations. For example, a key capability of many digital economy platforms is the ability to aggregate large amounts of data points across millions (if not billions) of users and repurpose that information for targeted adverting or directly selling goods and services. The technology enabling the aggregation of the user data and identifying patterns in consumer behavior is what adds value for resale to potential advertisers or retailers. Third, user contributions can be viewed as inputs to digital economy business models. It can be argued that the value of a single user's data or input is worth little to no market value in isolation. This is why users are generally willing to let companies track and collect these data without charge. Even if digital business models that allow individual users to monetize and sell their individual data grow, any income earned by individual users would be subject to tax under existing tax systems. For example, property owners on Airbnb are subject to income taxes and other hospitality fees levied by their national and local governments. YouTube "influencers" that are sponsored by companies pay personal income tax on those earnings to their home countries. Fourth, user contributions can be viewed as a substitute for money exchanged by consumers for the provision of digital services. "Direct provision," in this context, has the same meaning as "sale of" digital services, except there is no money exchanged in the transaction (i.e., bartering). For example, take the market for data generated by user-provided information. Google users agree to have Google track their search queries in exchange for the free use of Google's search engine. Similarly, Facebook users agree to have their likes, posts, and network connections tracked and aggregated for sale to advertisers in exchange for the use of Facebook's social media platform at zero cost. These transactions, it is argued, maximize the economic welfare of both consumers and producers. Consumers benefit because the behavioral data of any one user has little to zero market value (as discussed above), but consumers do value the provision of digital goods and services. Producers of digital services benefit because they are able to generate revenue from repurposing aggregated user data in exchange for operating their digital platforms at little to no cost to users. As another example, Amazon's business model can be viewed like a catalog retail merchant that features the goods of different manufacturers. A catalog retail merchant earns income by selling space to manufacturers for the privilege of featuring their products in the merchant's catalog. The catalog merchant's customers place an order, and the goods—which are typically manufactured from outside of the jurisdiction where the customer is located—are then shipped to the customer. The customers did not "create value" in that business-to-business transaction via their subscription and purchases of the catalog. By analogy, just because a final consumer of goods sold via Amazon resides in the UK or France does not give those countries the right to tax Amazon's revenues. Fifth, the distinction that customers in the digital economy create value while customers in other industries do not could be viewed as arbitrary. Consumers engage in a countless array of activities that enhance a company's "value" in the course of everyday life. Customer reviews and referrals for services—everything from dog walkers to dry cleaners to dentists—have existed for years and can increase a business's revenues. However, consumers usually do not expect a share of those revenues, nor does the act of providing a review give the country in which that customer resides a right to tax the service provider's profits. Additionally, consumers promote certain brands and companies simply by using their goods or services. This sort of "free marketing" improves the reputation of the brand or firm but does not trigger tax liability based on the location of the consumer. The flow of users to one digital economy platform or another are similar in that mass consumer attraction drives revenue. What the digital economy has changed, though, is the speed and scope in which consumer actions can be relayed to others. As an Excise Tax on the Digital Economy Excise taxes are typically justified by economic principles or as revenue-raising measures. From an economic perspective, there are four common types of excise taxes: (1) sumptuary (or "sin") taxes, (2) regulatory or environmental taxes, (3) benefit-based taxes (or user charges), and (4) luxury taxes. The first two categories of excise taxes attempt to correct for a perceived "market failure" in which the actions of individuals in the market have negative spillover effects to society. The third category is typically used to limit the burden of funding a government program that tends to benefit a relatively defined or narrow set of beneficiaries. The fourth category, largely repealed in the United States, uses specific taxes as a means to raise revenue in a more progressive manner. Based on these classifications of excise taxes, it appears that a DST primarily serves as a revenue raising measure. The use of digital platforms does not appear to create negative spillovers to society, creating the economic justification for use of excise taxes to raise the price of individual transactions as a means to reduce the burden on society. DSTs do not appear to be a benefit-based tax, as proponents have not called for dedicating the revenue to specific government programs that benefit digital economy MNCs subject to tax. DSTs also do not appear to be clearly a more progressive method of financing government activities compared to income taxes or broad-based consumption taxes (e.g., value-added taxes) that are common in Europe. As discussed below in the " Vertical Equity (Progressivity) " section of this report, DSTs could be a regressive method of financing government spending in the countries that impose them. Economic Analysis This section analyzes DST proposals under the standard tax evaluation criteria used by economists. These criteria are used to understand how a tax affects consumer demand and producer supply, whether a tax aligns with common notions of fairness, and administrative issues that could increase tax compliance costs for taxpayers or affect the ability of governments to collect revenue from a tax. Economic Efficiency Economic efficiency is typically defined as optimal production and distribution of resources in a market. Taxes typically impede, or distort, that optimal allocation of resources by raising the price of the taxed activity. Central to estimating the magnitude of these distortions is determining who bears the economic burden, or incidence, of the tax. The economic incidence of a tax can differ from the statutory incidence (i.e., who is obligated by law to pay the tax) depending on conditions in the affected market. Once the economic incidence of a tax is established, the exact distortions to consumers and producers can be determined as well as any other economic activity that is typically discouraged by a tax. The statutory incidence of the DST is borne by firms that provide covered services. For example, under the Spanish DST, companies that sell online advertising services, provide platforms for online marketplaces and intermediation services, and data transfer services—all to users with IP addresses within Spain's jurisdiction—will be subject to the DST (providing that they meet the threshold requirements). The economic incidence of such a tax could vary depending on the structure and characteristics of those individual markets, as explained in more technical detail in the Appendix . Under one scenario, digital economy firms providing services subject to the DST are perfectly competitive, and the economic burden is borne by the consumers of the digital services in the form of higher prices over the long term. For example, Spain levies its DST on firms that place digital advertisements, based on the revenue earned from showing advertisements on the search results and web pages of users with Spanish IP addresses. In a perfectly competitive market, firms providing digital advertisements earn zero economic profit in that they could not earn a higher rate of return via alternative investments. When faced with the DST, these advertising firms can either (a) exit the industry and pursue higher returns in other industries that are not subject to tax or (b) pass along the tax in the form of higher prices to businesses that purchase the advertising services. The firms purchasing digital advertising could be Spanish companies, but they could also be foreign firms purchasing advertisements that are ultimately targeted to Spanish users. In this case, the imposition of a DST in a competitive market will increase the price of taxable services and lead to a decline in the quantity demanded. The exact magnitude of these changes will depend on the responsiveness, or "elasticity," of the companies purchasing the internet advertising to changes in price. Assuming that companies purchasing the advertising services are also operating in a perfectly competitive market, they are faced with the same options as the firms that sell internet advertising: exit the industry or pass the tax along to consumers of their goods. Higher prices could result in lower consumer demand for the advertised product. The magnitude of this reduced demand depends on the responsiveness of consumer demand to changes in price (i.e., the price elasticity of demand). Thus, a DST imposed on intermediary services can have ripple effects downstream within markets. Under perfect competition, the economic incidence of an upstream DST is ultimately borne by the final consumers of those advertised products. Under an alternative scenario, sellers of digital services (e.g., Google, Facebook, Amazon) could be monopolies, or a small number of firms could have "market power" (the ability to influence the price for their services prevailing in the market), and at least part of the tax is borne by these firms in the form of reduced economic profits. Firms can derive market power from a number of factors. For example, lack of competition could enable one firm to have a significant effect on the prevailing rate of digital advertising services. Also, the presence of complements and substitutes could affect market power. In contrast to firms in perfectly competitive markets, firms that have market power are able to earn positive economic profits, also known as "supernormal profits," because they are able to set a price above their marginal cost of production. Some have argued that digital economy firms are more likely to generate supernormal profits because the marginal cost of scaling production of their business model is relatively low, if not costless. For example, the marginal cost for Facebook to display an advertisement to a user is basically zero. Others argue that some firms generate supernormal profits because they are operating in an oligopoly or near-monopoly. For example, most search results are conducted through Google, and Facebook has the most users among social media platforms. These arguments, though, may not provide clear indication of supernormal profits. A variation of the first argument could have been made during the rise of the retail catalog industry, where the marginal cost of producing a single magazine and mailing it to a consumer was relatively small. However, the presence of competing catalog retailers should have driven the prices of firms down close to their marginal costs (which encompass more than just the cost of printing one additional catalog). The second argument could be seen to misidentify the structure of "two-sided markets" in which many digital economy firms provide services to individual users as well as businesses. For example, Google provides search engine results to individual users (at no cost) and sells advertising space on those search results to businesses. Even if Google dominates the search engine market, it still competes against other firms, such as Facebook, for digital advertising. Digital economy firms also compete with nondigital economy methods of providing advertising services (e.g., television, print, and radio), which could constrain their ability to set prices well above their marginal cost of production. When faced with the DST, a monopolist or firms with market power bear at least some of the tax in the form of lower profit. This analysis is explained in more detail in the Appendix . How much of the tax is passed along to companies buying the advertising placement (and their customers) depends on the elasticities of supply and demand in those markets. Like the analysis in the competitive market, consumers in the affected industries reduce their demand in response to higher prices. The ultimate implication of the analyses above is that DSTs introduce distortions in various markets by reducing the financial return to capital in digital economy industries or by raising the cost of goods and services intermediated through digital platforms. Investment in affected markets would be expected to decrease. An example of the former would shift investment out of digital economy firms (e.g., as retailers purchase more print, television, or radio advertisement instead of internet advertisement or increased sales via brick-and-mortar or catalog outlets instead of digital), while an example of the latter would involve a reduction in demand of the final goods. The exact magnitude of these changes will vary based on the responsiveness of supply and demand in those various markets. Distortions can also arise in different ways depending on how a particular country's DST is applied to different firms. These issues are described more in the " Differential Treatment of Firms " section below. Equity Vertical Equity (Progressivity) The principle of vertical equity generally implies that taxpayers with a greater ability to pay the tax should generally pay a greater share of their household income in taxes compared to households with a lesser ability. A tax is "progressive" if higher income households pay a greater share of their income in tax than lower-income households, whereas the opposite is true in a regressive tax system. If the economic incidence of DSTs resemble that of an excise tax rather than a tax on corporate profits, as discussed in the " Economic Efficiency " section, this finding also has an impact on the vertical equity analysis of DSTs. A review of the economic literature shows that the majority of the corporate income tax is borne by capital (i.e., the corporation's shareholders) with the residual being borne by labor, or workers. Capital, here in the form of stock ownership, tends to be disproportionately concentrated in higher-income households. In contrast, excise taxes are commonly borne by consumers in the form of higher prices. Excise taxes are often regressive, as lower-income households bear a higher share of their pre-tax income on consuming goods and services than higher-income households. The exact equity effects of DSTs could vary based on different abilities for intermediate firms to pass the tax along to consumers, the nature of the goods and services that they sell, and the responsiveness of consumers in those relative markets. For example, assume that Facebook charges higher prices for advertising on the social media platform to companies, and companies are able to pass those higher advertising costs in full to their customers in the form of higher prices. If one of those companies sells luxury cars and another sells consumer household goods, the DST has more progressive effects in the former case and more regressive effects in the latter. In the aggregate, though, there is little reason to assume that final consumers of goods and services sold through taxable activities in digitized business models are disproportionately higher-income. Thus, it can be expected that a DST affecting a broad range of goods and services is more likely to be regressive than not, especially when compared to a tax on corporate profits. Differential Treatment of Firms DSTs create unequal economic treatment between similarly situated firms inside and outside of the digital economy. Firms outside of the digital economy can earn just as much global or local revenue as firms taxed under DSTs without being subject to an additional layer of tax on their revenue. Firms outside or inside the digital economy can also engage in profit shifting and "aggressive" transfer pricing to reduce their taxes owed in a country. DSTs, as they have been presented thus far, also create inequalities for firms of similar size based on certain exemptions and thresholds. For example, each of the specific European DST proposals use different or multiple thresholds based on total cross-border profits, revenue generated from covered business activities, "clicks" or interaction based from local users, etc. While proponents of these DSTs with minimum thresholds might have other policy goals in mind (e.g., exempting smaller businesses from potentially costly tax compliance burdens), the exact levels at which these thresholds are drawn among larger MNCs are arbitrary from a policy perspective. Critics of DSTs would argue that the thresholds are drawn to exclude domestic MNCs or to target the taxes to a narrow set of foreign MNCs. Regardless of their rationale, these thresholds create concerns of inequitable treatment between different sectors. In the situation where the tax is fully passed along to consumers, digital firms either charge a higher price (reducing demand) or exit the industry. Where the MNCs subject to the statutory incidence of the tax bear at least a portion of the economic incidence of the DST, then they face a lower return to business investment in that country compared to firms not subject to the DST. Additionally, the UK DST's proposed exemption or "safe harbor" for "low profit" firms could create another layer of equity concerns. If the exemption is based on low profits as calculated by UK tax rules, then firms that are not subject to the UK corporate income tax (because they do not have a permanent establishment in the UK) will not be eligible for the exemption. In other words, if a firm must be subject to the UK corporate income tax to be eligible for exemption then, by definition, the exemption is not available to foreign MNCs. MNCs with similar amounts of global revenue would be subject to different effective tax rates on their worldwide consolidated earnings (across all related entities) based on whether they were subject to UK income taxes or not. An alternative exemption being considered by the UK, based on global consolidated profits, could have some administrative issues, as discussed in the next section of this report. Administration DSTs present several administrative challenges to both the public and private sectors. With regard to the public sector, lawmakers and revenue-collecting agencies will have to clarify exactly what types of activities are subject to tax and which parties bear the statutory burden of paying tax. These decisions affect the costs of administering the tax or the gross revenue collected by the tax. With regard to the private sector, the decisions made by lawmakers and agencies could affect the costs of complying with DST regimes. Technology could present administrative challenges to the implementation of DST proposal. First, some digital economy platforms allow users to opt out of having their data tracked or resold to third parties. Without this information a digital service provider may be able to fulfill a user's desire for privacy, but the absence of the information limits the provider's ability to apply proper taxes based on the customer's jurisdiction. "Do not track" or internet browser plugins that make it more difficult for companies to track users' activities could affect the measurement of data collected from local users. Second, users could reroute their internet traffic to servers outside of the country imposing the DST and mask their physical location. Virtual private network services (VPNs) allow users to access websites while making it appear that their IP addresses are from locations other than their actual locations. VPNs connect users to servers located in different parts of the world. Websites will see that a user's web traffic is originating from the VPN server, which could or could not be in the same jurisdiction as the user. Typically, VPNs are used for anonymity reasons or to bypass firewalls and website censors imposed in certain jurisdictions. VPNs are not sufficient to protecting a user's IP address, as other unmasking techniques (some requiring more effort) can be used. Still, users could use VPNs located outside of the taxing jurisdiction to reduce the flow of user activity attributed to IPs within the taxing jurisdiction, thereby reducing revenue collected from "local" user activity. Even if this does not completely eliminate the revenue base for a DST, VPN use still results in mismeasurement of the amount of revenue attributed to local users. Overall, lawmakers writing DSTs would likely need to consider specifying what level of enforcement would be sufficient for companies to make good faith efforts to source their revenues to local users. More due diligence required by companies to determine the source of their users or unmask user efforts designed to preserve their privacy will impose higher costs to the companies. A lower standard might require fewer resources from firms and be less intrusive on user privacy but reduce the amount of tax raised from local users. Thus, DSTs could present policy tradeoffs between individual privacy concerns and tax revenue collection. Two features of the UK's proposed DST create additional administrative challenges. An exemption based on low UK-source profits could also have unintended consequences for proponents of the DST in the form of reduced revenue. Some digital economy MNCs do have subsidiaries physically located in Europe. For example, these firms might have the purpose of providing customer service or call centers that speak the local language or market the company's lines of business. Generally, these types of business activities are low profit margin. If a digital economy MNC does have a permanent establishment in the UK that earns close to zero profits, thereby owing little to no income tax in the UK, does the tax situation of this local subsidiary justify an exemption for the entire MNC controlled group? If so, the MNC could still be technically generating millions of British pounds in revenue from sales to UK customers over the internet. In contrast, an MNC that does not have a UK subsidiary but also has millions in revenue from sales to UK customers would not be eligible for the low-profit exemption. The clear tax planning implication of such an interpretation of the low-profit exemption is that MNCs should establish a low-profit subsidiary in the UK as a means to claim the low-profit margin exemption. If allowed, then the UK DST would likely raise little to no revenue. Alternatively, the UK could base its low-profit exemption based on worldwide profits of the MNC. In the United States, corporations are required to report a number of tax-related calculations and information on their annual Securities and Exchange Commission filings for shareholders. Among these tax-related data are their effective tax rate and tax paid across all jurisdictions where the firm is subject to tax. However, the tax data reported under financial accounting rules typically varies from actual tax paid. This phenomenon is described as "book-tax differences." For example, different rules for depreciation are typically used for accounting purposes compared to actual tax policy in a jurisdiction (e.g., if the lawmakers in that country decided to speed up cost recovery with the intent of increasing business investment). Thus, an exemption based on financial disclosure forms may not accurately reflect taxable income. DSTs and Implications for U.S. Tax Policy U.S. Foreign Tax Credits and Bilateral Tax Treaties U.S. corporations are allowed to claim a tax credit against U.S. corporate income tax liability for income taxes paid to foreign jurisdictions. The rationale is to prevent double taxation of foreign-source income. DSTs are taxes on revenue earned from specific business activities and should not be eligible for U.S. foreign tax credit treatment for several reasons. First, such taxes are not income taxes under common bilateral tax treaty language. Statements from some countries imposing DSTs, such as the UK, indicate that they do not intend DST payments to be creditable against taxes that an MNC might owe in its home country. Nor are DSTs "in lieu of income taxes," as the countries imposing DSTs do have a corporate income tax system. The Internal Revenue Service (IRS) could clarify that U.S. bilateral income tax treaties do not provide for a foreign tax credit against U.S. tax for U.S. corporations that make DST payments to foreign jurisdictions. If the IRS does not do so, then Congress could enact legislation denying a U.S. foreign tax credit for such payments. Denying a foreign tax credit could increase the total taxes paid by U.S. MNCs in jurisdictions around the world, but allowing DST payments to be creditable would effectively force the U.S. Treasury (and U.S. taxpayers) to subsidize tax rates imposed by foreign jurisdictions. GILTI Policymakers who sympathize with the premise that MNCs in the digital economy are unfairly able to shift profits to low-tax jurisdictions could still disagree with the unilateral response of foreign countries to impose DSTs. The tax on GILTI serves as an alternative policy tool intended to impose higher effective tax rates on U.S. firms in the digital economy. For example, in the 115 th Congress, the No Tax Break for Outsourcing Act ( H.R. 5108 ; S. 2459 ) would have increased the GILTI tax rate to 21% and eliminated the deduction for the return on tangible assets derived by domestic corporations from serving foreign markets in computing GILTI tax liability, among other provisions. Possible Challenges at the World Trade Organization As discussed, above, DSTs have the same economic effects as an excise tax. It is not controversial for countries to levy excise taxes on imported as well as domestically consumed goods or services. Such taxes are considered to not distort trade. However, some DST proponents have not explicitly labeled them as "excise taxes," making it unclear how these taxes should be viewed in terms of international agreements. Regardless of the label attached to them, some commentators argued that DSTs violate restrictions on tariffs under the rules of the World Trade Organization. For example, some scholars argue that the high-revenue thresholds for taxation and the exclusion of certain revenues earned by European firms effectively discriminate against the digital exports of U.S. firms. Multilateral Tax Reform Negotiations and U.S. Economic Policy Many proponents of DSTs argue that they are "interim measures" until the international community adopts broader reforms in international tax rules. As mentioned in the discussion of the European Commission's DST proposal, the commission prefers changes, both inside and outside of the EU, in the permanent establishment rules to incorporate some measure of "digital presence." This goal aligns with the EU's goal of a consolidated tax base among its members and formulary apportionment of corporate tax revenue based on a set of factors (e.g., sales, assets, employment), which would result in a shift away from tax allocation based on assets. The form and rationale of DSTs appear to better comport with a formulary apportionment tax being pursued in the EU than a traditional national corporate income tax. The inability for consensus to impose a DST at the European Commission level could lead more individual member states to unilaterally impose their own DSTs. Even if the United States objects to unilateral DSTs, these sovereign countries are generally able to impose their own tax systems (within the boundaries of any other international agreements, such as EU membership). Congress could consider creating "carrots" or "sticks" affecting the policy choices of DST proponents. Tax policy and legal scholars have debated the merits of "potential compromises" that would not require fundamental rewrites of international tax rules. Some of these options would rely on the executive branch for day-to-day negotiations at a bilateral or multilateral level (e.g., at the OECD). Any modification to existing or new tax treaties, though, would require Senate approval. Congress could also direct the executive branch to impose incentives (and disincentives) that would affect key sectors of the EU economy. An evaluation of these emerging ideas and concepts is, however, beyond the scope of this report. Appendix. Technical Appendix DSTs Are Not Structured as Taxes on Profits Corporate profit is generally defined as: (1) π=TR-TC Where π is profit, TR is total revenue, and TC is total cost. This is before taxes. After tax corporate profit, π t , for a firm after imposition of a percentage tax ( t ) on corporate profit, is defined as: 2 πt=(1-t)(TR-TC) In contrast, a DST ( dst ) is levied as a percent of total, gross revenue yielding an after tax profit, π dst , of: 3 πdst=(1-dst)TR-TC Algebraically, equations (2) and (3) are not equivalent. To further illustrate, the following amounts can be substituted: TR = $1,000, TC = $500, and t = 0.03 (or a 3% tax rate). Using these parameters, πt based on a 3% profit tax would be: 4 πt=(1-0.03)($1,000-$500) 5 πt=$485 Using these parameters, πdst based on a 3% DST revenue tax would be: 6 πdst=(1-0.03)$1,000-$500 7 πdst=$470 As shown above, after-tax profit for a corporation subject to a 3% income tax rate (equation 5) is greater than after-tax profit for a corporation subject to a 3% DST (equation 7) in lieu of an income tax. The two taxes are not the same. Effects of a DST on Supply-Demand Conditions in Digital Markets To analyze the economic effects of a DST, the different markets in which digital economy firms operate must be conceptualized. In a general sense, the consumers or buyers in these markets are those that pay money to the supplier or seller for the provision of a service. Many firms in digital economies operate in "two-sided markets" in which they provide services to two different consumers: individual users and businesses. While both sides of these markets could be relevant for calculating DST liability, the markets for the latter group of services are the starting point for analyzing the economic effects of a DST, because these business-to-business transactions are where the statutory incidence of a DST is typically first imposed. For example, in the market for internet advertisements, a clothing company could be the consumer and Google or Facebook could be the seller or supplier. In the market for marketplace sales, a vendor could be the consumer and Amazon could be the seller or supplier. In the market for user data sales, a data transfer firm could be the consumer and Facebook, Google, or Fitbit could the supplier. From an economic perspective, there are two extremes of market structure: perfect competition and monopoly. Most market structures lie somewhere in between. Monopolies rarely exist, and they are typically regulated. For reasons explained below, there are specific reasons why monopolies are likely not to exist in the markets in which DSTs apply. However, firms could have market power if there are barriers to entry. The following analyses examine how a DST would apply, over the long run, in the two extremes of market structure for a digital economy firm facing a downward sloping demand curve. Analysis of a DST in a Competitive Market In perfect competition, firms face a downward-sloping demand curve, and the supply curve is perfectly elastic (horizontal) as increases in output are achieved by new firms entering the industry over the long run. Each firm earns no economic profit, meaning that the opportunity cost of investing in alternative ventures is zero, and each is a price taker in the market (i.e., an individual firm cannot influence the price prevailing in the market). In this scenario, when the government imposes an excise tax, firms must ultimately pass on the cost of the tax to their consumers or exit the market. The market for services provided by firms in the digital economy could be depicted as "perfectly competitive." Under this scenario, many firms are willing to provide a relatively similar service. These markets can be outlined more narrowly to encompass only activities by other digital economy firms (e.g., internet advertising, marketplace sales, data transfer), or they can be outlined more broadly (e.g., consumer advertising, retail outlets, consumer marketing research). In other words, although users typically associate Facebook as primarily a social network and Google as primarily a search engine, both firms may operate and compete in the same market for internet advertising. Additionally, both firms compete in the larger market for consumer advertising alongside television, print, and radio advertisers. If a clothing seller is deciding where to spend his advertising budget, that seller can purchase advertising placements on Facebook, Google, etc. (not to mention television, print, and radio). Similarly, a data transfer company looking to purchase and analyze user data then selling marketing services for another good or service not only has the choice to purchase data from Facebook, Google, etc.; it can also collect data from other companies that collect data and surveys on consumer preferences. Figure A-1 and Figure A-2 illustrate the long-run effects of a DST in a perfect competition scenario with demand curves of different slopes. The demand curves are downward-sloping because consumers demand less of the taxed service as price increases. The different slopes represent scenarios where consumer demand is more responsive, or elastic, to changes in price ( Figure A-1 ) and less responsive, or inelastic ( Figure A-2 ). The supply curves in both figures are flat, or "infinitely elastic" because suppliers, in the aggregate, are able to adjust their capacity to meet whatever level of consumer demand prevails in the market. In both figures, the initial equilibrium (E), before the tax, between the prevailing market price (P) and quantity (Q) is denoted by an asterisk superscript (*). After the tax is applied, the change in equilibrium between price and quantity is denoted by a subscript ( t ). In both figures, the tax is also passed forward to consumers in the form of higher prices. Firms reduce output or some firms exit the market because participants earn zero economic profit. If the DST rate is 3%, for example, then suppliers in a competitive market are assumed to increase price by 3% minus any tax savings (i.e., deductions for excise tax payments from any income tax owed to the jurisdiction imposing the DST). In Figure A-1 , imposition of a DST causes prices to rise and quantity demanded to fall in the market. The magnitude of the change in quantity is roughly similar to the change in price in the illustration below, but in a market with relatively elastic demand, the change in quantity can exceed the change in price. One cause for this phenomenon is the availability of near-substitutes. For example, if television advertisement is equally as effective as internet advertising, then a tax increasing prices of the latter will lead to a larger decline in demand as more companies purchase advertisements on television instead of the internet. In Figure A-2 , imposition of a DST also causes prices to rise and quantity demanded to fall in the market. With a relatively inelastic demand curve, though, the magnitude of the change in price exceeds the change in quantity. This could be caused, for example, by a lack of substitutes (e.g., a strong preference for internet advertising or lack of alternative outlets to online marketplaces to sell goods and services). In this case, the change in price is greater than the change in quantity demanded. Many of the services subject to a DST are intermediate inputs to the final sales of other goods and services. This means that the method of analyzing the effects of the DST would be replicated for each stage in the supply chain. For example, if a DST increases the price of advertising a clothing company's products over the internet, then that clothing company will likely increase the cost of the clothing that it charges its customers (the retail consumer in the country levying the tax). The exact magnitude of the effects will vary depending on elasticities of supply and demand in that downstream market for retail clothing sales. In a perfectly competitive retail clothing market, though, it is anticipated that prices will increase and quantity demanded will decrease. In addition to effects on price and quantity prevailing within a market, DSTs can also have "welfare effects." Under this method of analysis, economists consider changes to consumer surplus, producer surplus, and deadweight loss. Consumer surplus is the total benefit of value of a good or service that consumers receive beyond what they actually pay in the market. It is depicted on a supply-demand graph as the area below the demand curve and above the price. Producer surplus is the benefit to producers from selling a good or service at a price higher than their marginal cost of producing one additional unit. It is depicted on a supply-demand graph as the area above the supply curve and below the price. Deadweight loss is an inefficiency in the market that is typically introduced by government intervention, such as a tax, that results in a loss in economic activity and potential losses to consumer or producer surpluses. In a supply-demand graph of a competitive market, like the ones above, deadweight loss is depicted as the center triangle created after the imposition of a tax. Welfare analyses of the DSTs depicted in Figure A-1 and Figure A-2 indicate that they reduce consumer surplus, have no effect on producer surplus, and create deadweight loss inefficiencies. Before the imposition of a DST, consumer welfare is measured as the areas a + b + c in both figures. This area indicates that consumers are receiving benefits from consuming goods or services subject to DSTs in excess of the price they actually pay for them. This could be in part because social media platforms, shopping on online marketplaces, or using search engines are free to consumers. After the imposition of a DST, though, consumer welfare is reduced to the area a . As producers increase the cost of goods and services subject to a DST, consumer welfare decreases due to higher costs. The area b becomes revenue collected by the government and the area c becomes deadweight loss in economic activity discouraged by the DST. There is no effect on producer surplus, because it does not exist in a perfectly competitive market. In a perfectly competitive market, producers are price takers and earn no economic profit. The main differences in Figure A-1 and Figure A-2 are due to the slope of the demand curve. The relatively inelastic demand in Figure A-2 leads to greater reductions in consumer welfare, more tax revenue collected, and smaller deadweight losses. This is because a relatively inelastic demand curve indicates that consumers are less responsive to changes in price. If consumers are unable to substitute away from goods or services subject to DSTs toward nontaxed activities, then they pay higher prices for taxed activities, and the government collects more revenue. Analysis of a DST in a Monopoly Market Some argue that major firms in the digital economy have "monopoly power." Proponents of this assertion could point out that Facebook is the largest social media platform or that Google is the predominant search engine. Others may say that digital economy platforms create network effects that prevent competition. For example, Facebook is able to maintain its status as the most popular social media platform because the value of interacting on a network with billions of users exceeds a new platform with only a few users. Similarly, Amazon might be characterized as a monopoly because many customers shop and provide reviews on its website, so a vendor looking for exposure to the largest customer base will choose to pay for the service of listing its products on that site compared to a smaller internet marketplace. These views may be seen, by others, as misguided because they are viewing the opposite side of the two-sided markets in the digital economy or defining the "market" too narrowly. As explained in the perfect competition analysis, above, Google and Facebook can be viewed as competitors in the market for selling digital advertising space or data transfer services even if they have some degree of market power on the other side of the market (e.g., search engines and social networks). Additionally, digital economy firms also compete against "non-digital" competitors. For example, in the larger markets for consumer product advertising, internet companies compete with advertising via television, print, and radio. Whether firms have supernormal profits or economic rents in an industry is often difficult to determine. In general, the presence of high accounting profits (total revenue minus total costs) is not indicative of whether a firm has profits in an economic sense. Economic profits take into consideration the opportunity costs of investing in a different income-producing activity. There is typically a risk-free portion of the return to any investment. For example, in the corporate sector this could be the average rate of return of the stock market. However, riskier investments generally require a higher potential return in order to attract capital (also known as the "risk premium"). The point of this distinction is that high accounting profits can be an indication of a higher risk premium. For the sake of argument, Figure A-3 illustrates the effects of a DST in a hypothetical monopoly market where there is one producer. An example of this phenomenon in the digital economy could be a single firm that sells internet advertising, marketplace sales, or data transfers to a potential buyer. Figure A-3 illustrates a monopoly market before the imposition of a tax. In a monopoly market, the seller still faces a downward-sloping demand curve. However, the monopolist does not have a supply curve because it does not accept the price prevailing in the market (like individual sellers in a competitive market). Instead, it sets price (P M ) and output (Q M ) at the intersection of marginal revenue (MR) and marginal cost (MC) to arrive at a profit-maximizing equilibrium (E M ) along the demand curve. The upward-sloping MC represents the fact that the monopolist firm faces increasing marginal costs as it increases the quantity supplied in the market. The monopolist also has an upward-sloping average total cost (ATC) curve, which includes the upward-sloping function of the MC curve plus added fixed costs of production. Unlike producers in the competitive markets in Figure A-1 and Figure A-2 , the monopolist in Figure A-3 earns economic profits, or rents. Economic profit per unit sold is the difference between the price charged by the monopolist (P M ) and the ATC curve, or the distance bc . That average profit per unit times the total number of units sold ( dc ) equals the total economic profit earned by the monopolist, as shown in the gray shaded box ( abcd ). The effects of a DST on a monopoly market are illustrated in Figure A-4 . A DST shifts the demand curve in as consumers of taxed services respond to higher after-tax prices. As a result of the reduced demand, the marginal revenue earned by the monopolist declines, and the MR curve shifts from MR M to MR t . The equilibrium in the market shifts from E M to E t . Quantity decreases from Q M to Q t . The price faced by the consumer in the market increases from P M to P t . The price received by the monopolist, though, decreases from P M to P Mt . The economic profit earned by the monopolist under the new post-tax demand and MR t curves is represented by the gray shaded box ( fghi ). The revenue collected by the government is represented by the dashed-line area just above the monopolist's profit. Changes to deadweight loss is not illustrated on Figure A-4 , but they can be explained in qualitative terms. The presence of a monopoly market creates deadweight loss relative to a competitive market because P M is set higher than the price where supply and demand intersect in the competitive market (e.g., in Figure A-1 and Figure A-2 ). When a tax is introduced on top of the distortions caused by the monopolist, the size of the deadweight loss in the market is further increased.

Several countries, primarily in Europe, and the European Commission have proposed or adopted taxes on revenue earned by multinational corporations (MNCs) in certain "digital economy" sectors from activities linked to the user-based activity of their residents. These proposals have generally been labeled as "digital services taxes" (DSTs). For example, beginning in 2019, Spain is imposing a DST of 3% on online advertising, online marketplaces, and data transfer service (i.e., revenue from sales of user activities) within Spain. Only firms with €750 million in worldwide revenue and €3 million in revenues with users in Spain are to be subject to the tax. In 2020, the UK plans to implement a 3% DST that would apply only to businesses whose revenues exceed £25 million per year and groups that generate global revenues from search engines, social media platforms, and online marketplaces in excess of £500 million annually. The UK labels its DST as an "interim" solution until international tax rules are modified to allow countries to tax the profits of foreign MNCs if they have a substantial enough "digital presence" based on local users. The member states of the European Commission are also actively considering such a rule. These policies are being considered and enacted against a backdrop of ongoing, multilateral negotiations among members and nonmembers of the Organization for Economic Cooperation and Development (OECD). These negotiations, prompted by discussions of the digital economy, could result in significant changes for the international tax system. Proponents of DSTs argue that digital firms are "undertaxed." This sentiment is driven in part by some high-profile tech companies that reduced the taxes they paid by assigning ownership of their income-producing intangible assets (e.g., patents, marketing, and trade secrets) to affiliate corporations in low-tax jurisdictions. Proponents of DSTs also argue that the countries imposing tax should be entitled to a share of profits earned by digital MNCs because of the "value" to these business models made by participation of their residents through their content, reviews, purchases, and other contributions. Critics of DSTs argue that the taxes target income or profits that would not otherwise be subject to taxation under generally accepted income tax principles. U.S. critics, in particular, see DSTs as an attempt to target U.S. tech companies, especially as minimum thresholds are high enough that only the largest digital MNCs (such as Google, Facebook, and Amazon) will be subject to these specific taxes. DSTs are structured as a selective tax on revenue (akin to an excise tax) and not as a tax on corporate profits. A tax on corporate profits taxes the return to investment in the corporate sector. Corporate profit is equal to total revenue minus total cost. In contrast, DSTs are "turnover taxes" that apply to the revenue generated from taxable activities regardless of costs incurred by a firm. Additionally, international tax rules do not allow countries to tax an MNC's cross-border income solely because their residents purchase goods or services provided by that firm. Rather, ownership of assets justifies a country to be allocated a share of that MNC's profits to tax. Under these rules and their underlying principles, the fact that a country's residents purchase digital services from an MNC is not a justification to tax the MNC's profits. DSTs are likely to have the economic effect of an excise tax on intermediate services. The economic incidence of a DST is likely to be borne by purchasers of taxable services (e.g., companies paying digital economy firms for advertising, marketplace listings, or user data) and possibly consumers downstream from those transactions. As a result, economic theory and the general body of empirical research on excise taxes predict that DSTs are likely to increase prices in affected markets, decrease quantity supplied, and reduce investment in these sectors. Compared to a corporate profits tax—which, on balance, tends to be borne by higher-income shareholders—DSTs are expected to be more regressive forms of raising revenue, as they affect a broad range of consumer goods and services. Certain design features of DSTs could also create inequitable treatment between firms and increase administrative complexity. For example, minimum revenue thresholds could be set such that primarily large, foreign (and primarily U.S.) corporations are subject to tax. Requirements to identify the location of users could also introduce significant costs on businesses. This report traces the emergence of DSTs from multilateral tax negotiations in recent years, addresses various purported policy justifications of DSTs, provides an economic analysis of their effects, and raises several issues for Congress.

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F irearms have a unique significance in American society. Millions own or use firearms for numerous lawful purposes, such as hunting and protecting themselves in the home. Still, firearms annually cause tens of thousands of injuries and deaths, including in high-profile mass shootings. The widespread lawful and unlawful uses of firearms have prompted vigorous debate over wheth er further firearm regulation would be effective or appropriate. And framing the policy debate are legal issues stemming from the existing federal framework of firearms laws and the constitutional constraints that may cabin Congress's ability to legislate in this area. Firearms regulation at the federal level has grown more expansive over time, setting rules for the lawful manufacture, sale, and possession of firearms at the national level. These federal firearms laws mostly serve as a baseline that states can (and sometimes do) supplement, and Congress regularly considers legislation to address perceived gaps in these laws. Proposals to modify the current federal framework for regulating firearms may be informed by numerous constitutional considerations, including the scope of the Second Amendment right to keep and bear arms and the need to ground legislation in one of Congress's enumerated powers. This report provides an overview of the development of federal firearms laws and the major components of the current statutory regimes governing firearms. It then describes the constitutional considerations that may impact Congress's ability to enact firearms laws. Finally, this report describes selected topical areas where the 115 th and 116 th Congresses have considered legislation to amend the existing federal framework regulating firearms, highlighting some of the constitutional issues that may arise in those areas. Historical Overview of Major Federal Firearms Laws Federal laws regulating firearms date back roughly a century, and over time lawmakers have established more stringent requirements for the transfer, possession, and transportation of firearms. Though not a regulation of firearms per se, an excise tax was levied on imported firearms and ammunition beginning in 1919. In 1927, a federal law was enacted prohibiting the use of the U.S. Postal Service to ship concealable firearms. Then, "[s]purred by the bloody 'Tommy gun' era" of the 1920s and early 1930s, Congress passed the National Firearms Act of 1934 (NFA), which established a stringent taxation and registration scheme for specified weapons associated with the Prohibition-fueled gang violence of the time. A few years later, Congress enacted the Federal Firearms Act of 1938 (FFA), which created a licensing scheme for the manufacture, importation, and sale of firearms and established limited categories of persons who could not possess firearms. The FFA eventually was superseded, however, by the more comprehensive Gun Control Act of 1968 (GCA). In addition to expanding the FFA's licensing scheme and categories of prohibited persons—which largely had been restricted to certain criminals—the GCA augmented the criminal penalties available for violations and established procedures for obtaining relief from firearm disabilities. Since the GCA's passage, intervening legislation has amended the regulatory regime significantly. For instance, the Firearm Owners' Protection Act of 1986 (FOPA) carved out exceptions to the felony firearm prohibition for certain crimes, repealed certain regulations pertaining to ammunition, expressly prohibited the creation of a national gun registry, added additional categories of persons who are barred from possessing firearms, prohibited the private possession of machineguns manufactured on or after the date of FOPA's enactment, and further expanded the available criminal penalties for violations, among other things. Additionally, the Brady Handgun Violence Protection Act of 1993 (Brady Act) mandated that the Attorney General create a background check system—the National Instant Criminal Background Check System (NICS)—which queries various government records that could indicate that a prospective transferee is ineligible to receive a firearm. The Brady Act further required that a background check be run for many, but not all, proposed firearms transfers before they can be completed. And the Gun-Free School Zones Act added a provision to the GCA that, subject to certain exceptions, bans firearms in statutorily defined school zones. In 1994, Congress also imposed a 10-year moratorium on the manufacture, transfer, or possession of "semiautomatic assault weapons," as defined in the act, and large capacity ammunition feeding devices, but the ban was permitted to expire in 2004. Finally, some piecemeal legislation in recent years has sought to protect lawful firearm owners, manufacturers, or dealers in certain ways. For example, the Protection of Lawful Commerce in Arms Act, enacted in 2005, grants civil immunity to firearm manufacturers, dealers, and importers when weapons made or sold by them are misused by others. Federal Statutory Framework Firearms regulation in the United States is an area of shared authority among federal, state, and local governments. Individual states have enacted a variety of laws relating to the possession, registration, and carrying of firearms, among other things. However, federal law establishes a baseline regulatory framework that state and local laws may not contradict. Thus, the current collection of federal firearms laws may be thought of as a regulatory floor that sets out, at the federal level, the minimum requirements for lawful manufacture, sale, and possession of firearms. The two principal federal firearms laws currently in force are the NFA and the GCA, as amended. The Department of Justice's Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is the principal agency charged with administering these laws. National Firearms Act of 1934 The NFA was the first major piece of federal legislation regulating the sale and possession of firearms. Through a taxation and registration scheme, the law sought to curb the rise of violence connected to organized crime by targeting the types of weapons that (at the time of passage) were commonly used by gang members. Weapons Covered In its current form, the NFA regulates the manufacture, transfer, and possession of certain enumerated weapons deemed to be "particularly dangerous" : (1) short-barreled shotguns, defined as having a barrel length under 18 inches; (2) short-barreled rifles, defined as having a barrel length under 16 inches; (3) modified shotguns or rifles with an overall length under 26 inches; (4) machineguns, defined as weapons—including frames or receivers—that shoot "automatically more than one shot, without manual reloading, by a single function of the trigger," as well as parts intended to convert other weapons into machineguns; (5) silencers; (6) "destructive devices," including bombs, grenades, rockets, and mines; and finally (7) a catchall category of "any other weapon" that is "capable of being concealed on the person from which a shot can be discharged through the energy of an explosive," among other things. The NFA explicitly exempts from regulation antique firearms and other devices that are primarily "collector's item[s]" not likely to be used as weapons. Registration and Identification All NFA firearms that are produced or imported—as well as their manufacturers, dealers, or importers—must be authorized by and registered with the Attorney General (previously, the Secretary of the Treasury). Any transfer of an NFA firearm must likewise be accompanied by a registration in the name of the transferee. The registrations of all NFA firearms not in the possession or under the control of the United States are maintained in a central registry, and all persons possessing NFA firearms must retain proof that such firearms have been registered. Any NFA firearm that is produced or imported must be identifiable, with firearms that are not destructive devices bearing, among other things, a serial number that "may not be readily removed, obliterated, or altered." Taxation Every importer, manufacturer, and dealer in NFA firearms must pay an annual "special (occupational) tax for each place of business," and a separate tax must also be paid for each firearm made. Upon transfer of an NFA firearm, the transferor is subject to a tax of a varying amount depending on whether the firearm to be transferred falls under the catchall category of "any other weapon." A number of tax exemptions exist. Most notably, firearms made by or transferred to the United States, any state, any political subdivision of a state, or any official police organization engaged in criminal investigations are exempted, as are firearms made by or transferred between qualified manufacturers or dealers. Penalties A person who violates or fails to comply with the requirements of the NFA is subject to a fine of up to $10,000, imprisonment for up to 10 years, or both. Firearms involved in violations are also subject to forfeiture. To be criminally culpable for a violation of the NFA, one generally must have knowledge of the features of the firearm that make it a "firearm" under the statute, but one need not know that such a firearm is unregistered. As originally enacted, a person compelled by the NFA to disclose possession through registration could then be prosecuted if the registration reflected that the person was barred by other legal provisions from possessing firearms. However, the Supreme Court ruled in Haynes v. United States that this forced disclosure of potentially incriminating information violated the Fifth Amendment to the U.S. Constitution, which provides in part that no person "shall be compelled in any criminal case to be a witness against himself[.]" Haynes prompted Congress to amend the statute to make clear, among other things, that no information from registration records that are required to be submitted or retained by a natural person may be used as evidence against that person in a criminal proceeding for a violation of law occurring prior to or concurrently with the filing of the records, unless the prosecution relates to the furnishing of false information. As amended, the Court has rejected a subsequent challenge to the NFA on Fifth Amendment grounds. Gun Control Act of 1968 Congress passed the GCA in the wake of the assassinations of Dr. Martin Luther King Jr. and Senator Robert Kennedy to "keep firearms out of the hands of those not legally entitled to possess them because of age, criminal background, or incompetency and to assist law enforcement authorities in the states and their subdivisions in combating the increasing prevalence of crime in the United States." Among other things, the statute represented "a Congressional attempt to stem the traffic in dangerous weapons being used in an increasing number of crimes involving personal injury." As enacted, the GCA expanded the existing licensing scheme for the manufacture, importation, and sale of firearms and augmented a previously enacted prohibition on the possession of firearms by certain categories of persons (including felons and "mental defective[s]"). It also supplemented available criminal penalties and established procedures for obtaining relief from firearms disabilities. The GCA today is not a single statute but rather a complex statutory regime that has been supplemented regularly in the decades since its inception. Broadly speaking, the GCA, as amended, regulates the manufacture, transfer, and possession of firearms, extending to categories of weapons that fall outside the scope of the NFA. In general terms, the GCA sets forth who can—and cannot—sell, purchase, and possess firearms; how those sales and purchases may lawfully take place; what firearms may lawfully be possessed; and where firearm possession may be restricted. Major components of the GCA and related supplementing statutes are discussed below, focusing on (1) licensing requirements for firearm manufacturers and dealers, (2) prohibitions on firearm possession, (3) background checks for firearm purchases, (4) interstate firearm sales and transfers, and (5) penalties. Licensing of Firearm Manufacturers and Dealers The GCA regulates the manufacture and sale of firearms by requiring persons and organizations "engaged in the [firearms] business"—that is, importers, manufacturers, and dealers—to obtain a license from the federal government and pay an annual fee. These persons and entities are commonly known as Federal Firearm Licensees, or FFLs. Applicants must meet various requirements to become FFLs, including being at least 21 years of age, maintaining a premises from which to conduct business that meets safety standards, and certifying compliance with applicable state and local laws. Upon licensing, FFLs are subject to recordkeeping and reporting obligations with respect to the disposition of firearms to non-FFLs and must identify imported or manufactured firearms by means of a serial number, among other things. FFLs also must comply with background-check requirements and certain other transfer restrictions discussed in more detail below. An FFL who willfully violates any provision of the GCA or implementing regulations may, after notice and opportunity for hearing, have his or her license revoked. In this context, a "willful" violation means that the FFL purposefully disregarded or was plainly indifferent to his or her known legal obligation. A key question with respect to the GCA's licensing regime is what it means to be "engaged in the [firearms] business." Manufacturers are considered to be "engaged in the business" if they "devote time, attention, and labor to manufacturing firearms as a regular course of trade or business with the principal objective of livelihood and profit through the sale or distribution of firearms manufactured." And dealers are considered to be "engaged in the business" if they "devote[] time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms." A person is not "engaged in the business" of dealing in firearms, however, if that person "makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms." Accordingly, if a person falls within this definitional exclusion, he or she is not subject to the licensing regime and other FFL requirements, such as conducting background checks. There have been a number of court decisions shedding further light on what it means to be "engaged in the business" of dealing in firearms under the GCA, which is a fact-specific question that is dependent on the particular circumstances of the case. Even though the statute mandates that, to require a license, the dealer's principal objective in selling firearms must be livelihood and profit, courts have recognized that firearms sales need not be the person's sole source of income or main occupation. Instead, relevant factors include (1) the quantity and frequency of firearms sales; (2) sale location; (3) how the sales occurred; (4) the defendant's behavior before, during, and after the sales; (5) the type of firearms sold and prices charged; and (6) the defendant's intent at the time of the sales. At least one federal appellate court appears to apply a broad standard, requiring the government to prove only that the defendant holds himself out as a source of firearms. Furthermore, because the number of firearms sold is typically only one of many factors courts consider, convictions under the GCA for unlawfully dealing in firearms without a license have been sustained for as few as two or four firearms sales. Prohibitions on Firearm Possession The GCA regulates firearm possession in several ways. Principally, the statute establishes categories of persons who, because of risk-related characteristics, may not possess firearms. Possession of certain types of firearms, as well as possession of firearms in certain locations , also are restricted. Prohibited Persons Under the GCA, it is unlawful for a person who falls into at least one of nine categories to ship, transport, possess, or receive any firearms or ammunition. Specifically, a person is prohibited if he or she is a felon (i.e., someone who has been convicted in any court of a crime punishable by a term of imprisonment exceeding one year); is a fugitive from justice; is an unlawful user of, or is addicted to, any controlled substance; has been adjudicated as a "mental defective" or committed to a mental institution; has been admitted to the United States pursuant to a nonimmigrant visa or is an unlawfully present alien; has been dishonorably discharged from the Armed Forces; has renounced his or her U.S. citizenship; is subject to a court order preventing that person from harassing, stalking, or threatening an intimate partner (or that partner's child) or engaging in other conduct that would cause the partner to reasonably fear bodily injury to himself or herself or the child; or has been convicted in any court of a misdemeanor crime of domestic violence. A separate GCA provision prohibits anyone—not just FFLs—from selling or otherwise disposing of a firearm if that person knows or has "reasonable cause" to believe that the prospective recipient fits into any of the above categories. Additionally, a person under indictment for a crime punishable by a term of imprisonment exceeding one year is not barred by the GCA from possessing a firearm but may not receive, ship, or transport a firearm. In other words, a person who has been charged with a felony need not forfeit already-owned firearms, but he or she may not acquire new ones while the charges are pending. The GCA also places significant restrictions on the transfer to, and possession of, firearms by persons under the age of 18. Because a number of the terms in the individual prohibitions of Section 922(g) are not defined by statute, the contours of some of the prohibitions have had to be fleshed out by regulations and judicial construction. Some of the interpretative issues raised with respect to these prohibitions are discussed briefly below. " Possession " by a prohibited person . For possession of a firearm by a prohibited person to be unlawful, that possession may be "actual" or "constructive." Actual possession occurs when a person exercises physical control over a firearm. Constructive possession exists when a person has the power to exercise dominion and control over a firearm directly or through others. For example, actual possession may be found when, during a traffic stop, a police officer pats down the driver and discovers a firearm in the driver's waistband. Constructive possession, on the other hand, may be found when, during a traffic stop, an officer observes a firearm not on the driver's person but elsewhere inside the vehicle. Although proximity to a firearm, alone, is insufficient to establish constructive possession, the totality of the circumstances—including other evidence of a connection to the firearm, movements implying control, or the defendant's activities before and after the discovery—is used to establish constructive possession. Persons prohibited due to a conviction for a felony or misdemeanor crime of domestic violence "in any court . " The prohibitions on possession of a firearm by a person convicted of a felony or a misdemeanor crime of domestic violence "in any court," which are among the most frequently enforced prohibitions in the statute, raise the question of what constitutes "any court." Initially, federal courts took an expansive view of the term. For instance, in holding that a military court-martial is a court within the meaning of the GCA, a 1997 opinion from the Seventh Circuit Court of Appeals used the dictionary definition of the word any : Looking to section 922(g)(1), we find nothing that defines or limits the term "court," only a requirement that a conviction have been "in any court" in the course of prohibiting possession of firearms by a felon. Certainly "any court" includes a military court, the adjective "any" expanding the term "court" to include "one or some indiscriminately of whatever kind"; "one that is selected without restriction or limitation of choice"; or "all." Additionally, some federal courts had concluded that a conviction in "any court," for the purposes of determining a firearm disability, included convictions in foreign courts. But in resolving a circuit split over this issue, the Supreme Court interpreted the phrase to cover only domestic convictions in its 2005 ruling Small v. United States . In a 5-4 decision, the Court adopted a more limited interpretation of the GCA's reference to "any" court than employed by the Seventh Circuit and other lower courts. In reaching its conclusion, the Court applied the legal presumption that "Congress ordinarily intends its statutes to have domestic, not extraterritorial application." The Court ruled that this presumption against extraterritorial application was particularly relevant to the GCA, given the many potential differences between foreign and domestic convictions and "the potential unfairness of preventing those with inapt foreign convictions from possessing guns." The Court additionally reasoned that nothing in the GCA's text or legislative history suggests that the act was intended to allow foreign convictions to give rise to a firearms disability. Although the Supreme Court's opinion in Small abrogated lower court rulings holding that foreign convictions serve as a predicate offense for the GCA's firearm ban for felons, the opinion did not directly disturb earlier rulings holding that U.S. military convictions count for the ban. And a conviction by a court-martial does not appear to raise any of the concerns mentioned by the Supreme Court in Small about foreign convictions. Federal courts have not found tension with Small when analyzing the related issue of whether a court-martial conviction is encompassed by the term any court in statutes that provide heightened penalties for certain repeat offenders. For instance, the Eighth Circuit opined that courts-martial proceedings maintain a connection to the U.S. government, given that they were created by Congress and are governed by federal statute. And the Fourth Circuit reasoned that, although there are some differences between courts-martial and civilian courts, they do not "rise to the level of contrasts between domestic and foreign courts that Small highlighted." Accordingly, a conviction by a court-martial for a crime punishable by a term exceeding one year or a misdemeanor crime of domestic violence likely would qualify as a conviction in "any court" for the purposes of the GCA's firearm disqualifiers. Prohibition applicable to nonimmigrant visa holders . With respect to the prohibition for aliens admitted to the United States pursuant to nonimmigrant visas, the terms of the provision do not explicitly prohibit firearm possession for aliens otherwise admitted (e.g., those admitted on an immigrant visa, through the Visa Waiver Program, as refugees, or without a visa for brief visits for business or tourism by Canadian citizens and certain residents of the Caribbean islands). Initially, ATF interpreted the GCA provision barring firearm possession for aliens admitted on nonimmigrant visas as encompassing all foreign nationals in nonimmigrant status in the United States, including those categories of nonimmigrant aliens who do not need a visa to enter the United States. ATF reasoned that Congress intended for the prohibition to cover all nonimmigrant aliens, given that a nonimmigrant visa is needed for fewer than 50% of nonimmigrants entering the United States and merely "facilitates travel" rather than conferring nonimmigrant status. However, the DOJ's Office of Legal Counsel (OLC) overruled ATF's interpretation in 2011. "The text is clear," OLC said, "the provision applies only to nonimmigrant aliens who must have visas to be admitted , not to all aliens with nonimmigrant status." Additionally, OLC rejected ATF's contention that "applying the [firearm] prohibit[ion] to only a particular subset of nonimmigrants would produce 'irrational' results." Rather, OLC opined that Congress could have rationally concluded that nonimmigrants eligible for admission without a visa are less of a public safety risk or that nonimmigrants on brief visits to the United States may be less likely to purchase a firearm. In response, ATF issued a final rule imposing the firearm prohibition on only those nonimmigrants admitted to the United States with a nonimmigrant visa. ATF further announced that "[n]onimmigrant aliens lawfully admitted to the United States without a visa, pursuant either to the Visa Waiver Program or other exemptions from visa requirements, will not be prohibited from … possessing firearms." Prohibition applicable to those who unlawfully use or are addicted to a controlled substance . The prohibition on firearm possession by those who unlawfully use or are addicted to controlled substances also raises the question of what it means to be an "unlawful user" or "addicted." Regulations define the terms as including those who have "lost the power of self-control with reference to the use of [a] controlled substance," as well as "current user[s]" of a controlled substance "in a manner other than as prescribed by a licensed physician." The regulations make clear that one need not be using a controlled substance "at the precise time" a firearm is sought so long as use has occurred "recently enough to indicate that the individual is actively engaged in such conduct." Prosecutions and court decisions appear to focus on the term unlawful user , which establishes a lower disability threshold than "addict[]." Cases interpreting the term "typically discuss two concepts: contemporaneousness and regularity," requiring that there be some "pattern" and "recency" of controlled-substance use. For this reason, the prohibition appears to be temporary—that is, one may "regain his right to possess a firearm simply by ending his drug abuse." Prohibition applicable to a person "adjudicated as a mental defective" or "committed to a mental institutio n." The GCA is likewise silent as to the meaning of the terms adjudicated as a mental defective and committed to a mental institution for purposes of that prohibition. The term adjudicated as a mental defective has been interpreted in federal regulations, however, as: (a) A determination by a court, board, commission, or other lawful authority that a person, as a result of marked subnormal intelligence, or mental illness, incompetency, condition, or disease: (1) Is a danger to himself or to others; or (2) Lacks the capacity to manage his own affairs. (b) The term shall include—(1) a finding of insanity by a court in a criminal case, and (2) those persons found incompetent to stand trial or found not guilty by lack of mental responsibility [under the Uniform Code of Military Justice]. Prior to the issuance of the regulatory definition, at least one court had construed the term mental defective narrowly, encompassing only those who have "never possessed a normal degree of intellectual capacity" and excluding persons with "faculties which were originally normal [but which] have been impaired by mental disease." The term committed to a mental institution has also been interpreted in regulations as including a "formal commitment" for "mental defectiveness," mental illness, or "other reasons, such as drug use" by a "court, board, commission, or other lawful authority" that is "involuntary." Whether a person has been formally and involuntarily committed appears to be fact-specific and dependent on state law. Prohibited Firearms Federal law generally does not bar the possession or sale of particular types of firearms, with two major caveats currently in effect. First, the Firearm Protection Owners' Act of 1986 amended the GCA to prohibit the transfer and possession of machineguns. This prohibition does not apply, however, to (1) the transfer to or from, or possession by (or under the authority of) federal or state authorities; and (2) the transfer or possession of a machinegun lawfully possessed before the effective date of the act (May 19, 1986). In response to the 2017 mass shooting in Las Vegas, ATF recently amended the regulatory definition of machinegun for purposes of the NFA and GCA to include bump-stock-type devices, i.e., devices that "allow a shooter of a semiautomatic firearm to initiate a continuous firing cycle with a single pull of the trigger." The amended definition is effective as of March 26, 2019, rendering possession of bump-stock-type devices illegal (subject to exceptions) as of that date pursuant to the machinegun prohibition. Second, the Undetectable Firearms Act of 1988 (UFA) banned the manufacture, importation, possession, transfer, or receipt of firearms that are undetectable by x-ray machines or metal detectors at security checkpoints. The UFA has recently come under renewed scrutiny amid litigation over the dissemination of 3D-printed firearm designs that potentially could undermine the statute's requirements. Though most other types of firearms are lawful, possession of particular firearms may be prohibited based on external factors or the status of the possessor. For instance, it is unlawful to knowingly receive, possess, conceal, store, barter, sell, dispose of, or transport in interstate or foreign commerce any stolen firearm or stolen ammunition. Receipt, possession, and transportation of firearms that have had the importer's or manufacturer's serial number removed or altered are likewise prohibited. Additionally, juveniles—that is, persons under 18 years of age—are barred from knowingly possessing handguns and handgun ammunition, and others may not knowingly transfer such items to them. However, exception is made for, among other things, temporary transfers in the course of employment, ranching or farming activities or for target practice, hunting, or a safety course; possession in the line of duty by juvenile members of the Armed Forces or national guard; transfers of title by inheritance; and possession in defense of the juvenile or another against an intruder into certain residences. Beyond firearms themselves, the GCA prohibits any person from manufacturing or importing armor-piercing ammunition and any manufacturer or importer from selling or delivering such ammunition unless (1) the ammunition is for the use of the U.S. government, a state, or a political subdivision of a state; (2) the ammunition is to be exported; or (3) the ammunition is to be tested or used for experimentation as authorized by the Attorney General. A person who possesses armor-piercing ammunition with a firearm "during and in relation to the commission of a crime of violence or drug trafficking crime" is also subject to separate criminal sentencing provisions. Finally, a person who has been convicted of a felony crime of violence is barred from purchasing, owning, or possessing body armor unless the person has obtained prior written certification from his or her employer that the body armor is needed "for the safe performance of lawful business activity" and the armor's use is limited to the course of such performance. Prohibited Places The GCA prohibits the possession of firearms in certain locations. For instance, subject to exceptions, firearms may not be possessed in a "Federal facility," defined as a building (or part of a building) owned or leased by the federal government where federal employees are regularly present for performing their official employment. Additionally, loaded firearms are largely banned on federal land managed by the Army Corps of Engineers with exceptions for law enforcement, certain hunting and fishing activities, use at authorized shooting ranges, and with permission from the district commander. Firearms may generally be carried on most other kinds of federal lands, however, so long as the carrier is not otherwise prohibited by federal law from possessing a firearm and is complying with relevant local firearm laws. The Gun-Free School Zones Act (GFSZA) also amended the GCA to prohibit the knowing possession or discharge of a firearm in a school zone subject to exceptions for law enforcement and possession or discharge on private property not part of school grounds, among other things. As originally enacted, the GFSZA prohibited possession or discharge of any firearm in a school zone. The Supreme Court ruled in United States v. Lopez , however, that such a prohibition exceeded Congress's constitutional authority under the Commerce Clause. In response, Congress amended the statute in 1996 to make clear that it applies only to firearms that have "moved in or that otherwise affect[] interstate or foreign commerce." Though the Supreme Court has not reconsidered the amended GFSZA, lower courts have generally upheld it on the basis of the added textual link to commerce. Exceptions and Relief from Disability Several exceptions are set out in 18 U.S.C. § 925 to the firearm possession and transfer restrictions found elsewhere in the GCA. These exceptions primarily relate to firearms intended for the use of federal, state, or local governments or active duty military personnel. But Section 925 also authorizes a person who is barred by the GCA from possessing, transporting, or receiving firearms or ammunition to "make application to the Attorney General for relief" from the disability. The Attorney General has discretion to grant relief if the applicant establishes "to his satisfaction" that relief would not be contrary to the public interest and that the "circumstances regarding the disability, and the applicant's record and reputation, are such that the applicant will not be likely to act in a manner dangerous to public safety." Review of the Attorney General's decision is available in federal district court. This relief-from-disability process has been essentially defunct since 1992, however, as Congress has annually included a provision in ATF appropriations measures prohibiting the expenditure of funds to act on petitions by individuals. Nevertheless, the NICS Improvement Amendments Act of 2007 (NIAA) established, as relevant here, alternative mechanisms for obtaining relief from one of the GCA's firearm disabilities: the disability based on adjudication as a "mental defective" or commitment to a mental institution. Under NIAA, federal departments or agencies making determinations pertinent to that disability—for example, the Department of Veterans Affairs (VA) —must establish programs permitting affected persons to apply for relief. Applications must be acted on within one year, and judicial review is available. Further, the statute encourages states to create similar programs through conditional grants. If an application for relief is granted under one of these programs, the adjudication or commitment "is deemed not to have occurred" for purposes of the GCA, meaning that the firearm prohibition no longer applies. As of December 2017, some three dozen states had enacted qualifying relief programs. Background Checks for Firearm Purchases Overview The Brady Act requires FFLs—but not private parties who make occasional firearm sales from personal collections or as a hobby—to conduct background checks on prospective firearm purchasers who are not licensed dealers themselves in order to ensure that the purchasers are not prohibited from acquiring firearms under federal or state law. To implement the Brady Act, the FBI created the National Instant Criminal Background Check System (NICS), which launched in 1998. Between the enactment of the Brady Act and the launch of NICS, a set of interim provisions required background checks to be conducted through "the chief law enforcement officer of the place of residence of the transferee," but the Supreme Court struck down those provisions as an unconstitutional usurpation of state executive prerogatives. Today, the NICS background check is completed either by a state "point of contact" (in states that have voluntarily agreed to provide that service) or, otherwise, by the FBI. Through NICS, FFLs can determine whether a prospective firearm purchaser is disqualified from receiving a firearm. NICS is comprised of three FBI-maintained databases The National Crime Information Center Database (NCIC) contains crime data related to persons and property, including persons subject to protective orders, fugitive records, and aliens who have been deported or are deportable because of committing certain crimes. The Interstate Identification Index System (III) contains criminal history information for persons who have been arrested or indicted for any federal or state felony or serious misdemeanor. The NICS Index was created solely for NICS checks and is a catchall index housing records that do not fit under NCIC or III, including mental health and immigration records. Because the three NICS databases rely on record submissions from multiple federal entities and voluntary submissions from individual states, they are not comprehensive catalogues of the records that could identify a person as being prohibited from possessing or purchasing a firearm. As discussed below, Congress has sought on multiple occasions to improve the processes by which records are collected and to make the databases more comprehensive. Generally, the NICS check will quickly tell the dealer whether the sale may or may not proceed, or if it must be delayed for further investigation. If a dealer receives a response that the sale must be delayed, and the NICS check does not further alert the dealer as to whether the prospective purchaser is disqualified within three business days, the sale may proceed at the dealer's discretion. However, the FFL must still verify the transferee's identity by examining a valid identification document. The extent to which NICS examiners continue to investigate delayed requests after the three-day period is unclear, but if an FFL receives a "denied" response after the third day and after the firearm has already been transferred, the FFL "should notify" the NICS Section of ATF that the transfer was completed. An FFL who receives a NICS response denying a transfer will not see the reason for the denial, but the prospective transferee may request the reason from the denying agency (either the FBI or the state or local agency in a point-of-contact state). The denying agency must provide the reason or reasons, in writing, within five business days of receiving the request. Prospective transferees who are denied firearms on the basis of a NICS background check have multiple avenues to challenge the denial. First, the prospective transferee may challenge the accuracy of a record on which the denial was based or assert that his or her right to possess a firearm has been restored by appealing to the denying agency. Second, if that agency cannot resolve the appeal, the prospective transferee may apply for correction of the record directly to the agency that originated the record. If a record is corrected as the result of an appeal, the prospective transferee and relevant agencies are to be notified, and the record is to be corrected in NICS. At this point, the contested firearm transfer may go forward if there are no other disqualifying records, though the FFL will be required to query NICS again if too much time has elapsed since the initial background check. Finally, as an alternative to the agency appeals process, a prospective firearm transferee may contest the accuracy or validity of a disqualifying record in court by bringing an action against the United States or the relevant state or political subdivision, as applicable. Although NICS records of approved firearms transfers containing transferees' identifying information are destroyed within 24 hours, transferees who may be subject to repeated, erroneous denials because of similarities in name or identifying information to prohibited persons may consent to the FBI's retention of their personal information in a "Voluntary Appeal File" for use in preventing "the future erroneous denial or extended delay by the NICS of a firearm transfer." NICS Improvement Amendments Act of 2007 (NIAA) In an attempt to improve access to records concerning persons prohibited from possessing or receiving firearms because of mental illness, restraining orders, and misdemeanor domestic violence convictions, Congress passed the NIAA in early 2008. With respect to federal records, the statute (among other things) imposes a requirement that federal departments and agencies provide information in records pertaining to prohibited persons on a quarterly basis. With respect to state records, NIAA authorizes monetary incentives and penalties tied to submitting records to NICS. First, a state that provides at least 90% of its relevant records is eligible under NIAA for a waiver of a 10% matching requirement connected to an existing state grant program for upgrading criminal history and criminal justice record systems (among other things). To remain eligible for the waiver, a state must biannually certify that at least 90% of records have been made electronically available to the Attorney General. As another incentive, the statute directs the Attorney General to withhold, subject to waiver, up to 5% of funds available from the Edward Byrne Memorial Justice Assistance Grant Program (which provides federal funds for local law enforcement initiatives) if a state provides less than 90% of its available prohibiting records. NIAA also establishes additional grant programs that provide states with money to establish or update information and identification technologies for firearms eligibility determinations, automate record systems, and transmit to NICS the targeted prohibiting records. Fix NICS Act of 2018 The recently enacted Fix NICS Act (Fix NICS) aims to further increase federal and state submission of prohibiting records to NICS through additional incentive and accountability measures. At the federal level, departments and agencies must semiannually certify whether they are submitting all prohibiting records on at least a quarterly basis. Federal departments and agencies also must each create an "implementation plan" within one year that is designed to "ensure maximum coordination and automated reporting or making available of records to the Attorney General," and "the verification of the accuracy of those records," with annual benchmarks. The Attorney General is to publish and semiannually submit to Congress the names of departments and agencies that fail to submit the required certification, fail to certify compliance with the reporting obligation, fail to create an implementation plan, or fail to obtain substantial compliance with the implementation plan. Political appointees within a federal department or agency that fail to either certify compliance or substantially comply with an implementation plan will be ineligible for bonus pay. At the state level, Fix NICS reauthorizes some of the grant programs established or utilized by NIAA and ties monetary incentives and preferences under those programs to state creation and substantial compliance with implementation plans like those required of federal departments and agencies. Names of states that do not achieve substantial compliance with their implementation plans are to be published by the Attorney General, while those states determined to be in substantial compliance will receive affirmative preference in Bureau of Justice Assistance discretionary grant applications. Interstate Firearm Sales and Transfers The GCA strictly limits the interstate transfer of firearms to non-FFLs. This limitation takes several forms. First, a non-FFL is barred from directly selling or transferring any firearm to any person (other than an FFL) whom the transferor knows or has reason to believe is not a resident of the state in which the transferor resides. Second, FFLs are prohibited from selling or shipping firearms directly to non-FFLs in other states, but FFLs may make in-person, over-the-counter sales of long guns (i.e., shotguns or rifles) to qualified individuals who are out-of-state residents so long as the sales fully comply with the legal conditions of both states. Handguns may be sold only to persons who are residents of the state in which the FFL's premises are located. Non-FFLs who lawfully purchase long guns from out-of-state dealers may transport those firearms back into their states of residence, but such persons are otherwise prohibited from directly transporting into or receiving in their states of residence any firearms purchased or obtained outside the state. Despite the substantial restrictions on interstate firearm sales, federal law ensures that lawful firearm owners may transport their weapons between jurisdictions where it is legal to "possess and carry" them without incurring criminal liability under inconsistent state or local laws so long as the firearms are transported in a specified manner. Current or retired law enforcement officers who meet certain requirements are also entitled to carry concealed firearms throughout the United States regardless of restrictions under state or local law. Penalties Violations of many of the prohibitions contained in the GCA and supplementing statutes are punishable as felonies, subjecting violators to criminal fines and statutory imprisonment ranges of varying lengths. Increased penalties are also tied to transporting or receiving firearms in interstate or foreign commerce with intent to use the firearms (or with knowledge they will be used) to commit separate felony crimes, as well as using, carrying, or possessing firearms in connection with "any crime of violence or drug trafficking crime." A person thrice convicted of a "violent felony or a serious drug offense," committed on different occasions, who subsequently possesses or receives a firearm unlawfully is likewise subject to a heightened mandatory minimum sentence of imprisonment. However, the Supreme Court has partially struck down as unconstitutionally vague the definition of the term violent felony , which includes (among other things) any offense involving "conduct that presents a serious potential risk of physical injury to another." In response, past Congresses have considered legislation that would link the heightened penalty instead to prior "serious felony" convictions, with the term serious felony being tied to the authorized or imposed sentence of imprisonment. In a 1986 amendment, FOPA added an explicit mens rea , or intent, requirement to the GCA's penalty provisions. Accordingly, the GCA now imposes its criminal penalties for either knowing or willful violations, depending on the provision. A violation is made knowingly when the person knows the facts that establish the offense. Under this standard, the government need not prove that the defendant knew his behavior was illegal. This is so, according to the Supreme Court, because of the "background presumption that every citizen knows the law," thus making it "unnecessary to adduce specific evidence to prove that 'an evil-meaning mind' directed the 'evil-doing hand.'" Further, to prosecute unlawful possession of a firearm under 18 U.S.C. § 922(g), the federal courts of appeals have consistently concluded that the government must prove only that the defendant knowingly possessed a firearm but not that he had knowledge of the circumstances disqualifying him from possessing a firearm. For example, a prosecutor may prove a knowing violation of 18 U.S.C. § 922(g)(1)—the GCA provision that bars felons from possessing firearms—by establishing only that the defendant knew that he possessed a firearm but not that he knew of his status as a felon at the time he possessed the firearm. However, in January 2019, the Supreme Court granted certiorari in Rehaif v. United States in order to determine whether this interpretation of the GCA is correct or whether the "knowing" requirement must apply to both possession and disqualifying status. Argument in the case is set for April 23, 2019. For willful violations, there is a heightened intent requirement: A violation is willful when the actor knows that the conduct is unlawful. However, for the act to be willful, the actor need not have specific knowledge of provisions of the law he is breaking. Instead, the person must act only "with knowledge that his conduct [is] unlawful." Depending on proof of the requisite mens rea , firearms or ammunition involved in certain violations of the GCA or other federal criminal laws are subject to seizure and forfeiture. Constitutional Considerations Numerous constitutional considerations may inform congressional proposals to modify the current framework for regulating firearms sales and possession. Although Congress has broad constitutional authority to regulate firearms, any firearm measure must be rooted in one of Congress's enumerated powers. In enacting firearms laws, Congress has typically invoked its tax, commerce, and spending powers. Still, when exercising those enumerated powers, Congress must be mindful of other constitutional restraints, such as those flowing from the Second Amendment, the Fifth Amendment's Due Process Clause, and principles of federalism. This section provides an overview of the primary powers Congress has invoked to enact firearms measures and then addresses the constitutional constraints that independently could limit Congress's ability to regulate firearms. Constitutional Source of Authority to Enact Firearms Measures Tax Power Article I of the Constitution, which enumerates powers of Congress, declares that "[t]he Congress shall have Power To lay and collect Taxes." This broad power enables Congress to tax many activities that it could not directly regulate. Still, "[e]very tax is in some measure regulatory" by creating "an economic impediment to the activity taxed as compared with others not taxed." Because a tax can shape behavior, when imposing a tax Congress may be motivated by an objective other than raising revenue, like limiting the supply of certain firearms. And provisions of a tax measure that go beyond the actual collection of the tax, such as penalty provisions, are considered lawful so long as they are reasonably related to the exercise of Congress's tax power and not "extraneous to any tax need." Congress's tax power is not without limitation, however. While the Supreme Court often will "decline[] to closely examine the regulatory motive or effect of revenue-raising measures," the Court has indicated that it will step in when a tax measure is "so punitive" that it "loses its character as [a tax] and becomes a mere penalty with the characteristics of regulation and punishment." Congress invoked its tax power when enacting the NFA. Within a few years of its enactment, in 1937, the Supreme Court upheld the NFA as a lawful exercise of Congress's tax power in Sonzinsky v. United States . Notwithstanding the NFA's deterrent purpose, the Court opined that "a tax is not any the less a tax because it has a regulatory affect." The Court further concluded that the NFA's registration requirements were "obviously supportable as in aid of a revenue purpose," and, the Court added, the tax produced "some revenue." More recently, in 2018 the Tenth Circuit, relying on Sonzinsky , upheld the NFA's taxing and registration scheme as a valid exercise of Congress's tax power in a challenge to the NFA's regulation of firearm silencers. The Tenth Circuit rejected the defendants' argument that the NFA, in modern times, is "far more of a gun- control measure than a gun- tax measure." The defendants had principally argued that, because the NFA taxes collect no net revenue, "the NFA's taxing purpose disappear[ed], leaving only its regulatory effect," thus rendering the tax unconstitutional. But the Tenth Circuit declined to create a heightened constitutional requirement for Congress's tax power that would require a tax to produce net revenue, pointing to the Supreme Court's continued emphasis, since Sonzinsky , on whether a tax measure collects "some" gross revenue, no matter how small. Commerce Clause Power The Constitution grants Congress the power "to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." The Commerce Clause, as interpreted by the Supreme Court, authorizes Congress to regulate three categories of activities related to interstate commerce: (1) "channels" of interstate commerce, like highways and hotels; (2) "instrumentalities of interstate commerce, or persons or things in interstate commerce," such as motor vehicles and goods that are shipped; and (3) "activities that substantially affect interstate commerce," which include intrastate activities (such as robbery) "that might, through repetition elsewhere," substantially affect interstate commerce. Congress has relied on the Commerce Clause as a constitutional basis for GCA provisions restricting the manufacture, import, sale, transfer, and possession of firearms, and the Supreme Court has reviewed a number of these regulations. Early cases mainly involved statutory interpretation, centering on what conduct the statutory prohibitions reached. Only the most recent case— United States v. Lopez —directly addressed the scope of Congress's Commerce Clause power to regulate firearms. For example, in the 1971 ruling United States v. Bass , the Supreme Court analyzed the scope of a law enacted as part of Title VII of the Omnibus Crime Control and Safe Streets Act of 1968, which made it a federal crime for a felon to "receive[], possess[], or transport[] in commerce o r affecting commerce ... any firearm." (A similar provision is found in the current version of the GCA. ) In Bass , the Court held that the language "in commerce or affecting commerce" applied to all three listed activities—receiving, possessing, and transporting—and not just the last one. In resolving the textual ambiguity this way, the Court in part relied on federalism principles (discussed in more detail infra ), reasoning that if the statute had reached "mere possession," wholly untethered to interstate commerce, the provision would have "dramatically intrud[ed] upon traditional state criminal jurisdiction." In light of the Court's interpretation of the statute, it declined to opine on whether the Commerce Clause could provide a basis for Congress to regulate the "mere possession" of a firearm. A few years later, in Scarborough v. United States , the Supreme Court reviewed the same provision to determine when the firearm must travel in interstate commerce for the possession ban to apply to felons. The Court ultimately concluded that the criminal provision applied to any felon who possessed a firearm that had "at some time" traveled in interstate commerce. In rejecting the defendant's contention that the possession itself must be contemporaneous with interstate commerce, the Court pointed to contrary legislative intent. In particular, the Court concluded that the legislative history "supports the view that Congress sought to rule broadly to keep guns out of the hands of those who have demonstrated that 'they may not be trusted to possess a firearm without becoming a threat to society,'" without "any concern with either the movement of the gun or the possessor or with the time of acquisition." Similarly, in Barrett v. United States , the Supreme Court analyzed the scope of the interstate commerce nexus in a GCA provision that made it unlawful for certain categories of persons, such as felons, "to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce." The Court concluded that the term to receive applies to the intrastate acquisition of a firearm if that firearm previously had been transported in interstate commerce (e.g., from the manufacturer to the distributor to the dealer). The Court reasoned that the language "has been" shipped or transported in interstate commerce "denot[es] an act that has been completed" and thus applies "to a firearm that already has completed its interstate journey and has come to rest in the dealer's showcase at the time of its purchase and receipt by the felon." Finally, the Court commented that interpreting the provision to apply only to interstate receipts "would remove from the statute the most usual transaction, namely, the felon's purchase or receipt from his local dealer," and that interpretation, in the Court's view, would contravene Congress's "concern with keeping firearms out of the hands of categories of potentially irresponsible persons." Most recently, in its 1995 opinion United States v. Lopez , the Supreme Court reviewed—and invalidated—the GFSZA, which criminalized the possession of a firearm in a school zone but contained no explicit nexus to interstate commerce. The government had argued that firearm possession in a school zone may cause violent crime, which could affect the national economy by (1) handicapping the educational process, which would generate a "less productive citizenry," and (2) spawning substantial financial losses "spread throughout the population" through insurance costs and the "reduce[d] willingness of individuals to travel to areas within the country that are perceived to be unsafe." The Court rejected these arguments, opining that if the Commerce Clause could reach such activity, it essentially would authorize a federal police power, a constitutional power the Framers declined to give to the federal government. Without finding a substantial effect on interstate commerce, the Court further concluded that the law exceeded Congress's power under the Commerce Clause because "[t]he Act neither regulate[d] a commercial activity nor contain[ed] a requirement that the possession be connected in any way to interstate commerce." Congress subsequently amended the provision to provide expressly that, for the possession of a firearm in a school zone to be a federal crime, the government must show that the firearm "moved in or ... otherwise affects interstate or foreign commerce." This amended version of the statute has been upheld by lower courts against constitutional challenges. Spending Power Article I grants Congress broad authority to enact legislation for the "general welfare" through its spending power. When invoking this power, Congress can place conditions on funds distributed to the states that require those accepting the funds to take certain actions that Congress otherwise could not directly compel the states to perform. Still, the Supreme Court has articulated several limitations on Congress's power to attach conditions to the receipt of federal funds—namely, any condition must be written unambiguously, so that state lawmakers understand the full consequences of accepting or declining funds; must be germane to the federal interest in the particular program to which the money is directed; cannot induce the recipient states to engage in an activity that would independently violate the Constitution; and cannot be "so coercive as to pass the point at which pressure turns into compulsion." Arguably, the most difficult limitation to glean is whether a spending condition is unduly coercive. Two Supreme Court opinions exploring the bounds within which Congress must stay offer some guidance. First, in South Dakota v. Dole , the Supreme Court upheld a 1984 congressional measure designed to encourage states to raise the minimum drinking age to 21. To achieve this result, Congress directed the Secretary of Transportation to withhold 5% of certain federal highway grant funds from states with a lower minimum drinking age. In upholding the spending condition, the Court concluded that a state stood to lose only "a relatively small percentage of certain federal highway funds," which the Court further described as "relatively mild encouragement." Second, and more recently, in National Federation of Independent Business v. Sebelius ( NFIB ), the Supreme Court struck down a provision of the Patient Protection and Affordable Care Act of 2010 (ACA) that purported to withhold Medicaid funding from states that did not expand their Medicaid programs. Unlike in Dole , in NFIB the Court concluded that the financial condition placed on the states in the ACA (withholding all federal Medicaid funding, which, according to the Court, typically totals about 20% of a state's entire budget) was akin to "a gun to the head" and thus unlawfully coercive. Constitutional Constraints on Congress's Ability to Regulate Firearms The Second Amendment The Second Amendment states that "[a] well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear arms, shall not be infringed." In District of Columbia v. Heller , the Supreme Court held that the Second Amendment guarantees an individual right to possess firearms for historically lawful purposes. Since Heller , the Supreme Court has substantively opined on the Second Amendment one other time, holding in McDonald v. City of Chicago that the Second Amendment right is incorporated through the Fourteenth Amendment to apply to the states. During the upcoming October 2019 term, the Supreme Court is scheduled to review a Second Amendment challenge to a New York City firearm licensing provision in New York Rifle & Pistol Association v. City of New York . That ruling may provide further guidance for Congress in crafting legislation that comports with the Second Amendment. In Heller the Supreme Court did not elaborate on the full extent of the Second Amendment right. But a number of takeaways may be distilled from the Court's opinion. First, the Court concluded that the Second Amendment codified a pre-existing individual right to keep and bear arms for lawful purposes, such as self-defense and hunting, unrelated to militia activities. Second, the Court singled out the handgun as the weapon that "the American people have considered ... to be the quintessential self-defense weapon." But the Court clarified that, "[l]ike most rights, the right secured by the Second Amendment is not unlimited" and further announced that "nothing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of firearms," among other "presumptively lawful" regulations. Additionally, as for the kind of weapons that may obtain Second Amendment protection, the Court opined that the Second Amendment's coverage is limited to weapons "in common use at the time" that the reviewing court is examining a particular firearm; the conclusion, the Court added, "is fairly supported by the historical tradition of prohibiting the carrying of dangerous and unusual weapons." Since Heller , the circuit courts have largely been applying a two-step inquiry, drawn from the discussion in Heller , to determine whether a particular law is constitutional. First, courts ask whether the challenged law burdens conduct protected by the Second Amendment. If so, courts next ask whether, under some type of means-end scrutiny, the law is constitutional under that standard of review. To date, no federal appellate court has invalidated on Second Amendment grounds any provision of the GCA or NFA. Nonetheless, when considering proposals to expand federal firearm restrictions, Congress may want to consider whether the expansion would fit within the parameters established in Heller and subsequent jurisprudence as permissible under the Second Amendment. Due Process The Due Process Clause of the Fifth Amendment provides that "[n]o person shall be ... deprived of life, liberty, or property, without due process of law." "The touchstone of due process is protection of the individual against arbitrary action of government." The Due Process Clause has a substantive and procedural component, described below, and may become relevant in the context on firearms regulation if the government deprives a person of constitutionally protected liberty interest (e.g., a right to keep and bear arms under the Second Amendment) or property interest (e.g., a firearm license). The substantive component of the Due Process Clause prohibits "the exercise of power without any reasonable justification in the service of a legitimate governmental objective." As relevant here, a substantive due process violation may occur when a legislative measure infringes on a fundamental right. But "[w]here a particular [constitutional] Amendment provides an explicit textual source of constitutional protection against a particular sort of government behavior," like the Second Amendment, "that Amendment, not the more generalized notion of 'substantive due process,' must be the guide for analyzing" such claims. Accordingly, it appears that in the event the government deprives a person of the right to keep and bear arms—the potential result of an overly stringent federal firearms measure—the touchtone of a reviewing court's constitutional analysis would be the Second Amendment rather than the substantive component of the Due Process Clause. Still, the Due Process Clause also requires that the government afford persons with adequate procedures when depriving them of a constitutionally protected interest. This "[p]rocedural due process imposes constraints on governmental decisions which deprive individuals of 'liberty' or 'property' interests within the meaning of the Due Process Clause of the Fifth ... Amendment." Examining procedural due process involves a two-step inquiry. First, a court asks whether the government has interfered with a protected liberty or property interest. In the context of federal firearms regulations, at least two constitutionally protected interests could be affected: (1) the fundamental liberty interest in a person's right to keep and bear arms, granted by the Second Amendment (i.e., the right to purchase and possess firearms for lawful purposes), and (2) the property interest in a government-issued firearms license (e.g., if the person is an FFL whose license is revoked by the government). If the government has deprived a person of one of these constitutionally protected interests, courts ask, second, whether the government, in deciding whether to make the deprivation, used constitutionally sufficient procedures. Adequate due process generally requires notice of the deprivation and an opportunity to be heard before a neutral party. This constitutional requirement, the Supreme Court says, is meant to be "flexible and calls for such procedural protections as the particular situation demands." Accordingly, the appropriate process due—i.e., the type of notice, the manner and time of a hearing regarding the deprivation, and the identity of the decisionmaker—will vary based on the specific circumstances at hand. To determine what procedures should be applied to a deprivation of a constitutionally protected interest, courts apply the balancing test outlined in Mathews v. Eldridge. This test requires courts to weigh three factors: (1) the private interest affected; (2) the risk of an erroneous deprivation of that interest through the procedures used; and (3) the government's interest. Accordingly, although substantive due process concerns surrounding firearms measures may fuse with the Second Amendment concerns identified above, the procedural component of the Due Process Clause raises independent considerations for Congress. For instance, procedural due process may be relevant to congressional consideration of firearm measures that may result in the revocation or inability to obtain a license to own, purchase, or sell a firearm. Accordingly, when considering a firearms licensing measure, Congress may want to keep in mind the standards and procedures for obtaining and revoking such a license to ensure that due process is supplied. Federalism The Constitution establishes a system of dual sovereignty in which "both the National and State Government have elements of sovereignty the other is bound to respect." For instance, the Constitution explicitly grants certain legislative powers to Congress in Article I and then reserves all other legislative powers for the states to exercise. Both the federal government and the states regulate firearms, and two federalism principles particularly inform this shared policymaking role: the preemption and anti-commandeering doctrines. The preemption doctrine derives from the Constitution's Supremacy Clause, which declares that "the Laws of the United States ... shall be the supreme Law of the Land." Congress, through legislation lawfully enacted pursuant to an independent source of constitutional authority, may "preempt" (i.e., invalidate) state law. The Supreme Court has articulated that the doctrine operates as follows: "Congress enacts a law that imposes restrictions or confers rights on private actors; a state law confers or imposes restrictions that conflict with the federal law; and therefore the federal law takes precedence and the state law is preempted." In other words, whenever states and the federal government regulate in the same area, like firearms, and the state and federal measures conflict, the conflict is to be resolved in favor of the federal government. Notwithstanding the supremacy of federal law, the anti-commandeering doctrine bars the federal government from directly regulating the states. The doctrine is "the expression of a fundamental structural decision incorporated into the Constitution" to limit Congress's authority, including "to withhold from Congress the power to issue orders directly to the States." Accordingly, Congress cannot direct the states to enact a particular measure, nor can it conscript state employees, or those of its political subdivisions, to enforce a federal regulatory program. Similarly, the federal government cannot prohibit a state from enacting new laws. As a result, the federal government cannot require the states to enforce a particular federal firearm regulatory regime. In Printz v. United States , for example, the Supreme Court struck down under the anti-commandeering doctrine certain interim provisions of the Brady Act. The relevant provisions required state and local law enforcement officers to conduct background checks on prospective handgun purchasers. The Court held that a federal mandate requiring state and local law enforcement to perform background checks on prospective handgun purchasers violated constitutional principles of federalism "by conscripting the State's officers directly" to enforce a federal regulatory scheme. Select Legal Issues for the 116th Congress Federal firearms regulation has been a subject of continuous interest for Congress. A range of proposals have been in this and past Congresses. Some seek to ease federal firearms restrictions or facilitate state reciprocity in the treatment of persons authorized to carry firearms by another state; others seek greater restrictions on the federal laws concerning the possession, transfer, or sale of firearms or the expansion of background checks for firearm purchases. These various approaches, in turn, prompt various constitutional questions, including Congress's constitutional authority to legislate on such matters and whether the proposed measures comport with the Second Amendment and other constitutional constraints. This section discusses several congressional proposals related to 3D-printed firearms, background checks, mental illness, particular firearms and accessories (e.g., semiautomatic assault weapons, bump stocks, silencers), and "red flag" laws and identifies related constitutional questions. 3D-Printed Firearms Under the Undetectable Firearms Act of 1988 (UFA), it is unlawful for any person to manufacture, import, sell, ship, deliver, possess, transfer, or receive a firearm (1) that, after removal of grips, stocks, and magazines, is not detectable by walk-through metal detectors; or (2) any major component of which does not generate an accurate image when scanned by the types of x-ray machines commonly used at airports. These prohibitions grew out of a concern that the increasing use of lightweight, noncorrosive plastics as a substitute for metal in firearm-component manufacturing would lead to the proliferation of firearms not detectable at security checkpoints. Despite the prohibitions in the UFA, the advent of 3D-printing technology and its application to firearms has prompted concern about a new wave of undetectable, plastic guns that technically comply with the statute and could fall into the wrong hands. A high-profile example of a design for such a gun is the "Liberator" pistol, plans for which were first disseminated in 2013 by Defense Distributed—a nonprofit "private defense firm" and FFL. According to media reports, the design for the Liberator allows for the 3D-printing of a functioning pistol that is almost entirely plastic, with the only metal components being a small firing pin and a removable piece of steel that is included specifically to make the design compliant with the UFA. In other words, the irrelevance of the steel block to the firearm's functionality potentially could allow bad actors to produce operable and concealable plastic firearms that would not be caught by metal detectors. With respect to Defense Distributed specifically, years of litigation over the company's online dissemination of computer files for 3D-printed nonmetallic firearms has mostly stymied the company's efforts to share its files on the internet. Most recently, a federal district court in Washington entered an order that effectively bars Defense Distributed from making its disputed files available online for the duration of the ongoing lawsuit in that jurisdiction. Nevertheless, the company's continuing efforts to spread its designs for nonmetallic firearms have raised novel constitutional questions without easy answers, including (1) whether First Amendment free speech protections extend to computer code (which could bring Defense Distributed's activities within the amendment's scope), and (2) whether the Second Amendment protects the right to make arms as a necessary precursor to keeping and bearing them. Faced with the long-simmering dispute over dissemination of 3D-printed gun files and the possibly incomplete protections of the UFA, the 115 th and 116 th Congresses have considered legislation addressing the online spread of 3D-printed gun files and the possession of 3D-printed guns themselves. For instance, the 3D-Printed Gun Safety Act of 2018 would have made it unlawful to "intentionally publish" on the internet "digital instructions ... that can automatically program" a 3D printer or similar device to produce or complete a firearm. Perhaps with First Amendment concerns in mind, the bill's "Findings" section stated that Congress's intention was not "to regulate the rights of computer programmers" but was instead "to curb the pernicious effects of untraceable—and potentially undetectable—firearms." Other legislation would appear to have banned firearm assembly kits or firearm components that might be produced with a 3D printer either by amending the definition of firearm in the GCA or by bringing such items within the purview of the Consumer Product Safety Act. The Untraceable Firearms Act of 2018 additionally would have expanded serial number requirements, extended the UFA to firearms lacking detectable major components, and clarified that manufacturing firearms under the GCA includes 3D printing, among other things. Finally, a bill introduced in the 115 th Congress would have amended the GCA to prohibit the manufacture of firearms or components by means of a 3D printer and the transfer or possession of any such items. Background Checks The 116 th Congress began with a push in the House to expand firearm background checks. Two House bills were passed in February 2019: (1) H.R. 8, the Bipartisan Background Checks Act of 2019, and (2) H.R. 1112 , the Enhanced Background Checks Act of 2019. If enacted, H.R. 8 would expand background checks to capture many private transfers between non-FFLs, subject to enumerated exceptions. (A similar bill has been introduced in the Senate. ) One question the bill raises is whether it may be lawfully enacted under one of Congress's Article I powers. The bill's accompanying constitutional authority statement does not specify which Article I power Congress is invoking to enact the measure, but the bill may be an attempt to exercise Congress's commerce power. Although the bill does not use the word commerce , other GCA provisions lack an explicit textual hook to the Commerce Clause. Courts reviewing other federal firearms law without a textual hook have upheld those measures after distinguishing them from the firearm possession law struck down in Lopez . Accordingly, the constitutionality of H.R. 8, as a lawful enactment under the Commerce Clause, may depend on the ability to distinguish it from the flaws the Supreme Court identified in Lopez . H.R. 1112 would amend the so-called "default proceed" process that allows an FFL to transfer a firearm when the NICS check has not been completed within three business days. The bill provides a mechanism for a transfer to occur if the FFL does not receive instructions from the NICS system on whether to proceed with or deny a proposed transaction within 10 business days. If the transferee wishes to proceed with the sale in such cases, he or she must file a petition (electronically or via first-class mail) to the Attorney General certifying that the transferee does not believe he or she is prohibited from acquiring the firearm. If a response is not provided within 10 business days, the FFL would be allowed to proceed with the transfer. The committee report accompanying the bill appears to construe these 10-day periods as occurring in succession rather than concurrently (i.e., the delay period might last up to 20 business days). Because the bill potentially could delay a sale to a law-abiding citizen up to 20 business days, there may be questions about whether those persons have received adequate procedural due process in the short-term deprivation of a constitutionally protected interest. Because the temporary deprivation (i.e., the inability to purchase a firearm for self-defense) would occur before a firearm may be transferred to the prospective purchaser, a reviewing court would be tasked with determining whether post-deprivation proceedings—meaning proceedings that take place after a person has been deprived of a constitutionally protected interest—are constitutionally permissible. Typically, due process requires that a person be given an opportunity to be heard before the deprivation of a protected interest may occur; in that case there are pre-deprivation hearings. But the Supreme Court has recognized in circumstances in which the government "must act quickly, or where it would be impractical to provide pre-deprivation process, post-deprivation process satisfies the requirements of the Due Process Clause." Concealed Carry Reciprocity Some Members of Congress have proposed measures that would require states to recognize concealed carry privileges afforded by other states. Both S. 69, the Constitutional Carry Reciprocity Act of 2019, and H.R. 38 , the Concealed Carry Reciprocity Act of 2019, if enacted, would allow persons who are eligible to carry a concealed handgun in one state to lawfully carry a handgun in other states that have a concealed-carry regime for their residents without regard to differences in the states' eligibility requirements for concealed carry. Both bills purport to preempt state laws to varying degrees. Whether these preemption provisions are considered to be valid likely will depend on whether the bills, as a whole, are interpreted to "confer[] on private entities ... a federal right to engage in certain conduct," i.e., carrying a concealed handgun, "subject only to certain (federal) constraints." H.R. 38 also contains a civil-suit provision that would authorize a private right of action against any person, state, or local government entity that interferes with a concealed-carry right that the bill establishes. Because the bill seeks to abrogate the states' Eleventh Amendment immunity from suit in federal court, several questions need to be answered, the first being what exception to Eleventh Amendment immunity the bill is invoking. Given that the bill cites the Second Amendment as the constitutional source of authority, it is possible that the bill seeks to invoke Congress's enforcement power under Section Five of the Fourteenth Amendment. Section Five of the Fourteenth Amendment enables Congress to abrogate a state's Eleventh Amendment immunity through legislation designed to enforce the Fourteenth Amendment's protections. And the Second Amendment is made enforceable on the states via the Fourteenth Amendment. If Congress, indeed, intends to invoke its Section Five power, a second question raised is whether legislation designed to remedy or deter state violations of the Second Amendment would be a permissible exercise of Congress's Section Five enforcement power. And assuming that Congress could lawfully exercise its Section Five power to enforce violations of Second Amendment rights, a third question would be whether the Second Amendment protects the right to carry a concealed handgun—an issue that has divided the federal appellate courts. Mental Illness As described previously, a person who has been "adjudicated as a mental defective" or "committed to a mental institution" is barred by federal law from transporting, possessing, or receiving firearms or ammunition. Both regulatory and judicial interpretations of these terms have focused on the need for a formal decision by an authoritative body like a court or board after an adjudicative hearing, as broader interpretations could raise constitutional due process and Second Amendment concerns. Nevertheless, the prohibition—even construed narrowly—has been criticized in some quarters as unconstitutional given its effectively permanent nature or as stigmatizing mental illness and unfairly painting as dangerous individuals who are more likely to be victims than perpetrators of violent crime. At the same time, some observers have, in response to past mass shootings, called for even stricter limits on possession of firearms by the mentally ill. For its part, the 115 th Congress considered bills that would have both broadened and narrowed the existing firearm prohibition. Some legislation would have, among other things, adopted the narrow understanding that an adjudication or commitment for purposes of the firearm prohibition must stem from an order or finding of an "adjudicative body" after a hearing and that the order or finding may impose only a temporary disability. Other legislation would have added temporary firearm prohibitions for persons assessed by mental health professionals to pose a risk of danger to others. Apart from constitutional and interpretive issues, commentators have highlighted the challenges of collecting comprehensive mental health records for use in NICS background checks, contending that the 2007 Virginia Tech shooting could have been avoided if the gunman's prior state mental health adjudication had been reported. One challenge specific to collecting mental health records is that many such records are held by state or local agencies that may believe patient information must remain confidential pursuant to the Health Insurance Portability and Accountability Act (HIPAA). To combat this perception, the Department of Health and Human Services issued a rule in 2016 that expressly allows specified state entities to report limited information otherwise covered by HIPAA to NICS or to another entity that reports to NICS. As noted above, Congress has also sought to improve mental health record reporting at the state level through NIAA, which (among other things) funds state efforts to develop systems for accurate and complete reporting. NICS reporting of mental health records at the federal level has raised somewhat different issues. Although federal agencies are generally required to report mental health adjudication records for background check purposes, NIAA makes clear that federal departments and agencies may not furnish such records if the relevant adjudication has been set aside or the person has been found to be "rehabilitated," among other things. Additionally, the Department of Veterans Affairs (VA), which appears to supply the vast majority of federal mental health records to NICS, has for years provided records of beneficiaries who are appointed fiduciaries to manage their financial affairs based on a VA determination that the beneficiaries are "mentally incompetent"; concern that this practice may unfairly deprive veterans of their right to possess firearms, however, led to the introduction of legislation in the 115 th Congress that would have ensured that veterans for whom fiduciaries are appointed are not considered "adjudicated as a mental defective" unless a judicial authority has issued an order or finding "that such person is a danger to himself or herself or others." A final rule published by the Social Security Administration (SSA) in December 2016, which specified similar conditions for SSA reporting of disability program beneficiaries who were appointed a representative payee, was also vacated by Congress through a Congressional Review Act resolution early in 2017. Particular Firearms and Accessories Numerous proposals have been made over the years to limit or expand the ability to possess certain kinds of firearms and accessories. For example, bills have targeted limiting the possession of semiautomatic "assault weapons," large-capacity ammunition feeding devices, and bump stocks. Conversely, other bills have proposed decreasing regulations on firearm silencers. There has been continued interest in tightening the regulation of semiautomatic "assault weapons" since the 1994 ban expired in 2004. Some proposals seek to reinstate and expand upon the former assault weapon ban. Congress has also considered bringing certain semiautomatic firearms under the more-stringent NFA's regulatory scheme. Further, some Members of Congress have proposed to make it unlawful for an FFL to sell or transfer to any person under 21 years old certain semiautomatic rifles; currently, anyone age 18 or older may purchase such rifles from an FFL. Banning the possession of these kinds of firearms entirely or by a subset of the population may raise Second Amendment questions, such as the extent to which the Second Amendment protects the right of all persons to bear specific arms other than handguns in the home for self-defense. To date every federal appellate court that has reviewed a state or local semiautomatic assault weapon ban has rejected Second Amendment challenges to those laws. Nor has a federal appellate court sustained a challenge to the current federal law that prohibits the sale of handguns to persons under 21 years old. There have also been proposals to ban "bump stock" devices, which can be attached to a semiautomatic firearm and allow it to effectively mimic the firing capability of a fully automatic weapon. After it was discovered that the assailant behind the Las Vegas, Nevada, mass shooting in October 2017 used one of these firearm accessories, ATF initiated the process of regulating them. ATF published a final rule the next year, on December 26, 2018, banning the transfer and possession of all bump stock devices, effective March 26, 2019. Litigation seeking to enjoin the rule before its effective date followed. The plaintiffs challenged the rulemaking process and the rule itself. Codifying the ban through legislation would avoid the challenges to the rulemaking process but could potentially be subject to constitutional challenge under the Takings Clause, which forbids "private property [to] be taken for public use, without just compensation." In this vein, takings lawsuits for compensation under the Tucker Act or Little Tucker Act potentially could be brought by persons who owned bump stock devices before the effective date of any statutory ban. Still, these constitutional concerns could be alleviated by creating a grandfather clause for bump stocks that were lawfully owned before the effective date of any bump stock ban. Additionally, there have been congressional efforts to deregulate firearm silencers, which are currently regulated under the NFA and GCA. In the SHUSH Acts, as introduced in the House and Senate, some Members have proposed measures that, if enacted, would eliminate the federal regulation of firearm silencers entirely. These bills also seek to preempt state and local laws that impose a tax on the making, transferring, possessing, or transporting of a firearm silencer as well as those that require marking, recordkeeping, or registering the same. Less expansive proposals purport only to remove silencers from NFA regulation. Thus, if the bills were enacted, silencers would not be subject to the NFA's tax and registration requirements but would still be subject to all GCA firearm regulations. Still, this proposal contains the same preemption provisions as the more comprehensive SHUSH Acts. All three bills may raise questions about whether the preemption provisions are constitutionally valid, as Congress can only preempt state and local measures when those measures conflict with a federal regulation covering the same activity. As relevant here, though, Congress, as part of a deregulation measure, may expressly prohibit states from further regulating the same activity "[t]o ensure that the States would not undo federal deregulation with regulation of their own." "Red Flag" Laws Somewhat related to mental health firearm restrictions are proposals for so-called "red flag" laws, which generally permit courts to issue temporary orders barring particular persons from possessing guns based on some showing of imminent danger or a risk of misuse. Following the February 2018 school shooting in Parkland, Florida, a number of states proposed or passed red-flag laws, and legislation has been introduced in the 116 th Congress on the subject. Disagreement over various proposals has largely turned on the stringency of the showing that must be made to obtain an order, the persons who may seek an order, whether an initial order may be obtained without the presence of the gun owner, and the length of the resultant firearm disability. Red-flag legislation may raise questions as to whether such measures run afoul of the Second Amendment and deprive gun owners (or prospective gun owners) of constitutionally protected interests without due process of law. However, proponents of such laws assert that they are an effective and needed means of averting gun violence before it happens and that hearing and review procedures are constitutionally adequate. Were a court to consider a constitutional challenge to a red-flag measure under the Second Amendment or Due Process Clause, the outcome potentially could depend on (1) the court's conception of the scope of the right to keep and bear arms in light of Heller and (2) the weight ascribed by the court to the three Mathews v. Eldridge factors based on the particular procedures of the measure at issue.

Firearms regulation is an area of shared authority among federal, state, and local governments. Individual states have enacted a diverse range of laws relating to the possession, registration, and carrying of firearms, among other things. Federal law establishes a regulatory framework for the lawful manufacture, sale, and possession of firearms at the national level. The federal framework generally serves as a floor for permissible firearm use and transactions, leaving states free to supplement with additional restrictions so long as they do not conflict with federal law. Federal laws regulating firearms date back roughly a century, and over time lawmakers have established more stringent requirements for the transfer, possession, and transportation of firearms. The two principal federal firearms laws currently in force are the National Firearms Act of 1934 (NFA) and the Gun Control Act of 1968 (GCA), as amended. The NFA was the first major piece of federal legislation regulating the sale and possession of firearms. Through a taxation and registration scheme, the law sought to curb the rise of violence connected to organized crime by targeting the types of weapons that (at the time of passage) were commonly used by gang members. Congress passed the GCA in the wake of the assassinations of Dr. Martin Luther King Jr. and Senator Robert Kennedy to prevent firearm possession by prohibited persons and to help law enforcement stem increasing crime rates. The GCA is a complex statutory regime that has been supplemented regularly in the decades since its inception. Broadly speaking, the GCA, as amended, regulates the manufacture, transfer, and possession of firearms, extending to categories of weapons that fall outside the scope of the NFA. In general terms, the GCA sets forth who can—and cannot—sell, purchase, and possess firearms, how those sales and purchases may lawfully take place, what firearms may lawfully be possessed, and where firearm possession may be restricted. The Brady Handgun Violence Prevention Act amended the GCA to require a background check for many, but not all, firearms transfers. Numerous constitutional considerations may inform congressional proposals to modify the current framework for regulating firearms sales and possession. Although Congress has broad constitutional authority to regulate firearms, any firearm measure must be rooted in one of Congress's enumerated powers. In enacting firearms laws, Congress has typically invoked its tax, commerce, and spending powers. For example, the NFA invokes Congress's tax power, and many GCA provisions invoke Congress's commerce power. Additionally, Congress has used its spending power to incentivize states, through offering grant money, to provide comprehensive records to the FBI's National Instant Background Check System (NICS). When exercising its enumerated powers, Congress nevertheless must be mindful of other constitutional restraints. Congress may want to look to the Supreme Court's Second Amendment jurisprudence—chiefly, District of Columbia v. Heller—when imposing any firearm restriction. In Heller, the Supreme Court held that the Second Amendment provides an individual right to keep and bear arms for lawful purposes. Further, the Due Process Clause of the Fifth Amendment limits Congress's ability to deprive a person of any constitutionally protected interest, such as Second Amendment firearms rights, and rights in property, such as firearms and accessories. Moreover, when enacting measures seeking to limit state firearm schemes, Congress may want to consider the federalism limits inherent in the Constitution's system of dual sovereignty, such as the anti-commandeering doctrine. These constitutional considerations are relevant to the scope of legislation that the 115th and 116th Congresses have considered to amend the existing federal statutory framework of firearms regulation. Among other things, such legislation has focused on issues arising from the dissemination of 3D-printed and untraceable firearms, gaps in the collection of records for background checks of prospective firearm purchasers, restrictions on certain types of firearms and accessories, possession of firearms by the mentally ill, interstate reciprocity for lawful concealed carry of firearms, and laws permitting courts to order that firearms be temporarily removed from persons deemed to be a risk to themselves or others.

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Introduction1 Artificial intelligence (AI) is a rapidly growing field of technology that is capturing the attention of commercial investors, defense intellectuals, policymakers, and international competitors alike, as evidenced by a number of recent initiatives. On July 20, 2017, the Chinese government released a strategy detailing its plan to take the lead in AI by 2030. Less than two months later Vladimir Putin publicly announced Russia's intent to pursue AI technologies, stating, "[W]hoever becomes the leader in this field will rule the world." Similarly, the U.S. National Defense Strategy, released in January 2018, identified artificial intelligence as one of the key technologies that will "ensure [the United States] will be able to fight and win the wars of the future." The U.S. military is already integrating AI systems into combat via a spearhead initiative called Project Maven, which uses AI algorithms to identify insurgent targets in Iraq and Syria. These dynamics raise several questions that Congress addressed in hearings during 2017 and 2018: What types of military AI applications are possible, and what limits, if any, should be imposed? What unique advantages and vulnerabilities come with employing AI for defense? How will AI change warfare, and what influence will it have on the military balance with U.S. competitors? Congress has a number of oversight, budgetary, and legislative tools available that it may use to influence the answers to these questions and shape the future development of AI technology. AI Terminology and Background5 Almost all academic studies in artificial intelligence acknowledge that no commonly accepted definition of AI exists, in part because of the diverse approaches to research in the field. Likewise, although Section 238 of the FY2019 National Defense Authorization Act (NDAA) directs the Secretary of Defense to produce a definition of artificial intelligence by August 13, 2019, no official U.S. government definition of AI currently exists. The FY2019 NDAA does, however, provide a definition of AI for the purposes of Section 238: Any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight, or that can learn from experience and improve performance when exposed to data sets. An artificial system developed in computer software, physical hardware, or other context that solves tasks requiring human-like perception, cognition, planning, learning, communication, or physical action. An artificial system designed to think or act like a human, including cognitive architectures and neural networks. A set of techniques, including machine learning that is designed to approximate a cognitive task. An artificial system designed to act rationally, including an intelligent software agent or embodied robot that achieves goals using perception, planning, reasoning, learning, communicating, decision-making, and acting. This definition encompasses many of the descriptions in Table 1 below, which summarizes various AI definitions in academic literature. The field of AI research began in 1956, but an explosion of interest in AI began around 2010 due to the convergence of three enabling developments: (1) the availability of "big data" sources, (2) improvements to machine learning approaches, and (3) increases in computer processing power. This growth has advanced the state of Narrow AI, which refers to algorithms that address specific problem sets like game playing, image recognition, and navigation. All current AI systems fall into the Narrow AI category. The most prevalent approach to Narrow AI is machine learning, which involves statistical algorithms that replicate human cognitive tasks by deriving their own procedures through analysis of large training data sets. During the training process, the computer system creates its own statistical model to accomplish the specified task in situations it has not previously encountered. Experts generally agree that it will be many decades before the field advances to develop General AI, which refers to systems capable of human-level intelligence across a broad range of tasks. Nevertheless, the growing power of Narrow AI algorithms has sparked a wave of commercial interest, with U.S. technology companies investing an estimated $20-$30 billion in 2016. Some studies estimate this amount will grow to as high as $126 billion by 2025. DOD's unclassified expenditures in AI contracts for FY2016 totaled just over $600 million, increasing to over $800 million in FY2017. AI has a number of unique characteristics that may be important to consider as these technologies enter the national security arena. First, AI has the potential to be integrated across a variety of applications, improving the so-called "Internet of Things" in which disparate devices are networked together to optimize performance. As Kevin Kelley, the founder of Wired magazine, states, "[AI] will enliven inert objects, much as electricity did more than a century ago. Everything that we formerly electrified we will now cognitize." Second, many AI applications are dual-use, meaning they have both military and civil applications. For example, image recognition algorithms can be trained to recognize cats in YouTube videos as well as terrorist activity in full motion video captured by uninhabited aerial vehicles over Syria or Afghanistan. Third, AI is relatively transparent, meaning that its integration into a product is not immediately recognizable. By and large, AI procurement will not result in countable objects. Rather, the algorithm will be purchased separately and incorporated into an existing system, or it will be part of a tangible system from inception, which may not be considered predominantly AI. An expert in the field points out, "We will not buy AI. It will be used to solve problems, and there will be an expectation that AI will be infused in most things we do." Issues for Congress A number of Members of Congress have called for action on military AI. During the opening comments to a January 2018 hearing before the House Armed Services Subcommittee on Emerging Threats, the subcommittee chair called for a "national level effort" to preserve a technological edge in the field of AI. Former Deputy Secretary of Defense Robert Work argued in a November 2017 interview that the federal government needs to address AI issues at the highest levels, further stating that "this is not something the Pentagon can fix by itself." Other analysts have called for a national AI strategy to articulate AI objectives and drive whole-of-government initiatives and cross-cutting investments. In the meantime, DOD has published a classified AI strategy and is carrying out multiple tasks directed by DOD guidance and the FY2019 NDAA, including establishing a Joint Artificial Intelligence Center (JAIC), which will "coordinate the efforts of the Department to develop, mature, and transition artificial intelligence technologies into operational use"; publishing a strategic roadmap for AI development and fielding, as well as guidance on "appropriate ethical, legal, and other policies for the Department governing the development and use of artificial intelligence enabled systems and technologies in operational situations"; establishing a National Security Commission on Artificial Intelligence; and conducting a comprehensive assessment of militarily relevant AI technologies and providing recommendations for strengthening U.S. competitiveness. These initiatives will present a number of oversight opportunities for Congress. In addition, Congress may consider the adequacy of current DOD funding levels for AI. Lieutenant General John Shanahan, the lead for the Pentagon's most prominent AI program, identified funding as a barrier to future progress, and a 2017 report by the Army Science Board states that funding is insufficient for the service to pursue disruptive technology like AI. Although DOD funding for AI has increased in 2018—to include the JAIC's $1.75 billion six-year budget and the Defense Advanced Research Projects Agency's (DARPA's) $2 billion multiyear investment in over 20 AI programs—some experts have argued that additional DOD funding will be required to keep pace with U.S. competitors and avoid an "innovation deficit" in military technology. Critics of increased federal funding contend that significant increases to appropriations may not be required, as the military should be leveraging research and development (R&D) conducted in the commercial sector. The 2017 National Security Strategy identifies a need to "establish strategic partnerships to align private sector R&D resources to priority national security applications" and to reward government agencies that "take risks and rapidly field emerging commercial technologies." In addition, the Office of Management and Budget directed DOD in preparing its FY2020 budget to "seek to rapidly field innovative technologies from the private sector, where possible, that are easily adaptable to Federal needs, rather than reinventing solutions in parallel." Some experts in the national security community also argue that it would not be a responsible use of taxpayer money to duplicate efforts devoted to AI R&D in the commercial sector when companies take products 90% of the way to a useable military application. Others contend that a number of barriers stand in the way of transitioning AI commercial technology to DOD, and that reforming aspects of the defense acquisition process may be necessary. These issues are discussed in more detail later in this report. One impediment to accurately evaluating funding levels for AI is the lack of a stand-alone AI Program Element (PE) in DOD funding tables. As a result, AI R&D appropriations are spread throughout generally titled PEs and incorporated into funding for larger systems with AI components. For example, in the FY2019 National Defense Authorization Act, AI funding is spread throughout the PEs for the High Performance Computing Modernization Program and Dominant Information Sciences and Methods, among others. On the other hand, a dedicated PE for AI may lead to a false precision, as it may be challenging to identify exact investments in enabling technologies like AI. The lack of an official U.S. government definition of AI could further complicate such an assessment. Congress may also consider specific policies for the development and use of military AI applications. Many experts fear that the pace of AI technology development is moving faster than the speed of policy implementation. Former Chairman of the House Armed Services Committee Representative Mac Thornberry has echoed this sentiment, stating, "It seems to me that we're always a lot better at developing technologies than we are the policies on how to use them." Congress may assess the need for new policies or modifications to existing laws to account for AI developments and ensure that AI applications are free from bias. Perhaps the most immediate policy concern among AI analysts is the absence of an independent entity to develop and enforce AI safety standards and to oversee government-wide AI research. Former Secretary of Defense Ashton B. Carter, for example, has suggested the need for an "AI czar" to coordinate such efforts. Relatedly, Congress may consider debating policy options on the development and fielding of Lethal Autonomous Weapons Systems (LAWS), which may use AI to select and engage targets. Since 2014, the United States has participated in international discussions of LAWS at the United Nations (U.N.) Convention on Certain Conventional Weapons (CCW). Approximately 25 state parties have called for a treaty banning "fully autonomous weapon systems" due to ethical considerations, while others have called for formal regulations or political declarations. Some analysts are concerned that efforts to ban or regulate LAWS could impose strict controls on AI applications that could be adapted for lethal use, thereby stifling development of other useful military—or even commercial—technology. During recent testimony to the U.N., one expert stated, "If we agree to foreswear some technology, we could end up giving up some uses of automation that could make war more humane. On the other hand a headlong rush into a future of increasing autonomy with no discussion of where it is taking us, is not in humanity's interest either." He suggested the leading question for considering military AI applications ought to be, "What role do we want humans to play in wartime decision making?" Congress may consider the growth of international competition in the AI market and the danger of foreign exploitation of U.S. AI technology for military purposes. In particular, the Chinese government is reported to be aggressively pursuing AI investments in the United States. Amid growing scrutiny of transactions involving Chinese firms in the semiconductor industry, in September 2017 President Trump, following the recommendation of the Committee on Foreign Investment in the United States (CFIUS), blocked a Chinese firm from acquiring Lattice Semiconductor, a U.S. company that manufactures chips that are a critical design element for AI technology. In this way, some experts believe that CFIUS may provide a means of protecting strategically significant technologies like AI. Indeed, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expands CFIUS's ability to review certain foreign investments, including those involving "emerging and foundational technologies." It also authorized CFIUS to consider "whether a covered transaction involves a country of special concern that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security." Congress may monitor the implementation of FIRRMA and assess whether additional reforms might be necessary to maintain effective congressional oversight of sensitive transactions. In addition, many analysts believe that it may be necessary to reform federal data policies associated with AI. Large data pools serve as the training sets needed for building many AI systems, and government data may be particularly important in developing military AI applications. However, some analysts have observed that much of this data is either classified, access-controlled, or otherwise protected on privacy grounds. These analysts contend that Congress should implement a new data policy that balances data protection and privacy with the need to fuel AI development. Closely related, AI development may increase the imperative for strict security standards. As discussed later in this report, AI algorithms are vulnerable to bias, theft, and manipulation, particularly if the training data set is not adequately curated or protected. During a February 2018 conference with defense industry CEOs, Deputy Defense Secretary Patrick Shanahan advocated for higher cybersecurity standards in the commercial sector, stating, "[W]e want the bar to be so high that it becomes a condition of doing business." Some leading commercial technology companies have issued similar calls for increased scrutiny, with Microsoft's president Brad Smith arguing that a lack of regulation in this area could lead to "a commercial race to the bottom, with tech companies forced to choose between social responsibility and market success." Finally, commercial companies have long cited the potential loss of intellectual property rights as a key impediment to partnering with DOD. In recognition of this issue, Section 813 of the FY2016 NDAA established a "government-industry advisory panel" to provide recommendations on technical data rights and intellectual property reform. The panel's report, released in November 2018, offers a number of recommendations, including increased training in intellectual property rights for acquisitions professionals and a pilot program for intellectual property valuation in the procurement process. AI Applications for Defense DOD is considering a number of diverse applications for AI. Currently, AI R&D is being left to the discretion of research organizations in the individual services, as well as to DARPA and the Intelligence Advanced Research Projects Agency (IARPA). However, DOD components are currently required to coordinate with the JAIC regarding any planned AI initiatives costing more than $15 million annually. In addition, the JAIC has been tasked with overseeing the National Mission Initiatives, projects that will leverage AI to address pressing operational challenges. The Office of the Under Secretary of Defense for Research and Engineering, which oversaw the development of DOD's AI Strategy, will continue to support AI development and delivery. The Algorithmic Warfare Cross-Functional Team, also known as Project Maven, has previously been a focal point for DOD AI integration and will transition from the Under Secretary of Defense for Intelligence to the JAIC, where it will become the first of the JAIC's National Mission Initiatives. Project Maven was launched in April 2017 and charged with rapidly incorporating AI into existing DOD systems to demonstrate the technology's potential. Project Maven's inaugural director stated, "Maven is designed to be that pilot project, that pathfinder, that spark that kindles the flame for artificial intelligence across the department." AI is also being incorporated into a number of other intelligence, surveillance, and reconnaissance applications, as well as in logistics, cyberspace operations, information operations, command and control, semiautonomous and autonomous vehicles, and lethal autonomous weapon systems. Intelligence, Surveillance, and Reconnaissance AI is expected to be particularly useful in intelligence due to the large data sets available for analysis. For example, Project Maven's first phase involves automating intelligence processing in support of the counter-ISIL campaign. Specifically, the Project Maven team is incorporating computer vision and machine learning algorithms into intelligence collection cells that would comb through footage from uninhabited aerial vehicles and automatically identify hostile activity for targeting. In this capacity, AI is intended to automate the work of human analysts who currently spend hours sifting through videos for actionable information, potentially freeing analysts to make more efficient and timely decisions based on the data. The intelligence community also has a number of publicly acknowledged AI research projects in progress. The Central Intelligence Agency alone has around 140 projects in development that leverage AI in some capacity to accomplish tasks such as image recognition and predictive analytics. IARPA is sponsoring several AI research projects intended to produce other analytic tools within the next four to five years. Some examples include developing algorithms for multilingual speech recognition and translation in noisy environments, geo-locating images without the associated metadata, fusing 2-D images to create 3-D models, and building tools to infer a building's function based on pattern-of-life analysis. Logistics AI may have a promising future in the field of military logistics. The Air Force, for example, is beginning to use AI for predictive aircraft maintenance. Instead of making repairs when an aircraft breaks or in accordance with monolithic fleet-wide maintenance schedules, the Air Force is testing an AI-enabled approach that tailors maintenance schedules to the needs of individual aircraft. This approach, currently used by the F-35's Automated Logistics Information System, extracts real-time sensor data embedded in the aircraft's engines and other onboard systems and feeds the data into a predictive algorithm to determine when technicians need to inspect the aircraft or replace parts. Similarly, the Army's Logistics Support Activity (LOGSA) has contracted IBM's Watson (the same AI software that defeated two Jeopardy champions) to develop tailored maintenance schedules for the Stryker fleet based on information pulled from the 17 sensors installed on each vehicle. In September 2017, LOGSA began a second project that will use Watson to analyze shipping flows for repair parts distribution, attempting to determine the most time- and cost-efficient means to deliver supplies. This task is currently done by human analysts, who have saved the Army around $100 million a year by analyzing just 10% of shipping requests; with Watson, the Army will have the ability to analyze 100% of shipping requests, potentially generating even greater cost savings in a shorter period of time. Cyberspace Operations AI is likely to be a key technology in advancing military cyber operations. In his 2016 testimony before the Senate Armed Services Committee, Commander of U.S. Cyber Command Admiral Michael Rogers stated that relying on human intelligence alone in cyberspace is "a losing strategy." He later clarified this point, stating, "If you can't get some level of AI or machine learning with the volume of activity you're trying to understand when you're defending networks ... you are always behind the power curve." Conventional cybersecurity tools look for historical matches to known malicious code, so hackers only have to modify small portions of that code to circumvent the defense. AI-enabled tools, on the other hand, can be trained to detect anomalies in broader patterns of network activity, thus presenting a more comprehensive and dynamic barrier to attack. DARPA's 2016 Cyber Grand Challenge demonstrated the potential power of AI-enabled cyber tools. The competition challenged participants to develop AI algorithms that could autonomously "detect, evaluate, and patch software vulnerabilities before [competing teams] have a chance to exploit them"—all within a matter of seconds, rather than the usual months. The challenge demonstrated not only the potential speed of AI-enabled cyber tools but also the potential ability of a singular algorithm to play offense and defense simultaneously. These capabilities could provide a distinct advantage in future cyber operations. Information Operations and "Deep Fakes"66 AI is enabling increasingly realistic photo, audio, and video forgeries, or "deep fakes," that adversaries could deploy as part of their information operations. Indeed, deep fake technology could be used against the United States and U.S. allies to generate false news reports, influence public discourse, erode public trust, and attempt to blackmail diplomats. Although most previous deep fakes have been detectable by experts, the sophistication of the technology is progressing to the point that it may soon be capable of fooling forensic analysis tools. In order to combat deep fake technologies, DARPA has launched the Media Forensics (MediFor) project, which seeks to "automatically detect manipulations, provide detailed information about how these manipulations were performed, and reason about the overall integrity of visual media." MediFor has developed some initial tools for identifying AI-produced forgeries, but as one analyst has noted, "a key problem … is that machine-learning systems can be trained to outmaneuver forensics tools." For this reason, DARPA plans to host follow-on contests to ensure that forensic tools keep pace with deep fake technologies. Artificial intelligence could also be used to create full "digital patterns-of-life," in which an individual's digital "footprint" is "merged and matched with purchase histories, credit reports, professional resumes, and subscriptions" to create a comprehensive behavioral profile of servicemembers, suspected intelligence officers, government officials, or private citizens. As in the case of deep fakes, this information could, in turn, be used for targeted influence operations or blackmail. Command and Control The U.S. military is seeking to exploit AI's analytic potential in the area of command and control. The Air Force is developing a system for Multi-Domain Command and Control (MDC2), which aims to centralize planning and execution of air-, space-, cyberspace-, sea-, and land-based operations. In the immediate future, AI may be used to fuse data from sensors in all of these domains to create a single source of information, also known as a "common operating picture," for decisionmakers. Currently, information available to decisionmakers comes in diverse formats from multiple platforms, often with redundancies or unresolved discrepancies. An AI-enabled common operating picture would theoretically combine this information into one display, providing a comprehensive picture of friendly and enemy forces, and automatically resolving variances from input data. Although MDC2 is still in a concept development phase, the Air Force is working with Lockheed Martin, Harris, and several AI start-ups to develop such a data fusion capability. A series of war-games in 2018 sought to refine requirements for this project. Similarly, DARPA's Mosaic Warfare program seeks to leverage AI to coordinate autonomous forces and dynamically generate multidomain command and control nodes. Future AI systems may be used to identify communications links cut by an adversary and find alternative means of distributing information. As the complexity of AI systems matures, AI algorithms may also be capable of providing commanders with a menu of viable courses of action based on real-time analysis of the battle-space, in turn enabling faster adaptation to complex events. In the long run, many analysts believe this area of AI development could be particularly consequential, with the potential to improve the quality of and accelerate wartime decisionmaking. Semiautonomous and Autonomous Vehicles All U.S. military services are working to incorporate AI into semiautonomous and autonomous vehicles, including fighter aircraft, drones, ground vehicles, and naval vessels. AI applications in this field are similar to commercial semiautonomous vehicles, which use AI technologies to perceive the environment, recognize obstacles, fuse sensor data, plan navigation, and even communicate with other vehicles. The Air Force Research Lab completed phase-two tests of its Loyal Wingman program, which pairs an older-generation, uninhabited fighter jet (in this case, an F-16) with an inhabited F-35 or F-22. During this event, the uninhabited F-16 test platform autonomously reacted to events that were not preprogrammed, such as weather and unforeseen obstacles. As the program progresses, AI may enable the "loyal wingman" to accomplish tasks for its inhabited flight lead, such as jamming electronic threats or carrying extra weapons. The Army and the Marine Corps tested prototypes of similar vehicles that follow soldiers or vehicles around the battlefield to accomplish independent tasks. For example, the Marine Corps' Multi-Utility Tactical Transport (MUTT) is a remote-controlled, ATV-sized vehicle capable of carrying hundreds of pounds of extra equipment. Although the system is not autonomous in its current configuration, the Marine Corps intends for follow-on systems to have greater independence. Likewise, the Army plans to field a number of Robotic Combat Vehicles (RCVs) with different types of autonomous functionality, including navigation, surveillance, and IED removal. These systems will be deployed as "wingmen" for the optionally inhabited Next Generation Ground Vehicle, tentatively scheduled for initial soldier evaluations in FY2020. DARPA completed testing of the Anti-Submarine Warfare Continuous Trail Unmanned Vessel prototype, or "Sea Hunter," in early 2018 before transitioning program development to the Office of Naval Research. If Sea Hunter enters into service, it would provide the Navy with the ability to autonomously navigate the open seas, swap out modular payloads, and coordinate missions with other unmanned vessels—all while providing continuous submarine-hunting coverage for months at a time. Some analysts estimate that Sea Hunter would cost around $20,000 a day to operate, in contrast to around $700,000 for a traditionally inhabited destroyer. DOD is testing other AI-fueled capabilities to enable cooperative behavior, or swarming . Swarming is a unique subset of autonomous vehicle development, with concepts ranging from large formations of low-cost vehicles designed to overwhelm defensive systems to small squadrons of vehicles that collaborate to provide electronic attack, fire support, and localized navigation and communication nets for ground-troop formations. A number of different swarm capabilities are currently under development. For example, in November 2016, the Navy completed a test of an AI-enabled swarm of five unmanned boats that cooperative ly patrolled a 4-by-4-mile section of the Chesapeake Bay and intercepted an "intruder" vessel. The results of this experiment may lead to AI technology adapted for defending harbors, hunting submarines, or scouting in front of a formation of larger ships. The Navy also plans to test swarms of underwater drones, and the Strategic Capabilities Office has successfully tested a swarm of 103 air-dropped micro-drones. Lethal Autonomous Weapon Systems (LAWS) Lethal Autonomous Weapon Systems (LAWS) are a special class of weapon systems capable of independently identifying a target and employing an onboard weapon system to engage and destroy it with no human interaction. LAWS require a computer vision system and advanced machine learning algorithms to classify an object as hostile, make an engagement decision, and guide a weapon to the target. This capability enables the system to operate in communications-degraded or -denied environments where traditional systems may not be able to operate. The U.S. military does not currently have LAWS in its inventory, although there are no legal prohibitions on the development of LAWS. DOD Directive 3000.09, "Autonomy in Weapon Systems," outlines department policies for semiautonomous and autonomous weapon systems. The directive requires that all systems, regardless of classification, be designed to "allow commanders and operators to exercise appropriate levels of human judgment over the use of force" and to successfully complete the department's weapons review process. Any changes to the system's operating state require that the system go through the weapons review process again to ensure that it has retained the ability to operate as intended. Autonomous weapons and a limited type of semiautonomous weapons must additionally be approved before both development and fielding by the Under Secretary of Defense for Policy; the Under Secretary of Defense for Acquisition, Technology, and Logistics; and the Chairman of the Joint Chiefs of Staff. Human-supervised autonomous weapons used for point defense of manned installations or platforms—but that do not target humans—and autonomous weapons that "apply non-lethal, non-kinetic force, such as some forms of electronic attack, against materiel targets" are exempted from this senior-level review. Despite this policy, some senior military and defense leaders have expressed concerns about the prospect of fielding LAWS. For example, in 2017 testimony before the Senate Armed Services Committee, Vice Chairman of the Joint Chiefs of Staff General Paul Selva stated, "I do not think it is reasonable for us to put robots in charge of whether or not we take a human life." Regardless, Selva explained that the military will be compelled to address the development of this class of technology in order to find its vulnerabilities, given the fact that potential U.S. adversaries are pursuing LAWS. Military AI Integration Challenges From the Cold War era until recently, most major defense-related technologies, including nuclear technology, the Global Positioning System (GPS), and the internet, were first developed by government-directed programs before later spreading to the commercial sector. Indeed, DARPA's Strategic Computing Initiative invested over $1 billion between 1983 and 1993 to develop the field of artificial intelligence for military applications, but the initiative was ultimately cancelled due to slower-than-anticipated progress. Today, commercial companies—sometimes building on past government-funded research—are leading AI development, with DOD later adapting their tools for military applications. Noting this dynamic, one AI expert commented, "It is unusual to have a technology that is so strategically important being developed commercially by a relatively small number of companies." In addition to the shift in funding sources, a number of challenges related to technology, process, personnel, and culture continue to impede the adoption of AI for military purposes. Technology A wide variance exists in the ease of adaptability of commercial AI technology for military purposes. In some cases, the transition is relatively seamless. For example, the aforementioned aircraft maintenance algorithms, many of which were initially developed by the commercial sector, will likely require only minor data adjustments to account for differences between aircraft types. In other circumstances, significant adjustments are required due to the differences between the structured civilian environments for which the technology was initially developed and more complex combat environments. For example, commercial semiautonomous vehicles have largely been developed in and for data-rich environments with reliable GPS positions, comprehensive terrain mapping, and up-to-date information on traffic and weather conditions obtained from other networked vehicles. In contrast, the military variant of such a vehicle would need to be able to operate in locations where map data are comparatively poor and in which GPS positioning may be inoperable due to adversary jamming. Moreover, semiautonomous or autonomous military ground vehicles would likely need the ability to navigate off-road in rough terrain—a capability not inherent in most commercial vehicles. Process Standing DOD processes—including those related to standards of safety and performance, acquisitions, and intellectual property and data rights—present another challenge to the integration of military AI. Often, civilian and military standards of safety and performance are either not aligned or are not easily transferable. A failure rate deemed acceptable for a civilian AI application may be well outside of tolerances in a combat environment—or vice versa. In addition, a recent research study concluded that unpredictable AI failure modes will be exacerbated in complex environments, such as those found in combat. Collectively, these factors may create another barrier for the smooth transfer of commercially developed AI technology to DOD. DOD may need to adjust its acquisitions process to account for rapidly evolving technologies such as AI. A 2017 internal study of the process found that it takes an average of 91 months to move from the initial Analysis of Alternatives, defining the requirements for a system, to an Initial Operational Capability. In contrast, commercial companies typically execute an iterative development process for software systems like AI, delivering a product in six to nine months. A Government Accountability Office (GAO) study of this issue surveyed 12 U.S. commercial companies who choose not to do business with DOD, and all 12 cited the complexity of the defense acquisition process as a rationale for their decision. As a first step in addressing this, DOD has created a number of avenues for "rapid-acquisitions," including the Strategic Capabilities Office, the Defense Innovation Unit, and Project Maven, in order to accelerate the acquisitions timeline and streamline cumbersome processes. Project Maven, for example, was established in April 2017; by December, the team was fielding a commercially acquired prototype AI system in combat. Although some analysts argue that these are promising developments, critics point out that the department must replicate the results achieved by Project Maven at scale and implement more comprehensive acquisitions reform. Commercial technology companies are also often reluctant to partner with DOD due to concerns about intellectual property and data rights. As an official interviewed for a 2017 GAO report on broader challenges in military acquisitions noted, intellectual property is the "life blood" of commercial technology companies, yet "DOD is putting increased pressure on companies to grant unlimited technical data and software rights or government purpose rights rather than limited or restricted rights." Personnel Some reports indicate that DOD and the defense industry also face challenges when it comes to recruiting and retaining personnel with expertise in AI due to research funding and salaries that significantly lag behind those of commercial companies. Other reports suggest that such challenges stem from quality-of-life factors, as well as from a belief among many technology workers that "they can achieve large-scale change faster and better outside the government than within it." Regardless, observers note that if DOD and defense industry are unable to recruit and retain the appropriate experts, military AI applications could be delayed, "deficient, or lacking in appropriate safeguards and testing." To address these challenges, the Obama Administration launched the Defense Digital Service in 2015 as a means of recruiting private sector technology workers to serve in DOD for one to two year assignments—a "tour of duty for nerds," according to director Chris Lynch. Similarly, former Deputy Secretary of Defense Bob Work has proposed an "AI Training Corps," in which DOD "would pay for advanced technical education in exchange for two days a month of training with government systems and two weeks a year for major exercises." Participants in the program could additionally be called to government service in the event of a national emergency. Other analysts have recommended the establishment of new military training and occupational specialties to cultivate AI talent, as well as the creation of government fellowships and accelerated promotion tracks to reward the most talented technology workers. Culture An apparent cultural divide between DOD and commercial technology companies may also present challenges for AI adoption. A recent survey of leadership in several top Silicon Valley companies found that nearly 80% of participants rated the commercial technology community's relationship with DOD as poor or very poor. This was due to a number of factors, including process challenges, perceptions of mutual distrust, and differences between DOD and commercial incentive structures. Moreover, some companies are refusing to work with DOD due to ethical concerns over the government's use of AI in surveillance or weapon systems. Notably, Google canceled existing government contracts for two robotics companies it acquired—Boston Dynamics and Schaft—and prohibited future government work for DeepMind, a Google-acquired AI software startup. In May 2018, Google employees successfully lobbied the company to withdraw from Project Maven and refrain from further collaboration with DOD. Other companies, however, have pledged to continue supporting DOD contracts, with Amazon CEO Jeff Bezos noting that "if big tech companies are going to turn their back on the U.S. Department of Defense, this country is going to be in trouble." Cultural factors within the defense establishment itself may also impede AI integration. The integration of AI into existing systems alters standardized procedures and upends well-defined personnel roles. Members of Project Maven have reported a resistance to AI integration because integration can be disruptive without always providing an immediately recognizable benefit. Deputy Director for CIA technology development Dawn Meyerriecks has also expressed concern about the willingness of senior leaders to accept AI-generated analysis, arguing that the defense establishment's risk-averse culture may pose greater challenges to future competitiveness than the pace of adversary technology development. Finally, some analysts are concerned that DOD will not capitalize on AI's potential to produce game-changing warfighting benefits and will instead simply use AI to incrementally improve existing processes or reinforce current operational concepts. Furthermore, the services may reject certain AI applications altogether if the technology threatens service-favored hardware or missions. Members of Congress may explore the complex interaction of these factors as DOD moves beyond the initial stages of AI adoption. International Competitors As military applications for AI grow in scale and complexity, many in Congress and the defense community are becoming increasingly concerned about international competition. In his opening comments at "The Dawn of AI" hearing before the Senate Subcommittee on Space, Science, and Competitiveness, Senator Ted Cruz stated, "Ceding leadership in developing artificial intelligence to China, Russia, and other foreign governments will not only place the United States at a technological disadvantage, but it could have grave implications for national security." Since at least 2016, AI has been consistently identified as an "emerging and disruptive technology" at the Senate Select Intelligence Committee's annual hearing on the "Worldwide Threat Assessment." In his written testimony for the 2017 hearing, Director of National Intelligence Daniel Coates asserted, "The implications of our adversaries' abilities to use AI are potentially profound and broad. They include an increased vulnerability to cyberattack, difficulty in ascertaining attribution, facilitation of advances in foreign weapon and intelligence systems, the risk of accidents and related liability issues, and unemployment." Consequently, it may be important for Congress to understand the state of rival AI development—particularly because U.S. competitors may have fewer moral, legal, or ethical qualms about developing military AI applications. China China is by far the United States' most ambitious competitor in the international AI market. China's 2017 "Next Generation AI Development Plan" describes AI as a "strategic technology" that has become a "focus of international competition." According to the document, China will seek to develop a core AI industry worth over 150 billion RMB —or approximately $21.7 billion—by 2020 and will "firmly seize the strategic initiative" and reach "world leading levels" of AI investment by 2030. Recent Chinese achievements in the field demonstrate China's potential to realize its goals for AI development. In 2015, China's leading AI company, Baidu, created AI software capable of surpassing human levels of language recognition, almost a year in advance of Microsoft, the nearest U.S. competitor. In 2016 and 2017, Chinese teams won the top prize at the Large Scale Visual Recognition Challenge, an international competition for computer vision systems. Many of these systems are now being integrated into China's domestic surveillance network and social credit system, which aims to monitor and, based on social behavior, "grade" every Chinese citizen by 2021. China is researching various types of air, land, sea, and undersea autonomous vehicles. In the spring of 2017, a civilian Chinese university with ties to the military demonstrated an AI-enabled swarm of 1,000 uninhabited aerial vehicles at an airshow. A media report released after the fact showed a computer simulation of a similar swarm formation finding and destroying a missile launcher. Open-source publications indicate that the Chinese are developing a suite of AI tools for cyber operations. Chinese development of military AI is influenced in large part by China's observation of U.S. plans for defense innovation and fears of a widening "generational gap" in comparison to the U.S. military. Similar to U.S. military concepts, the Chinese aim to use AI for exploiting large troves of intelligence, generating a common operating picture, and accelerating battlefield decisionmaking. The close parallels between U.S. and Chinese AI development have some DOD leaders concerned about the prospects for retaining conventional U.S. military superiority as envisioned in current defense innovation guidance. Analysts do, however, point to a number of differences that may influence the success of military AI adoption in China. Significantly, unlike the United States, China has not been involved in active combat for several decades. While on the surface this may seem like a weakness, some argue that it may be an advantage, enabling the Chinese to develop more innovative concepts of operation. On the other hand, Chinese military culture, which is dominated by centralized command authority and mistrust of subordinates, may prove resistant to the adoption of autonomous systems or the integration of AI-generated decisionmaking tools. China's management of its AI ecosystem stands in stark contrast to that of the United States. In general, few boundaries exist between Chinese commercial companies, university research laboratories, the military, and the central government. As a result, the Chinese government has a direct means of guiding AI development priorities and accessing technology that was ostensibly developed for civilian purposes. To further strengthen these ties, the Chinese government created a Military-Civil Fusion Development Commission in 2017, which is intended to speed the transfer of AI technology from commercial companies and research institutions to the military. In addition, the Chinese government is leveraging both lower barriers to data collection and lower costs to data labeling to create the large databases on which AI systems train. According to one estimate, China is on track to possess 20% of the world's share of data by 2020, with the potential to have over 30% by 2030. China's centrally directed effort is fueling speculation in the U.S. AI market, where China is investing in companies working on militarily relevant AI applications—potentially granting it lawful access to U.S. technology and intellectual property. Figure 2 depicts Chinese venture capital investment in U.S. AI companies between 2010 and 2017, totaling an estimated $1.3 billion. The CFIUS reforms introduced in FIRRMA are intended to provide increased oversight of such investments to ensure that they do not threaten national security or grant U.S. competitors undue access to critical technologies. Even with these reforms, however, China may likely gain access to U.S. commercial developments in AI given its extensive history of industrial espionage and cyber theft. Indeed, China has reportedly stolen design plans in the past for a number of advanced military technologies and continues to do so despite the 2015 U.S.-China Cyber Agreement, in which both sides agreed that "neither country's government will conduct or knowingly support cyber-enabled theft of intellectual property." While most analysts view China's unified, whole-of-government effort to develop AI as having a distinct advantage over the United States' AI efforts, many contend that it does have shortcomings. For example, some analysts characterize the Chinese government's funding management as inefficient. They point out that the system is often corrupt, with favored research institutions receiving a disproportionate share of government funding, and that the government has a potential to overinvest in projects that produce surpluses that exceed market demand. In addition, China faces challenges in recruiting and retaining AI engineers and researchers. Over half of the data scientists in the United States have been working in the field for over 10 years, while roughly the same proportion of data scientists in China have less than 5 years of experience. Furthermore, fewer than 30 Chinese universities produce AI-focused experts and research products. Although China surpassed the United States in the quantity of research papers produced from 2011 to 2015, the quality of its published papers, as judged by peer citations, ranked 34 th globally. China is, however, making efforts to address these deficiencies, with a particular focus on the development of military AI applications. Indeed, the Beijing Institute of Technology—one of China's premier institutes for weapons research—recently established the first educational program in military AI in the world. Some experts believe that China's intent to be the first to develop military AI applications may result in comparatively less safe applications, as China will likely be more risk-acceptant throughout the development process. These experts stated that it would be unethical for the U.S. military to sacrifice safety standards for the sake of external time pressures, but that the United States' more conservative approach to AI development may result in more capable systems in the long run. Russia Like China, Russia is actively pursuing military AI applications. At present, Russian AI development lags significantly behind that of the United States and China. In 2017, the Russian AI market had an estimated value of $12 million and, in 2018, the country ranked 20 th in the world by number of AI startups. However, Russia is initiating plans to close the gap. As part of this effort, Russia will continue to pursue its 2008 defense modernization agenda, with the aim of robotizing 30% of its military equipment by 2025. Russia is establishing a number of organizations devoted to the development of military AI. In March 2018, the Russian government released a 10-point AI agenda, which calls for the establishment of an AI and Big Data consortium, a Fund for Analytical Algorithms and Programs, a state-backed AI training and education program, a dedicated AI lab, and a National Center for Artificial Intelligence, among other initiatives. In addition, Russia recently created a defense research organization, roughly equivalent to DARPA, dedicated to autonomy and robotics called the Foundation for Advanced Studies, and initiated an annual conference on "Robotization of the Armed Forces of the Russian Federation." Some analysts have noted that this recent proliferation of research institutions devoted to AI may, however, result in overlapping responsibilities and bureaucratic inertia, hindering AI development rather than accelerating it. The Russian military has been researching a number of AI applications, with a heavy emphasis on semiautonomous and autonomous vehicles. In an official statement on November 1, 2017, Viktor Bondarev, chairman of the Federation Council's Defense and Security Committee, stated that "artificial intelligence will be able to replace a soldier on the battlefield and a pilot in an aircraft cockpit" and later noted that "the day is nearing when vehicles will get artificial intelligence." Bondarev made these remarks in close proximity to the successful test of Nerehta, an uninhabited Russian ground vehicle that reportedly "outperformed existing [inhabited] combat vehicles." Russia plans to use Nerehta as a research and development platform for AI and may one day deploy the system in combat, intelligence gathering, or logistics roles. Russia has also reportedly built a combat module for uninhabited ground vehicles that is capable of autonomous target identification—and, potentially, target engagement—and plans to develop a suite of AI-enabled autonomous systems. In addition, the Russian military plans to incorporate AI into uninhabited aerial, naval, and undersea vehicles and is currently developing swarming capabilities. It is also exploring innovative uses of AI for electronic warfare, including adaptive frequency hopping, waveforms, and countermeasures. Finally, Russia has made extensive use of AI technologies for domestic propaganda and surveillance, as well as for information operations directed against the United States and U.S. allies, and can be expected to continue to do so in the future. Despite Russia's aspirations, analysts argue that it may be difficult for Russia to make significant progress in AI development. In 2017, Russian military spending dropped by 20% in constant dollars, with subsequent cuts forecast in both 2018 and 2019. In addition, many analysts note that Russian academics have produced few research papers on AI and that the Russian technology industry has yet to produce AI applications that are on par with those produced by the United States and China. Others analysts counter that such factors may be irrelevant, arguing that while Russia has never been a leader in internet technology, it has still managed to become a notably disruptive force in cyberspace. International Institutions A number of international institutions have examined issues surrounding AI, including the Group of Seven (G7), the Organisation for Economic Co-operation and Development (OECD), and the Asia-Pacific Economic Cooperation (APEC). The U.N. CCW, however, has made the most concerted effort to consider certain military applications of AI, with a particular focus on LAWS. In general, the CCW is charged with "banning or restricting the use of specific types of weapons that are considered to cause unnecessary or unjustifiable suffering to combatants or to affect civilian populations" and has previously debated weapons such as mines, cluster munitions, and blinding lasers. The CCW began discussions on LAWS in 2014 with informal annual "Meetings of Experts." In parallel, the International Committee of the Red Cross (ICRC) held similar gatherings of interdisciplinary experts on LAWS that produced reports for the CCW on technical, legal, moral, and humanitarian issues. During the CCW's April 2016 meeting, state parties agreed to establish a formal Group of Governmental Experts (GGE), with an official mandate to "assess questions related to emerging technologies in the area of LAWS." Although the GGE has now convened three times, it has not produced an official definition of LAWS or issued official guidance for their development or use. As a result, one U.S. participant cautioned that the international community is in danger of "the pace of diplomacy falling behind the speed of technological advancement." AI Opportunities and Challenges AI poses a number of unique opportunities and challenges within a national security context. However, its ultimate impact will likely be determined by the extent to which developers, with the assistance of policymakers, are able to maximize its strengths while identifying options to limit its vulnerabilities. Autonomy Many autonomous systems incorporate AI in some form. Such systems were a central focus of the Obama Administration's "Third Offset Strategy," a framework for preserving the U.S. military's technological edge against global competitors. Depending on the task, autonomous systems are capable of augmenting or replacing humans, freeing them up for more complex and cognitively demanding work. In general, experts assert that the military stands to gain significant benefits from autonomous systems by replacing humans in tasks that are "dull, dangerous, or dirty." Specific examples of autonomy in military systems include systems that conduct long-duration intelligence collection and analysis, clean up environments contaminated by chemical weapons, or sweep routes for improvised explosive devices. In these roles, autonomous systems may reduce risk to warfighters and cut costs, providing a range of value to DOD missions, as illustrated in Figure 3 . Some analysts argue these advantages create a "tactical and strategic necessity" as well as a "moral obligation" to develop autonomous systems. Speed and Endurance AI introduces a unique means of operating in combat at the extremes of the time scale. It provides systems with an ability to react at gigahertz speed, which in turn holds the potential to dramatically accelerate the overall pace of combat. As discussed below, some analysts contend that a drastic increase in the pace of combat could be destabilizing—particularly if it exceeds human ability to understand and control events—and could increase a system's destructive potential in the event of a loss of system control. Despite this risk, some argue that speed will confer a definitive warfighting advantage, in turn creating pressures for widespread adoption of military AI applications. In addition, AI systems may provide benefits in long-duration tasks that exceed human endurance. For example, AI systems may enable intelligence gathering across large areas over long periods of time, as well as the ability to autonomously detect anomalies and categorize behavior. Scaling AI has the potential to provide a force-multiplying effect by enhancing human capabilities and infusing less expensive military systems with increased capability. For example, although an individual low-cost drone may be powerless against a high-tech system like the F-35 stealth fighter, a swarm of such drones could potentially overwhelm high-tech systems, generating significant cost-savings and potentially rendering some current platforms obsolete. AI systems could also increase the productivity of individual servicemembers as the systems take over routine tasks or enable tactics like swarming that require minimal human involvement. Finally, some analysts caution that the proliferation of AI systems may decouple military power from population size and economic strength. This decoupling may enable smaller countries and nonstate actors to have a disproportionately large impact on the battlefield if they are able to capitalize on the scaling effects of AI. Information Superiority AI may offer a means to cope with an exponential increase in the amount of data available for analysis. According to one DOD source, the military operates over 11,000 drones, with each one recording "more than three NFL seasons worth" of high-definition footage each day. However, the department does not have sufficient people or an adequate system to comb through the data in order to derive actionable intelligence analysis. This issue will likely be exacerbated in the future as data continue to accumulate. According to one study, by 2020 every human on the planet will generate 1.7 megabytes of information every second, growing the global pool of data from 4.4 zettabytes today to almost 44.0 zettabytes. AI-powered intelligence systems may provide the ability to integrate and sort through large troves of data from different sources and geographic locations to identify patterns and highlight useful information, significantly improving intelligence analysis. In addition, AI algorithms may generate their own data to feed further analysis, accomplishing tasks like converting unstructured information from polls, financial data, and election results into written reports. AI tools of this type thus hold the potential to bestow a warfighting advantage by improving the quality of information available to decisionmakers. Predictability AI algorithms often produce unpredictable and unconventional results. In March 2016, the AI company DeepMind created a game-playing algorithm called AlphaGo, which defeated a world-champion Go player, Lee Sedol, four games to one. After the match, Sedol commented that AlphaGo made surprising and innovative moves, and other expert Go players subsequently stated that AlphaGo overturned accumulated wisdom on game play. AI's capacity to produce similarly unconventional results in a military context may provide an advantage in combat, particularly if those results surprise an adversary. However, AI systems can fail in unexpected ways, with some analysts characterizing their behavior as "brittle and inflexible." Dr. Arati Prabhakar, the former DARPA Director, commented, "When we look at what's happening with AI, we see something that is very powerful, but we also see a technology that is still quite fundamentally limited ... the problem is that when it's wrong, it's wrong in ways that no human would ever be wrong." AI-based image recognition algorithms surpassed human performance in 2010, most recently achieving an error rate of 2.5% in contrast to the average human error rate of 5%; however, some commonly cited experiments with these systems demonstrate their capacity for failure. As illustrated in Figure 4 , researchers combined a picture that an AI system correctly identified as a panda with random distortion that the computer labeled "nematode." The difference in the combined image is imperceptible to human eyes, but the AI system labeled the image as a gibbon with 99.3% confidence. In another experiment, an AI system described the picture in Figure 5 as "a young boy is holding a baseball bat," demonstrating the algorithm's inability to understand context. Some experts warn that AI may be operating with different assumptions about the environment than human operators, who would have little awareness of when the system is outside the boundaries of its original design. Similarly, AI systems may be subject to algorithmic bias as a result of their training data. For example, researchers have repeatedly discovered instances of racial bias in AI facial recognition programs due to the lack of diversity in the images on which the systems were trained, while some natural language processing programs have developed gender bias. This could hold significant implications for AI applications in a military context, particularly if such biases remain undetected and are incorporated into systems with lethal effects. "Domain adaptability," or the ability of AI systems to adjust between two disparate environments, may also present challenges for militaries. For example, one AI system developed to recognize and understand online text was trained primarily on formal language documents like Wikipedia articles. The system was later unable to interpret more informal language in Twitter posts. Domain adaptability failures could occur when systems developed in a civilian environment are transferred to a combat environment. AI system failures may create a significant risk if the systems are deployed at scale. One analyst noted that although humans are not immune from errors, their mistakes are typically made on an individual basis, and they tend to be different every time. However, AI systems have the potential to fail simultaneously and in the same way, potentially producing large-scale or destructive effects. Other unanticipated results may arise when U.S. AI systems interact with adversary AI systems trained on different data sets with different design parameters and cultural biases. Analysts warn that if militaries rush to field the technology prior to gaining a comprehensive understanding of potential hazards, they may incur a "technical debt," a term that refers to the effect of fielding AI systems that have minimal risk individually but compounding collective risk due to interactions between systems. This risk could be further exacerbated in the event of an AI arms race. Explainability Further complicating issues of predictability, the types of AI algorithms that have the highest performance are currently unable to explain their processes. For example, Google created a cat-identification system, which achieved impressive results in identifying cats on YouTube; however, none of the system's developers were able to determine which traits of a cat the system was using in its identification process. This lack of so-called "explainability" is common across all such AI algorithms. To address this issue, DARPA is conducting a five-year research effort to produce explainable AI tools. Other research organizations are also attempting to do a backwards analysis of these types of algorithms to gain a better understanding of their internal processes. In one such study, researchers analyzed a program designed to identify curtains and discovered that the AI algorithm first looked for a bed rather than a window, at which point it stopped searching the image. Researchers later learned that this was because most of the images in the training data set that featured curtains were bedrooms. The project demonstrated the possibility that training sets could inadvertently introduce errors into a system that might not be immediately recognized or understood by users. Explainability can create additional issues in a military context, because the opacity of AI reasoning may cause operators to have either too much or too little confidence in the system. Some analysts are particularly concerned that humans may be averse to making a decision based entirely on AI analysis if they do not understand how the machine derived the solution. Dawn Meyerriecks, Deputy Director for Science and Technology at the CIA, expressed this concern, arguing, "Until AI can show me its homework, it's not a decision quality product." Increasing explainability will thus be key to humans building appropriate levels of trust in AI systems. As a U.S Army study of this issue concludes, only "prudent trust" will confer a competitive advantage for military organizations. Additional human-machine interaction issues that may be challenged by insufficient explainability in a military context include the following: Goal Alignment . The human and the machine must have a common understanding of the objective. As military systems encounter a dynamic environment, the goals will change, and the human and the machine must adjust simultaneously based on a shared picture of the current environment. Task A lignment. Humans and machines must understand the boundaries of one another's decision space, especially as goals change. In this process, humans must be consummately aware of the machine's design limitations to guard against inappropriate trust in the system. Human Machine Interface. Due to the requirement for timely decisions in many military AI applications, traditional machine interfaces may slow down performance, but there must be a way for the human and machine to coordinate in real time in order to build trust. Finally, explainability could challenge the military's ability to "verify and validate" AI system performance prior to fielding. Due to their current lack of an explainable output, AI systems do not have an audit trail for the military test community to certify that a system is meeting performance standards. DOD is currently developing a framework to test AI system lifecycles and building methods for testing AI systems in diverse environments with complex human-machine interactions. Exploitation AI systems present unique pathways for adversary exploitation. First, the proliferation of AI systems will increase the number of "hackable things," including systems that carry kinetic energy (e.g., moving vehicles), which may in turn allow exploitive actions to induce lethal effects. These effects could be particularly harmful if an entire class of AI systems all have the same exploitable vulnerability. In addition, AI systems are particularly vulnerable to theft by virtue of being almost entirely software-based. As one analyst points out, the Chinese may be able to steal the plans for an F-35, but it will take them years to find the materials and develop the manufacturing processes to build one. In contrast, stolen software code can be used immediately and reproduced at will. This risk is amplified by the dual-use nature of the technology and the fact that the AI research community has been relatively open to collaboration up to this point. Indeed, numerous AI tools developed for civilian use—but that could be adapted for use in weapon systems—have been shared widely on unclassified internet sites, making them accessible to major military powers and nonstate actors alike. Finally, adversaries may be capable of deliberately introducing the kinds of image classification and other errors discussed in the " Predictability " section above. In one such case, researchers who had access to the training data set and algorithm for an image classifier on a semiautonomous vehicle used several pieces of strategically placed tape (as illustrated in Figure 6 ) to cause the system to identify a stop sign as a speed limit sign. In a later research effort, a team at MIT successfully tricked an image classifier into thinking that a picture of machine guns was a helicopter—without access to the system's training data or algorithm. These vulnerabilities highlight the need for robust data security, cybersecurity, and testing and evaluation processes as military AI applications are developed. AI's Impact on Combat Although AI has not yet entered the combat arena in a serious way, experts are predicting the potential impact that AI will have on the future of warfare. This influence will be a function of many factors, including the rate of commercial investment, the drive to compete with international rivals, the research community's ability to advance the state of AI capability, the military's general attitude toward AI applications, and the development of AI-specific warfighting concepts. Many experts assert that there is a "sense of inevitability" with AI, arguing that it is bound to be substantially influential. Nevertheless, in January 2016, the Vice Chairman of the Joint Chiefs of Staff, General Paul Selva, intimated that it may be too early to tell, pointing out that DOD is still evaluating AI's potential. He stated, "The question we're trying to pose now is, 'Do the technologies that are being developed in the commercial sector principally provide the kind of force multipliers that we got when we combined tactical nuclear weapons or precision and stealth?' If the answer is yes, then we can change the way that we fight.... If not, the military will seek to improve its current capabilities slightly to gain an edge over its adversaries." There are a range of opinions on AI's trajectory, and Congress may consider these future scenarios as it seeks to influence and conduct oversight of military AI applications. Minimal Impact on Combat While many analysts admit that military AI technology is in a stage of infancy, it is difficult to find an expert who believes that AI will be inconsequential in the long run. However, AI critics point to a number of trends that may minimize the technology's impact. From a technical standpoint, there is a potential that the current safety problems with AI will be insurmountable and will make AI unsuitable for military applications. In addition, there is a chance the perceived current inflection point in AI development will instead lead to a plateau. Some experts believe that the present family of algorithms will reach its full potential in another 10 years, and AI development will not be able to proceed without significant leaps in enabling technologies, such as chips with higher power efficiency or advances in quantum computing. The technology has encountered similar roadblocks in the past, resulting in periods called "AI Winters," during which the progress of AI research slowed significantly. As discussed earlier, the military's willingness to fully embrace AI technology may pose another constraint. Many academic studies on technological innovation argue that military organizations are capable of innovation during wartime, but they characterize the services in peacetime as large, inflexible bureaucracies that are prone to stagnation unless there is a crisis that spurs action. Members of the Defense Innovation Board, composed of CEOs from leading U.S. commercial companies, remarked in their most recent report, "DOD does not have an innovation problem, it has an innovation adoption problem" with a "preference for small cosmetic steps over actual change." Another analysis asserts that AI adoption may be halted by poor expectation management. The report asserts that overhyped AI capabilities may cause frustration that will "diminish people's trust and reduce their willingness to use the system in the future." This effect could have a significant chilling effect on AI adoption. Evolutionary Impact on Combat Most analysts believe that AI will at a minimum have significant impact on the conduct of warfare. One study describes AI as a "potentially disruptive technology that may create sharp discontinuities in the conduct of warfare," further asserting that the technology may "produce dramatic improvements in military effectiveness and combat potential." These analysts point to research projects to make existing weapon systems and processes faster and more efficient, as well as providing a means to cope with the proliferation of data that complicate intelligence assessments and decisionmaking. However, these analysts caution that in the near future AI is unlikely to advance beyond narrow, task-specific applications that require human oversight. Some AI proponents contend that although humans will be present, their role will be less significant, and the technology will make combat "less uncertain and more controllable," as machines are not subject to the emotions that cloud human judgment. However, critics point to the enduring necessity for human presence on the battlefield in some capacity as the principle restraining factor that will keep the technology from upending warfare. An academic study of this trend argues, At present, even an AI of tremendous power will not be able to determine outcomes in a complex social system, the outcomes are too complex – even without allowing for free will by sentient agents.... Strategy that involves humans, no matter that they are assisted by modular AI and fight using legions of autonomous robots, will retain its inevitable human flavor. Pointing to another constraining factor, analysts warn of the psychological impact that autonomous systems will have on an adversary, especially in conflict with cultures that place a premium on courage and physical presence. One study on this topic quotes a security expert from Qatar who stated, "How you conduct war is important. It gives you dignity or not." In addition, experts highlight that the balance of international AI development will affect the magnitude of AI's influence. As one analyst states, "[T]he most cherished attribute of military technology is asymmetry." In other words, military organizations seek to develop technological applications or warfighting concepts that confer an advantage for which their opponent possesses no immediate countermeasure. Indeed, that is the U.S. military's intent with the current wave of technological development as it seeks "an enduring competitive edge that lasts a generation or more." For this reason, DOD is concerned that if the United States does not increase the pace of AI development and adoption, it will end up with either a symmetrical capability or a capability that bestows only a fleeting advantage, as U.S. competitors like China and Russia accelerate their own respective military AI programs. The democratization of AI technology will further complicate the U.S. military's pursuit of an AI advantage. As the 2018 National Defense Strategy warns, "The fact that many technological developments will come from the commercial sector means that state competitors and nonstate actors will also have access to them, a fact that risks eroding the conventional overmatch to which our Nation has grown accustomed." In these circumstances, AI could still influence warfighting methods, but the technology's overall impact may be limited if adversaries possess comparable capabilities. Revolutionary Impact on Combat A sizeable contingent of experts believe that AI will have a revolutionary impact on warfare. One analysis asserts that AI will induce a "seismic shift on the field of battle" and "fundamentally transform the way war is waged." The 2018 National Defense Strategy counts AI among a group of emerging technologies that will change the character of war, and Frank Hoffman, a professor at the National Defense University, takes this a step further, arguing that AI may "alter the immutable nature of war." Statements like this imply that AI's transformative potential is so great that it will challenge long-standing, foundational warfighting principles. In addition, members of the Chinese military establishment assert that AI "will lead to a profound military revolution." Proponents of this position point to several common factors when making their case. They argue that the world has passed from the Industrial Era of warfare into the Information Era, in which gathering, exploiting, and disseminating information will be the most consequential aspect of combat operations. In light of this transition, AI's potential ability to facilitate information superiority and "purge combat of uncertainty" will be a decisive wartime advantage, enabling faster and higher-quality decisions. As one study of information era warfare states, "[W]inning in the decision space is winning in the battlespace." Members of this camp argue that AI and autonomous systems will gradually distance humans from a direct combat role, and some even forecast a time in which humans will make strategic-level decisions while AI systems exclusively plan and act at the tactical level. In addition, analysts contend that AI may contest the current preference for quality over quantity, challenging industrial era militaries built around a limited number of expensive platforms with exquisite capabilities, instead creating a preference for large numbers of adequate, less expensive systems. A range of potential consequences flow from the assumptions surrounding AI's impact on warfighting. Some studies point to overwhelmingly positive results, like "near instantaneous responses" to adversary operations, "perfectly coordinated action," and "domination at a time and place of our choosing" that will "consistently overmatch the enemy's capacity to respond." However, AI may create an "environment where weapons are too fast, small, numerous, and complex for humans to digest ... taking us to a place we may not want to go but are probably unable to avoid." In other words, AI systems could accelerate the pace of combat to a point in which machine actions surpass the rate of human decisionmaking, potentially resulting in a loss of human control in warfare. There is also a possibility that AI systems could induce a state of strategic instability. The speed of AI systems may put the defender at an inherent disadvantage, creating an incentive to strike first against an adversary with like capability. In addition, placing AI systems capable of inherently unpredictable actions in close proximity to an adversary's systems may result in inadvertent escalation or miscalculation. Although these forecasts project dramatic change, analysts point out that correctly assessing future impacts may be challenging. Historians of technology and warfare emphasize that previous technological revolutions are apparent only in hindsight, and the true utility of a new application like AI may not be apparent until it has been used in combat. Nevertheless, given AI's disruptive potential, for better or for worse, it may be incumbent on military leaders and Congress to evaluate the implications of military AI developments and exercise oversight of emerging AI trends. Congressional actions that affect AI funding, acquisitions, norms and standards, and international competition have the potential to significantly shape the trajectory of AI development and may be critical to ensuring that advanced technologies are in place to support U.S. national security objectives and the continued efficacy of the U.S. military.

Artificial intelligence (AI) is a rapidly growing field of technology with potentially significant implications for national security. As such, the U.S. Department of Defense (DOD) and other nations are developing AI applications for a range of military functions. AI research is underway in the fields of intelligence collection and analysis, logistics, cyber operations, information operations, command and control, and in a variety of semiautonomous and autonomous vehicles. Already, AI has been incorporated into military operations in Iraq and Syria. Congressional action has the potential to shape the technology's development further, with budgetary and legislative decisions influencing the growth of military applications as well as the pace of their adoption. AI technologies present unique challenges for military integration, particularly because the bulk of AI development is happening in the commercial sector. Although AI is not unique in this regard, the defense acquisition process may need to be adapted for acquiring emerging technologies like AI. In addition, many commercial AI applications must undergo significant modification prior to being functional for the military. A number of cultural issues also challenge AI acquisition, as some commercial AI companies are averse to partnering with DOD due to ethical concerns, and even within the department, there can be resistance to incorporating AI technology into existing weapons systems and processes. Potential international rivals in the AI market are creating pressure for the United States to compete for innovative military AI applications. China is a leading competitor in this regard, releasing a plan in 2017 to capture the global lead in AI development by 2030. Currently, China is primarily focused on using AI to make faster and more well-informed decisions, as well as on developing a variety of autonomous military vehicles. Russia is also active in military AI development, with a primary focus on robotics. Although AI has the potential to impart a number of advantages in the military context, it may also introduce distinct challenges. AI technology could, for example, facilitate autonomous operations, lead to more informed military decisionmaking, and increase the speed and scale of military action. However, it may also be unpredictable or vulnerable to unique forms of manipulation. As a result of these factors, analysts hold a broad range of opinions on how influential AI will be in future combat operations. While a small number of analysts believe that the technology will have minimal impact, most believe that AI will have at least an evolutionary—if not revolutionary—effect. Military AI development presents a number of potential issues for Congress: What is the right balance of commercial and government funding for AI development? How might Congress influence defense acquisition reform initiatives that facilitate military AI development? What changes, if any, are necessary in Congress and DOD to implement effective oversight of AI development? How should the United States balance research and development related to artificial intelligence and autonomous systems with ethical considerations? What legislative or regulatory changes are necessary for the integration of military AI applications? What measures can Congress take to help manage the AI competition globally?

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I n the midst of ongoing concerns about illicit drug use and abuse, there has been heightened attention to the issue of opioid abuse—including both prescription opioids and nonprescription opioids such as heroin. The increased attention to opioid abuse and addiction first centered on the abuse of prescription painkillers. According to the Substance Abuse and Mental Health Services Administration (SAMHSA), about 3.3 million individuals were current (at least once in the past month) nonmedical users of prescription pain relievers such as OxyContin in 2016. Mirroring the nation's concern about prescription drug abuse, there has been corresponding unease regarding the rise in heroin abuse. According to the 2016 National Survey on Drug Use and Health, there were an estimated 948,000 individuals (0.4% of the 12 and older population) who reported using heroin within the past year—up from 0.2% to 0.3% of this population reporting use in the previous decade. In addition, about 626,000 individuals (0.2% of the 12 and older population) had a heroin use disorder in 2016. While this is similar to the proportion of the 12 and older population with a heroin use disorder from 2011 to 2015, it is significantly greater than the proportion from 2002 to 2010. Further, heroin overdose deaths increased by about 20% nationally between 2015 and 2016, and the Midwest and Northeast regions have been highlighted as areas of particular concern. In addition to increases in heroin use and abuse, there has been a simultaneous increase in its availability in the United States over the past decade. This has been fueled by a number of factors, including increased production and trafficking of heroin—principally by Mexican criminal networks. Mexican drug traffickers have been expanding their control of the U.S. heroin market, though the United States still receives some heroin from South America and Southwest Asia as well. Notably, while the majority of the world's opium is produced in Afghanistan, only a small proportion of that feeds the U.S. heroin market. Policymakers may want to examine U.S. efforts to counter heroin trafficking as a means of addressing opioid abuse in the United States. This report provides an overview of heroin trafficking into and within the United States. It includes a discussion of links between the trafficking of heroin and the illicit movement of related substances such as controlled prescription opioids and synthetic substances like fentanyl. The report also outlines existing U.S. efforts to counter heroin trafficking and possible congressional considerations going forward. Heroin Traffickers Mexican transnational criminal organizations (TCOs) "remain the greatest criminal drug threat to the United States; no other group is currently positioned to challenge them." They are the major suppliers and key producers of most illegal drugs smuggled into the United States, and they have been increasing their share of the U.S. drug market—particularly with respect to heroin. The Drug Enforcement Administration (DEA) notes that the Southwest border "remains the primary entry point for heroin into the United States." Mexican TCOs control the flow of heroin across the border, the majority of which "is through [privately owned vehicles] entering the United States at legal ports of entry, followed by tractor-trailers, where the heroin is co-mingled with legal goods." Mexican criminal networks have not always featured so prominently (or broadly) in the U.S. heroin market. Historically, Colombian criminal organizations controlled heroin markets in the Midwest and on the East Coast. Now, supply for these markets also comes directly from Mexican traffickers. The DEA indicates that "[s]ince 2015 most of the heroin sold in the U.S. is from Mexico." Mexican poppy cultivation reportedly increased by 35% from 2016 to 2017; officials project that the estimated 44,100 hectares cultivated in 2017 allowed for about 111 metric tons of pure heroin production. The DEA has observed that "[t]he increased role of Mexican traffickers is affecting heroin trafficking patterns." Historically, Mexican-produced black tar and brown powder heroin have been consumed in markets west of the Mississippi River, while markets east of the Mississippi have consumed more white powder heroin from South America. However, as the Mexican traffickers have taken on a larger role in the U.S. heroin market and have developed techniques to produce white powder heroin, they have moved their white powder heroin into both eastern and western U.S. markets. To facilitate the distribution and local sale of drugs in the United States, Mexican drug traffickers have sometimes formed relationships with U.S. gangs. Trafficking and distribution of illicit drugs is a primary source of revenue for these gangs and among the most common of their criminal activities. Gangs may work with a variety of drug trafficking organizations, and are often involved in selling multiple types of drugs besides heroin or other opioids. Heroin Seizures The majority of heroin making its way to the United States originates in Mexico and, to a lesser degree, Colombia. The amount of heroin seized across the United States, including at the Southwest border, has generally increased over the past decade, as illustrated in Figure 1 . Nationwide heroin seizures reached 7,979 kg in 2017, with 3,090 kg (39%) seized at the Southwest border. The United Nations Office on Drugs and Crime (UNODC) has outlined how seizure data can be used in combination with data on drug prices and purity to help serve as a drug market indicator. The UNODC notes that "[f]alling seizures in combination with rising drug prices and falling purity levels may suggest a decline in overall drug supply, while rising seizures in combination with falling drug prices and rising purity levels are usually considered a good indicator of an increase in drug supply." The UNODC's model can be applied to heroin seizure data to help assess the scope of the heroin market in the United States. Notably, heroin seizures have generally been increasing, as illustrated in Figure 1 . In addition, the average purity of retail-level heroin has been between 31% and 39% from 2012 to 2016; while the purity has fluctuated somewhat, it has remained elevated relative to levels in the 1980s. And while the retail-level price per gram has vacillated over the past couple of decades, it has remained lower than prices in the 1980s. This combination of seizures, purity, and price could indicate that there is an increased heroin supply for the U.S. market. Experts have noted an increase in Mexican heroin production, which is primarily destined for the United States. The increase in seizures, however, may reflect more than just increases in the heroin supply and demand in the U.S. market. This could also be driven by factors such as enhanced U.S. law enforcement efforts to interdict and seize the contraband and/or by less stringent efforts by traffickers and buyers to conceal the drugs. Arrests and Prosecutions Data from the DEA indicate that many of their heroin-related arrests are for trafficking-related offenses. In 2017, the DEA made 5,408 heroin-related arrests. The bulk of these were made for conspiracy (35%), distribution (24%), possession with intent (23%), and simple possession (11%). Other offense categories for which a much smaller proportion of arrests were made include importation, manufacture, RICO (Racketeer Influenced and Corrupt Organization), and CCE (continuing criminal enterprise). In other words, more of these heroin-related arrests were for offenses that may be considered to fall under the umbrella of trafficking rather than simple possession. DEA heroin arrest data indicate that since remaining relatively flat in the mid-2000s, overall heroin arrests generally increased through 2015 before declining through 2017 (see Figure 2 ). The U.S. Sentencing Commission reports that 2,658 individuals were sentenced for heroin trafficking offenses in U.S. District Courts in FY2017. While this was a decrease from FY2016, the number of individuals sentenced for heroin trafficking has generally moved upward over the past decade. FY2017 data indicate that of the 19,240 cases involving individuals sentenced for drug trafficking offenses, 2,658 (13.8%) involved individuals who were sentenced for heroin trafficking. That amounts to 4% of all cases sentenced in U.S. District Courts. (See Figure 3 .) Links to Related Substances Prescription Opioids Some have theorized that prescription opioid abuse may lead to, or be a "gateway" for, abuse of nonprescription opioids such as heroin. Results from one SAMHSA study indicate that the "recent (12 months preceding interview) heroin incidence rate was 19 times higher among those who reported prior nonmedical pain reliever (NMPR) use than among those who did not (0.39% vs. 0.02%)." However, while "four out of five recent heroin initiates (79.5%) previously used NMPR ... the vast majority of NMPR users have not progressed to heroin use." The 2016 National Heroin Threat Assessment Summary notes that about 4% of individuals who abuse prescription drugs will go on to use heroin. One factor that may sway opioid abusers' shifts from prescription opioids to heroin may be the cost. If users cannot afford prescription opioids, they may switch to heroin as a lower-cost alternative. While estimates vary, some have noted that an 80 mg pill of OxyContin (a prescription opioid containing oxycodone) can cost $80 on the street; a bag of heroin can cost $5-$10. The DEA reported that drug trafficking organizations have responded to the demand for lower cost opioids by sometimes shifting heroin trafficking operations to areas with higher prevalence of nonmedical prescription drug use. Fentanyl Fentanyl is a synthetic opioid that is approximately 50 times stronger than heroin and 100 times more potent than morphine. There are both legal and illegal forms of fentanyl. Legal fentanyl has pharmaceutical uses for treating post-operative pain and chronic pain associated with late stage cancer, and illicit fentanyl is sold on the black market and used/abused in similar ways as other opioid drugs. Most cases of fentanyl-related overdoses are associated with non-pharmaceutical, illegal fentanyl ; non-pharmaceutical fentanyl is often mixed with heroin and/or other drugs, sometimes without the consumer's knowledge. Some have purported that fentanyl is easier to mix with white powder heroin than with the black tar variety. As such, there have reportedly been more fentanyl-related overdose deaths in U.S. markets fueled by white powder heroin than those dominated by the black tar form. However, this could change as distributors are finding ways to incorporate fentanyl into the black tar heroin. Non-pharmaceutical fentanyl found in the United States is manufactured in China and Mexico. It is trafficked into the United States across the Southwest border or delivered through mail couriers directly from China, or from China through Canada. In addition, fentanyl-related substances—substances that are in the fentanyl chemical family but have minor variations in chemical structure—may be attractive to traffickers because the analogs are often unscheduled or unregulated. Like fentanyl, they can be sold as, or mixed in with, heroin or pressed into counterfeit pills. The DEA indicates that the majority of seized fentanyl samples analyzed involved fentanyl in powder form. However, law enforcement is concerned about the risks from fentanyl being pressed into counterfeit pills, in part, because there are more abusers of prescription pain pills than of heroin. As such, fentanyl pressed into counterfeit pills could ultimately affect a larger population of individuals. U.S. Heroin Trafficking Enforcement Efforts The United States confronts the drug problem through a combination of efforts targeting both the supply of and demand for drugs. As such, the Administration has directed resources into the areas of law enforcement initiatives, prevention, and treatment. In targeting one element of the drug problem—trafficking—U.S. efforts have centered on law enforcement initiatives. There are a number of federal law enforcement activities aimed specifically at (or which may be tailored to) curbing heroin trafficking. This section contains a snapshot of some of these efforts. DEA 360 Strategy The DEA has developed a 360 Strategy aimed at "tackling the cycle of violence and addiction generated by the link between drug cartels, violent gangs, and the rising problem of prescription opioid and heroin abuse." The strategy was launched in November 2015 as a pilot program in Pittsburgh, PA, and has since expanded to other cities. It leverages federal, state, and local law enforcement, diversion control, and community outreach organizations. As the program is relatively new, there have only been anecdotal reports of the operations that fall under the 360 Strategy framework, and an outcome evaluation of the strategy has not been conducted. Heroin and Fentanyl Signature Programs The DEA operates a heroin signature program (HSP) and a heroin domestic monitor program (HDMP), with the goal of identifying the geographic source of heroin found in the United States. The HSP analyzes wholesale-level samples of "heroin seized at U.S. ports of entry (POEs), all non-POE heroin exhibits weighing more than one kilogram, randomly chosen samples, and special requests for analysis." Chemical analysis of a given heroin sample can identify its "signature," which indicates a particular heroin production process that has been linked to a specific geographic source region. The HDMP assesses the signature source of retail-level heroin seized in the United States. This program samples retail-level heroin seized in 27 cities across the country and provides data on the price, purity, and geographic source of the heroin. The results from the HSP and HDMP can be used to help understand trafficking and distribution patterns throughout the country. The HSP started in 1977, and the HDMP began in 1979. The HSP tests about 600-900 heroin samples annually. In 2016, the HSP tested 744 samples from seizures totaling 1,632 kg—slightly more than 22% of the total heroin seized that year. Of the heroin analyzed in the HSP in 2016, 86% was identified as originating from Mexico, 10% was inconclusive, 4% was from South America, and less than 1% was from Southwest Asia. Wholesale-level Mexican white powder heroin produced with South American techniques had an average purity of 82%. Data from the HDMP indicate that retail-level Mexican white powder heroin produced with South American techniques had an average purity of 39.7% in 2016. The DEA has also started a Fentanyl Signature Profiling Program (FSPP), analyzing samples from fentanyl seizures to help "identify the international and domestic trafficking networks responsible for many of the drugs fueling the opioid crisis." In 2017, the FSPP analyzed 520 fentanyl powder samples from seizures totaling 960 kg of fentanyl. While the average purity was 5%, the DEA has indicated that fentanyl shipped directly from China often has purity levels above 90%, while fentanyl trafficked over the Southwest border from Mexico often has purity levels below 10%. HIDTA The High Intensity Drug Trafficking Areas (HIDTA) program provides assistance to law enforcement agencies—at the federal, state, local, and tribal levels—that are operating in regions of the United States that have been deemed critical drug trafficking areas. There are 29 designated HIDTAs throughout the United States and its territories. Administered by the Office of National Drug Control Policy (ONDCP), the program aims to reduce drug production and trafficking through four means: promoting coordination and information sharing between federal, state, local, and tribal law enforcement; bolstering intelligence sharing between federal, state, local, and tribal law enforcement; providing reliable intelligence to law enforcement agencies such that they may be better equipped to design effective enforcement operations and strategies; and promoting coordinated law enforcement strategies that rely upon available resources to reduce illegal drug supplies not only in a given area, but throughout the country. The HIDTA program does not mandate that all regional HIDTAs focus on the same drug threat—such as heroin trafficking; rather, funds can be used to support the most pressing drug threats in the region. As such, when heroin trafficking is found to be a top priority in a HIDTA region, funds may be used to support initiatives targeting it. In 2015, ONDCP launched the Heroin Response Strategy (HRS), "a multi-HIDTA, cross-disciplinary approach that develops partnerships among public safety and public health agencies at the Federal, state and local levels to reduce drug overdose fatalities and disrupt trafficking in illicit opioids." Within the HRS, a Public Health and Public Safety Network coordinates teams of drug intelligence officers and public health analysts in each state. The HRS not only provides information to these participating entities on drug trafficking and use, but it has "developed and disseminated prevention activities, including a parent helpline and online materials." Organized Crime Drug Enforcement Task Forces (OCDETF) The OCDETF program targets—with the intent to disrupt and dismantle—major drug trafficking and money laundering organizations. Federal agencies that participate in the OCDETF program include the DEA; Federal Bureau of Investigation (FBI); Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF); U.S. Marshals; Internal Revenue Service (IRS); U.S. Immigration and Customs Enforcement (ICE); U.S. Coast Guard (USCG); Offices of the U.S. Attorneys; and the Department of Justice's (DOJ's) Criminal Division. These federal agencies also collaborate with state and local law enforcement on task forces. There are 14 OCDETF strike forces around the country and an OCDETF Fusion Center that gathers and analyzes intelligence and information to support OCDETF operations. The OCDETFs target those organizations that have been identified on the Consolidated Priority Organization Targets (CPOT) List, the "most wanted" list for leaders of drug trafficking and money laundering organizations. During FY2017, 20% (932) of active OCDETF investigations were linked to valid CPOTs. Notably, 50% of the FY2017 CPOT investigations involved heroin trafficking. COPS Anti-Heroin Task Force Program Within DOJ, the Community Oriented Policing Services (COPS) Office's Anti-Heroin Task Force (AHTF) Program provides funding assistance to state law enforcement agencies to investigate illicit activities related to the trafficking or distribution of heroin or diverted prescription opioids. While the AHTF program is not a federal enforcement program, it is a federal grant program that exclusively provides money targeted specifically for heroin trafficking enforcement efforts. Funds cannot be used for treatment or other purposes because the program focuses on trafficking and distribution. Further, the program focuses its funding on state law enforcement agencies with multi-jurisdictional reach and interdisciplinary team structures—such as task forces. For FY2017, grants were awarded to entities in eight states. Going Forward Adequacy of Data on Heroin Flows What is known about heroin trafficking flows is contingent on a number of factors surrounding the collection and reporting of these data, which are both multifaceted and incomplete. Data on various elements (e.g., production, price, purity, seizures, etc.) can help provide insight into the landscape of heroin trafficking, though these data are sometimes imprecise. For example, as the bulk of heroin consumed in the United States has been traced to Mexico, one central piece of data in understanding trafficking flows to the United States is the total potential production in the source countries. The United Nations Office on Drugs and Crime has noted, however, that "[o]nly partial information about the extent of opium poppy cultivation and heroin production in the Americas is available." The DEA's 201 8 National Drug Threat Assessment estimates that Mexico may have cultivated 44,100 hectares of opium poppy in 2017, potentially yielding 111 metric tons of pure heroin. This is 38% higher than the estimated production in 2016. In the past, officials have noted that crop yield data are unreliable, and it is unclear whether the newer data are more reliable. Even with these questions about the data's reliability, U.S. officials state that production of heroin in Mexico has increased. While much of Mexican-produced heroin is reportedly destined for the United States, that proportion is unknown. In addition, it is unknown how much pure heroin is making its way into the United States. Data on seizures are available, but these reflect an unknown portion of total drugs traversing U.S. borders. In addition, as noted, officials have estimated heroin availability in the United States based, in part, on estimated production, known seizures, and the price and purity of select samples of wholesale and retail-level heroin, but these numbers collectively represent an imprecise picture of heroin trafficking. Policymakers may, in their oversight of efforts to counter the flow of heroin into the country, assess means to bolster the accuracy and completeness of data. Prioritizing Heroin Trafficking Enforcement Over the past few years, officials have repeatedly referred to heroin as a top drug threat in the United States. The 201 8 National Drug Threat Assessmen t notes that heroin is one of the most significant drug threats. This is largely based on the health risks—overdose and death—posed by these substances. Nationally, however, federal law enforcement seizures of heroin have generally increased in the past several years, as illustrated in Figure 1 . Policymakers may question whether federal enforcement efforts prioritize curbing heroin trafficking to an extent commensurate with the reported threat of the drug. While seizures have generally increased both along the Southwest border and throughout the country, it is unclear whether enforcement efforts should, or are able to, increasingly target heroin trafficking networks. In addition, law enforcement data indicate that there have been changes in heroin trafficking patterns along the Southwest border. For instance, from 2016 to 2017 heroin trafficking, by weight, increased 238% in the El Centro corridor, 174% in the Del Rio corridor, and 104% in the Yuma corridor, while it declined in other areas such as the Rio Grande Valley (by 24%). Policymakers may ask if heroin enforcement efforts are nimble and able to respond (and if so, how) to shifts in heroin trafficking patterns and maximize seizures in the areas where heroin flows are increasing. ONDCP has noted that the "responsibility for curbing heroin production and trafficking lies primarily with the source countries." Policymakers may examine the balance of resources targeted toward domestic efforts to reduce drug trafficking through interdiction and prosecution relative to resources dedicated to eradication, alternative economic development, and other options abroad. Evaluating Goals and Outcomes of U.S. Strategies The United States has a number of strategies and initiatives targeting illicit drugs. While they do not all focus on drug trafficking per se—or even more specifically, heroin trafficking—their goals include reducing drug trafficking. Policymakers may evaluate whether these strategies and initiatives are sufficient to effectively respond to the threat of heroin trafficking in the United States as well as to the role heroin trafficking may play in the opioid epidemic. If not, how might a strategy look that focuses specifically on heroin/opioid trafficking, and would such a strategy be nimble enough to counter the constantly evolving drug trafficking threats facing the United States? Examples of existing efforts are outlined here. National Drug Control Strategy ONDCP is charged with coordinating federal drug control policy. In doing so, ONDCP is responsible for producing the annual National Drug Control Strategy (strategy), the purpose of which is to outline a plan to reduce illicit drug consumption in the United States and the consequences of such use. The most recent strategy was released in 2016. The 2016 strategy prioritizes seven approaches to reduce both illicit drug use and its consequences: preventing drug use in U.S. communities; seeking early intervention opportunities in health care; increasing access to treatment and supporting recovery; reforming the criminal justice system to better address substance use disorders; disrupting domestic drug trafficking and production; bolstering international partnerships; and improving information systems for analysis, assessment, and management. Each of these approaches is based on several principles and fosters certain federal drug control activities. While these approaches and principles are not necessarily directed at countering heroin trafficking, they focus on confronting the top drug threats, which have in recent years involved heroin trafficking and its role in the opioid epidemic. Notably, the 2016 strategy identified the greatest drug threat to the United States as "the continuing opioid epidemic, which began with the overprescribing of powerful long-acting, time-released opioid medications … [and] was further complicated by a sharp increase in the supply and subsequent use of high purity, low cost heroin produced in Mexico and Colombia and the trafficking of illicitly produced fentanyl." It is unclear whether the Trump Administration will release a strategy or how prominently countering heroin trafficking as it contributes to the opioid epidemic may feature in that strategy. National Southwest Border Counternarcotics Strategy The National Southwest Border Counternarcotics Strategy (NSBCS) was first launched in 2009, and it outlines domestic and transnational efforts to reduce the flow of illegal drugs, money, and contraband across the Southwest border. It has a number of strategic objectives: enhance intelligence and information sharing capabilities and processes; reduce the flow of drugs, drug proceeds, and associated instruments of crime that cross the Southwest border; develop strong, resilient communities that resist criminal activity and promote healthy lifestyles; disrupt and dismantle TCOs operating along the Southwest border; stem the flow of illicit proceeds across the Southwest border; and enhance U.S.-Mexican-Central American cooperation on joint counterdrug efforts. The 2016 NSBCS focuses on drug trafficking broadly, noting that the Southwest border is the primary entry point for many illegal drugs arriving in the United States. Nonetheless, it mentions that "the threat posed by heroin in the United States is serious and continues to intensify." The objectives and action items, however, target the broader array of drug and criminal threats at the border. It is unclear whether the Trump Administration will use the NSBCS, modify it, or develop other measures and strategies to counter the threats—including those posed by heroin trafficking—at the Southwest border. National Strategy to Combat Transnational Organized Crime In July 2011, the Obama Administration released the Strategy to Combat Transnational Organized Crime: Addressing Converging Threats to National Security . The strategy provided the federal government's first broad conceptualization of "transnational organized crime," highlighting it as a national security concern. It highlights 10 primary categories of threats posed by transnational organized crime, one of which is the expansion of drug trafficking. Additionally, the strategy outlines six key priority actions to counter threats posed by transnational organized crime: taking shared responsibility and identifying what actions the United States can take to protect against the threat and impact of transnational organized crime; enhancing intelligence and information sharing; protecting the financial system and strategic markets; strengthening interdiction, investigations, and prosecutions; disrupting drug trafficking and its facilitation of other transnational threats; and building international capacity, cooperation, and partnerships. While this strategy is not tailored solely to drug trafficking (or more specifically, heroin trafficking) activities of criminal networks, it includes a discussion of the threat. Additionally, the strategy notes that a number of the threats outlined in the strategy may be facilitated by drug trafficking and the proceeds generated by those activities. For instance, the illicit drugs trade is at times linked to crimes such as weapons trafficking or human trafficking. Similar to the case with the NSBCS, it is unclear whether the Trump Administration will rely upon this strategy either broadly or more specifically to counter heroin trafficking. Executive Orders The Trump Administration has issued executive orders that could affect federal efforts to counter heroin trafficking, though they do not focus solely on them. For instance, the executive order Enforcing Federal Law with Respect to Transnational Criminal Organizations and Preventing International Trafficking , issued in February 2017, relies in part on the Threat Mitigation Working Group—which was established as part of the Strategy to Combat Transnational Organized Crime—to, among other things, support and bolster U.S. efforts to counter criminal organizations. However, the executive order does not speak to the larger strategy or specific efforts to counter heroin trafficking. In addition, President Trump issued the executive order Establishing the President's Commission on Combating Drug Addiction and the Opioid Crisis in March 2017. The commission's final report recommended a number of actions, including providing enhanced penalties for the trafficking of fentanyl and its analogues as well as bolstering tools and technologies to detect fentanyl before it enters the United States. National Heroin Task Force The National Heroin Task Force was convened by DOJ and ONDCP in March 2015 pursuant to P.L. 113-235 . The task force examined the Administration's efforts to tackle the heroin epidemic from various angles including criminal enforcement, prevention, and substance use disorder treatment and recovery services, and it developed a set of recommendations to "curtail the escalating overdose epidemic and death rates." The report's recommendations target the public safety and public health aspects of the opioid epidemic, and several specifically address countering heroin trafficking. The task force suggested, for instance, that the federal government prioritize prosecutions of heroin distributors and enhance investigation and prosecution techniques to target the heroin supply chain—particularly when the drug caused a death. The report noted that identifying the source of particularly potent heroin and cutting off the flow of heroin from the source may ultimately save lives. It also noted that prominent prosecutions of distributors and traffickers can help serve as a deterrent to other potential drug dealers. The task force also recommended using coordinated, real time data sharing to disrupt drug supply and to focus prevention, treatment, and intervention resources on the areas that need them most. It highlights the HIDTA program and the OCDETF program as examples of task forces that can be leveraged for information sharing purposes; while these programs have information sharing capacities, it is unclear how rapidly this sharing could be executed to fulfill the task force's recommendation of striving for "real time" information sharing.

Over the past several years, the nation has seen an uptick in the use and abuse of opioids—both prescription opioids and non-prescription opioids such as heroin. In 2016, there were an estimated 948,000 individuals (0.4% of the 12 and older population) who reported using heroin within the past year—up from 0.2% to 0.3% of this population reporting use in the previous decade. In addition to an increase in heroin use over the past several years, there has been a simultaneous increase in its availability in the United States. The increase in availability has been fueled by a number of factors, including increased production and trafficking of heroin—principally by Mexican criminal networks. Mexican transnational criminal organizations are the major suppliers and key producers of most illegal drugs smuggled into the United States. They have been increasing their share of the U.S. drug market—particularly with respect to heroin—even though the United States still receives some heroin from South America and, to a lesser extent, Southwest Asia. To facilitate the distribution and sale of drugs in the United States, Mexican drug traffickers have formed relationships with U.S. gangs. Heroin seizures across the country, as well as those at the Southwest border, have generally increased over the past decade. Nationwide heroin seizures reached 7,979 kg in 2017, with 3,090 kg (39%) seized at the Southwest border. This is up from about 2,000 kg seized at the Southwest border a decade prior. Further, there has been an increase in federal arrests and sentences for heroin-related crimes. For instance, the Drug Enforcement Administration made 5,408 heroin-related arrests in 2017—up from about 2,500 a decade prior. In addition, U.S. Sentencing Commission data indicate that from 2007 to 2017, there was a general increase in the number of individuals sentenced for heroin trafficking offenses in U.S. District Courts. The federal government—specifically, law enforcement—relies on a number of tools and initiatives to counter heroin trafficking. Many of these efforts focus on drug trafficking broadly and prioritize the greatest drug trafficking threats in a given area, whether those threats come from trafficking heroin or other illicit drugs or substances. Going forward, there are a number of issues policymakers may consider as they address heroin trafficking. For instance, what is known about drug trafficking is contingent on data surrounding poppy cultivation, heroin production, and product inflows into the United States. Given that these are often based on snapshots of knowledge from disparate sources, Congress may question how these data are collected and their adequacy. In addition, Congress may examine current law enforcement efforts to dismantle heroin trafficking networks and prosecute their leaders. Policymakers may also look at existing federal strategies on drug control and transnational crime to evaluate whether they are able to target the heroin trafficking threat effectively.

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Overview Title IV of the Higher Education Act (HEA; P.L. 89-329), as amended, authorizes programs that provide financial assistance to students to attend certain institutions of higher education (IHEs). In academic year (AY) 2016-2017, 6,760 institutions were classified as Title IV eligible IHEs. Of these IHEs eligible to participate in Title IV programs, approximately 29.4% were public institutions, 27.8% were private nonprofit institutions, and 42.9% were proprietary (or private, for-profit) institutions. It is estimated that $122.5 billion was made available to students through Title IV federal student aid in FY2017. To be able to receive Title IV assistance, students must attend an institution that is eligible to participate in the Title IV programs. IHEs must meet a variety of requirements to participate in the Title IV programs. First, an IHE must meet basic eligibility criteria, including offering at least one eligible program of education. In addition, an IHE must satisfy the program integrity triad, under which it must be legally authorized to provide a postsecondary education in the state in which it is located; accredited or preaccredited by an agency recognized by the Department of Education (ED) for such purposes, and certified by ED as eligible to participate in Title IV programs. The state authorization and accreditation components of the triad were developed independently to address the issues of quality assurance and consumer protection, and the federal government (ED specifically) generally relies on states and accrediting agencies to determine standards of educational program quality. The federal government's only direct role in determining Title IV eligibility is through the process of certification of eligibility and ensuring IHEs meet some additional Title IV requirements. Certification, as a component of the program integrity triad, focuses on an institution's fiscal responsibility and administrative capacity to administer Title IV funds. An IHE must fulfill a variety of other related requirements, including those that relate to institutional recruiting practices, student policies and procedures, and Title IV program administration. Finally, additional criteria may apply to an institution depending on its control or the type of educational programs it offers. For instance, proprietary institutions must derive at least 10% of their revenues from non-Title IV funds (also known as the 90/10 rule). Failure to fulfill some of these requirements does not necessarily end an IHE's participation in the Title IV programs, but may lead to additional oversight from ED and/or restrictions placed an IHE's Title IV participation. This report provides a general overview of HEA provisions that affect a postsecondary institution's eligibility for participation in Title IV student aid programs. It first describes general eligibility criteria at both the institutional and programmatic level and then, in more detail, the program integrity triad. Next, it discusses several issues that are closely related to institutional eligibility: Program Participation Agreements, campus safety policies and crime reporting required under the Clery Act, the return of Title IV funds, and distance education. Eligibility Criteria To be eligible to participate in HEA Title IV student aid programs, institutions must meet several criteria. These criteria include requirements related to programs offered by the institutions, student enrollment, institutional operations, and the length of academic programs. This section discusses the definition of an eligible IHE for the purposes of Title IV participation and program eligibility requirements. Eligible Institutions The HEA contains two definitions of institutions of higher education. Section 101 provides a general definition of IHE that applies to institutional eligibility for participation in HEA programs other than Title IV programs. The Section 102 definition of IHE is used only to determine institutional eligibility to participate in HEA Title IV programs. Section 101 Institutions Section 101 of the HEA provides a general definition of IHE. This definition applies to institutional participation in non-Title IV HEA programs. Section 101 IHEs can be public or private nonprofit educational institutions. Section 101 specifies criteria both public and private nonprofit educational institutions must meet to be considered IHEs. Public Institutions of Higher Education Neither the HEA nor regulations specifically define a public institution of higher education. However, in general, public institutions can be described as those whose educational programs are operated by states or other government entities and are primarily supported by public funds. Private Nonprofit Institutions of Higher Education Regulations define a nonprofit IHE as one that (1) is owned and operated by a nonprofit corporation or association, with no part of the corporation's or association's net earnings benefiting a private shareholder or individual, (2) is determined by the Internal Revenue Service to be a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code (IRC), and (3) is legally authorized to operate as a nonprofit organization by each state in which it is physically located. Section 101 Institution of Higher Education To be considered a Section 101 IHE, public and private nonprofit educational institutions must admit as regular students only individuals with a high school diploma or its equivalent, individuals beyond the age of compulsory school attendance, or individuals who are dually or concurrently enrolled in both the institution and in a secondary school; be legally authorized to provide a postsecondary education within the state in which they are located; offer a bachelor's degree, provide a program of at least two-years that is acceptable for full credit toward a bachelor's degree, award a degree that is accepted for admission to a graduate or professional program, or provide a training program of at least a one-year that prepares students for gainful employment in a recognized occupation; and be accredited or preaccredited by an accrediting agency recognized by ED to grant accreditation or preaccreditation status Section 102 Institutions Section 102 of the HEA defines IHE only for the purposes of Title IV participation. The Section 102 definition includes all institutions included in the Section 101 definition (i.e., public and private nonprofit IHEs) and also includes proprietary institutions, postsecondary vocational institutions, and foreign institutions that have been approved by ED. Section 102 specifies that proprietary and postsecondary vocational institutions must meet many of the same Section 101 requirements that are applicable to public and private nonprofit institutions. In addition, Section 102 specifies other criteria that all types of educational institutions must meet to be considered Title IV eligible IHEs. Proprietary Institutions of Higher Education HEA Section 102 specifies that a proprietary IHEs is an institution that is neither a public nor a private nonprofit institution. In addition to the basic Title IV eligibility criteria that all IHEs must meet (e.g., state authorization, accreditation by an ED-recognized accrediting agency), proprietary IHEs must meet additional criteria to be considered Title IV eligible. Specifically, a proprietary IHE must (1) provide an eligible program of training "to prepare students for gainful employment in a recognized occupation" or (2) provide a program leading to a baccalaureate degree in liberal arts that has been continuously accredited by a regional accrediting agency since October 1, 2007, and have provided the program continuously since January 1, 2009. Additionally, it must have been legally authorized to provide (and have continuously been providing) the same or a substantially similar educational program for at least two consecutive years. Postsecondary Vocational Institutions HEA Section 102 defines a postsecondary vocational institution as a public or private nonprofit institution that provides an eligible program of training "to prepare students for gainful employment in a recognized occupation," and has been legally authorized to provide (and has continuously been providing) the same or a substantially similar educational program for at least two consecutive years. It is possible for a public or private nonprofit IHE that offers a degree program (e.g., an associate's or bachelor's degree) to also qualify as a postsecondary vocational institution by offering programs that are less than one academic year and that lead to a nondegree recognized credential such as a certificate. Foreign Institutions Institutional participation in Title IV student aid programs allows students from the United States to borrow through the federal Direct Loan program to attend postsecondary institutions located outside of the United States. In general, a foreign institution is eligible to participate in the Direct Loan program if it is comparable to an eligible IHE (as defined in HEA Section 101) within the United States, is a public or private nonprofit institution, and has been approved by ED. Foreign graduate medical schools, veterinary schools, and nursing schools are also eligible to participate in Title IV student aid programs, but must meet additional requirements. Freestanding foreign graduate medical schools, veterinary schools, and nursing schools may be proprietary institutions. Additional requirements for foreign institutions to participate in Title IV student aid programs are beyond the scope of this report and, generally, will not be discussed hereinafter. Section 102 Institution of Higher Education The definitions of proprietary institutions and postsecondary vocational institutions contained in Section 102 have several overlapping components with the Section 101 definition of IHE. For instance, both proprietary and postsecondary vocational institutions must (1) admit as regular students only those individuals with a high school diploma or its equivalent, individuals beyond the age of compulsory school attendance, or individuals who are dually or concurrently enrolled in both the institution and in a secondary school; (2) be legally authorized to provide a postsecondary education by the state in which they are located; and (3) be accredited or preaccredited by an accrediting agency recognized by ED to grant such statuses. In addition, all types of institutions (including public and private nonprofit institutions) must meet requirements related to the course of study offered at the institution and student enrollment to be considered Title IV eligible under Section 102. In general, any type of institution is considered ineligible to participate in Title IV programs if more than 25% of its enrolled students are incarcerated, or if more than 50% of the its enrolled students do not have a secondary school diploma or equivalent and the institution does not provide a two-year associate's degree or a four-year bachelor's degree. Also, in general, an institution is ineligible if more than 50% of the courses offered are correspondence courses or if 50% or more of its students are enrolled in correspondence courses. These "50% rules" are discussed in more detail in the distance education section of this report. Finally, an institution is considered ineligible to participate in Title IV programs if the institution has filed for bankruptcy or the institution (or its owner or chief executive officer) has been convicted of or pled no contest or guilty to a crime involving the use of Title IV funds. While the above-described criteria generally apply to most types of Section 102 institutions, specific criteria apply to individual types of Section 102 institutions. The following sections provide information on Title IV eligibility criteria that apply to those additional types of IHEs not specified in Section 101, but specified in Section 102: proprietary IHEs, postsecondary vocational institutions, and foreign institutions. Hereinafter, unless otherwise noted, the term "institution of high education (IHE)" only refers to Section 102 institutions. Eligible Programs To qualify as an eligible institution for Title IV participation, an institution must offer at least one eligible program, but overall institutional eligibility does not necessarily extend to all programs offered by the institution. Not all of an institution's programs must meet program eligibility requirements for an IHE to participate in Title IV, but, in general, students enrolled solely in ineligible programs cannot receive Title IV student aid. To be Title IV eligible, a program must lead to a degree (e.g., an associate's or bachelor's degree) or certificate or prepare students for gainful employment in a recognized occupation. Before awarding Title IV aid to students, an IHE must determine that the program in which a student is participating is Title IV eligible, ensure that the program is included in its accreditation notice, and ensure that the the IHE is authorized by the appropriate state to offer the program. In addition to the general criteria for all types of institutions, a program must meet specific eligibility requirements depending on whether the institution at which it is offered is a public or private nonprofit IHE, a proprietary IHE, or a postsecondary vocational IHE. Public and Private Nonprofit Institutions of Higher Education At a public or private nonprofit IHE, the following types of programs are Title IV eligible: (1) programs that lead to an associate's, bachelor's, professional, or graduate degree; (2) transfer programs that are at least two academic years in length and for which the institution does not award a credential but that are acceptable for full credit toward a bachelor's degree; (3) programs that lead to a certificate or other recognized nondegree credential, that prepare students for gainful employment in a recognized occupation, and that are at least one academic year in length; (4) certificate or diploma training programs that are less than one year in length, if the institution also meets the definition of a postsecondary vocational institution; and (5) programs consisting of courses required for elementary or secondary teacher certification in the state in which the student intends to teach. For all of these, an academic year must also require an undergraduate course of study to contain an amount of instructional time in which a full-time student is expected to complete at least 24 semester or trimester credit hours, 36 quarter credit hours, or 900 clock hours. Proprietary and Postsecondary Vocational Institutions In general, eligible programs at proprietary and postsecondary vocational institutions must meet a specified number of weeks of instruction and must provide training that prepares students for gainful employment in a recognized occupation (described below). At proprietary and postsecondary vocational institutions, the following types of programs are Title IV eligible: undergraduate programs that provide at least 600 clock hours, 16 semester or trimester hours, or 24 quarter hours of instruction offered over a minimum of at least 15 weeks ; such programs may admit, as regular students, individuals who have not completed the equivalent of an associate's degree; programs that provide at least 300 clock hours, 8 semester hours, or 12 quarter hours of instruction offered over a minimum of 10 weeks; such programs must be graduate or professional programs or must admit as regular students only individuals who have completed the equivalent of an associate's degree; short-term programs that provide between 300 and 600 clock hours of instruction over a minimum of 10 weeks ; such programs must have been in existence for at least one year, have verified completion and placement rates of at least 70%, may not last more than 50% longer than the minimum training period required by the state or federal agency for the occupation for which the program is being offered, and must admit as regular students some individuals who have not completed the equivalent of an associate's degree; and programs offered by accredited proprietary IHEs that lead to a bachelor's degree in liberal arts; the school must have been continuously accredited by an ED-recognized accrediting agency since at least October 1, 2007 and must have provided the program continuously since January 1, 2009. Programs Required to Prepare Students for Gainful Employment Most nondegree programs offered by public and private nonprofit IHEs must prepare students for "gainful employment in a recognized occupation." Gainful employment requirements also apply to almost all programs offered by proprietary and postsecondary vocational institutions, regardless of whether they lead to a degree. Status of Gainful Employment Regulations In response to concerns about the quality of programs that prepare students for gainful employment and the level of student debt assumed by individuals who attend these programs, ED issued final rules on gainful employment on October 31, 2014. The regulations require that educational programs subject to gainful employment requirements offered by IHEs meet minimum performance standards to be considered offering education that prepares students for gainful employment in a recognized occupation. They also require IHEs to disclose specified information about each of its gainful employment programs to enrolled or prospective students. Finally, the gainful employment rules require IHEs to report information to ED necessary to calculate the debt-to-earnings ratios. Although the gainful employment regulations became effective July 1, 2015, various aspects of them have not yet been fully implemented or have been delayed in implementation. For example, ED delayed until July 1, 2019, some portions of the rule relating to certain disclosure requirements. Additionally, to enable ED to calculate whether an IHE's programs meet the minimum performance standards (discussed below), regulations specify that ED obtains data from the Social Security Administration (SSA). However, a memorandum of understanding relating to data sharing between ED and SSA lapsed in 2018. In August 2018, ED issued a Notice of Proposed Rulemaking that proposes to rescind the gainful employment rules in their entirety. Based on HEA requirements relating to the implementation date for Title IV regulations, the earliest possible date the proposed rules could go into effect is July 1, 2020. Current Gainful Employment Regulations The gainful employment regulations establish a framework within which educational programs offered by IHEs must meet minimum performance standards to be considered offering education that prepares students for gainful employment in a recognized occupation. Under the framework, ED annually calculates two debt-to-earnings (D/E) rates for each gainful employment program offered by an IHE, the discretionary income rate and the annual earnings rate. These rates measure a gainful employment program's completers' debt (their annual loan payments) as a percentage of their post-completion earnings. Using these measures, institutions will be determined to be "passing," "in the zone," or "failing." Thresholds for each category are as follows: Passing : Programs whose completers have annual loan payments less than or equal to 8% of annual earnings (the annual earnings rate) or less than or equal to 20% of discretionary income (the discretionary income rate). In the zone: Programs whose completers have annual loan payments greater than 8% but less than or equal to 12% of annual earnings or greater than 20% but less than or equal to 30% of discretionary income. Failing : Programs whose completers have annual loan payments greater than 12% of annual earnings and greater than 30% of discretionary income. Programs that are failing in two out of any three consecutive years or that are in the zone for four consecutive years will be ineligible for Title IV participation for three years. The gainful employment rules also contain several disclosure requirements. For any year in which ED notifies an IHE that a gainful employment program could become ineligible in the next year based on its debt-to-earnings ratios (i.e., one year of failure or three years in the zone), the IHE must provide a warning to current and prospective students that the program does not meet the gainful employment standards and that if the program does not meet the gainful employment standards in the future, students would not be able to receive Title IV aid. In addition, an IHE must disclose specified information about each of its gainful employment programs to enrolled and prospective students. Information to be disclosed includes the following: the primary occupation that the program prepares students to enter; whether the program satisfies applicable educational prerequisites for professional licensure or certification in each state within the institution's metropolitan statistical area (MSA); program length and number of clock or credit hours, or equivalent, in the program; the program's completion rates for full-time and less-than-full-time students and the program's withdrawal rates; Federal Family Education Loan (FFEL) and Direct Loan program loan repayment rates for all students who entered repayment on Title IV loans and who enrolled in the program, for those who withdrew from the program, and for those who completed the program; the program tuition, fees, and additional costs incurred by a student who completes the program within the program's published length; the job placement rate for the program, if otherwise required by the institution's accrediting agency or state; the percentage of enrolled students who received Title IV or private loans for enrollment in the program; the median loan debt and mean or median earnings of students who completed the program, of students who withdrew from the program, and of both groups combined; the program cohort default rate; and the annual earnings rate for the program. Institutions must also certify that each of their gainful employment programs is included in the IHE's accreditation, meets any state or federal entity accreditation requirements, and meets any state licensing and certification requirements for the state in which the IHE is located. Program Integrity Triad Title IV of the HEA sets forth three requirements to ensure program integrity in postsecondary education, known as the program integrity triad. The three requirements are state authorization, accreditation by an accrediting agency recognized by ED, and eligibility and certification by ED. This triad is intended to provide a balance in the Title IV eligibility requirements. The states' role is to provide consumer protection, the accrediting agencies' role is to provide quality assurance, and the federal government's role is to provide oversight of compliance to ensure administrative and fiscal integrity of Title IV programs at IHEs. State Authorization The state role in the program integrity triad is to provide legal authority for an institution to operate a postsecondary educational program in the state in which it is physically located. There are two basic requirements for an IHE to be considered legally authorized by a state: 1. the state must authorize the IHE by name to operate postsecondary educational programs, and 2. the state must have in place a process to review and address complaints concerning IHEs, including enforcing applicable state law. An IHE can be authorized by name through a state charter, statute, constitutional provision, or other action by an appropriate state agency (e.g., authorization to conduct business or operate as a nonprofit organization). Additionally, an institution must also comply with any applicable state approval or licensure requirements. The state agency responsible for the authorization of postsecondary institutions must also perform three additional functions: upon request, provide the Secretary with information about the process it uses to authorize institutions to operate within its borders; notify the Secretary if it has evidence to believe that an institution within its borders has committed fraud in the administration of Title IV programs; and notify the Secretary if it revokes an institution's authorization to operate. On December 19, 2016, ED issued final regulations related to state authorization for IHEs offering postsecondary distance or correspondence education (discussed later in this report). The regulations would require an IHE offering postsecondary distance or correspondence education to students residing in a state in which the IHE is not physically located to meet any requirements within the student's state of residence. Under the rules, an IHE may meet this requirement if it participates in a state authorization reciprocity agreement. These regulations were scheduled to become effective July 1, 2018. However, on July 3, 2018 (and effective June 29, 2018), the Secretary of Education (Secretary) issued a final rule delaying the implementation of these requirements until July 1, 2020. Accreditation The second component of the program integrity triad is accreditation by an ED-recognized accrediting agency or association. In higher education, accreditation is intended to help ensure an acceptable level of quality within IHEs. For Title IV purposes, an institution must be accredited or preaccredited by an ED-recognized accrediting agency. Each accrediting agency must meet HEA-specified standards to be recognized by ED. Background From its inception, accreditation has been a voluntary process. It developed with the formation of associations that distinguished between IHEs that merited the designation of college or university from those that did not. Since then, accreditation has been used as a form of "external quality review ... to scrutinize colleges, universities and programs for quality assurance and quality improvement." In 1952, shortly after the passage of the Veterans' Readjustment Act of 1952 (the Korean GI Bill; P.L. 82-550), the federal government began formally recognizing accrediting agencies. This was done as one means to assess higher education quality and link it to determining which institutions would qualify to receive federal aid under the Korean GI Bill. Rather than creating a centralized authority to assess quality, the federal government chose to rely in part on the existing expertise of accrediting agencies. Today, ED's formal recognition of accrediting agencies is important, because an IHE's Title IV eligibility is conditioned upon accreditation from an ED-recognized accreditation organization. As part of the accreditation system's development, three types of accrediting agencies have emerged: Regional accrediting agencies. These operate in six regions of the United States, with each agency concentrating on a specific region. Generally, these accredit entire public and private nonprofit degree-granting IHEs. National accrediting agencies. These operate across the United States and also accredit entire institutions. There are two types of national accrediting agencies: faith-based agencies that accredit religiously affiliated or doctrinally based institutions, which are typically private nonprofit degree-granting institutions, and career-related agencies that typically accredit proprietary, career-based, degree- and nondegree-granting institutions. Specialized or programmatic accrediting agencies. These operate throughout the United States and accredit individual educational programs (e.g., law) and single-purpose institutions (e.g., freestanding medical schools). Specific educational programs are often accredited by a specialized accrediting agency, and the institution at which the program is offered is accredited by a regional or national accrediting organization. Accreditation Process Generally, an institution must be accredited by an ED-recognized accrediting agency that has the authority to cover all of the institution's programs. Alternatively, a public or private nonprofit IHE may be preaccredited by an agency recognized by ED to grant such preaccreditation, and a public postsecondary vocational institution may be accredited by a state agency that ED determines is a reliable authority. Proprietary institutions must be accredited by an ED-recognized accrediting agency. The accreditation process begins with an institution or program requesting accreditation. Institutional accreditation is cyclical, with a cycle ranging from every few years up to 10 years. Initial accreditation does not guarantee subsequent renewal of the accredited status. Typically, an institution seeking accreditation will first perform a self-assessment to determine whether its operations and performance meet the basic standards required by the relevant accrediting agency. Next, an outside group of higher education peers (e.g., faculty and administrators) and members of the public conduct an on-site visit at the institution during which the team determines whether the accrediting organization's standards are being met. Based on the results of the self-assessment and site visit, the accrediting organization determines whether accreditation will be awarded, renewed, denied, or provisionally awarded to an institution. Educational programs within institutions can be accredited by programmatic accrediting agencies; however, a program is not required to be accredited by a programmatic accrediting agency for Title IV purposes. Rather, it only needs to be covered by the IHE's primary accrediting agency. Frequently, programmatic accrediting agencies review a specific program within an IHE that is accredited by a regional or national accrediting agency. An institution that has had its accreditation revoked or terminated for cause cannot be recertified as an IHE eligible to participate in Title IV programs for 24 months following the loss of accreditation, unless the accrediting agency rescinds the loss. The same rules apply if an institution voluntarily withdraws its accreditation. The Secretary can, however, continue the eligibility of a religious institution whose loss of accreditation, whether voluntary or not, is related to its religious mission and not to the HEA accreditation standards. If an institution's accrediting agency loses its recognition from ED, it has up to 18 months to obtain accreditation from another ED-recognized agency. Federal Recognition of Accrediting Agencies Although the federal government does not set specific standards for institutional or programmatic accreditation, generally, it does require that institutions be accredited or preaccredited by a recognized accrediting organization to be eligible for Title IV participation. ED's primary role in accreditation is to recognize an accrediting agency as a "reliable authority regarding the quality of education or training offered" at IHEs through the processes and conditions set forth in the HEA and federal regulations. For ED recognition, Section 496 of the HEA specifically requires that an accrediting agency be a state, regional, or national agency that demonstrates the ability to operate as an accrediting agency within the relevant state or region or nationally. Additionally, agencies must meet one of the following criteria: IHE membership with the agency must be voluntary, and one of the primary purposes of the agency must be accreditation of the IHEs. The agency must be a state agency approved by the Secretary as an accrediting agency on or before October 1, 1991. The agency must either conduct accreditation through a voluntary membership of individuals in a profession, or it must have as its primary purpose the accreditation of programs within institutions that have already been accredited by another ED-recognized agency. Agencies that meet the first or third criterion listed above must also be administratively and financially separate and independent of any related trade association or membership organization. For an agency that meets the third criterion and that was ED-recognized on or before October 1, 1991, the Secretary may waive the requirement that the agency be administratively and financially independent of any related organization, but only if the agency can show that the existing relationship with the related organization has not compromised its independence in the accreditation process. All types of accrediting agencies must show that they consistently apply and enforce standards that ensure that the education programs, training, or courses of study offered by an IHE are of sufficient quality to meet the stated objectives for which the programs, training, or courses are offered. The standards used by the accrediting agencies must assess student achievement in relation to the institution's mission; this may include course completion, job placement rates, and passage rates of state licensing exams. Agencies must also consider curricula, faculty, facilities, fiscal and administrative capacity, student support services, and admissions practices. Accrediting agencies must also meet requirements that focus on the review of an institution's operating procedures, including reviewing an institution's policies and procedures for determining credit hours, the application of those policies and procedures to programs and coursework, and reviewing any newly established branch campuses. They must also perform regular on-site visits that focus on the quality of education and program effectiveness. Eligibility and Certification by ED The final component of the program integrity triad is eligibility and certification by ED. Here, ED is responsible for verifying an institution's legal authority to operate within a state and its accreditation status. ED also evaluates an institution's financial responsibility and administrative capability to administer Title IV student aid programs. An institution can be certified to participate in Title IV for up to six years before applying for recertification. Financial Responsibility ED determines an IHE's financial responsibility based on its ability to provide the services described in its official publications, to administer the Title IV programs in which it participates, and to meet all of its financial obligations. A public IHE is deemed financially responsible if its debts and liabilities are backed by the full faith and credit of the state or another government entity. A proprietary or private nonprofit IHE is financially responsible if it meets specific financial ratios (e.g., equity ratio) established by ED, has sufficient cash reserves to make any required refunds (including the return of Title IV funds), is meeting all of its financial obligations, and is current on its debt payments. Even if an institution meets the above requirements, ED does not consider it financially responsible if the IHE does not meet third-party financial audit requirements or if the IHE violated past performance requirements, such as failing to satisfactorily resolve any compliance issues identified in program reviews or audits. Alternatively, if an institution does not meet the above standards of financial responsibility, ED may still consider it financially responsible or give it provisional certification, under which it may operate for a time, if it qualifies under an alternative standard. These alternative standards include submitting an irrevocable letter of credit to ED that is equal to at least 50% of the Federal Student Aid (FSA) program funds that the IHE received during its most recently completed fiscal year, meeting specific monitoring requirements, or participating in the Title IV programs under provisional certification. Administrative Capability Along with demonstrating financial responsibility, an institution must demonstrate its ability to properly administer the Title IV programs in which it participates and to provide the education it describes in public documents (e.g., marketing brochures). Administrative capability focuses on the processes, procedures, and personnel used in administering Title IV funds and indicators of student success. Administrative capability standards address numerous aspects of Title IV administration. For example, to administer Title IV programs an institution must use ED's electronic processes and develop a system to identify and resolve discrepancies in Title IV information received by various institutional offices. The IHE must also refer cases of Title IV student fraud or criminal misconduct to ED's Office of Inspector General for resolution, and it must provide all enrolled and prospective students financial aid counseling. Finally, the IHE must have an adequate internal system of checks and balances that includes dividing the functions of authorizing payments and disbursing funds between two separate offices. Institutions are required to have a capable staff member to administer Title IV programs and coordinate those programs with other aid received by students. This person must also have an adequate number of qualified staff to assist with aid administration. Before receiving Title IV funds, an IHE must certify that neither it nor its employees have been debarred or suspended by a federal agency; similar limitations apply to lenders, loan servicers, and third-party servicers. Relating to indicators of student success, an institution must have satisfactory academic progress (SAP) standards for students receiving Title IV funds. In general, IHEs must develop SAP standards that establish a minimum grade point average (or its equivalent) for students and a maximum time frame in which students must complete their educational programs. A student who fails to meet the SAP requirements becomes ineligible to receive Title IV funds. Also related to student success indicators, an institution that seeks to participate in Title IV programs for the first time may not have an undergraduate withdrawal rate for regular students that is greater than 33% during its most recently completed award year. Cohort Default Rate An institution may be deemed administratively incapable if it has a high cohort default rate (CDR). In general, the CDR is the number of an IHE's federal loan recipients who enter repayment in a given fiscal year (the cohort fiscal year) and who default within a certain period of time after entering repayment (cohort default period; CDP), divided by the total number of borrowers who entered repayment in the cohort fiscal year. Since 2014, ED has used a three-year CDP in calculating an institution's CDR. An IHE will be found administratively incapable if one of the following conditions is met: 1. an institution's CDR is greater than 40% in one year for loans made under the FFEL and Direct Loans programs; 2. an institution's CDR is 30% or greater for each of the three most recent fiscal years for loans made under the FFEL and Direct Loans programs; or 3. an institution's CDR is 15% or greater in any single year for loans made under the Federal Perkins Loan Program. When an IHE is determined to be administratively incapable due to a high CDR, it may become ineligible to participate in the Direct Loan, Pell Grant, and/or Perkins Loan programs (but not other Title IV programs). ED may grant provisional certification for up to three years to an institution that would be deemed administratively capable except for its high cohort default rates. Provisional Certification If an institution is seeking initial certification, ED can grant it up to one year of provisional certification. ED can also grant an institution provisional certification for up to three years if ED is determining the IHE's administrative capacity and financial responsibility for the first time, if the IHE has experienced a partial or total change in ownership, or if ED determines that the administrative or financial condition of the IHE may hinder its ability to meet its financial responsibilities. Additionally, if an accrediting agency loses its ED recognition, any institution that was accredited by that agency may continue to participate in Title IV programs for up to 18 months after ED's withdrawal of recognition. Program Reviews To ensure that an institution is conforming to eligibility requirements, ED can conduct program reviews. During a program review, ED evaluates an institution's compliance with Title IV requirements and identifies actions the IHE must take to correct any problem(s). Review priority is given to those institutions with high cohort default rates; IHEs with significant fluctuations in Pell Grant awards or Direct Loan volume that are not accounted for by changes in programs offered; IHEs that are reported to have deficiencies or financial aid problems by their state or accrediting agency; IHEs with high annual dropout rates; and IHEs determined by ED to pose a significant risk of failing to comply with the administrative capability or financial responsibility requirements. If, during a review, ED determines that an institution is not administratively capable or financially responsible or is violating Title IV program rules, ED may grant it provisional certification, take corrective actions, or impose sanctions. Sanctions and Corrective Actions ED has the authority to impose a variety of sanctions and corrective actions on an institution that violates Title IV program rules, a Program Participation Agreement (discussed later in this report) or any other agreement made under the laws or regulations, or if it substantially misrepresents the nature of its educational programs, financial charges, or graduates' employability. Sanctions include fines, limitations, suspensions, emergency actions, and terminations. ED can also sanction third-party servicers performing tasks related to the institution's Title IV programs. Fines, Limitations, and Suspensions ED may impose several types of sanctions on institutions for statutory and regulatory violations, including fines, limitations, and suspensions. ED can fine an institution up to $55,907 for each statutory or regulatory violation it commits, depending on the size of the IHE and the seriousness of the violation. Under a limitation, ED imposes specific conditions or restrictions on an institution related to its administration of Title IV funds. A limitation lasts for at least 12 months, and if an institution fails to abide by the limitation, ED may initiate a termination proceeding. Finally, under a suspension, an institution is not allowed to participate in Title IV programs for up to 60 days. Each of these sanctions may require an institution to take corrective actions as well, which may include repaying illegally used funds or making payments to eligible students from the IHE's own funds. Emergency Action ED can take emergency action to withhold Title IV funds from an institution if it receives reliable information that an IHE is violating applicable laws or regulations, agreements, or limitations. ED must determine that the institution is misusing federal funds, that immediate action is necessary to stop misuses, and that the potential losses outweigh the importance of using established procedures for limitation, suspension, or termination. An emergency action suspends an institution's participation in Title IV programs and prohibits it from disbursing such funds. Typically, the emergency action may not last more than 30 days. Termination of Title IV Participation The final action ED can take is the termination of an institution's participation in Title IV programs. Generally, an institution that has had its participation terminated cannot reapply to be reinstated for at least 18 months. To request reinstatement, an institution must submit a fully completed application to ED and demonstrate that it has corrected the violation(s) for which its participation was terminated. ED may then approve, approve subject to limitations, or deny the institution's request. Other Related Issues Several other requirements affect institutional eligibility for Title IV programs. Some of these requirements include institution Program Participation Agreements, which include provisions related to incentive compensation and campus crime reporting requirements; return of Title IV funds; and distance education. The failure to meet the requirements for any of these may result in the loss of Title IV eligibility or other sanctions. Program Participation Agreements HEA Section 487 specifies that each institution wanting to participate in Title IV student aid programs is required to have a current Program Participation Agreement (PPA). A PPA is a document in which the institution agrees to comply with the laws, regulations, and policies applicable to the Title IV programs; it applies to an IHE's branch campuses and locations that meet Title IV requirements, as well as its main campus. It also lists all of the Title IV programs in which the IHE is eligible to participate, the date on which the PPA expires, and the date on which the IHE must reapply for participation. By signing a PPA, an institution agrees that it will act as a fiduciary responsible for properly administering Title IV funds, will not charge students a processing fee to determine a student's eligibility for such funds, and will establish and maintain administrative and fiscal procedures to ensure the proper administration of Title IV programs. The PPA reiterates many provisions required for institutional eligibility and ED certification discussed earlier in this report and contains several additional notable requirements that may affect an IHE's Title IV eligibility, which are described below. Along with the general participation requirements with which an institution must comply, a PPA may also contain institution-specific requirements. 90/10 Rule As part of their PPAs, domestic and foreign proprietary IHEs must agree to derive at least 10% of their revenue from non-Title IV funds (i.e., no more than 90% of their revenue can come from Title IV funds). This is known as the 90/10 rule. Examples of non-Title IV funds include private education loans and some military and veterans' benefits, such as benefits provided under the Post-9/11 GI Bill program. If an IHE violates the 90/10 rule in one year, it does not immediately lose its Title IV eligibility. Rather, it is placed on a provisional eligibility status for two years. If the IHE violates the 90/10 rule for two consecutive years, it loses its eligibility for at least two years. Incentive Compensation In a PPA, an IHE must agree it will not provide any commission or incentive compensation to individuals based directly or indirectly on their success in enrolling students or the enrolled students' obtaining financial aid; however, some exceptions apply to this general rule. For instance, IHEs can provide incentive compensation to individuals for the recruitment of foreign students who are ineligible to receive Title IV funds or they can provide incentive compensation through a profit-sharing plan. The ban on incentive compensation only applies to the activities of securing enrollment (recruitment) and securing financial aid. Other activities are not banned, and ED draws a distinction between activities that involve directly working with individual students and policy-level determinations that affect recruitment and financial aid awards. For instance, an individual who is responsible for contacting potential student applicants or assisting students in filling out an enrollment application cannot receive incentive compensation, but an individual who conducts marketing activities, such as the broad dissemination of informational brochures or the collection of contact information, can receive incentive compensation. Clery Act Requirements HEA Section 485(f), referred to as the Clery Act, requires domestic Title IV participating IHEs (1) to report to ED campus crime statistics and (2) establish and disseminate campus safety and security policies. Both the campus crime statistics and campus safety and security policies must be compiled and disseminated to current and prospective students and employees in an IHE's annual security report (ASR). Campus crime statistics required to be reported to ED and included in an ASR include data on the occurrence on campus of a range of offenses specified in statute, including murder, burglary, robbery, domestic violence, rape, and other forms of sexual violence. In addition to campus crime statistics, ASRs must include statements of campus safety and security policies regarding, for example, procedures and facilities for students and others to report criminal actions or other emergencies occurring on campus and an IHE's response to such reports; security and access to campus facilities; campus law enforcement, including the law enforcement authority of campus security personnel, and the working relationship between campus security personnel and state and local law enforcement; programs designed to inform students and employees about the prevention of crimes; and the possession, use, and sale of alcoholic beverages and illegal drugs; enforcement of state underage drinking laws; enforcement of federal and state drug laws; and any drug or alcohol abuse education programs required under the HEA. An ASR must also include statements of policies specifically relating to incidence of domestic and sexual violence. For example, an ASR must include statements of policy regarding programs to prevent such incidents; procedures a victim should follow if such an incident as occurred; procedures an IHE will follow once such an incident has been reported and procedures for institutional disciplinary actions in cases of alleged incidents (including a statement of the standard of evidence that will be used in any school proceeding arising from the incident report); and possible sanctions and protective measures that an IHE may impose following a final determination in an institutional proceeding regarding such incidences. The Clery Act prohibits the Secretary of Education from requiring IHEs to adopt particular policies, procedures, or practices; and prohibits retaliation against anyone exercising his or her rights or responsibilities under the act. Return of Title IV Funds HEA Section 484B specifies that when a Title IV aid recipient withdraws from an IHE before the end of the payment or enrollment period for which funds were disbursed, Title IV funds must be returned to ED according to a statutorily prescribed schedule. In general, when a student withdraws from an IHE, an IHE first determines the portion of Title IV aid considered to be "earned" by the student while enrolled and the portion considered to be "unearned." Unearned aid must be returned to ED. Up to the 60% point of a payment or enrollment period, unearned funds must be returned on a pro rata schedule. After the 60% point of a payment or enrollment period, the total amount of funds awarded is considered to have been earned by the student and no funds are required to be returned. Whether an IHE and/or the student is required to return the funds to ED depends on a variety of circumstances, including whether Title IV funds have been applied directly to a student's institutional charges. Unearned funds must be returned to their respective programs in a specified order, with loans being returned first, followed by Pell Grants, and then other Title IV aid. In some instances, a student may have earned more aid than has been disbursed, and the difference is disbursed to the student after the student withdraws. Distance Education and Correspondence Education Generally, distance education and correspondence education refers to educational instruction with a separation in time, place, or both between the student and instructor. It is a way in which institutions can increase student access to postsecondary education by offering alternatives to traditional on-campus instruction. Recently, due to the greater availability of new technologies, there has been substantial growth in the amount and types of courses institutions offer. Section 103(7)(A) and (B) of the HEA and the accompanying regulations define distance education as instruction that uses "(1) the internet; (2) one-way and two-way transmissions through open broadcast, closed circuit, cable, microwave, broadband lines, fiber optics, satellite, or wireless communications devices; [or] ... (3) audio conferencing" to deliver instruction to students separated from the instructor. A course taught through a video cassette, DVD, or CD-ROM is considered a distance education course if one of the above-mentioned technologies is used to support student-instructor interaction. Regardless of the technology used, "regular and substantive interaction between the students and the instructor" must be ensured. Correspondence courses are expressly excluded from the definition of distance education. A correspondence course is one for which an institution provides instructional materials and exams for students who do not physically attend classes at the IHE, but does not include those courses that are delivered with "regular and substantive interaction between the students and the instructor" via one of the above-described technologies. 50% Rule for Correspondence Courses In 1992, partially in response to cases of some correspondence institutions' fraudulent and abusive practices used to attract unqualified students to enroll in programs of poor or questionable quality, Congress incorporated provisions referred to as the "50% rules" into the HEA. The rules affected both the eligibility of institutions offering correspondence courses and their students' eligibility for Title IV aid. In general, under the rules, an institution is ineligible for Title IV aid if more than 50% of its courses are offered by correspondence, or if 50% or more of its students are enrolled in correspondence courses. State Authorization for Correspondence and Distance Education Courses As discussed earlier in this report, rules promulgated in 2016 would have required an IHE offering postsecondary distance or correspondence education in a state in which it is not physically located to meet any state authorization requirements within that state. Under the regulations, an IHE could meet this requirement if it participates in a state authorization reciprocity agreement. These regulations were scheduled to become effective July 1, 2018. However, on July 3, 2018 (and effective June 29, 2018), the Secretary of Education issued a final rule delaying the implementation of these requirements until July 1, 2020. Foreign IHE Eligibility The distinction between distance education and traditional instruction is also important for the purposes of Title IV program eligibility. Distance education programs provided by domestic IHEs are eligible for Title IV participation if they have been accredited by an accrediting agency recognized by ED to evaluate distance education programs. A program offered by a foreign IHE, in whole or in part, through distance education (including telecommunications) or correspondence is ineligible for Title IV participation.

Title IV of the Higher Education Act (HEA) authorizes programs that provide financial assistance to students to assist them in obtaining a postsecondary education at certain institutions of higher education (IHEs). These IHEs include public, private nonprofit, and proprietary institutions. For students attending such institutions to be able to receive Title IV assistance, an institution must meet basic criteria, including offering at least one eligible program of education (e.g., programs leading to a degree or preparing a student for gainful employment in a recognized occupation). In addition, an IHE must satisfy the program integrity triad, under which it must be licensed or otherwise legally authorized to operate in the state in which it is physically located, accredited or preaccredited by an agency recognized for that purpose by the Department of Education (ED), and certified by ED as eligible to participate in Title IV programs. These requirements are intended to provide a balance between consumer protection, quality assurance, and oversight and compliance in postsecondary education providers participating in Title IV student aid programs. An IHE must also fulfill a variety of other related requirements, including those that relate to institutional recruiting practices, student policies and procedures, and the administration of the Title IV student aid programs. Finally, additional criteria may apply to an institution depending on its control or the type of educational programs it offers. For example, proprietary institutions must meet HEA requirements that are otherwise inapplicable to public and private nonprofit institutions, including deriving at least 10% of their revenues from non-Title IV funds (also known as the 90/10 rule). While an institution is ineligible to participate in Title IV programs if more than 50% of its courses are offered by correspondence or if 50% or more of its students are enrolled in correspondence courses. This report first describes the types of institutions eligible to participate in Title IV programs and discusses the program integrity triad. It then discusses additional issues related to institutional eligibility, including program participations agreements, required campus safety policies and crime reporting, and distance and correspondence education.

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Introduction This report presents background information and potential oversight issues for Congress on the Navy's Arleigh Burke (DDG-51) and Zumwalt (DDG-1000) class destroyer programs. The Navy's proposed FY2020 budget requests funding for the procurement of three DDG-51s. Decisions that Congress makes concerning destroyer procurement could substantially affect Navy capabilities and funding requirements, and the U.S. shipbuilding industrial base. For an overview of the strategic and budgetary context in which the DDG-51, DDG-1000, and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. Background Navy's Force of Large Surface Combatants (LSCs) LSC Definition Decades ago, the Navy's cruisers were considerably larger and more capable than its destroyers. In the years after World War II, however, the Navy's cruiser designs in general became smaller while its destroyer designs in general became larger. As a result, since the 1980s there has been substantial overlap in size and capability of Navy cruisers and destroyers. (The Navy's new Zumwalt [DDG-1000] class destroyers, in fact, are considerably larger than the Navy's cruisers.) In part for this reason, the Navy now refers to its cruisers and destroyers collectively as large surface combatants (LSCs) , and distinguishes these ships from the Navy's small surface combatants (SSCs) , the term the Navy now uses to refer collectively to its frigates, Littoral Combat Ships (LCSs), mine warfare ships, and patrol craft. The Navy's annual 30-year shipbuilding plan, for example, groups the Navy's surface combatants into LSCs and SSCs. LSC Force Levels In December 2016, the Navy released a goal to achieve and maintain a Navy of 355 ships, including 104 LSCs. At the end of FY2018, the Navy's force of LSCs totaled 88 ships, including 22 Ticonderoga (CG-47) class cruisers and 66 Arleigh Burke (DDG-51) class destroyers. Under the Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan, the Navy is to achieve a force of 104 large surface combatants by FY2029. DDG-51 Program Overview The DDG-51 program was initiated in the late 1970s. The DDG-51 ( Figure 1 ) is a multi-mission destroyer with an emphasis on air defense (which the Navy refers to as anti-air warfare, or AAW) and blue-water (mid-ocean) operations. DDG-51s, like the Navy's 22 Ticonderoga (CG-47) class cruisers, are equipped with the Aegis combat system, an integrated ship combat system named for the mythological shield that defended Zeus. CG-47s and DDG-51s consequently are often referred to as Aegis cruisers and Aegis destroyers, respectively, or collectively as Aegis ships. The Aegis system has been updated several times over the years. Existing DDG-51s (and also some CG-47s) are being modified to receive an additional capability for ballistic missile defense (BMD) operations. The first DDG-51 was procured in FY1985 and entered service in 1991. A total of 82 have been procured through FY2018, including 62 in FY1985-FY2005 and 20 in FY2010-FY2019. (In FY2007-FY2009, during the time when the Navy was not procuring DDG-51s, the Navy procured three Zumwalt (DDG-1000) class destroyers, which are discussed below.) With a total of 82 ships funded through FY2019, the DDG-51 program is, in terms of number of hulls, one of the largest Navy shipbuilding programs since World War II. Design Changes The DDG-51 design has been modified over time. The first 28 DDG-51s (i.e., DDGs 51 through 78) are called Flight I/II DDG-51s. In FY1994, the Navy shifted DDG-51 procurement to the Flight IIA DDG-51 design, which incorporated a significant design change that included, among other things, the addition of a helicopter hangar. A total of 47 Flight IIA DDG-51s (i.e., DDG-79 through DDG-124, plus DDG-127) were procured through FY2016. In FY2017, the Navy shifted DDG-51 procurement to the Flight III DDG-51 design, which incorporates a new and more capable radar called the Air and Missile Defense Radar (AMDR) or SPY-6 radar and associated changes to the ship's electrical power and cooling systems. DDG-51s procured in FY2017 and subsequent years (i.e., DDGs 125 and higher, except for DDG-127 noted above) are to be Flight III DDG-51s. Multiyear Procurement (MYP) As part of its action on the Navy's FY2018 budget, Congress granted the Navy authority to use a multiyear procurement (MYP) contract for DDG-51s planned for procurement in FY2018-FY2022. This is the fourth MYP contract for the DDG-51 program—previous DDG-51 MYP contracts covered DDG-51s procured in FY2013-FY2017, FY2002-FY2005, and FY1998-FY2001. Shipbuilders, Combat System Lead, and Radar Makers DDG-51s are built by General Dynamics/Bath Iron Works (GD/BIW) of Bath, ME, and Huntington Ingalls Industries/Ingalls Shipbuilding (HII/Ingalls) of Pascagoula, MS. Lockheed is the lead contractor for the Aegis system installed on all DDG-51s. The SPY-1 radar—the primary radar for the Aegis system on Flight I/II and Flight IIA DDG-51s—is made by Lockheed. The AMDR—the primary radar for the Aegis system on Flight III DDG-51s—is made by Raytheon. Modernization and Service Life Extension The Navy is modernizing its existing DDG-51s (and its CG-47s) so as to maintain their mission and cost-effectiveness out to the end of their projected service lives. In April 2018, the Navy announced that it wants to extend the service lives of all DDG-51s to 45 years—an increase of 5 or 10 years over previous plans to operate DDG-51s to age 35 or 40. Doing this, the Navy has said, will permit the Navy to achieve a total of 355 ships by 2034, or about 20 years earlier than under the FY2019 budget submission, although the 355-ship fleet of the 2030s would have more destroyers and fewer ships of other kinds (including attack submarines and aircraft carriers) than called for in the 355-ship force-level goal. Older CRS reports provide additional historical and background information on the DDG-51 program. DDG-1000 Program In FY2007-FY2009, during the time when the Navy was not procuring DDG-51s, the Navy procured three Zumwalt (DDG-1000) class destroyers. The Navy plans no further procurement of DDG-1000s. The Navy's proposed FY2020 budget requests $155.9 million in procurement funding to help complete the total procurement cost of the three DDG-1000 class ships. The DDG-1000 is a multi-mission destroyer with an originally intended emphasis on naval surface fire support (NSFS) and operations in littoral (i.e., near-shore) waters. Consistent with that mission orientation, the ship was designed with two new-design 155mm guns called Advanced Gun Systems (AGSs). The AGSs were to fire a new 155mm, gun-launched, rocket-assisted guided projectile called the Long-Range Land-Attack Projectile (LRLAP, pronounced LUR-lap). DDG-1000s are designed carry 600 LRLAP rounds (300 for each gun), and to have additional LRLAP rounds brought aboard the ship while the guns are firing, which would create what Navy officials called an "infinite magazine." In November 2016, however, it was reported that the Navy had decided to stop procuring LRLAP projectiles because the projected unit cost of each projectile had risen to at least $800,000. The Navy began exploring options for procuring a less expensive (and less capable) replacement munition for the AGSs. The Navy to date has not announced a replacement munition for the AGSs. In the meantime, it was reported in December 2017 that, due to shifts in the international security environment and resulting shifts in Navy mission needs, the mission orientation of the DDG-1000s will be shifted from an emphasis on NSFS to an emphasis on surface strike, meaning the use of missiles to attack surface ships and perhaps also land targets. Under this new plan, the mix of missiles carried in the 80 vertical launch system (VLS) tubes of each DDG-1000 may now feature a stronger emphasis on anti-ship and land-attack cruise missiles missiles. The two AGSs on each DDG-1000 will, for the time being at least, remain for the most part dormant, pending a final decision on whether to procure a replacement munition for the AGSs (which would require modifying the AGSs and their below-deck munition-handling equipment, since both were designed specifically for LRLAP), or instead pursue another option, such as removing the AGSs and their below-deck equipment and replacing them with additional VLS tubes. For additional background information on the DDG-1000 program, see the Appendix . Surface Combatant Construction Industrial Base All cruisers, destroyers, and frigates procured since FY1985 have been built at GD/BIW and HII/Ingalls. Both yards have long histories of building larger surface combatants. Construction of Navy surface combatants in recent years has accounted for virtually all of GD/BIW's ship-construction work and for a significant share of HII/Ingalls' ship-construction work. (HII/Ingalls also builds amphibious ships for the Navy and cutters for the Coast Guard.) Navy surface combatants are overhauled, repaired, and modernized at GD/BIW, HII/Ingalls, and other U.S. shipyards. Lockheed Martin and Raytheon are generally considered the two leading Navy surface combatant radar makers and combat system integrators. Lockheed is the lead contractor for the DDG-51 combat system (the Aegis system), while Raytheon is the lead contractor for the DDG-1000 combat system, the core of which is called the Total Ship Computing Environment Infrastructure (TSCE-I). Lockheed has a share of the DDG-1000 combat system, and Raytheon has a share of the DDG-51 combat system. Lockheed, Raytheon, and Northrop competed to be the maker of the AMDR to be carried by the Flight III DDG-51. On October 10, 2013, the Navy announced that it had selected Raytheon to be the maker of the AMDR. The surface combatant construction industrial base also includes hundreds of additional firms that supply materials and components. The financial health of Navy shipbuilding supplier firms has been a matter of concern in recent years, particularly since some of them are the sole sources for what they make for Navy surface combatants. Several Navy-operated laboratories and other facilities support the Aegis system and other aspects of the DDG-51 and DDG-1000 programs. FY2020 Funding Request The Navy estimates the combined procurement cost of the three DDG-51s requested for procurement in FY2020 at $5,463.0 million, or an average of $1,821.0 million each. The ships have received $363.7 million in prior-year Economic Order Quantity (EOQ) advance procurement (AP) funding (i.e., funding for up-front batch orders of components of DDG-51s to be procured under the FY2018-FY2022 MYP contract). The Navy's proposed FY2020 budget requests the remaining $5,099.3 million in procurement funding needed to complete the estimated procurement cost of the three DDG-51s, as well as $224.0 million in EOQ funding for DDG-51s to be procured in FY2021 and FY2022, bringing the total amount requested for the DDG-51 program for FY2020 to $5,323.3 million, excluding outfitting and post-delivery costs. The Navy's proposed FY2020 budget also requests $155.9 million in procurement funding to help complete the total procurement cost of the three DDG-1000 class ships. Issues for Congress FY2020 Funding Request One issue for Congress for FY2020 is whether to approve, reject, or modify the Navy's FY2020 funding requests for the DDG-51 and DDG-1000 programs. In considering this issue, Congress may consider, among other things, whether the Navy has accurately priced the work it is proposing to fund for FY2020. Cost, Technical, and Schedule Risk in Flight III DDG-51 Effort Another oversight issue for Congress concerns cost, technical, and schedule risk for the Flight III DDG-51. October 2018 CBO Report An October 2018 Congressional Budget Office (CBO) report on the cost of the Navy's shipbuilding programs stated the following about the Flight III DDG-51: To meet combatant commanders' goal of improving future ballistic missile defense capabilities beyond those provided by existing DDG-51s—and to replace 15 Ticonderoga class cruisers when they are retired in the 2020s—the Navy plans to substantially modify the design of the DDG-51 Flight IIA destroyer to create a Flight III configuration. That modification would incorporate the new Air and Missile Defense Radar (AMDR), now under development, which will be larger and more capable than the radar on current DDG-51s. For the AMDR to operate effectively in the new Flight III configuration, however, the ships must have a greater capacity to generate electrical power and cool major systems. With those improvements incorporated into the design of the Flight III and the associated increases in the ships' displacement, CBO expects that the average cost per ship over the entire production run would be $1.8 billion in 2018 dollars—about 15 percent more than the Navy's estimate of $1.6 billion. Costs could be higher or lower than CBO's estimate, however, depending on the eventual cost and complexity of the AMDR and the associated changes to the ship's design to integrate the new radar. May 2019 GAO Report A May 2019 Government Accountability Office (GAO) report assessing selected DOD acquisition programs stated the following in its assessment of the Flight III DDG-51: Current Status The Navy and the shipbuilders completed Flight III detail design activities in December 2017. As compared to Flight IIA, the Flight III design included considerable changes to the ship's hull, mechanical, and electrical systems to incorporate the AMDR program's SPY-6 radar, and changes to restore ship weight and stability safety margins. To reduce technical risk, the Navy plans to field all but one—the SPY-6 radar—of the program's four mature critical technologies on other ship classes before integration with Flight III. In 2018, however, the Navy identified software-related deficiencies affecting SPY-6 that delayed delivery of a radar array for power and integration testing with the Aegis combat system by at least 1 year. Despite these delays, the Navy plans to complete testing, install the radar on the ship, and activate the combat system for shipboard testing by January 2022. The Navy expects to complete a draft test and evaluation master plan for Flight III by early 2022. The Navy and the Director, Operational Test and Evaluation continue to disagree on whether the use of a self-defense test ship equipped with Aegis and the SPY-6 radar is necessary to validate performance during operational test and evaluation…. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office said that it has delivered 67 DDG 51 class ships since its inception in 1985 and the class remains in serial production at both new construction shipyards. Regarding the AMDR specifically, the report stated the following: Technology Maturity and Design Stability The program office reported that AMDR's four critical technologies are mature—although we disagree—and that the system design is stable. Since our 2018 assessment, the program office has further demonstrated the radar system's performance and capabilities through live testing and simulation. However, based on industry best practices, the program cannot fully demonstrate all critical technologies until the Navy tests them in their realistic, at-sea environment with the Aegis combat system. According to the AMDR program schedule, such testing will occur in 2023 during operational testing with a DDG 51 Flight III ship. Until the Navy completes this testing, the program's design stability remains at risk for disruption. Specifically, any performance deficiencies the Navy discovers during at-sea testing could require it to revise existing design drawings to remedy issues. As part of developmental testing, the program office tested a full-scale, single-face radar array at the Navy's Pacific Missile Range Facility (PMRF) beginning in September 2016. The program office successfully completed several live ballistic missile defense, anti-air, and anti-surface warfare tests. However, in March 2018, the array failed a ballistic missile test because of a defective software update that caused the array to stop tracking a live target. Officials said a software update corrected the issue and they verified the array's performance through a successful retest in January 2019. Officials said the single-face array, originally scheduled to support Aegis combat system equipment testing, will undergo additional testing at PMRF through 2019. As a result, the Navy has revised the acquisition schedule and will instead divert the delivery of a new array to support land-based Aegis combat system equipment testing sometime in 2019. The program has completed software development to support core radar capabilities and will continue to develop radar updates to support system improvements, cybersecurity, and combat system integration through 2021. In parallel to the radar's software development, significant software development remains to integrate AMDR with the Aegis combat system. Program officials said this software development must complete before both systems can be fully integrated and tested. While the Navy plans to test the radar and initial Aegis combat system software at a land-based site, the Navy will not test the radar and final Aegis combat system until both are installed on the lead ship. Any issues identified after the systems are installed on the lead ship could require retrofits to the radar or ship. Production Readiness Nearly 18 months after entering production, the program has not demonstrated that all of its critical manufacturing processes are in statistical control. The program reported that it exercised a contract option for the fourth low-rate initial production unit in April 2018 and was authorized to procure five additional low-rate production units in February 2019. However, in August 2018, the contractor reported early cost growth and schedule variance for the first three low-rate production units because of increased material costs and other production delays. Officials said the delays are partly due to a problem with a digital receiver component, which the contractor is testing. As a result, contractor delivery of the first production radar is at risk of delay from December 2019 to April 2020. The AMDR program office plans to procure more than two-thirds of its 22 total radars prior to completing operational testing. The Navy deliberately planned for AMDR to begin production prior to the start of Aegis upgrade software development to allow time for key radar technologies to mature and for the design to stabilize. However, this concurrency means any deficiencies identified during combat system integration or operational testing may lead to retrofitting after production is underway or complete for many of the radars. Any required retrofitting is likely to increase program costs or delay radar deliveries. Other Program Issues DOD's Director, Operational Test and Evaluation (DOT&E) has yet to approve the AMDR Test and Evaluation Master Plan. DOT&E stated that the proposed test approach for the AMDR and DDG 51 Flight III programs does not provide realistic operational conditions without the use of an AMDR- and Aegis-equipped unmanned self-defense test ship. Because the Navy has elected not to request funds for a test ship, DOT&E and the Navy are revising the DDG 51 Flight III operational test strategy to include AMDR operational requirements and an updated simulation strategy. DOT&E cautioned, however, that DDG 51 Flight III's self-defense and survivability capabilities will not be fully known until the program completes operational testing. Program Office Comments and GAO Response We provided a draft of this assessment to the program office for review and comment. In its comments, the program office disagreed with our assessment of the program's technology maturity, stating that combat system testing is not required to demonstrate mature radar technologies since the technologies have been tested and proven at the land-based PMRF site. We disagree. The PMRF site does not provide a realistic, at-sea environment to test the fit and function of the radar and combat system on a ship. Potential Change in Surface Force Architecture Another issue for Congress concerns the potential impact on the DDG-51 program of a possible change in the surface force architecture. The Navy's current force-level goal of 355 ships, including 104 large surface combatants (i.e., cruisers and destroyers), is the result of a Force Structure Analysis (FSA) that the Navy conducted in 2016. The Navy conducts a new or updated FSA every few years, and it is currently conducting a new FSA that is scheduled to be completed by the end of 2019. Navy officials have suggested that the Navy in coming years may shift to a new surface force architecture that will include a smaller proportion of large surface combatants, a larger proportion of small surface combatants, and a third tier of numerous unmanned surface vehicles (USVs). Some observers believe the results of the new FSA may reflect this potential new surface force architecture. Figure 2 shows a Navy briefing slide depicting the potential new surface force architecture, with each sphere representing a manned ship or USV. Consistent with Figure 2 , the Navy's current 355-ship goal calls for a Navy with twice as many large surface combatants (104) as small surface combatants (52). Figure 2 suggests that the potential new surface force architecture could lead to the obverse—a planned force mix that calls for twice as many small surface combatants than large surface combatants—along with the new third tier of USVs. A January 15, 2019, press report states: The Navy plans to spend this year taking the first few steps into a markedly different future, which, if it comes to pass, will upend how the fleet has fought since the Cold War. And it all starts with something that might seem counterintuitive: It's looking to get smaller. "Today, I have a requirement for 104 large surface combatants in the force structure assessment; [and] I have [a requirement for] 52 small surface combatants," said Surface Warfare Director Rear Adm. Ronald Boxall. "That's a little upside down. Should I push out here and have more small platforms? I think the future fleet architecture study has intimated 'yes,' and our war gaming shows there is value in that." An April 8, 2019, press report states that Navy discussions about the future surface fleet include the upcoming construction and fielding of the [FFG(X)] frigate, which [Vice Admiral Bill Merz, the deputy chief of naval operations for warfare systems] said is surpassing expectations already in terms of the lethality that industry can put into a small combatant. "The FSA may actually help us on, how many (destroyers) do we really need to modernize, because I think the FSA is going to give a lot of credit to the frigate—if I had a crystal ball and had to predict what the FSA was going to do, it's going to probably recommend more small surface combatants, meaning the frigate … and then how much fewer large surface combatants can we mix?" Merz said. An issue the Navy has to work through is balancing a need to have enough ships and be capable enough today, while also making decisions that will help the Navy get out of the top-heavy surface fleet and into a better balance as soon as is feasible. "You may see the evolution over time where frigates start replacing destroyers, the Large Surface Combatant [a future cruiser/destroyer-type ship] starts replacing destroyers, and in the end, as the destroyers blend away you're going to get this healthier mix of small and large surface combatants," he said—though the new FSA may shed more light on what that balance will look like and when it could be achieved. Change in DDG-1000 Mission Orientation Another potential oversight issue for Congress for FY2019 concerns the Navy's plan to shift the mission orientation of the DDG-1000s from an emphasis on NSFS to an emphasis on surface strike. Potential oversight questions for Congress include the following: What is the Navy's analytical basis for shifting the ships' mission orientation? What are the potential costs of implementing this shift? How much of these costs are in the Navy's FY2019 budget submission? How cost-effective will it be to operate and support DDG-1000s as ships with an emphasis on surface strike? When does the Navy plan to decide on whether to procure a replacement munition for the ships' AGSs, or instead pursue another option, such as removing the AGSs and their below-deck equipment and installing additional VLS tubes? What would be the cost of the latter option, and how many additional VLS tubes could be installed? If the ships will operate with their AGSs for the most part dormant, to what degree will that reduce the return on investment (ROI) involved in developing, procuring, operating, and sporting the DDG-1000s? Legislative Activity for FY2020 Summary of Congressional Action on FY2020 Funding Request Table 1 summarizes congressional action on the Navy's FY2020 procurement funding requests for the DDG-51 and DDG-1000 programs. Appendix. Additional Background Information on DDG-1000 Program This appendix presents additional background information on the DDG-1000 program. Overview The DDG-1000 program was initiated in the early 1990s. The DDG-1000 ( Figure A-1 ) is a multi-mission destroyer with an originally intended emphasis on naval surface fire support (NSFS) and operations in littoral (i.e., near-shore) waters. (NSFS is the use of naval guns to provide fire support for friendly forces operating ashore.) The DDG-1000 was originally intended to replace, in a technologically more modern form, the large-caliber naval gun fire capability that the Navy lost when it retired its Iowa-class battleships in the early 1990s, to improve the Navy's general capabilities for operating in defended littoral waters, and to introduce several new technologies that would be available for use on future Navy ships. The DDG-1000 was also intended to serve as the basis for a planned cruiser called CG(X) that was subsequently canceled. The DDG-1000 is to have a reduced-size crew of 175 sailors (147 to operate the ship, plus a 28-person aviation detachment), compared to roughly 300 on the Navy's Aegis destroyers and cruisers, so as to reduce its operating and support (O&S) costs. The ship incorporates a significant number of new technologies, including an integrated electric-drive propulsion system and automation technologies enabling its reduced-sized crew. With an estimated full load displacement of 15,612 tons, the DDG-1000 design is roughly 64% larger than the Navy's current 9,500-ton Aegis cruisers and destroyers, and larger than any Navy destroyer or cruiser since the nuclear-powered cruiser Long Beach (CGN-9), which was procured in FY1957. The first two DDG-1000s were procured in FY2007 and split-funded (i.e., funded with two-year incremental funding) in FY2007-FY2008; the Navy's FY2019 budget submission estimates their combined procurement cost at $9,242.3 million. The third DDG-1000 was procured in FY2009 and split-funded in FY2009-FY2010; the Navy's FY2019 budget submission estimates its procurement cost at $3,789.9 million. The first DDG-1000 was commissioned into service on October 15, 2016, although its delivery date was revised in the Navy's FY2018 budget submission to May 2018, and revised further in the Navy's FY2019 budget submission to December 2018, creating an unusual situation in which a ship was commissioned into service more than two years prior to its delivery date. The delivery dates for the second and third ships were revised in the Navy's FY2018 budget submission to May 2020 and December 2021, respectively, and were revised further in the Navy's FY2019 budget submission to September 2020 and September 2022, respectively. Program Origin The program known today as the DDG-1000 program was announced on November 1, 2001, when the Navy stated that it was replacing a destroyer-development effort called the DD-21 program, which the Navy had initiated in the mid-1990s, with a new Future Surface Combatant Program aimed at developing and acquiring a family of three new classes of surface combatants: a destroyer called DD(X) for the precision long-range strike and naval gunfire mission; a cruiser called CG(X) for the air defense and ballistic missile mission; and a smaller combatant called the Littoral Combat Ship (LCS) to counter submarines, small surface attack craft (also called "swarm boats"), and mines in heavily contested littoral (near-shore) areas. On April 7, 2006, the Navy announced that it had redesignated the DD(X) program as the DDG-1000 program. The Navy also confirmed in that announcement that the first ship in the class, DDG-1000, is to be named the Zumwalt , in honor of Admiral Elmo R. Zumwalt, the Chief of Naval operations from 1970 to 1974. The decision to name the first ship after Zumwalt was made by the Clinton Administration in July 2000, when the program was still called the DD-21 program. New Technologies The DDG-1000 incorporates a significant number of new technologies, including a wave-piercing, tumblehome hull design for reduced detectability, a superstructure made partly of large sections of composite (i.e., fiberglass-like) materials rather than steel or aluminum, an integrated electric-drive propulsion system, a total-ship computing system for moving information about the ship, automation technologies enabling its reduced-sized crew, a dual-band radar, a new kind of vertical launch system (VLS) for storing and firing missiles, and two copies of a new 155mm gun called the Advanced Gun System (AGS). Shipbuilders and Combat System Prime Contractor GD/BIW is the builder for all three DDG-1000s, with some portions of each ship being built by HII/Ingalls for delivery to GD/BIW. Raytheon is the prime contractor for the DDG-1000's combat system (its collection of sensors, computers, related software, displays, and weapon launchers). Under a DDG-1000 acquisition strategy approved by the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD AT&L) on February 24, 2004, the first DDG-1000 was to have been built by HII/Ingalls, the second ship was to have been built by GD/BIW, and contracts for building the first six were to have been equally divided between HII/Ingalls and GD/BIW. In February 2005, Navy officials announced that they would seek approval from USD AT&L to instead hold a one-time, winner-take-all competition between HII/Ingalls and GD/BIW to build all DDG-1000s. On April 20, 2005, the USD AT&L issued a decision memorandum deferring this proposal, stating in part, "at this time, I consider it premature to change the shipbuilder portion of the acquisition strategy which I approved on February 24, 2004." Several Members of Congress also expressed opposition to the Navy's proposal for a winner-take-all competition. Congress included a provision (§1019) in the Emergency Supplemental Appropriations Act for 2005 ( H.R. 1268 / P.L. 109-13 of May 11, 2005) prohibiting a winner-take-all competition. The provision effectively required the participation of at least one additional shipyard in the program but did not specify the share of the program that is to go to the additional shipyard. On May 25, 2005, the Navy announced that, in light of Section 1019 of P.L. 109-13 , it wanted to shift to a "dual-lead-ship" acquisition strategy, under which two DDG-1000s would be procured in FY2007, with one to be designed and built by HII/Ingalls and the other by GD/BIW. Section 125 of the FY2006 defense authorization act ( H.R. 1815 / P.L. 109-163 ) again prohibited the Navy from using a winner-take-all acquisition strategy for procuring its next-generation destroyer. The provision again effectively requires the participation of at least one additional shipyard in the program but does not specify the share of the program that is to go to the additional shipyard. On November 23, 2005, the USD AT&L granted Milestone B approval for the DDG-1000, permitting the program to enter the System Development and Demonstration (SDD) phase. As part of this decision, the USD AT&L approved the Navy's proposed dual-lead-ship acquisition strategy and a low rate initial production quantity of eight ships (one more than the Navy subsequently planned to procure). On February 14, 2008, the Navy awarded contract modifications to GD/BIW and HII/Ingalls for the construction of the two lead ships. The awards were modifications to existing contracts that the Navy has with GD/BIW and HII/Ingalls for detailed design and construction of the two lead ships. Under the modified contracts, the line item for the construction of the dual lead ships is treated as a cost plus incentive fee (CPIF) item. Until July 2007, it was expected that HII/Ingalls would be the final-assembly yard for the first DDG-1000 and that GD/BIW would be the final-assembly yard for the second. On September 25, 2007, the Navy announced that it had decided to build the first DDG-1000 at GD/BIW, and the second at HII/Ingalls. On January 12, 2009, it was reported that the Navy, HII/Ingalls, and GD/BIW in the fall of 2008 began holding discussions on the idea of having GD/BIW build both the first and second DDG-1000s, in exchange for HII/Ingalls receiving a greater share of the new DDG-51s that would be procured under the Navy's July 2008 proposal to stop DDG-1000 procurement and restart DDG-51 procurement. On April 8, 2009, it was reported that the Navy had reached an agreement with HII/Ingalls and GD/BIW to shift the second DDG-1000 to GD/BIW, and to have GD/BIW build all three ships. HII/Iingalls will continue to make certain parts of the three ships, notably their composite deckhouses. The agreement to have all three DDG-1000s built at GD/BIW was a condition that Secretary of Defense Robert Gates set forth in an April 6, 2009, news conference on the FY2010 defense budget for his support for continuing with the construction of all three DDG-1000s (rather than proposing the cancellation of the second and third). Reduction in Procurement to Three Ships Navy plans for many years called for ending DDG-51 procurement in FY2005, to be followed by procurement of up to 32 DDG-1000s and some number of CG(X)s. In subsequent years, the planned total number of DDG-1000s was reduced to 16 to 24, then to 7, and finally to 3. At the end of July 2008, in a major reversal of its destroyer procurement plans, the Navy announced that it wanted to end procurement of DDG-1000s and resume procurement of DDG-51s. In explaining this reversal, which came after two DDG-1000s had been procured, the Navy stated that it had reevaluated the future operating environment and determined that its destroyer procurement now needed to emphasize three missions: open-ocean antisubmarine warfare (ASW), countering anti-ship cruise missiles (ASCMs), and countering ballistic missiles. Although the DDG-1000 could perform the first two of these missions and could be modified to perform the third, the Navy concluded that the DDG-51 design could perform these three missions adequately and would be less expensive to procure than the DDG-1000 design. The Navy's proposal to stop procuring DDG-1000s and resume procuring DDG-51s was presented in the Navy's proposed FY2010 budget, which was submitted to Congress in 2009. Congress, in acting on the Navy's FY2010 budget, approved the idea of ending DDG-1000 procurement and restarting DDG-51 procurement, and procured a third DDG-1000 as the final ship in the class. In retrospect, the Navy's 2008 reversal in its destroyer procurement plans can be viewed as an early indication of the ending of the post-Cold War era (during which the Navy focused its planning on operating in littoral waters against the land- and sea-based forces of countries such as Iran and North Korea) and the shift in the international security environment to a new situation featuring renewed great power competition (during which the Navy is now focusing its planning more on being able to operate in mid-ocean waters against capable naval forces from near-peer competitors such as China and Russia). Increase in Estimated Procurement Cost As shown in Table A-1 below, the estimated combined procurement cost for all three DDG-1000s, as reflected in the Navy's annual budget submission, has grown by $4,218.4 million, or 47.0%, since the FY2009 budget (i.e., the budget for the fiscal year in which the third DDG-1000 was procured). Some of the cost growth in the earlier years in the table was caused by the truncation of the DDG-1000 program from seven ships to three, which caused some class-wide procurement-rated costs that had been allocated to the fourth through seventh ships in the program to be reallocated to the three remaining ships. The Navy states that the cost growth shown through FY2015 in the table reflects, among other things, a series of incremental, year-by-year movements away from an earlier Navy cost estimate for the program, and toward a higher estimate developed by the Cost Assessment and Program Evaluation (CAPE) office within the Office of the Secretary of Defense (OSD). As one consequence of a Nunn-McCurdy cost breach experienced by the DDG-1000 program in 2010 (see discussion bvelow), the Navy was directed to fund the DDG-1000 program to CAPE's higher cost estimate for the period FY2011-FY2015, and to the Navy's cost estimate for FY2016 and beyond. The Navy states that it implemented this directive in a year-by-year fashion with each budget submission from FY2010 through FY2015, moving incrementally closer each year through FY2015 to CAPE's higher estimate. The Navy stated in 2014 that even with the cost growth shown in the table, the DDG-1000 program as of the FY2015 budget submission was still about 3% below the program's rebaselined starting point for calculating any new Nunn-McCurdy cost breach on the program. Procurement Cost Cap Section 123 of the FY2006 defense authorization act ( H.R. 1815 / P.L. 109-163 of January 6, 2006) limited the procurement cost of the fifth DDG-1000 to $2.3 billion, plus adjustments for inflation and other factors. Given the truncation of the DDG-1000 program to three ships, this unit procurement cost cap appears moot. 2010 Nunn-McCurdy Breach, Program Restructuring, and Milestone Recertification On February 1, 2010, the Navy notified Congress that the DDG-1000 program had experienced a critical cost breach under the Nunn-McCurdy provision. The Nunn-McCurdy provision (10 U.S.C. 2433a) requires certain actions to be taken if a major defense acquisition program exceeds (i.e., breaches) certain cost-growth thresholds and is not terminated. Among other things, a program that experiences a cost breach large enough to qualify under the provision as a critical cost breach has its previous acquisition system milestone certification revoked. (In the case of the DDG-1000 program, this was Milestone B.) In addition, for the program to proceed rather than be terminated, DOD must certify certain things, including that the program is essential to national security and that there are no alternatives to the program that will provide acceptable capability to meet the joint military requirement at less cost. The Navy stated in its February 1, 2010, notification letter that the DDG-1000 program's critical cost breach was a mathematical consequence of the program's truncation to three ships. Since the DDG-1000 program has roughly $9.3 billion in research and development costs, truncating the program to three ships increased to roughly $3.1 billion the average amount of research and development costs that are included in the average acquisition cost (i.e., average research and development cost plus procurement cost) of each DDG-1000. The resulting increase in program acquisition unit cost (PAUC)—one of two measures used under the Nunn-McCurdy provision for measuring cost growth —was enough to cause a Nunn-McCurdy critical cost breach. In a June 1, 2010, letter (with attachment) to Congress, Ashton Carter, the DOD acquisition executive (i.e., the Under Secretary of Defense for Acquisition, Technology and Logistics), stated that he had restructured the DDG-1000 program and that he was issuing the certifications required under the Nunn-McCurdy provision for the restructured DDG-1000 program to proceed. The letter stated that the restructuring of the DDG-1000 program included the following: A change to the DDG-1000's design affecting its primary radar. A change in the program's Initial Operational Capability (IOC) from FY2015 to FY2016. A revision to the program's testing and evaluation requirements. Regarding the change to the ship's design affecting its primary radar, the DDG-1000 originally was to have been equipped with a dual-band radar (DBR) consisting of the Raytheon-built X-band SPY-3 multifunction radar (MFR) and the Lockheed-built S-band SPY-4 Volume Search Radar (VSR). (Raytheon is the prime contractor for the overall DBR.) Both parts of the DBR have been in development for the past several years. An attachment to the June 1, 2010, letter stated that, as a result of the program's restructuring, the ship is now to be equipped with "an upgraded multifunction radar [MFR] and no volume search radar [VSR]." The change eliminates the Lockheed-built S-band SPY-4 VSR from the ship's design. The ship might retain a space and weight reservation that would permit the VSR to be backfitted to the ship at a later point. The Navy states that As part of the Nunn-McCurdy certification process, the Volume Search Radar (VSR) hardware was identified as an acceptable opportunity to reduce cost in the program and thus was removed from the current baseline design.... Modifications will be made to the SPY-3 Multi-Function Radar (MFR) with the focus of meeting ship Key Performance Parameters. The MFR modifications will involve software changes to perform a volume search functionality. Shipboard operators will be able to optimize the SPY-3 MFR for either horizon search or volume search. While optimized for volume search, the horizon search capability is limited. Without the VSR, DDG 1000 is still expected to perform local area air defense.... The removal of the VSR will result in an estimated $300 million net total cost savings for the three-ship class. These savings will be used to offset the program cost increase as a result of the truncation of the program to three ships. The estimated cost of the MFR software modification to provide the volume search capability will be significantly less than the estimated procurement costs for the VSR. Regarding the figure of $300 million net total cost savings in the above passage, the Navy during 2011 determined that eliminating the SPY-4 VSR from the DDG-1000 increased by $54 million the cost to integrate the dual-band radar into the Navy's new Gerald R. Ford (CVN-78) class aircraft carriers. Subtracting this $54 million cost from the above $300 million savings figure would bring the net total cost savings to about $246 million on a Navy-wide basis. A July 26, 2010, press report quotes Captain James Syring, the DDG-1000 program manager, as stating the following: "We don't need the S-band radar to meet our requirements [for the DDG-1000]," and "You can meet [the DDG-1000's operational] requirements with [the] X-band [radar] with software modifications." An attachment to the June 1, 2010, letter stated that the PAUC for the DDG-1000 program had increased 86%, triggering the Nunn-McCurdy critical cost breach, and that the truncation of the program to three ships was responsible for 79 of the 86 percentage points of increase. (The attachment stated that the other seven percentage points of increase are from increases in development costs that are primarily due to increased research and development work content for the program.) Carter also stated in his June 1, 2010, letter that he had directed that the DDG-1000 program be funded, for the period FY2011-FY2015, to the cost estimate for the program provided by the Cost Assessment and Program Evaluation (CAPE) office (which is a part of the Office of the Secretary of Defense [OSD]), and, for FY2016 and beyond, to the Navy's cost estimate for the program. The program was previously funded to the Navy's cost estimate for all years. Since CAPE's cost estimate for the program is higher than the Navy's cost estimate, funding the program to the CAPE estimate for the period FY2011-FY2015 will increase the cost of the program as it appears in the budget for those years. The letter states that DOD "intends to address the [resulting] FY2011 [funding] shortfall [for the DDG-1000 program] through reprogramming actions." An attachment to the letter stated that the CAPE in May 2010 estimated the PAUC of the DDG-1000 program (i.e., the sum of the program's research and development costs and procurement costs, divided by the three ships in the program) as $7.4 billion per ship in then-year dollars ($22.1 billion in then-year dollars for all three ships), and the program's average procurement unit cost (APUC), which is the program's total procurement cost divided by the three ships in the program, as $4.3 billion per ship in then-year dollars ($12.8 billion in then-year dollars for all three ships). The attachment stated that these estimates are at a confidence level of about 50%, meaning that the CAPE believes there is a roughly 50% chance that the program can be completed at or under these cost estimates, and a roughly 50% chance that the program will exceed these cost estimates. An attachment to the letter directed the Navy to "return for a Defense Acquisition Board (DAB) review in the fall 2010 timeframe when the program is ready to seek approval of the new Milestone B and authorization for production of the DDG-1002 [i.e., the third ship in the program]." On October 8, 2010, DOD reinstated the DDG-1000 program's Milestone B certification and authorized the Navy to continue production of the first and second DDG-1000s and commence production of the third DDG-1000. Technical Risk and Test and Evaluation Issues May 2019 GAO Report A May 2019 GAO report assessing selected major DOD weapon acquisition programs stated the following of the DDG-1000 program: Technology Maturity and Design Stability The DDG 1000 program has fully matured most, but not all, of its nine current critical technologies and reports a stable design. According to the Navy, the fire suppression system, hull form, deckhouse, power system, and undersea warfare suite technologies are all mature. At the same time, the vertical launch system, infrared signature, multi-function radar, and total ship computing environment technologies each continue to approach maturity. The Navy expects to fully mature these systems as it completes ship construction, certification, and testing over the next 2 years. The program originally had 12 critical technologies, but in the last several years, the Navy removed three, including two technologies associated with the advanced gun system—the projectile and the gun—because of the projectile's high cost per round. The Navy planned to rely on these munitions for precision fires and offensive operations. Following an evaluation of five other munition options, the Navy determined that no viable replacement, guided or unguided, was feasible. As a result, the guns will remain inoperable on the ships for the foreseeable future. Lastly, the Navy will use a modified multi-function radar in place of a volume search radar, which the Navy removed from the class. As we have previously reported, the Navy and its shipbuilders had not stabilized DDG 1000's design by lead ship fabrication start in 2009—an approach inconsistent with best practices. This approach contributed to numerous design changes after the fabrication start and significant cost increases and schedule delays. Nearly 10 years later, development and shipboard testing of technologies continues, each of which could lead to discovery that could disrupt the design stability the Navy currently claims. The Navy plans to complete software development for the class in September 2020—a delay of 24 months since our 2018 assessment. As a result, the Navy has had to delay some testing. Also that month, the program plans to complete its cyber security vulnerability evaluation along with the remainder of a 2-year regimen of certifications and several different tests. The Navy expects this regimen to demonstrate the full functionality of the ship's systems. Production Readiness The DDG 1000 shipbuilder is approaching completion of the hull, mechanical, and electrical (HM&E) systems for all three ships of the class. Shipbuilder delivery of the lead ship's HM&E occurred 18 months behind schedule, in part because of problems completing electrical work associated with the ship's power system. The shipbuilder also experienced problems completing the power system for DDG 1001, the second ship in the class. Following sea trials, the Navy inspected one of the ship's main turbine generators and found that the generator was damaged by a woodscrew. The damage was extensive enough that the Navy chose to replace the engine and send it for repair. Officials report that the shipbuilder delivered the ship in April 2018 and the Navy replaced the engine in September 2018 at its expense. The Navy has scheduled DDG 1000's final delivery, including HM&E and combat systems, for May 2019. The Navy has scheduled DDG 1001's final delivery to follow in September 2020. However, the Navy is still working to correct serious deficiencies that its Board of Inspection and Survey has identified on both ships. Specifically, the board found over 320 serious deficiencies when the shipbuilder delivered DDG 1000's HM&E in May 2016, and 246 serious deficiences after the Navy conducted acceptance trials for DDG 1001 in January and February 2018. This increases the likelihood that the ship will not be fully capable and sustainable when provided to the fleet. To limit further delays to DDG 1000 and DDG 1001 construction, the Navy has authorized its shipbuilder to take parts from DDG 1002—the third and final ship of the class, which is under construction. The Navy does not yet know the full extent to which these actions will delay DDG 1002's construction schedule, but stated that these parts typically can be borrowed and replaced without causing a delay. The Navy has scheduled the ship's HM&E delivery in March 2020 followed by final delivery in September 2022. Other Program Issues In a January 2018 decision memorandum, the Navy changed DDG 1000's primary mission from land attack to offensive surface strike. Navy officials are in the process of determining the operational concept for the ship within its new mission. The Navy has yet to establish testing plans to evaluate these future mission sets. According to Navy officials, the Navy's planned modifications to support the new mission will cost about $1 billion, from non-acquisition accounts. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office also stated that it is making good progress delivering the Zumwalt class. The Navy said that, since our assessment, DDG 1000 completed combat systems availability, combat tests are underway, and final delivery is now planned for September 2019. The program office also said that DDG 1001 started combat systems availability in April 2019, and DDG 1002 is 84 percent constructed. The program office further noted that future addition of new systems onto Zumwalt-class ships will provide offensive fire capabilities.

The Navy began procuring Arleigh Burke (DDG-51) class destroyers, also known as Aegis destroyers, in FY1985, and a total of 82 have been procured through FY2019. The Navy's proposed FY2020 budget requests funding for the procurement of three more DDG-51s, which would be the 83rd, 84th, and 85th ships in the class. DDG-51s planned for procurement in FY2018-FY2022 are being procured under a multiyear procurement (MYP) contract that Congress approved as part of its action on the Navy's FY2018 budget. DDG-51s procured in FY2017 and subsequent years are being built to a new design (the Flight III DDG-51 design), which incorporates a new and more capable radar called the Air and Missile Defense Radar (AMDR) or SPY-6 radar. The Navy procured DDG-51s from FY1985 through FY2005, and resumed procuring them in FY2010. In FY2007-FY2009, during the time when the Navy was not procuring DDG-51s, the Navy procured three Zumwalt (DDG-1000) class destroyers. The Navy plans no further procurement of DDG-1000s. The Navy's proposed FY2020 budget requests $155.9 million in procurement funding to help complete the total procurement cost of the three DDG-1000 class ships. The Navy estimates the combined procurement cost of the three DDG-51s requested for procurement in FY2020 at $5,463.0 million, or an average of $1,821.0 million each. The ships have received $363.7 million in prior-year Economic Order Quantity (EOQ) advance procurement (AP) funding (i.e., funding for up-front batch orders of components of DDG-51s to be procured under the FY2018-FY2022 MYP contract). The Navy's proposed FY2020 budget requests the remaining $5,099.3 million in procurement funding needed to complete the estimated procurement cost of the three DDG-51s, as well as $224.0 million in EOQ funding for DDG-51s to be procured in FY2021 and FY2022, bringing the total amount requested for the DDG-51 program for FY2020 to $5,323.3 million, excluding outfitting and post-delivery costs. The Navy wants to procure the first ship of a new class of large surface combatants in FY2025. Under the Navy's plan, FY2025 would be the final year of DDG-51 procurement. Issues for Congress for FY2019 for the DDG-51 and DDG-1000 destroyer programs include the following: whether to approve, reject, or modify the Navy's FY2020 funding requests for the DDG-51 and DDG-1000 programs; cost, schedule, and technical risk in the Flight III DDG-51 effort; the potential impact on the DDG-51 program of a possible change in the surface force architecture; and the Navy's plan to shift the mission orientation of the DDG-1000s from an emphasis on naval surface fire support (NSFS) to an emphasis on surface strike.

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Introduction This report provides background information on the types of water supply and wastewater treatment projects traditionally funded by the federal government and the several existing programs to assist communities with water supply and wastewater treatment. For more than four decades, Congress has authorized and refined several programs to help communities address water supply and wastewater problems. The agencies that administer these programs differ in multiple ways. For example, in terms of funding mechanisms, projects developed by the Bureau of Reclamation (Reclamation) and the U.S. Army Corps of Engineers (USACE) typically require direct, individual project authorizations from Congress. In contrast, standing program authorizations provide project funding for other agencies, including the Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the Department of Commerce, and the Department of Housing and Urban Development (HUD). The key practical difference is that with the individual project authorizations there is no predictable assistance, or even guarantee of funding after a project is authorized, because funding must be secured each year in the congressional appropriations process. The programs, on the other hand, have set program criteria, are generally funded from year to year, and provide a process under which project sponsors compete for funding. In terms of scope and mission, the primary responsibilities of USACE are to maintain inland navigation, provide for flood and storm damage reduction, and restore aquatic ecosystems, while EPA's mission relates to protecting public health and the environment. Further, the Department of Commerce and HUD focus on community and economic development. Likewise, the specific programs discussed in this report—while all address water supply and wastewater treatment to some degree—differ in important respects. Some are national in scope (those of USDA, EPA, and the Department of Commerce, for example), while others are regionally focused (Reclamation's programs and projects). Some focus primarily on urban areas (HUD), some on rural areas (USDA). For each of the projects and programs discussed, this report describes purposes, financing mechanisms, eligibility requirements, recent funding, and statutory/regulatory authority. The report does not address special projects and programs aimed specifically at assisting Indian Tribes, Alaskan Native Villages, and c olonias , or other regional programs such as those associated with the Appalachian region or U.S. Territories. This report focuses on municipal and industrial (M&I) water and wastewater activities. This report does not address projects and programs that involve irrigation, flood control, power supply, and recreation. However, in some cases (noted below), a federal program (e.g., Reclamation) may primarily support one or more of these other objectives while providing some support for M&I activities, even if only incidentally. Other federal authorities of USDA's Rural Utilities Service, Reclamation, and USACE may be available to assist with the provision of emergency water and wastewater needs, such as improving access to water supplies during a drought. These authorities are not discussed in this report. Table 1 summarizes financial and other key elements of the projects and program activities discussed in this report. As indicated in the table, federal funding for the programs and projects discussed in this report varies greatly. Collectively, congressional funding for these programs in recent years has been somewhat eroded by overall competition among the many programs that are supported by discretionary spending, despite the continuing pressure from stakeholders and others for increased funding. While federal support for some traditional financing tools—project grants, formula grants, capitalization grants, direct and guaranteed loans—has declined, policymakers have begun to consider alternative financing approaches, such as trust funds, new types of federal loans, and options to encourage private sector investments in water infrastructure through public-private partnerships. Supporters of some of these newer ideas (e.g., the " Water Infrastructure Finance and Innovation Act Program ") see them as options to supplement or complement, but not replace, traditional financing tools. State and local contributions are the most significant source of total funds available to communities for drinking water and wastewater treatment improvements. According to the Congressional Budget Office, spending by state and local governments on drinking water and wastewater has increased much faster than spending by the federal government, especially since the mid-1970s. In 2017, the state and local share of such projects (both capital and operation and maintenance spending) was 96%, while the federal share was 4%. Department of the Interior Bureau of Reclamation The Bureau of Reclamation (Reclamation) was established to implement the Reclamation Act of 1902, which authorized the construction of water works to provide water for irrigation in arid western states. Reclamation owns and manages 475 dams and 337 reservoirs, which are capable of storing 245 million acre-feet of water. The agency's inventory of 4,000 "constructed real property assets" has a current replacement value of nearly $100 billion. Overall, these facilities serve approximately 31 million people, delivering a total of approximately 28.5 million acre-feet of water (an acre-foot is enough to cover one acre of land one foot deep, or 325,851 gallons) annually in nondrought years. Reclamation-funded municipal and industrial (M&I) water deliveries total approximately 2.8 million acre-feet and have more than doubled since 1970. Reclamation primarily manages M&I water supply facilities as part of larger, multipurpose reclamation projects serving irrigation, flood control, power supply, and recreation purposes. However, since 1980, Congress has individually authorized construction of "rural water supply" projects, as well as reclamation wastewater and reuse/recycling projects. This title also authorized Reclamation to undertake specific and general feasibility studies for reclamation wastewater and reuse projects and to research, construct, and operate demonstration projects. Even so, these projects remain a small part of the overall Reclamation portfolio. Historically, Reclamation constructed projects with federal funds, then established a repayment schedule based on the amount of total construction costs allocated to specific project purposes. Reclamation project authorizations typically require 100% repayment, with interest, for the M&I portion of water supply facilities, which makes Reclamation assistance a de facto long-term loan. However, for M&I projects under rural water and Title XVI authorities, Congress has authorized terms providing some or all federal funding for projects on a nonreimbursable basis (i.e. a de facto grant). For example, the federal government fully funds rural water projects serving Indian populations. For non-Indian rural water supply projects, Congress has authorized nonreimbursable federal funding of as much as 75%-85% of project costs. The federal share of costs for Title XVI projects is generally much lower than for rural water projects; it is limited to a maximum of 25% of total project costs or, for projects authorized since 1996, a maximum of $20 million per project authorization. "Traditional" Multipurpose Reclamation Projects9 Unlike many other programs described in this report, Reclamation undertakes projects largely at the explicit direction of Congress. Local project sponsors may approach Reclamation or Congress with proposals for project construction and funding; however, except where blanket feasibility study authorizations exist—for example, for certain program areas described below—specific project feasibility studies must be first authorized by Congress. Once a feasibility study is completed, congressional authorization is typically sought prior to construction. Because there is no "program" per se, there are no clear and concise eligibility or program criteria for selecting large, multipurpose projects. Rather, Congress relies on information provided in feasibility studies, including cost-benefit, engineering, and environmental analyses, and political considerations. Project Purposes Individual authorization statutes establish project purposes. Generally, M&I projects are part of larger, multipurpose projects such as those built for irrigation water supply, flood control, and hydro power purposes, or are authorized under the rural water supply or Title XVI water reuse programs described below. Financing Mechanism Projects are financed and constructed up front by the federal government, and costs for M&I portions of such projects are generally scheduled to be repaid 100%, with interest, via "repayment" or "water service" contracts. Irrigation districts must also repay their share of project benefits, but such payments are not subject to interest charges. Eligibility Requirements Generally, local governments and organizations such as irrigation, water, or conservation districts may approach Reclamation and/or Congress for project support. All construction project funding must be appropriated by Congress. As noted earlier, Reclamation only works on projects located in the 17 western states (32 Stat. 388; 43 U.S.C. §391 et seq. ), unless otherwise specifically authorized. Funding Funding information for the M&I portions of multipurpose projects is not readily available. Total regular Reclamation appropriations (gross current authority; not including permanent funding) for FY2019 were $1.571 billion. The total FY2020 budget request for Reclamation was $1.109 billion. Statutory and Regulatory Authority Reclamation generally carries out its water supply activities in 17 western states as authorized by the Reclamation Act of 1902, as amended (32 Stat. 388; 43 U.S.C. §391 et seq. ), as well as through hundreds of individual project authorization statutes. Rural Water Supply Projects Similar to its traditional multipurpose projects, Reclamation has undertaken individual rural water projects largely at the explicit direction of Congress. Generally speaking, Congress has in most cases prioritized appropriation of funding for already authorized projects rather than funds for new rural water construction projects. In lieu of the project-based approach to authorizing new rural water projects, in 2006 Congress authorized a rural water supply program ( P.L. 109-451 ). Under the program, Reclamation was authorized to work with rural communities and Indian tribes to identify municipal and industrial water needs and options to address such needs through appraisal investigations, and in some cases feasibility studies. In 2008, Reclamation published an interim final rule establishing future program criteria. According to the bureau, between 2006 and 2016, it used this authority to study approximately 26 projects to varying extents, although no projects were recommended for construction and authorized by Congress. This authority expired at the end of FY2016 and has not been renewed since. However, Reclamation continues to pursue authorized rural water projects that were previously authorized at the project level. As of early 2019, Reclamation reported that $1.3 billion was still needed to construct authorized, ongoing rural water projects. Project Purposes Historically, individual authorization statutes established rural water project purposes. Nearly half of the rural water supply projects authorized to date are somehow connected to previously authorized irrigation facilities under the Pick-Sloan Missouri Basin Program (PSMBP), or otherwise related to water service anticipated but not received under earlier PSMBP authorizations. Many rural water project authorizations are also linked to Indian water settlements or otherwise provide benefits to Indian tribes. Financing Mechanism Projects are generally cost-shared between the federal government and local sponsors. In the past, the federal cost-share for these projects has averaged 64%, and ranged from 15% to 80% for non-Indian rural water supply projects. As previously noted, the federal government pays up to 100% of the cost of Indian rural water supply projects. Assistance is generally provided on a competitive basis under the interim final rule's financial criteria. In accordance with the programmatic criteria provided in the rule, a nonfederal cost-share would be required, consistent with any future construction authorization for those projects. Eligibility Requirements15 Local governments and organizations such as water and conservation districts or associations, including Indian tribes, may approach Reclamation and/or Congress for project support. Currently, all construction project funding must be authorized at the project level and appropriated by Congress. As noted earlier, Reclamation only works on projects located in the 17 western states (32 Stat. 388; 43 U.S.C. §391 et seq. ), unless specifically authorized by Congress. Reclamation previously published an interim final rule (43 C.F.R. Part 404) that established criteria for developing new rural supply projects, but the authority for the program has since expired. The rule does not apply to previously authorized projects. As previously stated, ongoing rural water construction activities are limited to ongoing, previously authorized projects. Funding Enacted funding for rural water supply projects in FY2019 was $132.7 million. This included $98 million in additional funding above the Administration's FY2019 budget request to be allocated at the project level by Reclamation in a subsequent work plan for FY2019. For FY2020, the Administration's budget proposal requested $27.7 million for five ongoing authorized rural water projects. Statutory and Regulatory Authority The Rural Water Supply Program was authorized by the Rural Water Supply Act of 2006 ( P.L. 109-451 , Title I; 120 Stat. 3345; 43 U.S.C. 2401 note). This programmatic authority expired at the end of FY2016 and has yet to be renewed. Construction and operations and maintenance is ongoing for several geographically specific projects that were previously authorized under various individual acts. Title XVI Projects Title XVI of P.L. 102-575 directs the Secretary of the Interior to develop a program to "investigate and identify" opportunities to reclaim and reuse wastewater and naturally impaired ground and surface water. Generally speaking, water reclaimed via Title XVI projects may be used for M&I water supply (nonpotable and indirect potable purposes only), irrigation supply, groundwater recharge, fish and wildlife enhancement, or outdoor recreation. The original Title XVI legislation authorized construction of five reclamation wastewater projects and six wastewater and groundwater recycling/reclamation studies. The act was amended in 1996 ( P.L. 104-266 ) to authorize another 18 construction projects and an additional study, and has been amended several times since, resulting in a total of 53 projects individually authorized for construction. Most recently, amendments to Title XVI enacted in December 2016 in the Water Infrastructure Improvements for the Nation Act (WIIN Act, P.L. 114-322 ) made changes to the program, including authorizing the Secretary of the Interior to accept and review nonfederal feasibility studies for potential planning, design, and construction projects. As of February 2019, 47 projects had been authorized under the WIIN Act authority. The WIIN Act also authorized a competitive grant program for construction of projects approved under this authority, including an authorization of $50 million in appropriations. Based on agency data, CRS estimates that as of early 2018, the backlog of remaining federal funding for the 94 authorized Title XVI projects (i.e., both "traditional" and WIIN Act authorized projects) was over $1 billion. Project Purposes The general purpose of Title XVI projects is to provide supplemental water supplies by recycling/reusing agricultural drainage water, wastewater, brackish surface and groundwater, and other sources of contaminated water. Projects may be permanent or for demonstration purposes. Financing Mechanism Title XVI projects are funded through partial de facto grants. The funding is part of the larger Reclamation WaterSMART program, which also provides grants for water conservation and river basin studies under separate authority granted in the Secure Water Act ( P.L. 111-11 , subtitle B). Title XVI project construction costs are shared by the federal government and a local project sponsor or sponsors. The federal share is generally limited to a maximum of 25% of total project costs and is nonreimbursable, resulting in a de facto grant to the local project sponsor(s). In 1996, Congress limited the federal share of individual projects to $20 million in 1996 dollars ( P.L. 104-266 ). The federal share of feasibility studies is limited to 50% of the total, except in cases of "financial hardship"; however, the federal share must be reimbursed. The Secretary may also accept in-kind services that are determined to positively contribute to the study. Eligibility Requirements Similar to other Reclamation activities, the Title XVI water reclamation and wastewater recycling program is limited to projects and studies in the 17 western states unless otherwise specified. Authorized recipients of program assistance include "legally organized non-federal entities," such as irrigation districts, water districts, municipalities, and Indian tribes. Prior to enactment of the WIIN Act, Administration requests for construction funding have generally been limited to projects where (1) an appraisal investigation and feasibility study have been completed and approved by the Secretary; (2) the Secretary determined that the project sponsor was capable of funding the nonfederal share of project costs; and (3) the local sponsor entered into a cost-share agreement with Reclamation. The WIIN Act provided DOI with additional authority to accept nonfederal feasibility studies and approve and consider these projects for construction funding if they meet Title XVI program criteria, including that (1) the study complies with federal laws and regulations applicable to water reuse and recycling studies, and (2) the project is technically and financially feasible and provides a federal benefit in accordance with Reclamation laws. The WIIN Act authority has essentially rendered unnecessary the prior practice of obtaining geographically specific authorizations for individual Title XVI projects before they can pursue funding. Over time, Reclamation has issued and revised multiple documents outlining evaluation criteria for prioritizing Title XVI projects. The most recent evaluation criteria for Title XVI projects (for FY2018 funding) was posted for review and comment in March 2018. Funding The total regular appropriation for the Title XVI program in FY2019 was $58.6 million, with $20 million of this funding designated as being available for WIIN Act–authorized projects. The Administration's FY2020 request for Title XVI was $3.0 million. Projects authorized prior to 1996 ranged in size from $152 million ($38 million for Reclamation's share), to $690 million ($172 million for Reclamation's share). Post-1996 project authorizations have been smaller in size, ranging from $6.6 million ($1.65 million for Reclamation's share) to $319 million ($20 million for Reclamation's share). Statutory and Regulatory Authority The original statutory authority for the reclamation wastewater and reuse program is the Reclamation Wastewater and Groundwater Study and Facilities Act, Title XVI of P.L. 102-575 , as amended (43 U.S.C. 390h et. seq.). Other statutes that authorized Title XVI projects include the Reclamation Recycling and Water Conservation Act of 1996 ( P.L. 104-266 ); the Oregon Public Land Transfer and Protection Act of 1998 ( P.L. 105-321 ); the 1999 Water Resources Development Act ( P.L. 106-53 , Section 595); the Consolidated Appropriations Act for FY2001 ( P.L. 106-554 , Division B, Section 106); a bill amending the Reclamation Wastewater and Groundwater Study and Facilities Act ( P.L. 107-344 ); the Consolidated Appropriations Act for FY2003 ( P.L. 108-7 , Division D, Section 211); the Emergency Wartime Supplementals Act of 2003 ( P.L. 108-11 ); the Irvine Basin Surface and Groundwater Improvement Act of 2003 ( P.L. 108-233 ); a bill amending the Reclamation Wastewater and Groundwater Study and Facilities Act ( P.L. 108-316 ); the Hawaii Water Resources Act of 2005 ( P.L. 109-70 ); the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ); the Consolidated Natural Resources Act of 2009 ( P.L. 110-229 ); the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ; Title IX, Subtitle B); and the Water Infrastructure Improvements for the Nations Act ( P.L. 114-322 , Title III, Subtitle J). [This section was prepared by Charles V. Stern, Specialist in Natural Resources Policy, Resources, Science, and Industry Division.] Department of Defense Army Corps of Engineers (Civil Works Program) Under its civil works program, USACE operates water resource projects throughout the country. USACE civil works activities are concentrated on three principal missions—navigation, flood damage reduction, and aquatic ecosystem restoration. Many USACE activities also support municipal and industrial (M&I) water supply, environmental infrastructure, hydroelectric generation, fish and wildlife, and recreation. Municipal and Industrial (M&I) Water Supply A total of 136 USACE reservoirs have roughly 9.8 million acre-feet of storage designated for M&I water. Most of this water was allocated to M&I purposes when the projects were constructed; around 0.9 million acre-feet of this storage space has been allocated to M&I use from existing USACE reservoirs using USACE's general water supply authorities. The provision of M&I water from USACE reservoirs, as discussed below, is subject to availability, and the associated costs are 100% a local, nonfederal responsibility. Additionally Congress has chosen to authorize a small number of USACE projects primarily for water supply. In the WIIN Act, Congress expanded the agency's authorities related to "water conservation" at its projects. USACE also has authorities related to water supply provision as part of emergency and disaster relief, including during droughts. For all of its projects, USACE policy is that it does not acquire water rights for these water supply and conservation uses; the water user is responsible for securing water rights. Congress has given USACE limited general authority for M&I water supply. A 1958 authority is for permanent allocation of water storage for M&I applications, and a 1944 authority provides for temporary contracts for surplus water from USACE reservoirs. The Water Supply Act of 1958 authorized USACE (and Reclamation) to recommend economically justified M&I water supply storage space in new or existing reservoirs. USACE also has authority for the short-term provision of surplus water as specified in the Flood Control Act of 1944; surplus water contracts have generally been limited to five-year terms, with options to extend. Project Purposes As previously noted, Congress authorized USACE to allocate a portion of its multipurpose reservoirs for permanent M&I storage, or to provide M&I water from USACE reservoirs under temporary contacts for surplus water. Neither authority allows USACE to significantly modify its projects or to seriously affect the authorized purposes for which the project operates in order to provide for M&I water supply, nor allows USACE to sell or allocate quantities of water. Instead, USACE M&I contracts are for space in a reservoir and provide no guarantee of a fixed quantity of water to be delivered in a given year. Under these authorities, USACE delivers water if it is available in the storage space and if delivery does not seriously affect other authorized purposes. Financing Mechanism No federal money is provided to nonfederal entities through USACE for this work; instead, it is nonfederal entities that pay USACE for M&I water storage. USACE construction projects are financed up front by the federal government, and costs for M&I project purposes are repaid 100%, with interest, via long-term (typically 30-50 years) repayment contracts, unless specified otherwise in law. Through annual contract payments, nonfederal entities pay for the M&I water supply storage services provided. Most agreements for new M&I water supply storage are associated with existing USACE reservoirs and are managed through agreements requiring annual payments. Eligibility Requirements For new USACE projects with M&I water supply, existing law and agency policy require that (1) water supply benefits and costs be equitably allocated among multiple purposes; (2) repayment by state or local interests be agreed to before construction; (3) the water supply allocation for anticipated demand at any project not exceed 30% of the total estimated cost; (4) repayment shall be either during construction (without interest), or over 30 years (with adjustable interest rates); and (5) users reimburse USACE annually for all operation and maintenance or replacement costs. Occasional exceptions to USACE's general authority have been enacted by Congress. Allocation of water supply at existing projects is limited to actions that do not seriously affect project purposes. Funding The fees collected from nonfederal entities pursuant to water supply agreements are deposited into a general account at the U.S. Treasury. The agency uses the federal funds primarily for administration of its water supply authorities. From FY2018 appropriations, USACE used $8 million to implement its water supply authorities and $1 million for two authorized USACE water supply construction projects to address groundwater depletion in Arkansas. From FY2019 annual appropriations, USACE planned to use $7 million for its water supply authorities, $3 million for the ground water depletion projects in Arkansas, and $2 million a water supply reservoir reallocation study as part of an expansion of a USACE reservoir in Colorado. The Administration's FY2020 budget request included $7 million for USACE's water supply storage activities. Statutory Authority Water Supply Act of 1958 (Title III, 72 Stat. 320, as amended; 43 U.S.C. §390b); Flood Control Act of 1944 (Section 6, 58 Stat. 890, as amended, 33 U.S.C. §708); and project specific authorities in Water Resources Development Acts or similar legislation. Environmental Infrastructure Assistance Project Purpose Federal policy generally is that community water supply is a local and state responsibility. However, communities, particularly rural and small communities, increasingly have sought federal water supply assistance. Since 1992, Congress has enacted more than 400 authorizations allowing USACE to provide designated communities, counties, and states with design and construction assistance for drinking water and wastewater infrastructure (including treatment, and distribution/collection facilities) and source water protection and development; these activities are known as environmental infrastructure projects. The authorizations of federal appropriations for these activities vary widely from $0.5 million to $25 million for planning and design assistance, to $0.2 million to $435 million for construction assistance. As with Reclamation's rural water supply and Title XVI projects, congressional funding of these authorizations has enlarged the scope of the agency's activities. Like many USACE activities, congressional support for specific environmental infrastructure assistance authorizations and appropriations is complicated by the authorities' geographic specificity, which is problematic under congressional earmark bans and moratoria. Financing Mechanism Under most USACE environmental infrastructure assistance authorizations, federal assistance typically requires a 75% federal and 25% nonfederal cost-share. The federal portion typically is provided by Congress to USACE in annual Energy and Water Development Act appropriations legislation. How USACE and nonfederal financing is managed varies according to the specifics of the authorization. Sometimes USACE is responsible for performing the assistance or for contracting out the work; under other authorizations, USACE uses appropriated funds to financially assist by reimbursing nonfederal sponsors for their work. Eligibility Requirements Because environmental infrastructure assistance activities are not part of a national USACE program per se, there are no clear and/or consistent general eligibility criteria. Most of USACE environmental infrastructure authorities specify a specific geographic location (e.g., a city, county, or state) and types of projects (e.g., municipal drinking water) as the principal eligibility requirements. Consequently, an activity's eligibility is evaluated by identifying whether there is an authorization for the geographic area of the activity, and whether the type of activity is eligible under that authorization. Because this assistance is not associated with a traditional USACE water resources projects, it is not subject to USACE planning requirements (e.g., a benefit-cost analysis is not performed). Funding Only a subset of authorized USACE environmental infrastructure activities has received appropriations. Since 1992, Congress has provided USACE roughly $2 billion in funds for environmental infrastructure assistance. Congress provided USACE with $70 million for environmental infrastructure assistance activities in FY2018 and $77 million in FY2019. These funds are part of the "additional funding" provided by Congress in enacted appropriations bills. After enactment of an appropriations bill, the Administration follows guidance provided in the bill and accompanying reports to guide its use of these funds on authorized environmental infrastructure assistance activities. The selected environmental infrastructure assistance activities are identified in the agency's Work Plan for the fiscal year, which is typically available within two months after enactment of appropriations. Recent funds have been used to continue ongoing environmental infrastructure assistance. Interpretation of limitations on initiating new USACE activities in appropriations bills and accompanying reports appear to be limiting initiation of USACE funding for the environmental infrastructure activities that do not have a broad geographic scope. The Trump Administration requested no funding for these activities in its FY2020 request. Since the first authorization for environmental infrastructure assistance in 1992, no administration has asked for funding for USACE environmental infrastructure assistance. Statutory Authority Prior to 1992, USACE generally was not widely involved with municipal drinking water treatment and distribution and wastewater collection and treatment; the agency is now authorized to contribute to more than 400 environmental infrastructure projects and programs. A Water Resources Development Act or similar legislation is the typical legislative vehicle for USACE authorizations. Beginning with Sections 219 and 313 of WRDA 1992 ( P.L. 102-580 ), Congress has authorized USACE to assist local interests with planning, design, and construction assistance for environmental infrastructure projects. Subsequent USACE authorization bills included new environmental infrastructure assistance activities, and raised the authorized funding ceilings for previously authorized projects. Policies limiting congressionally directed spending have limited recent congressional authorizing activity of environmental infrastructure assistance. In December 2016, Congress expanded a process for nonfederal entities to propose modifications to existing authorities for environmental infrastructure assistance. For those proposals that meet the criteria established by Congress, the Administration transmits those proposals to Congress for its consideration as part of deliberations regarding USACE authorization legislation. [This section was prepared by Anna E. Normand, Analyst in Natural Resources Policy, Resources, Science and Industry Division.] Department of Agriculture Rural Utilities Service (Water and Waste Disposal Programs) The USDA has a variety of water and waste disposal programs to provide loans and grants for drinking water, sanitary sewer, and storm drainage facilities in rural communities. Eligibility is limited to rural communities of 10,000 population or less. These programs are administered at the national level by the Rural Utilities Service (RUS) at USDA. RUS allocates program funds to the USDA State Rural Development Offices through an allocation formula based on rural population, poverty, and unemployment. Loans originate at the USDA's State Rural Development offices. Between 2009 and 2016, RUS had funded $13.9 billion for nearly 5,825 projects for water supply and wastewater facilities. According to an RUS FY2016 annual report, 46% of $1.8 billion in investments in that year were for water supply, 49% were for wastewater systems, and the remaining 5% were for combined projects. There is heavy demand for water supply and wastewater disposal funds for small rural communities. At the end of FY2016, USDA reported a $2.5 billion backlog of requests for water and wastewater projects. Program Purpose The purpose of these programs is to provide basic human amenities, alleviate health hazards, and promote the orderly growth of the nation's rural areas by meeting the need for new and improved rural water and waste disposal facilities. Eligible projects can include drinking water facilities, sanitary sewers, and stormwater drainage and disposal facilities. Funds may be used for installation, repair, improvement, or expansion of rural water facilities, including costs of distribution lines and well-pumping facilities. The law directs that USDA make grants of 1% to 3% of total grant funding to qualified nonprofits to provide technical assistance and training to help communities in preparing applications for grants and loans and to help problem solving operation and maintenance of existing water and waste disposal facilities in rural areas. This has totaled $18 million to $20 million annually in recent years. For FY2018, technical assistance for water and waste disposal facilities will increase to $40 million. Financing Mechanism Direct loans, guaranteed loans, and grants provide USDA support for water and waste disposal projects. USDA prefers making direct loans. Grants are made only when necessary to reduce average annual user charges to a reasonable level, particularly for lower-income communities. The split between loans and grants distributed from the regular infrastructure program, which is the large majority of spending, was about 75-25 in 2015 and 2016. There is no statutory distribution formula. Funds are allocated to states based upon rural population, number of households in poverty, and unemployment. There are no matching requirements for states. Water and Waste Disposal Loans. The Rural Development Act of 1972 authorized establishment of the Rural Development Insurance Fund under the Consolidated Farm and Rural Development Act. Among other activities, this fund is used for loans (direct and guaranteed) to develop storage, treatment, purification, or distribution of water or collection, treatment, or disposal of waste in low-income rural areas. Loans are repayable in not more than 40 years or the useful life of the facilities, whichever is less. USDA makes either direct loans to applicants or guarantees up to 90% of loans made by third-party lenders such as banks and savings and loan associations. Loan interest rates are based on the community's economic and health environment and are designated poverty, market, or intermediate. Poverty interest rate loans are made in areas where the median household income (MHI) falls below the higher of 80% of the statewide nonurban MHI, or the poverty level, and the project is needed to meet health or sanitary standards; by law, this rate is set at 60% of the market rate. The market rate is adjusted quarterly and is set using the average of a specified 11-bond index. It applies to loans to applicants where the MHI of the service area exceeds the statewide nonurban MHI. The intermediate rate applies to loans that do not meet the criteria for the poverty rate and which do not have to pay the market rate; by law, this rate is set at 80% of the market rate. Interest rates on guaranteed loans are negotiated between the borrower and the lender. The 2014 farm bill ( P.L. 113-79 ) amended the water and waste disposal direct and guaranteed loan programs to encourage financing by private or cooperative lenders to the maximum extent possible, use of loan guarantees where the population exceeds 5,500, and use of direct loans where the impact of a guaranteed loan on rate payers would be significant. Water and Waste Disposal Grants . Grants for the development costs of water supply and waste disposal projects in rural areas also are authorized under the Consolidated Farm and Rural Development Act. Only communities with poverty and intermediate rate incomes qualify for USDA grants. An eligible project must serve a rural area that is not likely to decline in population below the level for which the project was designed and constructed so that adequate capacity will or can be made available to serve the reasonably foreseeable growth needs of the area. The 2014 farm bill ( P.L. 113-79 ) authorized appropriations at $30 million annually through FY2018 for these grants. The appropriation for water and waste water grants is $400 million. Grant funds may be available for up to 75% of the development cost of a project and should only be used to reduce user costs to a reasonable level. Grants are only made after a determination of the maximum amount of loan that a community can afford and still have reasonable user rates. Grants, which typically provide 35%-45% of project costs, may be used to supplement other funds borrowed or furnished by applicants for project costs, and may be combined with USDA loans when the applicant is able to repay part, but not all, of the project costs. Priority is given to projects serving populations of less than 5,500. Emergency Community Water Assistance Grants . RUS is also authorized to help eligible communities prepare, or recover from, an emergency that threatens the availability of safe, reliable drinking water. Grants, ranging from $10,000 to a maximum of $500,000, are provided for projects to serve a rural area with a population of 10,000 or less that has a median household income not in excess of the statewide nonmetropolitan median household income. Grants for repairs, partial replacement, or significant maintenance of an established system cannot exceed $150,000. Communities use the funds for new systems, waterline extensions, construction of water source and treatment facilities, and repairs or renovation of existing systems and may be awarded for 100% of project cost. Applicants compete on a national basis for available funding. Funding for this program is mandatory through reservation of 3% to 5% of appropriated water and waste disposal grant funds. Of the amounts appropriated for water and waste disposal grants, 3% to 5% is reserved for grants for the Emergency and Imminent Water Assistance program. The 2014 farm bill ( P.L. 113-79 ) also authorized an additional $35 million per year through FY2018 for this program. Amounts provided through this program have been quite variable over time, depending on need. In FY2014, $14.7 million was distributed in 14 states; in FY2015, $2.5 million was distributed in 14 states. No funds were appropriated for the program in FY2017 and FY2018. Eligibility Requirements Eligible entities are municipalities, counties, and other political subdivisions of a state; associations, cooperatives, and organizations operated on a not-for-profit basis; Indian tribes on federal and state reservations; and other federally recognized tribes. USDA's loan and grant programs are limited to community service areas (including areas in cities or towns) with population of 10,000 or less. To be eligible for assistance, communities must be unable to get reasonable credit through normal commercial channels. Also, communities must be below certain income levels. Loans and grants are made for projects needed to meet health or sanitary standards, including Clean Water Act and Safe Drinking Water Act standards and requirements. The 2014 farm bill ( P.L. 113-79 ) authorized $5 million per year through FY2018 for USDA to make grants to private nonprofit organizations for the purpose of providing loans to eligible individuals for construction, refurbishing, and servicing of individually owned household water well systems. Loans are limited to $11,000 per water well system. Authorized appropriations for the program were $993,000 in both FY2017 and FY2018. Funding Funds available through FY2018 appropriations for USDA's water and waste disposal programs were included in two titles of P.L. 115-141 . Title III provided $560.3 million in total for FY2018, including $400.0 million in grants, $2.0 million in direct loan subsidies ($1.2 billion in loan authority), and $230,000 in subsidy to support guaranteed loans ($50.0 million in loan authority). Title VII (Section 780) provided an additional $500 million for the grant and loan program "of which not to exceed $495,000,000 shall be for grants." Out of the total FY2018 funds, USDA has appropriations of $1.0 million for grants to capitalize revolving loans for water and waste disposal systems and $68 million to support water and waste disposal projects in the colonias, Alaskan Native communities, and Hawaiian Native communities. For FY2019, the President's budget requested $1.20 billion in direct loan authority and $0 for guaranteed loans and water and waste disposal grants. Statutory and Regulatory Authority Statutory authority for the water and waste disposal loan and grant programs is the Consolidated Farm and Rural Development Act, as amended, Section 306, 7 U.S.C. 1926. Regulations for these programs are codified at 7 C.F.R. Parts 1778-1780. [This section was prepared by Tadlock Cowan, Analyst in Natural Resources and Rural Development Policy, Resources, Science and Industry Division.] Natural Resources Conservation Service The USDA provides assistance to watershed activities under four closely related authorities that are administered by the Natural Resources Conservation Service (NRCS). The Watershed and Flood Prevention Operations Program (WFPO) consists of two authorities—referred to as P.L. 566 and P.L. 534 projects. These authorize NRCS to provide technical and financial assistance to state and local organizations to plan and install measures to prevent erosion, sedimentation, and flood damage and to conserve, develop, and utilize land and water resources. Dams constructed under the WFPO program are eligible to receive assistance under the Small Watershed Rehabilitation Program, authorized by Congress in 2000. The fourth watershed authority is an emergency program that is not discussed in this report. Watershed and Flood Prevention Operations The WFPO program consists of projects built under two authorities—the Watershed Protection and Flood Prevention Act of 1954 (P.L. 83-566) and the Flood Control Act of 1944 (P.L. 78-534). The vast majority of the projects have been built pursuant to the authority of P.L. 83-566 (referred to as P.L. 566 projects), under which smaller projects (discussed below) authorized by the Chief of the NRCS are constructed. Larger projects must be approved by Congress. Eleven projects were specifically authorized under P.L. 78-534 (referred to as P.L. 534 projects); they are much larger and more expensive than P.L. 566 projects. Under P.L. 566, over 2,100 projects have been authorized through FY2018. In FY2018, NRCS funded 23 new projects, 19 existing projects, and five remedial projects. The 11 projects that were specifically authorized under P.L. 534 encompass a total of almost 37.9 million acres and are divided into component projects in subwatersheds. Approximately 90% of the work on the P.L. 534 projects is complete. With the exception of the two smallest projects, the estimated federal costs for each of these projects range from $40 million to more than $275 million. Three of the projects have been completed, and work on the remainder continues in one or more subwatersheds. The FY2019 Consolidated Appropriations Act ( P.L. 116-6 , FY2019 appropriations) appropriated $150 million in FY2019. Recent amendments in the Agriculture Improvement Act of 2018 (2018 farm bill, P.L. 115-334 ) permanently authorized an additional $50 million annually from mandatory sources to the WFPO program. Program Purpose The purpose of the program is to provide technical and financial assistance to states and local organizations to plan and install watershed projects. Both P.L. 566 and P.L. 534 have similar objectives and are implemented following similar procedures. Both programs fund land treatment, and nonstructural and structural facilities for flood prevention, erosion reduction, agricultural water management, public recreation development, fish and wildlife habitat development, and municipal or industrial water supplies. Structural measures can include dams, levees, canals, and pumping stations. Local sponsors agree to operate and maintain completed projects. Financing Mechanism Partial project grants, plus provision of technical advisory services are provided. Financing for water projects under the WFPO program varies depending on project purposes. The federal government pays all costs related to construction for flood control purposes only. Costs for nonagricultural water supply must be repaid by local organizations; however, up to 50% of costs for land, easements, and rights-of-way allocated to public fish and wildlife and recreational developments may be paid with program funds. Additionally, sponsors may apply for USDA Rural Utilities Service (RUS) Water and Waste Program loans to finance the local share of project costs. Participating state and local organizations pay all operation and maintenance costs. Eligibility Requirements P.L. 566 has been called the small watershed program because no project may exceed 250,000 acres, and no structure may exceed more than 12,500 acre-feet of floodwater detention capacity, or 25,000 acre-feet of total capacity. The Senate and House Agriculture Committees must approve projects that need an estimated federal contribution of more than $25 million for construction or include a storage structure with a capacity in excess of 2,500 acre feet. If the storage structure will have a capacity in excess of 4,000 acre feet, approval is also required from the Senate Environment and Public Works Committee and the House Transportation and Infrastructure Committee. There are no population or community income-level limits on applications for P.L. 566 projects, but at least 20% of the total benefits of the project must directly relate to agriculture (including rural communities). Funding The enacted FY2019 appropriation provided WFPO with $150 million. Of the $150 million, $50 million is required to be allocated to projects and activities that can "commence promptly;" address regional priorities for flood prevention, agricultural water management, inefficient irrigation systems, fish and wildlife habitat, or watershed protection; or watershed protection projects authorized under P.L. 534. The FY2020 Administration's request proposes no funding for the program. Beginning in FY2014, when no funding was appropriated for WFPO, Congress directed funding from another conservation account—Conservation Operations, which funds general conservation technical assistance offered by NRCS—to fund projects authorized under the WFPO authority. The use of Conservation Operation funding for WFPO activities has continued each fiscal year through the FY2019 appropriations. This congressionally directed amount is in addition to the $150 million made available for the program as a whole in FY2019. In addition to discretionary funding provided through appropriations, the 2018 farm bill permanently authorized $50 million annually from mandatory sources. This mandatory funding will be available unless otherwise amended by Congress. Mandatory funds are authorized for P.L. 566 projects as well as rehabilitation work under the Small Watershed Rehabilitation Program. Statutory and Regulatory Authorities The Watershed and Flood Prevention Operations (WFPO) program consists of two authorities: the Flood Control Act of 1944, P.L. 78-534, as amended, 58 Stat. 905 (33 U.S.C. 701b-1); and the Watershed Protection and Flood Prevention Act of 1954, P.L. 83-566, as amended, 68 Stat. 666 (16 U.S.C. 1001-1008). Regulations are codified at 7 C.F.R. Part 622. Small Watershed Loans As part of its lending responsibilities, the Rural Utilities Service (RUS) at USDA (see discussion above) makes loans to local organizations to finance the local share of the cost of installing, repairing, or improving facilities, purchasing sites and easements, and related costs for P.L. 566 and P.L. 534 projects. Loans are limited to $10 million; they must be repaid within 50 years; and the cost-share assistance may not exceed the rate of assistance for similar projects under other USDA conservation programs. NRCS and the local organization must also agree on a plan of work before a loan is obligated. Over the life of the program, 495 RUS loans have been made at a value of almost $176 million. Small Watershed Rehabilitation Some of the oldest P.L. 566 projects that have exceeded their design life (dams were constructed starting in 1948) need rehabilitation work to continue to protect public health and safety by reducing any possibility of dam failure, and to meet changing resource needs. By December 2018, approximately 6,245 watershed dams have reached the end of their originally designed life spans. By the end of 2019, more than half of the 11,847 watershed dams will have reached the end of their designed life spans. In response to this concern, Congress created a rehabilitation program, known as the Small Watershed Rehabilitation Program, in Section 313 of the Grain Standards and Warehouse Improvement Act of 2000 ( P.L. 106-472 ), which revised the WFPO program. From 2000 to 2018, the program authorized the rehabilitation of 288 dams in 31 states. Of this total, 150 projects are complete, and the remaining projects are waiting for funding. Program Purpose The purpose of rehabilitation is to extend the service life of the dams and bring them into compliance with applicable safety and performance standards or to decommission the dams so they no longer pose a threat to life and property. Financing Mechanism Partial project grants, plus provision of technical advisory services are provided. NRCS may provide 65% of the total rehabilitation costs but no more than 100% of the actual construction cost, and is prohibited from funding operation and maintenance expense. Rehabilitation projects also provide an opportunity to modify projects to provide additional benefits, including municipal water supplies. Local watershed project sponsors provide 35% of the cost of a rehabilitation project and obtain needed land rights and permits. The source of these funds varies from state to state and may include bonds, local taxing authority, state appropriations, or in-kind technical services. Eligibility Requirements Only dams constructed under the P.L. 566 authority, the Resource Conservation and Development (RC&D) program, and pilot watershed projects authorized in the Agriculture Appropriations Act of 1953 are eligible for assistance under the Small Watershed Rehabilitation Program. Funding Since FY2000, Congress has appropriated more than $700 million for rehabilitation projects. The Trump Administration is seeking no funding for the Small Watershed Rehabilitation program for FY2020, citing the Administration's position that the maintenance, repair, and operation of these dams are the responsibility of local project sponsors. Similar positions were cited under the George W. Bush and Obama Administrations. The Small Watershed Rehabilitation Program has discretionary funding authority of up to $85 million annually. The program has received an average annual appropriation of $11.2 million over the last five years, including $10 million in FY2019. In the past, the program was authorized through omnibus farm bills to receive mandatory funding to remain available until expended. This funding was frequently restricted through annual appropriations to generate annual savings. The FY2018 appropriations act was the first to not restrict the remaining mandatory carryover, thereby making approximately $55 million available for obligation. The 2018 farm bill reauthorized discretionary funding authority for the program, but no additional mandatory funding authority was provided. Statutory and Regulatory Authorities The Small Watershed Rehabilitation Program is authorized by the Watershed Protection and Flood Prevention Act of 1954, P.L. 83-566, as amended by §313 of the Grain Standards and Warehouse Improvement Act of 2000, P.L. 106-472 , 114 Stat. 2077 (16 U.S.C. 1012). Regulations are codified at 7 C.F.R. Part 622. [This section was prepared by Megan Stubbs, Specialist in Agricultural Conservation and Natural Resources Policy, Resources, Science and Industry Division.] Environmental Protection Agency Clean Water State Revolving Fund Loan Program The Clean Water Act (CWA) establishes performance levels (e.g., secondary treatment) to be attained by municipal sewage treatment plants in order to prevent the discharge of harmful wastes into surface waters. The act also provides financial assistance, so that communities can construct treatment facilities in compliance with the law, which has the overall objective of restoring and maintaining the chemical, physical, and biological integrity of the nation's waters. Since 1973, Congress has appropriated approximately $98 billion in program grants that support wastewater projects. Funds are distributed to states under a statutory allocation formula and are used to assist qualified projects on priority lists that are determined by individual states. These funds are used to assist localities in meeting wastewater infrastructure needs most recently estimated (in 2016) by EPA and states at $271 billion nationally (over the next 20 years) for all categories of projects eligible for federal assistance under the law. In 1987, Congress amended the CWA ( P.L. 100-4 ) and initiated a new program of federal capitalization grants to support Clean Water State Revolving Funds (CWSRFs). Prior to 1989 (when the CWSRF program became effective), states used their annual allocations to make grants to cities and other eligible recipients. Since 1989, federal funds (grants of appropriated funds) have been used to capitalize state loan programs with states providing matching funds equal to 20% of the federal funds to capitalize the CWSRF. All 50 states, plus Puerto Rico, participate in the CWSRF program. Over the long term, the loan programs are intended to be sustained through repayment of loans to states, thus creating a continuing source of assistance for other communities. EPA data indicate that since 1987, 67% of all loans and other assistance have gone to assist communities with 10,000 people or fewer. These loans and assistance have comprised 22% of total CWSRF funding. Program Purpose The CWSRF program provides assistance in constructing and upgrading publicly owned municipal wastewater treatment plants, implementing nonpoint pollution management programs, developing and implementing management plans under the National Estuary Program, and supporting other eligible activities. Financing Mechanism EPA grants (from appropriated funds) and state matching funds help capitalize state CWSRF programs. These programs may provide seven general types of financial assistance: making loans; buying or refinancing existing local debt obligations; guaranteeing or purchasing insurance for local debt obligations; guaranteeing CWSRF debt obligations (i.e., to be used as security for leveraging the assets in the CWSRF); providing loan guarantees for local government revolving funds; earning interest on fund accounts; and supporting reasonable costs of administering the CWSRF. Loans are made at or below market interest rates, including zero interest loans, as determined by the state in negotiation with the applicant. Although the CWSRF program is generally a loan program, states may (under certain conditions) provide "additional subsidization"—such as principal forgiveness, negative interest loans, or a combination—to municipalities that meet the state's affordability criteria and for particular projects, such as those that implement water or energy efficiency goals or mitigate stormwater runoff. In addition, appropriations acts in recent years have required states to use minimum percentages of their allotted funds to provide additional subsidization. This trend began with the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), which required states to use at least 50% of their funds for this purpose. Recent appropriations acts included an identical condition, requiring 10% of the CWSRF grants be used "to provide additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest loans, or grants (or any combination of these)." All principal and interest payments on loans must be credited directly to the SRF, and loans are to be repaid within 30 years of a project's completion, not to exceed the project's useful life. States are required to ensure that CWSRF-funded projects use American iron and steel products and apply the prevailing wage requirements of the Davis-Bacon Act. Eligibility Requirements Eligible loan recipients for CWSRF assistance are any municipality, intermunicipal, interstate, or state agency. Private utilities are not eligible to receive funds for construction of wastewater treatment works and most other eligible activities, but in some cases, privately owned projects are eligible for certain types of activities (e.g., decentralized wastewater treatment projects; projects to manage, reduce or treat stormwater; or development of watershed management projects). Projects or activities eligible for funding were, initially, those needed for constructing or upgrading (and planning and designing) publicly owned municipal wastewater treatment plans. As defined in Clean Water Act Section 212, devices and systems used in the storage, treatment, recycling, and reclamation of municipal sewage are eligible. These include construction or upgrading of secondary or advanced treatment plants; construction of new collector sewers, interceptor sewers, or storm sewers; and projects to correct existing problems of sewer system rehabilitation, infiltration/inflow of sewer lines, and combined sewer overflows. Operation and maintenance are not eligible activities. All funds in the clean water SRF resulting from federal capitalization grants are first to be used to assure compliance with enforceable deadlines, goals, and requirements of the act, including municipal compliance. After satisfying the "first use" requirement, funds may be used to implement other eligible uses, which initially included nonpoint source management programs and estuary activities in approved State Nonpoint Management Programs and estuarine Comprehensive Conservation and Management Plans, respectively. In 2000, Congress authorized separate CWA grant funding for projects to address overflows from municipal combined sewer systems and from municipal separate sanitary sewers ("wet weather" projects). Overflows from these portions of municipal sewerage systems can occur especially during rainfall or other wet weather events and can result in discharges of untreated sewage into local waterways. This program, contained in the FY2001 Consolidated Appropriations Act ( P.L. 106-554 , Division B, Section 112), authorized $750 million per year in FY2002 and FY2003. No funds were appropriated for this program. America's Water Infrastructure Act of 2018 (AWIA, P.L. 115-270 ), enacted on October 23, 2018, reauthorized appropriations for the grant program (and expanded it to include certain stormwater activities) for $225 million for FY2019 and FY2020. The FY2019 appropriations act did not provide funding for this program. In 2014, the Water Resources Reform and Development Act of 2014 (WRRDA; P.L. 113-121 ) amended the list of eligible projects by adding several projects and activities, including replacement of decentralized treatment systems (e.g., septic tanks), energy-efficiency improvements at treatment works, reuse and recycling of wastewater or stormwater, and security improvements at treatment works. In 2018, AWIA amended the list of eligible activities to allow qualified nonprofits to provide assistance to certain individuals for the repair or replacement of existing decentralized wastewater treatment systems or for the connection of an individual household to a centralized publicly owned treatment works. Funding Since the first appropriations for the clean water SRF program in FY1989, Congress has provided more than $46 billion in grants to states and Puerto Rico to capitalize their CWSRFs. Through March 2018, federal funds, together with state matching contributions, repaid loans, and other funds, have been used for $126 billion in SRF assistance to support more than 39,000 SRF loans and debt refinance agreements. In both FY2016 and FY2017, Congress provided $1.394 billion for the CWSRF program. In FY2018, Congress increased the appropriation to the CWSRF program, providing $1.694 billion ( P.L. 115-141 ). In FY2019, Congress maintained the same level as the previous fiscal year, $1.694 billion ( P.L. 116-6 ). For FY2020, the President requested $1.120 billion for the CWSRF program. Through a separate process, EPA provides direct grants for the District of Columbia, the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of Northern Marianas. EPA also provides direct grants to Indian tribes (33 U.S.C. §1377). The funding for the District of Columbia, U.S. territories, and Indian tribes is part of the SRF appropriation to EPA. Statutory and Regulatory Authority Statutory authority for the clean water SRF program is the Clean Water Act, as amended, Sections 601-607, 33 U.S.C. §§1381-1387. Regulations are codified at 40 C.F.R. §35.3100. [This section was prepared by Jonathan Ramseur, Specialist in Resources and Environmental Policy, Resources, Science and Industry Division.] Drinking Water State Revolving Fund Loan Program The Safe Drinking Water Act (SDWA) requires public water systems to comply with federal drinking water regulations promulgated by EPA. Through these regulations, EPA has set standards to control the levels of approximately 90 contaminants in drinking water, and more regulations are under development. To help communities meet these federal mandates and to meet the act's public health objectives, Congress amended the SDWA in 1996 to establish a drinking water state revolving fund (DWSRF) loan program. The program is patterned closely after the clean water SRF, and authorizes EPA to make grants to states to capitalize drinking water state revolving loan funds. States use their DWSRFs to provide assistance to public water systems for infrastructure and other drinking water projects. States must match 20% of the federal capitalization grant. Each year, states must develop an "intended use plan" that includes a list of projects the state intends to fund through the DWSRF (referred to as the project priority list). The law generally directs states to give funding priority to projects that (1) address the most serious health risks; (2) are needed to ensure compliance with SDWA regulations; and (3) assist systems most in need on a per household basis, according to state affordability criteria. The law also directs states to make available at least 15% of their annual allotment to public water systems that serve 10,000 or fewer persons (to the extent the funds can be obligated to eligible projects). Over the life of the program, roughly 71% of DWSRF assistance agreements and 38% of funds have gone to these smaller systems. Capitalization grants are allotted among the states according to the results of the most recent quadrennial survey of the capital improvements needs of eligible water systems. Needs surveys are prepared by EPA and the states, and the most recent survey indicates that public water systems need to invest at least $$472.6 billion on infrastructure improvements over 20 years ($23.63 billion annually) to ensure the provision of safe drinking water and compliance with federal standards. Program Purpose This state-administered program provides assistance for infrastructure projects and other expenditures that facilitate compliance with federal drinking water regulations or that promote public health protection. The SDWA directs states to give funding priority to infrastructure projects that are needed to achieve or maintain compliance with SDWA requirements, protect public health, and assist systems with economic need. Further, states may use a portion of the capitalization grant for specified purposes, including programs for protecting sources of drinking water and improving the managerial and technical capacity of water systems. Financing Mechanism States may use the DWSRF to make low- or zero-interest loans to public water systems, and loan recipients generally must repay the entire loan plus any interest to the state. DWSRFs may also be used to buy or refinance local debt obligations, to guarantee or purchase insurance for a local obligation, as a source of revenue or security for payment of principal and interest on state revenue or general obligation bonds if the proceeds of the sale of the bonds are deposited into the DWSRF, and to earn interest on DWSRF accounts. The statute authorizes states to use up to 35% of their annual DWSRF grants to provide additional subsidies (e.g., principal forgiveness and negative interest rate loans) to help economically disadvantaged communities of any size. (A disadvantaged community is one in which the service area of a public water system meets state-established affordability criteria.) As with recent appropriations acts, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) requires states to use 20% of their DWSRF capitalization grants "to provide additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest loans, or grants (or any combination of these)." Eligibility Requirements Drinking water systems that are eligible to receive DWSRF assistance include community water systems, whether publicly or privately owned, and not-for-profit noncommunity water systems. Federally owned systems are not eligible to receive assistance from this program. Projects eligible for DWSRF assistance include (1) capital investments to rehabilitate or replace infrastructure in order to continue providing the public with safe drinking water (e.g., storage facilities, and transmission and distribution pipes); (2) projects needed to address violations of SDWA regulations (e.g., treatment facilities); and (3) project design and planning and associated preconstruction activities. Assistance may also be available for construction of new wells to replace contaminated wells, source water protection, land acquisition, security measures (including infrastructure improvements), and consolidation of water supplies (e.g., in cases where individual homes or public water systems have a water supply that is contaminated, or a system is unable to maintain compliance for financial or managerial reasons). Projects and activities not eligible for funding include projects primarily intended to serve future growth or to provide fire protection, construction of dams or reservoirs (except reservoirs for treated water), monitoring, and operation and maintenance. Ineligible systems include those that lack the financial, technical or managerial capacity to maintain SDWA compliance and systems in significant noncompliance with any SDWA regulation (unless the project is likely to ensure compliance). Funding For FY2018, the President requested $863.2 million for the state DWSRF capitalization grants, and Congress appropriated $1,163.2 million ( P.L. 115-141 ). For FY2019, the President requested $863 million, and Congress provided $1,164.0 million ( P.L. 116-6 ). AWIA reauthorized DWSRF appropriations for FY2019 through FY2021. In recent years, the estimated average state grant has been roughly $17.16 million per fiscal year. The estimated average grant to territories was $3.40 million per fiscal year. From FY1997 through FY2018, cumulative appropriations for the DWSRF program reached $22.11 billion. Adjusted for set-asides, cumulative net federal contributions totaled $21.52 billion. When combined with the 20% state match ($3.91 billion), bond proceeds, loan principal repayments, and other funds, the total DWSRF investment through FY2018 had reached $39.86 billion, and the program had provided more than $38.22 billion in assistance. Over the same period, more than 14,577 projects had received assistance, and 10,441 had been completed. Statutory and Regulatory Authority The statutory authority for the DWSRF program is the Safe Drinking Water Act Amendments of 1996 ( P.L. 104-182 , Section 1452, 42 U.S.C. 300j-12). Regulations are codified at 40 C.F.R. §35.3500. [This section was prepared by Mary Tiemann, Specialist in Environmental Policy, and Elena Humphreys, Analyst in Environmental Policy, Resources, Science, and Industry Division.] Water Infrastructure Finance and Innovation Act Program Localities are the entities that are primarily responsible for providing water infrastructure services, which include both drinking water and wastewater infrastructure. According to the most recent estimates by states and EPA, funding needs for projects eligible for CWSRF or DWSRF funding—described in the sections above (i.e., projects needed to address water quality and public health-related problems or regulations)—total $655 billion over a 20-year period. However, many water infrastructure capital needs are ineligible for assistance through the SRF programs or are too large or otherwise not suited for those programs. In 2014, WRRDA established a five-year Water Infrastructure Finance and Innovation Act (WIFIA) pilot program. WIFIA authorizes EPA to provide credit assistance—secured (direct) loans or loan guarantees—for a broad range of drinking water and wastewater projects. In contrast to SRF programs, EPA will provide the credit assistance directly to an eligible recipient. Most of the credit assistance will likely be secured loans, as the agency stated that it does not expect much demand for loan guarantees. To be eligible for WIFIA assistance, projects must generally have costs of $20 million or more. WRRDA also authorizes the Corps to provide similar assistance under the WIFIA for water resource projects, such as flood control or hurricane and storm damage reduction. Although Congress has provided funds to EPA to implement WIFIA, as of the date of this report, Congress has not yet appropriated funds (nor have any been requested) that would enable the Corps to begin preparations or begin making WIFIA loans under the authority in WRRDA. Program Purpose WIFIA provides an additional source of funding for water infrastructure projects. Some stakeholders have argued that the clean water and drinking water SRF programs are structured in a way that makes them useful primarily for smaller communities and smaller projects. The WIFIA program can provide credit assistance to large water infrastructure projects that otherwise have difficulty obtaining financing. WIFIA can provide capital at a low cost to the borrower, because even though the interest on 30-year Treasury securities is taxable, Treasury rates can be less expensive than rates on traditional tax-exempt municipal debt. Financing Mechanism In federal budgetary terms, WIFIA assistance has much less of an impact than a grant, which is not repaid to the U.S. Treasury. The volume of loans and other types of credit assistance that the programs can provide is determined by the size of congressional appropriations and calculation of the subsidy amount. WIFIA defines the subsidy amount as follows: The amount of budget authority sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, as calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq. ). Although subsidy rates are project-specific, in the Trump Administration's FY2019 budget proposal, OMB estimated a 0.98% subsidy rate for WIFIA. This equates to a 1:102 ratio. At this subsidy rate, a $10 million appropriation could support a direct loan (or loans) totaling $1.02 billion. Thus, one advantage of the WIFIA program is that it can provide a large amount of credit assistance relative to the amount of budget authority provided. Eligibility Requirements WIFIA credit assistance is available to state infrastructure financing authorities for a group of projects and individual project sponsors, which may include the following: a corporation; a partnership; a joint venture; a trust; or a federal, state, local, or tribal government (or consortium of tribal governments). Categories eligible for assistance by EPA include the following: wastewater treatment and community drinking water facilities; enhanced energy efficiency of a public water system or wastewater treatment works; repair or rehabilitation of aging wastewater and drinking water systems; desalination, water recycling, aquifer recharge, or development of alternative water supplies to reduce aquifer depletion; prevention, reduction, or mitigation of the effects of drought; or a combination of eligible projects. The act, among other provisions, authorizes EPA to provide credit assistance for a range of wastewater and drinking water projects. Project costs must be $20 million or larger to be eligible for credit assistance. In rural areas (defined as populations of 25,000 or less), project costs must be $5 million or more. Funding For FY2019, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $68 million for the WIFIA program (including $5 million for administrative costs). To receive funding, a prospective borrower submits a letter of interest to EPA. The letter includes project eligibility, financial creditworthiness, engineering feasibility, and alignment with EPA's policy priorities. From these submittals, the agency selects projects for funding. On March 29, 2019, EPA announced a third round of WIFIA funding. EPA estimated that its budget authority ($63 million) would provide approximately $6 billion in credit assistance. Statutory and Regulatory Authority The statutory authority for the WIFIA program is WRRDA ( P.L. 113-121 , Title V, codified in 33 U.S.C. §§3901-3914). EPA promulgated an interim final rule for the program on December 19, 2016 (81 F ederal Register 91822). Regulations are codified at 40 C.F.R. §35.10000. [This section was prepared by Jonathan Ramseur, Specialist in Environmental Policy, Resources, Science and Industry Division.] Department of Housing and Urban Development Community Development Block Grants HUD administers assistance in support of state and local government neighborhood revitalization and related community and economic development activities, including infrastructure improvements, primarily under the Community Development Block Grant (CDBG) program. The program's primary objective is to develop viable communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for persons of low and moderate income. CDBG funds are used by state and local governments for a broad range of neighborhood revitalization and community and economic development activities intended to meet one of three national objectives. Specifically, eligible activities must 1. principally benefit low- or moderate-income persons; 2. aid in preventing or eliminating slums and blight; or 3. address an imminent threat to the health and safety of residents. Program policy requires that at least 70% of funds must benefit low- and moderate-income persons. The block nature of the CDBG program provides local government discretion in selecting the eligible activities to be undertaken in pursuit of national objectives. Water and waste disposal needs compete with many other eligible activities for this assistance, including historical preservation, energy conservation, economic development, lead-based paint abatement, public facilities and public service activities. Since it began in 1974, the CDBG program has invested $150 billion in communities nationwide. Congress has also used the program to provide supplemental appropriations to assist communities and states in response to natural disasters, the mortgage foreclosure crisis of 2008, economic recessions, and terrorist attacks. Since 1992, Congress has appropriated approximately $50 billion in supplemental CDBG funding to assist targeted states and local governments in their recovery efforts. Funds from the regular CDBG program have been disbursed across several broad categories, including the acquisition and demolition of real property, planning and administrative activities, housing, public services, and public improvements such as water and wastewater treatment facilities. During the five-year period from FY2012 to FY2016, CDBG expenditures for public improvement—including water and sewer improvements—accounted for approximately 33% of all CDBG funds expended. Water and sewer improvements accounted for 10% of total CDBG expenditures during the same five-year span. After subtracting amounts specified in appropriations acts for special-purpose activities, 70% of CDBG funds are allocated by formula to approximately 1,224 entitlement communities nationwide. These communities are defined as central cities of metropolitan areas, metropolitan cities with populations of 50,000 or more, and statutorily defined urban counties (the entitlement program). These funds are not available for projects in rural communities. The remaining 30% of CDBG funding is allocated by formula to the states for distribution to nonentitlement communities (the state program) for use in areas that are not part of a CDBG entitlement community allocation. These funds, which are administered by each state, may be available for rural community water projects. The 70/30 split and allocation formulas are provided for in law. Between FY2012 and FY2016, disbursements by CDBG recipients for water and sewer improvements have averaged $370 million per year. Program Purpose The primary goal of this program is the development of viable communities by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for low- and moderate-income persons. Funds may also be used to aid in preventing or eliminating slums and blight or to address an imminent threat to residents of the impacted area. Financing Mechanism CDBG program funds are allocated by formula. After amounts specified in an appropriations act are allocated to Section 107 special-purpose activities, 70% of the remaining funds are allocated by formula to entitlement communities and 30% to the states for distribution to nonentitlement communities. Funds are awarded to entitlement communities based on the higher yield from one of two weighted formulas. The first of two formulas uses population, overcrowded housing, and poverty data, while the second formula allocates funds based on an entitlement community's relative share of poverty, housing built before 1940, and the lag in population growth rate relative to the total for all entitlement communities. Similar formulas are used to allocate nonentitlement funds to states. As a condition of receiving CDBG funds, an entitlement community must submit a consolidated plan at least 45 days before the beginning of its program year detailing the proposed use of funds over a five-year period. Each entitlement community's multiyear consolidated plan (ConPlan) must include a citizen participation plan, a housing needs assessment, and an annual community development plan. In addition to an annual action plan, each jurisdiction must annually submit to HUD a Comprehensive Annual Performance Evaluation Report (CAPER) detailing progress it has made in meeting the goals and objectives outlined in its action plans. States do not actually undertake eligible CDBG activities but act as pass-through agents charged with three distinct responsibilities: (1) determining the method or methods to be used to distribute funds to nonentitlement communities, including seeking the input of affected local governments; (2) selecting local governments that will receive funds; and (3) monitoring local government grant recipient project implementation to ensure compliance with rules governing the program. In addition, each state is required to submit to HUD a ConPlan that includes a five-year housing and homeless needs assessment, a housing market analysis, a strategic plan that includes proposed housing and nonhousing community development activities, and a one-year action plan. Also, each state must submit to HUD a CAPER detailing progress it has made in meeting the goals and objectives outlined in its action plans. Eligibility Requirements There are three categories of recipients eligible for direct allocations of CDBG program funds: entitlement communities (including insular areas), states, and Section 107 special project grants. Entitlement communities include central cities of metropolitan areas, metropolitan-based cities with populations of 50,000 or more, and statutorily defined urban counties. As of 2017, there were 1,224 entitlement communities, including the District of Columbia. States include the 50 states and Puerto Rico. Before funds are allocated to states and entitlement communities, a specific amount established by Congress is set aside annually for the United States territories or insular area of Guam, the Virgin Islands, American Samoa, and the Commonwealth of the Northern Marianas. These funds are awarded annually based on each insular area's relative share of aggregate population for all insular areas. Eligible activities include a wide range of projects such as public facilities and improvements, housing, public services, economic development, and brownfields redevelopment. State grantees must ensure that each activity meets one of the program's three national objectives: benefitting low- and moderate-income persons (the primary objective), aiding in the prevention or elimination of slums or blight, or assisting other community development needs that present a serious and immediate threat to the health or welfare of the community. Under the state program that assists smaller communities, states develop their own program and funding priorities and have considerable latitude to define community eligibility and criteria, within general criteria in law and regulations. Funding For FY2017, Congress provided $3.0 billion for CDBG entitlement/nonentitlement formula funds, of which approximately $2.095 billion was available for entitlement communities, $898 million for smaller communities under the state nonentitlement program, and $7 million for insular areas. For FY2018, the President's budget requested $0 in funds for this program, the same as the FY2017 request level. On March 23, 2018, the President signed into law the Consolidated Appropriations Act of 2018, P.L. 115-141 . Division L of the act appropriated $3.365 billion for the HUD-administered Community Development Fund, including $3.3 billion for the CDBG entitlement/nonentitlement formula funds. Of the amount appropriated for CDBG formula grants, $2.305 billion was allocated to entitlement communities, $988 million to states for distribution to nonentitlement communities, and $7 million for insular areas. The act also appropriated $65 million for Indian tribes. For FY2019, the Administration again requested $0 in funds for the CDBG program. On February 15, 2019, Congress, passed and the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act left the program's funding level unchanged from the previous year, appropriating $3.365 billion—including $2.305 for entitlement communities, $988 billion for states to distribute to nonentitlement communities, $7 million for insular areas, and $65 million for Indian tribes. The Administration's budget request for FY2020, released on March 11, 2019, does not include funding for the CDBG program. In proposing termination of the program in FY2020, the Administration cited its intent to redefine the proper role of the federal government in support of community and economic development by devolving responsibility to state and local governments. Statutory and Regulatory Authority Statutory authority for the CDBG program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq. ). Regulations are codified at 24 C.F.R. Part 570. Regulations covering the CDBG state program for nonentitlement communities are codified at 24 C.F.R. Part 570, Subpart I (§570.480). CDBG Section 108 Loan Guarantees Authorized under the same title (Title I of the Housing and Community Development Act of 1974) as the formula-based CDBG program, the Section 108 loan guarantees allow an entitlement community or a state, on behalf of a nonentitlement community, to leverage its annual CDBG allocation in support of large-scale economic development and housing rehabilitation projects and the construction, reconstruction, or installation of public facilities. Program Purpose Consistent with the goals and objectives of the CDBG program, Section 108 loan guarantees are intended to supplement CDBG program activities. The program allows entitlement communities and states to extend the reach of the formula-based CDBG program, giving them access to additional financial resources to undertake large-scale, transformative neighborhood revitalization efforts. Eligible activities include acquiring and rehabilitating publicly owned real property; housing rehabilitation; economic development activities, including those carried out by for-profit and nonprofit entities; debt service reserves; payment of interest on the guaranteed loan; issuance cost of the public offering; and the acquisition, construction, reconstruction, and installation of public facilities, including water and sewer improvements. Financing Mechanism Section 108 loan guarantees are financed through public offerings. Under the program, states and communities are allowed to float bonds, notes, or debentures worth up to five times their annual CDBG allocation, minus any existing Section108 commitments or outstanding principal balances, with a repayment period of up to 20 years. States and entitlement communities must pledge their current and future CDBG allocations as security against default of the bonds or notes. Section 108 funds are made available on an ongoing basis, allowing communities to apply for funds any time during the year. It should be noted that Section 108 loan funds are made available to eligible public entities that may reloan the funds to private participants in a redevelopment project. Applicants are encouraged to meet with HUD staff prior to submitting a formal application. Eligibility Requirements Section 108 loan guarantees may be accessed only by CDBG entitlement communities and states on behalf of a CDBG nonentitlement community. All eligible activities must meet one of the three national objectives of the regular CDBG program: principally benefit low- and moderate-income persons, aid in eliminating or preventing slums and blight, or address an imminent threat to the health and safety of residents. The program has an open application process, allowing entitlement communities and states to submit applications anytime during the year. The application process governing the Section 108 program can be grouped into several distinct stages: application presubmission, citizen participation, application submission, application review and notification, award allocation, and reporting. When submitting formal applications, states and entitlement communities must include a description of activities to be carried out, financing structure, source of loan repayment, citizen participation plan, anti-displacement strategy, and a pledge of the applicant's CDBG allocation as security for the Section 108 guaranteed loan. In general, HUD attempts to review an application within 90 days. HUD field offices are encouraged to complete applications within 45 days, with HUD headquarters attempting to complete its review within 45 days. Recipients receiving Section 108 funds are required to file annual performance reports with HUD detailing progress made in meeting the objectives of their community development plans, including Section 108 activities. Between FY2014 and FY2016, HUD issued loan guarantee commitments totaling $314.4 million to 47 projects, including $110.4 million to 17 projects in FY2014, $123.3 million in loan guarantees to 20 projects in FY2015, and $80.7 million to support 10 projects in FY2016. Funding For FY2017, Congress authorized a loan commitment ceiling of $300 million and directed HUD to collect fees from borrowers that results in a credit subsidy cost of zero for guaranteeing Section 108 loans. Until FY2015, Congress appropriated an amount necessary to cover the estimated long-term liability to the federal government of a Section 108 loan guarantee (credit subsidy). The Department of Housing and Urban Development Appropriations Act for FY2014 changed that arrangement, allowing HUD to collect a fee from the borrower to cover the cost of the credit subsidy. The amount of the fee will be determined annually by HUD based on a percentage of the principal amount of the Section 108 guaranteed loan. For FY2018, the Trump Administration did not request any new loan guarantee authority. The Consolidated Appropriations Act of 2018, P.L. 115-141 , signed by the President on March 3, 2018, included $300 million in Section 108 loan guarantee authority. For FY2019, the again requested no new loan guarantee authority. However, Congress, in passing the Consolidated Appropriations Act of 2019, P.L. 116-6 , provided $300 million in loan guarantee authority for Section 108 financed projects. For FY2020, the Administration has requested no new loan guarantee authority for the Section 108 program. Statutory and Regulatory Authority Statutory authority for the Section 108 program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5308). Regulations are codified at 24 C.F.R. Part 570, Subpart M. [This section was prepared by Eugene Boyd, Analyst in Federalism and Economic Development Policy, Government and Finance Division.] Department of Commerce Community Development Block Grants HUD administers assistance in support of state and local government neighborhood revitalization and related community and economic development activities, including infrastructure improvements, primarily under the Community Development Block Grant (CDBG) program. The program's primary objective is to develop viable communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for persons of low and moderate income. CDBG funds are used by state and local governments for a broad range of neighborhood revitalization and community and economic development activities intended to meet one of three national objectives. Specifically, eligible activities must 1. principally benefit low- or moderate-income persons, 2. aid in preventing or eliminating slums and blight, or 3. address an imminent threat to the health and safety of residents. Program policy requires that at least 70% of funds must benefit low- and moderate-income persons. The block nature of the CDBG program provides local government discretion in selecting the eligible activities to be undertaken in pursuit of national objectives. Water and waste disposal needs compete with many other eligible activities for this assistance, including historical preservation, energy conservation, economic development, lead-based paint abatement, public facilities, and public service activities. Since it began in 1974, the CDBG program has invested $150 billion in communities nationwide. Congress has also used the program to provide supplemental appropriations to assist communities and states in response to natural disasters, the mortgage foreclosure crisis of 2008, economic recessions, and terrorist attacks. Since 1992, Congress has appropriated approximately $50 billion in supplemental CDBG funding to assist targeted states and local governments in their recovery efforts. Funds from the regular CDBG program have been disbursed across several broad categories, including the acquisition and demolition of real property, planning and administrative activities, housing, public services, and public improvements such as water and wastewater treatment facilities. During the five-year period from FY2012 to FY2016, CDBG expenditures for public improvement—including water and sewer improvements—accounted for approximately 33% of all CDBG funds expended. Water and sewer improvements accounted for 10% of total CDBG expenditures during the same five-year span. After subtracting amounts specified in appropriations acts for special-purpose activities, 70% of CDBG funds are allocated by formula to approximately 1,224 entitlement communities nationwide. These communities are defined as central cities of metropolitan areas, metropolitan cities with populations of 50,000 or more, and statutorily defined urban counties (the entitlement program). These funds are not available for projects in rural communities. The remaining 30% of CDBG funding is allocated by formula to the states for distribution to nonentitlement communities (the state program) for use in areas that are not part of a CDBG entitlement community allocation. These funds, which are administered by each state, may be available for rural community water projects. The 70/30 split and allocation formulas are provided for in law. Between FY2012 and FY2016, disbursements by CDBG recipients for water and sewer improvements have averaged $370 million per year. Program Purpose The primary goal of this program is the development of viable communities by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for low- and moderate-income persons. Funds may also be used to aid in preventing or eliminating slums and blight or to address an imminent threat to residents of the impacted area. Financing Mechanism CDBG program funds are allocated by formula. After amounts specified in an appropriations act are allocated to Section 107 special purpose activities, 70% of the remaining funds are allocated by formula to entitlement communities and 30% to the states for distribution to nonentitlement communities. Funds are awarded to entitlement communities based on the higher yield from one of two weighted formulas. The first of two formulas uses population, overcrowded housing, and poverty data, while the second formula allocates funds based on an entitlement community's relative share of poverty, housing built before 1940, and the lag in population growth rate relative to the total for all entitlement communities. Similar formulas are used to allocate nonentitlement funds to states. As a condition of receiving CDBG funds, an entitlement community must submit a consolidated plan at least 45 days before the beginning of its program year detailing the proposed use of funds over a five-year period. Each entitlement community's multiyear consolidated plan (ConPlan) must include a citizen participation plan, a housing needs assessment, and an annual community development plan. In addition to an annual action plan, each jurisdiction must annually submit to HUD a Comprehensive Annual Performance Evaluation Report (CAPER) detailing progress it has made in meeting the goals and objectives outlined in its action plans. States do not actually undertake eligible CDBG activities but act as pass-through agents charged with three distinct responsibilities: (1) determining the method or methods to be used to distribute funds to nonentitlement communities, including seeking the input of affected local governments; (2) selecting local governments that will receive funds; and (3) monitoring local government grant recipient project implementation to ensure compliance with rules governing the program. In addition, each state is required to submit to HUD a ConPlan that includes a five-year housing and homeless needs assessment, a housing market analysis, a strategic plan that includes proposed housing and nonhousing community development activities, and a one-year action plan. Also, each state must submit to HUD a CAPER detailing progress it has made in meeting the goals and objectives outlined in its action plans. Eligibility Requirements There are three categories of recipients eligible for direct allocations of CDBG program funds: entitlement communities (including insular areas), states, and Section 107 special project grants. Entitlement communities include central cities of metropolitan areas, metropolitan-based cities with populations of 50,000 or more, and statutorily defined urban counties. As of 2017, there were 1,224 entitlement communities, including the District of Columbia. States include the 50 states and Puerto Rico. Before funds are allocated to states and entitlement communities, a specific amount established by Congress is set aside annually for the United States territories or insular area of Guam, the Virgin Islands, American Samoa, and the Commonwealth of the Northern Marianas. These funds are awarded annually based on each insular area's relative share of aggregate population for all insular areas. Eligible activities include a wide range of projects such as public facilities and improvements, housing, public services, economic development, and brownfields redevelopment. State grantees must ensure that each activity meets one of the program's three national objectives: benefitting low- and moderate-income persons (the primary objective), aiding in the prevention or elimination of slums or blight, or assisting other community development needs that present a serious and immediate threat to the health or welfare of the community. Under the state program that assists smaller communities, states develop their own program and funding priorities and have considerable latitude to define community eligibility and criteria, within general criteria in law and regulations. Funding For FY2017, Congress provided $3.0 billion for CDBG entitlement/nonentitlement formula funds, of which approximately $2.095 billion was available for entitlement communities, $898 million for smaller communities under the state nonentitlement program, and $7 million for insular areas. For FY2018, the President's budget requested $0 in funds for this program, the same as the FY2017 request level. On March 23, 2018, the President signed into law the Consolidated Appropriations Act of 2018, P.L. 115-141 . Division L of the act appropriated $3.365 billion for the HUD-administered Community Development Fund, including $3.3 billion for the CDBG entitlement/nonentitlement formula funds. Of the amount appropriated for CDBG formula grants, $2.305 billion was allocated to entitlement communities, $988 million to states for distribution to nonentitlement communities, and $7 million for insular areas. The act also appropriated $65 million for Indian tribes. For FY2019, the Administration again requested $0 in funds for the CDBG program. On February 15, 2019, Congress, passed and the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act left the program's funding level unchanged from the previous year, appropriating $3.365 billion—including $2.305 for entitlement communities, $988 billion for states to distribute to nonentitlement communities, $7 million for insular areas, and $65 million Indian tribes. The Administration's budget request for FY2020, released on March 11, 2019, does not include funding for the CDBG program. In proposing termination of the program in FY2020, the Administration cited its intent to redefine the proper role of the federal government in support of community and economic development by devolving responsibility to state and local governments. Statutory and Regulatory Authority Statutory authority for the CDBG program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq. ). Regulations are codified at 24 C.F.R. Part 570. Regulations covering the CDBG state program for nonentitlement communities are codified at 24 C.F.R. Part 570, Subpart I (§570.480). CDBG Section 108 Loan Guarantees Authorized under the same title (Title I of the Housing and Community Development Act of 1974) as the formula-based CDBG program, the Section 108 loan guarantees allow an entitlement community or a state, on behalf of a nonentitlement community, to leverage its annual CDBG allocation in support of large-scale economic development and housing rehabilitation projects and the construction, reconstruction, or installation of public facilities. Program Purpose Consistent with the goals and objectives of the CDBG program, Section 108 loan guarantees are intended to supplement CDBG program activities. The program allows entitlement communities and states to extend the reach of the formula-based CDBG program, giving them access to additional financial resources to undertake large-scale, transformative neighborhood revitalization efforts. Eligible activities include acquiring and rehabilitating publicly owned real property; housing rehabilitation; economic development activities, including those carried out by for-profit and nonprofit entities; debt service reserves; payment of interest on the guaranteed loan; issuance cost of the public offering; and the acquisition, construction, reconstruction, and installation of public facilities, including water and sewer improvements. Financing Mechanism Section 108 loan guarantees are financed through public offerings. Under the program, states and communities are allowed to float bonds, notes, or debentures worth up to five times their annual CDBG allocation, minus any existing Section108 commitments or outstanding principal balances, with a repayment period of up to 20 years. States and entitlement communities must pledge their current and future CDBG allocations as security against default of the bonds or notes. Section 108 funds are made available on an ongoing basis, allowing communities to apply for funds anytime during the year. It should be noted that Section 108 loan funds are made available to eligible public entities that may reloan the funds to private participants in a redevelopment project. Applicants are encouraged to meet with HUD staff prior to submitting a formal application. Eligibility Requirements Section 108 loan guarantees may be accessed only by CDBG entitlement communities and states on behalf of a CDBG nonentitlement community. All eligible activities must meet one of the three national objectives of the regular CDBG program: principally benefit low- and moderate-income persons, aid in eliminating or preventing slums and blight, or address an imminent threat to the health and safety of residents. The program has an open application process, allowing entitlement communities and states to submit applications anytime during the year. The application process governing the Section 108 program can be grouped into several distinct stages: application presubmission, citizen participation, application submission, application review and notification, award allocation, and reporting. When submitting formal applications, states and entitlement communities must include a description of activities to be carried out, financing structure, source of loan repayment, citizen participation plan, anti-displacement strategy, and a pledge of the applicant's CDBG allocation as security for the Section 108 guaranteed loan. In general, HUD attempts to review an application within 90 days. HUD field offices are encouraged to complete applications within 45 days, with HUD headquarters attempting to complete its review within 45 days. Recipients receiving Section 108 funds are required to file annual performance reports with HUD detailing progress made in meeting the objectives of their community development plans, including Section 108 activities. Between FY2014 and FY2016, HUD issued loan guarantee commitments totaling $314.4 million to 47 projects, including $110.4 million to 17 projects in FY2014, $123.3 million in loan guarantees to 20 projects in FY2015, and $80.7 million to support 10 projects in FY2016. Funding For FY2017, Congress authorized a loan commitment ceiling of $300 million and directed HUD to collect fees from borrowers that results in a credit subsidy cost of zero for guaranteeing Section 108 loans. Until FY2015, Congress appropriated an amount necessary to cover the estimated long-term liability to the federal government of a Section 108 loan guarantee (credit subsidy). The Department of Housing and Urban Development Appropriations Act for FY2014 changed that arrangement, allowing HUD to collect a fee from the borrower to cover the cost of the credit subsidy. The amount of the fee will be determined annually by HUD based on a percentage of the principal amount of the Section 108 guaranteed loan. For FY2018, the Trump Administration did not request any new loan guarantee authority. The Consolidated Appropriations Act of 2018, P.L. 115-141 , signed by the President on March 3, 2018, included $300 million in Section 108 loan guarantee authority. For FY2019, the Administration again requested no new loan guarantee authority. However, Congress, in passing the Consolidated Appropriations Act of 2019, P.L. 116-6 , provided $300 million in loan guarantee authority for Section 108 financed projects. For FY2020, the Administration has requested no new loan guarantee authority for the Section 108 program. Statutory and Regulatory Authority Statutory authority for the Section 108 program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5308). Regulations are codified at 24 C.F.R. Part 570, Subpart M. [This section was prepared by Eugene Boyd, Analyst in Federalism and Economic Development Policy, Government and Finance Division.] Department of Commerce Economic Development Administration (Public Works and Economic Development Facilities Program) The Department of Commerce's Economic Development Administration (EDA) is authorized to provide development assistance to areas experiencing substantial economic distress. EDA grants for community water and sewer projects are available through its Public Works and Economic Development Facilities program (PWED). Such assistance is also available under the agency's Economic Adjustment Assistance program. Under the PWED program public works grants are awarded competitively to eligible applicants to revitalize, expand, and upgrade their physical infrastructure. These investments in public works improvements must be linked to projects intended to enable communities to attract new industry, encourage business expansion and retention, diversify local economies, and generate or retain private sector jobs in EDA-designated distressed regions. Grants may be used for a wide range of purposes but frequently have a sewer or water supply element. The types of projects funded include industrial parks, expansion of port and harbor facilities, redevelopment of brownfields, and water and wastewater facilities primarily serving industry and commerce. Federal law requires that units of government retain ownership of EDA-funded projects. Because EDA grants must directly encourage employment generation, these grants generally are not available for rural residential sewer and water supply development. Program Purpose The purpose of the program is to promote long-term economic development and assist in the construction of public works and development facilities needed to initiate and support the creation or retention of permanent private sector jobs in areas experiencing long-term economic deterioration and distress. EDA's public works program supports investments that will help distressed areas address their competitive disadvantages. Funded projects must be part of an EDA-certified Comprehensive Economic Development Strategy (CEDS). Financing Mechanism EDA competitively awards public works grants directly to approved applicants. Generally, EDA investment assistance may not exceed 50% of the project cost. Projects may receive an additional amount, not to exceed 30%, based on the relative needs of the region in which the project will be located, as determined by EDA. In the case of certain Indian tribes, nonprofit organizations that have exhausted their effective borrowing capacity, or a state or political subdivision of a state that has exhausted its effective taxing and borrowing capacity, grants totaling 100% of a project's cost may be awarded. Credit may be given toward the nonfederal share for in-kind contributions, including contributions of space, equipment, and services. No minimum or maximum project amount is specified in law. Eligibility Requirements Public works grants may be made to states, cities, counties and other political subdivisions of states, an institution of higher education or a consortium of such institutions, and private or public not-for-profit organizations acting in cooperation with officials of a political subdivision of a state. Under this program, the term "state" includes the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. For-profit, private sector entities do not qualify. Qualified projects must fill a pressing need of the area and must (1) be intended to improve the opportunities for the successful establishment of businesses, (2) assist in the creation of additional long-term private sector employment, and (3) benefit long-term unemployed or underemployed persons and low-income families. Projects must also be consistent with the area's CEDS and have an adequate share of local funds. In addition, eligible projects must be located in areas that meet at least one of the following criteria: low per-capita income, unemployment above the national average, or an actual or anticipated abrupt rise in unemployment. Funding For FY2017, Congress provided appropriations totaling $100 million for EDA's public works grant program. For FY2018, the President's budget requested no funding for the public works program. On March 23, 2018, the President signed the Consolidated Appropriations Act of 2018, P.L. 115-141 . Division B of the act appropriated $262.5 million for EDA programs and additional $39 million for salaries and expenses. Of the amount appropriated for EDA programs, $117.5 million is allocated for the public works program. On February 15, 2019, the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act appropriated $265 million for EDA programs, including $117 million for the public works program. The act also appropriated an additional $39 million for EDA salaries and expenses. This is the same amount appropriated for FY2018. The Administration's FY2020 budget requests no new funding for EDA program activities but does request $30 million to cover the costs associated with closing down the agency. Statutory and Regulatory Authority The statutory authority for the public works program is the Public Works and Economic Development Act of 1965, as amended, P.L. 89-136 (42 U.S.C. 3121 et seq. ). Regulations are codified at 13 C.F.R. Chapter III, Part 302, 305, 316, and 317. Economic Adjustment Assistance (EAA) EDA, through its Economic Adjustment Assistance (EAA) grant program, awards development assistance to areas experiencing long-term economic deterioration and distress or sudden and substantial economic dislocation. This may include assisting communities/regions affected by natural disasters, natural resource depletion, mass layoffs, and other severe economic shocks that communities experience in restructuring and diversifying their regional economies. Funds have also been made available to aid communities experiencing chronic unemployment and underinvestment and communities impacted by military Base Realignments and Closures (BRAC). EAA funds are competitively awarded to qualified applicants to assist them in developing and implementing a five-year CEDS. EAA may be used to fund four types of activities: 1. strategic planning activities that include the creation of short-term action plans intended to stabilize a distressed community and regionally oriented long-term development strategies (CEDS) intended to assess and redirect the region's economic future; 2. technical assistance, including feasibility studies; 3. capitalization of revolving loan funds, which would allow qualifying businesses to borrow funds at favorable interest rates; and 4. financing of physical infrastructure projects, including water and sewer facilities, industrial parks, and business incubators. Program Purpose The purpose of the program is to promote long-term economic development in areas experiencing sudden economic dislocation or long-term economic distress. EDA's EAA program supports investments that will help distressed areas address their competitive disadvantages and rethink their economic futures. In general, funds may be used to develop CEDS, and funded projects must be part of EDA-certified CEDS. Financing Mechanism EDA competitively awards EAA grants directly to approved applicants. Generally, EAA investment assistance may not exceed 50% of the project cost. Projects may receive an additional amount, not to exceed 30%, based on the relative needs of the region in which the project will be located, as determined by EDA. In the case of certain Indian tribes and nonprofit organizations that have exhausted their effective borrowing capacity, or a state or political subdivision of a state that has exhausted its effective taxing and borrowing capacity, grants totaling 100% may be awarded. Credit may be given toward the nonfederal share for in-kind contributions, including contributions of space, equipment, and services. No minimum or maximum project amount is specified in law. Eligibility Requirements EAA grants may be made to states, cities, counties and other political subdivisions of states, institutions of higher education or consortia of such institutions, and private or public nonprofit organizations acting in cooperation with officials of political subdivisions of a state. Under this program, the term state includes the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. For-profit, private sector entities do not qualify. Qualified projects must fill a pressing need of the area and must (1) be intended to improve the opportunities for the successful establishment of businesses, (2) assist in the creation of additional long-term private sector employment, and (3) benefit long-term unemployed or underemployed persons and low-income families. Projects must also be consistent with the area's CEDS and have an adequate share of local funds. In addition, eligible projects must be located in areas that meet at least one of the following criteria: low per-capita income, unemployment above the national average, or an actual or anticipated abrupt rise in unemployment. Funding For FY2017, Congress provided appropriations totaling $35 million for EDA's EAA grant program. For FY2018, the President's budget requested $0 for the EAA program. On March 23, 2018, the President signed the Consolidated Appropriations Act of 2018, P.L. 115-141 , which included $262.5 million for EDA programs and additional $39 million for salaries and expenses. Of the amount appropriated for EDA programs, $37 million was allocated for the EAA program. On February 15, 2019, the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act appropriated $265 million for EDA programs, including $37 million for the EAA program. For FY2020, the Administration seeks to terminate EDA and its programs, citing changing national priorities, including prioritizing rebuilding the military and making critical investments in the nation's security. The Administration is requesting $30 million for salaries and expenses to cover the cost of shutting down the agency. Statutory and Regulatory Authority The statutory authority for the public works program is the Public Works and Economic Development Act of 1965, as amended, P.L. 89-136 (42 U.S.C. 3121 et seq. ). Regulations are codified at 13 C.F.R. Chapter III, Part 302, 305, 316, and 317. [This section was prepared by Eugene Boyd, Analyst in Federalism and Economic Development Policy, Government and Finance Division.]

For more than four decades, Congress has authorized and refined several programs to help communities address water supply and wastewater problems. The agencies that administer these programs differ in multiple ways. In terms of funding mechanisms, projects developed by the Bureau of Reclamation (Reclamation) and the U.S. Army Corps of Engineers (USACE) typically require direct, individual project authorizations from Congress. In contrast, standing program authorizations provide project funding for other agencies, including the Department of Agriculture (USDA), the U.S. Environmental Protection Agency (EPA), the Department of Commerce, and the Department of Housing and Urban Development (HUD). The key practical difference is that with the individual project authorizations, there is no predictable assistance or even guarantee of funding after a project is authorized, because funding must be secured each year in the congressional appropriations process. The programs, on the other hand, have set program criteria, are generally funded from year to year, and provide a process under which project sponsors compete for funding. In terms of scope and mission, the primary responsibilities of USACE are to maintain inland navigation, provide for flood and storm damage reduction, and restore aquatic ecosystems, while EPA's mission relates to protecting public health and the environment. The Department of Commerce and HUD focus on community and economic development. Likewise, the specific programs—while all address water supply and wastewater treatment to some degree—differ in important respects. Some are national in scope (those of USDA, EPA, and the Department of Commerce, for example), while others are regionally focused (Reclamation's programs and projects). Some focus primarily on urban areas (HUD) and some on rural areas (USDA), and others do not distinguish based on community size (e.g., EPA, USACE). Federal funding for the programs and projects discussed in this report varies greatly. Collectively, congressional funding for these programs in recent years has been somewhat eroded by overall competition among the many programs that are supported by discretionary spending, despite the continuing pressure from stakeholders and others for increased funding. FY2019 appropriations highlights include the following: $1.164 billion for capitalization grants to states under EPA's State Revolving Fund (SRF) loan program for drinking water systems and $1.694 billion for EPA's SRF program for wastewater projects; $60 million in subsidy costs for the EPA-administered Water Infrastructure Finance and Innovation Act (WIFIA) program, allowing the agency to provide approximately $5.5 billion in credit assistance for drinking water and wastewater infrastructure projects; $400 million for USDA's rural water and waste disposal grant program and direct loan authority of approximately $1.4 billion; $3.4 billion for HUD Community Development Block Grant (CDBG) funds (water and wastewater projects are among many eligible uses); and $58.6 million for Reclamation's Title XVI reclamation/recycling projects.

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Introduction The Old-Age, Survivors, and Disability Insurance (OASDI) program provides monthly benefits to retired or disabled workers and their family members and to the family members of deceased workers. The OASDI program operates as a pay-as-you-go program in which revenues (collected from payroll taxes and taxation of benefits) are paid out as monthly benefits. These monthly benefits constitute a substantial portion of income for a large segment of recipients. The payroll tax and the taxation of monthly benefits are major contributors to the OASDI program's revenues. For many years, the program's revenues exceeded its costs (i.e., benefit payments), resulting in annual surpluses. Annual surpluses are not needed to cover scheduled benefits, and the money is credited to the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund, or trust funds. The OASDI Trust Funds are invested in nonmarketable U.S. government securities (government bonds), where they earn interest. This interest provides a third source of revenue to the OASDI program. The combined OASDI Trust Funds had approximately $2.9 trillion in assets at the beginning of 2018. The OASDI Trust Funds' Board of Trustees (the trustees) manages the trust funds according to requirements set forth in the Social Security Act. Under current law, the trust funds' assets may be invested only in U.S. government securities issued by the Secretary of the Treasury. In practice, the trust funds invest solely in special, nonmarketable U.S. Treasury securities. By investing only in nonmarketable U.S. Treasury securities, or special issues , the trustees have not intervened directly in the private economy. Investing in marketable securities would signify a departure from the norms that govern the current investment practice. Investing in equities—for example, by purchasing company stock in the open market—would demonstrate a similar departure from the trust funds' investment norms and would represent a government intervention into the private market. Some argue this expansion of investment options would be problematic because it dictates government ownership of, and possibly influence on, private companies. Although this event may never come to pass, the historically higher returns on equity investment may motivate policymakers to enact changes to the OASDI Trust Funds' investment options and practices. Current Policies and Practices3 Section 201(c) of the Social Security Act establishes the Board of Trustees of the OASDI Trust Funds and states that the Secretary of the Treasury shall be the managing trustee. Subsequent sections outline the main duties of the managing trustee and provide instructions for how to conduct the trust funds' investment activities. The directives include the following: 1. The managing trustee is to invest portions of the trust funds that are not required for current costs. 2. The funds not necessary to meet current costs are to be invested only in interest-bearing securities issued by the Secretary of the Treasury. Upon purchasing a government security (i.e., exchanging tax revenues or earned interest for a government security), the surplus funds are deposited into the General Fund and the funds are available to the rest of the federal government to meet other spending needs, reduce taxes, or reduce publicly held debt. This transaction essentially results in excess revenues being loaned to the government. 3. The U.S. Treasury will make these securities available to the managing trustee for the trust funds' investments. These issues are referred to as special issues or special obligations . a. The maturity of special issues is fixed with due regard for the needs of the trust funds. b. The interest rate earned by special issues is equal to the average market yield on marketable, interest-bearing government securities due at least four years in the future. 4. The managing trustee may redeem any of these special issues, at any time, at par (i.e., face value) plus accrued interest. The ability to redeem the special issues at any time for par value, thus ensuring they cannot lose value, makes them nonmarketable. Other U.S. government issuances, if sold prior to maturity, are redeemed at the prevailing market rate. Because these special issues can always be redeemed at par, their early redemption at any time does not negatively affect the trust funds' value. If it is determined to be in the public interest, the managing trustee may purchase non - special issues (e.g., marketable U.S. securities) at the original or market price. Doing so would imply that any redemption, if needed prior to the maturity date of such security, would return the market price and possibly result in losses to the trust funds' capital. The 1957-1959 Advisory Council on Social Security Financing acknowledged that the trust funds could invest in public (i.e., marketable) issues, but recommended amending the Social Security Act to allow investment in public issues only "when they will provide currently a yield equal to or greater than the yield that would be provided by the alternative of investing in special issues." Had this amendment been enacted into law, it would have mandated the preference for special issues. The Social Security Act provides no direction on how the trust funds' investments should be redeemed. In practice, the trustees have adopted two administrative policies to address this gap. First, special issues are redeemed before maturity only when they are required to cover immediate costs. This policy prevents special issues with a low yield from being redeemed and then immediately reinvested at a higher rate. Second, special issues are redeemed in maturity-date order . This policy provides a reliable order of redemption. The Trust Funds' Investment Principles Actuarial Note Number 142 , published by the Social Security Administration's Office of the Chief Actuary (OCACT), outlines the OASDI Trust Funds' investment principles. The note acknowledges that the legislative history of the Social Security Act provides only limited guidance, and the rest can be inferred from the administrative policies adopted over the duration of the trust funds' existence. Principle 1: Nonintervention in the Private Economy The principle of nonintervention has long been recognized as important in the consideration of the trust funds' finances. The 1957-1959 Advisory Council on Social Security Financing stated the following in its final report: The Council recommends that investment of the trust funds should, as in the past, be restricted to obligations [issues] of the United States Government. Departure from this principle would put trust fund operations into direct involvement in the operation of the private economy or the affairs of State and local governments. Investment in private business corporations could have unfortunate consequences for the social security system—both financial and political—and would constitute an unnecessary interference with our free enterprise economy. Similarly, investment in the securities of State and local governments would unnecessarily involve the trust funds in affairs which are entirely apart from the social security system. The principle of nonintervention is reinforced by the creation and use of the special issue securities as the OASDI Trust Funds' primary investment mechanism. The purchase or sale of large quantities of marketable government securities in the open market by the OASDI Trust Funds could cause market disruptions and appear as interference in the open market operations of the Federal Reserve. Principle 2: Security Section 201(d) of the Social Security Act explicitly states the OASDI Trust Funds may only be invested in interest-bearing securities issued by or guaranteed by the U.S. government. These securities are backed by the full faith and credit of the government, offering them a high measure of protection. Furthermore, to the degree that the trust funds remain invested solely in special obligations (special issues), they are well protected from any loss to capital, earning a risk-free return. Principle 3: Neutrality With respect to operating neutrally, Actuarial Note Number 142 states the following: Trust fund investment policies have, for the most part, followed a principle of neutrality, in the sense that they have generally been intended neither to advantage or disadvantage the trust funds (the lenders) with respect to other Federal accounts (the borrowers). The underlying concept is that when the trust funds invest assets by lending to the general fund of the Treasury, these transactions should produce investment results similar to those that might be obtained by a prudent, private sector investor in Federal securities. If the general fund could not borrow from the trust funds, it would have to meet its borrowing needs by selling additional securities to just such private investors. The practice of neutrality is required, in part, by law in determining the interest rates for the special issues (see " Current Policies and Practices "). It is also encouraged by two administrative policies adopted by the trust funds: (1) only redeeming special issues before maturity when they are needed to meet program costs and (2) ensuring the maturities of special issues are evenly distributed among 1-year through 15-year durations. Note 142 concludes that "the administrative policy governing early redemption of special obligations [special issues], in combination with the policy of spreading maturities, is designed to compensate at least partially for, or neutralize, the advantage of no-risk liquidity." Principle 4: Minimal Management of Investment The parameters for the trust funds' investment set forth in the Social Security Act and the administrative policies adopted over time render active or day-to-day management of the trust funds' investments unnecessary. The types of possible investment vehicles are limited by law and by common practices. These practices have also eliminated discretion for when and why securities should be redeemed. Note 142 also explains that adhering to the principles of security and neutrality necessitates following the principle of minimal management, as active management (e.g., profit maximizing) would violate the first two principles. Performance and Criticism of the Trust Funds The Trust Funds' Performance Figure 1 displays the returns earned by the assets in the trust funds over the period 1940 to 2017. The average interest rate is the average of the monthly interest rates on new special issues acquired by the trust funds during that year. In 2003, for instance, the average interest rate for the special issues acquired by the OASDI Trust Funds was 4.1%. The effective interest rate is the interest earned during the calendar year on all of the securities held by the trust funds divided by the average amount of securities held by the trust funds during the year. Since 1985, the effective interest rate has been higher than the average interest rate due to securities in the trust funds acquired in earlier years when interest rates were much higher. For example, Figure 1 shows that in 2003 the effective interest earned by all special issues held in the trust funds was 6.0%. This relationship between the average interest rate and the effective interest rate is a consequence of the trust funds' special issues being evenly spread over maturity periods ranging from 1 year to 15 years. In an environment of falling interest rates, the trust funds' investment practices result in one-fifteenth of the trust funds' assets coming due each year and being invested at a lower interest rate. For instance, a portion of the special issues acquired in 1989 was invested for a duration of 15 years, thus maturing in 2003. Those special issues returned an average rate of 8.7% and would have then been invested in assets that were expected to earn an average rate of 4.1% (i.e., the average interest rate for new special issues in 2003). Similarly, a portion of special issues acquired in 1994 for a duration of 10 years earned an average rate of 7.1%; these special issues would also have been invested to earn an average of 4.1% (i.e., the average interest rate for new special issues in 2003). It must be reiterated, however, that this duration structure has afforded the trust funds a higher effective rate than the average rate, earned in an essentially risk-free manner. Criticism of the Trust Funds Criticism of the OASDI Trust Funds' current investment practices stems from the program's long-term solvency issues. The program is facing a funding shortfall due largely to demographic factors, and restoring long-term solvency would require a payroll tax increase or reduction in benefits. Critics argue that if the trust funds had earned a better return in the past, they would be in a better long-term financial position. The 1994-1996 Advisory Council on Social Security stated the following in its final report: Historically, returns on equities have exceeded those on Government bonds (where all Social Security funds are now invested). If this equity premium persists, it would be possible to maintain Social Security benefits for all income groups of workers, greatly improving the money's worth for younger workers without incurring the risks that could accompany individual investment.… As a matter of financial theory, the diversification achieved by investing in both stocks and government bonds should also reduce portfolio risk for the OASDI Trust Fund. Starting in 1998, the Social Security Advisory Board (SSAB) replaced the advisory councils. Since then, the SSAB has released numerous reports that affirm the prior advisory council's findings. In reports from 2005 and 2010, the SSAB noted that the increased rate of return offered by equities would eliminate a large portion of the projected funding shortfall and reduce the need for tax increases or benefit reductions. Because of declining interest rates and the trust funds' duration and reinvestment practice, a portion of the trust funds' holdings was continually being invested in securities that earned less than they did in the past (see Figure 1 ). This trend is expected to continue. Although the SSA's OCACT projects interest rates to increase over the next 10 years, much of the maturing holdings would still be reinvested at a lower rate. Figure 2 shows the value of the asset reserves in the OASDI Trust Funds at the end of each calendar year from 1957 to 2034 based on historical data and projections. The figure shows the value of assets growing from 1983 through 2017. The Social Security Amendments of 1983 established a number of provisions, including increasing the full retirement age, adding new federal workers into the OASDI program, and taxing Social Security benefits, which had a positive effect on the OASDI Trust Funds. From 1983 to 2017, OASDI program revenues exceeded program cost, resulting in annual surpluses. However, during the 1983-2017 period of sustained annual surpluses, the trust funds experienced falling interest rates (see Figure 1 ). Figure 2 depicts that at the end of 2017, the trust funds are also projected to be at peak value. For 2018, the trustees project that program costs will exceed program revenues. The assets previously invested in the trust funds will be drawn down to augment annual program revenues and fulfill annual scheduled payments. The trustees also project that under current law costs will exceed revenues for the entirety of their 75-year projection period. Under the projection, the OASDI program will be able to draw upon the trust funds' assets to fulfill scheduled payments until 2034, the date at which the trustees project assets will be depleted. Alternative Investments and Possible Issues The 1994-1996 Advisory Council on Social Security identified the demographic implications of the aging b aby b oom generation—those born from 1946 through 1964—and the associated effects on the trust funds as an issue. As a result, the council's final report recommended investing a portion of the trust funds in equities to help alleviate pressure on the OASDI program's long-term actuarial balance. Other alternatives included investments in private (e.g., corporate) bonds, or in social and economic activities, such as housing construction. The primary argument for the trust funds to invest in private equity is that historical returns on equity have been greater than returns on government bonds. Some critics of this approach are concerned that by investing in private companies and gaining some control over their activities, the federal government would be intervening in the market, resulting in what some have described as "socialism by the backdoor method." The advisory council reasoned as follows: Another practical disadvantage would be the need for a far-reaching and deep-searching investment policy that would permit the trust funds to obtain an adequate rate of interest with reasonable security of principal. Under such a policy, the Federal Government would, in effect, be setting itself up as a rating organization, because the investment procedures would naturally have to be open to full public view. If no preference were shown for different types of securities, but rather investments were made widely and indiscriminately, there would be a substantial risk of diminution of investment income, or even loss of principal. Alternatively, it could be argued that if the trust funds invested passively into an index fund, the managing trustee or Board of Trustees could forgo voting rights. Although this may help to solve, or at least alleviate, the issue of government control over private companies, it may introduce new risks. The value of shares in companies included in the chosen index would receive a steady stream of support from routine and unconditional government purchase of their shares. Investing trust fund assets in index funds—for example, by investing in an index of the largest 500 companies—may effectively create an atmosphere where these companies, by the value of their market capitalization , are chosen as the "winners" via the trust funds' purchases. The benefits of being among the winners could provide incentives for companies near the cutoff in market capitalization to adopt accounting methods not generally accepted as good practice. Deceptive accounting methods could be used to inflate stock prices and market capitalization for the purpose of becoming a winner wherein the company would benefit from consistent purchase of its stock by the trust funds. Investing the trust funds' assets in private equities or bonds could also introduce instability to the financial markets. Whereas Figure 2 shows that the trust funds' values on a year-to-year basis are smooth, the trust funds' balance fluctuates greatly throughout the year. The need to redeem the trust funds' assets throughout the year, combined with the trust funds' ebbs and flows, presents conditions that have the potential to disrupt private markets. Large sales of private stocks and bonds needed to smooth fluctuations in the trust funds' value may create a liquidity crisis where irregular price movements prohibit sales and purchases at market prices; a lack of liquidity is also a reason critics cite for not investing in social projects such as housing or hospitals. Lastly, for the trust funds to purchase equities, some portion of the trust funds' existing special issues would need to be redeemed to provide the necessary capital. Research presented in the following sections suggests a phase-in of equity purchases worth 2.67 percentage points of the trust funds' value per year. Phasing in the purchase of equities in 2018 at 2.67 percentage points would have required the redemption of approximately $77 billion worth of special issues. In other words, the federal government would have needed to find $77 billion to redeem these special issues so the cash could be invested in equities. Providing that capital for the new equity investments would require a corresponding increase in publicly held debt, a corresponding increase in tax revenue, or a corresponding reduction in other government spending. Subsequent years would require similar redemptions as well. Equity Investment and Risk Investing the trust funds' assets in equities could introduce instability to the financial markets. Conversely, the trust funds would also be subject to the volatility already present in the markets. The higher average returns offered by equity investments are accompanied by higher risk. The degree of volatility, or risk, among investment vehicles is positively correlated to returns; that is, investments that can offer greater returns are accompanied by greater volatility. Likewise, investments that offer lower returns are accompanied by lower volatility. Investing in equities may improve the overall financial health of the trust funds, but it would likely be accompanied by higher volatility, which could pose challenges for a system dependent on dedicated sources of funding. Figure 3 displays the effective interest rate earned by the special issues in the combined OASDI Trust Funds and the returns of the equity market as measured by the Wilshire 5000 Total Market Index, or Wilshire 5000. During the 1983-2017 period, the Wilshire 5000 returns outperformed the trust funds' effective interest rate in 21 of the 35 years. The average effective interest rate of special issues in the OASDI Trust Funds over this period was 5.8% versus an average return of 12.7% earned in the Wilshire 5000. At the same time, the equity returns demonstrated a higher degree of volatility. Railroad Retirement Board and Alternative Investments Many of the issues mentioned above are similar to the experiences of the Railroad Retirement Board, or RRB, an independent federal agency that administers benefits to railroad workers and their families. In 2001, Congress passed the Railroad Retirement Survivors' Improvement Act, which established the National Railroad Retirement Investment Trust (NRRIT). To ensure independence and limit political interference, the NRRIT is not a part of the federal government and is independent of the RRB. Congress aimed to increase RRB funding by realizing higher returns than would be possible from investing solely in government securities. As such, the act requires the NRRIT to invest a portion of the RRB's assets in non-U.S. government securities, such as private stocks and bonds. The NRRIT investment practices require a diversified portfolio to minimize risk and avoid disproportionate influence over a firm or industry. From the NRRIT's inception to the end of FY2016, the investment returns helped increase the value of assets held by the RRB. From FY2003 to FY2016, annual returns averaged 7.9%, compared with expected returns of 8%. These rates of return are higher than what would have been earned if the NRRIT invested solely in government securities ( Figure 1 ); prior to the act's implementation, the NRRIT was invested in government securities in much the same manner as the OASDI Trust Funds. The overall size of assets held by the NRRIT is considerably smaller than the OASDI Trust Funds. For instance, at the end of FY2017, the market value of NRRIT-managed assets was $26.5 billion, whereas at the end of CY2017, the OASDI Trust Funds held $2,892 billion in assets. For a complete overview of the NRRIT, see CRS Report RS22782, Railroad Retirement Board: Trust Fund Investment Practices . Alternative Investments and Review of Past Performance With accurate and precise knowledge of the OASDI Trust Funds' cash flows from 1983 through 2016, it is possible to model the trust funds' performance had they participated in alternative investments. Research published by Burtless et al. at the Center for Retirement Research in 2017 sought to determine how the trust funds would have benefited if alternative investments began in 1984, after the Social Security Amendments of 1983 ushered in a 34-year period of annual surpluses, and in 1997, after the last Advisory Council on Social Security recommended trust fund investment in equity. This analysis compares how incorporating equity investments would have affected the OASDI Trust Funds ratio. The t rust f und s ratio is the measure of the trust funds' asset reserves at the beginning of the year divided by the projected total cost for the year. According to the trustees, a trust funds ratio above 100% throughout the short-range period (10 years) indicates a financially healthy program, whereas a ratio below 100% signals the program is in a financially inadequate position. The results are presented in Figure 4 below. The scenarios presented below assume that the amount of the trust funds' reserves invested in equities would increase by 2.67 percentage points per year until 40% of reserves were allocated in equities. That is, the trust funds' purchase of equities was phased in until equities represented 40% of total assets. This analysis yields several insights, the most pertinent of which may be that if the trust funds had invested in equities in the past, they would have higher levels of assets today than they currently do. Figure 4 shows that at the end of 2016, undertaking equity investments in 1983 would have left the trust funds with reserves enough to cover about an additional 1.2 years of program costs (424% less 302%); equity investing beginning in 1997 would have supplied the trust funds with assets to cover an additional 0.88 years of program costs (390% less 302%). In other words, the trust funds would still be facing long-term insolvency even with equity investment. A second item of note is that from 1983 to 2008, when the actual trust funds ratio peaked, the analysis shows that investing in equities would not have drastically improved the financial situation. The actual trust funds ratio was 358% in 2008, contrasted with a ratio of 371% if investment in equities began in 1984 and a ratio of 383% if investment began in 1997. By 2008, the current investment strategy resulted in a similar trust funds ratio, accomplished with less risk, with no intervention into the capital markets, and at minimal cost. A third observation is that despite several large downturns, most notably the 2008-2009 financial crisis, the trust funds would still stand in a better financial position today had equity investments been incorporated. Lastly, in each of these two alternative cases, the trust funds would have owned less than 10% of the total value of the stock market today. This result owes to the growth in aggregate equity value contrasted with the phased-in purchases of equity. Trust fund ownership at this level would perhaps assuage the concerns of critics wary of government intervention in the equity markets. Alternative Investments and Projections for Future Performance Impact of Various Policy Options Without Revenue Increase OCACT maintains relevant estimates on policy options that would affect the program's long-range solvency. The options for investing in equities presented in Table 1 vary by phase-in date, percentage of reserves that would be invested in equities, and assumed real rate of return. Policy options that incorporate equity investing can be assessed by examining their effects on the long-range actuarial balance . Table 1 shows that under current law, the long-range actuarial balance is -2.84% of taxable payroll, indicating that under intermediate assumptions provided in T he 2018 Annual Report , an approximately 2.84-percentage-point increase in payroll tax rate (from current the 12.40% to 15.24%) or a comparable reduction in benefits would be needed to maintain program solvency throughout the projection period and result in a trust funds ratio of 100% at the end of the projection period. As shown in Table 1 , none of the options that incorporate investing the trust funds in equities is projected to result in an appreciable change in the long-term solvency of the program. The best-performing option, G1, involves investing 40% of the OASDI Trust Funds into equities, phased in from 2019 to 2033, and it assumes a real rate of return of 6.2%. Although OCACT projects this option to improve the long-range actuarial balance by 0.51 percentage points, the trust funds' cash flow operations are still projected to result in depletion, albeit in 2035, one year later than expected under current law. As shown in Figure 2 , the combined OASDI Trust Funds value at the end of 2017 represents a peak value. As it becomes necessary to draw upon those assets to pay scheduled benefits, there will be less and less money that can be invested. Therefore, the projected drawdown of the trust funds makes any potential advantage of investing in equities less effective over time. Once the trust funds are depleted, the OASDI program's cost is projected to remain greater than revenues indefinitely. When the trust funds are depleted, any measure involving investment in equities would have no effect on solvency, as there would be no money to invest. Impact of Various Policy Options with Revenue Increase The Burtless et al. research that examined how the trust funds would have fared by including alternative investments from 1984 to 2016 also sought to determine how the trust funds would perform moving forward from 2017. Table 1 shows that policy options that do not include any increase to revenue do not result in an appreciable change to the current trajectory of the OASDI Trust Funds' insolvency. As such, the researchers' simulations first require that Congress passes legislation to "restore balance to the system." To restore balance to the system, the authors assume that payroll taxes are raised to eliminate the long-run funding shortfall—at the end of 2016 this was projected to require a 2.58-percentage-point increase in the payroll tax. After the balance is restored, there is no longer any long-term funding shortfall, as the actuarial deficit is brought to zero. If enacted in 2016, an increase in the payroll tax of 2.58 percentage points, on a stand-alone basis, would have resulted in the projected solvency being extended from 2034 to 2091. With balance now restored to the system, the authors present two scenarios. The first scenario is a continuation of current policy in which the trust funds remain solely invested in special issues. The second scenario presents projections in which the trust funds increase the amount of their reserves invested in equities by 2.67 percentage points per year until no more than 40% of the trust funds' assets are equities. This second scenario is similar to the simulated scenarios of past performance presented in " Alternative Investments and Review of Past Performance ." Once the OASDI program is brought back into balance (i.e., projected to be solvent throughout the 75-year projection period), Monte Carlo simulations are used to model the two scenarios. The results of continuing to invest only in special issues are presented below in Figure 5 , which shows the range of outcomes for the trust funds ratios for simulated special issue returns grouped into percentiles based on the outcome of the final year in the simulation. For instance, the 95 th percentile shows that the average of the top 5% of simulations resulted in a trust funds ratio of 100% in the final year, 2091. Conversely, the 5 th percentile, those simulations in the bottom 5%, resulted in trust fund depletion in 2083, on average. For reference, the graph also shows the projected trust funds ratio from T he 2018 Annual Report (solid black line), which does not include any increase in payroll tax or investment in equities. The results of the simulations correspond with the Trustees' 2018 Annual R eport . The simulations at the 50 th percentile, the best guess estimate, project that program solvency would be extended to about 2090, assuming first a reduction in the actuarial deficit. The simulations at the 5 th percentile resulted in maintaining short-range financial adequacy through 2071 and solvency through 2082. In essence, Figure 5 shows the improved adequacy of the trust funds' financial position from a tax increase but with no change to the current investment practices. In contrast, a second scenario, shown in Figure 6 , simulates how incorporating equity investment following the tax increase, wherein the trust funds hold a mixed portfolio of equity (at most 40%) and special issues (at least 60%), would alter the trust funds' performance. The results in Figure 6 show the potential benefits from equity investing. In this scenario, the simulations at the 50 th percentile, the best guess estimate, resulted in a mixed portfolio that is valued at 330% of the next year's projected costs (i.e., a trust funds ratio of 330%) at the end of the projection period. Comparing the 50 th percentile outcomes under each scenario shows that incorporating equity investments could improve the trust funds' long-range financial position. The only instance in which the special issue-only practice performs similarly to the mixed portfolio is under the worst possible outcomes, those in the 5 th percentile of each scenario. In these groups, the mixed portfolio fails the short-range adequacy test at an earlier date, 2069 versus 2071 for the special issue-only; however, it remains solvent for two years longer than the special issue-only, 2084 versus 2082. In almost all simulated scenarios, the inclusion of equities into the trust funds' investment practices improved their long-range financial position. A Railroad Retirement Board Approach for Social Security? The scenarios presented above appear suggest that after the long-term funding shortfall is eliminated, the inclusion of equity investing into the trust funds could improve the Social Security program's solvency. A change of this nature would represent a large departure from current policy. Since 2002, the National Railroad Retirement Investment Trust (NRRIT) has incorporated equity purchases in its management of a portion of Railroad Retirement Board (RRB) assets. From FY2003 through FY2017, the NRRIT achieved annual rates of return after fees of 8.3%. From calendar years 2003 through 2017, the OASDI Trust Funds achieved an average effective return of 4.5%. Although this comparison in performance between the NRRIT and OASDI Trust Funds covers the 2008-2009 financial crisis, it is somewhat limited in overall duration. In addition, any comparison between the two programs must take into account the smaller size of the NRRIT. The board of the NRRIT is composed of seven trustees who have expertise in financial management and pension plans. Three of the members are selected by labor unions and three by railroad management. These six members select the final trustee, and all trustees are limited to three-year terms. The trustees hire independent investment managers to invest the NRRIT assets, with no one manager controlling more than 10% of the assets. Whereas features such as a nonfederal entity of trustees seem easily replicable, other features of the NRRIT model may prove more difficult to copy. The pursuit of higher returns is accompanied by additional risk (see " Equity Investment and Risk "). To compensate for the additional risk, the NRRIT has developed safeguards to protect against periods of low returns. These safeguards include fund reserves of four to six years' worth of benefits (i.e., trust fund ratio of 400% to 600%) and automatic payroll tax adjustments on employees and employers. To acquire asset reserves of at least four years of annual program costs, thus maintaining a safeguard similar to the NRRIT's, the OASDI Trust Funds would require substantial revenue-increasing or benefit-reducing measures. For instance, as discussed in the previous section, for the OASDI Trust Funds to be brought into balance before the purchase of equities, an increase of 2.58 percentage points to the payroll tax is required. Even with the additional returns generated by equity investments under the best-case scenario presented in Figure 6 (i.e., simulated equity returns in the 95 th percentile), a trust funds ratio of 400% is not attained until 2035. Some features of the NRRIT model may prove more difficult for policymakers to accept. For instance, automatic payroll tax adjustments could prove hard to implement. About 93% of the work in the United States is covered by Social Security. Given this high coverage rate, some policymakers may object to automatic adjustments to a payroll tax that affects so many workers. In addition, an automatic increase of the payroll tax to maintain a specific trust funds ratio (e.g., 400%) would most likely occur during a period of low equity returns. Thus, such an increase could occur when workers and businesses were already subject to negative equity returns. However, a more sizeable trust funds ratio, such as 600%, could provide adequate contingency funds such that an automatic increase in the payroll tax would not be prompted. Periods with a high trust funds ratio and positive equity returns could prompt an automatic payroll tax decrease. Lastly, the amount of funds managed by the NRRIT versus those managed by the OASDI Trust Funds are different. At the end of FY2017, the NRRIT managed assets with a market value of $26.5 billion. At the end of CY2017, the OASDI Trust Funds managed assets worth $2,892 billion. Because the NRRIT is an independent nongovernmental entity, it is not subject to the same oversight as federal agencies. Several times since its inception, the RRB Office of the Inspector General (OIG) has expressed concerns regarding the effectiveness of proper oversight of the NRRIT. Most specifically, the OIG noted that, under current policy, there are fewer safeguards protecting the NRRIT than for retirement investments of federal government and private-sector workers. Given the magnitude of the Social Security program and its importance for retired workers, a similar absence oversight may prove unacceptable to policymakers. Conclusion Under current law, and assuming the Board of Trustees' intermediate projections will unfold close to its assumptions, the long-range solvency of the OASDI Trust Funds is at risk. In addition, under current law, the trust funds' financial position would not be improved by the inclusion of alternative investments, namely equity investments. However, should Congress pass legislation to reduce the actuarial deficit, available research suggests that investing the trust funds' newly increased assets in equities could result in a higher trust funds ratio (i.e., greater solvency) than if the trust funds' assets were invested in only government bonds. Phasing in equity investments over a sufficient length of time could minimize adverse effects and result in the trust funds holding a relatively small position in the stock market. Although much smaller in scale, the practices of the RRB provide a framework and history for the use of equity investment in a trust fund (see CRS Report RS22782, Railroad Retirement Board: Trust Fund Investment Practices ). This would, however, require putting aside current investment principles and methods that have guided investment practices. These practices have led the OASDI Trust Funds to be managed at a low cost with minimal risk and resulted in no direct intervention in the private equity markets.

The Old-Age, Survivors, and Disability Insurance (OASDI) program provides monthly benefits to retired or disabled workers and their family members and to the family members of deceased workers. These monthly benefits constitute a substantial portion of income for a large segment of recipients. The OASDI program is financed primarily by payroll taxes on covered earnings up to an annual limit, as well as federal income taxes paid by some beneficiaries on a portion of their OASDI benefits. OASDI program revenues are invested in federal government securities held by the Federal Old-Age Survivors Insurance (OASI) and Federal Disability Insurance (DI) Trust Funds, where they earn interest. The interest earned on assets in the trust funds provides a third stream of revenue to the OASDI program. The OASDI Trust Funds are overseen by a Board of Trustees, which is composed of six members: the Secretary of the Treasury, who is the managing trustee; the Secretary of Labor; the Secretary of Health and Human Services; the Commissioner of Social Security; and two public trustees, who are appointed by the President with advice and consent of the Senate. By law, the assets of the OASDI Trust Funds may be invested only in federal government securities issued by the Secretary of the Treasury. Although the Managing Trustee may invest in U.S. securities that are sold on the open market (marketable securities) if it is deemed in the public interest to do so, in practice, the OASDI Trust Funds' assets are invested in nonmarketable U.S. securities, known as special issues. The practice of investing solely in special issues has led the Board of Trustees to effectively adopt the principles of (1) nonintervention in the private economy, (2) security, (3) neutrality, and (4) minimal management. Although not explicitly codified in the Social Security Act, these principles have provided a framework to guide the trustees in their investment operations. At the beginning of 2018, the trust funds reported asset reserves of around $2.9 trillion, which represents the projected peak value of the funds. The OASDI program's total costs are projected to exceed its total revenues, due largely to the aging of the baby boomers, thus requiring the trust funds to draw down their assets to pay scheduled benefits. The trustees expect this trend to continue indefinitely, with the trust funds' reserves reaching depletion in 2034. To extend the trust funds' solvency, some argue the trust funds' assets should be invested in equities (i.e., stocks sold on the open market). The main argument for this approach is that equities have historically produced higher rates of return, on average, than U.S. securities, which are the trust funds' only investment option under current law. Proposals favoring equity investment seek to earn higher rates of return for the trust funds than provided by special issues. However, the higher average rates of return associated with equity investing come with more risk. Investing the trust funds in equities would expose them to a higher degree of volatility than the current investment practices. The trustees estimate that bringing OASDI program revenues into balance with program costs would require an immediate permanent increase of 2.78 percentage points in the payroll tax rate, from 12.40% to 15.18%, a permanent reduction in benefits of about 17%, or some combination of the two approaches. Although investing in equities may result in a higher return on the trust funds' assets, such a proposal would, by itself, have little effect on the program's long-term outlook, and it would have budgetary implications by requiring the immediate liquidation of the trust funds' existing assets. Because the trust funds are projected to be depleted in 2034 and because costs are expected to exceed revenues indefinitely, any proposal to invest the trust funds' asset in equities without first bringing the OASDI program into balance would result in little change to the program's solvency. Should Congress pass legislation that reduces the actuarial deficit, research indicates that including equity in the trust funds' investment practices could improve the program's financial position. This practice, if enacted, would disregard several of the trust funds' investment principles.

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Introduction The international oil market has influenced U.S. domestic and foreign policy decisions for decades. The United States plays a significant role in the world oil market, not only as the top consumer of crude oil and petroleum products, but also as the largest producer. The U.S. Energy Information Administration (EIA) estimated that the United States surpassed Russia and Saudi Arabia as the world's number one crude oil producer in 2018. U.S. production is at an all-time high as a result of technological advancements and policy. Despite the recent surge in U.S. oil production, the United States remained a net importer of oil in 2018. Oil availability associates with energy independence and energy security more than any other fuel. Supply, demand, the strength of currencies, and other factors link crude oil to the world market to determine the price. Because the United States is a top consumer and producer of oil, it has the ability to influence this world market. Trade agreements, regulation, sanctions, and unpredictable events all contribute to the flow of oil in the world market. Congress may consider policies that affect the world oil market, including sanctions, alternative fuel standards, emission controls, use of electric vehicles, and protection of international trade routes. This report provides an introduction to the U.S. and world oil markets, with an overview of supply and demand, price considerations, and trade flows. The report also includes analysis on selected examples of international conditions that in the past have affected policy decisions in the United States. This report does not focus on trade associated with the entire crude oil and petroleum product value chain, the history of imports and exports, or provide an in-depth country trade balance analysis. The potential impacts of the world oil market on the climate and the environment are not within the scope of this report. U.S. Oil Market The United States has abundant reserves of various natural resources, including crude oil in both conventional and unconventional deposits, such as shale. Technological advancements and new policies have changed the outlook for oil production in the United States from perceived scarcity to abundance. The United States, both the top oil producer and the world's greatest consumer of crude oil and petroleum products (e.g., gasoline), remains a net oil importer. U.S. Supply The availability of the crude oil resource and more specifically the "proved" reserves limits the economic production, or supply. Proved reserves are identified, undeveloped resources in the ground that are both technically and economically recoverable under existing economic and operating conditions. This measurement can fluctuate depending on a number of factors such as technology costs, new discoveries, and local and international oil prices. By the end of 2017, the United States had 39.2 billion barrels of proved reserves of oil, according to the U.S. Energy Information Administration (EIA). U.S. oil production has seen steady growth through the deployment of new oil extraction technologies. Production nearly doubled from around 5 million barrels per day (Mb/d) in 2008 to just over 10 Mb/d in 2018. In a world context, in September 2018, the EIA estimated that the United States surpassed Russia and Saudi Arabia as the number one crude oil producer. In 2018, nearly 3 Mb/d of U.S. crude oil production came from shale formations within the Permian basin, located in west Texas and southeastern New Mexico. The United States produces primarily light, sweet crude oil. In 2017, light, sweet crude oil accounted for over half of all U.S. production, primarily from the Bakken shale formation in North Dakota and Montana and the Permian Basin. Hydraulic fracturing and horizontal drilling technologies largely drove the production growth of the past decade. Hydraulic fracturing allows crude oil trapped inside "tight" rock formations to be released. Fluid forced under high pressure into the formation fractures it, creating fissures through which the oil can flow. Horizontal drilling requires a single vertical wellbore at the surface and then drills out horizontally underground across numerous points of extraction. The use of these technologies has raised environmental concerns, particularly involving possible ground water contamination and earthquakes. U.S. Demand The United States is the number one consumer of crude oil and refined petroleum products such as gasoline, diesel fuel, and aviation fuel. As Table 1 indicates, crude oil is both a raw ingredient for transportation fuels and a petrochemical feedstock to produce heating oil, lubricants, and other products. Due to this versatility, the price and supply of crude oil can directly affect other industries. Figure 1 shows that U.S. crude oil and petroleum product supplied in 2017 was on average 19.96 Mb/d—which was 20% of total world consumption. According to EIA, consumption is inferred from measurements of products supplied. Domestic crude oil production in 2017 was 9.35 Mb/d. While the United States is at record levels of production, current U.S. production is not meeting U.S. consumption. This supply/demand gap is filled by imports (a constant, but sometimes not dependable source), natural gas liquids, and, if necessary, drawing down commercial crude oil stockpiles or from the Strategic Petroleum Reserve. The demand for crude oil and petroleum products links closely to economic conditions. Consumers use petroleum products for everyday needs, such as driving, making crude oil and petroleum products relatively inelastic. While the economy is often a reliable driver of petroleum product consumption, so too is policy. In 2007, Congress passed the Energy Independence and Security Act ( P.L. 110-140 ), which directed the National Highway Traffic Safety Administration to promulgate new fuel economy standards to increase vehicle fleet efficiency. These standards demonstrate how federal policy choices can influence crude oil consumption in transportation. U.S. Prices Several different characteristics of oil determine the price of crude oil. Crude oil quality is one factor that determines a price. Lighter, sweeter crude oil prices, for example, are generally higher than heavy, sour crudes oils, because refineries (see textbox about refineries above) use lighter, sweeter crude oils to produce higher-value petroleum products, such as gasoline and diesel fuel. The spot price and future price are other ways to measure the price of crude oils. The spot market (i.e., where assets are traded for immediate delivery) has a benchmark representing trade of that crude oil. In the United States, the most commonly referenced benchmark is known as West Texas Intermediate or WTI. This benchmark is the price at which oil is traded on the spot market in Cushing, OK. Several world crude oils serve as price benchmarks for other crude oils. Other world reference price benchmarks for crude oil include Brent (Europe) and Dubai Crude. These price benchmarks often differ from one another (known as a spread) and reflect the varying type and quality of the oil, regional market conditions, infrastructure limitations, and transportation costs. Crude oil prices commonly reported in newspapers are those of crude oil futures tied to a benchmark. Futures deal in the trade using contracts for the future delivery of oil, known as the futures market. The oil futures market provides customers the opportunity to hedge risk from price volatility, by contracting a price for production in the future. The pricing of crude oil contributes to the price consumers pay for petroleum products in the United States. Gasoline, for example, closely follows the trends in WTI and Brent. As illustrated by Figure 2 , with the costs of refining, distribution, and taxes relatively stable, changes in crude price drive changes in gasoline price. The Permian Basin produces a significant amount of light, sweet crude at relatively low cost, because of its unique geologic structure. At the Permian Basin, according to the EIA, "operators can continue to drill through several tight oil layers and increase production even with sustained West Texas Intermediate (WTI) crude oil prices below $50 per barrel (bbl)." While also cost competitive, production from the Bakken and Eagle Ford (south Texas) formations may be more economic with sustained prices above $50/bbl (at 2018 infrastructure, market, technology, and cost conditions). In 2017, WTI crude oil averaged $50.80/bbl, down from an average of $99.67/bbl in 2008. U.S. Oil Trade The 1970s began the era of limited oil availability and rising oil prices. Following the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) oil embargo, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163 ). The EPCA, among many other things, restricted U.S. produced crude oil exports. Since its passage, crude oil exports occurred only in certain circumstances. For example, in 1985, President Reagan found it in the national interest to lift export restrictions on U.S. produced crude oil to Canada, following Canada's decision to remove price and volume controls on exports to the United States. The oil sector in the United States has gone through several transformations since the 1970s. Trade policy with respect to oil has undergone significant changes in recent years to accommodate technological and world developments. U.S. crude oil and petroleum product gross imports have declined from average all-time highs of over 13 Mb/d in 2005 to 10 Mb/d average in 2017 ( Figure 3 ). As the U.S. oil market moved toward higher production levels, policies that were put in place during a time of rapidly rising prices and perceived resource scarcity came into question. Consequently, in December 2015, Congress passed the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), which repealed Section 103 of the EPCA ( P.L. 94-163 ), removing any restrictions to crude oil exports. Crude oil and petroleum product imports from Canada have steadily increased since the 1980s. The United States, in 2017, imported roughly 4 Mb/d (or 40% of all U.S. crude oil and petroleum product imports) on average from Canada. In 2013, Canada surpassed the Organization of the Petroleum Exporting Countries (OPEC) as the number one supplier to the United States (see Figure 3 ). Much of Canada's crude oil exports go to the United States. If imports from Canada continue to grow, infrastructure demands will increase. According to the EIA, over half of Canada's production comes from oil sands (a gritty, semisolid form of petroleum) that, once separated from the sand and clay, is a heavy, viscous crude oil. A majority of Canada's crude oils usually end up in the Midwest due to pipeline capacity limitations to the Gulf of Mexico. As mentioned above, not all crude oils are the same and refineries generally process different types of crude oil. In the United States, over half of all crude oil produced is light and sweet, while much of the U.S. refinery capacity processes heavy, sour crude oil grades. Prior to 2015, light, sweet crude oils were discounted domestically, sometimes by as much as $30/bbl, because of infrastructure constraints. With export restrictions removed, producers are now able to sell crude oil to the world market, not eliminating the discount, but lowering it. While U.S crude oil and petroleum product imports are declining, exports are breaking records. The EIA estimates that the United States exported around 7 Mb/d of crude oil and products combined in 2018 ( Figure 4 ). EIA further projects that, in most modeling cases, the United States will become a net petroleum exporter around 2030. As Figure 4 indicates, from 2017 to 2018, gross imports remained constant while exports increased, reducing net imports. Top destinations for U.S. crude oil and petroleum product exports include Mexico, Canada, China, Brazil, and Japan. According to EIA data, these five countries received about half of all U.S. oil exports in 2017. On average, Mexico imported 1 Mb/d of U.S. crude oil and petroleum products in 2017 (nearly double from 2013 levels), due to Mexico's decreased production coupled with rising demand. Mexico has not kept up refining to meet domestic demand. In 2016, Mexico became a net oil importer from the United States for the first time. U.S. gasoline exports in 2018 were more than half of Mexico's gasoline consumption. World Oil Market In general, the world oil market determines the price and supply of oil and petroleum products for U.S. consumers, which may impact policy decisions by Congress. In January 2019, the World Bank projected world gross domestic product growth of 2.9% in 2019 and 2.8% in 2020-2021. As developing economies grow, so too does their demand for fuel and consumer goods, including paints, lubricants, and plastics—many dependent on crude oil. Meanwhile, many countries are also trying to reduce greenhouse gas emissions, diversify their fuel mix, and enhance energy security and independence. The world oil market historically follows the world economy as it grows or declines. Supply generally does not follow demand smoothly, and this results in price volatility. For example, supply bottlenecks can constrain open trade, which can conflate prices and access. The Government of Alberta instituted a crude oil curtailment policy in January 2019, as crude producers faced export infrastructure bottlenecks. The inability to export excess production had caused storage to increase to 35 million barrels of crude oil (nearly double the historical amount) for the Canadian province. Further, prices declined during this period of overproduction to $11.43/bbl from $58.49. In addition to economic growth or decline, the world oil supply is influenced by a number of drivers, including project investments, the price of oil, demand forecasts, and geopolitics. Oil producers attempt to match world demand projections by making new production investments and replacing exhausted or uncompetitive production sites. World Supply The EIA estimated the world's proved reserves in 2017 at approximately 1,645 billion barrels of oil. The world supplied approximately 98 Mb/d of petroleum and other liquids; this equates to roughly 50 years of production at 2017 levels. As noted above, proved reserves incorporates crude oil prices, domestic fiscal conditions, geology, and the technology available to economically produce from the reserve base. Often suppliers make decisions to maximize revenue without causing a corresponding decrease in demand. Similarly, volatility in oil prices can create swings in revenue that can disrupt or enable development plans among producers. Venezuela, according to EIA, holds the world's largest proved reserves at 301 billion barrels of oil in 2017, followed by Saudi Arabia (266 billion barrels) and Canada (170 billion barrels). Proved reserves do not necessarily correlate with production levels. Venezuela, for example, has significantly decreased its crude oil production (due in part to a lack of investment and other contributing factors) while the United States has become the number one producer. The EIA estimated that the United States surpassed Russia and Saudi Arabia as the world's number one crude oil producer in 2018. National oil companies (NOCs) dominate Russian and Saudi Arabian oil production. NOCs operate under government ownership or are companies under influence by national governments. In contrast, oil companies in the U.S. private sector operate autonomously. Saudi Arabia, historically the world's leading oil producer and a member of OPEC, has held enough spare capacity to influence the market when it has deemed it necessary. In September 2018, Saudi Arabia held an estimated 1.5 Mb/d of crude oil spare capacity, or 72% of world spare capacity. Spare capacity allows for swift adjustments to crude oil output that can affect the world oil market. OPEC, through crude oil policy decisions, can influence the world's oil supply and as a result crude oil prices. OPEC is an organization of oil-producing nations that together represent nearly 40% of world oil production (see Figure 5 ). Saudi Arabia, a founding member of OPEC, holds the largest share of OPEC production. Although not an OPEC member, Russia recently has coordinated with OPEC on oil supply decisions, which can have a profound effect on the world market. For example, Russia is a participating country to the Declaration of Cooperation, an agreement between OPEC and non-OPEC countries to adjust world oil market production. OPEC countries, particularly Saudi Arabia, often maintain varying levels of spare oil capacity. Those with the greatest spare capacity may be referred to as "swing producers," as they may have the ability to more easily influence the oil market. Swing producers may use their spare capacity to bring balance to an often unstable market, but also may have the power to manipulate the price of oil by either flooding the market (causing downward pressure on price) or by reducing supply (resulting in an increase in price). While OPEC dominates oil production, other non-OPEC countries will gain market share contributing to world supply growth through 2023. The International Energy Agency (IEA) estimates that the United States, Brazil, and Canada will provide the majority of world supply growth. Iraq, Iran, Norway, the United Arab Emirates, and Libya also are expected to contribute to oil supply growth through 2023, but to a smaller degree. Total non-OPEC supply growth is expected to increase by 5.2 Mb/d by 2023, accounting for 81% of 6.4 Mb/d of total world oil capacity growth during this period. While the EIA projects the United States, Brazil, and Canada to drive supply growth through 2023, a number of other countries may experience production declines. China, Mexico, and Venezuela have seen comparatively lower production for the past three years as a result of lower investments and other contributing factors. Venezuelan crude oil production has trended downward since 1998 from approximately 3.4 Mb/d to 2 Mb/d in 2018, with IEA forecasting continued declines to as low as 1 Mb/d through 2023. The IEA reports that globally new oil discoveries fell to a record low in 2017 with 4 billion barrels of new crude oil reserves discovered. Producers consider world demand growth forecasts when making investment decisions. If the prospects for increasing oil consumption appear minimal or if the price outlook looks uneconomical, then producers may be more hesitant to invest in new fields. Producers, however, are looking at ways to make existing mature fields more productive, as well as increasing production of alternatives to crude oil, such as biofuels. Mature fields with production that is declining or nearing retirement may not necessarily be fully exhausted, but rather, oil extraction costs may be at a point that is no longer profitable in the world market. World Demand In 2018, world oil product demand was 99.2 Mb/d, and IEA projects that this will increase to 104.7 Mb/d by 2023. Countries seeing the strongest gains economically may also see growth in their demand for oil. The IEA projects China and India to contribute to a large portion of oil demand growth, representing around 20% of total world demand. IEA projects China's oil demand to grow from 12.5 Mb/d in 2017 to 14.4 Mb/d in 2023. India's demand projection is to grow by about 0.2 Mb/d annually to total demand of 5.9 Mb/d in 2023. As demonstrated by Figure 6 , IEA projects relatively flat demand growth for the United States through 2023. Several forecasts estimate that the transportation sector will continue to dominate oil demand. For example, British Petroleum (BP) estimates that transportation will comprise over half of world oil demand through 2040. IEA projects transportation sectors will represent 6.4 Mb/d of the 9.6 Mb/d total oil demand growth from 2017 through 2030. In addition to transportation, the IEA projects petrochemicals (e.g., a chemical product derived from petroleum refining) to contribute to nearly one-third of that total demand growth, at 3.2 Mb/d. Oil demand forecasting for the transportation sector is subject to policy, regulation, and technological development (e.g., electric vehicles). Some countries or international organizations may enact regulations to increase efficiency or to diversify the fuel mix. For example, the International Maritime Organization has set a new world limit of sulfur content in fuel oil used in ships (0.5% down from 3.5%) beginning in 2020. It remains to be seen whether this limit will impact the overall oil market, but crude oils already low in sulfur content may be in higher demand. The shipping industry may even look toward alternative fuels, such as biofuels or liquefied natural gas (LNG, which has negligible sulfur emissions), depending on price and availability. Shippers could also install "scrubbers" (e.g., exhaust cleaning systems) onboard to reduce the sulfur emissions and avoid switching fuels. Petrochemicals contribute to the manufacture of many everyday household items (e.g., paints, lubricants, cars, and plastics). The increase in availability of lighter crude oils in the United States (along with natural gas production in the form of natural gas liquids) contributes to this production industry. Crude oils of this quality can more easily produce ethane, a feedstock once processed becomes ethylene, most commonly used in the making of plastics. Efficiency gains and environmental policy considerations may affect forecasted petrochemical demand growth. Forecast models predicting world oil demand rely on assumptions and can provide divergent results. Projections are highly dependent on their methodologies, assumptions, and available data. For instance, the IEA has multiple scenarios for forecasting (e.g., "Sustainable Development," "Current Policies," and "New Policies"), and each scenario results in different forecasts of future oil demand. In the Sustainable Development scenario, oil demand peaks (i.e., reaches its highest point) around 2020 and begins to decline through 2040, whereas the Current Policies scenario sees strong oil demand growth through 2040. Fuel efficiency standards, alternative fuels, and other policies can all contribute to varying oil demand forecasts across all sectors. These different forecast scenarios illustrate the complexity of oil demand, as well as the effect policy can have on it. World Prices and Factors Oil prices in the world market are determined fundamentally by supply and demand, which in turn depend on a number of other factors, such as currency exchange rates, the condition of the world economy, investments, and political environments. The market fluctuates over time with numerous often unforeseen circumstances, but responds to decisions and events occurring today. As mentioned above, various hubs price and trade oil in different regions all over the world. These hubs, despite location, trade oil in the U.S. dollar (as is the case with many other commodities), as it serves as a reserve currency for the world economy. As a result, the U.S. dollar and the price of oil have had an inverse relationship, in which a weak dollar has made oil more attractive for purchase to buyers holding other currencies. However, in March 2018, China launched its first crude oil futures contract in Shanghai pegged to the Chinese yuan. As a recent development, it remains to be seen how this will impact oil trade. In the first six months of the Shanghai futures, trade volumes have surpassed the Dubai Mercantile Exchange's oil contract. As Figure 7 demonstrates, several events have correlated to drastic changes in the oil sector. In late 2014, the price of oil decreased from a period of high prices (around $100/bbl in real 2010 dollars) to an annual average low (under $40/bbl in real 2010 dollars), causing producers to reconsider investments in new locations with higher production costs. The price decline was in part due to an oversupplied market, furthered by an OPEC decision to maintain production levels in November 2014, in part to defend market share. OPEC decisions, political destabilization, financial crisis, and war are some of the world events that can affect the supply and price of oil. Geopolitical events resulted in changes to the price of oil, just as the price of oil elicited changes in foreign policy. World Trade Volumes The IEA Oil 2018 report forecasts an almost near parity between domestic production and consumption in the Americas (down to -0.5 Mb/d) in 2023, while Asia's oil trade deficit (led by China's imports) may increase to about -25.3 Mb/d in 2023 ( Figure 8 ). Middle Eastern (ME), Former Soviet Union (FSU), and European crude oil balances, according to IEA projections, will see only marginal changes—a slight increase in exports for ME and FSU, a slight decrease in imports for Europe ( Figure 8 ). Furthermore, the IEA projects that Latin America may see a slight drop in exports as Venezuela continues to decline in production. In Africa, Nigeria and Egypt may increase domestic consumption, while Angola continues to decline. The IEA also forecasts countries in the Organisation for Economic Co-operation and Development (OECD) on average to trend toward import reduction, as a result of efficiency gains, emissions policies, and fuel diversification (e.g., natural gas in power generation in place of diesel). According to IEA, Asia will increase imports 3.7 Mb/d by 2023. China's projection alone sees an increase in net imports of crude oil from just over 8 Mb/d in 2017 to 10 Mb/d in 2023. China's imports are likely to continue coming from current trading partners, but at higher volumes, with Russia being the top exporter to China. Largely due to an extensive pipeline infrastructure network, Russia exports oil directly to China. Two recently completed Russian pipelines now have a total capacity of 0.6 Mb/d to China. The IEA projects the United States, Norway, Brazil, and Canada to provide the largest new non-OPEC crude exports to the world market. The IEA projects Europe to reduce oil imports and diversify its imports away from reliance on Russia, bringing more imports of crude oil from the United States. According to the IEA, Brazil may increase exports by about 1 Mb/d and offset some of the reduction from Venezuela. Meanwhile, the IEA estimates that Canadian producers may be able to increase exports, but face transportation bottlenecks, limiting their export capacity. The largest outlet for Canadian crude is the United States, either via pipeline or rail. Should the United States reach capacity limits, Canadian producers may have to consider new opportunities. The United States, however, may continue to import Canadian heavy crude oil and export U.S. light crude oil. Canadian producers are attempting to bring oil via pipeline to its west coast for marine export to meet the growing demand in Asia. However, Canadian producers face opposition from environmental groups and from the provincial and local government, resulting in challenges for pipeline approvals. Policy Considerations While the oil market directly affects the economy, oil-related policy has the power to influence geopolitics and can be utilized as a tool to influence other countries. Oil policy can be influential in a number of ways, for instance as a response to or in anticipation of undesirable international behavior or as a means to bring balance and stability to an otherwise volatile market. Decisions about energy conservation, environmental protection, and protection of strategic resources can also affect a country's oil supply and demand. The United States plays a multifaceted role in the world oil market, which may affect Congress's policy decisions. International Policy Measures Role of OPEC As noted, individual countries or events may be able to affect the oil market. OPEC, especially in conjunction with other major producers (e.g., Russia), can exert a greater influence. OPEC produces 40% of world crude oil and maintains enough spare capacity to affect the market. In November 2016, OPEC, Russia, and other non-OPEC members committed to reduce the supply of oil in the world market due to low prices. Since the production cuts began prices increased from around $45/bbl in January 2015 to $84/bbl in October of 2018. Overall, OPEC has exceeded the original production cuts of 1.2 Mb/d agreed to in November 2016, reaching 147% compliance in May 2018. Since 2017, the schedule and quota for production cuts has shifted, as the non-OPEC group has not been in full compliance, while other OPEC members have reached targets and even in some cases have exceeded them. In June 2018, recognizing this overcompliance and rising oil prices, OPEC and Russia agreed to increase production back to 100% group-level compliance with the November 2016 target. Prices have since declined to around $50/bbl in early January 2019. Addressing OPEC's Market Influence OPEC's coordinated effort to adjust the world supply of oil has an effect on price. OPEC's spare capacity and willingness to adjust production levels gives the organization the ability to exert such influence. Several bills introduced in the 115 th Congress addressed the U.S. relationship with OPEC, including the United States Commission on the Organization of Petroleum Exporting Countries Act of 2017 ( H.R. 545 ); the OPEC Accountability Act of 2018 ( S. 2929 ); and the No Oil Producing and Exporting Cartels (NOPEC) Act of 2018 ( H.R. 5904 and S. 3214 ). Both the House and the Senate NOPEC bills would have amended antitrust law, known as the Sherman Act, to make oil cartels illegal and prosecutable by the U.S. Department of Justice. NOPEC would have revoked the sovereign immunity historically applied to OPEC members, allowing the United States to sue for collusion. It would have made production and price manipulation illegal. Similar bills have been introduced in other Congresses, but were not enacted. Some private sector entities expressed opposition to H.R. 5904 and S. 3214 . For instance, on August 22, 2018, the American Petroleum Institute (API) issued a letter to Congress opposing NOPEC. It stated the legislation may have unintended consequences for the U.S. oil and gas sectors and expressed concerns for U.S. diplomatic and military interests, reciprocal action by OPEC countries. Low oil prices are not necessarily ideal for all U.S. stakeholders throughout the oil supply chain. For example, refiners prefer lower oil prices since they are buying crude oil; however, U.S. producers (depending on their costs of extraction, transportation, etc.) may find extraction of crude oil uneconomic below a certain price. The pressure from these various stakeholders and their effect on government policy is an important factor in the oil market. Oil-Targeted International Sanctions Members of Congress and Presidents have sought to use oil policy as a foreign policy tool. Historically, Congress and the executive branch have placed sanctions on crude oil, the banking and the financial sectors, and other oil-related sectors in order to communicate favor or disfavor to the governments of certain countries. Often, oil-targeted sanctions have been on selected countries with NOCs, which finance and support government operations. Congress also has used sanctions against individuals, entities, and governments as a response to undesirable international behavior. For example, the 115 th Congress passed the Countering America's Adversaries through Sanctions Act of 2017 ( P.L. 115-44 ), which established requirements for, and granted the President authority to impose, sanctions on Iran, Russia, and North Korea. Russia Sanctions In 2014, in response to Russia's invasion and annexation of Ukraine's Crimea region and Russia's subsequent support of separatists in eastern Ukraine, the United States imposed sanctions on over 600 individuals, entities, and vessels. President Barack Obama, in initiating economic sanctions on Russian individuals, declared that these activities in Ukraine "threaten its peace, security, stability, sovereignty, and territorial integrity" and constitute a threat to U.S. national security. The United States worked with the European Union to amplify the effect of sanctions on Russia and since 2014 has widened their scope in response to election interference, illegal trade with North Korea, and other activities. The Russia sanctions target several different sectors, including energy, and specifically oil production. Known as "sectoral sanctions," they include restrictions on (1) financing to specific oil companies, and (2) engagement (trade, technology, support, etc.) in certain kinds of oil projects (shale, Arctic offshore, deepwater, etc.) under the directive of Executive Order 13662 and the Ukraine Freedom Support Act of 2014 ( P.L. 113-272 ), as amended. Since 2014, the success of these sectoral sanctions has been difficult to ascertain, as the price of oil sharply declined during the same time period. Furthermore, Russia enacted changes in its tax system and devalued the ruble. Russian economic growth correlates with oil prices. The price collapse likely had an effect on Russia, as economic growth slowed and even contracted by 2.5% in 2015. With the price of oil strengthening, so too did Russia's economy, which grew by 1.5% in 2017. However, the technology-related sanctions aim to have a longer-term effect on Russian oil production by limiting access to U.S. and EU technology. The overall effect of these technological sanctions on Russian oil production may take years to come to fruition. Iran Sanctions The United States has been utilizing sanctions on Iran for decades as part of an ongoing policy strategy to compel Iran to cease supporting terrorism, to provide transparency of Iran's nuclear program, and to limit strategic power in the Middle East. Starting midyear 2012, the United States and the European Union together enforced sanctions on Iran. These hindered Iran's economy and cut crude production by around 1 Mb/d through 2015, according to EIA ( Figure 9 ). In 2016, these sanctions were lifted, and Iran increased its crude production back to presanctions levels of just under 4 Mb/d. In May 2018, the Trump Administration announced its intention to withdraw from the Joint Comprehensive Plan of Action (which relieved Iran of the 2012-2015 sanctions). In August 2018, the Administration announced that sanctions would be resumed. Overall, these reinstated sanctions, although not adopted worldwide, have had an effect on the Iranian economy, as companies have moved to comply to avoid U.S. penalties for dealing with Iran. Iran's crude oil exports fell to their lowest in 2.5 years in September 2018 to 1.72 Mb/d. On November 5, 2018, China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey were issued waivers to the Iranian oil sanctions with an expiration date set for May 2, 2019. The Trump Administration announced on April 23, 2019, that waivers would no longer be issued or extended beyond May 2. Secretary of State Mike Pompeo stated in a press release that this is to "apply maximum pressure on the Iranian regime until its leaders change their destructive behavior, respect the rights of the Iranian people, and return to the negotiating table." Iran's exports fell to just around 1 Mb/d in April 2019. Venezuela Sanctions Venezuela has experienced production declines for many reasons, including sanctions. For years, the Venezuelan government has used revenues from the NOC Petróleos de Venezuela, S.A (PdVSA) to pay for social services and support government spending. When the price of oil collapsed, Venezuela's lack of investment, corruption, and a lack of technical expertise led to oil production declines from roughly 2.5 Mb/d in 2015 to IEA estimates of around 1.5 Mb/d in 2018. For over a decade the United States has imposed a range of sanctions on the Venezuelan government. The Trump Administration imposed sanctions restricting Venezuela's access to U.S. financial markets in August 2017, increasing fiscal pressure on the government. On March 21, 2018, through E.O. 13827, "Taking Additional Steps to Address the Situation in Venezuela," the Administration expanded on 2017 sanctions. Furthermore, on January 25, 2019, the Administration updated the executive orders by broadening "the definition of the term 'Government of Venezuela' to include persons that have acted, or have purported to act, on behalf of the Government of Venezuela." Under these updates, U.S. consumers can continue to purchase Venezuelan crude oil until April 28, 2019, but the payments will be held in blocked accounts. A prohibition on U.S. crude oil imports from Venezuela could result in a shock to the world oil market and a constraint in the world oil supply system, resulting in U.S. Gulf Coast refineries experiencing higher oil prices. However, this initial shock may be short term, as the market would eventually find alternative sources. Protection of Trade Routes While the oil market has changed in the past 40 years, physical threats to oil supply still exist, particularly along certain trade routes. Bottlenecks or disruptions along routes can affect the supply of oil and ultimately the price consumers pay. This section will highlight some examples. A key waterway for the transit of oil and natural gas is the Strait of Hormuz in the Persian Gulf. This juncture is the only passage in the Persian Gulf with access to the open ocean and is surrounded by some of the world's largest oil-producing countries. Roughly 24% of the world oil market, almost 22 Mb/d of crude oil and petroleum products, transited the Strait of Hormuz in the first half of 2018. Saudi Arabia has other outlets for oil exports, including the Red Sea; however, the Bab al-Mandeb Strait (where the Red Sea and the Gulf of Aden meet just along the shores of Djibouti, across from Yemen) is another choke point. Saudi Arabia in the summer of 2018 temporarily announced a suspension of oil shipments (roughly 500,000-700,000 barrels per day) through the Bab al-Mandeb Strait after two ships were attacked by Yemen's Houthis. As introduced in the House, a previous version of the National Defense Authorization Act (NDAA) for Fiscal Year 2018 ( P.L. 115-91 ) included language specific to defending critical choke points of interest to national security in the Persian Gulf. While P.L. 115-91 as enacted did not include this language, the House Committee on Armed Services, in H.Rept. 115-200 , stressed that the U.S. military should maintain capabilities to "ensure freedom of navigation at the Bab al Mandab Strait and the Strait of Hormuz." The political relationships of the United States with Iran, Saudi Arabia, other members of OPEC, and China have been strategically important when considering legislation that may affect the security of supply along major oil trade routes. Though most of the oil that flows through the Strait of Hormuz goes to Asia, the world oil market is integrated, so a disruption anywhere can contribute to higher oil prices everywhere. If a major disruption were to occur, depending on the size and cause, the supply shock to the international oil market would likely put upward pressure on oil prices. Some possible examples include escalating war in Yemen; armed confrontation with Iran; and increased tensions over Chinese control in South China Sea. The impact of oil price increases on other economic sectors is difficult to ascertain and challenging to predict, given the pervasive role of oil and oil-based products in the world economy. Despite a new era of abundance for the United States, a massive disruption to world supply along trade routes could permeate into geopolitical relationships, secondary industries (e.g., petrochemicals, agriculture), and the economy at large. Selected Domestic Policy Measures Congress over many years has enacted several laws intended to secure the nation's oil supply. The 1970s was an especially busy time for Congress in this area. Largely in response to the OAPEC oil embargo and exhausted U.S. spare capacity, Congress considered security-of-supply policy options. This time period initiated the perception of energy scarcity in the United States. Since then, Congress has continuously demonstrated interest in the oil market. This section identifies some of the ways in which Congress has addressed oil consumption and security. Creation of the Strategic Petroleum Reserve In response to the 1973 OAPEC oil embargo, the United States entered into the International Energy Program in 1974, an agreement that requires all members to hold a 90-day supply of petroleum (based on the previous year's net imports) for emergency use. The following year, Congress passed the EPCA of 1975 ( P.L. 94-163 ), which authorized the creation of the SPR to address emergency supply shortages. The SPR originally was an up to 1 billion barrel petroleum reserve (a combination of crude oil, home heating oil, and gasoline), located around the Gulf of Mexico and in the Northeast. Congress, in 1990, amended the EPCA ( P.L. 101-383 ) to authorize the President to initiate SPR drawdowns during times of economic stress, not necessarily considered an emergency. Congress has also authorized sales form the SPR for various purposes. Its current inventory is around 650 million barrels. Today the SPR's role has expanded to ensure ready oil supplies during natural disasters and to help stabilize the oil market. Corporate Average Fuel Economy Standards The EPCA of 1975 also established Corporate Average Fuel Economy (CAFE) standards that began in model year (MY) 1978 for passenger cars and for light trucks in MY 1979. CAFE standards require auto manufacturers to meet miles-per-gallon fuel economy targets for passenger vehicles and light trucks sold in the United States. If a manufacturer fails to do so, it is subject to financial penalties. Vehicle miles per gallon have increased significantly since the institution of CAFE standards. For example, according to the Department of Energy's 2018 Transportation Energy Data Book, starting in 1978, passenger vehicle fuel use dropped from around 80 billion gallons of gasoline to just above 69 billion in 1982. Conversely, the number of registered vehicles increased from 116 million to 123 million during the same time period. While the number of registered passenger vehicles increased, the number of miles driven per vehicle stayed relatively flat (around 9,000 miles per vehicle) throughout the time period. In August 2018, the Environmental Protection Agency and the National Highway Traffic Safety Administration proposed amendments to CAFE standards. These proposed amendments offer eight alternatives for MY 2021-2026. The agencies' preferred alternative is to retain the existing standards through MY 2020 and then to freeze the standards at this level for both programs through MY 2026. Electric Vehicles Congress has passed several laws establishing tax credits for plug-in electric vehicles (EVs). The Energy Improvement and Extension Act of 2008, enacted as Division B of P.L. 110-343 , established the credit for plug-in EVs. As first enacted, the credit phased out once 250,000 credit-eligible vehicles were sold. The plug-in EV phaseout threshold changed from a 250,000-vehicle limit to a 200,000-vehicle per manufacturer limit in the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). EVs may play an important role in the future of oil as the transportation sector diversifies fuel sources. In the United States, EVs had less than 4% market share in 2017. Competitive gasoline prices and the often higher cost of initial purchase for EVs may be factors contributing to the relatively slow growth in market share for EVs. In the 115 th Congress, there were proposals to extend, as well as proposals to repeal, the plug-in EV tax credit. Renewable Fuel Standard In 2005, Congress established the Renewable Fuel Standard (RFS) with the passage of the Energy Policy Act ( P.L. 109-58 ), and expanded it in 2007 with the Energy Independence and Security Act ( P.L. 110-140 ). The RFS requires transportation fuel to contain an increasing amount of renewable fuels, including conventional biofuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. At the time, transportation sector fuel diversity was negligible; the stronger the reliance of an economic sector on one fuel source, the more at risk it is to fuel supply disruptions. The RFS, in concept, intends to provide some diversification to transportation fuels away from a strong reliance on traditional gasoline or diesel derived from crude oil. Additionally, the focus on agriculture-derived fuels would support the U.S. biofuel industry and could reduce greenhouse gas emissions compared to traditional gasoline and diesel. Implementing the RFS has been challenging due to a number of factors (e.g., infrastructure, technology, and limited federal assistance). Some Members of Congress have expressed concerns about whether or not to amend or repeal the RFS. Other Considerations This report has reviewed select policy issues from the full suite of legislative measures that may influence the world oil market. Domestically, for example, Congress could enact legislation to increase or reduce production by opening areas or restricting certain technologies. Furthermore, emissions controls and emissions-related policies could play a pivotal role in the world oil market. For instance, the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) expanded the 45Q tax credit from $10 to $35 per ton of carbon dioxide (CO 2 ) for use in enhanced oil recovery. The 45Q tax credit demonstrated an interest in utilizing CO 2 emissions, while at the same time expanding oil production in the United States. Furthermore, oil tends to affect many other sectors of the economy and vice versa. Policy changes in one sector could have intended or unintended consequences for the oil market. For instance, tariffs on steel could affect production transportation costs. Other major policy considerations could include international trade policies, infrastructure, diversification of transportation fuels, and funding in research and development.

The United States, as the largest consumer and producer of oil, plays a major role in the world market. Policy decisions can affect the price of oil and petroleum products (e.g., gasoline) for U.S. consumers and companies operating in U.S. oil production, transportation, and refining sectors. Congress considers policies that can affect the world oil market, including trade, sanctions, protection of trade routes, the Strategic Petroleum Reserve (SPR), and alternative fuel standards. Technological advancements, supportive policies, and other aspects of the U.S. oil industry have reversed a multidecade downward trend in U.S. oil production. In 2018, U.S. oil production nearly doubled compared to 2008. The United States is also the number one consumer of crude oil and refined petroleum products in the world. The pricing of crude oil contributes to the price consumers pay for petroleum products in the United States. Congress has maintained an interest in oil policy. Following the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) oil embargo, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163). In response to rapid price escalation and perceived scarcity, the EPCA, among many other things, restricted U.S. produced crude oil exports. As the oil sector evolved, Congress has amended the EPCA. The Consolidated Appropriations Act, 2016 (P.L. 114-113) repealed Section 103 of the EPCA removing any restrictions to crude oil exports. Supply, demand, price, and other factors all combine and interact with one another to create the world oil market. Saudi Arabia, historically, has been the world's leading oil producer and along with the Organization of the Petroleum Exporting Counties (OPEC) has held enough spare capacity to influence global oil supply and prices. World oil demand typically follows world economic conditions. Oil prices are set in the world market and are primarily a function of supply and demand fundamentals, but also a number of other factors, such as quality, location, and transport infrastructure availability (e.g., pipelines). While the world oil market historically follows the world economy, supply generally does not follow demand smoothly and this results in price volatility. As economies grow, so too does the demand for crude oil and petroleum products, including fuels, paints, lubricants, and plastics. China and India are forecasted by the International Energy Agency (IEA) to contribute a large portion of oil demand growth, representing around 20% of total world demand by 2023. Asia, by IEA's forecast, will remain a net importer of crude oil through 2023. Oil policy can be influential as a response to or in anticipation of undesirable international behavior or as a means to bring balance and stability to an otherwise volatile market. OPEC, especially in conjunction with other major producers (e.g., Russia), can exert influence on the oil market. Several bills introduced in the 115th Congress addressed the U.S. relationship with OPEC, such as the No Oil Producing and Exporting Cartels (NOPEC) Act of 2018 (H.R. 5904 and S. 3214). The United States has utilized the oil market as a political tool. National oil companies (NOCs) operate under government ownership or are companies under influence by national governments. The United States, by placing sanctions on crude oil and crude oil-related industries, can send a message to those governments (e.g., Iran). Physical threats to oil supply still exist, particularly along certain trade routes. For instance, roughly 24% of the world oil market transited the Strait of Hormuz in the first half of 2018. A disruption to world supply along trade routes could permeate into geopolitical relationships, secondary industries (e.g., petrochemicals, agriculture), and the economy at large. The United States plays a multifaceted role in the world oil market, which may affect policy decisions for Congress. Congress has in the past enacted legislation to promote a stable, reliable supply of oil. For example, the EPCA created the SPR and established the Corporate Average Fuel Economy (CAFE) standard for vehicles, in part, as strategies to reduce U.S. exposure to future supply disruptions. Additionally, Congress has enacted legislation to diversify transportation fuels, including tax credits for electric vehicles and the Renewable Fuel Standard. As the oil market continues to evolve, Congress may want to consider these and other major policy options that could include international trade policies, infrastructure, diversification of transportation fuels, and funding in research and development.

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Introduction The Social Security full retirement age (FRA) is the age at which workers can first claim full Social Security retired-worker benefits. Among other factors, the age at which an individual begins receiving Social Security benefits has an impact on the size of the monthly benefits. Claiming benefits before the FRA can substantially reduce monthly benefits, whereas claiming benefits after the FRA can lead to a substantial increase in monthly benefits. Benefit adjustments are made based on the number of months before or after the FRA the worker claims benefits. The adjustments are intended to result in roughly the same total lifetime benefits, regardless of when the worker claims benefits, based on average life expectancy. The FRA was 65 at the inception of Social Security in the 1930s. As part of legislation enacted in 1983, the FRA is increasing gradually from 65 to 67 over a 22-year period that started for those who turned age 62 in 2000. The increase in the FRA will be fully phased in (the FRA will reach 67) for workers born in 1960 or later (i.e., for workers who become eligible for retirement benefits at age 62 in 2022). For workers who become eligible for retirement benefits in 2019 (i.e., workers born in 1957), the FRA is 66 and 6 months. Workers can claim Social Security retired-worker benefits as early as age 62, the early eligibility age (EEA). However, workers who claim benefits before the FRA are subject to a permanent reduction in their benefits. Spouses can also claim reduced retirement benefits as early as age 62. Other types of dependents can claim benefits before the age of 62. Workers who claim benefits after the FRA receive a delayed retirement credit that results in a permanent increase in their monthly benefits. The credit applies up to the age of 70. Claiming benefits after attainment of age 70 does not result in any further increase in monthly benefits. Full Retirement Age The FRA was 65 at the inception of Social Security. According to Robert Myers, who worked on the creation of the Social Security program in 1934 and later served in various senior and appointed capacities at the Social Security Administration (SSA), "[a]ge 65 was picked because 60 was too young and 70 was too old. So we split the difference." On the other hand, SSA suggests that the Committee on Economic Security (CES) made the proposal of 65 as the retirement age due to the prevalence of private and state pension systems using 65 as the retirement age and the favorable actuarial outcomes for 65 as the retirement age. In 1983, Congress increased the FRA as part of the Social Security Amendments of 1983, which made major changes to Social Security's financing and benefit structure to address the system's financial imbalance at the time. Among other changes, the FRA was increased gradually from 65 to 67 for workers born in 1938 or later. Under the scheduled increases enacted in 1983, the FRA increases to 65 and 2 months for workers born in 1938. The FRA continues to increase by two months every birth year until the FRA reaches 66 for workers born in 1943 to 1954. Starting with workers born in 1955, the FRA increases again in two-month increments until the FRA reaches 67 for workers born in 1960 or later. The increase in the FRA, one of many provisions in the 1983 amendments designed to improve the system's financial outlook, was based on the rationale that it would reflect increases in longevity and improvements in the health status of workers. The 1983 amendments did not change the early eligibility age of 62 (discussed below); however, the increase in the FRA results in larger benefit reductions for workers who claim benefits between the age of 62 and the FRA. Table 1 shows the FRA by worker's year of birth under current law. Early Eligibility Age Currently, the EEA is 62 for workers and spouses; this is the earliest age at which they can claim retirement benefits. Benefits claimed between age 62 and the FRA, however, are subject to a permanent reduction for "early retirement." When the original Social Security Act was enacted in 1935, the earliest age to receive retirement benefits was the FRA (age 65). In 1956, the eligibility age was lowered from 65 to 62 for female workers, wives, widows, and female dependent parents. This was to allow wives, who traditionally were younger than their husbands, to qualify for benefits at the same time as their husbands. Benefits for female workers and wives were subject to reduction if claimed between the ages of 62 and 65; the reduction did not apply to benefits for widows and female dependent parents. In 1961, the eligibility age was lowered from 65 to 62 for men as well. Benefits for male workers and husbands were subject to reduction if claimed between the ages of 62 and 65; the reduction did not apply to widowers and male dependent parents. Although the eligibility age was made consistent for male and female workers, an inconsistency remained in the calculation of benefits. A man the same age as a woman needed more Social Security credits to qualify for benefits, and, if his earnings were identical to hers, usually received a lower benefit because his earnings were averaged over a longer period. This inconsistency was addressed in legislation enacted in 1972 which provided that retirement benefits would be computed the same way for men and women (the provision was fully effective for men reaching age 62 in 1975 or later). In subsequent years, further adjustments were made to the eligibility age for surviving spouses. The eligibility age was lowered to age 60 for widows (1965), age 50 for disabled widow(er)s (1967), and age 60 for widowers (1972). Actuarial Modification to Benefits: Claiming Before or After the FRA Benefits are adjusted based on the age at which a person claims benefits to provide roughly the same total lifetime benefits regardless of when a person begins receiving benefits, based on average life expectancy. The earlier a worker begins receiving benefits (before the FRA), the lower the monthly benefit will be, to offset the longer expected period of benefit receipt. Conversely, the longer a worker delays claiming benefits (past the FRA), the higher the monthly benefit will be, to take into account the shorter expected period of benefit receipt. The benefit adjustment is based on the number of months between the month the worker attains the FRA and the month he or she claims benefits. The day of birth is ignored for adjustment purposes, except for those born on the first of the month. Workers born on the first of the month base their FRA as if their birthday was in the previous month (e.g., someone born on February 1, 1980, who has an FRA of 67, can apply for full retirement benefits in January 2047). A calculator on SSA's website allows the user to enter his or her date of birth and the expected month of initial benefit receipt to see the effect of early or delayed retirement; the effect is shown as a percentage of the full benefit payable at the FRA. Actuarial Reduction for Claiming Benefits Before the FRA When a worker claims benefits before the FRA, there is an actuarial reduction in monthly benefits. The reduction for claiming benefits before the FRA can be sizable and it is permanent; all future monthly benefits are payable at the actuarially reduced amount. For each of the 36 months immediately preceding the FRA, the monthly rate of reduction from the full retirement benefit is five-ninths of 1%. This equals a 6⅔% reduction each year. For each month earlier than three years (36 months) before the FRA, the monthly rate of reduction is five-twelfths of 1%. This equals a 5% reduction each year. The earliest a worker can claim retirement benefits is age 62. For a worker with an FRA of 67, claiming benefits at 62 results in a 30% reduction in their monthly benefit. Table 2 shows the actuarial reduction applied to retired-worker benefits based on the FRA and the age at which benefits are claimed. Delayed Retirement Credit for Claiming Benefits After the FRA Workers who claim benefits after the FRA receive a delayed retirement credit (DRC). As with the actuarial reduction for early retirement, the delayed retirement credit is permanent. The DRC has been modified over the years. Initially, the Social Security Amendments of 1972 provided a delayed retirement credit that increased benefits by one-twelfth of 1% for each month between ages 65 and 72 that a worker did not claim benefits (i.e., 1% per year). The credit, which was effective after 1970, applied only to the worker's benefit; it did not apply to a widow(er)'s benefit payable on the worker's record. The Social Security Amendments of 1977 increased the credit to 3% per year and included the credit in the computation of a widow(er)'s benefit. The credit was further increased under the Social Security Amendments of 1983. As shown in Table 3 , under current law, the amount of the credit varies based on the worker's year of birth (i.e., when the worker becomes eligible for benefits at age 62). The credit increases gradually until it reaches 8% per year (two-thirds of 1% per month) for workers born in 1943 or later (i.e., workers who became eligible for retirement benefits in 2005 or later). In addition, the maximum age at which the DRC applies was lowered from 72 to 70. Any further delay in claiming benefits past age 70 does not result in a higher benefit. The increase in the DRC was intended to ensure that workers who claim benefits after the FRA receive roughly the same total lifetime benefits as if they had claimed benefits earlier (based on average life expectancy). A worker with an FRA of 66, for example, receives a 32% benefit increase if he or she claims benefits at age 70; a worker with an FRA of 67 receives a 24% benefit increase. Figure 1 illustrates the effect of claiming age on benefit levels based on an FRA of 66. If the worker claims retirement benefits at age 62, for example, his or her benefit would be equal to 75% of the full benefit amount—a 25% permanent reduction based on claiming retirement benefits four years before attaining the FRA. If the worker delays claiming retirement benefits until age 70, however, his or her benefit would be equal to 132% of the full benefit amount—a 32% permanent increase for claiming benefits four years after the FRA. Retirement Earnings Test The decision to claim Social Security benefits before the FRA results in a permanent reduction in monthly benefits for early retirement. In addition, if a Social Security beneficiary is below the FRA and has current earnings, he or she is subject to the retirement earnings test (RET). Stated generally, Social Security benefits are withheld partially or fully, for one or more months, if current earnings exceed specified thresholds. There are two separate earnings thresholds (or exempt amounts ) under the RET. The first (lower) threshold applies to beneficiaries who are below the FRA and w ill not attain the FRA during the year. In 2019, the lower earnings threshold is $17,640. If a beneficiary has earnings that exceed the lower threshold, SSA withholds $1 of benefits for every $2 of earnings above the threshold. The second (higher) threshold applies to beneficiaries who are below the FRA and will attain the FRA during the year. In 2019, the higher earnings threshold is $46,920. If a beneficiary has earnings that exceed the higher threshold, SSA withholds $1 of benefits for every $3 of earnings above the threshold. The RET no longer applies beginning with the month the beneficiary attains the FRA. In other words, once the beneficiary attains the FRA, his or her benefits are no longer subject to withholding based on earnings. During the first year of benefit receipt, a special monthly earnings test applies. Regardless of the amount of annual earnings in the first year of benefit receipt, benefits are not withheld for any month in which earnings do not exceed a monthly exempt amount (the monthly exempt amount is equal to 1/12 of the annual exempt amount). In 2019, the monthly exempt amounts are $1,470 ($17,640/12) and $3,910 ($46,920/12). For example, consider a worker who claims benefits at age 62 in January 2019 and has no earnings during the year except for a consulting project that pays $20,000 in July. Although the beneficiary's annual earnings ($20,000) exceed the annual exempt amount ($17,640), benefits are withheld only for the month of July. The beneficiary has $0 earnings in all other months; July is the only month in which earnings exceed the monthly exempt amount ($1,470). Benefits withheld under the RET are not "lost" on a permanent basis. When a beneficiary attains the FRA and is no longer subject to the RET, SSA automatically recalculates the benefit, taking into account any months for which benefits were partially or fully withheld under the RET. Stated generally, there is no actuarial reduction for early retirement for any month in which benefits were partially or fully withheld under the RET. The recalculation results in a higher monthly benefit going forward. Starting at the FRA, the beneficiary begins to recoup the value of benefits withheld under the RET; the beneficiary recoups the full value of those benefits if he or she lives to average life expectancy. Age Distribution of New Retired-Worker Beneficiaries Statistics published by SSA show that a majority of retired-worker beneficiaries claim benefits before the FRA. Figure 2 shows the age distribution of new retired-worker beneficiaries in 2017. Among nearly 2.5 million new retired-worker beneficiaries that year, 37% claimed benefits at age 62 (the first year of eligibility) and 64% were under the age of 66. About one-fourth (23%) of new retired-worker beneficiaries claimed benefits at age 66, while 12% were age 67 or older. The percentage of retired-worker beneficiaries who claim benefits at earlier ages has declined in recent years. In 2010, for example, more than one-half (52%) of new retired-worker beneficiaries were age 62 and 81% were under the age of 66. Proposals to Increase the Retirement Age The Social Security full retirement age was 65 when the program was established in the 1930s. It remained 65 until 1983, when Congress included an increase in the FRA among many provisions in the Social Security Amendments of 1983, which were designed to address serious near-term and long-range financing problems. The 1983 Amendments became law on April 20, 1983 . Without legislative action, it was anticipated that Social Security benefits could not be paid on time beginning in July 1983 . The 1983 provision that increased the FRA from 65 to 67 continues to be phased in; it will be fully phased in by 2022. The Social Security system once again faces projected long-range funding shortfalls. The Social Security Board of Trustees (the Trustees) projects that full Social Security benefits can be paid on time until 2034 with a combination of annual Social Security tax revenues and asset reserves held by the Social Security trust funds. After the projected depletion of trust fund reserves in 2034, however, annual tax revenues are projected to cover about three-fourths of benefits scheduled under current law. Over the years, many proposals have been designed to improve Social Security's financial outlook as well as achieve other policy goals. A common proposal is to increase the early eligibility age or further increase the full retirement age. As in the past, lawmakers who support increasing the retirement age point to gains in average life expectancy as an indicator that people can work until older ages. Those who oppose this type of policy change, however, point out that gains in life expectancy have not been shared equally across different segments of the population. They cite research showing that life expectancy is lower for individuals with lower socioeconomic status (SES) compared to those with higher SES, and that the gap in life expectancy by SES has been growing over time. Differential gains in life expectancy are important in the context of Social Security. The actuarial adjustments to benefits for early or delayed retirement (i.e., for claiming benefits before or after the FRA) are based on average life expectancy. That is, the actuarial adjustments are designed to provide a person with roughly the same total lifetime benefits, regardless of the age at which he or she claims benefits, assuming the person lives to average life expectancy. Research has shown that differential gains in life expectancy have resulted in a widening gap in the value of lifetime Social Security retirement benefits between low earners and high earners. Over the years, deficit reduction commissions and other policymakers have recommended an increase in the Social Security retirement age. The recent proposals, for example, included the S.O.S. Act of 2016 ( H.R. 5747 , the 114 th Congress), which proposed increasing the FRA among other changes. Under the proposal, after the FRA reaches 67 for those attaining 62 in 2022, the FRA would increase by two months per year until the FRA reaches 69 for those attaining 62 in 2034. Thereafter, the FRA would increase one month every year. SSA's Office of the Chief Actuary (OCACT) projects that this option would improve the Social Security trust fund outlook by eliminating 39% of the system's projected long-range funding shortfall (based on the 2018 Annual Report of the Social Security Board of Trustees, intermediate assumptions). Another recent proposal from the Bipartisan Policy Center in 2016 recommended, among other changes, to increase the FRA by one month every two years after the FRA reaches 67 for those attaining age 62 in 2022 until the FRA reaches 69, and also increase the age up to which the DRC may be earned at the same rate (from 70 to 72). This option contains no change in the EEA. OCACT estimates that this option would improve the Social Security trust fund outlook by eliminating 19% of the system's projected long-range funding shortfall (based on the 2018 Annual Report of the Social Security Board of Trustees, intermediate assumptions). In 2010, the National Commission on Fiscal Responsibility and Reform (also called the Simpson-Bowles Commission after co-chairs Alan Simpson and Erskine Bowles) recommended increasing both the EEA and the FRA, among other Social Security changes. Under the commission's recommendations, after the FRA reaches 67 in 2027, both the EEA and the FRA would be indexed to increases in life expectancy. The commission estimated that the FRA would reach 68 by about 2050, and 69 by about 2075. The EEA would increase to 63 and 64 in step with increases in the FRA. OCACT estimates that this option would improve the Social Security trust fund outlook by eliminating 15% of the system's projected long-range funding shortfall. In conjunction with proposed increases in the EEA and FRA, the commission recommended policies that would provide people with more flexibility in claiming benefits. Specifically, the commission recommended allowing people to claim up to half of their benefits at age 62 (with an actuarial reduction) and the other half at a later age (with a smaller actuarial reduction). This option was intended to provide a smoother transition for those interested in phased retirement or for households where one member has retired and another continues to work. In general, it could provide a stream of income for those with financial difficulties by allowing them to claim a portion of their benefits early and avoid taking a permanent reduction on the full benefit amount. Recognizing that some workers may be physically unable to work beyond the current EEA (62) and may not qualify for Social Security disability benefits, the commission also recommended a hardship exemption for up to 20% of retirees. Under the proposal, as the EEA and FRA increase, certain beneficiaries could continue to claim benefits at age 62 and their benefits would not be subject to additional actuarial reductions. The commission specified that SSA would design the policy taking into consideration factors such as the physical demands of labor and lifetime earnings in developing eligibility criteria. Concerns regarding the effects of increasing the retirement age, especially on certain segments of the population, are not new. The Social Security Amendments of 1983, which increased the retirement age gradually from 65 to 67, mandated a study to examine the effects of increasing the retirement age on workers in physically demanding jobs or ill health.

The Social Security full retirement age (FRA) is the age at which workers can first claim full Social Security retired-worker benefits. Among other factors, a worker's monthly benefit amount is affected by the age at which he or she claims benefits relative to the FRA. Benefit adjustments are made based on the number of months before or after the FRA the worker claims benefits. The adjustments are intended to provide the worker with roughly the same total lifetime benefits, regardless of when he or she claims benefits, based on average life expectancy. Claiming benefits before the FRA results in a permanent reduction in monthly benefits (to take into account the longer expected period of benefit receipt); claiming benefits after the FRA results in a permanent increase in monthly benefits (to take into account the shorter expected period of benefit receipt). The FRA was 65 at the inception of Social Security in the 1930s. Under legislation enacted in 1983, the FRA is increasing gradually from 65 to 67 over a 22-year period (for those reaching age 62 between 2000 and 2022). The FRA will reach 67 for workers born in 1960 or later (i.e., for workers who become eligible for retirement benefits at age 62 in 2022). Currently, the FRA is 66 and 6 months for workers who become eligible for retirement benefits in 2019 (i.e., workers born in 1957). Workers can claim reduced retirement benefits as early as age 62 (the early eligibility age). Spouses can also claim reduced retirement benefits starting at age 62. Other dependents, such as widow(er)s, can claim benefits at earlier ages. For workers with an FRA of 66, for example, claiming benefits at age 62 results in a 25% reduction in monthly benefits. For workers with an FRA of 67, claiming benefits at age 62 results in a 30% benefit reduction. A majority of retired-worker beneficiaries claim benefits before the FRA. In 2017, 37% of new retired-worker beneficiaries were age 62; almost two-thirds (64%) were under the age of 66. Workers who delay claiming benefits until after the FRA receive a delayed retirement credit, which applies up to the age of 70. For workers with an FRA of 66, for example, claiming benefits at age 70 results in a 32% increase in monthly benefits. For workers with an FRA of 67, claiming benefits at age 70 results in a 24% benefit increase. In 2017, almost one-fourth (23%) of new retired-worker beneficiaries were age 66; 12% were over the age of 66. Some lawmakers have called for increasing the Social Security retirement age in response to the system's projected financial imbalance, citing gains in life expectancy for the population overall. Other lawmakers, however, express concern that increasing the retirement age would disproportionately affect certain groups within the population, citing differences in life expectancy by socioeconomic groups. Differential gains in life expectancy are important in the context of Social Security because the actuarial adjustments for claiming benefits before or after the full retirement age are based on average life expectancy. Proposals to increase the retirement age are also met with concerns about the resulting hardship for certain workers, such as those in physically demanding occupations, who may be unable to work until older ages and may not qualify for Social Security disability benefits. For an in-depth discussion of potential changes in the Social Security retirement age in the context of life expectancy trends, see CRS Report R44846, The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age.

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Background In March 2011, antigovernment protests broke out in Syria, which has been ruled by the Asad family for more than four decades. The protests spread, violence escalated (primarily but not exclusively by Syrian government forces), and numerous political and armed opposition groups emerged. In August 2011, President Barack Obama called on Syrian President Bashar al Asad to step down. Over time, the rising death toll from the conflict, and the use of chemical weapons by the Asad government, intensified pressure for the United States and others to assist the opposition. In 2013, Congress debated lethal and nonlethal assistance to vetted Syrian opposition groups, and authorized the latter. Congress also debated, but did not authorize, the use of force in response to an August 2013 chemical weapons attack. In 2014, the Obama Administration requested authority and funding from Congress to provide lethal support to vetted Syrians for select purposes. The original request sought authority to support vetted Syrians in "defending the Syrian people from attacks by the Syrian regime," but the subsequent advance of the Islamic State organization from Syria across Iraq refocused executive and legislative deliberations onto counterterrorism. Congress authorized a Department of Defense-led train and equip program to combat terrorist groups active in Syria, defend the United States and its partners from Syria-based terrorist threats, and "promote the conditions for a negotiated settlement to end the conflict in Syria." In September 2014, the United States began air strikes in Syria, with the stated goal of preventing the Islamic State from using Syria as a base for its operations in neighboring Iraq. In October 2014, the Defense Department established Combined Joint Task Force-Operation Inherent Resolve (CJTF-OIR) to "formalize ongoing military actions against the rising threat posed by ISIS in Iraq and Syria." CJTF-OIR came to encompass more than 70 countries, and has bolstered the efforts of local Syrian partner forces against the Islamic State. The United States also gradually increased the number of U.S. personnel in Syria from 50 in late 2015 to roughly 2,000 by late 2017. President Trump in early 2018 called for an expedited withdrawal of U.S. forces from Syria, but senior Administration officials later stated that U.S. personnel would remain in Syria to ensure the enduring defeat of the Islamic State. National Security Advisor John Bolton also stated that U.S. forces would remain in Syria until the withdrawal of Iranian-led forces. In December 2018, President Trump ordered the withdrawal of all U.S. forces from Syria, contributing to the subsequent decision by Defense Secretary James Mattis to resign, and drawing criticism from several Members of Congress. In early 2019, the White House announced that several hundred U.S. troops would remain in Syria. The collapse of IS and opposition territorial control in most of Syria since 2015 has been matched by significant military and territorial gains by the Syrian government. The U.S. intelligence community's 2018 Worldwide Threat Assessment stated in February 2018 that, "The conflict has decisively shifted in the Syrian regime's favor, enabling Russia and Iran to further entrench themselves inside the country." At the same time, ongoing conflict between the coalition's Syrian Kurdish partners and Turkey has continued to challenge U.S. policymakers, as has the entrenchment of Al Qaeda-affiliated groups among the opposition and the ongoing humanitarian crisis. As of 2019, 5.7 million Syrians are registered as refugees in nearby countries, with 6.2 million more internally displaced. The U.N. has sponsored peace talks in Geneva since 2012, but it is unclear when (or whether) the parties might reach a political settlement that could result in a transition away from Asad. With many armed opposition groups weakened, defeated, or geographically isolated, military pressure on the Syrian government to make concessions to the opposition has been reduced. U.S. officials have stated that the United States will not fund reconstruction in Asad-held areas unless a political solution is reached in accordance with U.N. Security Council Resolution 2254. Issues for Congress Congress has considered the following key issues since the outbreak of the Syria conflict in 2011: What are the core U.S. national interests in Syria? What objectives derive from those interests? How should U.S. goals in Syria be prioritized? What financial, military, and personnel resources are required to implement U.S. objectives in Syria? What measures or metrics can be used to gauge progress? Should the U.S. military continue to operate in Syria? For what purposes and on what authority? For how long? How are developments in Syria affecting other countries in the region, including U.S. partners? What potential consequences of U.S. action or inaction should be considered? How might other outside actors respond to U.S. choices? Amid significant territorial losses by the Islamic State and Syrian opposition groups since 2015 and parallel military gains by the Syrian government and coalition partner forces, U.S. policymakers face a number of questions and potential decision points related to the following factors: Counter-IS operations and the presence of U.S. military personnel in Syria The announcement by President Trump in December 2018 that U.S. forces would withdraw from Syria was welcomed by the Syrian government and its Russian and Iranian partners, along with observers who questioned the necessity, utility, and legality of continued U.S. operations. The decision also drew domestic and international criticism from those who argued it could enable the reemergence of the Islamic State and embolden Russia and Iran in Syria (see " 2018: President Trump Announces Withdrawal "). Some Members of Congress called upon President Trump to reconsider his decision to withdraw U.S. forces, stating that the move was premature and "threatens the safety and security of the United States." Others embraced the decision, citing concerns about the lack of specific authorization for the U.S. campaign and the effectiveness of U.S. efforts. In February 2019, the White House reversed its December announcement, stating that roughly 400 U.S. troops would remain in Syria. Members of the 116 th Congress may seek clarification on the Administration's strategy to ensure the enduring defeat of the Islamic State. A Lead Inspector General report on Operation Inherent Resolve (OIR) released in February 2019 states that, "absent sustained [counterterrorism] pressure, ISIS could likely resurge in Syria within six to twelve months and regain limited territory in the [Middle Euphrates River Valley (MERV)]." The future of the Syria Train and Equip program The Islamic State has lost the territory it once held in Syria, and much of that territory is now controlled by local forces that have received U.S. training and assistance since 2014. (See Figure 3 and Figure 4 .) In 2017 and 2018, significant reductions in IS territorial control prompted some reevaluation of the Syria Train and Equip (T&E) program, whose primary purpose had been to support offensive campaigns against Islamic State forces. The Trump Administration requested $300 million in FY2019 Counter-ISIS Train and Equip Fund (CTEF) monies for Syria programs, largely intended to shift toward training local partners as a hold force. The Department of Defense Appropriations Act, 2019 ( P.L. 115-245 ) provided $1.35 billion for the CTEF account, slightly less than the Administration's requested amount for the overall account ($1.4 billion) based on congressional concerns about some Syria-related funds. The FY2017 National Defense Authorization Act (NDAA) extended the Syria T&E program's authority through the end of 2018, but the FY2018 NDAA did not extend it further, asking instead for the Trump Administration to submit a report on its proposed strategy for Syria by February 2018. The FY2019 NDAA ( P.L. 115-232 ) prohibited the obligation of FY2019 defense funds for the program until the strategy required by the FY2018 NDAA and an additional update report on train and equip efforts was submitted to Congress. The FY2019 act extended the Syria T&E authority through December 2019 but did not adjust the program's authorized scope or purposes. The Administration's FY2020 defense funding request seeks an additional $300 million to equip and sustain vetted Syrian opposition (VSO) forces. The future of U.S. relations with the Asad government Strained U.S.-Syria ties prior to the start of the conflict, including Syria's designation as a State Sponsor of Terrorism, are reflected in a series of U.S. sanctions and legal restrictions that remain in place today. U.S. policy toward Syria since August 2011 has been predicated on a stated desire to see Bashar al Asad leave office, preferably through a negotiated political settlement. However, the Asad government—backed by Russia and Iran—has reasserted control over much of western Syria since 2015, and appears poised to claim victory in the conflict. In an acknowledgement of the conflict's trajectory, U.S. calls for Asad's departure have largely faded. In late 2018, senior Administration officials stated that while "America will never have good relations with Bashar al Asad," the Syrian people ultimately "get to decide who will lead them and what kind of a government they will have. We are not committed to any kind of regime change." Nevertheless, the Trump Administration has stated its intent to refrain from supporting reconstruction efforts in Syria until a political solution is reached in accordance with UNSCR 2254, which calls for constitutional reform and U.N.-supervised elections. The future of U.S. assistance and stabilization programs in Asad-led Syria In the short term, policy discussions may focus on whether or how the Syrian government's reassertion of de facto control should affect U.S. military and assistance policy. The Trump Administration has directed a reorientation in U.S. assistance programs in Syria and has sought and arranged for new foreign contributions to support the stabilization of areas liberated from Islamic State control. The practical effect of this approach to date has been the drawdown of some assistance programs in opposition-held areas of northwestern Syria and the reprogramming of some U.S. funds appropriated by Congress for stabilization programs in Syria to other priorities. The future of U.S.-administered stabilization and other assistance programs in formerly opposition-held areas of Syria and areas currently held by U.S. partner forces is in question, in light of both the Asad government's reassertion of control in many areas, the planned reduction of U.S. military forces, and the December 2018 withdrawal of State Department and USAID personnel from northern Syria. As noted above, the Administration has stated its intention to end U.S. nonhumanitarian assistance to Asad-controlled areas of the country until the Syrian government fulfills the terms of UNSCR 2254. The Administration also has stated its intent to use U.S. diplomatic influence to discourage other international assistance to government-controlled Syria in the absence of a credible political process. Then-U.N. Special Envoy for Syria Staffan de Mistura said in 2017 that Syria reconstruction will cost at least $250 billion, and a group of U.N.-convened experts estimated in August 2018 that the cost of conflict damage could exceed $388 billion. Congress may debate how the United States might best assist Syrian civilians in need, most of whom live in areas under Syrian government control, without inadvertently strengthening the Asad government or its Russian and Iranian patrons. Syria-Related Legislation in the 116th Congress Strengthening America's Security in the Middle East Act of 2019 (S. 1) Introduced on January 3 by Senator Rubio and three cosponsors, the bill incorporates the Senate version of the Caesar Syria Civilian Protection Act of 2018 considered during the 115 th Congress and passed by the House in a different version. Title III would require the Secretary of the Treasury to make a determination within 180 days of enactment on whether the Central Bank of Syria is a financial institution of primary money laundering concern. If so, the bill would require the Secretary to impose one or more of the special measures described in Section 5318A(b) of Title 31, United States Code. The bill also would expand the scope of secondary sanctions on Syria to include foreign persons who knowingly provide support to Russian or Iranian entities operating on behalf of the Syrian government. It would also make eligible for sanctions foreign persons who knowingly sell or provide military aircraft and energy sector goods or services, or who knowingly provide significant construction or engineering services to the government of Syria. The bill does include several suspension and waiver authorities for the President. Its provisions would expire five years after the date of enactment. Caesar Syria Civilian Protection Act of 2019 (H.R. 31, S. 52) In January, the House passed the Caesar Syria Civilian Protection Act of 2019, introduced by Representative Engel ( H.R. 31 ). A version of the bill was also introduced in the Senate by Senators Risch, Menendez, and Rubio ( S. 52 ). An earlier version of the bill was considered during the 115 th Congress. H.R. 31 would eliminate Sections 103 to 303 of S. 52 (primarily amendments to the Syria Human Rights Accountability Act of 2012). The House bill retains all of the provisions found in Title III of S. 1 (see above). No Assistance for Assad Act (H.R. 1706) Introduced in March by Representative Engel, the bill would state that it is the policy of the United States that U.S. foreign assistance made available for reconstruction or stabilization in Syria should only be used in a democratic Syria or in areas of Syria not controlled by the Asad government or aligned forces. Reconstruction and stabilization aid appropriated or otherwise available from FY2020 through FY2024 could not be provided "directly or indirectly" to areas under Syrian government control—as determined by the Secretary of State—unless the President certifies to Congress that the government of Syria has met a number of conditions. These include ceasing air strikes against civilians, releasing all political prisoners, allowing regular access to humanitarian assistance, fulfilling obligations under the Chemical Weapons Convention, permitting the safe and voluntary return of displaced persons, taking steps to establishing meaningful accountability for perpetrators of war crimes, and halting the development and deployment of ballistic and cruise missiles. The House passed an earlier version of the bill during the 115 th Congress. By noting restrictions on U.S. aid provided "directly or indirectly," the bill also would limit U.S. funds that could flow into Syria via multilateral institutions and international organizations, including the United Nations, the International Monetary Fund, and the World Bank. The bill would permit exceptions to the above restrictions on aid to government-held areas for humanitarian projects, "projects to be administered by local organizations that reflect the aims, needs, and priorities of local communities," and projects that meet basic human needs including drought relief; assistance to refugees, IDPs, and conflict victims; the distribution of food and medicine; and the provision of health services. The bill would also state that it is the sense of Congress that the United States should not fund projects in which any Syrian government official or immediate family member has a financial or material interest, or is affiliated with the implementing partner. Recent Developments Military Islamic State Loses Last Territorial Stronghold On March 23, the Syrian Democratic Forces (SDF) announced that the Islamic State had lost its final stronghold in the eastern Syrian town of Baghouz. President Trump initially announced the group's defeat in December 2018, although Coalition and SDF operations against the group continued in 2019. In early March CENTCOM Commander General Joseph Votel stated that the territory held by the Islamic State had been reduced down to a single square mile near Baghouz, along the Euphrates River ( Figure 3 ). However, Votel also noted, we should be clear that what we are seeing now is not the surrender of ISIS as an organization, but a calculated decision to preserve the safety of their families and preservation of their capabilities by taking their chances in camps for internally displaced persons and going to ground and remote areas and waiting for the right time to resurge. Votel also noted that, "ISIS population being evacuated from the remaining vestiges of caliphate largely remain unrepentant, unbroken, and radicalized. We will need to maintain a vigilant offensive against this now widely dispersed and disaggregated organization." Coalition officials previously have stated that they do not intend to operate in Syrian-government controlled territory, despite reports that IS militants remain present in those areas. Continued attacks by the Islamic State in 2019 have raised concerns about the group's resiliency and potential to regenerate, particularly given plans to withdraw most U.S. military forces from Syria. On January 16, a suicide bombing claimed by the Islamic State killed 4 Americans and 15 others in the northern city of Manbij, in Aleppo province. One week later, a vehicle-borne improvised explosive device targeted a joint American-SDF patrol in the town of Ash Shaddadi in Hasakah province. Both cities were liberated from the Islamic State in 2016. The most recent Lead Inspector General report on Operation Inherent Resolve (OIR) states that, "absent sustained [counterterrorism] pressure, ISIS could likely resurge in Syria within six to twelve months and regain limited territory in the [Middle Euphrates River Valley (MERV)]." Prior to the Administration's withdrawal announcement in December 2018, U.S. officials had stated that once the conventional fight against the Islamic State was completed, the coalition would shift to a "new phase" focused on stabilization, including the training of local forces to hold liberated areas. These plans were reflected in the Defense Department and State Department requests for appropriations for FY2019. Following the Administration's February announcement that several hundred U.S. troops would remain in Syria, Chairman of the Joint Chiefs of Staff General Joseph Dunford stated, [...] this is about campaign continuity. So we had a campaign that was designed to clear ISIS from the ground that they had held, and we always had planned to transition into a stabilization phase where we train local forces to provide security and prevent the regeneration of ISIS. So there is -- there is no change in the basic campaign, the resourcing is being adjusted because the threat has been changed. While military officials have emphasized the continuity of the U.S. military campaign, it is not clear whether the threat posed by the Islamic State is similarly unchanged, particularly as the group shifts from controlling territory to operating as what General Votel has described as a "clandestine insurgency." U.S. officials in 2018 stated that the Islamic State had "atomized," becoming more dispersed in its command and control, and posing a more decentralized threat. Former U.S. Special Envoy Brett McGurk, who resigned in December 2018, had stated that the "defeat of the physical space is not the defeat of ISIS," noting that the group is less vulnerable to conventional military operations once it no longer holds large areas of territory. Idlib: The Final Opposition Stronghold Idlib province has been under rebel control since 2015, hindering the Asad government's ability to transit directly from government-held areas in the south to Syria's largest city of Aleppo, in the north. While a range of opposition groups operate in Idlib, U.S. officials have described the province as a safe haven for Al Qaeda, while also highlighting the significant civilian presence. U.S. initiatives in Idlib aimed at countering violent extremism (CVE) were halted in May 2018 as part of a broader withdrawal of U.S. assistance to northwest Syria. De-escalation A rea & D emilitarized Z one . In May 2017, an agreement between Russia, Iran, and Turkey established the Idlib de-escalation area (encompassing all of Idlib province as well as portions of neighboring Lattakia, Aleppo, and Hama provinces). The agreement was designed to reduce violence between regime and opposition forces. However, regime forces continued to pursue military operations in the area, recapturing about half of the de-escalation area by mid-2018. Both regime and armed opposition forces expressed determination to control the remaining portions of Idlib, raising fears that a large-scale offensive pitting Syrian government forces against a mix of armed opposition and jihadist forces could trigger a humanitarian crisis for civilians in the area. In October 2018, Russia and Turkey created a demilitarized zone in parts of Idlib province to separate the two sides. 2019 Jihadist Advance . In January 2019, the Al Qaeda-linked group Haya't Tahrir al Sham (HTS) seized large areas of Idlib province from rival armed groups, forcing them to accept an HTS-run civil administration. HTS was established in 2017 as a successor to the Nusra Front (Al Qaeda's formal affiliate in Syria). U.S. officials have stated that "The core of HTS is Nusra," and amended the FTO designation of the Nusra Front in May 2018 to include HTS as an alias. Al Qaeda in Idlib U.S. officials in mid-2017 described Idlib province as "the largest Al Qaeda safe haven since 9/11." Beginning in 2014, the United States conducted a series of air strikes, largely in Idlib province, against Al Qaeda targets. These strikes fell outside the framework of Operation Inherent Resolve (which focuses on the Islamic State), and U.S. officials stated that they were conducted on the basis of the 2001 AUMF. At least a dozen foreign Al Qaeda leaders have been killed in Syria since 2014, mostly in Idlib. A February 2017 U.S. drone strike in Idlib killed the deputy leader of Al Qaeda, and a U.S. strike on an Al Qaeda training camp in Idlib the previous month killed more than 100 Al Qaeda fighters. In addition to HTS, the intelligence community's 2019 worldwide threat assessment also referenced another Al Qaeda-linked group in Syria known as Hurras al Din ("Guardians of Religion"). While HTS and Hurras al Din have occasionally clashed in Idlib, some analysts have assessed that the two groups "serve different functions that equally serve al-Qa`ida's established objectives: one appeals to hardened jihadis with an uncompromising doctrine focused on jihad beyond Syria and one appeals to those focused on the Syrian war." In February 2019, the two groups signed an accord pledging broader cooperation. Risk of Escalation The 2019 expansion of jihadist groups in Idlib has raised concern about the potential for renewed Syrian and/or Russian operations in the area. In March 2019, Syrian and Russian strikes in Idlib reportedly intensified to their highest level in months. U.N. officials have described Idlib as a "dumping ground" for fighters and civilians—including an estimated 1 million children—evacuated or displaced from formerly opposition-held areas in other parts of the country. U.N. officials have warned that a mass assault on Idlib could result in "the biggest humanitarian catastrophe we've seen for decades." Turkish Operations in Northern Syria35 Turkey has maintained a military presence in northern Syria since 2016, and currently has forces deployed in Aleppo and Idlib provinces. Turkish forces partner with local Arab militias and have conducted border operations against the Islamic State and other jihadist fighters, while also targeting Syrian Kurdish forces. President Trump has stated that Turkey could play a larger role in countering the Islamic State in Syria, although it is unclear to what extent U.S. and Turkish objectives overlap. Turkish officials have openly stated that their objectives are not limited to IS militants, and that they also intend to expand military operations against Kurdish forces—including those that have been allied with the United States as part of the counter-IS campaign. It is unclear to what extent Ankara is prepared to launch counter-IS operations in parts of Syria not adjacent to Turkey's border. U.S. military officials have noted that Turkey has not participated in ground operations against the Islamic State in Syria since 2017, and that Turkish forces have not participated in the fight against the Islamic State in the Middle Euphrates River Valley (MERV), which is roughly 230 miles away from the Turkish border. Turkish officials have requested U.S. air and logistical support for their potential operations, despite the two countries' different stances on the YPG. In January 2019, President Trump proposed the creation of a 20-mile deep "safe zone" on the Syria side of the border. Secretary of State Mike Pompeo later said that the U.S. "twin aims" are to make sure that those who helped take down the IS caliphate have security, and to prevent terrorists from attacking Turkey out of Syria. It is unclear who would enforce such a zone. Some sources suggest that U.S. officials favor having a Western coalition patrol any kind of buffer zone inside the Syrian border, with some U.S. support, while Turkey wants its forces together with allied Syrian opposition partners to take that role. Kurdish representatives have said that a safe zone must be guaranteed by international forces. Israeli Strikes in Syria In September 2018, Israeli Intelligence Minister Israel Katz said, "in the last two years Israel has taken military action more than 200 times within Syria itself." Israeli strikes in Syria have mostly targeted locations and convoys near the Lebanese border associated with weapons shipments to Lebanese Hezbollah. However, in 2018, strikes widely attributed to Israel for the first time directly targeted Iranian facilities and personnel in Syria. In September 2018, Israel struck military targets in Syria's coastal province of Lattakia. A Syrian antiaircraft battery responding to the Israeli strikes downed a Russian military plane, killing 15 Russian personnel. An IDF spokesperson stated that Israeli jets were targeting "a facility of the Syrian Armed Forces from which systems to manufacture accurate and lethal weapons were about to be transferred on behalf of Iran to Hezbollah in Lebanon." The spokesperson added that the IDF and the Russian military maintain a deconfliction system in Syria, stating that the Russian plane was not in the area of operation during the Lattakia strike and blaming "extensive and inaccurate" Syrian antiaircraft fire for the incident. In response to the downing of their plane, Russian defense officials announced plans to provide an S-300 air defense system to Syria. The expanding presence of Iranian and Iranian-backed personnel in Syria remains a consistent point of tension between Israel and Iran. In a rare acknowledgement, Israeli military officials in January 2019 confirmed strikes on Iranian military targets in Syria. Israel has accused Hezbollah of establishing a cell in Syrian-held areas of the Golan Heights, with the eventual goal of launching attacks into Israel. For additional information, see CRS In Focus IF10858, Iran and Israel: Tension Over Syria , by Carla E. Humud, Kenneth Katzman, and Jim Zanotti. Political Negotiations The Geneva Process Since 2012, the Syrian government and opposition have participated in U.N.-brokered negotiations under the framework of the Geneva Communiqué. Endorsed by both the United States and Russia, the Geneva Communiqué calls for the establishment of a transitional governing body with full executive powers. According to the document, such a government "could include members of the present government and the opposition and other groups and shall be formed on the basis of mutual consent." The document does not discuss the future of Asad. Subsequent negotiations have made little progress, as both sides have adopted differing interpretations of the agreement. The opposition has said that any transitional government must exclude Asad. The Syrian government maintains that Asad was reelected (by referendum) in 2014, and notes that the Geneva Communiqué does not explicitly require him to step down. In the Syrian government's view, a transitional government can be achieved by simply expanding the existing government to include members of the opposition. Asad has also stated that a political transition cannot occur until "terrorism" has been defeated, which his government defines broadly to include all armed opposition groups. As part of the Geneva Process, U.N. Security Council Resolution (UNSCR) 2254, adopted in 2015, endorsed a "road map" for a political settlement in Syria, including the drafting of a new constitution and the administration of U.N.-supervised elections. U.S. officials continue to stress that a political solution to the conflict must be based on the principles of UNSCR 2254. The last formal round of Geneva talks, facilitated by then-U.N. Special Envoy for Syria Staffan de Mistura, closed in late January 2018. While the United States continues to call for a political settlement to the conflict, the U.S. intelligence community has assessed that Asad is "unlikely to negotiate himself from power" or make meaningful concession to the opposition: The regime's momentum, combined with continued support from Russia and Iran, almost certainly has given Syrian President Bashar al-Asad little incentive to make anything more than token concessions to the opposition or to adhere to UN resolutions on constitutional changes that Asad perceives would hurt his regime. The United States has repeatedly expressed its view that Geneva should be the sole forum for a political settlement to the Syria conflict, possibly reflecting concern regarding the Russia-led Astana Process. However, the United States supported de Mistura's efforts throughout 2018 to stand up a Syrian Constitutional Committee, an initiative originally stemming from the Russian-led Sochi conference in January 2018 (see below). De Mistura resigned in December 2018, and was succeeded by veteran Norwegian diplomat Geir Pederson. As of early 2019, Pederson has continued De Mistura's efforts to convene a constitutional committee. The Astana Process Since January 2017, peace talks hosted by Russia, Iran, and Turkey have convened in the Kazakh capital of Astana. These talks were the forum through which three "de-escalation areas" were established—two of which have since been retaken by Syrian military forces. The United States is not a party to the Astana talks but has attended as an observer delegation. Russia has played a leading role in the Astana process, which some have described as an alternate track to the Geneva process. The United States has strongly opposed the prospect of Astana superseding Geneva. Following the release of the Joint Statement by President Trump and Russian President Putin on November 11, 2017 (in which the two presidents confirmed that a political solution to the conflict must be forged through the Geneva process pursuant to UNSCR 2254), U.S. officials stated that We have started to see signs that the Russians and the regime wanted to draw the political process away from Geneva to a format that might be easier for the regime to manipulate. Today makes clear and the [Joint Statement] makes clear that 2254 and Geneva remains the exclusive platform for the political process. The 11 th round of Astana talks was held in November 2018. In February 2019, the presidents of Russia, Iran, and Turkey held a trilateral summit at the Russian Black Sea resort of Sochi to discuss the future of Idlib, anticipated changes to the U.S. military presence in Syria, and how to move forward on the formation of a constitutional committee. Constitutional Committee . Despite the November 2017 agreement, Russia persisted in its attempts to host, alongside Iran and Turkey, a "Syrian People's Congress" in Sochi, intended to bring together Syrian government and various opposition forces to negotiate a postwar settlement. The conference, held in January 2018, was boycotted by most Syrian opposition groups and included mainly delegates friendly to the Asad government. Participants agreed to form a constitutional committee comprising delegates from the Syrian government and the opposition "for drafting of a constitutional reform," in accordance with UNSCR 2254. The statement noted that final agreement regarding the mandate, rules of procedure, and selection criteria for delegates would be reached under the framework of the Geneva process. The United States supports the formation of the committee under U.N. auspices, but has emphasized that "the United Nations must be given a free hand to determine the composition of the committee, its scope of work, and schedule." Following the 2018 Sochi Conference, de Mistura sought to reach consensus among the parties regarding delegates for the constitutional committee. The committee's membership is to be divided in equal thirds between delegates from the Syrian government, Syrian opposition, and delegates selected by the U.N. comprising Syrian experts, civil society, independents, tribal leaders, and women. The sticking point remains this latter, U.N.-selected group, known as the "middle third list." The Syrian government has objected to the U.N.'s role in naming delegates to the list, describing the constitution as "a highly sensitive matter of national sovereignty." Kurdish Outreach to Asad Government In July 2018, the Syrian Democratic Council (SDC), the political wing of the U.S.-backed Syrian Democratic Forces (SDF), opened formal discussions with the Syrian government. The Kurdish-held areas in northern Syria, comprising about a quarter of the country, are the largest remaining areas outside of Syrian government control. Asad has stated that his government intends to recover these areas, whether by negotiations or military force. In early 2019, the U.S. intelligence community also assessed that the Asad government was "likely to focus on reasserting control over Kurdish-held areas." Following President Trump's announcement in December 2018 that the United States shortly would withdraw forces from Syria, Kurdish leaders sought Asad government protection from a possible Turkish attack. Turkey, which captured the Kurdish enclave of Afrin in northern Syria in 2018, has stated its intent to expand its military operations against PYD and YPG elements in Syria, and Kurdish concerns about such an operation appear to have accelerated talks between Kurdish representatives and the Asad government. The PYD is not a party to the ongoing talks in Geneva between Syrian government and opposition forces, despite the fact that its YPG militia controls the vast majority of territory that remains outside of Syrian government control. Humanitarian Situation As of 2019, nearly 12 million people in Syria are in need of humanitarian assistance, 6.2 million Syrians are internally displaced, and an additional 5.6 million Syrians are registered with the U.N. High Commissioner for Refugees (UNHCR) as refugees in nearby countries. The Syrian government has long opposed the provision of humanitarian assistance across Syria's border and across internal lines of conflict outside of channels under Syrian government control. Successive U.N. Security Council resolutions have nevertheless authorized the provision of such assistance. The Syrian government further seeks the prompt return of Syrian refugees from neighboring countries, while humanitarian advocates and practitioners raise concern about forced returns and the protection of returnees from political persecution and the difficult conditions prevailing in Syria. The U.N. Secretary-General regularly reports to the Security Council on humanitarian issues and challenges in and related to Syria pursuant to Resolutions 2139 (2014), 2165 (2014), 2191 (2014), 2258 (2015), 2332 (2016), 2393 (2017), 2401 (2018), and 2449 (2018). U.S. Humanitarian Funding The United States is the largest donor of humanitarian assistance to the Syria crisis, drawing from existing funding from global humanitarian accounts and some reprogrammed funding. As of March 2019, total U.S. humanitarian assistance for the Syria crisis since 2011 had reached more than $9.5 billion. Of this total, roughly $4.7 billion has gone toward meeting humanitarian needs inside Syria, while the remainder has supported host communities in Lebanon, Jordan, Turkey, Iraq, and Egypt that host Syrian refugees. The Trump Administration's FY2020 request would eliminate funding for the International Disaster Assistance (IDA) account as well as funding for overseas humanitarian assistance programs previously funded through the Migration and Refugee Assistance (MRA) account. Instead, it requests $5.9 billion in funding for a new International Humanitarian Assistance (IHA) account, intended to consolidate all U.S. overseas humanitarian programming into a single account. Funds requested for the IHA account would fund the U.S. humanitarian response in Syria and other crisis areas. International Humanitarian Funding Multilateral humanitarian assistance in response to the Syria crisis includes both the Regional Refugee and Resilience Plan (3RP) and the Humanitarian Response Plan (HRP). The 3RP is designed to address the impact of the conflict on Syria's neighbors, and encompasses the Lebanon Crisis Response Plan, the Jordan Response Plan, and country chapters in Turkey, Iraq, and Egypt. It includes a refugee/humanitarian response coordinated by UNHCR and a "resilience" response (stabilization-based development assistance) led by the U.N. Development Program (UNDP). In parallel to the 3RP, the HRP for Syria is designed to address the crisis inside the country through a focus on humanitarian assistance, civilian protection, and increasing resilience and livelihood opportunities, in part by improving access to basic services. This includes the reconstruction of damaged infrastructure (water, sewage, electricity) as well as the restoration of medical and education facilities and infrastructure for the production of inputs for sectors such as agriculture. In 2019, U.N. officials warned that the Syria conflict was not over, and that significant humanitarian needs remain. The 2019 3RP appeal seeks $5.5 billion and the HRP for Syria seeks $3.3 billion, on par with previous years. U.N. officials have noted that the 2018 3RP appeal was funded at 62%, while the Syria HRP was funded at 65%. U.S. Policy Since 2011, U.S. policy toward the unrest and conflict in Syria has attempted to pursue parallel interests and manage interconnected challenges, with varying degrees of success. Among the objectives identified by successive Administrations and by many Members in successive sessions of Congress have been supporting Syrian-led efforts to demand more representative, accountable, and effective governance; seeking a negotiated settlement that includes a transition in Syria away from the leadership of Bashar al Asad and his supporters; limiting or preventing the use of military force by state and nonstate actors against civilian populations; mitigating transnational threats posed by Syria-based Islamist extremist groups; meeting the humanitarian needs of internally and externally displaced Syrians; preventing the presence and needs of Syrian refugees from destabilizing neighboring countries; limiting the negative effects of other third party interventions on regional and international balances of power; and responding to and preventing the use of chemical weapons. As Syria's conflict has changed over time from civil unrest to nationwide military conflict involving multiple internal and external actors to the apparent resurgence of the Asad government, the policies, approaches, and priorities of the United States and others also have changed. As of late 2018, the United States and its Syrian and regional partners have not succeeded in inducing or compelling Syrian President Bashar al Asad to leave office or secured a fundamental reorientation of Syria's political system as part of a negotiated settlement process. The United States continues to advocate for an inclusive negotiated solution, but has largely acquiesced to Asad's resumption of political and security control. Forceful interventions in Syria by Russia, Iran, Turkey, the United States, and Israel have created a fundamentally different set of calculations for policymakers to consider relative to those that prevailed prior to the conflict. Trump Administration Syria Policy Evolves in 2018 In 2018, the Administration's Syria policy underwent significant changes, reflecting an internal policy review as well as apparent differences of opinion between President Trump and senior military and diplomatic officials. In January 2018, then-Secretary of State Rex Tillerson stated that "the United States will maintain a military presence in Syria focused on ensuring that ISIS cannot re-emerge." Tillerson stated that the United States intended to carry out stabilization initiatives in areas liberated from IS control, pursue measures to de-escalate the conflict, partner with allies to address counterterrorism goals, encourage U.N.-mediated peace efforts, and provide targeted reconstruction in areas liberated from the Islamic State. This approach was echoed by CENTCOM Commander General Votel, who said in testimony that, "after we have removed [ISIS] from their control of the terrain, we have to consolidate our gains and we have to ensure that the right security and stability is in place so that they cannot resurge." In March 2018, President Trump fired Secretary Tillerson. The President later stated that U.S. troops in Syria would be "coming out of Syria, like, very soon." Speaking about Syria on April 3, Trump reiterated, "I want to get out. I want to bring our troops back home." Military officials sought to downplay any divisions within the Administration, stating, "... as we reach finality against ISIS in Syria, we're going to adjust the level of our presence there. So in that sense, nothing actually has changed." An April 7 chemical weapons attack by the Syrian government and subsequent U.S., British, and French air strikes on Syrian CW facilities also appeared to temper the President's calls for a quick U.S. military withdrawal from the country. However, by May 2018, the Administration had begun to shift away from direct U.S. funding of stabilization programs in areas of Syria recently liberated from IS control. The Administration moved to end a range of U.S. nonlethal, nonhumanitarian assistance programs for opposition-held communities in southern and northwestern Syria, including in Idlib province. At the same time, officials continued to stress the importance of a sustained U.S. presence in the country. In July, then-Defense Secretary Mattis stated that U.S. military forces were focused on the "last bastions" of the Islamic State in Syria, adding, "As that falls, then we'll sort out a new situation. But what you don't do is simply walk away and—and leave the place as devastated as it is, based on this war. You don't just leave it, and then ISIS comes back." In August, Administration officials announced that the State Department would "redirect approximately $230 million in stabilization funds for Syria." In August and September, the Administration notified Congress that these funds, originally appropriated as FY2017 ESF-OCO, would be reprogrammed to meet other priorities. Administration officials also stated that the United States intended to rely on contributions from foreign partners, including a $100 million contribution from Saudi Arabia and contributions from the United Arab Emirates and Germany, to continue stabilization efforts in northeastern Syria. In the fall of 2018, Administration officials began to articulate a three-track Syria strategy which included seeking the enduring defeat of the Islamic State, achieving a political settlement to the Syrian civil war based on the terms of UNSCR 2254, and inducing the departure of all Iranian-commanded forces from Syria. In September 2018, U.S. National Security Advisor John Bolton stated, "We're not going to leave [Syria] as long as Iranian troops are outside Iranian borders and that includes Iranian proxies and militias." In November 2018, Ambassador James F. Jeffrey—appointed in August as the Secretary of State's Special Representative for Syria Engagement—stated that, "U.S. troops will stay on in Syria we say until the enduring defeat of ISIS which means to establish the conditions so that local forces, local populations, local governments, can deal with ISIS as a terrorist or as an insurgent movement." In December, then-Special Presidential Envoy for the Global Coalition to Defeat ISIS Brett McGurk stated that, "Even as the end of the physical caliphate is clearly now coming into sight, the end of ISIS will be a much more long-term initiative," adding, "Nobody is declaring a mission accomplished." McGurk also stated that if we've learned one thing over the years, enduring defeat of a group like this means you can't just defeat their physical space and then leave; you have to make sure the internal security forces are in place to ensure that those gains, security gains, are enduring. 2018: President Trump Announces Withdrawal of U.S. Forces President Trump announced on December 19 that U.S. forces would be returning from Syria "now." He stated, "We have defeated ISIS in Syria, my only reason for being there during the Trump Presidency." Pentagon Spokesperson Dana White later stated that while the U.S.-led coalition had liberated IS-held territory, the campaign against the group was not over. Nevertheless, a Pentagon spokesperson confirmed that the Defense Department had "started the process of returning U.S. troops home" from Syria, and State Department personnel reportedly were evacuated from Syria within 24 hours of the announcement. The announced troop withdrawal came as a surprise to senior military and diplomatic officials, who publicly had stated that the United States intended to remain inside Syria to carry out stabilization operations. The week prior to the announcement, Brett McGurk had emphasized that the Islamic State is likely to be a resilient force, stating, There's clandestine cells. Nobody is saying that they are going to disappear. Nobody is that naive. So we want to stay on the ground and make sure that stability can be maintained in these areas [...] obviously, it would be reckless if we were just to say, well, the physical caliphate is defeated, so we can just leave now. Following the announcement, some Defense and State Department officials reportedly sought to persuade the White House to reconsider the withdrawal. On December 20, Defense Secretary Mattis submitted his resignation. On December 22, Brett McGurk announced that he would accelerate his resignation as Special Presidential Envoy for the Global Coalition to Defeat ISIS, stating that, "The recent decision by the president came as a shock and was a complete reversal of policy that was articulated to us […] I ultimately concluded that I could not carry out these new instructions and maintain my integrity." The Syria withdrawal announcement was criticized by many Members of Congress, but some Members embraced the decision as overdue. Senators Graham, Shaheen, Ernst, King, Cotton, and Rubio drafted an open letter to President Trump, stating, "We believe that such action at this time is a premature and costly mistake that not only threatens the safety and security of the United States, but also emboldens ISIS, Bashar al Assad, Iran, and Russia." Senator Graham also drafted a nonbinding resolution ( S.Res. 738 ) calling on the President to reconsider his decision. In contrast, Senator Rand Paul and Representatives Ted Lieu and Ro Khanna praised the President's decision, citing concerns about the wisdom, effectiveness, and authorization for U.S. operations. Some U.S. allies also criticized the decision, including coalition partners in the counter-IS campaign such as France and the United Kingdom. A spokesperson for the French Defense Ministry stated that French air strikes against the Islamic State in Syria would continue. Britain's defense minister disputed the claim that the Islamic State had been defeated, saying that the group had morphed into another form and was "very much alive." In contrast, Russian President Putin praised the U.S. move toward withdrawal, calling it "correct." Turkish leaders also welcomed the U.S. decision, which some reports described as having been influenced by a call between President Trump and Turkish President Erdogan. 2019: Some U.S. Troops to Remain in Syria In early January, U.S. forces began withdrawing equipment—but not personnel—from Syria. In late February, the White House announced that the United States would leave approximately 400 troops in Syria, reversing President Trump's December withdrawal announcement. These troops reportedly are intended to form part of a multinational force of roughly 800-1,500 military personnel, which the Administration intends to solicit mostly from NATO member states. When asked about the mission of the remaining U.S. contingent in Syria, Chairman of the Joint Chiefs of Staff General Joseph Dunford stated, It's the same -- we're -- this is about campaign continuity. So we had a campaign that was designed to clear ISIS from the ground that they had held, and we always had planned to transition into a stabilization phase where we train local forces to provide security and prevent the regeneration of ISIS. So there is -- there is no change in the basic campaign, the resourcing is being adjusted because the threat has been changed. In March 2019, the Wall Street Journal , citing unnamed U.S. officials, reported that the U.S. military was preparing to leave as many as 1,000 troops in Syria. In a statement, General Dunford described this claim as "factually incorrect." Other reports citing U.S. officials have stated that the number of U.S. forces to remain in Syria ultimately will depend on the number of forces pledged by allied states. The Administration's FY2020 defense funding request assumes for budgeting purposes that more than 7,000 U.S. military personnel will be deployed to Iraq and Syria in FY2020. It is unclear whether USAID and State Department personnel will redeploy to Syria to spearhead stabilization projects. Administration officials have stated that they are seeking increased coalition financial contributions to continue Syria stabilization efforts. The Administration's FY2020 foreign assistance request states that the United States will seek to "leverage" additional partner contributions. The request does not include funding for specific assistance programs in Syria but states that funds designated for Relief and Recovery Fund purposes could be used in Syria. President Trump Recognizes Israeli Claim to Golan Heights On March 25, President Trump issued a proclamation recognizing the Golan Heights as part of the state of Israel. The Golan Heights, a roughly 450-square-mile plateau situated between Israel and Syria, has been disputed since 1967, when Israel captured most of the area from Syria. U.N. Security Council resolutions have called for the final status of the area to be determined via negotiations between the two sides. In 1974, U.N. Security Council Resolution 350 established the United Nations Disengagement Observer Force (UNDOF) to monitor a separation zone between Israel and Syria on the Golan Heights. In 1981, Israel effectively annexed the Golan Heights unilaterally by applying Israeli law to the area. In December 1981, the Security Council voted unanimously to adopt Resolution 497, stating that the annexation was "null and void and without international legal effect." Syria condemned the Trump Administration's March 2019 recognition of Israeli sovereignty, describing it as a "flagrant violation" of U.N. resolutions regarding the status of the Golan. For additional information, see CRS Insight IN11081, Israel and Syria in the Golan Heights: President Trump Voices Support for Israeli Sovereignty Claim , by Jim Zanotti and Carla E. Humud. Presidential Authority to Strike Syria under U.S. Law107 Since 2011, Members of Congress and successive Administrations have debated presidential authority to conduct military operations in Syria absent a declaration of war. This has, over time, included debates regarding the potential imposition of no-fly zones over areas of the country to protect civilians, operations against various extremist groups, force protection for U.S. military personnel and partner forces inside Syria, and strikes against Syrian chemical weapons facilities and related forces. In April 2018, U.S. missile strikes targeted chemical weapons-related facilities in Syria, in response to a chemical weapons attack in the city of Douma. The strikes occurred just over a year after the U.S. strike on Al Shayrat airbase in Homs province, following the sarin gas attack in Khan Sheikhoun. Describing the Administration's view of the authorities underlying the 2018 operation, Defense Secretary Mattis stated As our commander in chief, the president has the authority under Article II of the Constitution to use military force overseas to defend important U.S. national interests. The United States has an important national interest in averting a worsening catastrophe in Syria, and specifically deterring the use and proliferation of chemical weapons. Similarly, in an April 8, 2017, letter to Congress, President Trump had stated that he had acted "pursuant to my constitutional authority to conduct foreign relations and as Commander in Chief and Chief Executive" in ordering the April 6, 2017, U.S. missile strikes on Al Shayrat airbase. In the letter, President Trump says that he "acted in the vital national security and foreign policy interests of the United States," and that, "the United States will take additional action, as necessary and appropriate, to further its important national interests." In the past, Presidents have justified the use of military force by relying on presidential powers they assert are inherent under Article II Commander in Chief and Chief Executive authority. The executive branch has claimed that a President may use military force to defend U.S. national security interests (even when an immediate threat to the United States and its Armed Forces is not necessarily apparent) and to promote U.S. foreign policy. In 2017 and 2018, the U.S. military used force against the Syrian government and its allies on limited occasions for force-protection purposes, including for the protection of U.S. partner forces. In an August 2017 letter to Senate Foreign Relations Committee Chairman Senator Bob Corker, the State Department asserted that "the 2001 AUMF also provides authority to use force to defend U.S., Coalition and partner forces engaged in the campaign to defeat ISIS to the extent such use of force is a necessary and appropriate measure in support of counter-ISIS operations." The letter states the Administration's view that The strikes taken by the United States in May and June 2017 against the Syrian Government and pro-Syrian-Government forces were limited and lawful measures to counter immediate threats to U.S. or partner forces engaged in that campaign. The United States does not seek to fight the Syrian Government or pro-Syrian-Government forces. However, the United States will not hesitate to use necessary and proportionate force to defend U.S., Coalition, or partner forces engaged in the campaign against ISIS. Congress has debated Syria-specific and Islamic State-focused authorization for military force proposals intermittently in recent years. In 2013, the Senate Foreign Relations Committee considered and reported a proposed authorization for the use of military force following a chemical weapons attack in the suburbs of Damascus, Syria ( S.J.Res. 21 , 113 th Congress). The Senate did not consider the measure further. Since U.S. military action against the Islamic State began in June 2014, starting in Iraq and then spreading to Syria, Congress also has debated the need for enactment of a new IS-specific authorization for use of military force. President Obama asserted that the campaign against the Islamic State in Iraq and Syria was authorized by both the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40 ; claiming that the Islamic State was a successor organization of Al Qaeda and that elements of Al Qaeda were present in Syria) and Authorization for Use of Military Force Against Iraq Resolution of 2002 (2002 AUMF; P.L. 107-243 ; claiming authority to defend Iraq from the Islamic State threat). As noted above, Senate committees held hearings on a proposed new AUMF ( S.J.Res. 59 ) in 2018. U.S. Assistance U.S. Military Operations in Syria and U.S. Train, Advise, Assist, and Equip Efforts U.S. Military Presence in Syria Since 2015, U.S. forces have operated in Syria in support of the counter-IS campaign. Roughly 2,000 U.S. military personnel conduct train and equip program-related activities as well as "advise and assist" operations in support of U.S. partner forces. The Special Operations Joint Task Force, Operation Inherent Resolve (SOJTF-OIR) led by Brigadier General Patrick B. Roberson has been "the primary advise, assist and accompany force in Syria, working closely with the SDF." SOJTF-OIR has reported to the Combined Joint Task Force-Operation Inherent Resolve (CJTF-OIR), which leads the international coalition to defeat the Islamic State in Iraq and Syria. In September 2018, Lieutenant General Paul LaCamera assumed command of CJTF-OIR. U.S. forces have operated in northern and eastern Syria in partnership with the SDF and in southwest Syria in partnership with the Maghawir al Thawra militia near the At Tanf garrison adjacent to the tri-border area shared by Syria, Jordan, and Iraq. Military Authorities As discussed above (" Presidential Authority to Strike Syria under U.S. Law "), U.S. strike operations against the Islamic State and Al Qaeda-affiliated targets in Syria are conducted pursuant to the 2001 Authorization for Use of Military Force. U.S. forces have operated in Syria for train and equip program purposes as well as to advise and assist U.S. partner forces, whether or not those specific partner forces were trained and/or armed under the train and equip program. Such "advise and assist" activities may have been conducted pursuant to the authorities outlined by train and equip program provisions or pursuant to other defense authorities defined in law or asserted by the executive branch. This includes military operations against IS targets conducted pursuant to the 2001 Authorization for Use of Military Force. U.S. operations in Syria also are supported in part by the 2014 request of the Iraqi government to the U.N. Security Council for military support to address the threat of terrorism emanating from Syria. Syria Train and Equip Program Overview In 2014, Congress created a new authority for the Department of Defense (DOD) to train and equip select Syrians in the FY2015 National Defense Authorization Act (NDAA, Section 1209 of P.L. 113-291 , as amended). This authority, as amended by subsequent legislation, enables DOD "to provide assistance, including training, equipment, supplies, stipends, construction of training and associated facilities, and sustainment, to appropriately vetted elements of the Syrian opposition and other appropriately vetted Syrian groups and individuals." Such assistance activities are authorized for select purposes, including supporting U.S. efforts to combat the Islamic State and other terrorist organizations in Syria and promoting the conditions for a negotiated settlement to Syria's civil war. Congress has not appropriated funds specifically for the Syria train and equip program since the program's inception. Rather, Congress has authorized the Department of Defense to reprogram funds from global counterterrorism assistance accounts to operations and maintenance accounts to support program activities, with each reprogramming subject to the prior approval of the four congressional defense committees. As of March 2019, more than $2.5 billion has been reprogrammed or requested for the program. ( Table 1 provides information about program funding and related requests.) FY2019 Legislation The FY2019 NDAA ( P.L. 115-232 ) extends the program's authorization through the end of 2019, but also places limitations on the use of FY2019 funds for the program until certain requirements have been met. The act prohibits the obligation or expenditure of funds authorized to be appropriated for FY2019 until both (1) the President submits the report on U.S. strategy in Syria required by Section 1221 of the FY2018 NDAA ( P.L. 115-91 ), and (2) the Secretary of Defense submits a separate report to the congressional defense committees regarding the program. The act also requires the Secretary of Defense to submit a written certification quarterly on matters including progress on stabilization as well as any human rights violations committed by U.S.-supported groups. The act continues to apply the prior approval reprogramming requirements applied to date for the use of appropriated funds. The Department of Defense Appropriations Act, 2019 ( P.L. 115-245 ) provides $1.35 billion for the CTEF account, slightly less than the Administration's requested amount for the overall account ($1.4 billion). As in previous years, the text of the act does not specify the amount for Syria-specific programs. FY2020 Defense Funding Request The Administration's FY2020 request seeks $300 million in CTEF funds to equip and sustain "vetted Syrian opposition (VSO) forces," including Internal Security Forces. The department describes U.S. SDF and other partners as VSO in planning and reporting documents. The request states that the "primary focus" will be on the continued equipping of Internal Security Forces, and that these forces "together with wide-area security and other VSO elements, will focus on back-clearing and holding areas that were liberated from ISIS." The Administration's FY2019 request had envisioned the creation of a 35,000-person Internal Security Force and a 30,000-person combat force. The FY2020 request references a 61,000 VSO force without specifying what percentage of these are to be focused on internal security versus other tasks. Other differences with the FY2019 request include a reduced emphasis on direct U.S. training of VSO forces. Instead, the FY2020 request states that DOD will "support the VSO's ongoing efforts to recruit, vet, train, and equip additional Syrians representative of the population and enable them to engage ISIS throughout the battlespace." The request states that $252 million was enacted for the Syria Train and Equip program in FY2019 (about $50 million less that the Administration's FY2019 request). It also notes that the FY2020 budget realigns $250 million in FY2019 funds for IS-related border security support to partner nations from the CTEF fund to Operation and Maintenance, Defense-wide. U.S. Nonlethal and Stabilization Assistance The Administration's FY2020 foreign assistance budget request reflects a move by the Trump Administration to end nonlethal assistance for the Syrian opposition, and to shift funding responsibility for stabilization projects to coalition partners. Since 2012, the United States has provided nonlethal assistance to Syrian opposition groups. The United States also has funded stabilization efforts in areas of northeastern Syria liberated from Islamic State control. Possibly reflecting a recognition that the Syria conflict has "decisively shifted in the Syrian regime's favor," the FY2020 request includes no Syria-specific funding. Background Since 2012, the United States has provided a range of nonlethal assistance to Syrian opposition and civil society groups. At the start of the Syria conflict, U.S. ability to provide aid to the Syrian opposition was limited by restrictions stemming from an existing body of U.S. bilateral sanctions against Syria, as well as Syria's status as a state sponsor of terrorism. President Obama invoked emergency and contingency authorities under the Foreign Assistance Act to enable initial deliveries. To enable the expanded delivery of aid to Syrian opposition groups, the executive branch requested and Congress granted specific authorities to provide nonlethal foreign assistance in Syria for certain purposes notwithstanding other provisions of law. Over time, Congress expanded and amended these authorities to focus on areas of congressional priority and to put into place oversight and reporting requirements. Nonlethal and Stabilization Aid to Syria: 2017-2019 Since FY2012, successive Administrations and Congresses have taken evolving approaches to requests and appropriations of funds for assistance and stabilization programs in Syria. Funding for both types of projects has been drawn from a mix of regular and OCO funds from multiple accounts—largely ESF—with the Administration required to notify Congress of its intent to use these funds for assistance and stabilization efforts in Syria. FY2017 Funds . In January 2017, the Obama Administration notified Congress that it intended to spend $230 million in FY2017 ESF-OCO funds (originally appropriated under the Further Continuing and Security Assistance Appropriations Act, 2017, P.L. 114-254 ) to support stabilization in areas liberated from the Islamic State in Syria. In August and September 2018, the Trump Administration notified Congress of plans to reprogram those funds and instead rely on contributions from foreign partners—reflecting a broader assessment by the Administration that the United States was bearing more than its share of costs in regards to Syria stabilization. The Administration's FY2020 budget request states that $422 million in OCO funds were obligated for Syria in FY2017. FY2018 Funds. The Administration has not acted to obligate or expend funds appropriated by Congress in FY2018 foreign operations appropriations legislation for nonlethal assistance and stabilization in Syria. The FY2018 appropriations act ( P.L. 115-141 ) authorized the use of $500 million in FY2018 funds from various foreign assistance accounts for a "Relief and Recovery Fund" (RRF) for areas liberated from the Islamic State, while not specifying a specific amount for Syria. RRF funds could be used for Syria stabilization, but as of March 2019 no FY2018 monies have been notified for programs in Syria. FY2019 . The Administration's FY2019 budget request sought $130 million in Economic Support and Development Fund (ESDF) monies and $44.5 million in Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) for stabilization efforts in nongovernment-controlled areas of Syria. FY2019 Legislation and the FY2020 Request The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) states that, of the funds appropriated under the ESF, INCLE, and PKO accounts, no less than $40 million should be made available for nonlethal stabilization assistance for Syria, of which not less than $7 million should be made available for emergency medical and rescue response, and chemical weapons use investigations. Notably, the act states only that nonlethal assistance is to be provided for stabilization purposes. This is a significant departure from the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ), which made funds available for 14 listed purposes including establishing inclusive local governance, bolstering the viability of the Syrian opposition, developing civil society and independent media, and countering extremism. The Administration's FY2020 State and Foreign Operations request for Syria seeks no ESDF or NADR funding for Syria-specific programs, in contrast to the FY2019 request which sought $130 million and $44.5 million for Syria programs in the two accounts, respectively. The request includes $145 million from various accounts for the Relief and Recovery Fund, some of which could be used in Syria. Uncertain Future for Syria START Programs and Cross Border Aid To monitor and implement U.S. assistance programs, several regionally based teams were established. A Syria Transition Assistance and Response Team (START) operated from Turkey and coordinated U.S. humanitarian and foreign assistance to northern Syria, including assistance to opposition-held areas. In Jordan, the Southern Syria Assistance Platform (SSAP) monitored and coordinated comparable U.S. humanitarian and foreign assistance to southern and eastern Syria, including assistance to opposition-held areas. The Trump Administration also deployed a small team of U.S. civilian assistance officials (known as START Forward) inside areas of northern Syria where DOD-trained and/or equipped local forces are in control. In 2018, these programs underwent significant changes. Some START programs were amended and/or ended in 2018 in line with the Administration's plans to focus on stabilizing former IS-held areas to the east. Cross-border SSAP programs reportedly were halted in mid-2018, after Syrian military forces regained control of southwestern Syria. In late 2018, the announced withdrawal of U.S. forces was preceded by the withdrawal of U.S. civilian personnel from northern Syria. With the Administration's 2019 announcement that some U.S. forces would remain in Syria, it is unclear whether or under what circumstances START Forward personnel might redeploy to the country to assist in stabilization efforts. Increasingly vocal demands by the Syrian government and its international supporters for an end to cross-border assistance operations may significantly complicate U.S. assistance operations. This dynamic has been evident in Russian objections to the renewal of the U.N. Security Council mandate for cross-border and cross-line humanitarian operations (Resolutions 2393 and 2449), but it similarly applies to ongoing Syrian government rejections of non-humanitarian assistance operations in opposition-held areas. UNSCR 2449 currently authorizes cross-border and cross-line humanitarian assistance until January 10, 2020—at which point the resolution will be subject to renewal at the Security Council. Russia and China abstained from the December 2018 renewal, and the Russian representative objections argued that "new realities ... demand that [the mandate] be rejigged with the ultimate goal of being gradually but inevitably removed." Overview: Syria Chemical Weapons and Disarmament120 The United States, the United Nations, and others have assessed that the Syrian government has used chemical weapons repeatedly against opposition forces and civilians in the country. Expert teams affiliated with the U.N.-OPCW Joint Mission to Investigate Allegations of the Use of Chemical Weapons in the Syrian Arab Republic (JIM) and the OPCW Fact-Finding Mission (FFM) in Syria have investigated some of these allegations and have found evidence that in some cases confirms and in others suggests that chemical weapons and/or toxic chemicals have been used in attacks by the Syrian regime and by the Islamic State. Any use of chemical weapons is prohibited by the Chemical Weapons Convention, which Syria joined in September 2013. Chemical Weapons Use The majority of reports of chemical weapons use in Syria have consisted of chlorine use in barrel bombs in addition to the use of sarin in August 2013, April 2017, and possibly April 2018. The use of sarin by the Syrian military in the April 2017 and April 2013 attacks was confirmed by the United Nations. Reports of the use of chlorine gas as a chemical weapon in barrel bombs used by the Syrian military began to surface in April 2014 and continue. Most recently, the FFM has been investigating an alleged CW incident in Aleppo on November 24, 2018. U.N. investigators have confirmed several cases of the use of mustard gas by the Islamic State. The OPCW established a fact-finding mission to investigate these allegations. The Syrian government continues to deny categorically that it has used chemical weapons or toxic chemicals, while accusing opposition forces of doing so and calling into question the methods and results of some investigations into alleged chemical attacks. The Russian Federation supports the Syrian position. 2018 Chemical Attack (Douma) and U.S. Response On April 7, Syrian government forces launched a chemical attack on Douma, killing at least 40 people and injuring hundreds more. U.S. officials described the symptoms displayed by victims as consistent with an asphyxiation agent and "a nerve agent of some type." Then-Defense Secretary Mattis stated, "We're very confident that chlorine was used. We are not ruling out sarin right now." An OPCW/FFM investigation concluded in March 2019 that it is likely that toxic chlorine was used as a weapon in the attack, which came within the context of broader Syrian government operations to retake the rebel enclave of eastern Ghouta, on the outskirts of Damascus. On April 13 (April 14 local time), more than 100 missiles were launched into Syria from British, French, and U.S. air and naval platforms in the Red Sea, the Northern Arabian Gulf, and the Eastern Mediterranean. The strikes targeted three chemical weapons storage and research sites in Syria: the Barzeh Research and Development Center on the outskirts of Damascus and the Him Shinshar chemical weapons storage and bunker facilities in Homs province. Contrasting the operation with the April 2017 U.S. strikes on Al Shayrat airbase, military officials stated, "Last year the focus was on the delivery [of chemical weapons]. This time, we went—the strikes went to the very heart of the enterprise, to the research, to development, to storage." U.S. military officials also stated that "obviously the Syrian chemical weapons system is larger than the three targets that we addressed tonight. However, these are the targets that presented the best opportunity to minimize collateral damage, to avoid killing innocent civilians, and yet to send a very strong message." 2017 Chemical Attack (Khan Sheikhoun) and U.S. Response On April 4, 2017, Syrian aircraft operating in rebel-held Idlib province conducted several air strikes using what U.S. officials assessed to be a chemical nerve agent. The strikes, which occurred in the town of Khan Sheikhoun, killed an estimated 80 to 100 people. The Director General of the OPCW, which conducted a fact-finding mission following the attack, stated on April 19 that four of its laboratories had "incontrovertible" evidence that victims "were exposed to Sarin or a Sarin-like substance." In addition, then-Secretary of State Tillerson said that the U.S. government had a "very high level of confidence" that the Syrian air force had used the nerve agent sarin in two earlier 2017 attacks—on March 25 and March 30 in neighboring Hamah province. On April 6, 2017, the United States fired 59 Tomahawk missiles at Al Shayrat airfield in Homs province, from which U.S. intelligence sources had concluded the Khan Sheikhoun attack was launched. A Defense Department statement said the U.S. strike "targeted aircraft, hardened aircraft shelters, petroleum and logistical storage, ammunition supply bunkers, air defense systems, and radars" and that "the strike was intended to deter the regime from using chemical weapons again." Secretary Mattis later stated that "around 20 aircraft were taken out" by the strike. The United States also imposed sanctions on 271 Syrian employees of the Scientific Studies and Research Center (SSRC), the entity responsible for managing Syria's chemical weapons program. 2013 Chemical Weapons Attack (Ghouta) The largest-scale use of chemical weapons in Syria to date was an August 21, 2013, nerve gas attack, which the U.S. government estimated killed more than 1,400 people. A U.N. investigation subsequently identified the nerve agent as sarin. The U.S. intelligence community assessed that the Syrian government had "used chemical weapons on a small scale against the opposition multiple times in the last year." President Obama requested congressional approval of a limited authorization for the use of military force to respond. As part of a diplomatic solution to the crisis based on a U.S.-Russian joint proposal, the Obama Administration withdrew the threat of military force and Syria agreed to give up its chemical weapons and join the Chemical Weapons Convention (CWC). U.N. Security Council Resolution 2118 (2013) further mandated that Syria give up all its chemical weapons under Chapter VII provisions of the U.N. Charter. Syria and the CWC: Disarmament Verification After joining the CWC in September 2013, Syria declared that it possessed 1,308 metric tons of chemical warfare agents and precursor chemicals, including several hundred metric tons of the nerve agents sarin and VX, as well as mustard agent in ready-to-use form. The nerve agents were stored as two separate components that are combined before use, called precursor chemicals, a form that facilitated removal and destruction efforts. In an unprecedented effort, the international community oversaw the removal in late 2013 and 2014 of chemical weapons agents to locations outside of Syria for destruction. As of January 4, 2016, all of Syria's declared Category 1 and 2 chemicals had been neutralized. As of June 2018, the OPCW had verified that all 27 of Syria's declared chemical weapons production facilities (CWPFs) had been destroyed. The continued use of chemical weapons in Syria has raised questions about Syrian compliance. In addition, the OPCW has not been able to verify the completeness of the Syrian initial declaration, part of Syria's obligations after having joined the CWC. For years, the United States, the OPCW Director General, and other governments have asserted that Syria had not declared all of its chemical weapons stocks and facilities. The OPCW's Declaration Assessment Team (DAT) continues to investigate "gaps, inconsistencies and discrepancies" through interviews and lab analysis of samples from site visits according to OPCW Executive Council reports. The latest report said that since the government of Syria has not answered the DAT's inquiries, the OPCW "cannot fully verify that the Syrian Arab Republic has submitted a declaration that can be considered accurate and complete in accordance with the Chemical Weapons Convention." A technical meeting to resolve these differences was held in mid-March. International Investigations of CW Use Since the first reports of alleged chemical weapons use during the conflict in Syria, the U.N. Secretary-General, the U.N. Security Council, and the CWC Executive Council have formed several different bodies to investigate chemical weapons use in Syria, outlined below. Of these, OPCW inspections to verify CWC compliance as well as the OPCW Fact Finding Mission are the only two currently functioning: In response to the Syrian government and other governments' request, in March 2013, the U.N. Secretary-General established the United Nations Mission to Investigate Allegations of the Use of Chemical Weapons in the Syrian Arab Republic . The Syrian government alleged that opposition forces had used chemical weapons at Khan al-Asal on March 19, 2013, while opposition forces had accused the Asad government of CW use there. Following a U.S.- and Russian-brokered deal with Syria to join the CWC, the Security Council established the U . N . -OPCW Joint Mission to oversee the removal of chemical weapons in Syria between October 2013 and June 2014. After Syria joined the CWC in September 2013, the OPCW was responsible for overseeing the verification of its initial declaration and continues to monitor destruction of chemical weapons facilities in the country. The OPCW Director-General declared the creation of a Fact Finding Mission (FFM) in Syria on April 29, 2014, in response to new allegations of the use of chlorine as a weapon from December 2013 to April 2014. The CWC allows for the OPCW Director General to start an investigation into chemical weapons use in a member state with its permission. The Syrian government agreed to accept the FFM and provide security. The FFM did not have authority to attribute attacks until a decision was taken by a special session of the CWC member states in June 2018. That decision gave the FFM authority to attribute as part of its investigations. On August 7, 2015, the U.N. Security Council unanimously adopted Resolution 2235, which established a new OPCW-U.N. Joint Investigative Mechanism (JIM) tasked with identifying "to the greatest extent feasible" those responsible for or involved in chemical attacks identified by the OPCW fact finding mission. The JIM's mandate expired in November 2017. Earlier U.N. and OPCW investigations starting in 2013 had not been tasked with assigning responsibility for alleged attacks but were to identify whether and which type of chemical weapons were used. This changed with the JIM, which was mandated to attribute attacks. The JIM was to have access anywhere in Syria; however, the JIM's mission was complicated by the security situation on the ground. The OPCW FFM and JIM have concluded with a high degree of confidence that chemical weapons were used in Syria in 48 incidents from April 2014 to November 24, 2017. All incidents occurred in governorates considered by the Syrian government as outside its effective control from 2014 to present. The JIM was able to attribute the use of chemical weapons in 7 of these 48 incidents. The JIM concluded that the Syrian Armed Forces dropped barrel-bombs containing chlorine or a chlorine-like substance from helicopters on towns in the Idlib Governorate in three attacks: Talmenes on April 21, 2014, Qmenas on March 16, 2015, and Sarmin on March 16, 2015. The FFM concluded in its June 2017 report that sarin had been used as a weapon in Khan Sheikhoun, Idlib Governorate, on April 4, 2017. The JIM concluded on October 26, 2017, a few weeks before the expiration of its mandate, that the Syrian Armed Forces used sarin-filled aerial bombs in the Khan Sheikhoun attack, and that ISIL used sulfur mustard-filled mortars in attacks in Um Housh, Aleppo Governorate, on September 15 and 16, 2016. The Security Council extended the mandate of the JIM through November 2017 but further attempts to renew the mandate were blocked by Russia, which argues for a wider regional coverage. In January 2018, the French government gathered 30 countries in Paris to announce a new effort, the "International Partnership against Impunity for the Use of Chemical Weapons," to raise awareness of the issue, strengthen international action against CW use, and bolster international pressure on Syria. Then-U.S. Secretary of State Rex Tillerson attended. Repeated efforts by these states to pass U.N. Security Council resolutions condemning attacks have been blocked by a Russian veto on multiple occasions. The latest incidence of chemical weapons use on April 7, 2018, elevated these issues again to the U.N. Security Council, where Russia defends the Syrian stance. The United States, United Kingdom, and France proposed a U.N. Security Council Resolution in support of a U.N. investigation into who was responsible for the April 7 attack, but the resolution was vetoed by Russia. Nevertheless, under the U.N. and OPCW mechanisms already in place from past Security Council resolutions, the OPCW's Fact-Finding Mission (FFM) continued to investigate instances of use, including the April 2018 attack in Douma. In August 2011, the U.N. Human Rights Council established an Independent International Commission of Inquiry into human rights abuses and violations of international law in the Syrian conflict. The Commission has documented the use of prohibited chemical weapons in Syria and is specifically mandated to identify perpetrators. It is instructed "where possible, to identify those responsible with a view to ensuring that perpetrators of violations, including those that may constitute crimes against humanity, are held accountable." The Commission of Inquiry's 2017 report says that between March 2013 and March 2017, it documented 25 incidents of CW use in Syria, "of which 20 were perpetrated by government forces and used primarily against civilians." Outlook The victory of pro-Asad forces in the broader conflict appears likely, and, from a U.S. perspective, that may further complicate several unresolved issues, including the stabilization and governance of areas recaptured from the Islamic State; the resolution of security threats posed by extremist groups in northwest Syria; the return and reintegration of internally and externally displaced Syrians; the reconstruction of conflict-damaged areas; the management of Syria-based threats to Syria's neighbors; and, the terms of a postconflict political order in Syria. In light of current trends and conditions related to these issues, Administration officials and Members of Congress may reexamine appropriate terms and conditions for U.S. investment, force deployment, and the nature of relationships with U.S. partners in and around Syria. Consolidating Gains Against the Islamic State Combatting the Islamic State in Syria has been the top priority for U.S. policymakers since 2014. Prior to President Trump's announcement in December 2018 that U.S. military forces would withdraw from Syria, U.S. policymakers had stated their intention to train and equip local forces to hold and secure areas recaptured from the Islamic State. They also had signaled that U.S. funds would no longer be invested at previously prevailing levels to stabilize conflict-damaged areas under U.S. partner control in Syria's northeast. Instead, the Trump Administration seeks to encourage coalition members and U.S. partners to contribute to stabilization efforts as a means of lowering the direct costs to the United States. Questions about program management, coordination, and evaluation may have accompanied what was expected to have been a planned shift toward joint stabilization. More fundamental questions now exist about the future of security and stabilization efforts amid U.S. plans for military withdrawal. The Administration's FY2020 defense funding requests suggest it plans to continue to support U.S. partner forces, but the potential reintegration of areas of Syria's east and northeast by the Asad government—whether by force or negotiation—raises other challenging policy questions. If the resurgent Asad government adopts a confrontational posture toward withdrawing U.S. forces and their local partners, renewed conflict could result and create new threats to U.S. personnel, demands on U.S. resources, and dilemmas for U.S. decisionmakers. If the Asad government adopts a relatively conciliatory approach toward U.S. partners and moves to reintegrate the northeast under its control through negotiation, it may seek to absorb U.S.-trained and -equipped forces into its own ranks. In light of standing and proposed restrictions on the use of U.S. nonhumanitarian funding in Asad-controlled areas, the expansion of Syrian government control to the areas of northeastern Syria recaptured from the Islamic State could impose limits on U.S. involvement in stabilization and/or counterterrorism activities. Conflict in Northwestern Syria Areas of Idlib province are the most significant zone remaining outside of government control in western Syria, and pro-Asad forces may launch military operations to reclaim areas of the province in the coming months. Although infighting among anti-Asad groups in the province escalated in 2018 and mutual suspicions remain between Syrian and non-Syrian fighters, extremist groups and some opposition fighters relocated to the province are expected to forcefully resist any Syrian government military campaign. Turkish forces present in some areas also may oppose or actively resist pro-Syrian government forces if hostilities erupt. The wide-scale use of military force by the Syrian government and its supporters against opposition-held areas of Idlib would likely result in significant civilian casualties and displacement and could generate renewed calls for U.S. or coalition military intervention to protect and aid civilians. The presence in Idlib of Al Qaeda-aligned individuals remains a security concern of the United States and its allies, but the ability of U.S. and coalition forces to operate in or over Idlib may continue to be complicated by Syrian government disapproval and Russian military capabilities. If the Syrian government delays or defers action against opposition-held areas of Idlib, extremist groups hostile to the United States could enjoy some degree of continued safe haven. The Asad government also might seek to leverage the persistence of an extremist threat in Idlib to aid in its consolidation of domestic political and international diplomatic support for Asad's continued rule. The Future of Displaced Syrians Conflict in Syria has taken the lives of hundreds of thousands of people and has displaced millions within the country and beyond its borders. As the intensity of conflict has declined in some areas of the country, displaced Syrians have faced difficult choices about whether or how to return to their home areas amid uncertainty about security, potential political persecution, crime, economic conditions, lost or missing documentation, and prospects for recovery. The Asad government is actively encouraging internally displaced Syrians to return home and is seeking the return of Syrian refugees from neighboring countries under a Russian-designed plan. Humanitarian advocates and practitioners continue to raise concerns about the security and protection of returnees and displaced individuals in light of conditions in many areas of the country and questions about the Syrian government's approach to political reconciliation. In addition, mechanisms and mandates that have provided for the delivery of humanitarian assistance across the Syrian border without the consent of the Syrian government could face renewed scrutiny in coming months, and the Asad government and its backers may pressure neighboring countries to forcefully return Syrian refugees that are within their jurisdictions. The United States remains the leading donor for international humanitarian efforts related to Syria, and U.S. policymakers may face a series of decisions about whether or how to continue or adapt U.S. support in light of changing conditions. Reconstruction In 2017, U.N. Special Envoy for Syria Staffan de Mistura estimated that Syria's reconstruction will cost at least $250 billion, and a group of U.N.-convened experts estimated in August 2018 that the cost of conflict damage could exceed $388 billion. The Trump Administration has stated its intent not to contribute to the reconstruction of Asad-controlled Syria absent fundamental political change and to use U.S. diplomatic influence to discourage other international assistance to Asad-controlled Syria. Congress also has acted to restrict the availability of U.S. funds for assistance projects in Asad-controlled areas and is considering legislation that would further restrict such assistance through FY2024 ( H.R. 1706 ). In the absence of U.S. engagement, other actors such as Russia or China could conceivably provide additional assistance for reconstruction purposes, but may be unlikely to mobilize sufficient resources or adequately coordinate investments with other members of the international community to meet Syria's considerable needs. Predatory conditional assistance could also further indebt the Syrian government to these or other international actors and might strengthen strategic ties between Syria and third parties in ways inimical to U.S. interests. A lack of reconstruction, particularly of critical infrastructure, could delay the country's recovery and exacerbate the legacy effects of the conflict on the Syrian population, with negative implications for the country's security and stability. Addressing Syria-based Threats to Neighboring Countries Aside from terrorism threats posed by Syria-based Sunni Islamist extremists, U.S. partners and allies among Syria's neighbors perceive threats from Syria-based Iranian forces and associated militia, the reconstituted Syrian military and security services, Russia's presence, and the activities of Syria-based Kurdish armed groups. Asad's post-2015 fortunes in the conflict are largely attributable to the support of Russia and Iran. While there are some tensions reported between Syrian leaders and their foreign partners, it is difficult to foresee a scenario in the short term in which the current Syrian government would seek or be in a position to compel a fundamental change in the posture or presence of Russian or Iranian forces inside Syria. The Syrian security services, once severely degraded, have reconstituted some of their lost capabilities and may continue to grow in strength and coherence. For U.S. partners like Israel and Jordan, these conditions pose long-term strategic challenges, and any independent military or diplomatic actions on their part to address them in turn may create challenges in their relationship with the United States. Similarly, the Turkish government expresses continuing concern about the presence and power in Syria of armed Kurdish groups, including groups partnered with the United States. Turkish military deployments inside Syria are ongoing and the prospect of confrontation between Turkish forces, U.S. forces, and their respective partners remains a real one. U.S. plans for any enduring partnership with Kurdish-led or -constituted armed groups in Syria or for an enduring U.S. presence in areas under their control would likely have caused related tensions in U.S. relations with Turkey, Syria, Russia, and Iran to persist. If Kurdish armed groups reconcile and align with the Asad-led government in the wake of U.S. drawdown or withdrawal, it could increase the likelihood of more pronounced confrontation between Turkey, the Syrian government, and its allies. An abrupt severance of all U.S. support for Kurdish groups also could sour U.S. relations not just with Syrian Kurds, but with Kurdish populations and leaders in other regional countries. Syria's Political Future Since 2011, the United States has pursued a policy of seeking fundamental political change in Syria, initially reflected in U.S. calls for President Asad to step aside. The Trump Administration in 2018 stated that it seeks behavior change rather than regime change in Syria. However, the Administration still calls for a political settlement to the Syria conflict based on UNSCR 2254—which requires the drafting of a new constitution and the holding of U.N.-supervised elections. Asad's reelection in self-administered 2014 elections and his subsequent reconsolidation of security control in much of western Syria may limit the likelihood of substantive political change in line with U.S. preferences. U.N.-led negotiations over a settlement of the conflict remain open-ended, but appear unlikely to result in the meaningful incorporation of opposition figures or priorities into new governing arrangements in the short term. Alternative negotiations backed by Asad's Russian and Iranian supporters have their own logic and momentum, and place Syria's opposition groups in a political predicament. Congress and the Administration may reexamine what remaining points of leverage the United States can exercise or whether new points of leverage could be developed that might better ensure a minimally acceptable political outcome. Members of Congress and Administration officials may differ among themselves over what such an outcome might entail. Perceptions among Syrian opposition supporters of U.S. abandonment or acquiescence to an Asad victory may also have long-term diplomatic and security consequences for the United States and its partners. Implications for Congress The 115 th Congress appropriated defense funds for FY2019 and the 116 th Congress has appropriated foreign assistance funds for FY2019. As discussed above, Congress conditioned the availability for obligation of some of the defense funds on the Administration's provision of a new strategic plan for Syria and the delivery of oversight reporting on current Syria programs to Congress. As of March 2019, Congress was reviewing the Administration's responses and its FY2020 requests for additional funding. Questions remain about the specifics of the Administration's planned military withdrawal as well as the decision's effect on other U.S. priorities. The 116 th Congress may attempt to reach consensus on a formal congressional counterproposal to the Administration's priorities and initiatives, and such a task is likely to be challenging if past trends in congressional debate prevail. As with Administration policy decisions, Asad's likely eventual victory in the conflict runs counter to long-stated congressional preferences and thus complicates appropriation, authorization, and sanctions decisions. Principal questions for Congress for the future may concern the extent and nature of conditions Congress places on U.S. engagement with the Asad-led government and on the expenditure of U.S. funds for any remaining U.S. programs in Asad-controlled areas. For the foreseeable future, the essential dilemma for Members of Congress and the Administration may remain how to pursue U.S. counterterrorism and stabilization goals in Syria while maintaining a minimal U.S. military footprint in the country and avoiding actions that further empower the Asad government. While this may be accomplished in part by working through local partners and regional allies, these may also have interests and goals in Syria that do not align with U.S. preferences. New efforts by the Asad government and its external backers to assert the Syrian government's sovereignty could prompt additional scrutiny of residual U.S. and coalition military operations inside the country, to include partnership with local forces. Observers, U.S. officials, and many Members of Congress continue to differ over which incentives and disincentives may prove most effective in influencing various combatants in Syria and their supporters. Still less defined are the long-term commitments that the United States and others may be willing to make to achieve an inclusive political transition; protect civilians; defend U.S. partners; promote accountability and reconciliation; or contribute to the rebuilding of a country significantly destroyed by years of brutal war. Author Contact Information Carla E. Humud, Coordinator, Analyst in Middle Eastern Affairs ( [email address scrubbed] , [phone number scrubbed]) Christopher M. Blanchard, Specialist in Middle Eastern Affairs ( [email address scrubbed] , [phone number scrubbed]) Mary Beth D. Nikitin, Specialist in Nonproliferation ( [email address scrubbed] , [phone number scrubbed])

Since 2011, the Syria conflict has presented significant policy challenges for the United States. (For a brief conflict summary, see Figure 2). U.S. policy toward Syria since 2014 has prioritized counterterrorism operations against the Islamic State (IS, also known as ISIL/ISIS), but also has included nonlethal assistance to Syrian opposition groups, diplomatic efforts to reach a political settlement to the civil war, and humanitarian aid to Syria and regional countries affected by refugee outflows. U.S. forces deployed to Syria have trained, equipped, and advised local partners under special authorization from Congress and have worked primarily "by, with, and through" those local partners to retake nearly all areas formerly held by the Islamic State. Following an internal policy review, Administration officials in late 2018 had described U.S. policy toward Syria as seeking (1) the enduring defeat of the Islamic State; (2) a political settlement to the Syrian civil war; and (3) the withdrawal of Iranian-commanded forces. President Trump's December 2018 announcement that U.S. forces had defeated the Islamic State and would leave Syria appeared to signal the start of a new U.S. approach. However, in February 2019, the White House stated that several hundred U.S. troops would remain in Syria, and the President is requesting $300 million in FY2020 defense funding to continue to equip and sustain Syrian partner forces. The FY2019 National Defense Authorization Act (P.L. 115-232) required the Administration to clarify its Syria strategy and report on current programs in order to obligate FY2019 defense funds for train and equip purposes in Syria. The United States continues to advocate for a negotiated settlement between the government of Syrian President Bashar al Asad and Syrian opposition forces in accordance with U.N. Security Council Resolution 2254 (which calls for the drafting of a new constitution and U.N.-supervised elections). However, the Asad government's use of force to retake most opposition-held areas of Syria has reduced pressure on Damascus to negotiate, and U.S. intelligence officials in 2019 assessed that Asad has little incentive to make significant concessions to the opposition. U.S. officials have stated that the United States will not contribute aid to reconstruction in Asad-held areas unless a political solution is reached. The United States has directed more than $9.1 billion toward Syria-related humanitarian assistance, and Congress has appropriated billions more for security and stabilization initiatives in Syria and neighboring countries. The Defense Department has not disaggregated the costs of military operations in Syria from the overall cost of the counter-IS campaign in Syria and Iraq (known as Operation Inherent Resolve, OIR), which had reached $28.5 billion by September 2018. The 115th Congress considered proposals to authorize or restrict the use of force against the Islamic State and in response to Syrian government chemical weapons attacks, but did not enact any Syria-specific use of force authorizations. The 116th Congress may seek clarification from the Administration concerning its overall Syria policy, plans for the withdrawal of U.S. military forces, the U.S role in ensuring a lasting defeat for the Islamic State, U.S. investments and approaches to postconflict stabilization, the future of Syrian refugees and U.S. partners inside Syria, and the challenges of dealing with the Iran- and Russia-aligned Asad government.

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Background1 The Republic of Cyprus gained its independence from Great Britain in 1960. At the time, the population living on the island was approximately 77% Greek ethnic origin and roughly 18% Turkish ethnic origin. (This figure has changed over the years, as an influx of mainland Turks have settled in the north.) Maronite Christians, Armenians, and others constituted the remainder. At independence, the republic's constitution defined elaborate power-sharing arrangements between the two main Cypriot groups. It required a Greek Cypriot president and a Turkish Cypriot vice president, each elected by his own community. Simultaneously, a Treaty of Guarantee signed by Britain, Greece, and Turkey ensured the new republic's territorial integrity, and a Treaty of Alliance between the republic, Greece, and Turkey provided for Greek and Turkish soldiers to help defend the island. However, at that time, the two major communities aspired to different futures for Cyprus: most Greek Cypriots favored union of the entire island with Greece ( enosis ), whereas Turkish Cypriots preferred to partition the island ( taksim ) and possibly unite the Turkish Cypriot zone with Turkey. Cyprus's success as a new, stable republic lasted from 1960 to 1963. In 1963, after President (and Greek Orthodox Archbishop) Makarios III proposed constitutional modifications that favored the majority Greek Cypriot community, relations between the two communities deteriorated, with Turkish Cypriots increasingly consolidating into enclaves in larger towns, mostly in the north of the island, for safety. In 1964, Turkish Cypriots withdrew from most national institutions and began to administer their own affairs. Intercommunal violence began to increase between 1963 and 1964 and continued to escalate in the ensuing years. Outside mediation and pressure, including by the United States, appeared to prevent Turkey from intervening militarily on behalf of the Turkish Cypriots. On March 4, 1964, the United Nations Security Council authorized the establishment of the United Nations Peacekeeping Force in Cyprus (UNFICYP) to control the violence and act as a buffer between the two communities. UNFICYP became operational on March 27, 1964, and still carries out its mission today. In 1974, a military junta in power in Athens supported a coup against President Makarios, replacing him with a more hard-line supporter of enosis . In July 1974, Turkey, citing the 1960 Treaty of Guarantee as a legal basis for its move to defend the Turkish Cypriots, deployed military forces to the island in two separate actions. By August 25, 1974, Turkey had taken control of more than one-third of the island. This military intervention had many ramifications. Foremost was the physical separation of the island; widespread dislocation of both the Greek and the Turkish Cypriot populations and related governance, refugee, and property problems; and what the Greek Cypriots refer to as the continued occupation of the island. After the conflict subsided and a fragile peace took root, Turkish Cypriots pursued a solution to the conflict that would keep the two communities separate in two states under the government of either a confederation or a stronger central federal government. In February 1975, the Turkish Cypriots declared their government the Turkish Federated State of Cyprus (TFSC). In 1983, Turkish Cypriot leader Rauf Denktash declared the Turkish Republic of Northern Cyprus (TRNC)—a move considered by some to be a unilateral declaration of independence. At the time, Denktash argued that creation of an independent state was a necessary precondition for a federation with the Greek Cypriots. However, he ruled out a merger with Turkey and pledged cooperation with U.N.-brokered settlement efforts. Thirty-five years later, only Turkey has recognized the TRNC. Between 1974 and 2002, there were numerous, unsuccessful rounds of U.N.-sponsored direct and indirect negotiations to achieve a settlement. Negotiations focused on reconciling the two sides' interests and reestablishing a central government. They foundered on definitions of goals and ways to implement a federal solution. Turkish Cypriots emphasized bizonality and the political equality of the two communities, preferring two nearly autonomous societies with limited contact. Greek Cypriots emphasized the freedoms of movement, property, and settlement throughout the island. The two parties also differed on the means of achieving a federation: Greek Cypriots wanted their internationally recognized national government to devolve power to the Turkish Cypriots, who would then rejoin a Cypriot republic. For the Turkish Cypriots, two entities would join, for the first time, in a new federation. These differences in views also affected the resolution of issues such as property claims, citizenship of mainland Turks who had settled on the island, and other legal issues. These differences in views continue to plague the negotiations today. Annan Plan Negotiations for a final solution to the Cyprus issue appeared to take a dramatic and positive step forward when on November 11, 2002, then-U.N. Secretary-General Kofi Annan presented a draft of "The Basis for Agreement on a Comprehensive Settlement of the Cyprus Problem," commonly referred to as the Annan Plan. The plan called for, among many provisions, a "common state" government with a single international legal personality that would participate in foreign and European Union relations. Two politically equal component states would address much of the daily responsibilities of government in their respective communities. The Annan Plan was a comprehensive approach and, of necessity, addressed highly controversial issues for both sides. Over the course of the following 16 months, difficult negotiations ensued. Turkish Cypriot leader Denktash was replaced as chief negotiator by a more prosettlement figure, newly elected "prime minister" Mehmet Ali Talat. Republic of Cyprus President Glafkos Clerides was replaced through an election with, according to some observers, a more skeptical president, Tassos Papadopoulos. The Annan Plan itself was revised several times in an attempt to reach compromises demanded by both sides. Complicating the matter even more, on April 16, 2003, the Republic of Cyprus signed an accession treaty with the European Union (EU) to become a member of the EU on May 1, 2004, whether or not there was a settlement and a reunited Cyprus. Finally, after numerous meetings and negotiations, and despite a lack of a firm agreement but sensing that further negotiations would produce little else, on March 29, 2004, Secretary-General Annan released his "final revised plan" and announced that the plan would be put to referenda simultaneously in both north and south Cyprus on April 24, 2004. The Turkish Cypriot leadership split, with Denktash urging rejection and Talat urging support. Greek Cypriot President Papadopoulos, to the dismay of the U.N., EU, and United States, but for reasons he argued were legitimate concerns of the Greek Cypriot community, urged the Greek Cypriots to reject the referenda. On April 24, what remaining hope existed for a solution to the crisis on Cyprus was dashed as 76% of Greek Cypriot voters rejected the plan, while 65% of Turkish Cypriot voters accepted it. In his May 28, 2004, report following the vote, Annan said that "the Greek Cypriots' vote must be respected, but they need to demonstrate willingness to resolve the Cyprus problem through a bicommunal, bizonal federation and to articulate their concerns about security and implementation of the Plan with 'clarity and finality.'" The Christofias-Talat Negotiations: 2008-2010 As early as 2004, Talat, as Turkish Cypriot "prime minister," was credited with helping convince the Turkish Cypriots to support the Annan Plan and had been seen as perhaps the one Turkish Cypriot leader who could move the Greek Cypriots toward a more acceptable solution for both sides. For his efforts at the time, Talat, on April 17, 2005, was elected "president" of the unrecognized TRNC over the National Unity Party's (UBP) candidate, Dr. Dervis Eroglu, receiving 55.6% of the vote in a field of nine. For roughly the next four years, to little avail, Cyprus muddled through a series of offers and counteroffers to restart serious negotiations even as the Greek Cypriots solidified their new status as a member of the EU, a status not extended to the Turkish Cypriots despite an EU pledge to try to help end the isolation of the north. On February 24, 2008, Demetris Christofias of the Progressive Party of Working People (AKEL) was elected to a five-year term as president of the Republic of Cyprus. Christofias was educated in the Soviet Union and was a fluent Russian speaker. He joined the communist-rooted AKEL party at the age of 14 and rose through its ranks to become leader in 1988. Christofias was elected president of the Cypriot House of Representatives in 2001 and won reelection in 2006. Christofias's election had the backing of the Democratic (DIKO) Party and the Socialist (EDEK) Party. Christofias, in part, tailored his campaign to opposing what he believed was an uncompromising approach toward the Turkish Cypriots by his opponent, incumbent President Papadopoulos, and the stagnation in the attempt to reach a just settlement of the Cyprus problem. Although serious differences existed between the Greek Cypriot and Turkish Cypriot sides over a final settlement, Christofias took the outcome of the vote as a sign that Greek Cypriots wanted to try once again for an end to the division of the island. In his inaugural address, President Christofias expressed the hope of achieving a "just, viable, and functional solution" to the Cyprus problem. He said that he sought to restore the unity of the island as a federal, bizonal, bicommunal republic; to exclude any rights of military intervention; and to provide for the withdrawal of Turkish troops and, ultimately, the demilitarization of the island. Christofias also reaffirmed that the 2004 Annan Plan, which he himself opposed at the time, was null and void and could not be the basis for a future settlement. After Christofias's election, Turkish Cypriot leader Talat, a long-time acquaintance of Christofias, declared that "a solution in Cyprus is possible by the end of 2008." He also declared that "the goal was to establish a new partnership state in Cyprus, based on the political equality of the two peoples and the equal status of two constituent states." While the negotiations between Christofias and Talat appeared to get off to a fast start, the differences in positions quickly became apparent, and the talks, although held on a regular basis, soon began to bog down. Talat wanted to pursue negotiations on the basis of the provisions of the old Annan Plan, while Christofias, mindful of the Greek Cypriot rejection of that plan, was keen to avoid references to it. Old differences quickly resurfaced. As the negotiations dragged on well into 2009, it appeared that impatience, frustration, and uncertainty were beginning to mount against both Christofias in the south and Talat in the north. By the end of 2009, perspectives on both sides of the island began to change. Some suggested that the Greek Cypriots sensed that the talks would not produce a desired outcome before the April 2010 elections in the north, in which Talat, running for reelection, was trailing in the polls to Eroglu. If Talat lost, it was argued, the negotiations were likely to have to begin anew with an entirely different Turkish Cypriot leadership. Under that scenario, many Greek Cypriots, including members within the political parties of the governing coalition, seemed leery of weakening their hand by offering further concessions. Some Turkish Cypriots, on the other hand, appeared to think that the Greek Cypriot side would not offer Talat a negotiated settlement, betting from the opinion polls in the north that Eroglu would win the April elections and would pull back from serious negotiations, at least for a while as he consolidated his new government and reordered Turkish Cypriot strategy. The Greek Cypriots could then blame the anticipated hard-liners in the north and their presumed patrons in Ankara if the talks collapsed. As the negotiations entered 2010, it appeared that the window of opportunity to reach a final settlement, at least between Christofias and Talat, was closing fast. Despite the fact that the two sides had been in negotiations for almost 18 months and in close to 60 meetings, they appeared to have had very little to show for their efforts. In his New Year message to the Greek Cypriots, Christofias suggested that while some progress had been made in a few areas, the two sides were not close to a settlement. The intensive dialogue between Christofias and Talat resumed on January 11, 2010, but after three sessions the talks seemed to have reached a standstill, with the gap between the respective positions of President Christofias and Talat on many of the tougher issues seeming to be insurmountable. The last formal negotiating session between Christofias and Talat concluded on March 30, 2010, with no new developments. In the run-up to the final session there was some speculation that both sides would issue a joint statement assessing the negotiations up to that point and perhaps even announcing some of the areas in which convergences between Christofias and Talat had been achieved. Speculation was that Talat had wanted something positive to take into the final days of the election campaign and had presented Christofias a report summarizing what the Turkish Cypriots understood to have been achieved. Christofias, however, was already under pressure from his coalition partner, DIKO, and former coalition partner, EDEK, not to issue such a statement, which could have been interpreted as an interim agreement. On March 30, 2010, Christofias and Talat issued a short statement suggesting that they had indeed made some progress in governance and power sharing, EU matters, and the economy, but they did not go beyond that. On April 1, Talat, feeling he needed to say more to his Turkish Cypriot constituents about the negotiations, held a press conference at which he outlined his understandings of what he and Christofias had achieved to that point. Christofias would neither confirm nor deny what Talat had presented. A New Era: Christofias and Eroglu On April 18, 2010, Talat lost his reelection bid to his rival Dervis Eroglu of the UBP. Observers believe Talat's defeat was due to a combination of his failure to secure a settlement of the Cyprus problem after almost two years and his inability to convince the EU and others to help end what the Turkish Cypriots believed was the economic isolation of the north. Some observers also noted that an overwhelming number of mainland Turks who had settled in the north and who continued to identify more with mainland Turkey had little interest in unification with Greek Cyprus and supported Eroglu because they believed his views were consistent with theirs. Eroglu, then a 72-year-old physician and long-time politician, won the election with just over 50% of the vote. Eroglu was seen as having a combative style and hard-line views similar to former Turkish Cypriot leader Rauf Denktash, particularly in seeking more autonomy for each community. Eroglu also headed a party in which some of its followers had advocated a permanently divided island and international recognition for the TRNC. It was reported that during the campaign Eroglu may have suggested that perhaps Cyprus should consider a kind of "soft divorce" similar to what the Slovaks and Czechs did when they separated. During the campaign, Eroglu also criticized Talat for what he thought were too many concessions to the Greek Cypriot side, including the agreement that a reunited Cyprus would hold a single sovereignty through which both sides would reunite. Nevertheless, even while criticizing Talat's positions, Eroglu insisted that negotiations would continue under his presidency. Upon assuming his new office, Eroglu wrote a letter to U.N. Secretary-General Ban Ki-moon expressing his willingness to resume the negotiations under the good offices of the U.N. and at the point where the negotiations between Talat and Christofias had left off. Despite Eroglu's position regarding the resumption of talks, most political elements on the Greek Cypriot side saw Eroglu's election as a negative development and expressed their skepticism as to what the future would hold. On May 26, 2010, President Christofias and Turkish Cypriot leader Eroglu held their first formal negotiating session. The meeting was held under the auspices of the U.N. Secretary-General's special adviser on Cyprus, Alexander Downer. Almost immediately, a controversy arose when it was reported that Downer read a statement from U.N. Secretary-General Ban congratulating the parties for starting the talks again from where they left off (including the confirmation of existing convergences agreed to by Christofias and Talat), for agreeing to abide by U.N. Security Council resolutions on Cyprus, and for suggesting that a final agreement could be reached in the coming months. Downer's statement immediately drew criticism from several of the Greek Cypriot political parties that were concerned that the references to the convergences arrived at by Christofias and Talat were being considered as agreements by the U.N., a position not shared by the Greek Cypriots. On the other hand, apparently after the May 26 meeting, Eroglu made a statement that the Turkish Cypriots would not be bound by the statement of the U.N. Secretary-General, especially with regard to previous U.N. Security Council resolutions, some of which did include calls for Turkey to withdraw its troops from Cyprus. While Eroglu was trying to clarify that he accepted U.N. resolutions on the parameters of the negotiations, some in the Greek Cypriot leadership seem to question whether Eroglu was trying to redefine the basis under which he would proceed with the negotiations. When the talks resumed in May 2010, Christofias and Eroglu, along with several technical committees and working groups with representatives from both sides, met regularly but made no apparent progress. In September, in an interview with Greek Cypriot press, Eroglu expressed his frustration with the process and accused the Greek Cypriots of treating Turkish Cypriot positions with contempt. He apparently suggested that Christofias needed to inform the Greek Cypriot people that any final solution would involve pain on both sides but also had to minimize social upheaval, especially among the Turkish Cypriot community. When asked what pain Eroglu was prepared to accept, however, he stated that it would not include giving up the Turkish Republic of Northern Cyprus or its flag or sending mainland Turks who settled in the north back to Turkey. In October 2010, Turkish press reported that Eroglu appeared so frustrated with the negotiations that he suggested that Turkish Cypriots had become fed up and no longer believed in the possibility of a mutually agreeable settlement. "As time passes," he said, "the willingness of the two communities to live together is diminishing." For his part, Christofias told the U.N. Secretary-General in September 2010 that both sides were not coming closer to a settlement and that Turkey, given its own domestic and regional problems, "was not ready to solve the Cyprus problem." Although assessments of the negotiations appeared to grow more pessimistic, additional sessions were held through the end of December. Talks were then suspended while Eroglu tended to medical problems. While both sides continued to talk and continued to pledge to seek a solution, neither side had indicated whether progress was being made or that any compromises were possible. On January 1, 2011, Christofias declared his disappointment over the passing of another year without a settlement and accused Turkey of not making any effort to promote a solution to the Cyprus issue. In mid-April 2011, the Republic of Cyprus entered into a parliamentary election period that concluded on May 22. The outcome of the elections did not seem to suggest that the negotiating position of Christofias would require changes. Although opposition to what was perceived to be Christofias's concessions to the north was voiced during the campaign, none of the three parties with the most hard-line views—EDEK, the pro-Europe EVROKO party, and DIKO—increased its vote share. The impact of the elections would later prove problematic for the negotiations. Similarly, in national elections held in Turkey in June, Cyprus was barely an issue among the competing parties. After the election there was some speculation that then-Turkish Prime Minister Recep Tayyip Erdogan, having won another five-year term, might have been prepared to inject some positive new energy into the Cyprus negotiations in order to help Turkey's flagging accession negotiations with the EU. Later this seemed to have been a misreading of the prime minister's intentions. New Year, Continued Stalemate, End of the Talks Throughout 2011, Christofias and Eroglu continued their futile negotiations, which also included two meetings with U.N. Secretary-General Ban in another attempt by the U.N. to boost momentum for the talks. Ban insisted that the negotiations be stepped up and that the three would meet on October 30 to assess what progress had been achieved. The U.N. would then be prepared to organize an international conference to discuss security-related issues as Turkey suggested. This would be followed by plans to hold referenda on a final solution in both the north and south by the spring of 2012. The hope among some was that by intensifying the negotiations and reaching a solution by the end of 2011, a potentially reunified Cyprus would be prepared to assume the rotating presidency of the EU on July 1, 2012. By the fall of 2011, both sides seemed to have lost a clear urgency to achieve a final solution. Trying to reach a negotiated settlement by the end of October became impractical. As 2011 ended, pessimism abounded, with many feeling that what had not been accomplished in the previous two years could become very difficult to achieve in 2012 as the Republic of Cyprus entered into full preparation for its EU presidency. Many felt that unless there was a major breakthrough in the negotiations by early 2012, the talks would become even more stalemated and could culminate in a potential dramatic turn of events by the summer. Doubts about the prospects of a solution acceptable to both sides were also raised with the release of a public opinion poll that apparently found a growing negative climate and public discontent on the island, an increased ambivalence on the part of Turkish Cypriots, and a possible shift toward a no vote for reunification among Greek Cypriots. The poll also found that society on both sides needed to begin a very public discussion of the parameters of the negotiations and that confidence-building measures were needed to be implemented to increase the levels of trust in the peace process. As 2012 began, both sides were again preparing to travel to New York for a fifth meeting with Ban to assess the progress of the negotiations. Ban had asked both Christofias and Eroglu to come to New York on January 22-24 with significant offers in the areas of governance, economy, and EU affairs so that the "Greentree 2" meeting could facilitate a final deal that would allow the U.N. to convene an international conference in the spring to resolve security-related issues and allow referenda on a final agreement in both the north and south by early summer of 2012. It appeared, however, that even before arriving in New York, neither Christofias nor Eroglu was willing or able to make necessary concessions on the difficult issues of property rights, security, territory, mainland Turks who had "settled" in the north, or citizenship—areas where both sides had long-held and very different positions. The uncertainty of what could be achieved prompted Christofias to question whether the meeting should take place at all. The lack of any progress to that point led some in the Greek Cypriot opposition to suggest the meeting be cancelled and warned Christofias not to accept any deadlines or U.N. arbitration or agree to an international conference without explicit agreements on internal issues. Nevertheless, Greentree 2 took place, and it was reported that both sides had submitted to Ban extensive proposals that each felt could provide the basis for a solution. The Greentree meetings concluded without any new agreement to end the stalemate and led an apparently frustrated Ban to say that he would wait until he received a progress report from his special adviser at the end of March 2012 before deciding whether to convene an international conference, despite Christofias's opposition to any such decision. Christofias and Eroglu resumed their direct negotiations in mid-February, but it appeared unlikely that the stalemate could be broken at that point and that the potential for any agreement looked to be delayed—not only until after the EU presidency in the latter half of 2012, but also until after the February 2013 national elections in the republic. In early April, it was reported that the Turkish Cypriot side had suggested that the U.N.-sponsored talks be terminated once the republic assumed the EU presidency on July 1, 2012. This prompted President Christofias to respond that Turkish Cypriots were no longer interested in a solution, even though, as Christofias suggested, the talks could continue during the EU presidency, as the two issues were not related. In May 2012, and with the EU presidency fast approaching, Christofias understood that the talks could not have achieved anything positive, and although he insisted that the negotiations could have continued during the EU presidency, the U.N. did not. U.N. special envoy Alexander Downer then announced that Ban had decided not to call for an international conference on Cyprus due to the lack of agreement on core domestic issues and further stated that the U.N. would no longer host the leaders' "unproductive" talks. Downer said that the U.N. would reconvene the meetings "when there was a clear indication that both sides had something substantial to conclude." By mid-2012, the convergence of several factors led to the suspension of the talks. One factor was Christofias's intent to make the republic's presidency of the EU a success. Christofias clearly did not want a divisive debate over what would have probably been an unpopular agreement—even if he and Eroglu could have negotiated a settlement—to detract from or ultimately overshadow the Cyprus EU presidency. Eroglu's pronouncement that he would not meet directly with President Christofias during the six-month EU presidency, despite the fact that the settlement negotiations were not part of the presidency's mandate, was also a factor. The emergence of the fiscal and budget crisis in Cyprus brought on in the aftermath of the larger Eurozone crisis also contributed to the demise of the negotiations. Christofias realized that managing a serious fiscal crisis and the presidency of the EU simultaneously would leave, in reality, little time for him to continue any regular negotiations with Eroglu. On May 14, 2012, recognizing his own internal political realities and reverting back to an earlier statement that he would not seek reelection if he was not able to resolve the Cyprus problem, President Christofias announced that he would not seek reelection in 2013, stating that "there are no reasonable hopes for a solution to the Cyprus problem or for substantial further progress in the remaining months of our presidency." By the end of May 2012, the U.N.-sponsored talks, having essentially reached a stalemate, were formally suspended. Neither Christofias nor Eroglu strongly objected to the U.N. decision. While both sides blamed the other for a lack of progress on an agreement, the reaction to the downgrading of the talks appeared to be muted among both the political leaders and the general publics in both communities. In early June, Kudret Ozersay, then the chief adviser to Eroglu for the negotiations, resigned, further signaling that the talks, even at the technical level, would not continue at the same pace. However, Ozersay was soon replaced by Osman Ertuğ as chief negotiator. Elections 2013: The Anastasiades Government and New Talks In January 2013, the Republic of Cyprus entered a period of national elections. With Christofias out of the picture, Nicos Anastasiades of the center-right, democratic DISY party, with the backing of the conservative DIKO and EVROKO parties, emerged as the leader in early public opinion polls. DIKO had been part of the previous Christofias-led government but withdrew from the coalition in disagreement over some of the positions Christofias took in the negotiations with the Turkish Cypriots. Anastasiades's closest challenge came from the AKEL party itself, led by Stavros Malas. Although Anastasiades took the largest number of first round votes, he was forced into a runoff with Malas but eventually emerged victorious. During the campaign, neither candidate offered many concrete proposals regarding the negotiations with the Turkish Cypriots, as the fiscal and budget crisis took center stage. Anastasiades, who had backed the 2004 Annan Plan for a Cyprus settlement, appeared cautious about his intentions other than calling for a settlement, perhaps not wanting to cause a public rift with his DIKO and EVROKO allies, who had opposed the Annan Plan. While foreclosing new discussions based on the old Annan Plan, Anastasiades had suggested that the basis of future talks would have to be broad understandings reached in 1977 and 1979 between the Greek and Turkish Cypriot leadership at the time as well as a 2006 set of principles agreed to by former Cypriot leaders. He also suggested that as president he would not be directly involved in the day-to-day negotiations but would, in time, appoint someone as his representative and principal negotiator. Upon being sworn in as president, Anastasiades did reach out to the Turkish Cypriots, referring to them as citizens of Cyprus but not giving any clear signal as to his timetable for restarting the negotiations. On the other hand, Yiannakis Omirou, then-leader of the parliament, stated that a new national policy was necessary: "We need to denounce the Turkish stance to the international and European community and redefine the Cyprus problem as a problem of invasion, occupation and violation of international law." The new policy, Omirou went on, "must set out the framework for a Cyprus solution and use Cyprus's EU membership and Turkey's EU prospects to exert pressure on Ankara to terminate the island's occupation and accept a solution, in accordance with international and European law." Initially, the Turkish Cypriots appeared cautious about which negotiating partner they expected to see across the table if and when the talks resumed. Would it be Anastasiades, who earlier was sympathetic to many of the provisions of the Annan Plan, or a different negotiator, who was critical of the previous government's negotiating positions and had teamed with what the Turkish Cypriots believed to be hard-line partners who either withdrew from the previous government coalition in part because of the reported "concessions" being offered by Christofias or were consistently critical of the previous government's approach? The Turkish Cypriots had also seemed to set a new standard regarding their own status as a prelude for resuming the talks. Eroglu had stated that the talks could not resume automatically from where they left off and had begun referring to the two "states," a "new dynamic," a "new negotiating table," and a timetable for concluding whatever talks did resume. Even as Anastasiades was being inaugurated, he had to turn his attention to the serious domestic banking and fiscal crises facing the republic. At the same time, Turkish Cypriot and Turkish leadership began to publicly pressure Anastasiades to restart the settlement talks as soon as possible, although it appeared that the Turkish Cypriot side was not proposing any significant compromises or new ideas that would move the talks forward. This prompted Anastasiades to respond that he would not be forced to the bargaining table during this period of economic turmoil and was committed to first addressing the government's fiscal crisis. In mid-May, Foreign Minister Ioannis Kasoulides traveled to New York and Washington to assure everyone that the leadership of the republic was indeed interested in resuming the negotiations but that they needed time to get a handle on the economic crisis on the island. He also made it clear that the Anastasiades administration would not be bound by any previous convergences discussed between his predecessor Christofias and Eroglu and would not agree to any definitive timetable to conclude the talks. Kasoulides also floated the old idea, previously rejected by the Turkish Cypriots (and opposed by some Greek Cypriots who wanted a comprehensive agreement), that as a confidence-building measure on the part of Turkey, the abandoned town of Verosha should be returned to "its rightful owners." In exchange, the Turkish Cypriots could be permitted to use the port of Famagusta for direct trade with Europe under the supervision of the EU. Turkish Cypriots also traveled to Washington with a more upbeat message that 2014 would be a good year to reach an agreement. The Turkish Cypriots, however, rejected the return of Verosha and began speaking more publicly and more often of "the realities on the island," referring to two separate coequal states as well as timetables for concluding the talks. Eroglu had stated that "while there is a Greek Cypriot administration in the South, there is the TRNC state in the North." Ankara, for its part, had already suggested that while it was ready to say "yes" to a negotiated solution, a two-state option was viable if talks could not restart and produce a solution in a timely fashion. Eroglu stated in December 2012 that "the Cyprus problem cannot be solved under existing conditions" and that "a possible settlement of the Cyprus issue could be viable only if it is based on the existing realities on the island," which acknowledges that "there were two different people having two separate languages, religions, nationality and origin and two different states" and that "certainly it was possible to find a solution to make these two people live together, however people should bear in mind, it is [not] realistic to establish one state from two separate states." In late May 2013, Anastasiades and Eroglu finally met, and Anastasiades restated his support for the resumption of the talks but again indicated that the talks could not restart until perhaps October 2013. In July, the Greek Cypriot National Council took the day-to-day responsibility for the negotiations out of the hands of the president, as had been the practice since 2008, and appointed Ambassador Andreas Mavroyiannis of the Foreign Ministry as the Greek Cypriot negotiator. This action increased speculation that the Greek Cypriots were close to proposing that preliminary discussions begin with the goal of resuming the formal negotiations. Throughout the remainder of 2013 and into the beginning of 2014, both sides repeatedly argued over how to restart the talks despite repeated assurances from both sides that they remained committed to restarting the negotiations. Through that period, neither side had been willing to reach agreement on the language of what the Greek Cypriots insisted should be a "joint statement" redefining a set of negotiating goals or outcomes that both sides would strive to achieve. The Turkish Cypriots initially rejected the idea that such an opening statement was necessary but then decided to negotiate language they could be comfortable with. Negotiations between Mavroyiannis and Osman Ertuğ took almost six months to conclude. On February 8, 2014, after what appeared to be a significant intervention by the United States, the Cyprus press reported that an agreement on the language of a "joint declaration" had been reached and that Anastasiades and Eroglu would meet right away to relaunch the negotiations. This was further confirmed when the "joint statement" was released to the public a few days later. The Declaration, which to some became the most comprehensive agreed document on the Cyprus question since the High Level Agreements of 1977 and 1979 or the Annan Plan of 2004, now serves as the basis of the current negotiations. The agreement on the language of the joint statement, however, did not come without a political price for Anastasiades. On February 27, the leader of the government's coalition partner, DIKO, Nicolas Papadopoulos, announced that it was leaving the government in disagreement over the way President Anastasiades was handling the negotiations, much as they did when they quit the Christofias government. It appeared that Papadopoulos—whose father, former President Tassos Papadopoulos, had opposed the Annan Plan—was concerned that Anastasiades had tacitly accepted some of the past convergences that DIKO had opposed. The fact that the joint statement referred only to a "united" Cyprus and not the Republic of Cyprus may have again suggested to DIKO that Anastasiades had come too close to accepting an autonomous Turkish Cypriot state over which the Greek Cypriots would have little or no authority or jurisdiction. Curiously, Ertuğ left his post as negotiator after the Declaration was announced but continued to serve as Eroğlu's spokesperson. The Turkish Cypriots then reappointed former negotiator Kudret Ozersay, one seen as more willing to seek accommodation, as their representative to the talks. Negotiations resumed between Mavroyiannis and Ozersay, with Anastasiades and Eroglu meeting periodically. It remained unclear exactly where the starting point for each of the "chapters" of issues to be negotiated had been set. Both sides had earlier insisted that they would not be bound by past convergences thought to have been achieved in previous negotiations. However, the February joint statement referred to the fact that only "unresolved" issues would be on the table, suggesting that perhaps some previous agreements had, in fact, been accepted. Such a long disagreement first over the need for, and then the language of, the joint statement indicated to many observers that it would continue to be difficult to reach a final solution, particularly in 2014, which marked the 40 th anniversary of the 1974 deployment of Turkish military forces to the island and the 10 th anniversary of the Greek Cypriot vote against the Annan Plan, events that would be observed in very different ways on each side of the island. The pessimism surrounding the potential continuation of the stalemate prompted one well-respected Washington think tank to suggest that a permanent separation of the two sides might become inevitable and that serious consideration should be given to such a possible outcome. The talks did resume in 2014, with Anastasiades and Eroglu meeting several times. In early July, Eroglu was said to have submitted a "roadmap" toward a settlement, which included a national referendum to be held by the end of 2014. This was apparently rejected by Anastasiades. Later in July it was reported that the Greek Cypriots had tabled a 17-point plan addressing their positions on issues for a future agreement while the Turkish Cypriots submitted a 15-point counterproposal. Both proposals were apparently rejected. Not only was there disagreement on how to go forward, but there had been reports that both sides had actually backtracked on several issues (see below). These and other reported roadblocks to the negotiations prompted Greek Prime Minister Antonis Samaras to say in July that no "significant progress" had been made and the Turkish Cypriot official for foreign affairs, Ozdil Nami, to suggest "the peace talks were finished." The last meeting between Anastasiades and Eroglu before a break for the summer was held on July 26 and was reportedly a somewhat tense session, with Anastasiades expressing his frustration with the Turkish Cypriot side. In late August, the United Nations named Norwegian diplomat Espen Barth Eide as the Secretary-General's new special adviser on Cyprus. The talks, hosted by Eide, resumed in September, and when Anastasiades and Eroglu renewed their meetings on September 21, Turkish Cypriot negotiator Kudret Ozersay stated that he felt that "real negotiations are starting now." Unfortunately, Ozersay's optimism did not last very long. Near the end of September, Turkey, sensing an increased interaction among the Republic of Cyprus, Greece, Israel, and Egypt over energy resources in the Eastern Mediterranean, decided, in what was seen as a provocative act, to move its own seismic exploration vessel into the Republic of Cyprus's exclusive economic zone (EEZ) off the southern coast of the island. Turkey then issued what was referred to as a "navigational telex" (NAVTEX) stating that the seismic operations could last until April 2015 unless the Turkish Cypriots were given more of a role in decisions regarding the island's natural resources, specifically energy. Reacting to Turkey's decision to establish a presence in the Cypriot EEZ, President Anastasiades announced in October that he was withdrawing from the settlement negotiations and declared that the talks would not resume until the Turkish seismic vessel was withdrawn from Cyprus's EEZ and the NAVTEX was rescinded. By March 2015, the seismic ship had moved to the port of Famagusta, but the NAVTEX had not been withdrawn. Although the Greek Cypriots insisted that all of the island would eventually benefit from any resources exploited in the waters off the coast, they pointed out that energy, under the provisions of the joint statement agreed to earlier, would be considered a "federal-level" issue and would become part of the dialogue once an agreement was reached. The Turkish Cypriots, for their part, demanded that energy issues become part of the formal settlement negotiations once they resumed. In late October 2014, with the negotiations suspended, Turkish Cypriot negotiator Ozersay was replaced by Ergun Olgun. The suspension of the talks, precipitated for some by an unnecessary action and a possible overreaction, again raised serious doubts regarding the commitment of both sides to achieve a solution that left one former British foreign secretary stating that "the international community should accept the reality that there is division and that you have partition." Through the first four months of 2015, the talks remained in suspension with Anastasiades continuing to hold that Turkey would have to withdraw its seismic ship, rescind the NAVTEX issued in January, and stop threatening existing energy exploration activities off the southern coast of Cyprus. Some believed that political pressure from what would be his normal domestic political allies had forced Anastasiades into a corner, preventing him from backing down from this demand despite some domestic and international pressure to do so. Others believed he was under pressure to hold off on the talks until the national elections in the north, scheduled for April 19, were concluded. By mid-April 2015, Turkey had removed its seismic vessel from Cyprus and did not renew the NAVTEX. However, the election campaign in the north had begun, and both sides accepted the fact that the negotiations would not resume until after the elections. Elections 2015: Akinci and the Resumption of the Negotiations On April 19, Turkish Cypriots went to the polls to elect a new "president." Seven candidates were on the ballot. The incumbent, Dervis Ergolu, emerged with a thin margin of votes over the runner up, Mustafa Akinci, but did not win enough to avoid a second round of voting. On April 26, in the second round of voting, Mustafa Akinci of the small, center-left, Communal Democratic Party (TDA) won the election to become the new leader of the Turkish Cypriots, defeating Eroglu with 60% of the votes. Akinci, a three-time "mayor" of the Turkish Cypriot-administered half of Nicosia, immediately announced that the negotiations would resume as soon as possible in May and that it was his intention to conclude a settlement agreement by the end of 2015. In congratulating Akinci on his election, Anastasiades confirmed that he, too, looked forward to restarting the negotiations as soon as possible. Akinci leads a small political party that played little, if any, role in previous governments or the past negotiation process. His candidacy initially was criticized by some who claimed he was inexperienced. For others, Akinci entered the negotiations unencumbered with any preconditions for the talks or for a settlement. However, while Akinci controlled the "presidency," his party did not control the government. Akinci also did not initially meet with all of the other Turkish Cypriot political parties, and he seemed determined to rely on the business and nongovernmental organization (NGO) communities to help develop and articulate his negotiating positions. It did not take long for the two sides to meet. On May 11, 2015, the U.N. Special Envoy hosted a dinner for the two leaders in what was described as a relaxed and positive setting. Akinci quickly named Ozdil Nami, the former "foreign minister" in the Eroglu government, as the new negotiator for the Turkish Cypriot side. On May 17, 2015, Anastasiades and Akinci held their first formal negotiating session. On May 23, the two leaders took the unprecedented step of walking together down Ledra Street, the symbolic dividing line of the island, in a show of solidarity and hope that this time things would be different. This was the first time that a president of the republic stepped onto territory normally referred to as "occupied" land. Since then, the two leaders have met regularly, including an intensified series of meetings in August and September 2016. The reaction to Akinci among some, although not all, Greek Cypriots appeared to be positive but restrained, with a somewhat upbeat "wait-and-see" attitude prevailing. Many appeared to be relieved that Eroglu and his hard-line approach to the negotiations were gone. With little in the way of determined political opponents acting as a restraint on his negotiating strategy, some felt that Akinci would be more willing to compromise on some of the issues Eroglu would not budge on. On the other hand, not knowing where Akinci's support for a final deal would actually come from, some were not sure exactly what Akinci could compromise on. In August 2015, Akinci held a round of visits and discussions with the political parties, NGOs, and the business community apparently to assess exactly how much leeway he had for compromise. Turkey was another factor for Akinci. Akinci was not seen as a favorite of Ankara during the elections, and Ankara was likely surprised with the margin of his victory. The government in Ankara offered the obligatory congratulations to Akinci, and Turkey's President Erdogan visited the island to meet with the new leader. In fact, it was reported in the Turkish press that Akinci and Turkish President Erdogan had exchanged some unpleasant words immediately after the election. In his victory statement, Akinci reiterated his campaign position that the status of the relationship between Turkey and Turkish Cyprus should change. "It should be a relationship of brothers/sisters, not a relationship of a motherland and her child," he had said. This provoked a somewhat angry response from Erdogan and led the Turkish press to question the future of Turkey's support for the negotiations. In an editorial in the April 28, 2015, edition of the Hurriyet Daily News , the author suggested that Akıncı has been away from active politics for more than a decade. His team is mostly composed of young people unaware of the delicacies and history of the Cyprus problem. Anastasiades might try to score an easy victory. If the Cyprus talks between the "novice" Akıncı team and a ravenous Anastasiades team somehow agree on a deal that favored the demands of the Greek Cypriots, Akinci could dangerously risk fundamental demands of the Turkish Cypriots, forcing the whole process to be derailed in a manner very difficult to revive with extreme effort. In an August 2015 interview, Emine Colak, the former Turkish Cypriot "foreign minister," indicated that Turkey was not trying to manipulate the peace talks and seemed, for the moment, content to let the Turkish Cypriots negotiate their own agreement. Some observers attributed this "hands-off" approach by Turkey as a reason why a positive atmosphere had surrounded the talks and why some concrete progress seemed to have been made. Over the summer and fall of 2015, as the negotiations continued on a regular pace, several new "confidence-building" measures were initiated. The two leaders agreed on the opening of a new border crossing at Deryneia, and for the first time in 40 years, electricity connections between the two sides were reestablished. Returning Verosha to the Greek Cypriots continued to be a confidence-building measure that Anastasiades endorsed, but that issue was mostly deferred by Akinci. Despite the positive atmosphere surrounding the talks, there were words of caution, particularly from Greek Cypriots, who reminded everyone that there was still a lot of ground to cover. For instance, in early September 2015 several Greek Cypriot political parties officially rejected the notion of a bizonal, bicommunal federation as a part of the solution to the Cyprus problem and criticized reported convergences on population size in the north, the rotating presidency, and particularly Turkey's security role. The concerns expressed by the Greek Cypriot opposition were not just reserved for Anastasiades. In late December 2015, Akinci, in an interview on Turkish television, seemed to outline some very basic bottom lines, referred to as his "wish list," on the issues under negotiation. The reaction to Akinci's comments drew swift and negative reaction from several Greek Cypriot political leaders, suggesting that trouble for the talks was brewing just below the surface. Former House Speaker Yiannakis Omirou described Akinci's remarks as "highly indicative of the Turkish side's intentions," and said "Turkey effectively seeks to legalize the results of its 1974 invasion. He [Akinci] continues to support the preservation of Turkey's role as a guarantor, and insists on unacceptable views on political equality and rotating presidency." For some in the opposition, this was a warning to Anastasiades that he should seriously rethink his views if he had made any concessions on those issues. During 2016, the road to a settlement remained difficult and, beyond the negotiators themselves, became somewhat more complicated. Internally, in the north, disputes among the political parties in early 2016 forced the more "friendly-to-Akinci" government coalition to collapse. A new, more conservative Turkish Cypriot coalition government formed that did not include representatives from Akinci's party or parties from the previous coalition. The government was led by "Prime Minister" Huseyin Ozgurgun, whose support for the negotiations went from lukewarm to marked by serious doubts. Ozgurgun became more critical of the talks and spoke out forcefully in favor of retaining Turkish security guarantees. In an August 2016 interview, Ozgurgun reminded observers that Akinci's negotiating team did not include any representatives from the government, suggesting that the government and the negotiators were "disconnected." The government also included "Deputy Prime Minister" Serdar Denktash, the son of the former icon of the Turkish Cypriots. Some believed that he retained his father's hard-line skepticism of any deal and had suggested that if an agreement was not reached by the end of 2016, a referendum should be held in the north to determine whether the Turkish Cypriots wanted the negotiations to continue in 2017. Such a referendum idea was dropped as the negotiations entered 2017. Then-"Foreign Minister" Tashsin Ertugruloglu, who opposed the Annan Plan, also had become more public in expressing the view that no agreement could be achieved. These three influential figures eventually became a political problem for Akinci as negotiations toward a tentative agreement were pursued. In the south, elections were held in spring 2016 for the Greek Cypriot House of Representatives. The two largest parties, the governing DISY party and the pro-settlement AKEL, lost some ground, and for the first time a nationalist/populist party (ELAM) entered the House. This party was seen by some as an offshoot of the radical right Golden Dawn in Greece. Although small in number, like several of the other parties, ELAM is skeptical of any power-sharing arrangement with the Turkish Cypriots. In addition to ELAM, in September 2016, the DIKO and Green parties suggested that the parliament pass a resolution stating that no agreement could include "foreign guarantees" and "foreign troops." DIKO's chairman reportedly stated that there no longer was confidence in the president. Despite the internal political developments, both sides proceeded with the negotiations through 2016. The mood appeared to be as positive and constructive as it had ever been, at least among the negotiators, with more frequent references to being farther along on the road to a settlement than in the past. There were also more positive stories in the international press and significant expressions of support for the negotiations from many world capitals, indicating perhaps that progress was actually being achieved. Despite the level of optimism displayed by the leaders of the two sides, many recalled a similarly hopeful atmosphere in early 2008, after Christofias was elected president on a campaign filled with commitments of a quick conclusion to the negotiations. At that time, Turkish Cypriot leader Ali Talat declared that because he and Christofias shared the same vision of a future for Cyprus, the two could overcome years of disagreement and mistrust and that the negotiations could conclude within six months. Akinci's declarations regarding a quick settlement by the end of 2015 raised expectations, but that deadline, never accepted by Anastasiades, was missed—as, subsequently, was the end of 2016 target. To most observers, the two leaders seemed to have come closer to reaching a settlement than at any time since 2004, when the Annan Plan for a settlement and unification of the island was actually voted on (and ultimately rejected by the Greek Cypriots). However, the normal frustrations that inevitably appear in these negotiations again mounted over the two sides' inability to establish an end point at which time an agreement—not perfect, but acceptable to both sides—would be reached. Some Turkish Cypriot leaders, including Akinci, had begun to suggest that the round of talks in 2016 could be the last if an agreement was not reached. By the beginning of August 2016, both sides had insisted that significant convergences acceptable to both leaders had been reached on many issues. At this point, the leaders again raised the possibility of reaching an agreement by the end of 2016. Such a timetable would have allowed them to hold referenda in both communities by spring 2017, possibly before the next presidential election cycle began in the republic. Having agreed to try to reach a settlement by the end of 2016, Anastasiades and Akinci accelerated their negotiations after a short early August recess. In late August and early September, eight intense sessions were held in advance of the U.N. General Assembly's annual meeting in mid-September. The idea was to achieve enough progress by then on many of the basic issues that both sides would then ask the U.N. Secretary-General to convene a five-party conference (with the two Cypriot communities and the security guarantee countries, Greece, Turkey, and the UK) in December to discuss the issue of security guarantees and finalize an agreement. Although no five-party conference was announced at the U.N. meeting, the two leaders returned to Cyprus and agreed to another series of accelerated sessions in October and November, to further address the issue of territory and to move to a multiparty conference on security guarantees with the intention of finalizing an agreement. Despite the progress in areas such as economic affairs, EU affairs, citizenship, and governance structures, serious differences on a rotating presidency, territory, and the sensitive chapter on security guarantees—the first time these issues had been formally discussed since the 2004 Annan Plan—remained wide enough to prevent an actual agreement from being achieved during those sessions. Mont Pelerin In November 2016, both sides agreed to travel to Mont Pelerin, Switzerland, to further address the more difficult issue of territory and to move to an agreement on holding a five-party conference on security guarantees. During the first week of the Mont Pelerin talks, which began on November 8, progress was reported on several issues and maps depicting what both sides thought should be the new boundaries of the new constituent states were discussed. Disagreement over the amount of territory both sides would eventually claim and the number of displaced persons (mostly Greek Cypriots) who would be allowed to return to the new territories brought the talks to a standstill. The Greek Cypriots demanded that some 90,000 displaced Greek Cypriots be returned to new territory that would come under Greek Cypriot administration. The Turkish Cypriots insisted that the number be closer to 65,000. Faced with the loss of territory and a potential influx of Greek Cypriots into areas once controlled by the Turkish Cypriots, Akinci suggested that no deal on territorial adjustment could be made without a discussion and agreement on security guarantees. President Anatasiades rejected the security-guarantee demand, noting that the Mont Pelerin sessions were only intended to reach an agreement on territorial adjustment and, if accomplished, a discussion of the security issues would be held. Amid this disagreement, the meetings were suspended for one week while both sides consulted with their advisers. Apparently, during this time, Ankara reiterated that the Turkish Cypriots should not agree to any territorial concessions without security guarantees, which could only be agreed to in a five-party or a multiparty conference to include Turkey. When the talks reconvened on November 20 and 21, 2016, no agreement could be reached, as the Turkish Cypriots insisted on a date for a five-party conference and maintained that both territory and security be included in those talks. The Greek Cypriots refused to agree to set a date for the five-party conference, and the talks ended. Both sides returned to Cyprus to reflect on the negotiations and to decide how to proceed. The Greek Cypriots wanted the resumption of the talks to begin where the Mont Pelerin talks on territory ended, including the presentation of maps defining new territorial boundaries. The Turkish Cypriots insisted that the talks could only restart if the Greek Cypriots agreed to a formal date for a five-party conference on territory and guarantees. Not wanting to lose the momentum achieved at that point or to have the talks end, Anastasiades and Akinci on December 1, 2016, after a dinner hosted by U.N. Special Adviser on Cyprus Espen Barth Eide, agreed to meet as necessary in December 2016 and early January 2017. The goal was to bridge the gaps and resolve the disagreements that existed on most issues. In agreeing to the additional meetings, both sides set a timetable that included the following: After the additional meetings, the leaders would meet in Geneva on January 9, 2017, to discuss and wrap up all pending issues, outside of territory and security. On January 11, 2017, the two sides would present their respective proposed maps for a territorial adjustment. A five-party conference with the participation of the guarantor powers would be convened on January 12, 2017, to discuss and settle both the territory issue and the future of security guarantees, paving the way for a final agreement. These new developments again reinforced the observation that Anastasiades and Akinci still felt that a final agreement looked to be achievable. Both leaders subsequently instructed their negotiators to meet regularly and agreed to meet with each other as necessary until January 9, 2017, when the negotiations would reconvene in Geneva. After the missed opportunity at Mont Pelerin, Anastasiades's decision to resume the talks was not without additional controversy. In December 2016, after the announcement that the talks would resume, the leaders of DIKO, EDEK, the Citizens Alliance, and the Greens criticized Anastasiades's decision to accept an international conference on guarantees before resolving the other issues, as he had promised. Anastasiades reportedly was accused of giving in to Akinci's demand for a five-party conference on security without having achieved any territorial adjustments. The Citizens Alliance leader, Lillikas, supposedly asked for Anastasiades's resignation. Geneva Conference On January 9, 2017, Anastasiades and Akinci, accompanied by their negotiating teams, leaders of the major political parties, and EU representation, convened in Geneva, Switzerland, to begin what was hoped to be the final phase of the negotiations. The meeting also ushered in a new, historic element of the talks in that the guarantor nations, including Turkey, would be present at the negotiating table. For some, it was curious that Turkey agreed to go to Geneva while Ankara worked through a controversial constitutional referendum at home. Ankara had to be aware that any security concessions in which Turkey was required to withdraw its military forces or forego its right to defend northern Cyprus, at the demand of the Greek Cypriots or Greece, could have been interpreted as weakness, even as Ankara was trying to keep Iran's influence at bay and to negotiate with Moscow over Syria and with the United States over the Kurds. However, once Turkey agreed to attend the Geneva conference, the Greek Cypriots could have used any Turkish refusal to offer meaningful compromises on security and guarantees to prove that Turkey was not interested in seeking a fair solution. Ankara's decision led some to wonder if its presence at Geneva was merely intended to reinforce Akinci's earlier demands that Anastasiades agree to such a conference or to demonstrate that Turkey, despite Greek Cypriot claims that Ankara was not interested in a solution, was indeed willing to continue negotiations. However, Turkey's apparent opposition to certain territorial concessions that Akinci may have offered seemed to complicate the negotiations at a critical time. It is conceivable that Ankara's strategy to inject new complications at Geneva could have been Turkey's attempt to stall the negotiations and build international pressure on the Greek Cypriots to compromise, even on an interim basis, on Turkish troops and guarantees, which would have allowed Turkey's military a face-saving exit from Cyprus and would have reassured the Turkish Cypriots that they would still be protected. The Geneva meetings apparently began on a positive note with what was reported to be a convergence on the sticking point of a rotating presidency and even more public references to a "United Federal Cyprus." Nevertheless, on January 11, 2017, when both sides presented their proposed maps for territorial adjustment to the U.N., the negotiations appeared to veer off course. Although the differences in the amount of territory each side demanded came within approximately 1% of each other, the symbolism of the differences was notable. Each side found the other's demands to be unacceptable. For instance, the Greek Cypriot map included the return of Morphou, whereas the Turkish Cypriot map did not. After failing to accept each other's territorial demands, the negotiations ran into additional problems on January 12, 2017, when the five-party negotiations convened. Ankara rejected the Greek Cypriot territorial demand and insisted that Turkey's security role in the north be preserved; Greece insisted that Turkey's security role end. Other issues, including political equity concerns expressed by the Turkish Cypriots and Turkey's curious demand that the EU's four freedoms (movement of people, goods, services, and property rights), implied in any solution, also be applied to Turkish citizens living in the north, became sticking points. Apparently realizing that the security-guarantee issue and Turkey's future role in the north would not be resolved, and with Anastasiades's rejection of the introduction of the four freedoms proposal, Turkish Foreign Minister Mevlut Cavusoglu departed Geneva. The conference ended, with some questioning why Turkey even attended the meeting. Both sides returned to Cyprus empty-handed and disappointed. Although the Geneva talks came to a surprising and disappointing end, with each side blaming the other, Anastasiades and Akinci would not let the failure to make any significant progress end the momentum for which they had been praised earlier in the conference. The leaders agreed to establish a working group of technical experts to continue ironing out differences and prepare for new meetings later in January or February 2017. That working group returned to Mont Pelerin for two days of what Greek Cypriot negotiator Mavroyiannis described as very positive discussions. Once again, Anastasiades and Akinci were unable to overcome some of the barriers that have blocked their ability to secure a final agreement. In addition, the strong statements voiced by both Greece and Turkey regarding security guarantees raised concern among some that the negotiations had, in part, been taken out of Cypriots' hands and put into the Turkey-Greece relationship. Equally important to the two sides' inability to overcome long-standing differences was the fact that political opposition to the two leaders' negotiating positions had begun to increase. Some in the opposition feared that Anastasiades had come under pressure from the international community to accept only a reduced Turkish military presence in the north and some form of right of intervention. Some complained that U.N. Adviser Eide was favoring the Turkish Cypriot view of "reduce but not remove" Turkish troops or security guarantees. Although opponents of the talks on both sides were invited to Geneva, four of the five major Greek Cypriot political parties took issue with Anastasiades over his positions. Akinci fared no better, with leaders of the Turkish Cypriot government apparently objecting to the map he presented. The opposition forces were so effective at making their views known that Anastasiades had to ask his detractors to calm down and Akinci asked his people to have patience. Talks Suspended, Uncertain Times The two sides' inability to make discernable progress toward a final solution at both Mont Pelerin and Geneva underscored the difficulties of reaching agreement on both territorial adjustments and security guarantees. Turkey's injection of the four freedoms issue could have been an attempt by Ankara to stall the negotiations until after the April referendum in Turkey, while Akinci still wanted Anastasiades to step back from his reported comments that the Turkish Cypriots had to face the fact of a minority status on the island. Nevertheless, as was the case after the failure of Mont Pelerin, both sides anticipated that the two leaders' good relationship would allow negotiations to resume, at least between the Cypriots, after a short time of reflection. The talks did resume on January 27, 2017, and two additional sessions were held in the beginning of February. During that time, the discussions focused on the four freedoms issue and on how and when a possible second Geneva conference could be convened. Anastasiades continued to refuse to discuss the four freedoms and called on the EU to support his position that only the EU could make that decision once an agreement was reached and the north entered the EU. Akinci, for his part, suggested that a new Geneva conference could be held by the end of March 2017, although many thought that unlikely given the mid-April referendum in Turkey. On February 13, however, the negotiations hit a wall. That day, the Greek Cypriot parliament approved a proposal submitted by the right-wing ELAM political party to introduce an annual event in the form of a reading and discussion in public schools to mark the January 1950 referendum on enosis (the union of Cyprus with Greece). Nineteen members of parliament from five parties voted in favor of the proposal, 16 AKEL MPs voted against, and DISY MPs abstained. Akinci was livid that Anastasiades's party did not oppose the legislation and demanded that Anastasiades take action to retract the resolution. Akinci notified the Greek Cypriots that the meeting of the technical negotiators scheduled for the next day would be canceled. When the two leaders met for their regularly scheduled meeting on February 16, 2017, Akinci insisted that Anastasiades reverse the parliament's decision on a commemoration of the 1950 referendum, claiming the enosis issue underscored Turkish Cypriot concerns for their safety and security after a settlement and reinforced the argument for why Turkish troops should remain in the north. When Anastasiades reacted by trying to downplay the legislation's significance, a debate ensued. Reportedly, Anastasiades left the room for a break and, when he returned, found that Akinci had left the meeting. Both sides blamed each other for walking out of the meeting. Over the next eight weeks, no meetings were held between Anastasiades and Akinci despite efforts by U.N. Special Adviser Eide and others to jumpstart the talks. Akinci stated that he would not return to the table until the enosis issue was retracted. In an interview with Anastasiades, the president said he hoped the Turkish Cypriot side and Turkey would reconsider the suspension and return to the negotiating table but he did not expect this to happen before the April referendum in Turkey. While the talks were suspended, each side continued to blame the other for ending the negotiations, and each claimed that it was ready to resume discussions. Although Akinci and other Turkish Cypriot leaders were clearly angry over the enosis issue, some believe Akinci also was stalling on behalf of Turkey, since Ankara could not negotiate on security guarantees and troop deployments until after the vote on the constitutional referendum in Turkey. Eventually, the Greek Cypriot parliament took action to partially reverse the enosis requirement by turning the decisions over how the Greek Cypriot school system would address the historical event to the Education Ministry. Although some in the north complained that this was not enough, and many in the south complained that the government had capitulated to the Turkish Cypriots, Akinci felt Anastasiades had made the effort to diffuse the tension and agreed to return to the talks. On April 11, 2017, after eight weeks of suspended negotiations, both sides agreed to resume the talks and scheduled additional meetings throughout May. Although it is unclear whether any additional progress was made during the renewed negotiations, both sides did eventually begin to discuss the possible need for a new conference on Cyprus in Geneva that would again include the guarantor powers. However, there was prolonged disagreement over the conditions and issues to be addressed at a second conference. The Turkish Cypriots argued that Anastasiades placed preconditions on the meeting and that all outstanding issues should be tackled simultaneously. The Greek Cypriots appeared to want Geneva II to reverse the order of issues to be discussed, with negotiations on territory and security guarantees held first; if those negotiations were successful, the remaining issues in all negotiating chapters would then subsequently be resolved. Both sides agreed that a Geneva II conference would continue until all issues were resolved or until it was agreed that no solution was possible. Crans Montana—The Last Negotiation? When the talk of a "Geneva II" conference began to run into trouble as both sides debated whether either side was setting preconditions that had to be met before any session could be convened, U.N. Secretary-General Antonio Guterres invited both Anastasiades and Akinci to New York for a June 4 dinner discussion on the viability of a second U.N.-hosted session in Geneva. After the dinner, both sides announced that a new conference would take place beginning June 28 at Crans Montana, just outside Geneva, with the purpose of finalizing an agreement, including on security guarantees and territory. Guterres also announced that U.N. Special Adviser Eide would prepare a common document to guide the discussions on security and guarantees, after consulting with the two Cypriot sides and the guarantor nations. After leaving New York, Anastasiades traveled to Washington, DC, to meet with Vice President Pence and others to discuss expectations of the upcoming Crans Montana conference. He also appeared to be interested in seeking a U.S. commitment to speak to Ankara in support of finding the necessary compromises needed to secure an agreement. Speaking to a group at the German Marshall Fund, Anastasiades again raised the idea of creating an international police force that would provide the necessary security guarantees sought by the Turkish Cypriots until the provisions of any final agreement were fully implemented and the north was fully integrated into the EU structures. When he earlier offered this proposal, Anastasiades indicated that Greek, Turkish, or UK forces could be part of the multinational force. However, some had suggested that a possible compromise on the concept of a multinational security force could allow Turkish military police or other security forces to be part of such a force but perhaps only if those forces remained in the north and would be under operational command of a third party, such as the U.N., the United States or NATO. Following the announcement of the new conference in Crans Montana, U.N. Special Adviser Eide contacted officials of Greece, Turkey, the UK, and the two Cypriot parties to collect the "bottom line" positions of all sides on the security guarantee and troop level issues. Eide suggested he would discuss the outline of his findings with Anastasiades and Akinci, as well as the level of compromise each side may have been willing to entertain to reach an agreement. Eide hoped to present his document not as an official U.N. document but as a "working roadmap" to what the five parties would negotiate at Geneva. Presumably, Eide considered including other options for providing security, such as a multinational security force. Simultaneously, the other unresolved "domestic" issues would be discussed. Observers of the negotiations were relieved that both sides, along with the three guarantor parties, particularly Turkey, were willing to resume at Crans Montana what had begun at Geneva in January. Others, however, remained skeptical of what actually could be accomplished, as there appeared to be little or no change in the positions on security guarantees and troops on either side. In addition, both Cypriot sides seemed to have changed their strategies for this new conference. It seemed clear at the outset that Anastasiades wanted to reach an agreement on the elimination of Turkish security guarantees and the removal of Turkish troops first; otherwise it would likely provide little political advantage for him to reach agreement on any other issues. For Akinci, it appeared that if he could win enough concessions on issues such as political equality and a rotating presidency, and could be comfortable as a coequal partner in the future of Cyprus, he might have been able to help Turkey make the necessary concessions on security that Ankara may not have been willing to accept otherwise. In the election-charged atmosphere in Greek Cyprus, not everyone was pleased with the outcome. Anastasiades's political opponents accused him of abandoning all the preconditions he set for convening a new conference, including the debate on security and territory as a matter of priority. They also accused him of delegating to the U.N. the role of preparing a document on security, therefore giving up the Cypriot ownership of the process and placing the most crucial issue in the hands of Special Adviser Eide, who many felt had a biased attitude favoring Turkey. Before the opening session of the Crans Montana conference, controversy arose over the security-related "roadmap" U.N. Special Adviser Eide was preparing. In one report, Anastasiades apparently objected to some of the provisions, suggesting they were not points put forward by the Greek Cypriots and that he would not discuss the document in its current form. Eide apparently then abandoned the idea of tabling the discussion paper. On June 28, 2017, the Crans Montana conference opened, with both sides putting forward their long-held positions on security and their differences on the domestic issues. Almost immediately, and predictably, the talks became deadlocked over the security issues. The original plan for the conference called for U.N. Secretary-General Guterres to arrive in Crans Montana on June 30 to review the progress and hold additional meetings with the leaders. After arriving in Crans Montana and facing a deadlocked conference, Guterres apparently issued what was referred to as a "non-paper" addressing six points that he felt needed to be resolved and instructed the two sides to develop a package of proposals in response to his "framework" over the July 1-2 weekend. Guterres said he would return to Crans Montana if the proposals appeared to generate positive movement in the negotiations. Negotiations Collapse—Talks Suspended On July 3, 2017, both sides presented their counterproposals, which they claimed represented concessions from their previous positions. Turkey insisted that security guarantees under the existing treaties be retained but appeared to offer a proposal that included the withdrawal of most Turkish military forces. A small contingent of both Greek and Turkish forces would remain and their continued deployment would be reviewed in 15 years. The Greek Cypriots insisted that the Treaty of Guarantee be abolished, that most Turkish forces be withdrawn immediately, and—although a small contingent (less than 1,000 each) of Greek and Turkish forces could initially be deployed—that there had to be a clear, short sunset date for those forces to leave. Turkish Foreign Minister Cavusoglu stated that Turkey could not accept a "zero guarantees, zero troops" option and apparently warned that this would be the final conference and that a settlement had to be reached. After several days of talks, little movement was achieved. It was reported that positions may have even hardened between July 3 and July 7, with Turkey insisting on a larger force to remain permanently and the Greek Cypriots withdrawing their proposal for a limited contingency force. Apparently there were also disagreements on several of the governance issues, such as the rotating presidency, the return of the town of Morphu to Greek Cypriot administration, and the rights of former and current owners of property located in the north. On July 7, 2017, U.N. Secretary-General Guterres acknowledged the failure of the negotiations to reach an agreement and announced that the conference would be closed. Guterres indicated that Special Adviser Eide would present a summary report to the Secretary-General and that the Secretary-General would issue a final assessment later in the year. The Guterres "Framework" Secretary-General Guterres's proposed "framework" set out six points for discussion. On security , the Guterres paper seemed to suggest that both sides "must begin to recognize that in Cyprus a new security system was needed and not a continuation of the existing one." On t roops , Guterres suggested "that there should be a rapid reduction from the first day, gradually decreasing within an agreed timetable to numbers that would be in line with the old Treaty of Alliance: 950 Greek officers, non-commissioned officers and men, and 650 Turkish officers, non-commissioned officers and men." On territory , Guterres's document says the Turkish Cypriot side needs to adjust the map to address some concerns of the Greek side. On equality , the framework seems to suggest that Turkish nationals living on Cyprus should have a quota that is equitable and that a further discussion is needed on what "equitable" means. On property , the framework suggests that in areas that would be returned to Greek Cypriot administration, the rightful owner would have preferential treatment, but not 100%. In areas that would remain under Turkish Cypriot administration, preferential treatment would be given to current users, but not 100%. And finally, on p ower sharing , Guterres suggested that the issue needed to be discussed further, particularly on the issue of the rotating presidency. On September 28, 2017, Guterres issued his report. While offering a fairly positive assessment of the level of "convergences" both sides had made on each of the six negotiating chapters, his assessment seemed to indicate that only the economic chapter may have been ready to be closed, while the others still had issues to be worked out. In his conclusion, Guterres stated, "I am convinced that the prospects of finally pushing this process 'over the finishing line' will remain elusive without the strongest of political will, courage and determination, mutual trust and a readiness on the part of all parties to take calculated risks in the last and most difficult mile of the negotiations." In the end, he said a "historic opportunity was missed." Guterres, however, reiterated that the U.N. would be available to continue to host future discussions, if and when both sides were ready. In stating their assessments of the conference, both Cypriot sides blamed each other for refusing to make concessions. The Greek Cypriots and Greece also placed blame on Ankara. President Anastasiades indicated that he was ready to resume the negotiations, and, despite Guterres's assertion that this was not the end of the road, several news outlets reported that comments by Turkish Foreign Minister Cavusoglu suggested a Turkish decision to abandon the U.N. framework (bizonal, bicommunal federation) as a solution to the Cyprus problem and to move on to a "Plan B." Several in the Turkish Cypriot government also echoed the theme that negotiations under the current U.N. structure were over. Others pointed out that Akinci may have suggested that the solution of a federation was not possible and that the Turkish Cypriot community would continue to improve its international relations with Turkey's assistance.  On August 5, 2017, it was reported that in a speech, Akinci suggested that the only solution now may be for two separate states to exist as neighbors, both in the EU. In a late September meeting at the International Republican Institute in Washington, then-Turkish Cypriot "foreign minister" Tashsin Ertugruloglu stated that the Turkish Cypriots have moved on to a new view that any future negotiations must be based on two states, and that a solution could only include a confederation. More interesting for some at the meeting was Ertugruloglu's suggestion that he could envision establishing an autonomous republic where the Turkish Cypriots would leave authority on foreign affairs and defense to Turkey while the Turkish Cypriots would self-govern internally. Ertugruloglu's comments were met with a good deal of opposition in Cyprus, including from some Turkish Cypriots. The suspension of the negotiations in July 2017 carried over into 2018 (referred to as a period of reflection) as both sides prepared to hold national elections. The 2017 introduction in the Greek Cypriot parliament of the controversial proposal to recognize the 1950 enosis referendum by several opposition political parties posed a serious challenge to Anastasiades and the negotiations. When the election campaign began, some observers felt Anastasiades could again come under a good deal of pressure from his presidential opponents for his failure to gain an acceptable outcome at Crans Montana and his role in squelching the enosis effort. Some believed that entire episode raised the issue of trust with Akinci. During the election campaign, negative views about the negotiation framework were expressed by several Greek Cypriot presidential candidates who questioned the continuation of the goal of a bizonal, bicommunal, federal solution. Many in the north who once looked favorably on Anastasiades's efforts to seek a solution began to feel that the election campaign would leave Anastasiades little room to argue for a settlement if he were reelected. Anastasiades was reelected president after a second round of voting. Unlike when Anastasiades was first elected as a pro-Annan Plan leader, however, this time many Turkish Cypriots, including Akinci, apparently did not anticipate much of a change in the positions Anastasiades had taken during the negotiations. Akinci then stated that the negotiations could not resume under the same U.N. parameters that existed before the collapse of the talks, which he believed had yielded little return. Akinci raised the issue of political equality and demanded a deadline as preconditions for the resumption of talks. Most observers believed the bizonal, bicommunal approach was still valid, but it was unclear whether the new framework raised by Akinci meant a simple review and public agreement on how both sides defined a bizonal, bicommunal federal solution or whether Akinci had begun to shift to a looser "confederation" approach with two separate states. It also was unclear how existing U.N. parameters could be changed. Immediately after the elections in the south, parliamentary elections took place in February 2018 in the north. The election outcome resulted in a new four-party coalition government that some believed would likely be more supportive of Akinci's efforts to renegotiate a new approach to a solution with Anastasiades than the previous government, which was led by those opposed to an agreement or skeptical that an acceptable agreement could be achieved. The new government included two former Turkish Cypriot negotiators, Ozdil Nami (the most recent negotiator) and Kudret Ozersay. The negotiations, however, did not resume immediately after the elections. Anastasiades restated his readiness to restart negotiations and invited Akinci to meet with him informally to discuss the road ahead. Akinci signaled his intention to meet with Anastasiades but only to try to determine exactly what Anastasiades wanted to negotiate and how long it might take. Akinici reiterated his view that the framework of the negotiations had to change. In the interim, tensions over the issue of energy resources spiked, forcing both sides to delay any new meeting. During March and early April 2018, as both sides struggled over the issue of resuming negotiations, they seemed to consider the idea that any new negotiations should begin with the governance issues. In an April 2018 interview in Politis , Greek Cypriot negotiator Mavroyiannis admitted there were differences in every negotiating chapter but that the Greek Cypriot side had accepted the effective participation of the Turkish Cypriots in a council of ministers, the parliament, an equally divided senate, and the judiciary. Mavroyiannis also suggested the Greek Cypriots could accept a rotating presidency, but only with a single ticket and weighted voting. Akinci suggested that the issue of a rotating presidency, among others, had not been resolved. On April 16, 2018, the two leaders sat down over the course of three hours of meetings and dinner, hosted by the U.N., to discuss the road ahead for the negotiations. Expectations were low, and after the meeting both sides acknowledged that no progress had been made with respect to changes in positions or if and when the negotiations would resume. Each side suggested the other needed a change in attitude for any new negotiations to be successful. In May 2018, Akinci, despite his earlier comments regarding a new format for the talks, suggested negotiations could possibly resume from where they left off at Crans Montana if both sides agreed to adopt as a strategic agreement the six-point framework presented by U.N. Secretary-General Guterres on June 30, 2017. Anastasiades rejected a strategic agreement approach, and both sides broke into an extended disagreement over which Guterres document of July the other side was referring to as the framework to be used. Some observers, however, believed that if resuming the talks where they left off at Crans Montana meant starting with the security issues, then the talks were unlikely to resume. Other issues also complicated the talks' resumption. In April 2018, Turkish Foreign Minister Cavusoglu visited the north and suggested the Turkish Cypriots consider negotiating for a "confederation" of two equal states instead of a federation. In May, Cavusoglu again stated that the talks should shift to a confederation or even a "two-state" approach. Akinci apparently did not embrace this approach, and the Greek Cypriots rejected it outright, arguing that it did not fall within the agreed framework of a bizonal, bicommunal federation. U.N. Attempts to Break the Deadlock In an attempt to assess the two sides' interest in resuming the negotiations and break the stalemate, U.N. Secretary-General Antonio Guterres in July 2018 appointed Jane Holl Lute as his new special adviser to Cyprus. Lute's mission was to consult not only with the two Cypriot leaders but also with Athens, Ankara, and London to assess their perspectives on the future of the Cyprus problem and to determine if sufficient conditions existed for the negotiations to resume. It was unclear why U.N. Representative Elizabeth Spehar's earlier meetings with both leaders could not have helped the Secretary-General make a determination on both sides' political will to restart the negotiations. Nevertheless, Lute conducted a first round of consultations and presented her report to the Secretary-General in September 2018. Lute apparently found some positive aspects but no clear indication that the two sides were ready to resume the negotiations. At the U.N. General Assembly session in September, Guterres met with both Cypriot leaders but apparently found no changes in what Lute had reported. Guterres then submitted a report of Lute's findings to the Security Council. The Secretary-General's report did not break any new ground and essentially restated the option that his July 2017 six-point "framework" presented at Crans Montana should be used as the starting point. The Security Council recommended that the U.N. not abandon the negotiations, if possible. At the time, observers, despite what they may have believed were less-than-optimal conditions for resuming the negotiations, likely assumed that neither Cypriot leader was willing to walk away from the negotiations or that the Secretary-General had not foreseen any potential new hurdles to the eventual resumption of talks. With no apparent progress and little leverage, Guterres suggested that both sides, despite the most recent one-year "period of reflection," take another time-out to consider a comprehensive negotiating plan and be ready to negotiate a solution when the U.N. felt the time was ripe to host the talks once again. In mid-October 2018, Anastasiades and Akinci agreed to meet informally to discuss the possible road ahead. Although they could not find common ground on which to restart the talks, Secretary-General Guterres saw a new opportunity to move the process. He ordered Lute to follow up on the Anastasiades/Akinci meeting and conduct yet another round of consultations with the two Cypriot leaders and the three guarantor countries. This time, however, the Secretary-General tasked Lute to determine during her consultations whether there were grounds for the two leaders to accept what Guterres referred to as a "terms of reference" document that would include his original 2017 six-point framework, those issues on which both sides previously agreed "convergences" had been reached, and a road map for when and how new negotiations would be launched. Lute was given until the end of December 2018 to meet with the principals and construct the terms of reference document. Some thought Lute's deadline was too ambitious, as it was unclear, despite having the Guterres framework for over a year, whether either side would agree to the provisions of the six-point framework (both had expressed objections to parts of it in the past) or whether both sides, despite years of negotiation, could agree on what constituted previous convergences. Observers noted that it took Anastasiades and Eroglu almost nine months in 2013-2014 to reach an agreement on a simple joint statement defining a set of negotiating goals or outcomes that both sides would strive to achieve once they restarted the talks. Some observers also suggested that both Cypriot leaders may have been wary of agreeing to the Guterres terms of reference process, as any agreed document could be interpreted by some as coming close to an interim agreement. Thus, from the beginning, finding agreement as to what would constitute the document was to be a major challenge for Lute. At the same time, and for reasons that remain unclear, in fall 2018 Anastasiades surprised many by publicly suggesting consideration of an undefined, "loose," or "decentralized" federation in which the two constituent states that would emerge under such a federation would have more powers than what had been discussed previously. Anastasiades also has suggested holding a conference in Cyprus to discuss the various parameters of his idea of a decentralized federation. In addition, some reports indicated he was not ruling out discussion of a confederation, which led several of Anastasiades's political opponents to suggest he was even considering a two-state solution. Some Turkish Cypriots expressed skepticism of Anastasiades's suggestion of a decentralized federation, seeing it as either a delaying tactic or a way to reach a settlement without giving the Turkish Cypriots the political equality they sought at any federal level. After Lute concluded her second round of consultations with all parties in mid-December, it apparently had become clear, once again, just how difficult this approach had become. Lute concluded she would have to return to the island in early January 2019 for further consultations. Lute's plan upon returning to Cyprus was to ask the two leaders to review her proposed ideas for a terms of reference document and agree to these terms as the basis upon which new negotiations would begin. It was clear that such an agreement would be difficult to achieve, and in fact Lute's return in early January was short-lived, as no agreement was reached. In April, Lute once again travelled to the island to gauge whether her consultations should continue and to determine the possibility of restarting the negotiations. When she arrived on April 7 she found an adamant Akinci insisting that restarting the formal negotiations could not happen until Turkish Cypriots achieved political equality, demanding that on all issues addressed at the federal level, at least one positive Turkish Cypriot vote would be necessary for the issue to go forward. Anastasiades rejected the idea that a positive Turkish Cypriot voted would be needed for all issues, claiming such a requirement could result in gridlock, but apparently did concede that on certain issues, he was willing to consider such a requirement. For his part, Anastasiades resurrected an older concept of creating a mixed presidential/parliamentary system of government at the federal level that would include a president, who would be a Greek Cypriot, and a prime minister that would rotate between the two communities. Akinci rejected that proposal and criticized Anastasiades for backtracking on agreed "convergences" by dropping the idea of a rotating president, and for his unwillingness to accept the Turkish Cypriots as coequal partners in government. Other Turkish Cypriot political leaders criticized the proposal as creating a Greek Cypriot state. For Lute, four failed attempts to have both sides agree to a terms of reference document that she could present to Secretary-General Guterres as a starting point for resuming the negotiations lead some to note that resuming the negotiations was apparently no closer to being achieved than it was in June 2018. Issues39 Throughout much of the recent history of the Cyprus negotiations, both sides have periodically reported that various levels of convergences had been reached, mostly on the issues of EU affairs, governance, economics, citizenship, and how to resolve and compensate for disputed property. As intensely as the Cyprus negotiations have been followed in the press and by outside observers, it has always been difficult to determine with any specificity exactly what either side means by the term convergences when referring to agreements on the issues under negotiation. The negotiations are conducted under the principle that "nothing is agreed until everything is agreed"; thus, the term convergences has been used to describe likely agreement without admitting that agreements have actually been reached until all issues have been resolved. In his April 1, 2010, press conference, former Turkish Cypriot leader Talat stated that 31 "joint documents" had been prepared addressing a range of issues. It appeared that both sides agreed in principle that the new federal government would have powers over external relations, EU policies, citizenship, budget matters, and economic coordination. Within these, for instance, was apparently an understanding that one side would hold the portfolio of the foreign minister and the other side would hold the EU portfolio. Still another point had the equal constituent states covering most of the remainder of the governance issues. These convergences seemed to have been written into the later 2014 joint statement between Anastasiades and Akinci. It also appeared that the two sides had agreed on a Senate, equally represented, and a House proportionally represented based on population. There was also reportedly a convergence on a new judicial court that would have equal Turkish and Greek Cypriot representation and an agreement that Cyprus would be represented in the European Parliament by four Greek and two Turkish Cypriot members of parliament. A federal supreme court also was identified in the joint statement. Apparently, on April 15, 2018, in an interview in the Greek Cypriot Politis , Greek Cypriot negotiator Mavroyiannis confirmed that many of these convergences had been reached. When Anastasiades and Akinci began their negotiations, it was not clear specifically what the starting point of the negotiations had been beyond the joint statement issued in 2014. Eroglu apparently drew some pretty strong red lines around some issues, and Akinci initially had not appeared, at least publically, to have adopted or refuted any particular positions advocated by Eroglu, although many expected that to happen on some issues. Although reports out of Cyprus by the end of 2016 suggested that more than 90% of the governance, power sharing, economy, and European Union issues had fallen under the term convergences, other reports indicated that many technical issues remained unresolved. In his September 2017 report on his mission of good offices in Cyprus, U.N. Secretary-General Guterres appeared to reaffirm that these convergences had been reached. One issue both sides continued to differ over was how a new, united Cyprus would be created. The Greek Cypriots assumed that the new unified state would evolve from the existing Republic of Cyprus. The Turkish Cypriots wanted the new state to be based on two equal "founding states." Eroglu had reiterated that he was not prepared to give up the TRNC. The Turkish Cypriots also wanted the new entity referred to as something other than the "Republic of Cyprus." The joint statement agreed to by Anastasiades and Eroglu in 2014 simply referred to a "united" Cyprus, not a united "Republic of Cyprus." The Anastasiades/Akinci talks initially seemed to suggest that the new entity could be referred to as something such as the "Federal or United Republic of Cyprus," but it was unclear how the two sides would get there. In mid-December 2015, Anastasiades stated that "no one was aiming to abolish the Republic of Cyprus," rather "what we are pursuing is the evolution of the Republic of Cyprus into a bizonal, bicommunal federation." In public statements, including in Washington in summer 2016, then-Turkish Cypriot "foreign minister" Ertugruloglu and others suggested that no agreement could be signed between the leadership of a "Republic of Cyprus" and the leader of the Turkish Cypriot "community." For Ertugruloglu, it appeared that sovereign equality was not the same as political equality, suggesting that the Turkish Cypriots could not accept an agreement unless it was signed by two equal sovereign leaders, implying that recognition of the Turkish Republic of Northern Cyprus was a requirement for a final agreement. In response, then-Greek Cypriot government spokesman Nicos Christodoulides said under no circumstances can "the regime in the occupied areas be upgraded since it is the product of an illegal action." In late 2016, as both sides talked about convening a five-party conference to settle the issue of security and to sign a new agreement, controversy erupted over whether the Greek Cypriots would be represented as the republic. Anastasiades stated that the Republic of Cyprus, as a signatory to the Treaty of Guarantee, had to be represented at the conference. During the Geneva talks in January 2017, the term "United Federal Cyprus" appeared in numerous references to the federal entity that would be created by an agreement. In addition, the Turkish Cypriots apparently also raised the idea that political equality had to include equality for Turkish Cypriots in the new federal entity and that they could not accept a "minority" status or representation in any new federal entity. More recently, the Turkish Cypriots championed the concept of "effective participation," meaning that on any decision taken at the new federal level, there would have to be at least one positive Turkish Cypriot vote in favor of the decision for that decision to take effect. Anastasiades suggested this would effectively give the Turkish Cypriots a veto over every decision that its representatives did not agree with. When the Crans Montana conference began, it appeared that Anastasiades and Akinci may have worked out an understanding on both the issues of political equality and effective participation, but such a convergence was not made public. In April 2018, Anastasiades appeared to have suggested that codecision could not be accepted. Since then, Akinci has continuously demanded agreement on political equality for the Turkish Cypriots, suggesting this issue remains unresolved. One highly sensitive issue under the governance chapter involves that of a rotating president and vice president for an elected term. The Greek Cypriots reportedly had proposed the direct election of a president and vice president on the same ticket with weighted cross-community voting for a six-year term. The president would be a Greek Cypriot for four years, and the vice president would be a Turkish Cypriot; they would then rotate offices, with the Turkish Cypriot becoming president for two years. Turkish Cypriots initially proposed that the executive have two alternating presidents elected by the Senate. Turkish Cypriots were opposed to a single list of Greek Cypriot and Turkish Cypriot candidates to be elected by all of the people of Cyprus principally because Greek Cypriots, by virtue of their majority, could in effect elect the Turkish Cypriot candidate of their preference. At some point, former Turkish Cypriot leader Talat seemed to have made a significant concession in agreeing to accept the Greek position for the election of a president and vice president but only with a weighted cross-community system to address the Turkish Cypriot concerns over the power of the Greek Cypriot majority to elect the Turkish Cypriot candidate, even though he continued to have doubts about direct popular voting. Although the idea of a rotating presidency was not new, opposition to the proposal was, and continues to be, vocal on the Greek Cypriot side, as many Greek Cypriots apparently could not accept the idea of being governed by a representative what many believe is still the Turkish Cypriot minority. It had been reported that in July 2014, Anastasiades retreated on the notion of a rotating presidency, proposing the old idea that future presidents be Greek Cypriots and future vice presidents be Turkish Cypriots elected directly by all voters. The Turkish Cypriots rejected the proposal. Akinci, in early August 2016 and subsequently on numerous times, suggested that a rotating presidency elected with weighted voting was a must in order to have political equality. Although a rotating presidency would apply only to the federal entity and would have limited authority over the daily lives of most citizens in either community, several Greek Cypriot political parties continue to oppose the concept. Greek Cypriot Archbishop Chrysostomos stated his opposition to a rotating presidency, saying that no population of only 18% should be permitted to elect the president. During the Geneva conference, it was reported that a five-year rotating presidency would be created with the Greek Cypriots holding the office for approximately a little over three years and a Turkish Cypriot for just under two years. However, other iterations of the convergence also had arisen. It was reported that at Crans Montana, Anastasiades had held out a concession on the rotating president in return for a Turkish concession on security guarantees. In April 2018, Akinci reiterated that the issue of a rotating presidency had not been resolved and was an absolute requirement on a 2:1 basis. Akinci stated that Anastasiades had not reconciled this matter with the Greek Cypriots. The presidency, however, was only one of several sticking points. For instance, the question of which community would hold the portfolio of foreign minister and how external policy would be made also was controversial, as both sides hold different views on, for instance, Turkey. It also was unclear how a new Turkish Cypriot state could maintain traditional ties to Ankara or the Greek Cypriot state could maintain ties to Athens in light of long-held hostility toward both Greece and Turkey. The thorny and emotional issue of property had been the focus of a significant debate between by Anastasiades and Akinci. As a result of the ethnic strife of the 1960s and the deployment of Turkish military forces on the island in 1974, it was estimated that over 150,000 Greek Cypriots living in the north were forced south and close to 50,000 Turkish Cypriots living in the south fled to the north, with both communities leaving behind large amounts of vacated property, especially in the north. Greek Cypriots had long insisted that the original and legal owners who lost properties in the north must have the right to decide how to deal with their property, whether through recovery, exchange, or compensation. Turkish Cypriots believe that the current inhabitant of a property must have priority and that the issue should be resolved through compensation, exchange of alternate property, or restitution. To try to help resolve some of the property issues, the Turkish Cypriots established the Immovable Property Commission (IPC) to hear cases related to Greek Cypriot property claims in the north. The Greek Cypriots initially rejected the IPC. Only a few private Greek property owners have filed claims for compensation with the IPC, and funding for the IPC has become controversial in the north. Although the gap in the respective Cypriot positions on property had been wide, it appeared that positive movement had been achieved by 2017. In July 2015, Anastasiades and Akinci seemed to agree that former property owners would be offered various choices regarding their claims that would allow all involved to be fairly compensated. For the Turkish Cypriots, however, only a limited number of Greek Cypriots would be permitted to return to or take actual ownership of their properties. However, it appeared that any settlement might involve between €25 billion and €30 billion, a price tag the new "federal" entity might not be able to afford. At Crans Montana, U.N. Secretary-General Guterres's six-point framework proposed that in areas that would be returned to Greek Cypriot administration, the rightful owner would have preferential treatment. In areas that would remain under Turkish Cypriot administration, current users would have preferential treatment. The question of overall territory that would come under the jurisdiction of the two equal states remains in dispute. The Turkish Cypriot side of the "green line" currently includes approximately 37% of the island and includes several areas that had been inhabited almost entirely by Greek Cypriots before the 1974 division, such as Varosha, Morphou, and Karpas. Greek Cypriots have long wanted all of that territory returned, which would leave the Turkish Cypriot side controlling about 28% of the territory. At the time, Christofias resurrected an older proposal that would have the Turkish side return the uninhabited city of Varosha to Greek Cyprus in exchange for opening the seaport of Famagusta for use by the Turkish Cypriots to conduct international trade. The port would be operated by the EU and a joint Greek/Turkish Cypriot administration, thus allowing direct trade between northern Cyprus and the EU. The European Parliament declined to consider an EU Commission initiative to permit direct trade on technical grounds, but its 2011 report on Turkey's EU accession progress (introduced in parliament in 2012) called for that very trade-off offered by Christofias. After the 2013 Greek Cypriot elections, President Anastasiades resurrected the proposal in the form of a "confidence-building" measure to test the sincerity of the Turkish Cypriots and Turkey to move forward in the negotiations. In early August 2014, it was reported that Anastasiades had upped the ante by suggesting that no agreement could be reached unless the town of Morphou was also returned to the republic. The Turkish Cypriots quickly rejected the idea, saying the town would not be returned. After Turkish Cypriot leader Akinci took office, Anastasiades again included the Varosha/Famagusta option as a confidence-building measure. As in the past, Akinci rejected the return of Morphou as part of a final settlement. Understanding the sensitivity of this issue for both leaders, Akinci had suggested that the discussions of territorial adjustments be held off the island and away from potential leaks that could set off a firestorm of protests from either side. At the November 2016 meetings at Mont Pelerin, Switzerland, the two sides agreed to discuss three issues regarding territory: percentage of land to be administered by each constituent state, the number of Greek Cypriots who would be allowed to return to the new territories given back to the Greek Cypriots, and the shoreline. Following Mont Pelerin, both sides, in agreeing to meet in Geneva in January 2017, agreed to present maps indicating their proposals for a territorial adjustment. As noted, the Turkish Cypriots administer approximately 37% of the island. At Geneva, the Greek Cypriots proposed long-standing views that the boundaries be redrawn such that the Turkish Cypriots would control approximately 28.2% of the island and that some 90,000 displaced Greek Cypriots could return to those areas gained back by the Greek Cypriots. Some of the territory—such as the cities of Verosha, parts of Famagusta, and Morphou—would come under direct control of the Greek Cypriots whereas other areas that once had large Greek Cypriot populations would either come under control of the Greek Cypriots or become "enclaves" under the administration of the new federal government. The Greek Cypriots also wanted additional shoreline along the east coast of the island, including part of Karpas. The Turkish Cypriots insisted on controlling at least 29.2% of the island, with as straight of a border between the two constituent states as possible; no enclaves; and only 65,000-72,000 returning Greek Cypriots. The Turkish Cypriots also expressed a willingness to meet the Greek Cypriot demand for more shoreline, but only if the new shoreline territory was made into state parks so that no new Greek Cypriot communities could settle in those areas. On all three points, the leaders failed to reach an agreement at Mont Pelerin and again in Geneva in January 2017. For the first time at Geneva, both sides had presented maps outlining the territorial concessions they were prepared to make. However, when the Turkish Cypriot representatives rejected the return of Morphou, which was included in the Greek Cypriot map, and insisted that additional territory, including the area of Kokkina, be added to Morphou and remain under Turkish Cypriot jurisdiction in exchange for Verosha and parts of Famagusta, the discussions broke down. Both sides apparently withdrew their maps. At Crans Montana, it was reported that Akinci appeared willing to return part but not all of the town of Morphu to the Greek Cypriots but that Akinci wanted to retain additional territory that the Greek Cypriots had requested be returned. In July 2010, President Christofias, seeking to unlock the stalemate on territory, tabled a citizenship proposal that would have linked property, territory, and the number of citizens permitted to reside in the north into one agreement. The offer included an agreement to allow 50,000 mainland Turks who had settled in the north to remain in the north. Eroglu had indicated that any final solution could not result in significant social upheaval in north Cyprus, meaning that significant numbers of citizens of the north, whether from the mainland or not, could not be forced to leave, and only a small number of Greek Cypriots would be permitted to return to property in the north. Eroglu rejected the offer from Christofias, stating that "no one on Cyprus is any longer a refugee" and that sending mainland Turkish settlers back to Turkey was not something he could agree to. Eroglu had also reiterated in his talks with Anastasiades that the number of mainland Turks who had settled in the north and who would be allowed to remain on the island would have to be higher than previously discussed. After the joint statement was agreed to in February 2014, Turkish Cypriot representatives were reported to have stated that no citizens of the north would be required to leave the country. In a talk given at the Woodrow Wilson Center in Washington, DC, on February 28, 2014, the then-Cyprus ambassador to the United States speculated that a resolution of the Cyprus problem could conceivably allow for mainland Turks, who came to the island as long ago as 40 years and had established clear roots in the north, to remain on the island. Akinci, perhaps not wishing to antagonize what had become a majority of the population in the north, initially stayed away from this issue. However, apparently through the negotiations he and Anastasiades may have agreed to at least set population sizes in both of the "constituent" states that would emerge as part of an agreement. The population for the Turkish Cypriots was apparently set at 220,000, although Akinci seemed to want another 50,000, while the Greek Cypriot population would be approximately 802,000. This ratio, while including a sizable number of mainland Turks who have since become citizens in the north, would be close to the ratio of the island's population in 1960. Nevertheless, several of the Greek Cypriot political parties appear to remain opposed to any agreement that would allow a large number of "settlers" to remain on the island. In the summer of 2016, there were reports that Ankara had wanted the Turkish Cypriot government to speed up the process of "citizenship" for more of the mainland Turks living in the north. In August, some news accounts in the media claimed that the Ozgurgun government was trying to rush citizenship for around 26,000 additional mainland Turks before a final agreement was reached. Greek Cypriot political parties jumped on the news and claimed Ozgurgun was trying to sabotage the negotiations. In January 2017, it was reported that Turkish Deputy Prime Minister Turkes stated that there were some 300,000 Turkish Cypriots in the north so the population sizes of the two constituent states would have to be adjusted. In May 2017, Anastasiades reportedly told a meeting of the Greek Cypriot National Council that Akinci had retreated from previous convergences, including accepting a 4:1 ratio of populations. In his September 2017 report to the Security Council, Secretary-General Guterres stated that the "sensitive issue of citizenship, with its links to other key aspects, including the exercise of civil and political rights in the future united Cyprus, was almost completely concluded, with only certain details left to be agreed." Next to the property and territory issues, the issues of security guarantees and Turkish troop deployments continue to be the most difficult bridges to cross. These issues became real stumbling blocks as the two sides met in Geneva in January 2017 and at Crans Montana in July 2017, and they resulted in the collapse of both meetings. The Greek Cypriots long have argued that all Turkish military forces would have to leave the island, beginning immediately after an agreement was adopted. They argue that the U.N. or the EU can offer security guarantees to all citizens in the two member states. Therefore, once the entire island became part of the EU, the Greek Cypriots see no reason for guarantees from third countries, such as Turkey, Greece, or the United Kingdom. By contrast, Turkish Cypriots and Turkey long had maintained that the 1960 Treaties of Guarantee and Alliance must be retained in some form in any settlement, because, without guarantees, the Turkish Cypriots would feel insecure based on their history with ethnic violence on the island in the 1960s. They continuously point out that the U.N. had forces on the island even before the 1974 violence that were unable to prevent the military coup against the Makarios government or to protect the Turkish Cypriot population. They argue that the Greek Cypriots maintain a 12,000-man, fully armed National Guard, while the Turkish Cypriot security forces are smaller and less well equipped and have to rely on the presence of the Turkish military for security. Eroglu had stated on several past occasions that "the security guarantees with Motherland Turkey could not be changed." After the February 2014 joint statement was agreed to, it was reported that Eroglu had again stated that Turkish troops would not leave the island. It remained unclear for a while whether Akinci held the traditional Turkish hard line. He clearly did not want to antagonize Ankara over this issue by going too far into the negotiating process without including Turkey, but he also appeared to have not gone out of his way to focus on the issue. Some suggested that Akinci, while not wanting to abandon the Treaty of Guarantee altogether, may have been willing to adjust the provisions regarding when or under what pretext Turkey could intervene in northern Cyprus in the future and to include the gradual withdrawal of most Turkish military forces, leaving only a small garrison on the island. In one August 2016 news article, it was suggested that Anastasiades had put forward the option that a multinational police force, made up of U.N. or EU personnel with some Turkish police, could be created to support the new federal entity. The Turkish Cypriots and Turkey rejected the idea. In the lead-up to the Mont Pelerin and Geneva conferences, most of the public demands for continued Turkish security guarantees and military presence in the north came from former "foreign minister" Ozgurgun and others in the Turkish Cypriot government who had stated that no agreement could be accepted without the guarantees. Ozgurgun reportedly stated that in conversations with Akinci, he was assured that Turkey must continue to play a role in the security of the north. Nevertheless, as the negotiators at Geneva opened the security guarantees "chapter," the rhetoric increased. Greek Cypriots, and Greece, continued to insist that no guarantees were necessary and, on their part, no agreement could be accepted that would allow Turkey to intervene on the island or to retain a military presence there. In April 2016, the Greek foreign minister reportedly suggested that no final agreement on Cyprus could be achieved until all Turkish military forces agreed to leave the island. With the two sides dug in, compromise seemed unrealistic. Once formal talks on security were begun in late fall 2016, both Cypriot sides appeared to soften their positions. In November 2016, Athens and Ankara agreed to begin bilateral discussions over the future of the guarantees in advance of a meeting between the respective prime ministers and any five-party conference on the issue. According to some sources, although Turkey appeared willing to discuss a revised agreement on security, Ankara initially did not want to discuss the abolition of the guarantees or the complete withdrawal of the Turkish troops from Cyprus. Ankara apparently raised the idea of the establishment of a military base in the north and suggested that the timetable for the reduction of the Turkish military on the island could be 10-15 years. The Greek Cypriots would not accept such provisions but reportedly may have proposed that a small contingent of Turkish troops could remain, but only for a short period of time. At Geneva, Turkey, clearly keeping in mind the fate of its own constitutional reform referendum in April, took a hard line on the issues of continued Turkish security guarantees and troops on the island. The Greek Cypriots and Greece took a similar hard line in opposition to Turkey's continued presence. Apparently, at Geneva, Anastasiades reoffered his proposal for an international police force, this time, however, noting that Greek, Turkish, or UK forces would not be part of that multinational force. Turkey and the Turkish Cypriots rejected the idea again. Russia and others also suggested that the U.N. Security Council could serve as the initial guarantors of security, but that too was brushed aside. At Geneva, the EU was fully represented by the Commission President and the High Representative for Foreign and Security Policy, with each offering assurances that any solution could be adequately implemented and enforced by the EU. Nevertheless, the EU was not able to convince either Ankara or the Turkish Cypriots that it could guarantee the security and fair treatment of the Turkish Cypriot community, even though the north would become fully integrated into the united Cyprus under EU law. The lack of any appreciable progress on the security issue, in part, resulted in the January 12, 2017, session in Geneva being cut short without a resolution. The February 2017 dispute over the introduction of the enosis legislation in the Greek Cypriot Assembly (see above) led Akinci to complain that the enosis issue underscored Turkish Cypriot concerns for their safety and security after a settlement and reinforced the argument for why some level of Turkish troops should remain in the north as well as the need for some type of guarantees for Turkey to assist the Turkish Cypriots, if conditions changed on the island.  During the suspension of the talks between February and April 2017, U.N. Special Adviser Eide was reported to have been working out the details of some kind of bridging compromise between the two positions on security as a way to move the talks forward until after a solution was agreed and implementation begun. When the two sides announced that a new conference would be held in late June 2017 at Crans Montana, it was also revealed that Eide would prepare a security "roadmap" from which all five parties could negotiate. The Eide proposal would not be issued as a formal U.N. proposal but as a working paper that would outline the various positions each side had taken on the issue of security guarantees and the possible compromises that could be accepted. Although Eide consulted with the guarantor parties and the two Cypriot leaders, Anastasiades apparently objected to parts of the Eide document and the paper was not presented. At Crans Montana, the same security issues quickly forced the negotiations into deadlock. Although Turkey appeared ready to discuss the removal of most of its troops after an agreement was reached, Ankara rejected any "zero troops, zero guarantees" option and insisted on maintaining a small contingent of forces on the island for at least 15 years, when the issue would be revisited. Turkey refused to agree to any changes to its right to intervene in the north, although the Turkish Cypriots appeared to indicate some flexibility by Ankara on this as the presence of a contingent of Turkish military forces on the island could be used to respond to any problems incurred by the Turkish Cypriots during the implementation of an agreement. The Greek Cypriots and Greece held to their positions that the Treaty of Guarantee be abolished, although Greece suggested a new "treaty of Friendship" between Greece, Turkey, and Cyprus, which apparently would allow for consultations on complaints that implementation of the agreement was not being fulfilled from either Cypriot side. Greece and the Greek Cypriots again insisted that all Turkish troops be withdrawn from the island, although Anastasiades may have appeared ready to accept a small contingent of Turkish troops to remain on the island but only if that provision included a date for the final withdrawal of the remaining Turkish troops. The Crans Montana talks clearly proved that the differences between the two sides on these two security issues had become too high a barrier to be the starting point, or focus, for any new round of negotiations. For many, these issues should be reserved until all the outstanding governance issues have been resolved and an international conference on security can be established again. By July 2018, it appeared that both sides had set the need for concessions regarding the security-related issues as a precondition for resuming the talks. The Greek Cypriots once again insisted that Turkey change its position on retaining troops and security guarantees, and the Turkish Cypriots and Ankara have argued that Anastasiades drop his "zero troops, zero guarantees" position. In mid-December 2018, when U.N. Special Adviser Jane Holl Lute met with Turkish Foreign Minister Mevlut Cavusoglu, he reportedly said that those who dream of zero guarantees and zero troops should let it go, as such a thing will never happen. Energy The introduction of the issue of energy resources resulted in yet another complication in the talks and has stalled the negotiations at times. The energy dispute has led to accusations, threats, and further distrust between the republic, the Turkish Cypriots, and Ankara. Initially, some observers thought the energy issue could have become a rallying point for stepped-up and hopefully successful negotiations in which both sides would enjoy the economic benefits of the newly found resources. However, the atmosphere quickly became poisoned. For some, the energy issue has become not only another lost opportunity but also the issue that has doomed the talks altogether. For the Greek Cypriots, exploiting energy resources offered a potential financial windfall that could help the Cypriot economy and establish Cyprus as an important energy hub for Europe. The Turkish Cypriots, arguing that the energy resources belonged to all of Cyprus, feared the loss of significant revenue to their economy as long as the Greek Cypriots refused to include them until a solution to the division of Cyprus was concluded. For Ankara, insisting that the Turkish Cypriots be involved in the decisionmaking process may have been seen as the only practical way to preserve Turkey's position as a main supplier of non-Russian gas to Europe. Ankara supported the conclusions of some in the industry that the fastest and least expensive route to transport Israeli and Cypriot gas to Europe was via a pipeline through Turkey. For Eroglu, the energy issue had to be a part of the negotiations. The Greek Cypriots rejected such a proposal, stating that energy issues would be dealt with under any new "federal" system agreed to in the negotiations. Akinci, at first, seemed reluctant to press this issue, apparently accepting Anastasiades's promises that energy wealth would be shared by both sides and how that would be accomplished would be left to another time once a settlement was agreed. However, in July 2016, after the republic announced that it would proceed with the issuance of new licenses for additional gas exploration in the Cyprus EEZ, and in August 2016 when it was announced that the republic and Egypt would sign an agreement that could allow Cypriot gas to be shipped to Egypt in the future, both Turkey and the Turkish Cypriots raised objections, with some claiming these actions would harm the settlement negotiations. At Geneva, and despite the news that the French energy corporation, Total, would begin additional exploration in summer 2017 and that Cyprus, Greece, Israel, and Italy would renew discussions of a possible gas pipeline to Europe via Greece, the issue did not seem to impede discussions of the other, more immediate issues. After the Geneva conference, Energy Ministers from the Republic of Cyprus, Israel, Greece, and Italy unveiled plans for an East Mediterranean pipeline running all the way from Israel to the coast of Greece and on to Italy. Total also announced that it would begin a new round of exploration in Cypriot waters during the first few weeks of July 2017. As expected, Turkey and the Turkish Cypriots reacted negatively, with Ankara threatening to take actions if the drilling commenced before an agreement on the Cyprus issue was achieved. As the Crans Montana talks approached, the energy issue again came into play . In May 2017, Akinci stated that the next several months would be crucial in part because of the expected launch of new hydrocarbon exploration activities off the coast of south Cyprus. Turkey stated that it would begin its own exploration in two areas in Cypriot waters that Turkey claims are part of its EEZ and announced that a series of military exercises in the region had been scheduled for July. Some observers believed that Turkey's actions and Akinci's comments were an attempt to pressure Anastasiades to delay the exploration, particularly if the Crans Montana negotiations showed some promise. Others felt this move could set the stage for another confrontation between Turkey and the Republic of Cyprus. When the Crans Montana conference collapsed, French energy firm Total moved its drilling platform, the West Capella, to its drilling site and commenced drilling in mid-July 2017. Ankara reiterated its objections, and Turkey issued a new NAVTEX reserving an area southwest of Cyprus for naval exercises with live ammunition. In the end, Total completed its drilling without incident. This new round of exploration apparently resulted in negligible findings. The Greek Cypriots had also approved additional drilling in 2018 by Total and Italy's ENI as well as by Exxon/Qatar. The ENI group began new drilling on December 31, 2017, in a new area. In February 2018, ENI announced that the drilling had produced a significant find of gas. ENI then announced it would move its drilling platform, Saipem 12000, to another area that is also claimed by Turkey. On February 11, Turkish warships appeared in the waters off the southern coast of Cyprus and attempted to impede the movement of Saipem 12000 to the disputed area. The Greek Cypriots, supported by the EU and others, reacted negatively to Turkey's activity. Over the course of February and March, both Akinci and Ankara restated that the resources around the island belonged to all Cypriots and that the republic should halt further exploration and drilling unless the Turkish Cypriots were included in the planning and decisionmaking, a demand again rejected by Anastasiades. Turkey stepped up its military threats and indicated it would begin its own drilling inside one or two of the disputed blocks in the Cypriot EEZ. Some believe Turkey was concerned that the new gas finds could be significant enough to encourage the Greek Cypriots and others to move forward with various shipping and pipeline options that would exclude the possibility that the gas could eventually be piped across Turkey to Europe. Others felt the Greek Cypriots were trying to apply maximum pressure on the Turkish Cypriots to agree to compromise on several issues demanded by the Greek Cypriots as part of an eventual solution. The United States and the EU both intervened, restating the republic's right to explore for natural resources in its EEZ but asking both the Greek and Turkish Cypriots to tone down the rhetoric and for Turkey not to provoke additional tensions over the energy issue. In a March 15, 2018, press conference welcoming the visit to Cyprus of U.S. Assistant Secretary of State for Europe and Eurasia Wess Mitchell, U.S. Ambassador Cathleen Doherty stated that while the United States supported the republic's right to exploratory activities in its EEZ, the island's energy resources should be fairly shared between both communities in the context of an overall settlement. The Ambassador said that even if the drilling located additional gas deposits, it may not be possible or feasible to commercialize those deposits right away, as costs associated with extraction and transportation may not make the resources viable. She noted that it could take several years, even decades, before all the conditions were right for revenues to begin flowing. In the interim, Ambassador Doherty intimated that the two sides and Turkey should stop the feuding and focus on a solution to the island's division. Assistant Secretary Mitchell, in a summer 2018 speech at the Heritage Foundation, reiterated the U.S. position and stated that Turkey should tone down its provocations in the waters south of Cyprus. He restated that view one week later at a hearing before the Senate Foreign Relations Committee. In November 2018, the energy partnership of Exxon-Mobil/Qatar Petroleum began gas exploration in block 10 of the Cypriot EEZ. Turkey revived its warnings about unilateral exploitation of the resources and announced its intentions to begin drilling in waters that both Ankara and Cyprus claim are part of their respective EEZs. In early 2019, Exxon-Mobile announced that it had found significant gas deposits and would continue to explore the feasibility of extraction. Up until the end of 2018, tensions between the United States and Turkey had threatened to play out over the drilling issue. A slight thaw in U.S.-Turkish relations restrained Turkey from taking any negative actions against Exxon-Mobile's early exploration. However, as Turkey deploys two drilling platforms in the same commercial blocks, tensions could spike again. Assessment When Mustafa Akinci was elected as leader of the Turkish Cypriots in 2015, many believed the window of opportunity for a permanent settlement of the Cyprus problem, for all intents closed by Ergolu, had been reopened. As "mayor" of the Turkish Cypriot portion of Nicosia, Akinci had been praised for working cooperatively with his Greek Cypriot counterparts on a number of infrastructure projects, leading some to take a positive view of the possibilities of a settlement between Anastasiades and Akinci. While the political environment on both sides of the island immediately after the election of Akinci had taken on a positive air, with predictions that the negotiations could conclude quickly, the scene reminded Cyprus observers of the 2008 election of Christofias and the almost giddy atmosphere that arose over a possible quick solution to the division of the island with Turkish Cypriot leader Talat. Akinci, much as Talat had with Christofias, declared that he and Anastasiades were of the same generation and could relate more easily to each other and better understand the measures that both sides would have to take to achieve a solution. Negotiations between Anastasiades and Akinci, once begun, got off to a fast start. For many, the first 20 months of the Anastasiades/Akinci era went well. Both leaders seemed to enjoy meeting with each other and doing public events together in a show of solidarity. The positive atmosphere of the negotiations raised hope among some that these two leaders might just reach a settlement. And, although the issues that have separated the two communities and prevented a solution for more than 44 years have long been clearly defined and repeatedly presented and debated by both sides, the chemistry between Anastasiades and Akinci, seen by many as an improvement over the Anastasiades/Eroglu relationship, seemed to allow the leaders to overcome some of the traditional barriers to a settlement more effectively than previous attempts by Cypriot leaders. However, as the talks progressed, with more references to agreed convergences , both Anastasiades and Akinci, as those before them had experienced, began to hear public controversy and criticism of the negotiations emerge from the skeptics and opponents of an agreement. Despite the inevitable level of domestic opposition in both communities and the inability to reach concrete agreements on several governance issues, as well as the security and guarantees issues, Anastasiades and Akinci, at least publicly, seemed determined to continue to seek a solution. The intensity of the negotiations beginning in fall 2016 and continuing through Mont Pelerin and Geneva in 2017 earned both leaders international praise for their commitment and persistence. To most observers, the fact that Anastasiades and Akinci appeared to have come closer to reaching a settlement by early 2017 than at any time since 2004, and that both sides, plus Greece and Turkey, were willing, after the failure at Geneva, to come together again at Crans Montana for another attempt to resolve their differences, seemed to support the growing optimism. Indeed, although a solution for that final settlement remained elusive, the negotiators maintained a level of optimism that a breakthrough was possible. The failure of the Crans Montana conference, despite the framework presented by U.N. Secretary-General Guterres, appeared to be directly related to the disagreement over security issues. Ankara appeared unwilling to accept the replacement of Turkish security guarantees with guarantees from the EU or an interim international security force, despite the fact that some Turkish troops that might have remained under a compromise could have provided security to the Turkish Cypriots during the time the agreement was being implemented. It also appeared Ankara was not willing to forego its geostrategic interests and influence over the island by accepting a longer-term "zero guarantees, zero troops" option. Ankara insisted that some level of troops would remain on the island either permanently or at least for several years, a condition that they knew Anastasiades would continue to reject. Ankara's determination to build a permanent naval base in North Cyprus, raised again in December 2018, seemed to affirm this view. By summer 2018, however, Akinci indicated that he and Anastasiades no longer shared the same vision of what constituted a bizonal, bicommunal federation or whether such a form of government was even desirable at this point. Reports suggested that several governance issues long thought to have been part of the oft referred convergences , such as the rotating presidency, Turkish Cypriot codecision power, political equality, and the population mix in the north, not only appeared to remain unresolved but also may have been pulled back from the status of convergences. Some observers believed that if the two sides could not find common agreement on the governance issues, then arguing over troops and security, as seen at Geneva and Crans Montana, was a futile exercise. In appointing Jane Holl Lute as his new adviser in July 2018, it appeared that Secretary-General Guterres specifically intended to challenge the sincerity of both sides to return to the negotiations. Guterres also appeared to have adopted Akinci's demand for a results-oriented negotiation, first by making it clear that both sides would have to agree to a "terms of reference" document that Lute would draft and then by not letting the talks become open-ended by allowing the terms of reference document, once presented, to be renegotiated. The approach initially seemed to work: Anastasiades reportedly believed the terms of reference could reinforce his position that Turkish military forces would have to withdraw from the island and future security guarantees for the island would have to take another form. Akinci apparently saw some support for his demand for political equality for Turkish Cypriots. Nevertheless, acceptance of the terms of reference would require the restoration of trust between the two leaders, between the Greek Cypriots and Ankara, and perhaps between Ankara and Akinci. As Lute started on her mission, it was unclear whether such trust could be restored. Akinci indicated he was no longer sure what type of solution Anastasiades was looking for and made it clear again that he could not accept changes to the security issues. Anastasiades apparently could not agree to how the Turkish Cypriots defined political equality. Further complicating Lute's task was the fact that the political mindset surrounding the talks began to change, actually pointing both sides in opposite directions. In mid-fall 2018, Anastasiades surprised many by suggesting that both sides might consider some form of a "decentralized" federation. His proposal seemed to suggest that the two constituent states that would emerge under such a working agreement would have more powers than what had been discussed previously, even though he was slow in defining what those additional powers might be. It also was reported that Anastasiades suggested holding a conference in Cyprus to discuss the various parameters of either a decentralized federation or perhaps even a confederation. This proposal resulted in the atmosphere becoming muddled. Some thought that after meeting with Turkish Foreign Minister Cavusoglu at the U.N. in New York, Anastasiades may have become convinced that Ankara would no longer accept a federal solution and that Anastasiades was looking for an acceptable middle ground. Some others assumed that Anastasiades was trying to buy time in the hope that the gas exploration being conducted by Exxon-Mobile and others would produce positive results, thus putting more pressure on the Turkish Cypriots to cut a deal in time to guarantee they would share in the potential revenues generated by the additional gas finds. Akinci expressed skepticism of Anastasiades's proposal, seeing it as undermining his support for a federal solution and a way to try to reach a settlement without giving the Turkish Cypriots the political equality they sought at any federal level. Anastasiades also came under heavy criticism from his political opponents, particularly the leadership of the AKEL party, for what they claimed was an abandonment of the goal of a federal solution. More importantly, when some Turkish and Turkish Cypriot government officials who had begun to sour on a federal solution, particularly Foreign Minister Ozersay, insisted the government should have a say in the negotiations, Akinci saw a growing challenge to his position. Ersin Tatar, the newly elected head of the opposition National Unity Party (UBP), indicated his party would not support a federal solution and would not be bound by Akinci's decisions. Tatar apparently threw his support behind a "two-state" solution. Some also pointed out that the decision by several of the original pro-federal solution political parties not to publicly defend Akinci had left him isolated. Some suggested that Akinci and Ankara were no longer on the same page. By contrast, observers who saw Ankara attempting to sideline Akinci and move beyond a federal solution saw the infighting as a ploy to buy more time for Turkey to get through local elections in March and perhaps even the May European Parliament elections. In this strategy, the resumption of negotiations would not even be considered until at least June 2019. When the apparent rift between Akinci, Ozersay, and others became increasingly public, threatening Turkish Cypriot unity, Turkish Foreign Minister Cavasoglu traveled to Cyprus in late January 2019, apparently to bring all sides together and to try to end the public squabbling. Cavasoglu reiterated that Ankara wanted a permanent solution, no matter what it was, but that the Greek Cypriots had to determine what outcome they were willing to negotiate to achieve. At the same time, some observers questioned whether special adviser Lute's mission could actually succeed, as it appeared that disagreement on several issues would not likely help achieve agreement on her eventual terms of reference document. For instance, Anastasiades did not accept a definition of political equality for the Turkish Cypriots favored by Akinci. Nor would he reverse his long-held position and accept a target deadline to conclude the talks. Cavasoglu's December 2018 comment that those who dream of an option with zero guarantees and zero troops should let it go, as such a thing will never happen, suggested that the Guterres framework, in which Turkish troops would begin to leave the island after an agreement is reached, could jeopardize the entire terms of reference from the start. These questions resulted Lute's inability to craft a terms of reference document by the end of 2018, and she stated she would have to return to the island for another round of consultations in early 2019. When she returned in early 2019, the rift between Anastasiades and Akinci centered on the issue of Turkish Cypriot political equality. Akinci demanded his proposal be accepted as a condition for resuming the negotiations. The idea was again rejected by Anastasiades. Subsequently, Lute found little basis for continuing her consultations and decided to meet with the guarantor powers. Although the Greek and Turkish foreign ministers agreed to hold their own consultations on security, Lute saw no likely breakthrough between Anastasiades and Akinci. Nevertheless, Lute agreed to return to the island on April 7 for yet another round of consultations with the two leaders. When Lute returned, she apparently found both sides seemingly farther apart. Aside from the long-standing disagreements between the two Cypriot sides, particularly on security and troops, a big sticking point was Akinci's insistence that the Turkish Cypriots have political equality in the new federal government rather than holding a minority status. Akinci repeated his demand that if a solution would result in two equal constituent states, under a federal structure, then the Turkish Cypriots should hold equal power on issues taken up at the federal level that would involve both constituent states. He proposed that on all issues there must be a positive Turkish Cypriot vote. Anastasiades again rejected that approach, claiming it would give the Turkish Cypriots an absolute veto over all policy issues and would subject Cyprus to the demands of Ankara, potentially resulting in gridlock. Anastasiades, however, apparently did express a willingness to discuss Akinci's proposal, but only for some issues. At the same time, Anastasiades resurrected an old proposal that the new government be a cross between a presidential system, in which the president would be a Greek Cypriot, and a parliamentary system in which a prime minister would rotate between the two communities. Akinci rejected this proposal, arguing that it reinforced his view that the Greek Cypriots will always see the Turkish Cypriots as a minority and not a coequal partner. Other Turkish Cypriot officials claimed this was an attempt by Anastasiades to establish a Greek Cypriot state on the island. Lute's fourth return to Cyprus again failed to achieve an agreement between the two Cypriot leaders on a "terms of reference" document that would become the basis for restarting the negotiations and suggested that negotiations were unlikely to resume anytime soon. Secretary-General Guterres will now have to decide how to proceed. Continuing with the Lute mission without a chance of being successful may seem fruitless. Even if Anastasiades and Akinci could compromise on some form of an agreement on the definition of political equality for the Turkish Cypriots, questions still remain on what type of final governmental structure would be addressed, specifically, is the long-sought bizonal, bicommunal, federal solution for the island still attainable? The Guterres framework suggests that a new security framework was needed, particularly one that does not envision Turkey's automatic right to unilaterally intervene on the island. Would Ankara eventually accept that concept? Could Akinci argue successfully to his citizens that the new federal structure, loose or otherwise, with some version of political equality for the Turkish Cypriotst, the guarantees of EU law, and a more robust U.N. peacekeeping force in place, might be enough to argue for a new security arrangement regarding Turkish troops or Turkish security guarantees? Could either side accept a future NATO-led peacekeeping force, in which Turkish and Greek troops could participate as a reassurance to both sides? History might indicate a continued "no" to these questions. At the same time, relations between Turkey and the Greek Cypriots have become so tense over the energy exploration issue that neither side appears capable of backing down from its security demands, leaving little room for optimism that any kind of a solution can be achieved. Many also wonder whether either leader could sell any agreement to his community at this point. Some longtime observers of the negotiations in the international community expressed deep concern for the direction the dispute has taken since Crans Montana. For instance, in late 2017, the Business Monitor Internatio nal, part of the Fitch Group, downgraded its assessment of a new unification deal from slim to extremely remote. Its 2018 forecast likely will not have changed. Former British Foreign Secretary Jack Straw in 2017 restated a previous assessment that "from the Greek Cypriot point of view, conceding political equality with the Turkish Cypriots means giving power away. But absent a real incentive for both sides" to actually reach an agreement, "the reality is that no Greek Cypriot leader will ever be able to get their electorate behind a deal. The status quo for the south is simply too comfortable." At this point, and despite the effort being put forward by U.N. Secretary-General Guterres to restart the negotiations, a final settlement for Cyprus remains elusive.

Four months into 2019, unification talks intended to end the division of Cyprus after 55 years as a politically separated nation and 45 years as a physically divided country have remained suspended since July 2017. Attempts by the United Nations to find common ground between the two Cypriot communities to resume the negotiations have not been successful. The talks have fallen victim to the realities of five decades of separation and both sides' inability to make the necessary concessions to reach a final settlement. As a result, the long-sought bizonal, bicommunal, federal solution for the island has remained elusive and may no longer be attainable. Cyprus negotiations typically exhibit periodic levels of optimism, quickly tempered by the political reality that difficult times between Greek and Turkish Cypriots always lay ahead. In June 2018, in an attempt to jump-start the talks, U.N. Secretary-General Antonio Guterres appointed Jane Holl Lute as his new adviser for Cyprus. Her mission was to consult with the two Cypriot leaders, Nicos Anastasiades and Mustafa Akinci, and the three guarantor parties (Greece, Turkey, and Great Britain) to determine if sufficient conditions existed to resume U.N.-hosted negotiations and, if so, to prepare a comprehensive "terms of reference" document by the end of 2018. This document was supposed to include a version of a 2017 "framework" proposed by Guterres, previous "convergences" both sides had reportedly reached on many issues, and a proposed road map for how the negotiations would proceed. Lute conducted her first consultations in September 2018 and a second round in October. Although the talks reportedly were "productive," they did not result in an agreement to resume the talks and Lute announced she would have to return to the island in early 2019, reaffirming the difficulty many thought she would encounter in trying to reach agreement on the provisions of the "terms of reference." Lute's initial return in January 2019 was short and inconclusive. Subsequently, Lute returned to meet with Anastasiades and Akinci on April 7. What Lute apparently found was that both sides were seemingly farther apart. Aside from the long-standing disagreement on security guarantees, a big sticking point was Akinci's insistence that the Turkish Cypriots have political equality, demanding that on all issues taken up at any new federal level, a positive Turkish Cypriot vote would be necessary. Anastasiades expressed a willingness to discuss Akinci's proposal for some issues but rejected the demand claiming, it would give the Turkish Cypriots an absolute veto over all policy issues, potentially resulting in gridlock. At the same time, Anastasiades resurrected an old proposal that the new government be a cross between a presidential system, in which the president would be a Greek Cypriot, and a parliamentary system in which a prime minister would rotate between the two communities. Akinci rejected this proposal, claiming it reinforced his view that the Greek Cypriots will always see the Turkish Cypriots as a minority and not a coequal partner. Lute's fourth attempt failed to achieve an agreement between the two Cypriot leaders on how to restart the talks and suggested that negotiations were likely to remain suspended indefinitely. The United States historically has held an "honest broker" approach to achieving a just, equitable, and lasting settlement of the Cyprus issue. However, some observers have seen recent actions within Congress and the Administration in support of Cyprus's unfettered energy development in the Eastern Mediterranean and lifting of restrictions on arms sales to Cyprus as an admission by the United States that an equitable solution has become more difficult. These policy directions also suggest that U.S. interests in the Eastern Mediterranean have moved on to security and energy concerns for which closer relations with the Republic of Cyprus have become a higher priority. This report provides an overview of the negotiations' history and a description of some of the issues involved in those talks.

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Foreign Aid: An Introduction to U.S. Programs and Policy U.S. foreign aid is the largest component of the international affairs budget, for decades viewed by many as an essential instrument of U.S. foreign policy. Each year, the foreign aid budget is the subject of congressional debate over the size, composition, and purpose of the program. The focus of U.S. foreign aid policy has been transformed since the terrorist attacks of September 11, 2001. Global development, a major objective of foreign aid, has been cited as a third pillar of U.S. national security, along with defense and diplomacy, in the national security strategies of the George W. Bush and Barack Obama Administrations. Although the Trump Administration's National Security Strategy does not explicitly address the status of development vis-à-vis diplomacy and defense, it does note the historic importance of aid in achieving foreign policy goals and supporting U.S. national interests. This report addresses a number of the more frequently asked questions regarding the U.S. foreign aid program; its objectives, costs, and organization; the role of Congress; and how it compares to those of other aid donors. It attempts not only to present a current snapshot of American foreign assistance, but also to illustrate the extent to which this instrument of U.S. foreign policy has evolved over time. Data presented in the report are the most current, consistent, and reliable figures available, generally updated through FY2017. Dollar amounts come from a variety of sources, including the U.S. Agency for International Development (USAID) Foreign Aid Explorer database (Explorer) and annual State, Foreign Operations, and Related Programs (SFOPS) appropriations acts. As new data are obtained or additional issues and questions arise, the report will be revised. Foreign aid abbreviations used in this report are listed in Appendix B . How Is "U.S. Foreign Aid" Defined and Counted? In its broadest sense, U.S. foreign aid is defined under the Foreign Assistance Act of 1961 (FAA), the primary legislative basis of foreign aid programs, as any tangible or intangible item provided by the United States Government [including "by means of gift, loan, sale, credit, or guaranty"] to a foreign country or international organization under this or any other Act, including but not limited to any training, service, or technical advice, any item of real, personal, or mixed property, any agricultural commodity, United States dollars, and any currencies of any foreign country which are owned by the United States Government.... (§634(b)) For many decades, nearly all assistance annually requested by the executive branch and debated and authorized by Congress was ultimately encompassed in the foreign operations appropriations and the international food aid title of the agriculture appropriations. In the U.S. federal budget, these traditional foreign aid accounts have been subsumed under the 150 (international affairs) budget function. By the 1990s, however, it became increasingly apparent that the scope of U.S. foreign aid was not fully accounted for by the total of the foreign operations and international food aid appropriations. Many U.S. departments and agencies had adopted their own assistance programs, funded out of their own budgets and commonly in the form of professional exchanges with counterpart agencies abroad—the Environmental Protection Agency, for example, providing water quality expertise to other governments. These aid efforts, conducted outside the purview of the traditional foreign aid authorizing and appropriations committees, grew more substantial and varied in the mid-1990s. The Department of Defense (DOD) Nunn-Lugar effort provided billions in aid to secure and eliminate nuclear and other weapons, as did Department of Energy activities to control and protect nuclear materials—both aimed largely at the former Soviet Union. Growing participation by DOD in health and humanitarian efforts and expansion of health programs in developing countries by the National Institutes of Health and Centers for Disease Control and Prevention, especially in response to the HIV/AIDS epidemic, followed. During the past 15 years, DOD-funded and implemented aid programs in Iraq and Afghanistan to train and equip foreign forces and win hearts and minds through development efforts were often considerably larger than the traditional military and development assistance programs provided under the foreign operations appropriations. The recent decline in DOD activities in these countries has sharply decreased nontraditional aid funding. In FY2011, nontraditional sources of assistance, at $17.3 billion, represented 35% of total aid obligations. By FY2017, nontraditional aid, at $9.7 billion, represented 19% of total aid, still a significant proportion. While the executive branch has continued to request and Congress to debate most foreign aid within the parameters of the foreign operations legislation, both entities have sought to ascertain a fuller picture of assistance programs through improved data collection and reporting. Significant discrepancies remain between data available for traditional versus nontraditional types of aid and, therefore, the level of analysis applied to each. (See text box , "A Note on Numbers and Sources," below.) Nevertheless, to the extent possible, this report tries to capture the broadest definition of aid throughout. Foreign Aid Purposes and Priorities What Are the Rationales and Objectives of U.S. Foreign Assistance? Foreign assistance is predicated on several rationales and supports a great many objectives. The importance and emphasis of various rationales and objectives have changed over time. Rationales for Foreign Aid Throughout the past 70 years, there have been three key rationales for foreign assistance National Security has been the predominant theme of U.S. assistance programs. From rebuilding Europe after World War II under the Marshall Plan (1948-1951) and through the Cold War, U.S. aid programs were viewed by policymakers as a way to prevent the incursion of communist influence and secure U.S. base rights or other support in the anti-Soviet struggle. After the Cold War ended, the focus of foreign aid shifted from global anti-communism to disparate regional issues, such as Middle East peace initiatives, the transition to democracy of eastern Europe and republics of the former Soviet Union, and international illicit drug production and trafficking in the Andes. Without an overarching security rationale, foreign aid budgets decreased in the 1990s. However, since the September 11, 2001, terrorist attacks in the United States, policymakers frequently have cast foreign assistance as a tool in U.S. counterterrorism strategy, increasing aid to partner states in counterterrorism efforts and funding the substantial reconstruction programs in Afghanistan and Iraq. As noted, global development has been featured as a key element in U.S. national security strategy in both Bush and Obama Administration policy statements. Commercial Interests. Foreign assistance has long been defended as a way to either promote U.S. exports by creating new customers for U.S. products or by improving the global economic environment in which U.S. companies compete. Humanitarian Concerns. Humanitarian concerns drive both short-term assistance in response to crisis and disaster as well as long-term development assistance aimed at reducing poverty, hunger, and other forms of human suffering brought on by more systemic problems. Providing assistance for humanitarian reasons has generally been the aid rationale most broadly supported by the American public and policymakers alike. Objectives of Foreign Aid The objectives of aid generally fit within these rationales. Aid objectives include promoting economic growth and reducing poverty, improving governance, addressing population growth, expanding access to basic education and health care, protecting the environment, promoting stability in conflictive regions, protecting human rights, promoting trade, curbing weapons proliferation, strengthening allies, and addressing drug production and trafficking. The expectation has been that, by meeting these and other aid objectives, the United States will achieve its national security goals as well as ensure a positive global economic environment for American products, and demonstrate benevolent and respectable global leadership. Different types of foreign aid typically support different objectives. But there is also considerable overlap among categories of aid. Multilateral aid serves many of the same objectives as bilateral development assistance, although through different channels. Military assistance, economic security aid—including rule of law and police training—and development assistance programs may support the same U.S. political objectives in the Middle East, Afghanistan, and Pakistan. Military assistance and alternative development programs are integrated elements of American counternarcotics efforts in Latin America and elsewhere. Depending on how they are designed, individual assistance projects can also serve multiple purposes. A health project ostensibly directed at alleviating the effects of HIV/AIDS by feeding orphan children may also stimulate grassroots democracy and civil society through support of indigenous NGOs while additionally meeting U.S. humanitarian objectives. Microcredit programs that support small business development may help develop local economies while at the same time enabling client entrepreneurs to provide food and education to their children. Water and sanitation improvements both mitigate health threats and stimulate economic growth by saving time previously devoted to water collection, raising school attendance for girls, and facilitating tourism, among other effects. In 2006, in an effort to rationalize the assistance program more clearly, the State Department developed a framework that organizes U.S. foreign aid around five strategic objectives, each of which includes a number of program elements, also known as sectors. The five objectives are Peace and Security; Investing in People; Governing Justly and Democratically; Economic Growth; and Humanitarian Assistance. Generally, these objectives and their sectors do not correspond to any one particular budget account in appropriations bills. Annually, the Department of State and USAID develop their foreign operations budget request within this framework, allowing for an objective and program-oriented viewpoint for those who seek it. An effort by the State Department to obtain reporting from all departments and agencies of the U.S. government on aid levels categorized by objective and sector is ongoing. USAID's Explorer website (explorer.usaid.gov) currently provides a more complete picture from all parts of the U.S. government (see Table 1 ). What Are the Major Foreign Aid Funding Categories and Accounts? The 2006 framework introduced by the Department of State organizes assistance by foreign policy strategic objective and sector. But there are many other ways to categorize foreign aid, one of which is to sort out and classify foreign aid accounts in the U.S. budget according to the types of activities they are expected to support, using broad categories such as military, bilateral development, multilateral development, humanitarian assistance, political/strategic, and nonmilitary security activities (see Figure 1 ). This methodology reflects the organization of aid accounts within the SFOPS appropriations but can easily be applied to the international food aid title of the Agriculture appropriations as well as to the DOD and other government agency assistance programs with funding outside traditional foreign aid budget accounts. In FY2017, these many aid accounts provided $49.9 billion in obligated assistance. Bilateral Development Assistance For FY2017, U.S. government departments and agencies obligated about $16.2 billion in bilateral development assistance, or 33% of total foreign aid, primarily through the Development Assistance (DA) and Global Health (Global Health-USAID and Global Health-State) accounts and the administrative accounts that allow USAID to operate (Operating Expenses, Capital Investment Fund, and Office of the Inspector General). Other bilateral development assistance accounts support the development efforts of distinct institutions, such as the Peace Corps, Inter-American Foundation (IAF), U.S.-African Development Foundation, Trade and Development Agency, Millennium Challenge Corporation (MCC), and National Endowment for Democracy (NED). Development assistance programs aim to foster sustainable broad-based economic progress and social stability in developing countries. This aid is managed largely by USAID and is used for long-term projects in a wide range of areas. Many programs share the objective in the State Department framework of "promoting economic growth and prosperity." Agriculture programs focus on reducing poverty and hunger, trade-promotion opportunities for farmers, and sound environmental practices for sustainable agriculture. Private sector development programs include support for business associations and microfinance services. Programs for managing natural resources and protecting the global environment focus on conserving biological diversity; improving the management of land, water, and forests; encouraging clean and efficient energy production and use; and reducing the threat of global climate change. Programs supporting the objective of "governing justly and democratically" include support for promoting rule of law and human rights, good governance, political competition, and civil society. Programs with the objective of "investing in people" include support for basic, secondary, and higher education; improving government ability to provide social services; water and sanitation; and health care. By far the largest portion of bilateral development assistance is devoted to global health. These programs include treatment of HIV/AIDS and other infectious diseases, maternal and child health, family planning and reproductive health programs, and strengthening the government health systems that provide care. Most funding for HIV/AIDS, malaria, and tuberculosis is directed through the State Department's Office of the Global AIDS Coordinator to other agencies, including USAID and the Centers for Disease Control and Prevention. The latter agency and the National Institutes for Health also conduct programs funded by Labor-Health and Human Services (HHS) appropriations. In addition to providing emergency food aid in crisis situations, a portion (about 25% in FY2017) of the Food for Peace (FFP) Title II international food aid program (also referred to as P.L. 480, named after the 1954 law that authorized it)—funded under the Agriculture appropriations—provides nonemergency food commodities to private voluntary organizations (PVOs) or multilateral organizations, such as the World Food Program, for development-oriented purposes. FFP funds are also used to support the "farmer-to-farmer" program, which sends hundreds of U.S. volunteers as technical advisors to train farm and food-related groups throughout the world. In addition, the McGovern-Dole International Food for Education and Child Nutrition Program, a program begun in 2002, provides commodities, technical assistance, and financing for school feeding and child nutrition programs. Multilateral Development Assistance A share of U.S. foreign assistance—4% in FY2017 ($2.1 billion)—is combined with contributions from other donor nations to finance multilateral development projects. Multilateral aid is funded largely through the International Organizations and Programs (IO&P) account and individual accounts for each of the Multilateral Development Banks (MDBs) and global environmental funds. For FY2017, the U.S. government obligated $2.1 billion for development activities managed by international organizations and financial institutions, including contributions to the United Nations Children's Fund (UNICEF); the United Nations Development Program (UNDP); and MDBs, such as the World Bank. The U.S. share of donor contributions to each of the MDB concessional (subsidized) and nonconcessional (market rate) loan windows varies widely. For the largest MDB, the World Bank, the United States has contributed about 20.5% to the nonconcessional lending window (the International Development Associations [IDA]) and about 17.3% to the nonconcessional lending window (the International Bank for Reconstruction and Development [IBRD]). In determining the U.S. share of donor contributions to the various multilateral institutions, the U.S. faces the challenge of finding the right balance between the benefits of burden sharing and the constraints of sharing control when determining multilateral priorities. Humanitarian Assistance For FY2017, obligations for humanitarian assistance programs amounted to $8.9 billion, 18% of total assistance. Unlike development assistance programs, which are often viewed as long-term efforts that may have the effect of preventing future crises from emerging, humanitarian assistance programs are devoted largely to the immediate alleviation of human suffering in emergencies, both natural and man-made, as well as problems resulting from conflict associated with failed or failing states. The largest portion of humanitarian assistance is managed through the International Disaster Assistance (IDA) account by USAID, which provides relief and rehabilitation efforts to victims of man-made and natural disasters, such as the economic and social dislocations caused by the 2014/2015 Ebola epidemic, and the ongoing crises in Syria, South Sudan, Yemen, and Venezuela. A portion of IDA is used for food assistance through the Emergency Food Security Program. Additional humanitarian assistance goes to programs administered by the State Department and funded under the Migration and Refugee Assistance (MRA) and the Emergency Refugee and Migration Assistance (ERMA) accounts, aimed at addressing the needs of refugees and internally displaced persons. These accounts support a number of refugee relief organizations, including the U.N. High Commission for Refugees and the International Committee of the Red Cross. The Department of Defense provides disaster relief under the Overseas Humanitarian, Disaster, and Civic Assistance (OHDACA) account of the DOD appropriations. (For further information on humanitarian programs, see CRS In Focus IF10568, Overview of the Global Humanitarian and Displacement Crisis , by Rhoda Margesson.) The bulk of FFP Title II Agriculture appropriations—$1.3 billion in obligations, about 75% of total Food for Peace Act in FY2017—are used by USAID, mostly to purchase U.S. agricultural commodities, for emergency needs, supplementing both refugee and disaster programs. (For more information on food aid programs, see CRS Report R45422, U.S. International Food Assistance: An Overview , by Alyssa R. Casey.) Assistance Serving Both Development and Special Political/Strategic Purposes A few accounts promote special U.S. political and strategic interests. Programs funded through the Economic Support Fund (ESF) account generally aim to promote political and economic stability, often through activities indistinguishable from those provided under regular development programs. However, ESF is also used for direct budget support to foreign governments and to support sovereign loan guarantees. For FY2017, USAID and the State Department obligated $4.8 billion, nearly 10% of total assistance, through this account. For many years, following the 1979 Camp David accords, most ESF funds went to support the Middle East Peace Process—in FY1997, for example, 87% of ESF went to Israel, Egypt, the West Bank and Jordan. Those proportions have declined significantly in recent decades. In FY2007, 22% of ESF funding went to these countries and, in FY2017, 25%. Since the September 2001 terrorist attacks, ESF has largely supported countries of importance in the U.S. global counterterrorism strategy. In FY2007, for example, activities is Afghanistan and Pakistan received 17% of ESF funding (25% in FY2017). Over the years, other accounts have been established to meet specific political or security interests and then were dissolved once the need was met. One example is the Assistance to Eastern Europe and Central Asia (AEECA) account, established in FY2009 to combine two aid programs that met particular strategic political interests arising from the demise of the Soviet empire. The SEED (Support for East European Democracy Act of 1989) and the FREEDOM Support Act (Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992) programs were designed to help Central Europe and the newly independent states of the former Soviet Union (FSA) achieve democratic systems and free market economies. With funding decreasing as countries in the region graduated from U.S. assistance, Congress discontinued use of the AEECA account in the FY2013 appropriations. Increasing requests and appropriations for countries in the former Soviet Union threatened by Russia, however, led to its re-emergence in the FY2017 and succeeding SFOPS appropriations. In the recent past, several DOD-funded nontraditional aid programs directed at Afghanistan also supported development efforts. The Afghanistan Infrastructure Fund and the Business Task Force wound down as the U.S. military presence in that country declined; the Commander's Emergency Response Program (CERP) still exists. The latter two programs had earlier iterations as well in Iraq. Nonmilitary Security Assistance Several U.S. government agencies support programs to address global concerns that are considered threats to U.S. security and well-being, such as terrorism, illicit narcotics, crime, and weapons proliferation. In the past two decades, policymakers have given greater weight to these programs. In FY2017, they amounted to $2.9 billion, 6% of total assistance Since the mid-1990s, three U.S. agencies—State, DOD, and Energy—have provided funding, technical assistance, and equipment to counter the proliferation of chemical, biological, radiological, and nuclear weapons. Originally aimed at the former Soviet Union under the rubric cooperative threat reduction (CTR), these programs seek to ensure that these weapons are secured and their spread to rogue nations or terrorist groups prevented. In addition to nonproliferation efforts, the Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) account, managed by the State Department, encompasses civilian anti-terrorism efforts such as detecting and dismantling terrorist financial networks, establishing watch-list systems at border controls, and building developing country anti-terrorism capacities. NADR also funds humanitarian demining programs. The State Department is the main implementer of counternarcotics programs. The State-managed International Narcotics Control and Law Enforcement (INCLE) account supports counternarcotics activities, most notably in Afghanistan, Pakistan, Peru, and Colombia. It also helps develop the judicial systems—assisting judges, lawyers, and legal institutions—of many developing countries, especially in Afghanistan. DOD and USAID also support counternarcotics activities, the former largely by providing training and equipment, the latter by offering alternative crop and employment programs. Military Assistance The United States provides military assistance to U.S. friends and allies to help them acquire U.S. military equipment and training. At $14.5 billion, military assistance accounted for about 29% of total U.S. foreign aid in FY2017. The Department of State administers three programs, with corresponding appropriations accounts that are then implemented by DOD. Foreign Military Financing (FMF) is a grant program that enables governments to receive equipment and associated training from the U.S. government or to access equipment directly through U.S. commercial channels. Most FMF grants support the security needs of Israel, Egypt, Jordan, Pakistan, and Iraq. The International Military Education and Training program (IMET) offers military training on a grant basis to foreign military officers and personnel. Peacekeeping funds (PKO) are used to support voluntary non-U.N. peacekeeping operations as well as training for an African crisis response force. Since 2002, DOD appropriations have supported FMF-like programs, training and equipping security forces in Afghanistan and Iraq. These programs and the accounts that fund them are called the Afghanistan Security Forces Fund (ASFF) and, through FY2012, the Iraq Security Forces Fund (ISFF). Beginning in FY2015, similar support was provided Iraq under the Iraq Train and Equip Fund. The DOD-funded programs in Afghanistan and Iraq accounted for more than half of total military assistance in FY2017. Delivery of Foreign Assistance How and in what form assistance reaches an aid recipient can vary widely, depending on the type of aid program, the objective of the assistance, and the agency responsible for providing the aid. What Executive Branch Agencies Implement Foreign Aid Programs? Federal agencies may implement foreign assistance programs using funds appropriated directly to them or funds transferred to them from another agency. For example, significant funding appropriated through State Department and Department of Agriculture accounts is used for programs implemented by USAID (see Figure 2 ). The funding data in this section reflect the agency that implemented the aid, not necessarily the agency to which funds were originally appropriated. U.S. Agency for International Development For 50 years, USAID has implemented the bulk of the U.S. bilateral economic development and humanitarian assistance. It directly implements the Development Assistance, International Disaster Assistance, and Transition Initiatives accounts, as well as a USAID-designated portion of the Global Health account. Jointly with the State Department, USAID co-manages ESF, AEECA, and Democracy Fund programs, which frequently support development activities as a means of promoting U.S. political and strategic goals. Based on historical averages, according to USAID, the agency implements more than 90% of ESF, 70% of AEECA, 40% of the Democracy Fund, and about 60% of the Global HIV/AIDS funding appropriated to the State Department. USAID also implements all Food for Peace Act Title II food assistance funded through agriculture appropriations. USAID obligated an estimated $20.55 billion to implement foreign assistance programs and activities in FY2017. The agency's staff in 2018 totaled 9,747 , of which about 67% were working overseas, overseeing the implementation of hundreds of projects undertaken by thousands of private sector contractors, consultants, and nongovernmental organizations. U.S. Department of Defense DOD implements all SFOPS-funded military assistance programs—FMF, IMET, PKO, and PCCF—in conjunction with the policy guidance of the Department of State. The Defense Security Cooperation Agency is the primary DOD body responsible for these programs. DOD also carries out an array of state-building activities, funded through defense appropriations legislation, which are usually in the context of training exercises and military operations. These sorts of activities, once the exclusive jurisdiction of civilian aid agencies, include development assistance to Iraq and Afghanistan through the Commander's Emergency Response Program (CERP), the Iraq Relief and Reconstruction Fund, and the Afghanistan Infrastructure Fund, and elsewhere through the Defense Health Program, counterdrug activities, and humanitarian and disaster relief. Training and equipping of Iraqi and Afghan police and military, though similar in nature to some traditional security assistance programs, has been funded and implemented primarily through DOD appropriations, though implementing the Iraq police training program was a State Department responsibility from 2012 until it was phased out in 2013. In FY2017, the Department of Defense implemented an estimated $14.50 billion in foreign assistance programs. U.S. Department of State The Department of State manages and co-manages a wide range of assistance programs. It is the lead U.S. civilian agency on security and refugee related assistance, and has sole responsibility for implementing the International Narcotics and Law Enforcement (INCLE) and Nonproliferation, Antiterror, and Demining (NADR) accounts, the two Migration and Refugee accounts (MRA and ERMA), and the International Organizations and Programs (IO&P) account. State is also home to the Office of the Global AIDS Coordinator (OGAC), which manages the State Department's portion of Global Health funding in support of HIV/AIDS programs, though many of these funds are transferred to and implemented by USAID, the National Institutes of Health, and the Centers for Disease Control and Prevention. In conjunction with USAID, the State Department manages the Economic Support Fund, AEECA assistance to the former communist states, and Democracy Fund accounts. For these accounts, the State Department largely sets the overall policy and direction of funds, while USAID implements the preponderance of programs. In addition, the State Department, through its Bureau of Political-Military Affairs, has policy authority over the Foreign Military Financing (FMF), International Military Education and Training (IMET), and Peacekeeping Operations (PKO) accounts, and, while it was active, the Pakistan Counterinsurgency Capability Fund (PCCF). These programs are implemented by the Department of Defense. Police training programs have traditionally been the responsibility of the International Narcotics and Law Enforcement (INL) Office in the State Department, though programs in Iraq and Afghanistan were implemented and paid for by the Department of Defense for several years. State is also the organizational home to the Office of U.S. Foreign Assistance Resources (formerly the Office of the Director of Foreign Assistance), known as "F," which was created in 2006 to coordinate U.S. foreign assistance programs. The office establishes standard program structures and definitions, as well as performance indicators, and collects and reports data on State Department and USAID aid programs. The State Department implemented about $7.66 billion in foreign assistance funding in FY2017, though it has policy authority over a much broader range of assistance funds. U.S. Department of Health and Human Services The U.S. Department of Health and Human Services implements a range of global health programs through its various component institutions. As an implementing partner in the President's Emergency Plan for Aids Relief (PEPFAR), a large portion of HHS foreign assistance activity is related to HIV prevention and treatment, including technical support and preventing mother to child transmission of HIV/AIDS. The Centers for Disease Control and Prevention participates in a broad range of global disease control activity, including rapid outbreak response, global research and surveillance, information technology assistance, and field epidemiology and laboratory training. The National Institutes of Health (NIH) also conduct international health research that is reported as assistance. In FY2017, HHS institutions implemented $2.66 billion in foreign assistance activities. U.S. Department of the Treasury The Department of the Treasury's Under Secretary for International Affairs administers U.S. contributions to and participation in the World Bank and other multilateral development institutions. In this case, the agency manages the distribution of funds to the institutions, but does not implement programs. Presidentially appointed U.S. executive directors at each of the banks represent the United States' point of view. Treasury also deals with foreign debt reduction issues and programs, including U.S. participation in the Highly Indebted Poor Countries (HIPC) initiative, and manages a technical assistance program offering temporary financial advisors to countries implementing major economic reforms and combating terrorist finance activity. For FY2017, the Department of the Treasury managed foreign assistance valued at about $1.85 billion. Millennium Challenge Corporation Created in February 2004, the Millennium Challenge Corporation (MCC) seeks to concentrate significantly higher amounts of U.S. resources in a few low- and lower-middle-income countries that have demonstrated a strong commitment to political, economic, and social reforms relative to other developing countries. A significant feature of the MCC effort is that recipient countries formulate, propose, and implement mutually agreed multi-year U.S.-funded project plans known as compacts. Compacts in the 27 recipient countries selected to date have emphasized construction of infrastructure. The MCC is a U.S. government corporation, headed by a chief executive officer who reports to a board of directors chaired by the Secretary of State. The Corporation maintains a relatively small staff of about 300. The MCC obligated about $1.01 billion in FY2017. Other Agencies A number of other government agencies play a role in implementing foreign aid programs. The Peace Corps, an autonomous agency with FY2017 obligations of $445 million, supports about 7,300 volunteers in 65 countries. Peace Corps volunteers work in a wide range of educational, health, and community development projects. The Trade and Development Agency (TDA), which obligated $58 million in FY2017, finances trade missions and feasibility studies for private sector projects likely to generate U.S. exports. The Overseas Private Investment Corporation (OPIC) provides political risk insurance to U.S. companies investing in developing countries and finances projects through loans and guarantees. Its insurance activities have been self-sustaining, but credit reform rules require a relatively small appropriation to back up U.S. guarantees and for administrative expenses. The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), signed into law in October 2018 ( P.L. 115-254 ), authorized consolidation of OPIC and USAID's Development Credit Authority into a new U.S. International Development Finance Corporation (IDFC), which is expected to become operational in fall 2019. For FY2017, as for most prior years, OPIC receipts exceeded appropriations, resulting in a net gain to the Treasury. The Inter-American Foundation and the African Development Foundation, obligating $25.8 million and $20.2 million, respectively, in FY2017, finance small-scale enterprise and grassroots self-help activities aimed at assisting poor people. What Are the Different Forms in Which Assistance Is Provided? Most U.S. assistance is now provided as a grant (gift) rather than a loan, so as not to increase the heavy debt burden carried by many developing countries. However, the forms a grant may take are diverse. The most common type of U.S. development aid is project-based assistance (77% in FY2017), in which aid is channeled through an implementing partner to complete a project. Aid is also provided in the form of core contribution to international organizations such as the United Nations, technical assistance, and direct budget support (cash transfer) to governments. A portion of aid money is also spent on administrative costs ( Figure 3 ). Within these categories, aid may take many forms, as described below. Cash Transfer Although it is the exception rather than the rule, some countries receive aid in the form of a cash grant to the government. Dollars provided in this way support a government's balance-of-payments situation, enabling it to purchase more U.S. goods, service its debt, or devote more domestic revenues to developmental or other purposes. Cash transfers have been made as a reward to countries that have supported the United States' counterterrorism operations (Turkey and Jordan in FY2004), to provide political and strategic support (both Egypt and Israel annually for decades after the 1979 Camp David Peace Accord), and in exchange for undertaking difficult political and economic reforms. Commodities Assistance may be provided in the form of food commodities, weapons systems, or equipment such as generators or computers. Food aid may be provided directly to meet humanitarian needs or to encourage attendance at a maternal/child health care program. Weapons supplied under the military assistance program may include training in their use. Equipment and commodities provided under development assistance are usually integrated with other forms of aid to meet objectives in a particular social or economic sector. For instance, textbooks have been provided in both Afghanistan and Iraq as part of a broader effort to reform the educational sector and train teachers. Computers may be offered in conjunction with training and expertise to fledgling microcredit institutions. Since PEPFAR was first authorized in 2004, antiretroviral drugs (ARVs) provided to individuals living with HIV/AIDS have been a significant component of commodity-based assistance. Economic Infrastructure Although once a significant portion of U.S. assistance programs, construction of economic infrastructure—roads, irrigation systems, electric power facilities, etc.—was rarely provided after the 1970s. Because of the substantial expense of these projects, they were to be found only in large assistance programs, such as that for Egypt in the 1980s and 1990s, where the United States constructed major urban water and sanitation systems. The aid programs in Iraq and Afghanistan supported the building of schools, health clinics, roads, power plants, and irrigation systems. In Iraq alone, more than $10 billion went to economic infrastructure. Economic infrastructure is now also supported by U.S. assistance in a wider range of developing countries through the Millennium Challenge Corporation. In this case, recipient countries design their own assistance programs, most of which, to date, include an infrastructure component. Training Transfer of knowledge and skills is a significant part of most assistance programs. The International Military Education and Training Program (IMET) provides training to officers of the military forces of allied and friendly nations. Tens of thousands of citizens of aid recipient countries receive short-term technical training or longer-term degree training annually under USAID programs. More than one-quarter of Peace Corps volunteers are English, math, and science teachers. Other aid programs provide law enforcement personnel with anti-narcotics or anti-terrorism training. Expertise Many assistance programs provide expert advice to government and private sector organizations. The Department of the Treasury, USAID, and U.S.-funded multilateral banks all place specialists in host government ministries to make recommendations on policy reforms in a wide variety of sectors. USAID has often placed experts in private sector business and civic organizations to help strengthen them in their formative years or while indigenous staff are being trained. While most of these experts are U.S. nationals, in Russia, USAID funded the development of locally staffed political and economic think tanks to offer policy options to that government. Small Grants USAID, the Inter-American Foundation, and the African Development Foundation often provide aid in the form of small grants directly to local organizations to foster economic and social development and to encourage civic engagement in their communities. Grants are sometimes provided to microcredit organizations, such village-level women's savings groups, which in turn provide loans to microentrepreneurs. Small grants may also address specific community needs. Recent IAF grants, for example, have supported organizations that help resettle Salvadoran migrants deported from the United States and youth programs in Central America aimed at gang prevention. How Much Aid Is Provided as Loans and How Much as Grants? What Are Some Types of Loans? Have Loans Been Repaid? Why Is Repayment of Some Loans Forgiven? Under the Foreign Assistance Act of 1961, the President may determine the terms and conditions under which most forms of assistance are provided. In general, the financial condition of a country—its ability to meet repayment obligations—has been an important criterion of the decision to provide a loan or grant. Some programs, such as humanitarian and disaster relief programs, were designed from the beginning to be entirely grant activities. Loan/Grant Composition During the past two decades, nearly all foreign aid—military as well as economic—has been provided in grant form. While loans represented 32% of total military and economic assistance between 1962 and 1988, this figure declined substantially beginning in the mid-1980s, until by FY2001, loans represented less than 1% of total aid appropriations. The de-emphasis on loan programs came largely in response to the debt problems of developing countries. Both Congress and the executive branch have generally supported the view that foreign aid should not add to the already existing debt burden carried by these countries. In the FY2019 budget request, the Trump Administration encouraged the use of loans over grants when providing military assistance (Foreign Military Financing), but Congress did not include language in support of that proposal in the enacted FY2019 appropriation ( P.L. 116-6 ). Loan Guarantees Although a small proportion of total current aid, there are significant USAID-managed programs that guarantee loans, meaning the U.S. government agrees to pay a portion of the amount owed in the case of a default on a loan. A Development Credit Authority (DCA) loan guarantee, in which risk is shared with a private sector bank, can be used to increase access to finance in support of any development sector. The DCA is to be transferred from USAID in 2019 to the new IDFC, established by the BUILD Act of 2018 ( P.L. 115-254 ), to enhance U.S. development finance capacity. Under the Israeli Loan Guarantee Program, the United States has guaranteed repayment of loans made by commercial sources to support the costs of immigrants settling in Israel from other countries and may issue guarantees to support economic recovery. USAID has also provided loan guarantees in recent years to improve the terms or amounts of financing from international capital markets for Ukraine and Jordan. In these cases, assistance funds representing a fraction of the guarantee amount are provided to cover possible default. Loan Repayment Between 1946 and 2016, the United States loaned $112.7 billion in foreign economic and military aid to foreign governments, and while most foreign aid is now provided through grants, $9.18 billion in loans to foreign governments remained outstanding at the end of FY2016. For nearly three decades, Section 620q of the Foreign Assistance Act (the Brooke amendment) has prohibited new assistance to the government of any country that falls more than one year past due in servicing its debt obligations to the United States, though the President may waive application of this prohibition if he determines it is in the national interest. Debt Forgiveness The United States has also forgiven debts owed by foreign governments and encouraged, with mixed success, other foreign aid donors and international financial institutions to do likewise. In some cases, the decision to forgive foreign aid debts has been based largely on economic grounds as another means to support development efforts by heavily indebted, but reform-minded, countries. The United States has been one of the strongest supporters of the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). These initiatives, which began in the late 1990s, include participation of the World Bank, the International Monetary Fund, and other international financial institutions in a comprehensive debt workout framework for the world's poorest and most debt-strapped nations. The largest and most hotly debated debt forgiveness actions have been implemented for much broader foreign policy reasons with a more strategic purpose. Poland, during its transition from a communist system and centrally planned economy (1990—$2.46 billion); Egypt, for making peace with Israel and helping maintain the Arab coalition during the Persian Gulf War (1990—$7 billion); and Jordan, after signing a peace accord with Israel (1994—$700 million), are examples. Similarly, the United States forgave about $4.1 billion in outstanding Saddam Hussein-era Iraqi debt in November 2004 and helped negotiate an 80% reduction in Iraq's debt to creditor nations later that month. What Are the Roles of Government and Private Sector in Development and Humanitarian Aid Delivery? Most development and humanitarian assistance activities are not directly implemented by U.S. government personnel but by private sector entities, such as individual personal service contractors, consulting firms, universities, private voluntary organizations (PVOs), or public international organizations (PIOs). Generally speaking, U.S. government foreign service and civil servants determine the direction and priorities of the aid program, allocate funds while keeping within legislative requirements, ensure that appropriate projects are in place to meet aid objectives, select implementers, and monitor the implementation of those projects for effectiveness and financial accountability. Both USAID and the State Department have promoted the use of public-private partnerships, in which private entities such as corporations and foundations are contributing partners, not paid implementers, in situations where business interests and development objectives coincide. Which Countries Receive U.S. Foreign Aid? In FY2017, the United States provided some form of bilateral foreign assistance to more than 150 countries. Aid is concentrated heavily in certain countries, reflecting the priorities and interests of United States foreign policy at the time. Table 2 identifies the top 15 recipients of U.S. foreign assistance for FY1997, FY2007 and FY2017. As shown in the table above, there are both similarities and sharp differences among country aid recipients for the three periods. The most consistent thread connecting the top aid recipients over the past two decades has been continuing U.S. strategic interests in the Middle East, with large programs maintained for Israel and Egypt and, for Iraq, following the 2003 invasion. Two key countries in the U.S. counterterrorism strategy, Afghanistan and Pakistan, made their first appearances on the list in FY2002 and continued to be among the top recipients in FY2017. In FY1997, one sub-Saharan African country appeared among leading aid recipients; in FY2017, 7 of the 15 are sub-Saharan African. Many are focus countries under the PEPFAR initiative to address the HIV/AIDS epidemic; South Sudan receives support as a newly independent country with multiple humanitarian and development needs. In FY1997, three countries from Eastern Europe and the former Soviet Union made the list, as many from the region had for much of the 1990s, representing the effort to transform the former communist nations to democratic societies and market-oriented economies. None of those countries appear in the FY2017 list. In FY1997, four Latin American countries make the list; no countries from the region appear in FY2017. On a regional basis, the Middle East/North Africa (MENA) region has received the largest share of U.S. foreign assistance for many decades. Although economic aid to the region's top two recipients, Israel and Egypt, began to decline in the late 1990s, the dominant share of bilateral U.S. assistance consumed by the MENA region was maintained in FY2005 by the war in Iraq. Despite the continued importance of the region, its share slipped substantially by FY2017 as the effort to train and equip Iraqi forces diminished. Since September 11, 2001, South and Central Asia has emerged as a significant target of U.S. assistance, rising from a roughly 3% share 20 years ago to 16% in FY2007 and 15% in FY2017, largely because of aid to Afghanistan and Pakistan. Similarly, the share represented by African nations has increased from 10% and 19%, respectively, in FY1997 and FY2007, to 25% in FY2017, largely due to the HIV/AIDS initiative that funnels resources mostly to African countries and to a range of other efforts to address the region's development challenges. Meanwhile, the share of aid to Europe/Eurasia, which greatly surpassed that of Africa in FY1997, has declined significantly in the past decade, to about 4% in FY2017, with the graduation of many East European aid recipients and the termination of programs in Russia. The Ukraine was responsible for about one third of aid to that region in FY2017. East Asia/Pacific has remained at a low level during the past two decades, while Latin America's share has risen and fallen based on U.S. interest in Colombia and a few Central American countries as aid has shifted to regions of more pressing strategic interest (see Figure 4 ). Foreign Aid Spending How Large Is the U.S. Foreign Assistance Budget? There are several methods commonly used for measuring the amount of federal spending on foreign assistance. Amounts can be expressed in terms of budget authority (funds appropriated by Congress), obligations (amounts contractually committed), outlays or disbursements (money actually spent). Assistance levels are also sometimes measured as a percentage of the total federal budget, as a percentage of total discretionary budget authority (excluding mandatory and entitlement programs), or as a percentage of the gross domestic product (GDP) (for an indication of the national wealth allocated to foreign aid). By nearly all of these measures, foreign aid resources fell gradually on average over several decades since the historical high levels of the late 1940s and early 1950s ( Appendix A ). This downward trend was sporadically interrupted, largely due to major foreign policy initiatives such as the Alliance for Progress for Latin America beginning in 1961, the infusion of funds to implement the Camp David Middle East Peace Accords in 1979, and an increase in military assistance to Egypt, Turkey, Greece and others in the mid-1980s. The lowest point in U.S. foreign aid spending since World War II came in 1997, when foreign assistance obligations fell to just above $20 billion (in 2017 dollar terms). ( Figure 5 ) While foreign aid consistently represented just over 1% of U.S. annual gross domestic product in the decade following World War II, it fell gradually to between 0.2% and 0.4% for most years in the past three decades. Foreign assistance spending has comprised, on average, around 3% of discretionary budget authority and just over 1% of total budget authority each year since 1977, though the percentages have sometimes varied considerably from year to year. Foreign aid dropped from 5% of discretionary budget authority in 1979 to 2.4% in 2001, before rising sharply in conjunction with U.S. activities in Afghanistan and Iraq starting in 2003. As a portion of total budget authority, foreign assistance reached 2.5% in 1979, but has hovered below 1.5% since 1987. In 2017, foreign assistance was estimated to account for 4.1% of discretionary budget authority and 1.2% of total budget authority ( Figure 6 ; Appendix A ). As previously discussed, since the September 11, 2001, terrorist attacks, foreign aid funding has been closely tied to U.S. counterterrorism strategy, particularly in Iraq, Afghanistan, and Pakistan. Bush and Obama Administration global health initiatives, the creation of the Millennium Challenge Corporation, and growth in counter-narcotics activities have driven funding increases as well. The Budget Control Act of 2011, and the drawdown of U.S. military forces in Iraq, and to some degree Afghanistan, led to a notable dip in aid obligations in FY2013, but aid levels have risen again with efforts to address the crisis in Syria, counter-ISIL activities, and humanitarian aid. The use of the Overseas Contingency Operations (OCO, discussed below) designation has enabled this growth despite the BCA limitations. Figure 7 shows how trends in foreign aid funding in recent decades can be attributed to specific foreign policy events and presidential initiatives. What Does Overseas Contingency Operations (OCO) Mean? The Obama Administration's FY2012 international affairs budget proposed that the overseas contingency operations (OCO) designation, which had been applied since 2009 to war-related Defense appropriations, including to DOD assistance programs such as ISFF, ASFF and CERP, be extended to include "extraordinary, but temporary, costs of the Department of State and USAID in the front line states of Iraq, Afghanistan and Pakistan." Congress not only adopted the OCO designation in the FY2012 SFOPS appropriations legislation, but expanded it to include funding for additional accounts and countries. In every fiscal year since, a portion of certain foreign assistance accounts—primarily ESF, FMF, IDA, MRA and INCLE—has been appropriated with the OCO designation. The OCO designation is significant because the Budget Control Act of 2011 (BCA), which set annual caps on discretionary funding from FY2013 through FY2021, specified that funds designated as OCO do not count toward the discretionary spending limits established by the act. OCO designation makes it possible to prevent war-related funding from crowding out core international affairs activities within the budget allocation. The OCO approach is reminiscent of the use of supplemental international affairs appropriations for the first decade after the September 11, 2001, terrorist attacks. Congress appropriated significant emergency supplemental funds for foreign operations and Defense assistance programs every year from FY2002 through FY2010 for activities in Iraq, Afghanistan, and elsewhere, which were not counted toward subcommittee budget allocations. Since the OCO designation was first applied to foreign operations in FY2012, supplemental appropriations for foreign aid have declined significantly. In the FY2019 and FY2020 budget requests, the Trump Administration did not request OCO funding within the international affairs budget, but did request OCO funding for the Department of Defense, including for DOD aid accounts. Congress used the OCO designation for both DOD and State/USAID accounts in the FY2019 appropriation, P.L. 116-6 , but a smaller portion of aid was designated as OCO compared to FY2018. It remains to be seen whether this is the beginning of a downward trend in OCO use for foreign aid. How Much of Foreign Aid Dollars Are Spent on U.S. Goods? Congress historically sought to enhance the domestic benefits of foreign aid by requiring that most U.S. foreign aid be used to procure U.S. goods and services. The conditioning of aid on the procurement of goods and services from the donor-country is sometimes called "tied aid," and while quite common for much of the history of modern foreign assistance, has become increasingly disfavored in the international community. Studies have shown that tying aid increases the costs of goods and services by 15%-30% on average, and up to 40% for food aid, reducing the overall effectiveness of aid flows. The United States joined other donor nations in committing to reduce tied aid in the Paris Declaration on Aid Effectiveness in March 2005, and the portion of tied aid from all donors fell from 70% of total bilateral development assistance in 1985 to an average of 12% in 2016. However, an estimated 32% of U.S. bilateral development assistance was tied in 2016, the highest percentage among major donors, perhaps reflecting the perception of policymakers that maintaining public and political support for foreign aid programs requires ensuring direct economic benefit to the United States. About 67% of U.S. foreign assistance funds in FY2017 were obligated to U.S.-based entities. A considerable amount of U.S. foreign assistance funds remain in the United States, through domestic procurement or the use of U.S. implementers, but the portion differs by program and is hard to identify with any accuracy. For some types of aid, the legislative requirements or program design make it relatively easy to determine how much aid is spent on U.S. goods or services, while for others, this is more difficult to determine. USAID. Most USAID funding (Development Assistance, Global Health, Economic Support Fund) is implemented through contracts, grants, and cooperative agreements with implementing partners. While many implementing partner organizations are based in the United States and employ U.S. citizens, there is little information available about what portion of the funds used for program implementation are used for goods and services provided by American firms. Procurement reform efforts initiated by USAID in 2010 have aimed to increase procurement and implementation by host country entities as a means to enhance country ownership, build local capacity, and improve sustainability of aid programs. Food assistance commodities, until recently, were purchased wholly in the United States, and generally required by law to be shipped by U.S. carriers, suggesting that the vast majority of food aid expenditures are made in the United States. Starting in FY2009, a small portion of food assistance was authorized to be purchased locally and regionally to meet urgent food needs more quickly. Successive Administrations and several Members of Congress have proposed greater flexibility in the food aid program, potentially increasing aid efficiency but reducing the portion of funds flowing to U.S. farmers and shippers. To date, these proposals have been largely unsuccessful. Foreign Military Financing , with the exception of certain assistance allocated to Israel, is used exclusively to procure U.S. military equipment and training. Millennium Challenge Corporation. The MCC bases its procurement regulations on those established by the World Bank, which calls for an open and competitive process, with no preference given to donor country suppliers. Between FY2011 and FY2017, the MCC awarded roughly 15% of the value of compact contracts to U.S. firms. Multilateral development aid. Multilateral aid funds are mixed with funds from other nations and the bulk of the program is financed with borrowed funds rather than direct government contributions. Information on the U.S. share of procurement financed by MDBs is unavailable. In addition to the direct benefits derived from aid dollars used for American goods and services, many argue that the foreign aid program brings significant indirect financial benefits to the United States. For example, analysts maintain that provision of military equipment through the military assistance program and food commodities through the Food for Peace program helps to develop future, strictly commercial, markets for those products. More broadly, as countries develop economically, they are in a position to purchase more goods from abroad and the United States benefits as a trade partner. Since an increasing majority of global consumers are outside of the United States, some business leaders assert that establishing strong economic and trade ties in the developing world, using foreign assistance as a tool, is key to U.S. economic and job growth. How Does the United States Rank as a Donor of Foreign Aid? Since World War II, with the exception of several years between 1989 and 2001, during which Japan ranked first among aid donors, the United States has led the developed countries in net disbursements of economic aid, or "Official Development Assistance (ODA)" as defined by the Organization for Economic Cooperation and Development's (OECD) Development Assistance Committee (DAC). In 2017, the most recent year for which data are available, the United States disbursed $34.12 billion in ODA, or about 24% of the $144.71 billion in total net ODA disbursements by DAC donors that year. Germany ranked second at $24.16 billion, the United Kingdom followed at $18.59 billion, Japan ranked fourth at $11.85 billion, and France rounded out the top donors with $11.03 billion in 2017 (see Figure 8 ). While the top five donors have not varied for more than a decade, there have been shifts lower down the ranking. For example, Turkey has become a much more prominent ODA donor in recent years (ranked 6 th in 2017, with $9.08 billion in ODA, compared to 21 st in 2006), reflecting large amounts of humanitarian aid to assist Syrian refugees. Even as it leads in dollar amounts of aid flows to developing countries, the United States often ranks low when aid is calculated as a percentage of gross national income (GNI). This calculation is often cited in the context of international donor forums, as a level of 0.7% GNI was established as a target for donors in the 2000 U.N. Millennium Development Goals. In 2017, the United States ranked at the bottom among major donors at 0.18% of GNI, slightly lower than Portugal and Spain (0.18% and 0.19%, respectively). The United Arab Emirates, which has significantly increased its reported ODA in recent years, ranked first among top donors at 1.03% of GNI, followed by Sweden at 1.02% and Luxembourg at 1.00%. There has also been an increase in ODA from non-DAC countries. Between 2000 and 2014, China spent $81.1 billion in ODA, more than tripling its ODA commitments during this period. While reported Chinese ODA is still relatively small compared to that of major donor countries, policymakers are paying increasing attention to growing Chinese investments in developing countries that do not meet the ODA definition. China has touted its "Belt and Road" initiative as an effort to boost development and connectivity across as many as 125 countries to create "strategic propellers" for its own development. However, China has provided little official aggregate information on the initiative, including on the number of projects, countries involved, the terms of financing, and metrics for success. Congress and Foreign Aid What Congressional Committees Oversee Foreign Aid Programs? Numerous congressional authorizing committees and appropriations subcommittees maintain responsibility for U.S. foreign assistance. Several committees have responsibility for authorizing legislation establishing programs and policy and for conducting oversight of foreign aid programs. In the Senate, the Committee on Foreign Relations, and in the House, the Committee on Foreign Affairs, have primary jurisdiction over bilateral development assistance, political/strategic and other economic security assistance, military assistance, and international organizations. Food aid, primarily the responsibility of the Agriculture Committees in both bodies, is periodically shared with the Foreign Affairs Committee in the House. U.S. contributions to multilateral development banks are within the jurisdiction of the Senate Foreign Relations Committee and the House Financial Services Committee. The large nontraditional aid programs funded by DOD, such as Nunn-Lugar Cooperative Threat Reduction programs and the military aid programs in Afghanistan and Iraq, come under the jurisdiction of the Armed Services Committees. Some global health assistance, such as research and other activities done by the Centers for Disease Control and Prevention, may fall under the jurisdiction of the House Energy and Commerce and Senate HELP committees. Traditionally, most foreign aid appropriations fall under the jurisdiction of the SFOPS Subcommittees, with food assistance appropriated by the Agriculture Subcommittees. As noted earlier, however, certain military, global health, and other activities that have been reported as foreign aid have been appropriated through other subcommittees in recent years, including the Defense and the Labor, Health and Human Services, Education and Related Agencies subcommittees. (For current information on SFOPS Appropriations legislation, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations , by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill.) What Are the Major Foreign Aid Legislative Vehicles? The most significant permanent foreign aid authorization laws are the Foreign Assistance Act of 1961, covering most bilateral economic and security assistance programs (P.L. 87-195; 22 U.S.C. 2151); the Arms Export Control Act (1976), authorizing military sales and financing (P.L. 90-629; 22 U.S.C. 2751); the Agricultural Trade Development and Assistance Act of 1954 (P.L. 480), covering food aid (P.L. 83-480; 7 U.S.C. 1691); and the Bretton Woods Agreement Act (1945), authorizing U.S. participation in multilateral development banks (P.L. 79-171; 22 U.S.C. 286). In the past, Congress usually scheduled debates every two years on omnibus foreign aid legislation that amended these permanent authorization measures. Congress has not enacted into law a comprehensive foreign assistance authorization measure since 1985, although foreign aid authorizing bills have passed the House or Senate, or both, on numerous occasions. Foreign aid bills have frequently stalled at some point in the debate because of controversial issues, a tight legislative calendar, or executive-legislative foreign policy disputes. In contrast, DOD assistance is authorized in annual National Defense Authorization legislation. In lieu of approving a broad State Department/USAID authorization bill, Congress has on occasion authorized major foreign assistance initiatives for specific regions, countries, or aid sectors in stand-alone legislation or within an appropriation bill. Among these are the SEED Act of 1989 ( P.L. 101-179 ; 22 U.S.C. 5401); the FREEDOM Support Act of 1992 ( P.L. 102-511 ; 22 U.S.C. 5801); the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 ; 22 U.S.C. 7601); the Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 ( P.L. 110-293 ); the Millennium Challenge Act of 2003 (Division D, Title VI of P.L. 108-199 ); the Enhanced Partnership With Pakistan Act of 2009 ( P.L. 111-73 ; 22 U.S.C. 8401); the Global Food Security Act of 2016 ( P.L. 114-195 ; 22 U.S.C. 9306), and the BUILD Act ( P.L. 115-254 ). In the absence of regular enactment of foreign aid authorization bills, appropriation measures considered annually within the SFOPS spending bill have assumed greater significance for Congress in influencing U.S. foreign aid policy. Not only do appropriations bills set spending levels each year for nearly every foreign assistance account, SFOPS appropriations also incorporate new policy initiatives that would otherwise be debated and enacted as part of authorizing legislation. Appendix A. Data Table Appendix B. Common Foreign Assistance Abbreviations

Foreign assistance is the largest component of the international affairs budget and is viewed by many as an essential instrument of U.S. foreign policy. On the basis of national security, commercial, and humanitarian rationales, U.S. assistance flows through many federal agencies and supports myriad objectives. These include promoting economic growth, reducing poverty, improving governance, expanding access to health care and education, promoting stability in conflict regions, countering terrorism, promoting human rights, strengthening allies, and curbing illicit drug production and trafficking. Since the terrorist attacks of September 11, 2001, foreign aid has increasingly been associated with national security policy. At the same time, many Americans and some Members of Congress view foreign aid as an expense that the United States cannot afford given current budget deficits. In FY2017, U.S. foreign assistance, defined broadly, totaled an estimated $49.87 billion, or 1.2% of total federal budget authority. About 44% of this assistance was for bilateral economic development programs, including political/strategic economic assistance; 35% for military aid and nonmilitary security assistance; 18% for humanitarian activities; and 4% to support the work of multilateral institutions. Assistance can take the form of cash transfers, equipment and commodities, infrastructure, or technical assistance, and, in recent decades, is provided almost exclusively on a grant rather than loan basis. Most U.S. aid is implemented by nongovernmental organizations rather than foreign governments. The United States is the largest foreign aid donor in the world, accounting for about 24% of total official development assistance from major donor governments in 2017 (the latest year for which these data are available). Key foreign assistance trends in the past decade include growth in development aid, particularly global health programs; increased security assistance directed toward U.S. allies in the anti-terrorism effort; and high levels of humanitarian assistance to address a range of crises. Adjusted for inflation, annual foreign assistance funding over the past decade was the highest it has been since the Marshall Plan in the years immediately following World War II. In FY2017, Afghanistan, Iraq, Israel, Jordan, and Egypt received the largest amounts of U.S. aid, reflecting long-standing aid commitments to Israel and Egypt, the strategic significance of Afghanistan and Iraq, and the strategic and humanitarian importance of Jordan as the crisis in neighboring Syria continues. The Near East region received 27% of aid allocated by country or region in FY2017, followed by Africa, at 25%, and South and Central Asia, at 15%. This was a significant shift from a decade prior, when Africa received 19% of aid and the Near East 34%, reflecting significant increases in HIV/AIDS-related programs concentrated in Africa between FY2007 and FY2017 and the drawdown of U.S. military forces in Iraq and Afghanistan. Military assistance to Iraq began to decline starting in FY2011, but growing concern about the Islamic State in Iraq and Syria (ISIS) has reversed this trend. This report provides an overview of the U.S. foreign assistance program by answering frequently asked questions on the subject. It is intended to provide a broad view of foreign assistance over time, and will be updated periodically. For more current information on foreign aid funding levels, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations, by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill.

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T he federal government collects various fees and other charges from businesses and households. Choosing to raise public funds via user fees, as opposed to other means such as taxes, has important administrative and economic consequences. Many fees stem from "business-like activities," in which the government provides a service or benefit in return for payment. For example, many n ational p arks charge entry fees , which then help fund maintenance projects. Some fees are closely tied to regulatory or judicial activities, such as filing or inspection fees, which stem from the federal government's sovereign powers. Other federal fees or charges are intragovernmental transactions that do not involve the public. For example, the Office of Personnel Management (OPM) charges other federal agencies fees to cover the cost of background investigations. For many federal agencies, fees or user charges amount to a minimal portion of budgetary resources. Other regulatory agencies, such as the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC), the Patent and Trademark Office (PTO), and the Federal Trade Commission (FTC), are wholly or partially funded by user fees and other nontax receipts. User fees from the public accounted for $331 billion in FY2017, about a tenth of total federal receipts ( $3.32 trillion ). Fees and charges generally result from voluntary choices, such as entering a national park. By contrast, the collection of taxes ultimately relies on the government's sovereign power to compel payments. Fees may not be compulsory, but not paying them may make it impossible to carry out many activities legally. For instance, without paying passport application fees and obtaining a passport, people cannot fly to other countries. Nor can businesses issue securities without paying federal filing fees. The statutory basis for each particular fee or user charge varies in specificity and in the degree of discretion granted to the executive branch. For example, authorizing legislation might specify in detail how certain fees are imposed and how proceeds are used. In other cases, federal agencies rely on broader authorities to impose user fees. User fees have several advantages as a means of financing public activities. They are voluntary, they connect the burden of financing activities to those who directly benefit from them, and they can help decentralize decisionmaking by bypassing centralized allocation of resources. At times, proposals to raise fees may encounter less political resistance than proposals to raise an equivalent sum via taxes. On the other hand, the flow of user fees and charges may reflect fluctuations in economic conditions, which may complicate the financing of government operations. Some are also concerned that funding arrangements may bypass regular congressional scrutiny and dilute Congress's power of the purse. What Is a User Fee or User Charge? The Government Accountability Office (GAO) defines a user fee as a fee assessed to users for goods or services provided by the federal government. User fees generally apply to federal programs or activities that provide special benefits to identifiable recipients above and beyond what is normally available to the public. The Office of Management and Budget (OMB) defines the term user charge to include transactions not normally considered fees, such as land or asset sales. OMB's budget preparation documents state that user charges include not only proceeds from selling postage stamps, electricity, and Medicare Part B premiums, but also sales of assets and natural resources, among other categories. The federal government, which operates on a modified cash accounting basis, does not recognize in its budgetary accounts the loss of asset values when it sells assets or natural resources, as a private firm would using typical business accounting methods. For instance, if the government were to sell oil at a price of $60 per barrel that it bought at $120 per barrel, only the current revenues would be reflected in budget accounts. A private firm would normally adjust its balance sheet to reflect a loss. OMB designates whether each account receives collections associated with user charges, and that information is contained within OMB's MAX budget data system. OMB has not released data on those designations. The Budget Appendix that OMB issues annually, while not including information on that designation, does present detailed subaccount-level data that often indicate whether a federal program's budgetary resources rely on fee income. The format of the Budget Appendix, however, makes it an impractical source of data for government-wide research. As far as CRS can determine, a comprehensive and authoritative list of federal fees is not publicly available. Budget and financial documents from OMB and the U.S. Treasury, however, do provide detailed information on offsetting collections and offsetting receipts—the budget categories that typically contain user fees and other charges—as well as information on budgetary accounts. In some cases, account descriptions clearly indicate an association with one or more fees. In other cases, however, whether or not an account receives fees is unclear. For example, an account might be labeled as miscellaneous receipts, or as fines, fees, and penalties. Offsetting Collections and Offsetting Receipts User fees classified as offsetting collections, which go into expenditure accounts, generally can be used without further congressional action. Offsetting collections, as the term suggests, typically count as offsets to spending when accounts are scored to check compliance with various budgetary controls. Scorekeeping is the process of measuring the budgetary effects of legislation. For example, the Budget Control Act of 2011 ( P.L. 112-25 ) imposed caps on specified categories of discretionary budget authority. When evaluating compliance with those caps, scorekeepers (CBO, OMB, and the b udget c ommittees) subtract offsetting collections from budget authority totals. User fees or charges are collected into the U.S. Treasury General Fund or into special fund accounts. Offsetting receipts, which go into receipt accounts, typically require approval through appropriations acts. User fees can be classified as discretionary or mandatory spending, depending on how those fees are authorized. Some payments to the federal government, such as electromagnetic spectrum auction proceeds or offshore continental shelf oil and gas leases that are classified as undistributed offsetting receipts, do not offset spending of any agency, but are recorded as reducing the federal deficit. Data Sources and Federal Analyses of User Fees and Charges OMB provides a discussion of budget concepts related to offsetting receipts and offsetting collections, which include the bulk of user fees and charges in terms of dollar amounts, in the President's annual budget submission. More detailed supplementary tables that summarize collections of offsetting receipts and offsetting collections are also provided online. The U.S. Treasury's Bureau of the Fiscal Service issues its annual Combined Statement that reports budget data for all federal agencies at an account level as well as detailed summaries of receipts, including user fees. The Monthly Treasury Statement and a quarterly statement of offsetting receipts provide data on an ongoing basis. As the Treasury's role and responsibilities differ from those of OMB, totals from Treasury sources may not coincide with data issued by OMB due to various budgetary reporting adjustments. GAO has analyzed the administration of various user fees and has set out some principles for the design of those fees . The Benefit Principle User fees, as noted above, can tie benefits enjoyed by households or firms—such as passports, access to national parks, or approvals to raise investment funds from the public—to payments that can help defray public costs of providing them. An economist's rule of thumb known as the benefit principle, which suggests linking the fiscal burden of publicly provided benefits to those who enjoy those benefits, can promote fairness and efficiency. For example, many would contend that those with the opportunity to travel abroad should shoulder more of the costs of reviewing passport applications and issuing documents than those who do not. Moreover, if fees are set at levels that match the incremental cost of providing benefits, then when an agency is called to expand its work—such as an uptick in demand for passports, park visits, or company registrations—then those fees could fund the needed extra resources. Matching fees to incremental costs, however, is difficult where demand is irregular or unpredictable. OMB guidelines on user fees outline aims similar to the benefit principle, mandating that federal agencies ensure that each service, sale, or use of Government goods or resources provided by an agency to specific recipients be self-sustaining; promote efficient allocation of the Nation's resources by establishing charges for special benefits provided to the recipient that are at least as great as costs to the Government of providing the special benefits; and allow the private sector to compete with the Government without disadvantage in supplying comparable services, resources, or goods where appropriate. OMB mandates that agencies review user fees every other year. OMB also encourages agencies seeking new authority to assess fees to "seek to remove restraints on user charges." In some cases, federal agencies and regulated industries negotiate over user fee levels and the improvements in federal regulatory operations supported in large part by those fees. For instance, pharmaceutical companies negotiate with the Food and Drug Administration (FDA) over fees charged to review drug applications. Over time, the scope of FDA activities supported in part by fees has expanded. Some contend that the FDA's increasing reliance on user fees has tilted the agency's priorities toward industry interests and away from consumer protection responsibilities. One 2005 analysis of the FDA drug review process found that approval times decreased after legislation expanded the agency's reliance on user fees, while it found no statistically significant evidence of a decrease in one proxy measure of drug safety. Federal agencies such as the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) are largely supported from amounts paid by covered industries. Matching Charges to Spillover Costs Can Enhance Efficiency The costs and benefits associated with many goods and services mainly involve buyers and sellers. For example, buying a stamp allows a correspondent to mail a letter, which leads the postal service to incur roughly similar costs. Others—at least to a first approximation—are not affected. For other goods, market or market-like transactions may impose costs or convey benefits on third parties. When prices paid by buyers or received by sellers do not reflect spillover costs or benefits to others, economic theory suggests levels of transactions will be inefficient, in the sense that alternative economic arrangements could make all participants—at least potentially—better off. Logic of Pigou Taxation May Apply to Design of User Fees and Charges The benefit principle is in some ways similar to the concept of Pigou taxation—that taxing goods linked to negative spillovers, such as pollution, can enhance economic efficiency by diminishing those spillovers. More generally, spillovers are costs borne or benefits enjoyed by one party due to activities of another party where no voluntary exchange or market transaction occurs. Conversely, subsidizing goods or services that provide beneficial spillovers can also increase economic efficiency. For instance, some justify federal tax subsidies to home ownership on the grounds that homeowners generate positive spillovers in their neighborhoods. Charges aimed at limiting negative spillovers are known as Pigou taxes, after the English economist who first articulated the concept. Pigou taxation provides a more narrowly based efficiency rationale for user fees that would limit negative spillovers. Moreover, administering an excise tax imposed on Pigou tax grounds—which would involve a private vendor collecting and remitting tax revenues—differs from user fees and charges collected directly by a government. Nonetheless, the same logic that raising the end-user price of goods linked to negative spillovers can enhance economic efficiency can be applied to the design of user fees. For instance, federal policymakers might choose to charge pharmaceutical companies application fees lower than the full cost of associated approval processes because introducing new drugs onto the market may have wider positive social benefits. Spillover Benefits Complicate Application of Benefit Principle The economic suitability of the benefit principle depends on whether the publicly provided benefit has meaningful spillover effects. For example, benefits generated by governments such as national defense or support for basic research are widely shared and thus, arguably, are appropriately supported by general taxation. By contrast, while the broader economy benefits from the ability of firms to raise capital in transparent and competitive markets, the chief beneficiary of having a security offering approved is the issuing firm. Similarly, a family visiting a federal park presumably benefits more than another family that stayed at home. Financing more of park maintenance through general taxation would thus involve an implicit subsidy from nonusers to users, something that reliance on user fees would mitigate. In other cases, the linkage between fees and benefits is not apparent. For example, a 2009 law ( Travel Promotion Act of 2009 , TPA; P.L. 111-145 ) imposed a $10 fee on most international air travelers from visa-waiver countries to fund tourism marketing initiatives . An exact match between the level of user fees and publicly provided benefits may be hard or impossible to determine in many situations. While public corporations operating on a largely commercial basis, such as the Tennessee Valley Authority, may set prices and fees much as a private firm would, many of the federal government's activities are within the public sector because past policymakers considered them to be closely associated with inherently governmental functions—such as providing security—or as services that the private sector would have had trouble providing, such as basic research. The U.S. Postal Service sets rates to cover nearly all of its costs according to a 2006 statutory framework . Subsidized rates for certain classes of mail users, such as the blind, reflect adaptation of pricing schemes to broader social priorities. The proper boundaries between public, private, and nonprofit sectors, of course, is an ongoing concern of policymakers. In many cases, it is difficult to design fees, charges, or taxes that directly influence activities generating negative spillovers. For instance, cars and trucks generate air pollution as well as wear and tear on roadways. Excise taxes on gasoline and other fuels—if set at levels that approximate the costs of pollution and road wear—can motivate drivers to use roads less often when the total costs of driving, including pollution, road wear, and other costs, exceed the benefits of driving. Thus, excise taxes can be a way of using the price mechanism to induce individuals to make decisions that lead to more economically efficient outcomes. Setting excise taxes at levels that reflect all costs to third parties may involve complex estimates. For instance, while higher fuel usage implies greater use of roads and more production of air pollutants, several other factors complicate that linkage. Heavier vehicles may cause disproportionate damage to roads. Vehicles vary widely in fuel efficiency and in the volume of pollutants generated. In addition, driving also imposes congestion costs on other drivers, and those costs vary by location and time of day. One recent analysis estimated that fuel excise taxes addressed less than a third of the air-pollution-related efficiency losses. While excise taxes are a public finance instrument that is distinct from user fees and charges, similar complications may be encountered. In some cases, adopting new fiscal instruments—such as using road charges or tolls—may prove more effective tools in increasing efficiency. In the case of transportation policy, increased economic efficiency, depending on how consumers and policymakers respond, might manifest itself in some combination of higher after-tax incomes, greater provision of publicly provided goods, cleaner air, and less-congested highways. Changes in the design of some user fees or charges might also yield analogous efficiency improvements. Other Policy Concerns Some observers have raised concerns that federal agencies that rely more heavily on user fees may put greater weight on the interests of those paying fees rather than the broader public interest. For instance, the U.S. Patent and Trademark Office charges application and examination fees to those seeking to obtain a patent. Certainly, the applicant would be a central beneficiary of a patent, if granted, although many others—including other inventors, business competitors, and consumers—might also be significantly harmed or benefited. Some contend that the Patent Office's reliance on fees motivates it to approve invalid patents . Tying patent fees narrowly to the benefits obtained by the applicant, while overlooking wider spillover effects, might then result in poor decisions. Of course, nonfinancial policy instruments, such as applicable laws, regulations, or congressional oversight, may affect outcomes more directly. Administrative concerns may also play a role. In some cases, where the costs of collecting fees are high relative to the costs of providing public services, imposing user fees may be a suboptimal choice of funding. For instance, federal courts collect more in PACER fees (which provide access to court documents ) than is needed to maintain the underlying computer system , with excess fees being earmarked for other court improvements. Some argue that funding that system and other court improvements with general revenues would allow broader access to court filings and related public documents, which one proposal ( H.R. 6714 introduced in the 115 th Congress ) would have implemented. Charging access fees above incremental costs—which for electronic documents may be minimal—can limit access to public information. Eliminating PACER user fees , however, may require Congress to shift that fiscal burden elsewhere. Other policy concerns also may play a role. Ability to pay among households varies widely; a national park entrance fee that one family regarded as trivial might deter another family. Policymakers may also wish to express preferences for identifiable groups, such as the elderly, children, or veterans. The classification of fees, charges, taxes, and even negative loan subsidy amounts hinges on budget concepts outlined above along with scorekeeping rules and precedents. In some cases, the distinctions made to categorize a given receipt might seem arbitrary to some. For example, the Travel Promotion Act fees imposed on most international air travelers convey n o special benefit on them, but are not categorized a s tax es . Refundable biofuel tax credits are counted as negative taxes in budget documents rather than as subsidy outlays. Those distinctions, however, can affect the tax treatment of those receipts. For instance, a firm can generally deduct an excise tax from its gross revenues, but typically cannot deduct a fee. Some governments have instituted user fees to fill shortfalls in tax revenues. The economic burden of higher fees or charges might be less obvious and therefore subject to less resistance than broad-based taxes. For example, policymakers in several states have sought to avoid increases in general taxes by increasing fee revenues. That strategy may have two downsides. First, more narrowly focused fees set at higher levels could cause greater economic distortions than smaller taxes applied to a broader base. Second, more narrowly based fees might be less stable in economic downturns. To the extent that fees diverge from the incremental costs of publicly provided services, sudden fiscal adjustments might be required. Is Privatization an Option? If benefits from federal operations are distributed narrowly enough to justify financing them via user fees or charges, one might ask whether those activities should be carried out by the private sector. State and local governments and the federal government have privatized many services previously provided by government. Foreign governments have also privatized provision of goods and services once delivered by the public sector. Some activities, however, may involve inherently governmental responsibilities that would be difficult to devolve to the private sector. A 1997 GAO report noted that rigorous evaluations of cost savings of privatization initiatives at the state and local government level were not common. GAO also noted that privatization increased the need for oversight and evaluation, although some local officials deemed that the "weakest link" in privatization initiatives. Others note that while privatization may yield efficiency gains, it may also lead to policy or operational failure. User Fees and the Power of the Purse Conflicts between executive branch agencies, which often have sought greater flexibility to use funds to respond to public priorities as they see them, and Congress, which has sought to defend its fiscal prerogatives and ability to set federal policy priorities, are long-standing. The Miscellaneous Receipts Act In 1849, Congress sought to bolster its powers of the purse by passing the Miscellaneous Receipts Act , which required all government revenues, aside from postal sales, to be deposited into the U.S. Treasury "at as early a day as practicable, without any abatement or deduction on account of salary, fees, costs, charges, expenses, or claim of any description whatever…" Over time, Congress set out exceptions to the modern version of the Miscellaneous Receipts Act that let agencies charge user fees, accept gifts, and collect and retain fines and penalties within specified limits or as detailed in appropriations laws. Recent Proposals on User Fees and Charges Some legislative proposals, such as H.R. 850 (115 th Congress) , would eliminate most exceptions and require most fees and charges to be deposited in the U.S. Treasury General Fund. Congress could fund agencies and activities directly through annual appropriations. Funding through lump-sum appropriations, as opposed to via user fees, however, might change incentives facing decisionmakers and could affect federal operations and programmatic outcomes. Issues and Options for Congress Congressional Oversight and Control of the Federal Purse Congress could constrain agency discretion by requiring more user fee proceeds be either subject to annual appropriations or deposited in the U.S. Treasury General Fund, although that may limit agencies' capacity to respond to new public demands and other changing conditions, as the Government Accountability Office (GAO) has noted . Some inspectors general and congressional committees have also called for tighter, more efficient, and more consistent financial management of user fee funds. During the mid-1980s, Congress, with GAO support, conducted a comprehensive review of so-called "backdoor spending"—an informal term for budget authority provided in laws other than appropriations acts—including spending supported by user fees, which was updated in 1996 . A narrower follow-up in 2017 covering five agencies concluded that "all entities GAO examined have policies and procedures to manage and report on their permanent funding authorities," but that "some, however, could improve practices to manage funds and report information that facilitates oversight." Sweeping changes to the budgetary treatment of user fees, however, could add new pressures on the congressional appropriations process. Proposals to require that most fees be collected into the Treasury General Fund and that activities previously supported by those fees be funded by annual appropriations could create new demands on appropriations committees. Such proposals could also affect the division of responsibilities among authorizing committees and appropriations committees. Statutory texts governing many fees, including those noted above, have evolved over many years and involve substantive policy decisions, often related to industry or programmatic concerns. Congress may also enhance its oversight of agencies reliant on user fees by requiring more timely and detailed financial reports as well as more precise and systematic explanations of linkages between those fees and associated programs. Transparency OMB and Treasury issue extensive information on user fees and charges. Nonetheless, the format and level of detail of published data make it difficult to address some government-wide policy questions regarding user fees and charges. Congress could modify laws governing the President's budget submission (31 U.S.C. 1105) to require OMB to release data that it collects on which budget accounts receive material amounts of user fee and user charge revenues. That could allow Congress to track and analyze user fees and charges more easily. In particular, it would also provide a means to distinguish discretionary and mandatory fees and charges, which could be useful in understanding the effects or constraints imposed by budget enforcement measures. That might provide Congress with a clearer view of its fiscal options when considering budgetary measures. Mandating that OMB or other agencies provide more data would probably require additional budgetary resources to cover costs of new personnel and capabilities. Broader Policies Regarding User Fees and Charges Congress can promote economic efficiency and an equitable sharing of public burdens by choosing appropriate means of financing federal operations. User fees and charges, as noted above, can help tie the costs of supporting specific federal operations with those who benefit from them. Even if closely regulated industries may find federal requirements, inspections, or approval processes burdensome, they also presumably benefit from the increased demand for their products that carry the imprimatur of explicit or implicit federal approval. Federal regulation and inspection operations, however, also serve broader interests of consumers, taxpayers, and related industries. To the extent that inherently governmental responsibilities motivate federal operations, the argument for using general revenues may be stronger. If benefits of federal actions are more narrowly distributed, the case for financing operations with user fees or charges may become stronger. Of course, the structure and administration of federal inspection and regulation plays a central role in enhancing efficiency and minimizing burdens borne relative to benefits enjoyed.

The federal government collects various fees from businesses and households. Choosing to raise public funds via user fees, as opposed to other means such as taxes, has important administrative and economic consequences. Many fees stem from "business-like activities," in which the government provides a service or benefit in return for payment. For example, many national parks charge entry fees, which then help fund maintenance projects. Such fees and charges that result from voluntary choices, such as entering a national park, are distinguished from taxes—which stem from the government's sovereign power to compel payments. The Government Accountability Office (GAO) defines a user fee as a "fee assessed to users for goods or services provided by the federal government. User fees generally apply to federal programs or activities that provide special benefits to identifiable recipients above and beyond what is normally available to the public." User fees and charges have several advantages as a means of financing public activities. They are voluntary, they connect the burden of financing activities to those who directly benefit from them, and can help decentralize decisionmaking by bypassing centralized allocation of resources. Some have expressed concerns that user fee arrangements may bypass regular congressional scrutiny and dilute Congress's power of the purse. Collections of fees and charges may also be more sensitive to economic fluctuations, which could complicate financing of programs dependent on those revenue streams. Many user fees or charges are classified as offsetting collections, which are deposited into expenditure accounts. Offsetting collections can be used to offset agency spending and typically require no further congressional approval to use. Other fees and charges are classified as offsetting receipts, which are collected into revenue accounts and typically require congressional authorization to be spent. User fees and charges can be classified as discretionary or mandatory spending, depending on how they are legally authorized. The levels and administration of some fees are specified in detailed statutory text, while other fees are created under broader agency authorities. Certain agencies, such as the Food and Drug Administration (FDA), have increased their reliance on user fees in past decades. Some critics have raised concerns that increased reliance on user fees could shift incentives facing those agencies. Some legislative proposals, such as H.R. 850 introduced in the 115th Congress, would limit or eliminate most exceptions and require most fees and charges to be deposited in the U.S. Treasury General Fund. Congress could fund agencies and activities now funded in whole or in part via user fees directly through the annual appropriations process. Such proposals would mark a departure from past practice. Statutory text governing many fees has evolved over many years and involves substantive policy decisions, often related to the industry or programmatic concerns. A general change in funding from user fees and charges to annual appropriations would likely shift the division of responsibilities between authorizing committees and appropriations committees. Congress may also enhance its oversight of agencies reliant on user fees by requiring more timely and detailed financial reports as well as more precise and systematic explanations of linkages between those fees and associated programs. Congress could also ask for greater transparency in fiscal data. While the Office of Management and Budget (OMB) and the U.S. Treasury Bureau of the Fiscal Service provide extensive data on user fees and charges, it is difficult to conduct governmentwide analyses using publicly available sources. Congress could mandate more detailed and more easily accessed data on user fees and charges. Additional funding may be needed to develop the capacity to issue those data.

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Introduction According to the Office of Personnel Management (OPM), the federal workforce is composed of an estimated 2.1 million civilian workers, and several federal agencies collect, compile, and publish statistics about this workforce. Source s may vary in their totals due to differences in how federal workforce statistics are compiled. Some sources rely on "head counts" of employees (OPM), some on total hours worked (such as the Office of Management and Budget [OMB]), some on surveys of employing agencies, and others on self-identification by workers surveyed in their homes. In addition, federal civilian employee databases may exclude particular departments, agencies, or branches of government. Some may also account for temporary or seasonal employees (such as those employed by the U.S. Census) depending on the time of year the statistics are generated. This report focuses on differences in methodologies, including exclusions, and the frequency of data collection employed by OMB and OPM to determine the size and scope of the federal workforce. These differences will facilitate the selection of appropriate data for specific purposes. Comparing Methodologies: On-Board Personnel Versus Full-Time Equivalents2 One example of a key methodological distinction is the difference between "full-time equivalents" (FTEs) and on-board personnel. The following two examples illustrate how the FTE and on-board methods can be used to derive different federal workforce totals. Method 1: Full-Time Equivalent Employment (OMB) Full-time equivalent employment is defined as the total number of regular straight-time hours (not including overtime or holiday hours) worked by employees divided by the number of compensable hours applicable to each fiscal year. Work years, or FTEs, are not employee "head counts." One work year, or one FTE, is equivalent to 2,080 hours of work. Table 1 offers examples in which there is a difference between the actual number of people and the number of FTEs working the same number of total hours. It also illustrates how measuring employment by hours can substantially change the perception of the number of employees it takes to accomplish the work. FTE employment numbers are used by OMB to manage employment in departments and agencies. The requirements for reporting FTE employment in the President's Budget are prescribed in Section 85 of OMB Circular No. A-11 on "Estimating Employment Levels and the Employment Summary (Schedule Q)." FTE data are published annually in OMB's the Budget of the United States Government under the individual department and agency accounts in the Appendix as well as in the Analytical Perspectives and Historical Tables volumes. Method 2: On-board Employment (OPM) OPM defines on-board employment as the number of employees in pay status at the end of the quarter. Data for on-board employment provide employee "head count" in most departments and agencies as of a particular date, including full-time, part-time, and seasonal employees. OPM's Employment and Trends report and OPM's FedScope database provide on-board employment headcounts. When calculating on-board personnel, the number of full-time, part-time, and seasonal workers at an agency is relevant. For example, an agency reporting 10 FTEs could conceivably report 20 "on-board" employees, depending on employees' work schedules. In addition, the "on-board" headcount may result in wide variances in employment numbers, depending on the specific date the employees are counted. For example, the Census Bureau hires 7,000 Census enumerators every 10 years. The federal on-board employees count is likely to be larger during the duration of their employment. Office of Personnel Management OPM is an independent agency that functions as the central human resources department of the executive branch. In fulfilling its mission, OPM collects, maintains, and publishes data on a large portion of the federal civilian workforce. In FY2010, OPM established a system called the Enterprise Human Resources Integration-Statistical Data Mart (EHRI-SDM). This automated system provides access to personnel data for 96% of nonpostal federal civilian executive branch employees. The database does have exclusions; for example, not all executive branch agencies submit their personnel data to OPM. These exclusions include some national security and intelligence agencies, and the Postal Service. Even with these exclusions, the EHRI-SDM is widely regarded as the most comprehensive resource available on the size and scope of the federal workforce. More than 100 data elements are collected for each federal employee within the EHRI-SDM. These data are aggregated by OPM and published in the resources described below. FedScope FedScope is a website that provides public access to the EHRI-SDM, covering the most recent five years of employment, accession, and separation data provided by approximately 120 federal agencies. It is available at http://www.fedscope.opm.gov/ . FedScope data are presented in five subject categories, called "cubes," each covering a different subject and time span. The following are descriptions of the data cubes available through FedScope: Employment . This set of cubes contains the total number of federal employees of the included agencies, as well as other information such as age, gender, length of service, occupation, occupation category, pay grade, salary level, type of appointment, work schedule, agency, and location. Data are published quarterly (March, June, September, and December) for the most recent eight fiscal years. September data, which align with the end of the fiscal year, are available from 1998 to the present. Accession . This set of cubes contains the number of people added to the federal civilian workforce each fiscal year. It includes data elements on employees hired from outside the government and those who transferred from one type of federal service category to another. The most recent 14 fiscal years of data are available. Separation . This set of cubes contains the number of people who leave the federal civilian workforce each fiscal year. It captures data elements on employees who transferred to other agencies, voluntarily resigned, retired, experienced a reduction-in-force (RIF), were terminated, or died while employed. The most recent 14 years of data are available. Employment Trends . This set of cubes displays the most recent five years of employment cube data together in one interface, facilitating workforce data comparisons and trend recognition. Diversity . This set of cubes sorts data by an Ethnicity and Race Indicator. Data elements for 13 categories of racial and ethnic groups are available for the most recent eight years. September data, which align with the end of the fiscal year, are available from 2006 to the present. Table 2 provides some of the most commonly requested data available from FedScope. Employment and Trends Employment and Trends is an occasional publication from OPM based on on-board employee data. It provides data on executive departments and independent agencies, including the Department of Defense (DOD) civilian employees, Executive Office of the President, legislative branch, and judicial branch. It presents selected data in detailed statistical tables and includes information by government branch, agency, and location. Introductory material in Employment and Trends explains the data presented, time lags in data releases, and caveats to consider when calculating workforce totals. The most recently released version of this resource is available at http://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/#url=Employment-Trends . Common Characteristics of Government Common Characteristics of Government is an annual publication that includes a brief outline of OPM's federal employee databases and it includes frequently requested data. The latest edition (FY2017) is available at https://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/common-characteristics-of-the-government/ccog2017.pdf . Sizing Up the Executive Branch of the Federal Workforce Sizing Up the Executive Branch of the Federal Workforce is an OPM report that provides access to frequently requested data related to the executive branch. This report includes some information related to the size of the executive branch by month and year, types of employment, and other frequently requested data. The most recent report (FY2017) is available at https://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/reports-publications/sizing-up-the-executive-branch-2016.pdf . Office of Management and Budget OMB is the largest component of the Executive Office of the President. OMB reports directly to the President, and it assists executive departments and agencies in implementing priorities and commitments of the President. OMB produces the Budget of the United States , which includes federal employee statistics created using the FTE counting method. Budget of the United States The Budget of the United States , sometimes referred to as the President's Budget, is a four-volume set of documents that includes detailed financial information on individual programs and appropriations accounts. Three volumes of the budget include information on direct civilian FTEs. Tables in the President's Budget typically include actual FTE levels for prior fiscal years and estimates for the two most current fiscal years. The U.S. Government Publishing Office website posts budget volumes dating back to FY1996 at https://www.govinfo.gov/app/collection/BUDGET/ . Table 3 illustrates an example of some commonly requested federal employment data found within the President's Budget. The following volumes of the President's Budget include information on federal employees. The current volumes can be accessed at https://www.whitehouse.gov/omb/budget . Analytical Perspectives The Analytical Perspectives volume typically includes information on the federal workforce, sometimes including information on occupations, trends, education level, age distribution, and other factors. The most current Analytical Perspectives volume of the President's Budget is available at http://www.whitehouse.gov/omb/analytical-perspectives/ . Appendix The Appendix volume typically includes an estimate of individual agency FTEs based on the President's proposal along with an estimate and actual FTE count for the prior two years. The most recent Appendix volume of the President's Budget is available at http://www.whitehouse.gov/omb/appendix . Historical Tables The Historical Tables volume of the President's Budget includes historical data on topics such as budget, receipts, outlays, and deficits. This volume also typically includes historical employment counts. The most recent Historical Tables volume of the President's Budget is available at http://www.whitehouse.gov/omb/historical-tables . Consideration of Sources The resources described in this report contain data often requested by Members or congressional staff. The sources covered differ in the methodology, including exclusions, and the frequency of data collection. Users should be aware of these differences when using federal workforce statistics from these sources.

This report describes online tools, reports, and data compilations created by the Office of Management and Budget (OMB) and the Office of Personnel Management (OPM) that contain statistics about federal employees and the federal workforce. The report also describes key characteristics of each resource and briefly discusses selected methodological differences, with the intention of facilitating the selection of appropriate data for specific purposes. This report is not intended to be a definitive list of all information on the federal workforce. It describes significant and recurring products that contain specific data often requested by Members or congressional staff.

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Background Between 1969 and 1999, almost 3,500 people died as a result of political violence in Northern Ireland, which is a part of the United Kingdom (UK). The conflict, which has its origins in the 1921 division of Ireland and is often referred to as "the Troubles," has reflected a struggle between different national, cultural, and religious identities. Protestants in Northern Ireland (48%) largely define themselves as British and support continued incorporation in the UK ( unionists ). Catholics in Northern Ireland (45%) consider themselves Irish, and many Catholics desire a united Ireland ( nationalists ). More militant unionists are often termed loyalists , while more militant nationalists are referred to as republicans ; in the past, loyalists and republicans have been willing to use force to achieve their goals. The latest version of the Troubles was sparked in late 1968, when a civil rights movement was launched in Northern Ireland mostly by Catholics, who had long faced discrimination in areas such as electoral rights, housing, and employment. This civil rights movement was met with violence by some unionists, loyalists, and the police, which in turn prompted armed action by nationalists and republicans. Increasing chaos and escalating violence led the UK government to deploy the British Army on the streets of Northern Ireland in 1969 and to impose direct rule from London in 1972 (between 1920 and 1972, Northern Ireland had its own regional government at Stormont, outside Belfast). For years, the British and Irish governments sought to facilitate a negotiated political settlement to the conflict in Northern Ireland. After many ups and downs, the two governments and the Northern Ireland political parties participating in the peace talks announced an agreement on April 10, 1998. This accord became known as the Good Friday Agreement (for the day on which it was concluded); it is also known as the Belfast Agreement. At the core of the Good Friday Agreement is the "consent principle"—that is, a change in Northern Ireland's status can come about only with the consent of the majority of its people (as well as with the consent of a majority in Ireland). While the agreement acknowledged that a substantial section of the population in Northern Ireland and a majority on the island desired a united Ireland, it recognized that the majority of people in Northern Ireland wished to remain part of the UK. If the preferences of these majorities were to change, the agreement asserted that both the British and Irish governments would have a binding obligation to bring about the wish of the people; thus, the agreement included provisions for future polls to be held in Northern Ireland on its constitutional status should events warrant. The Good Friday Agreement set out a framework for devolved government—the transfer of specified powers over local governance from London to Belfast—and called for establishing a Northern Ireland Assembly and Executive Committee in which unionist and nationalist parties would share power. To ensure that neither unionists nor nationalists could dominate the Assembly, the agreement specified that "key decisions" must receive cross-community support. The Executive Committee would be composed of a first minister, deputy first minister, and other ministers with departmental responsibilities (e.g., health, education, employment). In addition, the Good Friday Agreement contained provisions on several issues viewed as central to the peace process: decommissioning (disarmament) of paramilitary weapons; policing; human rights; UK security normalization (demilitarization); and the status of prisoners. Negotiations on many of these areas had been extremely contentious. Experts assert that the final agreed text thus reflected some degree of "constructive ambiguity" on such issues. Finally, the Good Friday Agreement created new "North-South" and "East-West" institutions. A North-South Ministerial Council was established to allow leaders in the northern and southern parts of the island of Ireland to consult and cooperate on cross-border issues. A British-Irish Council also was formed, composed of representatives of the two governments and the devolved administrations of Northern Ireland, Scotland, Wales, the Channel Islands, and the Isle of Man to discuss matters of regional interest. Voters in Northern Ireland and the Republic of Ireland approved the Good Friday Agreement in separate referendums on May 22, 1998. Elections to the new Northern Ireland Assembly, which had 108 seats at that time, took place on June 25, 1998. The two biggest and mainstream unionist and nationalist parties at the time—the Ulster Unionist Party (UUP) and the Social Democratic and Labour Party (SDLP)—won 28 and 24 seats respectively. The harder-line Democratic Unionist Party (DUP), despite its continued opposition to many parts of the Good Friday Agreement, won 20 seats; Sinn Fein, the associated political party of the Irish Republican Army (IRA), won 18; and a number of smaller parties claimed the rest of the Assembly seats. Implementing the Peace Agreement Despite a much-improved security situation since the signing of the Good Friday Agreement in 1998, full implementation has been difficult. For years, decommissioning and police reforms were key sticking points. Sporadic violence from dissident republican and loyalist paramilitary groups that refused to accept the peace process and sectarian strife between Protestants and Catholics also helped to feed ongoing mistrust between the unionist and nationalist communities. 1999-2002: Instability in the Devolved Government Although Assembly elections were held in June 1998, devolution of power from London to Belfast did not follow promptly because of unionist concerns about decommissioning, or the surrender of paramilitary weapons. The text of the agreement states "those who hold office should use only democratic, non-violent means, and those who do not should be excluded or removed from office." Unionists argued, however, that Sinn Fein could not assume its ministerial posts on the Executive Committee until the IRA had surrendered at least some of its weapons. Sinn Fein countered that the Good Friday Agreement did not specify a start date for decommissioning. The IRA had been observing a cease-fire since 1997, but it viewed decommissioning as tantamount to surrender and had long resisted such calls. In the fall of 1999, former U.S. Senator George Mitchell (who had chaired the peace talks) led a review of the Good Friday Agreement's implementation. This review succeeded in getting unionists to drop their precondition that the IRA had to decommission first, before Sinn Fein representatives could assume their ministerial posts. After 27 years of direct rule from London, authority over local affairs was transferred to the Northern Ireland Assembly and Executive on December 1, 1999. David Trimble, the leader of the UUP at the time, was elected First Minister; Seamus Mallon of the SDLP was elected Deputy First Minister. On February 11, 2000, however, London suspended Northern Ireland's devolved government because First Minister Trimble was poised to resign to protest the continued absence of IRA decommissioning. British officials feared that Trimble would have been replaced as UUP party leader by someone less supportive of, if not opposed to, the peace agreement. After the IRA pledged to initiate a process to put its arms "beyond use," Northern Ireland's power-sharing institutions were reinstated in June 2000. For the next 12 months, unionists remained frustrated by the ongoing lack of actual IRA decommissioning. As a result, Trimble resigned as First Minister on July 1, 2001. Negotiations led by the British and Irish governments to restore the devolved government proved difficult. Finally, in late October 2001, the IRA announced that it had put a quantity of arms, ammunition, and explosives "beyond use" to "save the peace process." The UUP agreed to rejoin the Executive, and the Assembly reconvened in November 2001. Trimble was reelected First Minister, and Mark Durkan, the new leader of the SDLP, was elected Deputy First Minister. In April 2002, the IRA carried out a second act of decommissioning. Still, unionists continued to worry about the IRA's long-term commitment to the peace process. In early October 2002, police raided Sinn Fein's Assembly offices and arrested four officials as part of an investigation into a suspected IRA spy ring. Both the UUP and the DUP threatened to withdraw from the government unless Sinn Fein was expelled. With the political process in turmoil, London once again suspended the devolved government and reinstated direct rule on October 14, 2002. 2003-2007: The Struggle to Restore Devolution Despite the suspension of the devolved government, Assembly elections took place in November 2003. The elections produced a significant shift in the balance of power in Northern Ireland politics in favor of perceived hard-liners on both sides of the conflict. The DUP—led by the Reverend Ian Paisley—overtook the UUP as the dominant unionist party. Sinn Fein surpassed the more moderate SDLP to become the largest nationalist party. Immediately after the elections, the DUP asserted that it would not enter into government with Sinn Fein until the IRA disarmed and disbanded; the DUP also refused to talk directly to Sinn Fein. For much of 2004, negotiations to restore the devolved government continued but remained stalemated. Talks were further complicated by a December 2004 bank robbery in Belfast, which police believed was carried out by the IRA, and the January 2005 murder of a Belfast man, Robert McCartney, during a bar brawl involving IRA members. These incidents increased pressure on the IRA and Sinn Fein to address the additional issue of IRA criminality. In April 2005, Sinn Fein leader Gerry Adams effectively called on the IRA to abandon violence and pursue politics as an "alternative" to "armed struggle." In July 2005, the IRA ordered an end to its armed campaign. It instructed all members to pursue objectives through "exclusively peaceful means" and to "not engage in any other activities whatsoever." All IRA units were ordered to "dump arms." Although many analysts asserted that the IRA's statement was the least ambiguous one ever, unionists were wary, noting that it did not explicitly address the issue of IRA criminality or whether the IRA would disband. The DUP and other unionists also wanted Sinn Fein to support Northern Ireland's new police service. In September 2005, Northern Ireland's Independent International Commission on Decommissioning (IICD) announced that the IRA had put all of its arms beyond use, asserting that the IRA weaponry dismantled or made inoperable matched estimates provided by the security forces. With no real progress on restoring Northern Ireland's devolved government, then-UK Prime Minister Tony Blair and then-Irish Prime Minister Bertie Ahern called an all-party meeting in Scotland in October 2006. Blair and Ahern put forth a road map, known as the St. Andrews Agreement, intended to break the political stalemate. It called for negotiations between November 2006 and March 2007 on forming a new devolved government; during this time, the DUP would agree to share power with Sinn Fein and Sinn Fein would agree to support the police service and join the Policing Board. In January 2007, Sinn Fein members voted to support Northern Ireland's police and the criminal justice system in the context of the reestablishment of the political institutions. Many experts viewed Sinn Fein's resolution as historic, given the IRA's traditional view of the police as a legitimate target. On March 26, 2007, Paisley and Adams met for the first time ever and announced a deal to form a power-sharing government on May 8, 2007. Observers contended that the image of Paisley and Adams sitting at the same table was unprecedented, as were the statements of both leaders pledging to work toward a better future for "all" the people of Northern Ireland. On May 8, 2007, Paisley and Sinn Fein's chief negotiator, Martin McGuinness, were sworn in as First Minister and Deputy First Minister, respectively, and the power-sharing Assembly and Executive began work. Many experts believed that unlike past efforts, this deal would stick, given that it was reached by the DUP and Sinn Fein, viewed as the two most polarized forces in Northern Ireland politics. At the same time, tensions continued to persist within the devolved government and between the unionist and nationalist communities. 2008-2010: The Transfer of Policing and Justice Powers At the time of the Good Friday Agreement's signing, the parties had been unable to reach an accord on the devolution of the sensitive matters of policing, prisons, and the criminal justice system. Consequently, the parties agreed to postpone the devolution of policing and justice powers until an undetermined point in the future. The 2006 St. Andrews Agreement called for the devolution of policing and justice powers by May 2008, but the DUP and Sinn Fein remained at odds over this timeline. The DUP maintained that May 2008 was merely an aspirational date to which it was not committed. In July 2008, the lack of progress on devolving police and justice powers from London to Belfast prompted Sinn Fein to block the regular meetings of the Executive Committee, essentially bringing the formal work of the Assembly to a standstill. Executive Committee meetings resumed in late November 2008 following a DUP-Sinn Fein agreement on a road map for devolving authority for policing and justice affairs. As part of the road map, the DUP and Sinn Fein agreed that a Northern Ireland Justice Department would be established, as well as an independent attorney general for Northern Ireland. In addition, the parties agreed on a system for choosing a justice minister. Although Executive Committee ministerial portfolios are normally allocated based on party strength, the two sides asserted that given the sensitive nature of this position, the new justice minister would be elected by a cross-community vote in the Assembly. Nevertheless, progress on transferring police and justice powers to the devolved government remained slow. Nationalists increasingly warned that the failure to do so could lead to renewed political instability. In late January 2010, then-British Prime Minister Gordon Brown and then-Irish Prime Minister Brian Cowen convened a summit with the parties to try to hammer out a deal and set a date for the devolution of authority for policing and justice affairs. On February 4, 2010, the DUP and Sinn Fein announced that they had reached the Hillsborough Agreement, setting April 12, 2010, as the date for the devolution of policing and justice authority from London to Belfast. As part of the deal, the Hillsborough Agreement also established a timeline for developing a new mechanism to address how contentious sectarian parades in the region were managed. On March 9, 2010, the Northern Ireland Assembly approved the Hillsborough Agreement. On April 12, as agreed and for the first time in 38 years, London transferred power over policing and justice affairs to Belfast. That same day, David Ford, of the smaller, cross-community Alliance Party, was elected as Northern Ireland's new Justice Minister. Police Reforms Police reforms have long been recognized as a key element in achieving a comprehensive peace in Northern Ireland. The Royal Ulster Constabulary (RUC)—Northern Ireland's former, 92% Protestant police force—was long viewed by Catholics as an enforcer of Protestant domination. Human rights organizations accused the RUC of brutality and collusion with loyalist paramilitary groups. Defenders of the RUC pointed to its tradition of loyalty and discipline and its record in fighting terrorism. The Good Friday Agreement called for an independent commission to make recommendations to help "ensure policing arrangements, including composition, recruitment, training, culture, ethos and symbols, are such that ... Northern Ireland has a police service that can enjoy widespread support from ... the community as a whole." In September 1999, this independent commission (the so-called Patten Commission) released a report with 175 recommendations. It proposed a new name for the RUC, a new badge, and new symbols free of the British or Irish states. Other key measures included reducing the size of the force from 11,400 to 7,500, and increasing the proportion of Catholic officers (from 8% to 30% in 10 years). Unionists responded negatively, but nationalists were mostly positive. In May 2000, the Blair government introduced the Police Bill in the UK House of Commons, and maintained that the reform bill was faithful to the Patten report's "broad intention" and "detailed recommendations." Nationalists were critical, arguing that Patten's proposals had been gutted. London responded that amendments would deal with human rights training, promoting 50-50 recruitment of Catholics and Protestants, and oversight responsibilities. The Police (Northern Ireland) Bill became law in November 2000. Recruitment for the future Police Service of Northern Ireland (PSNI) began in March 2001, but it was unclear whether the SDLP or Sinn Fein would support it or join the 19-member Policing Board, a new democratic oversight body. To help ensure nationalist support, London proposed further concessions in July 2001, including halving the antiterrorist "Special Branch" and prohibiting new recruits from using plastic bullets. In August 2001, the SDLP broke with Sinn Fein and accepted the British government's additional concessions on policing. The SDLP agreed to nominate representatives to the Policing Board and urged young Catholics to join the new police service. The UUP and the DUP also agreed to join the Policing Board, which came into being on November 4, 2001. That same day, the RUC was renamed the PSNI, and the first class of recruits drawn 50-50 from both Catholic and Protestant communities began their training. Sinn Fein maintained that the changes in the police service were largely cosmetic and continued to charge that the new PSNI—like the RUC before it—would be unduly influenced by elements of the security services opposed to the peace process. Some say that Sinn Fein's absence from the Policing Board discouraged more Catholics from joining the PSNI, and prevented the PSNI's full acceptance by the nationalist community. Following the suspension of Northern Ireland's devolved institutions in October 2002, Sinn Fein asserted that its acceptance of the PSNI and the Policing Board hinged on a deal to revive the devolved government and the transfer of policing and justice powers from London to a restored Assembly and Executive. As noted previously, in January 2007, Sinn Fein members voted to support the police and join the Policing Board. Sinn Fein members assumed their places on the Policing Board in late May 2007, following the reestablishment of the devolved government. In March 2011, the 50-50 recruitment process for Catholic and Protestant PSNI officers was brought to a close. In making this decision, UK officials asserted that Catholic officers now made up almost 30% of the PSNI, and as such, the 50-50 process had fulfilled the goal set out by the Patten Commission. Although some nationalists viewed this decision as premature, many unionists applauded it, viewing the 50-50 rule as unfairly discriminating against Protestants. In recent years, concerns have increased that not enough Catholics have been seeking to join the PSNI, partly because of lingering suspicions about the police within the Catholic/nationalist community but also because of fears that Catholic police recruits may be key targets of dissident republicans. According to one news report, of the 401 new officers recruited to join the PSNI between 2013 and 2015, only 77 were Catholic. Following a PSNI review of the recruitment process in 2016, the PSNI introduced a number of procedural changes in 2017 to help attract more Catholics (and more women). Security Normalization In July 2007, the British army ended its 38-year-long military operation in Northern Ireland in the context of the peace process and the improved security situation. Although a regular garrison of 5,000 British troops remains based in Northern Ireland, they no longer have a role in policing and may be deployed worldwide. Policing in Northern Ireland is now the responsibility of the PSNI. Current Crisis in the Devolved Government In light of the 2007 political agreement to restore Northern Ireland's devolved government, the transfer of policing and justice powers in 2010, and the extensive police reforms, many analysts view the implementation of the most important aspects of the Good Friday Agreement as having been completed. In March 2011, the Northern Ireland Assembly and Executive concluded its first full term in office in 40 years. The regularly scheduled Assembly elections in May 2011 and May 2016 produced successive power-sharing governments led by the DUP and Sinn Fein. Nevertheless, deep distrust persists between unionists and nationalists and their respective political parties. A series of events over the past few years—including protests over the use of flags and emblems, a crisis over implementing welfare reform, a controversy over a past deal for republican "on the runs," and the arrest of a Sinn Fein leader in connection with the murder of a former IRA member—have highlighted the fragility of community relations and periodically threatened the stability of the devolved government. In January 2017, after only 10 months in office, the devolved government led by First Minister Arlene Foster of the DUP and Deputy First Minister Martin McGuinness of Sinn Fein collapsed, prompting snap Assembly elections. The March 2017 Snap Assembly Elections The immediate cause of the devolved government's collapse in January 2017 was a scandal over flaws in a renewable energy program (the Renewable Heat Incentive, or RHI), initially overseen by First Minister Foster when she served as Northern Ireland's Enterprise Minister in 2012. The problems in the RHI, which sought to increase consumption of heat from renewable energy sources by offering businesses financial incentives to do so, are expected to cost Northern Ireland taxpayers £490 million (roughly $600 million). Sinn Fein called for Foster to temporarily stand aside as First Minister while an investigation was conducted into the energy scheme; she refused, and McGuinness resigned as Deputy First Minister in protest. Under the rules governing Northern Ireland's power-sharing arrangements, if either the First Minister or the Deputy First Minister resigns (without a replacement being nominated), the government cannot continue and new elections must be held. New elections were called for March 2, 2017. Arlene Foster led the DUP's campaign, but McGuinness stepped down as Sinn Fein's northern leader due to health reasons (he passed away a few weeks after the election). Michelle O'Neill succeeded McGuinness as Sinn Fein's leader in Northern Ireland. Tensions with the DUP on several issues besides the RHI scandal likely contributed to Sinn Fein's decision to force snap Assembly elections. The elections were called amid continued uncertainty over the implications for Northern Ireland of "Brexit"—the UK's pending exit from the European Union (EU). The DUP was the only major Northern Ireland political party to back Brexit ahead of the June 2016 referendum on EU membership, and Northern Ireland voted 56% to 44% against leaving the EU (the UK overall voted in favor, 52% to 48%). Other points of contention included the introduction of a potential Irish Language Act—a long-standing nationalist demand to give the Irish language the same official status as English in Northern Ireland—and legalizing same-sex marriage. Both measures are supported by Sinn Fein but opposed by the DUP. As seen in Table 1 , the number of Northern Ireland Assembly seats contested in 2017 was 90 rather than 108 because of previously agreed reforms to reduce the size of the Assembly. The DUP retained the largest number of seats, but Sinn Fein was widely regarded as the biggest winner given its success in reducing the previous gap between the two parties from 10 seats to 1. A high voter turnout of almost 65%—fueled by anger over the energy scandal and a perceived lack of concern from London about Brexit's impact on Northern Ireland—appears to have favored Sinn Fein and the cross-community Alliance Party. For the first time in the Assembly, unionist parties will not have an overall majority (a largely symbolic status because of the power-sharing rules but highly emblematic for the unionist community). With fewer than 30 seats, the DUP also lost its unilateral ability to trigger a "petition of concern," a procedure used by the DUP to block legislation on various social policy issues, including same-sex marriage. At the same time, the election results reinforced the DUP and Sinn Fein as the dominant voices for their respective communities, suggesting continued and possibly increased polarization in Northern Ireland's politics. Status of Negotiations Two years after Assembly elections, Northern Ireland remains without a devolved government. Negotiations have proceeded in fits and starts but appear to be stalemated at present. Press reports indicate that the biggest sticking point is Sinn Fein's demand for a stand-alone Irish Language Act, which the DUP continues to oppose. Some analysts suggest that the June 2017 UK general election, which resulted in Prime Minister Theresa May's Conservative Party losing its majority in the House of Commons and forming a minority government that relies on support from the DUP, has hardened the positions of the DUP and Sinn Fein and made reaching an agreement on a new devolved government more difficult. In February 2018, media reports signaled that the DUP and Sinn Fein were close to reaching a deal to restore the devolved government. No deal materialized, however. DUP leaders apparently judged that the party's base would not support a possible "package deal" addressing both the Irish and Ulster Scots languages (and other cultural matters). Arlene Foster contended that it was not a "fair and balanced package" and there was "no current prospect" for reestablishing Northern Ireland's power-sharing institutions; she also urged the UK government to "start making policy decisions." While Foster maintained that the DUP was committed to restoring devolved government, some nationalists interpreted her statements as calling for a return to direct rule. Sinn Fein's new leader, Mary Lou McDonald (who replaced Gerry Adams in early 2018), asserted that "direct rule is not acceptable." London does not appear eager to reinstate direct rule or call new elections. Secretary of State for Northern Ireland Karen Bradley has stated that "devolved government is in the best interests of everyone in Northern Ireland." In February 2019, Secretary of State Bradley and Irish Foreign Minister Simon Coveney met with Northern Ireland's five main political parties; news reports indicate that both Bradley and Coveney pledged to present proposals to restart negotiations. Some observers contend that the ongoing internal debate within the UK on Brexit—and in particular, the "backstop" designed to ensure no "hard" land border between Northern Ireland and Ireland following the UK's departure from the EU—has consumed UK and Northern Ireland politicians' time and attention and largely overshadowed discussions on a new devolved government. Analysts suggest that any significant progress on reestablishing the devolved government likely will only occur after Brexit and the backstop issue are resolved (see "Possible Implications of Brexit" for more information). Several commentators have speculated that the British and Irish governments might seek to establish some sort of joint authority if a devolved government cannot be formed, but this approach is largely viewed as a nonstarter for the DUP and other unionists who would be leery of giving Dublin a formal role in Northern Ireland affairs. In the continued absence of a devolved government, Sinn Fein has called for the British-Irish Intergovernmental Conference—provided for in the Good Friday Agreement to promote bilateral cooperation between British and Irish government ministers—to be reconvened (it has not met since the DUP-Sinn Fein power-sharing agreement of 2007). In late 2017, Irish Prime Minister Leo Varadkar appeared to support this idea, but also noted that reviving the intergovernmental conference should not be construed as "joint rule." Initiatives to Further the Peace Process Over the past few years, the Northern Ireland political parties and the British and Irish governments have made several attempts to resolve outstanding issues related to the peace process, reduce tensions between the unionist and nationalist communities, and promote reconciliation. Such efforts also have sought to address concerns such as ongoing sectarian strife, paramilitary and dissident activity, and Northern Ireland's legacy of violence (often termed "dealing with the past"). Major endeavors include the 2013 Haass initiative, the 2014 Stormont House Agreement, and the 2015 Fresh Start Agreement. The Haass Initiative In July 2013, the Northern Ireland Executive appointed former U.S. diplomat and special envoy for Northern Ireland Richard Haass as the independent chair of interparty talks aimed at tackling some of the most divisive issues in Northern Ireland society. In particular, Haass was tasked with setting out recommendations by the end of 2013 on dealing with the past and the sectarian issues of parading, protests, and the use of flags and emblems. At the end of December 2013, Haass released a draft proposal outlining the way forward in these areas, but was unable to broker a final agreement among the Northern Ireland political parties participating in the talks. (The specifics of the Haass proposals are discussed below in " Ongoing Challenges .") The Stormont House Agreement and Implementation Problems During the summer of 2014, the devolved government was tested by financial pressures and disagreement over UK-wide welfare reforms (passed by the UK parliament in February 2013 but which Sinn Fein and the SDLP opposed implementing in Northern Ireland). Northern Ireland also faced significant spending cuts given the imposition of austerity measures throughout the UK. Analysts contend that the welfare and budgetary disputes decreased public confidence in the devolved government's effectiveness and raised broader questions about its stability. In September 2014, then-First Minister Peter Robinson asserted that the current governing arrangements were "no longer fit for purpose" and called for new interparty discussions to improve Northern Ireland's institutions and decisionmaking processes. A few weeks later, the UK government announced it would convene talks with Northern Ireland's main political parties (the DUP, Sinn Fein, the UUP, the SDLP, and the Alliance) on government stability and finances. The talks also would address the issues previously tackled by Richard Haass in 2013 (managing parades and protests, the use of flags and emblems, and dealing with the past). On December 23, 2014, the Northern Ireland political parties and the British and Irish governments announced that a broad, multifaceted agreement had been reached on financial and welfare reform; governing structures; and the contentious issues of parades, flags, and the past (see " Ongoing Challenges " for more information on these latter provisions). As part of the resulting "Stormont House Agreement," the five main political parties agreed to support welfare reform (with certain mitigating measures), balance the budget, address Northern Ireland's heavy economic reliance on the public sector, and reduce the number of Executive departments and Assembly members over the next few years to improve efficiency and cut costs. London and Dublin hailed the Stormont House Agreement as a welcome step forward. The five main Northern Ireland political parties also appeared largely satisfied with the new agreement, despite some reservations. Some Alliance and UUP members worried that the accord did not make greater progress toward resolving the parades issue, while Sinn Fein and the SDLP expressed disappointment that the deal did not call for an Irish Language Act, a bill of rights for Northern Ireland, or a public inquiry into the 1989 murder of Belfast lawyer Patrick Finucane. In early 2015, as promised in the Stormont House Agreement, the devolved government brought forward a welfare reform bill to enact the required changes. In March 2015, however, as the bill was nearing completion in the Assembly, Sinn Fein announced it would block the bill. Sinn Fein accused the DUP of reneging on commitments to fully protect current and future welfare claimants and argued that the UK government must provide more money to assist welfare recipients negatively affected by the reforms. The DUP responded that Sinn Fein's behavior was "dishonorable and ham-fisted." The failure to resolve the welfare reform issue also stalled implementation of the other aspects of the Stormont House Agreement, including measures aimed at dealing with sectarian issues and the past. Some observers and analysts worried that the continued impasse was increasingly threatening to collapse the devolved government. On September 3, 2015, the UK and Irish governments decided to convene a new round of cross-party talks. On September 9, 2015, the devolved government was further rocked by the arrest of Bobby Storey, a senior Sinn Fein leader (and former IRA commander). Storey was arrested in connection with the August 2015 murder of ex-IRA member Kevin McGuigan (believed to be a revenge killing for the murder of another former IRA commander in May). Shortly after the McGuigan murder, PSNI Police Chief George Hamilton claimed that the IRA continued to exist (with some of its structures and operatives still "broadly in place") but that McGuigan's murder did not appear to have been sanctioned or directed by the IRA. Sinn Fein asserted that the IRA had "gone away" and no longer existed. Storey and two others (described as "senior republicans") arrested as part of the McGuigan investigation ultimately were released without charge. Nevertheless, the McGuigan killing and Storey's arrest renewed lingering unionist concerns about continuing IRA activities and further complicated efforts to implement the Stormont House Agreement. The Fresh Start Agreement After 10 weeks of talks in the fall of 2015 on the implementation of the Stormont House Agreement and the legacy of paramilitary activity, the British and Irish governments, the DUP, and Sinn Fein reached a new "Fresh Start Agreement" on November 17, 2015. The deal was broadly welcomed in Northern Ireland, although the other main Northern Ireland political parties—the SDLP, the UUP, and the Alliance Party—reportedly objected to some elements. Many Northern Ireland political leaders and human rights groups were dismayed that negotiators failed to reach final agreement on establishing new institutions to deal with the past, as called for in the Stormont House Agreement. A key part of the Fresh Start Agreement focused on welfare reform and improving the stability and sustainability of Northern Ireland's budget and governing institutions. The DUP and Sinn Fein agreed to allow the UK parliament to implement changes to the welfare system in Northern Ireland and on a financial package worth £585 million (roughly $832 million) to soften the effects of the welfare and tax credit cuts (funded from the Northern Ireland budget). In exchange, the UK government pledged up to £500 million (about $711 million) in new funding to tackle issues "unique to Northern Ireland," such as addressing security concerns and removing Northern Ireland's "peace walls" (physical barriers that separate Protestant and Catholic neighborhoods). The new accord also confirmed institutional reforms originally outlined in the Stormont House Agreement. These reforms included reducing the size of the Assembly from 108 to 90 members, which would have effect from the first Assembly election after the May 2016 election (and was thus implemented in the March 2017 snap elections). The Stormont House Agreement also decreased the number of government departments from 12 to 9 and made provision for an official opposition in the Assembly. Paramilitary activity was the other main issue addressed in the Fresh Start Agreement. The new accord established "fresh obligations" on Northern Ireland's elected representatives to work together toward ending all forms of paramilitary activity and disbanding paramilitary structures. It also called for enhanced efforts to combat organized crime and cross-border crime. (See " Ongoing Challenges " for more information on these provisions in the Fresh Start Agreement.) Ongoing Challenges Although Northern Ireland has made considerable progress in the years since the 1998 Good Friday Agreement, the search for peace and reconciliation remains challenging. Controversial issues include bridging sectarian divisions and managing key sticking points (especially parading, protests, and the use of flags and emblems); dealing with the past; curbing remaining paramilitary and dissident activity; and furthering economic development. As noted, the 2013 Haass initiative, the 2014 Stormont House Agreement, and the 2015 Fresh Start Agreement all attempted to tackle at least some aspects of these long-standing challenges. Some measures agreed in these successive accords have been delayed amid the current absence of a devolved government. Significant concerns also exist about the possible implications of Brexit for Northern Ireland. Sectarian Sticking Points: Parading, Protests, and the Use of Flags and Emblems Observers suggest that Northern Ireland remains a largely divided society, with Protestant and Catholic communities existing in parallel. Peace walls that separate Protestant and Catholic neighborhoods are perhaps the most tangible sign of such divisions. Estimates of the number of peace walls vary depending on the definition used. Northern Ireland's Department of Justice recognizes around 50 peace walls for which it has responsibility; when other types of "interfaces" are included—such as fences, gates, and closed roads—the number of physical barriers separating Protestant and Catholic communities is over 100. Northern Ireland's Executive is working to remove the peace walls, but a 2015 survey of public attitudes toward the walls found that 30% of those interviewed want the walls to remain in place; it also found that more than 4 in 10 people have never interacted with anyone from the community living on the other side of the nearest peace wall. Furthermore, experts note that schools and housing estates in Northern Ireland remain mostly single-identity communities. Some analysts contend that sectarian divisions are particularly evident during the annual summer "marching season," when many unionist parades commemorating Protestant history are held. Although the vast majority of these annual parades by unionist cultural and religious organizations are not contentious, some are held through or close to areas populated mainly by Catholics (some of whom perceive such parades as triumphalist and intimidating). During the Troubles, the marching season often provoked fierce violence. Many Protestant organizations view the existing Parades Commission that arbitrates disputes over parade routes as largely biased in favor of Catholics and have repeatedly urged its abolition. Although the Hillsborough Agreement called for a new parading structure to be established by the end of 2010, this process quickly stalled. The DUP-Sinn Fein-led Northern Ireland Executive proposed new parades legislation in mid-2010 that would have abolished the Parades Commission and promoted local solutions to disputed marches. However, the Protestant Orange Order—a group at the center of many contentious parades in the past—opposed several elements of the plan. The DUP asserted that it a new parading structure would not succeed without the support of the Orange Order. Frictions between the unionist and nationalist communities were also highlighted by a series of protests in late 2012-early 2013 following a decision to fly the union (UK) flag at Belfast City Hall only on designated days, rather than year-round (nationalist city councilors had originally wanted the flag removed completely but agreed to a compromise plan to fly it on certain specified days instead). The protests, mostly by unionists and loyalists, occurred in Belfast and elsewhere in Northern Ireland, and some turned violent. Northern Ireland leaders on both sides of the sectarian divide received death threats, and some political party offices were vandalized. As mentioned previously, parading, protests, and the use of flags and emblems were discussed during the talks led by Richard Haass in the fall of 2013. According to Haass, dealing with flags and symbols was the "toughest area of negotiations," and the draft agreement proposed at the end of December 2013 noted that the parties had been unable to reach consensus on any new policies surrounding the display of flags or emblems. Instead, the Haass proposals called for establishing a commission to hold public discussions throughout Northern Ireland on the use of flags and emblems (among other issues) to try to find a way forward. The December 2014 Stormont House Agreement essentially endorsed this idea and asserted that a new Commission on Flags, Identity, Culture and Tradition would be set up, composed of 15 members (with 7 to be appointed by Northern Ireland's main political parties and 8 drawn from outside the government). As for parading, the Haass proposals recommended transferring authority over parading from the Parades Commission to the devolved government and establishing two new institutions: one to receive all event notifications and promote community dialogue and mediation; and another to make decisions in cases where parading and protest disputes remained. The Haass proposals also called for establishing in law a code of conduct for both marchers and protesters. In the Stormont House Agreement, the parties agreed that responsibility for parades and related protests should, in principle, be devolved to the Northern Ireland Assembly and that new legislation should be introduced. The Stormont House Agreement, however, did not provide further specifics and did not reference the parading institutions proposed by Haass. As noted above, the crisis over welfare reform and paramilitary activity largely stalled implementation of the Stormont House Agreement. According to the Fresh Start Agreement of November 2015, the measures outlined in the Stormont House Agreement on the issues of flags and parades would move forward. The Commission on Flags, Identity, Culture and Tradition began work in June 2016. As for legislation on parading and related protests, the Fresh Start Agreement called for a discussion paper to be prepared for Northern Ireland's Executive Committee. This paper is expected to outline options for the regulation of parades and related protests and evaluate how key outstanding issues, such as a code of conduct, could be addressed in new legislation. To date, the discussion paper on parading has not yet been presented given the impasse in the devolved government. Dealing with the Past Fully addressing the legacy of violence in Northern Ireland remains controversial. The Good Friday Agreement asserted that "it is essential to acknowledge and address the suffering of the victims of violence as a necessary element of reconciliation." In 2008, the Northern Ireland Assembly established a Commission for Victims and Survivors aimed at supporting victims and their families. Several legal processes for examining crimes stemming from the Troubles also exist. These include police investigations into deaths related to the conflict; investigations by the Police Ombudsman for Northern Ireland (PONI) of historical cases involving allegations of police misconduct; and public inquiries, such as the Saville inquiry (concluded in 2010) into the 1972 Bloody Sunday incident. Critics argue that these various legal processes represent a "piecemeal" approach and give some deaths or incidents priority over others. Some observers point out that more than 3,000 conflict-related deaths have never been solved. In 2005, a Historical Enquiries Team (HET) was established within the PSNI to review over 3,200 deaths relating to the conflict between 1968 and 1998, but, despite the HET's efforts, progress was slow; the HET was wound down at the end of 2014, and its work was taken over by another, smaller unit within the PSNI. Others note the expense and time involved with some of these processes; for example, the Bloody Sunday inquiry cost £195 million (more than $300 million) and took 12 years to complete. Some analysts and human rights advocates argue that Northern Ireland needs a comprehensive mechanism for dealing with its past, both to meet the needs of all victims and survivors and to contain costs. At the same time, many commentators assert that there is no consensus in Northern Ireland on the best way to deal with the past. This is in large part because many unionists and nationalists continue to view the conflict differently and retain competing narratives. Recommendations issued in 2009 by the Consultative Group on the Past (set up by the UK government) were widely criticized for a variety of reasons by nearly all segments of Northern Ireland society. Dealing with the past was a key focus of the talks chaired by Richard Haass in December 2013. Among other recommendations related to the past, the draft proposals put forward by Haass called for establishing new mechanisms to consolidate police investigations and better address the needs of victims and survivors. The December 2014 Stormont House Agreement largely endorsed the proposals suggested by Haass. Among other measures for dealing with the past, the Stormont House Agreement called for setting up four bodies: Historical Investigations Unit (HIU) . This body would take forward outstanding cases from the HET process and the historical unit of the Police Ombudsman dealing with past police misconduct cases. The HIU would be overseen by the Northern Ireland Policing Board and would aim to complete its work within five years of its establishment. The HIU would be established through UK legislation, and the UK government pledged to make "full disclosure" to the HIU. Independent Commission for Information Retrieval (ICIR) . The ICIR would enable victims and survivors to seek and privately receive information about conflict-related violence. It would be established by the British and Irish governments with a five-year mandate and would be entirely separate from the justice systems in each jurisdiction. The ICIR would not disclose the identities of those coming forward with information to law enforcement authorities, and any information provided to it would be inadmissible in criminal and civil proceedings; individuals who provide information, however, would not be immune to prosecution for any crime committed should evidentiary requirements be met by other means. Oral History Archive. The Northern Ireland Executive would establish this archive by 2016 to provide a central place for people from all backgrounds to share experiences and narratives related to the Troubles. Implementation and Reconciliation Group (IRG) . This body would be set up to oversee work on themes, archives, and information recovery in an effort to promote reconciliation and reduce sectarianism. In September 2015, the Secretary of State for Northern Ireland published a policy paper outlining the UK government's proposal for the legislation required to establish the HIU, the ICIR, and the Oral History Archive. Amid the crisis in the devolved government in the fall of 2015, however, work on setting up these new bodies largely came to a standstill. Controversy also arose over the UK government's assertion in its policy paper that "the HIU must protect information that, if [publicly] disclosed, would or would be likely to prejudice national security" and that "where the HIU proposes to disclose information of this nature, it will be required to refer the matter to the UK government, which may prevent disclosure, if necessary." Victims groups and many nationalists strongly objected to such "national security caveats," viewing them as essentially providing the UK government with a veto over the release of information by the proposed HIU. Divisions over such "national security caveats" appear to be a key reason that a final deal on establishing the HIU (and the other bodies to deal with the past) was not possible in the Fresh Start Agreement. In February 2016, then-Secretary of State for Northern Ireland Theresa Villiers stated that the proposed national security provisions have "led some to assume that the government will be constantly seeking to block the onward disclosure by the HIU of information to victims' families and the public. This is simply not the case." She went on to note that during the Fresh Start talks, the UK government offered a "significant compromise," in which families would be told whether the government had required the HIU to withhold certain sensitive information, and that the families or the HIU director would have the right to challenge this decision in Northern Ireland's High Court. Press reports indicate that victims groups and nationalists remained concerned that "national security" could be used to cover up criminal wrongdoing by state agents. Sinn Fein reportedly argued that an international panel of judges should be appointed to hear any appeals, rather than the High Court. Despite continued discussions in 2016 between the UK government, Sinn Fein, the DUP, and other stakeholders, the "national security caveats" continued to pose a stumbling block to implementing the "dealing with the past" provisions in the Stormont House Agreement. The stalemate since 2017 in reestablishing a devolved government further stalled work on mechanisms to address Northern Ireland's legacy of violence. In May 2018, the UK government launched a public consultation process on a draft bill to establish the four legacy institutions called for in the Stormont House Agreement—the HIU, the ICIR, the Oral History Archive, and the IRG. The government envisions that the HIU would have a caseload of about 1,700 Troubles-related deaths. "National security caveats" for the HIU would remain, but, as described by former Secretary of State Villiers, families or the HIU director would be able to appeal government decisions to withhold information to Northern Ireland's High Court. At the same time, unionists have voiced concerns that the HIU could unfairly target former soldiers and police officers, and many argue that any measures to deal with the past in Northern Ireland should contain a statute of limitation on the prosecution of former soldiers. Nationalists strongly reject any such statute of limitations or amnesty to prosecutions. Human rights groups have complained that the government's proposals largely neglect the right of individuals injured during the Troubles to have their cases investigated. The public consultation process concluded in October 2018, but its findings have yet to be released. Remaining Paramilitary and Dissident Activity Paramilitary Concerns Experts contend that the major paramilitary organizations active during the Troubles are now committed to the political process and remain on cease-fire. However, the apparent continued existence of such groups and their engagement in criminality worries many in both the unionist and nationalist communities. In response to the heightened concerns about paramilitary activity in Northern Ireland in 2015, former Secretary of State for Northern Ireland Villiers commissioned a study on the status of republican and loyalist paramilitary groups. This review was drafted jointly by the PSNI and MI5 (the UK's domestic intelligence service) and reviewed by three independent observers. Published in October 2015, the assessment found that all the main paramilitary groups operating during the Troubles still existed, but they remained on cease-fire, and the leadership of each group, "to different degrees," is "committed to peaceful means to achieve their political objectives." although such paramilitary groups continue to "organize themselves along militaristic lines," none are planning or conducting terrorist attacks and they do not have significant capabilities to do so. at the same time, individual members of paramilitary groups still represent a threat to national security. Some have committed murders or other violence, and many are engaged in organized crime. None of the leaderships have complete control over the activities of their members, and "there is regular unsanctioned activity including behavior in direct contravention of leadership instruction." The Fresh Start Agreement sought to address some of the most pressing concerns about the main paramilitary groups in Northern Ireland. Among the measures, the accord established a new set of principles for members of the Executive and Assembly that commits them to work toward the disbandment of all paramilitary organizations and their structures, to challenge paramilitary attempts to control communities, and to take no instructions from such groups; an independent three-member panel tasked with recommending a strategy for disbanding paramilitary groups; a new, four-member international body to monitor paramilitary activity and to report annually on progress toward ending paramilitary activity; and a cross-border Joint Agency Task Force to bring together officials from the PSNI and UK and Irish police, intelligence, and tax agencies to tackle paramilitarism and organized crime throughout the island of Ireland. Some Northern Ireland politicians and analysts suggested that some of these proposals did not go far enough. Press reports indicated that some unionists were unhappy that the new international paramilitary monitoring body—unlike the former Independent Monitoring Commission (IMC)—would not have the power to recommend the exclusion of political parties from the Assembly should it be determined that the parties are not living up to their commitments to exclusively peaceful means. As part of the Fresh Start Agreement, the UK government pledged a total of £188 million (roughly $267 million) more in security-related spending, with the bulk of this amount (£160 million, or $228 million) going to the PSNI to improve its ability to tackle dissident groups, remaining paramilitarism, and organized crime. In June 2016, the so-called Three Person Panel published its report with 43 recommendations for disbanding paramilitary groups; in July 2016, Northern Ireland's Executive set out an action plan on tackling paramilitary activity, criminality, and organized crime based on the panel's work. In September 2016, the British and Irish governments agreed to establish the four-person Independent Reporting Commission (IRC), tasked with monitoring progress on ending paramilitary activity, including the Executive's new action plan. In December 2016, the British and Irish governments named one representative each to the IRC and the Northern Ireland Executive named two. The IRC released its first annual report in October 2018; the IRC assessed that although some progress has been made, paramilitarism remains a "stark reality of life in Northern Ireland" and that the lack of political decisionmaking institutions since January 2017 has negatively affected efforts to tackle paramilitarism. The Dissident Threat Security assessments indicate that the threat posed by dissident republican and loyalist groups not on cease-fire and opposed to the 1998 peace agreement remains serious. The aforementioned October 2015 review of paramilitary groups maintained that the most significant terrorist threat in Northern Ireland was posed not by the groups evaluated in that report but rather by dissident republicans. The review described dissident loyalist groups as posing another, albeit "smaller," threat. Some loyalists are heavily engaged in a wide range of serious crimes. At the same time, experts note that dissident groups do not have the same capacity to mount a sustained terror campaign as the IRA did between the 1970s and the 1990s. Most of the dissident republican groups are small in comparison to the IRA during the height of the Troubles. Moreover, the actual number of individuals actively involved has not grown significantly in recent years, although such dissident republican groups have proliferated. UK security services assert that there are currently four main dissident republican groups: the Continuity IRA (CIRA); Óglaigh na hÉireann (ÓNH); Arm na Poblachta (ANP), and the New IRA (which reportedly was formed in 2012 and brought together the Real IRA, the Republican Action Against Drugs, or RAAD, and a number of independent republicans). These groups have sought to target police officers, prison officers, and other members of the security services in particular. Between 2009 and 2017, dissident republicans were responsible for the deaths of two PSNI officers, two British soldiers, and two prison officers. In January 2018, ÓNH declared itself on cease-fire. However, the other groups remain active, and authorities warn that the threat posed by the New IRA in particular is severe. The New IRA has carried out about 40 attacks since 2012. Police believe the New IRA may have been responsible for the January 2019 car bomb that exploded in Londonderry (or Derry). Some experts are concerned that dissident republicans could seek to step up attacks in an effort to exploit the divisions due to Brexit. Economic Issues Many assert that one of the best ways to ensure a lasting peace in Northern Ireland and deny dissident groups new recruits is to promote continued economic development and equal opportunity for Catholics and Protestants. Northern Ireland's economy has made significant advances since the 1990s. Between 1997 and 2007, Northern Ireland's economy grew an average of 5.6% annually (marginally above the UK average of 5.4%). Unemployment decreased from over 17% in the late 1980s to 4.3% by 2007. The 2008-2009 global recession, however, significantly affected Northern Ireland. Economic recovery has been slow in Northern Ireland, although it appears to have gained momentum since 2017. In the four quarters ending September 2018, Northern Ireland's economic activity grew by approximately 2.1%, as compared to 1.5% growth for the UK overall. Unemployment in Northern Ireland is currently 3.8%, lower than the UK average (4.0%), and that in the Republic of Ireland (5.3%) and the EU (6.7%). Income earned and living standards in Northern Ireland remain below the UK average. Of the UK's 12 economic regions, Northern Ireland had the third-lowest gross value added per capita in 2017 (£21,172), considerably below the UK's average (£27,555). Northern Ireland also has both a high rate of economic inactivity (27%) and a high proportion of working-age individuals with no qualifications. Studies indicate that the historically poorest areas in Northern Ireland (many of which bore the brunt of the Troubles) remain so and that many of the areas considered to be the most deprived are predominantly Catholic. At the same time, Northern Ireland has made strides in promoting equality in its workforce. The gap in economic activity rates between Protestants and Catholics has shrunk considerably since 1992 (when there was a 10 percentage point difference) and has largely converged in recent years (in 2017, the economic activity rate was 70% for Protestants and 67% for Catholics). In addition, the percentage point gap in unemployment rates between the two communities has decreased from 9% in 1992 to 0% in 2017. To improve Northern Ireland's economic recovery and strengthen its long-term performance, Northern Ireland leaders are seeking to promote export-led growth, decrease Northern Ireland's economic dependency on the public sector by growing the private sector, and attract more foreign direct investment. Reducing Northern Ireland's economic dependency on the public sector (which accounts for about 70% of the region's GDP and employs roughly 30% of its workforce) and devolving power over corporation tax from London to Belfast to help increase foreign investment were key issues addressed in the cross-party negotiations in both 2014 and 2015. In 2015, the UK passed legislation to permit the devolution of corporation tax-setting power to the Northern Ireland Assembly (subject to certain financial conditions). The Fresh Start Agreement set April 2018 as the target date for introducing a devolved corporate tax rate of 12.5% in Northern Ireland (the same rate as in the Republic of Ireland). In the absence of devolved government, however, reducing Northern Ireland's corporate tax rate is on hold. Possible Implications of Brexit55 The UK is scheduled to exit the EU on March 29, 2019. Many officials and analysts are concerned about Brexit's possible implications for Northern Ireland's peace process, economy, and, in the longer term, constitutional status. At the time of the 1998 Good Friday Agreement, the EU membership of both the United Kingdom and the Republic of Ireland was viewed as essential to underpinning the peace process by providing a common European identity for both unionists and nationalists. In the years since, as security checkpoints were removed in accordance with the peace agreement, and because both the UK and Ireland belonged to the EU's single market and customs union, the circuitous 300-mile land border between Northern Ireland and Ireland effectively disappeared. This served as an important political symbol on both sides of the sectarian divide and helped produce a dynamic cross-border economy. Preventing a "hard" land border (with customs checks and physical infrastructure) on the island of Ireland has been a key goal, as well as a major stumbling block, in negotiating and finalizing the UK's withdrawal agreement with the EU. The Irish Border, the Peace Process, and Status Issues Many on both sides of Northern Ireland's sectarian divide have expressed concerns that Brexit could lead to a return of a hard border with the Republic of Ireland and destabilize the fragile peace in Northern Ireland, in part because it could pose a considerable security risk. During the Troubles, the border regions were considered "bandit country," with smugglers and gunrunners, and checkpoints were frequently the site of sectarian conflict, especially between British soldiers and the IRA. PSNI Police Chief George Hamilton warns that if physical border posts were reinstated as a result of Brexit, they would be seen as "fair game" by violent dissident republicans opposed to the peace process, endangering the lives of police and customs officers. Such renewed violence not only would threaten the security and stability of the border regions but also could put the entire peace process at risk. In addition, establishing checkpoints would pose logistical difficulties given that estimates suggest there are upward of 275 crossing points along the Northern Ireland-Ireland border. UK, Irish, and EU leaders have asserted repeatedly that they do not want a hard border and have sought to prevent such a possibility. Resolving the border issue, however, has presented one of the most difficult challenges in UK-EU negotiations on Brexit. Analysts contend that ensuring an open border has been complicated by the UK government's pursuit of a largely "hard Brexit" that would keep the UK outside of the EU's single market and customs union. In December 2017, the UK and the EU reached an agreement in principle on main aspects of three priority issues in the withdrawal negotiations (citizens' rights, financial settlement, and Ireland/Northern Ireland). Among other measures related to Northern Ireland, the UK pledged to uphold the Good Friday Agreement, avoid a hard border (and any physical infrastructure), and protect North-South cooperation on the island of Ireland. Crucially, the UK also committed to the so-called backstop—a mechanism designed to guarantee that the border would remain invisible under all circumstances. Finding agreement on precisely how this backstop would function, however, did not prove easy for UK and EU negotiators. In November 2018, the UK and the EU concluded a draft withdrawal agreement (outlining the terms of the "divorce") and a draft political declaration (setting out the broad contours of the future UK-EU relationship). The withdrawal agreement contains a 21-month transition period (in which the UK would cease to be an EU member but would continue to apply EU rules while negotiations continue on the details of the UK's future political and economic relationship with the EU). The backstop arrangement ultimately reached in the withdrawal agreement essentially would keep all of the UK in a customs union with the EU (with areas of deeper regulatory alignment between Northern Ireland and the EU) pending agreement on a more preferable solution in forthcoming negotiations on the future UK-EU relationship. Various elements of the withdrawal agreement have faced opposition in the UK Parliament, but the backstop has emerged as the primary sticking point. Many critics argued that the backstop, if triggered, would tie the UK to an EU customs union indefinitely, prohibit the UK from concluding its own free trade deals with other countries, and leave the UK in the position of having to accept EU rules without having a say in EU decisionmaking. The DUP warned that the backstop would create regulatory divergence between Northern Ireland and the rest of the UK and thus would threaten the constitutional integrity of the United Kingdom. UK officials maintain that it will never be necessary to implement the backstop. On January 15, 2019, the UK Parliament decisively rejected the withdrawal agreement by a vote of 432 to 202. This has intensified fears about a disorderly "no deal" scenario in which the UK would "crash out" of the EU at the end of March without a transition period and settled arrangements in place. Prime Minister May has approached the EU about devising "alternative arrangements" to the backstop or modifying it in an effort to secure the UK Parliament's approval. UK officials have proposed possibly imposing a time limit on the backstop or a mechanism by which the UK could withdraw from the backstop. The EU insists that the backstop and the withdrawal agreement are not open for renegotiation, and press reports suggest that the UK government has been unsuccessful to date in gaining any EU concessions. Prime Minister May intends to put the withdrawal agreement to another vote in the UK Parliament on March 12, 2019. If Parliament again fails to approve the withdrawal agreement, it is then expected to consider whether to back "no deal" or direct the government to seek to extend the March 29 deadline. Extending the deadline for the UK's departure from the EU would require the unanimous agreement of the other 27 EU member states. Although the UK, the EU, and Ireland have escalated contingency planning for a "no deal" Brexit, the Irish government continues to resist making any plans for physical infrastructure on the Irish border. The Irish government maintains that there will be no hardening of the Irish border under any circumstances and insists that an arrangement similar to the backstop would have to be negotiated even if there is no approved UK withdrawal agreement. Irish Prime Minister Varadkar admits that a "no deal" scenario would entail "difficult discussions" with the EU and the UK. Some analysts assert, however, that in the event of a "no deal" Brexit, protecting the integrity of the single market will be an EU priority, which will necessitate customs checks and some sort of border infrastructure. Some "Brexiteers"—or those in the UK who strongly favor a "hard Brexit"—contend that the border issue is being exploited by the EU and those in the UK who would prefer a "soft Brexit" (in which the UK remains inside the EU single market and/or customs union). Some Brexiteers have ruminated whether the Good Friday Agreement has outlived its usefulness, especially in light of the stalemate in reestablishing Northern Ireland's devolved government. The Prime Minister's office responded that the UK government remains "fully committed" to the Good Friday Agreement. Brexit also has revived questions about Northern Ireland's constitutional status within the UK in the longer term. Sinn Fein argues that "Brexit changes everything" and could generate greater support for a united Ireland. At the same time, most experts believe that the conditions required to hold a "border poll" on Northern Ireland's constitutional status do not currently exist. Opinion polls indicate that a majority of people in Northern Ireland continue to support Northern Ireland's position within the UK, although some surveys suggest that a "damaging Brexit" could increase support for a united Ireland. According to one recent press report, concerns appear to be growing within the UK government that a "no deal" Brexit could change the dynamics and lead to a border poll on Irish unification. Economic Concerns Many experts contend that Brexit could have serious negative economic consequences for Northern Ireland. According to a UK parliamentary report, Northern Ireland depends more on the EU market (and especially that of the Republic of Ireland) for its exports than does the rest of the UK. Approximately 52% of Northern Ireland exports go to the EU, including 38% to the Republic of Ireland. UK government statistics indicate that Ireland is the top external export and import partner for Northern Ireland. Analysts worry in particular that a "hard Brexit" outside of the EU's single market and customs union could jeopardize Northern Ireland's extensive cross-border trade with Ireland, as well as integrated labor markets and industries that operate on an all-island basis. Some analysts note that access to the EU single market has been one reason for Northern Ireland's success in attracting foreign direct investment, and they suggest that Brexit could deter future investment. Post-Brexit, Northern Ireland also stands to lose EU regional funding (roughly $1.3 billion between 2014 and 2020) and agricultural aid (direct EU farm subsidies to Northern Ireland are nearly $375 million annually). UK officials assert that the government is determined to safeguard Northern Ireland's interests and "make a success of Brexit" for Northern Ireland. UK and DUP leaders maintain that the rest of the UK is more important economically, historically, and culturally to Northern Ireland than the EU. They note, for example, that the UK is the most significant market for businesses in Northern Ireland, with sales to other parts of the UK worth one and a third times the value of all Northern Ireland exports and nearly four times the value of exports to Ireland (in 2016). UK and DUP officials insist that Northern Ireland will continue to trade with the EU (including Ireland) and that Brexit offers new economic opportunities for Northern Ireland outside the EU. U.S. Policy Successive U.S. Administrations have viewed the Good Friday Agreement as the best framework for a lasting peace in Northern Ireland. The Clinton Administration was instrumental in helping the parties forge the agreement, and the George W. Bush Administration strongly backed its full implementation. U.S. officials welcomed the end to the IRA's armed campaign in 2005 and the restoration of the devolved government in 2007. The Obama Administration remained engaged in the peace process. In October 2009, then-U.S. Secretary of State Hillary Clinton visited Northern Ireland, addressed the Assembly, and urged Northern Ireland's leaders to reach an agreement on devolving policing and justice powers. In February 2010, President Obama welcomed the resulting Hillsborough Agreement. In June 2013, President Obama visited Northern Ireland in the context of a G8 summit meeting and noted that the United States would always "stand by" Northern Ireland. The Obama Administration welcomed the conclusion of both the December 2014 Stormont House Agreement and the November 2015 Fresh Start Agreement. Like its predecessors, the Trump Administration has offered support and encouragement to Northern Ireland. In March 2017, Vice President Mike Pence noted that, "the advance of peace and prosperity in Northern Ireland is one of the great success stories of the past 20 years" and paid tribute to Senator Mitchell and his role in the peace process. In November 2017, the State Department spokesperson expressed regret at the impasse in discussions to restore Northern Ireland's power-sharing institutions, urged continued dialogue, and asserted that the United States remained "ready to support efforts that ensure full implementation of the Good Friday Agreement and subsequent follow-on cross-party agreements." Many Members of Congress have actively supported the peace process for decades. Encouraged by progress on police reforms, several Members prompted the Bush Administration in December 2001 to lift a ban on contacts between the Federal Bureau of Investigation and the new PSNI. Congress had initiated this prohibition in 1999 because of the former RUC's human rights record. More recently, congressional hearings have focused on the peace process, policing reforms, human rights, and the status of public inquiries into several past murders in Northern Ireland in which collusion between the security forces and paramilitary groups is suspected; these murders have included the 1989 slaying of Belfast attorney Patrick Finucane and the 1997 killing of Raymond McCord, Jr. Some Members of Congress have urged the Trump Administration to name a special envoy for Northern Ireland to signal that the United States remains committed to the region, especially in light of the stalemate in reestablishing the devolved government. On the economic front, the United States is an important source of investment for Northern Ireland. According to one study, foreign direct investment by U.S.-based companies in Northern Ireland totaled £1.48 billion (nearly $2.1 billion) between 2003-2004 and 2015-2016 and was responsible for creating 13,875 jobs. Between 2009 and 2011, a special U.S. economic envoy to Northern Ireland worked to further economic ties between the United States and Northern Ireland and to underpin the peace process by promoting economic prosperity. International Fund for Ireland The United States has provided aid to the region through the International Fund for Ireland (IFI), which was created in 1986. Although the IFI was established by the British and Irish governments based on objectives in the Anglo-Irish Agreement of 1985, the IFI is an independent entity. The IFI supports economic regeneration and social development projects in areas most affected by the civil unrest in Northern Ireland and in the border areas of the Republic of Ireland; in doing so, it has also sought to foster contact, dialogue, and reconciliation between nationalists and unionists. The United States has contributed more than $540 million since the IFI's establishment, roughly half of total IFI funding. The EU, Canada, Australia, and New Zealand also have provided funding for the IFI. During the 1980s and 1990s, U.S. appropriations for the IFI averaged around $23 million annually; in the 2000s, U.S. appropriations averaged $18 million each year. According to the fund, the vast majority of projects that it has supported with seed funding have been located in disadvantaged areas that have suffered from high unemployment, a lack of facilities, and little private sector investment. In its first two decades, IFI projects in Northern Ireland and the southern border counties focused on economic and business development and sectors such as tourism, agriculture, and technology. In 2006, amid an improved economic situation, the IFI released a five-year "Sharing this Space" program, in which the IFI announced that it would began shifting its strategic emphasis away from economic development and toward projects aimed at promoting community reconciliation and overcoming past divisions. Successive U.S. Administrations and many Members of Congress have backed the IFI as a means to promote economic development and encourage divided communities to work together. Support for paramilitary groups in Northern Ireland has traditionally been strongest in communities with high levels of unemployment and economic deprivation. Thus, many observers have long viewed the creation of jobs and economic opportunity as a key part of resolving the conflict in Northern Ireland and have supported the IFI as part of the peace process. Many U.S. officials and Members of Congress also encouraged the IFI to place greater focus on reconciliation activities, and were pleased with the IFI's decision to do so in 2006. However, critics have questioned the IFI's effectiveness, viewing some IFI projects as largely wasteful and unlikely to bridge community divides in any significant way. Others suggest that the IFI was never intended to continue in perpetuity. Some also argue that it is time to move the U.S. relationship with Ireland and Northern Ireland onto a more mature and equal footing, and that U.S. development assistance undermines this goal. Between FY2006 and FY2011, neither the Bush nor the Obama Administration requested funding for the IFI in the President's annual budget request. Administration officials maintained that the lack of a funding request for the IFI did not signal a decreased U.S. commitment to Northern Ireland; rather, they asserted that the IFI was expected to begin winding down as an organization. The 2006 "Sharing this Space" program was intended as the "last phase" of the IFI, and in its 2009 Annual Report, the IFI stated that it would no longer be seeking contributions from its donors. Despite the lack of an Administration request, Congress continued to appropriate funding for the IFI between FY2006 and FY2010 ($17 million for FY2010), viewing these contributions as an important and tangible sign of the ongoing U.S. commitment to the peace process. In FY2011, however, amid the U.S. economic and budget crisis, some Members of Congress began to call for an end to U.S. funding for the IFI as part of a raft of budget-cutting measures. Many asserted that U.S. contributions to the IFI were no longer necessary given Ireland and Northern Ireland's improved political and economic situation (relative to what it was in the 1980s). The sixth FY2011 continuing resolution ( P.L. 112-6 ) did not specify an allocation for the IFI, nor did the final FY2011 continuing resolution ( P.L. 112-10 , the Department of Defense and Full-Year Continuing Appropriation Act of 2011). Other Members of Congress continued to support U.S. funding for the IFI, noting the financial woes in Ireland and Northern Ireland stemming from the 2008-2009 global recession and increasing concerns about the possibility of dissident violence, and ongoing sectarian tensions in the region. They pointed out that in light of these evolved circumstances, the IFI itself reversed course, announcing it would continue functioning for the near term. Press reports indicated that the British and Irish governments also supported the IFI's continuation, as did Northern Ireland's Executive. Subsequent to the FY2011 budget deliberations, the Obama Administration allocated $2.5 million from FY2011 Economic Support Fund (ESF) resources to the IFI in the form of a grant for specific IFI activities to support peace and security in Ireland and Northern Ireland. For FY2012, the Obama Administration requested $2.5 million in ESF funding for the IFI in its annual budget request, asserting that "a permanent political settlement in Northern Ireland remains a priority foreign policy goal of the United States" and that "cross-community relations continue to be hampered by a lack of economic development and high unemployment." The FY2012 budget request also noted an increase in sectarian-driven hate crimes and paramilitary-style shootings and assaults in Northern Ireland, and that U.S. assistance would seek to counter these negative trends "by addressing the root causes of violence and intolerance." For similar reasons, in its FY2013 and FY2014 budget requests the Administration proposed $2.5 million for the IFI, as part of its ESF request for the Europe and Eurasia region aimed at promoting peace and reconciliation programs. The Obama Administration did not request funding for the IFI in its subsequent annual budget requests. According to the U.S. Agency for International Development (USAID), U.S. funding provided between FY2011 and FY2014 enabled the United States to meet an existing $7.5 million commitment to the IFI's Peace Impact Program, targeting those communities in Ireland and Northern Ireland most prone to dissident recruitment and activity. In June 2016, the Obama Administration allocated $750,000 from FY2015 ESF resources to the IFI in the form of a grant to support activities aimed at promoting a sustained peace in Northern Ireland and the border counties of Ireland; examples of programs to be supported included cross-community workshops on violence prevention and job training for unemployed youth in communities with high rates of joblessness and sectarian violence. For similar purposes as described for FY2015, the Obama Administration allocated $750,000 from FY2016 ESF funds to the IFI in the form of a grant in December 2016, and the Trump Administration allocated $750,000 from FY2017 ESF funds to the IFI in August 2018, also in the form of a grant. The Trump Administration did not request funding for the IFI in its FY2018 or FY2019 budget requests.

Between 1969 and 1999, almost 3,500 people died as a result of political violence in Northern Ireland, which is one of four component "nations" of the United Kingdom (UK). The conflict, often referred to as "the Troubles," has its origins in the 1921 division of Ireland and has reflected a struggle between different national, cultural, and religious identities. Protestants in Northern Ireland (48%) largely define themselves as British and support remaining part of the UK (unionists). Most Catholics in Northern Ireland (45%) consider themselves Irish, and many desire a united Ireland (nationalists). On April 10, 1998, the UK and Irish governments and key Northern Ireland political parties reached a negotiated political settlement. The resulting Good Friday Agreement (also known as the Belfast Agreement) recognized the "consent principle" (i.e., a change in Northern Ireland's status can come about only with the consent of a majority of its people). It called for devolved government—the transfer of power from London to Belfast—with a Northern Ireland Assembly and Executive Committee in which unionist and nationalist parties would share power; it also contained provisions on decommissioning (disarmament) of paramilitary weapons, policing, human rights, UK security normalization (demilitarization), and the status of prisoners. Despite a much-improved security situation since 1998, full implementation of the peace accord has been challenging. For many years, decommissioning and police reforms were key sticking points that generated instability in the devolved government. In 2007, however, the hard-line Democratic Unionist Party (DUP) and Sinn Fein, the associated political party of the Irish Republican Army (IRA), reached a landmark power-sharing deal. Although many analysts view implementation of the most important aspects of the Good Friday Agreement as having been completed, tensions remain in Northern Ireland and distrust persists between the unionist and nationalist communities and their respective political parties. In January 2017, the devolved government led by the DUP and Sinn Fein collapsed, prompting snap Assembly elections in March 2017. Amid a renewable energy scandal involving DUP leader Arlene Foster and unease in much of Northern Ireland about "Brexit"—the UK's expected exit from the European Union (EU)—Sinn Fein made significant electoral gains. Negotiations to form a new power-sharing government have been unsuccessful to date. Northern Ireland continues to face a number of broader challenges in its search for peace and reconciliation. These challenges include reducing sectarian strife, fully grappling with Northern Ireland's legacy of violence (often termed dealing with the past); addressing lingering concerns about paramilitary and dissident activity; and promoting further economic development. Brexit also may have significant political and economic repercussions for Northern Ireland. The future of the border between Northern Ireland and the Republic of Ireland was a central issue in the UK's withdrawal negotiations with the EU and has posed a key stumbling block to approving the withdrawal agreement in the UK Parliament. Brexit also has renewed questions about Northern Ireland's status within the UK in the longer term. Successive U.S. Administrations and many Members of Congress have actively supported the Northern Ireland peace process. For decades, the United States provided development aid through the International Fund for Ireland (IFI). In recent years, congressional hearings have focused on the peace process, police reforms, and the status of public inquiries into several murders in Northern Ireland in which collusion between the security forces and paramilitary groups is suspected. Such issues may continue to be of interest in the 116th Congress.

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Introduction The issue of executive discretion has been at the center of constitutional debates in liberal democracies throughout the twentieth century. How to balance a commitment to the rule of law with the exigencies of modern political and economic crises has engaged legislators and scholars in the United States and around the world. The United States Constitution is silent on questions of emergency power. As such, over the past two centuries, Congress and the President have answered those questions in varied and often ad hoc ways. In the eighteenth and nineteenth centuries, the answer was often for the President to act without congressional approval in a time of crisis, knowingly risking impeachment and personal civil liability. Congress claimed primacy over emergency action and would decide subsequently to either ratify the President's actions or indemnify the President for any civil liability. By the twentieth century, a new pattern had begun to emerge. Instead of retroactively judging an executive's extraordinary actions in a time of emergency, Congress created statutory bases permitting the President to declare a state of emergency and make use of extraordinary delegated powers. The expanding delegation of emergency powers to the executive and the increase of governing via emergency power by the executive has been a common trajectory among twentieth-century liberal democracies. As innovation has quickened the pace of social change and global crises, some legislatures have felt compelled to delegate to the executive, who traditional political theorists assumed could operate with greater "dispatch" than deliberate, future-oriented legislatures. Whether such actions subvert the rule of law or are a standard feature of healthy modern constitutional orders has been a subject of extensive debate. The International Emergency Economic Powers Act (IEEPA) is one such example of a twentieth-century delegation of emergency authority. One of 123 emergency statutes under the umbrella of the National Emergencies Act (NEA), IEEPA grants the President extensive power to regulate a variety of economic transactions during a state of emergency. Congress enacted IEEPA in 1977 to rein in the expansive emergency economic powers that it had been delegated to the President under the Trading with the Enemy Act (TWEA). Nevertheless, some scholars argue that judicial and legislative actions subsequent to IEEPA's enactment have made it, like TWEA, a source of expansive and unchecked executive authority in the economic realm. Others, however, argue that Presidents often use IEEPA to implement the will of Congress either as directed by law or as encouraged by congressional activity. Until recently, there has been little congressional discussion of modifying either IEEPA or its umbrella statute, the NEA. Recent presidential actions, however, have drawn attention to presidential emergency powers under the NEA of which IEEPA is the most frequently used. Should Congress consider changing IEEPA, there are two issues that Congress may wish to address. The first pertains to how Congress has delegated its authority under IEEPA and its umbrella statute, the NEA. The second pertains to choices made in the Export Control Reform Act of 2018. Origins The First World War and the Trading with the Enemy Act (TWEA) The First World War (1914-1918) saw an unprecedented degree of economic mobilization. The executive departments of European governments began to regulate their economies with or without the support of their legislatures. The United States, in contrast, was in a privileged position relative to its allies in Europe. Separated by an ocean from Germany and Austria-Hungary, the United States was never under substantial threat of invasion. Rather than relying on the inherent powers of the presidency, or acting unconstitutionally and waiting for congressional ratification, President Wilson sought explicit pre-authorization for expansive new powers to meet the global crisis. Between 1916 and the end of 1917, Congress passed 22 statutes empowering the President to take control of private property for public use during the war. These statutes gave the President broad authority to control railroads, shipyards, cars, telegraph and telephone systems, water systems, and many other sectors of the American economy. TWEA was one of those 22 statutes. It granted to the executive an extraordinary degree of control over international trade, investment, migration, and communications between the United States and its enemies. TWEA defined "enemy" broadly and included "any individual, partnership, or other body of individuals [including corporations], of any nationality, resident within the territory ... of any nation with which the United States is at war, or resident outside of the United States and doing business within such a territory ...." The first four sections of the act granted the President extensive powers to limit trading or communication with, or transporting enemies (or their allies) of the United States. These sections also empowered the President to censor foreign communications and place extensive restrictions on enemy insurance or reinsurance companies. It was Section 5(b) of TWEA, however, that would form one of the central bases of presidential emergency economic power in the twentieth century. Section 5(b), as originally enacted, states: That the President may investigate, regulate, or prohibit, under such rules and regulations as he may prescribe, by means of licenses or otherwise, any transactions in foreign exchange, export or earmarkings of gold or silver coin or bullion or currency, transfers of credit in any form (other than credits relating solely to transactions to be executed wholly within the United States), and transfers of evidences of indebtedness or of the ownership of property between the United States and any foreign country, whether enemy, ally of enemy or otherwise, or between residents of one or more foreign countries, by any person within the United States; and he may require any such person engaged in any such transaction to furnish, under oath, complete information relative thereto, including the production of any books of account, contracts, letters or other papers, in connection therewith in the custody or control of such person, either before or after such transaction is completed. The statute gave the President exceptional control over private international economic transactions in times of war. While Congress terminated many of the war powers in 1921, TWEA was specifically exempted because the U.S. Government had yet to dispose of a large amount of alien property in its custody. The Expansion of TWEA The Great Depression, a massive global economic downturn that began in 1929, presented a challenge to liberal democracies in Europe and the Americas. To deal with the complexities presented by the crisis, nearly all such democracies began delegating discretionary authority to their executives to a degree that had only previously been done in times of war. The U.S. Congress responded, in part, by dramatically expanding the scope of TWEA, delegating to the President the power to declare states of emergency in peacetime and assume expansive domestic economic powers. Such a delegation was made possible by analogizing economic crises to war. In public speeches about the crisis, President Franklin D. Roosevelt asserted that the Depression was to be "attacked," "fought against," "mobilized for," and "combatted" by "great arm[ies] of people." The economic mobilization of the First World War had blurred the lines between the executive's military and economic powers. As the Depression was likened to "armed strife" and declared to be "an emergency more serious than war" by a Justice of the Supreme Court, it became routine to use emergency economic legislation enacted in wartime as the basis for extraordinary economic authority in peacetime. As the Depression entered its third year, the newly-elected President Roosevelt sought from Congress "broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe." In his first act as President, Roosevelt proclaimed a bank holiday, suspending all transactions at all banking institutions located in the United States and its territories for four days. In his proclamation, Roosevelt claimed to have authority to declare the holiday under Section 5(b) of TWEA. However, because the United States was not in a state of war and the suspended transactions were primarily domestic, the President's authority to issue such an order was dubious. Despite the tenuous legality, Congress ratified Roosevelt's actions by passing the Emergency Banking Relief Act three days after his proclamation. The act amended Section 5(b) of TWEA to read: During time of war or during any other period of national emergency declared by the President , the President may, through any agency that he may designate, or otherwise, investigate, regulate, or prohibit.... This amendment gave the President the authority to declare that a national emergency existed and assume extensive controls over the national economy previously only available in times of war. By 1934, Roosevelt had used these extensive new powers to regulate "Every transaction in foreign exchange, transfer of credit between any banking institution within the United States and any banking institution outside of the United States." With America's entry into the Second World War in 1941, Congress again amended TWEA to grant the President extensive powers over the disposition of private property, adding the so-called "vesting" power, which authorized the permanent seizure of property. Now in its most expansive form, TWEA authorized the President to declare a national emergency and, in so doing, to regulate foreign exchange, domestic banking, possession of precious metals, and property in which any foreign country or foreign national had an interest. The Second World War ended in 1945. Following the conflict, the allied powers constructed institutions and signed agreements designed to keep the peace and to liberalize world trade. However, the United States did not immediately resume a peacetime posture with respect to emergency powers. Instead, the onset of the Cold War rationalized the continued use of TWEA and other emergency powers outside the context of a declared war. Over the next several decades, Presidents declared four national emergencies under Section 5(b) of TWEA and assumed expansive authority over economic transactions in the postwar period. During the Cold War, economic sanctions became an increasingly popular foreign policy and national security tool, and TWEA was a prominent source of presidential authority to use the tool. In 1950, President Harry S. Truman declared a national emergency, citing TWEA, to impose economic sanctions on North Korea and China. Subsequent Presidents referenced that national emergency as authority for imposing sanctions on Vietnam, Cuba, and Cambodia. Truman likewise used Section 5(b) of TWEA to maintain regulations on foreign exchange, transfers of credit, and the export of coin and currency that had been in place since the early 1930s. Presidents Richard M. Nixon and Gerald R. Ford invoked TWEA to continue export controls established under the Export Administration Act when the act expired. TWEA was also a prominent instrument of postwar presidential monetary policy. Presidents Dwight D. Eisenhower and John F. Kennedy used TWEA and the national emergency declared by President Roosevelt in 1933 to maintain and modify regulations controlling the hoarding and export of gold. In 1968, President Lyndon B. Johnson explicitly used Truman's 1950 declaration of emergency under Section 5(b) of TWEA to limit direct foreign investment by U.S. companies in an effort to strengthen the balance of payments position of the United States after the devaluation of the pound sterling by the United Kingdom. In 1971, after President Nixon ended the convertibility of the U.S. dollar to gold, effectively ending the postwar monetary order, he made use of Section 5(b) of TWEA to declare a state of emergency and place a 10% ad valorem supplemental duty on all dutiable goods entering the United States. The reliance by the executive on the powers granted by Section 5(b) of TWEA meant that postwar sanctions regimes and significant parts of U.S. international monetary policy relied on continued states of emergency for their operation. Pushing Back Against Executive Discretion By the mid-1970s, in the wake of U.S. military involvement in Vietnam, revelations of domestic spying, assassinations of foreign political leaders, the Watergate break-in, and other related abuses of power, Congress increasingly focused on checking the executive branch. The Senate formed a bipartisan special committee chaired by Senators Frank Church and Charles Mathias to reevaluate the expansive delegations of emergency authority to the President. The special committee issued a report surveying the President's emergency powers in which it asserted that the United States had technically "been in a state of national emergency since March 9, 1933" and that there were four distinct declarations of national emergency in effect. The report also noted that the United States had "on the books at least 470 significant emergency statutes without time limitations delegating to the Executive extensive discretionary powers, ordinarily exercised by the Legislature, which affect the lives of American citizens in a host of all-encompassing ways." In the course of its investigations, Senator Mathias, committee co-chair, noted, "A majority of the people of the United States have lived all of their lives under emergency government." Senator Church, the other co-chair, said the central question before the committee was "whether it [was] possible for a democratic government such as ours to exist under its present Constitution and system of three separate branches equal in power under a continued state of emergency." Among the more controversial statutes highlighted by the committee was TWEA. In 1977, during the House markup of a bill revising TWEA, Representative Jonathan Bingham, Chairperson of the House International Relations Committee's Subcommittee on Economic Policy, described TWEA as conferring "on the President what could have been dictatorial powers that he could have used without any restraint by Congress." According to the Department of Justice, TWEA granted the President four major groups of powers in a time of war or other national emergency: (a) Regulatory powers with respect to foreign exchange, banking transfers, coin, bullion, currency, and securities; (b) Regulatory powers with respect to "any property in which any foreign country or a national thereof has any interest"; (c) The power to vest "any property or interest of any foreign country or national thereof"; and (d) The powers to hold, use, administer, liquidate, sell, or otherwise deal with "such interest or property" in the interest of and for the benefit of the United States. The House report on the reform legislation called TWEA "essentially an unlimited grant of authority for the President to exercise, at his discretion, broad powers in both the domestic and international economic arena, without congressional review." The criticisms of TWEA centered on the following: (a) It required no consultation or reports to Congress with regard to the use of powers or the declaration of a national emergency. (b) It set no time limits on a state of emergency, no mechanism for congressional review, and no way for Congress to terminate it. (c) It stated no limits on the scope of TWEA's economic powers and the circumstances under which such authority could be used. (d) The actions taken under the authority of TWEA were rarely related to the circumstances in which the national emergency was declared. In testimony before the House Committee on International Relations, Professor Harold G. Maier summed up the development and the main criticisms of TWEA: Section 5(b)'s effect is no longer confined to "emergency situations" in the sense of existing imminent danger. The continuing retroactive approval, either explicit or implicit, by Congress of broad executive interpretations of the scope of powers which it confers has converted the section into a general grant of legislative authority to the President…" Enactment of the National Emergencies Act and the International Emergency Economic Powers Act Congress's reforms to emergency powers under TWEA came in two acts. First, Congress enacted the National Emergencies Act (NEA) in 1976. The NEA provided for the termination of all existing emergencies in 1978, except those making use of Section 5(b) of TWEA, and placed new restrictions on the manner of declaring and the duration of new states of emergency, including: Requiring the President to immediately transmit to Congress of the declaration of national emergency. Requiring a biannual review whereby "each House of Congress shall meet to consider a vote on a concurrent [now joint, see below] resolution to determine whether that emergency shall be terminated." Authorizing Congress to terminate the national emergency through a privileged concurrent [now joint] resolution. Second, Congress tackled the thornier question of TWEA. Because the authorities granted by TWEA were heavily entwined with postwar international monetary policy and the use of sanctions in U.S. foreign policy, unwinding it was a difficult undertaking. The exclusion of Section 5(b) reflected congressional interest in preserving existing regulations regarding foreign assets, foreign funds, and exports of strategic goods. Similarly, establishing a means to continue existing uses of TWEA reflected congressional interest in "improving future use rather than remedying past abuses." The subcommittee charged with reforming TWEA spent more than a year preparing reports, including the first complete legislative history of TWEA, a tome that ran nearly 700 pages. In the resulting legislation, Congress did three things. First, Congress amended TWEA so that it was, as originally intended, only applicable "during a time of war." Second, Congress expanded the Export Administration Act to include powers that previously were authorized by reference to Section 5(b) of TWEA. Finally, Congress wrote the International Emergency Economic Powers Act (IEEPA) to confer "upon the President a new set of authorities for use in time of national emergency which are both more limited in scope than those of section 5(b) and subject to procedural limitations, including those of the [NEA]." The Report of the House Committee on International Relations summed up the nature of an "emergency" in their "new approach" to international emergency economic powers: [G]iven the breadth of the authorities, and their availability at the President's discretion upon a declaration of a national emergency, their exercise should be subject to various substantive restrictions. The main one stems from a recognition that emergencies are by their nature rare and brief, and are not to be equated with normal ongoing problems. A national emergency should be declared and emergency authorities employed only with respect to a specific set of circumstances which constitute a real emergency, and for no other purpose. The emergency should be terminated in a timely manner when the factual state of emergency is over and not continued in effect for use in other circumstances. A state of national emergency should not be a normal state of affairs. IEEPA's Statute, its Use, and Judicial Interpretation IEEPA's Statute IEEPA, as currently amended, empowers the president to: (A) investigate, regulate, or prohibit: (i) any transactions in foreign exchange, (ii) transfers of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or national thereof, (iii) the importing or exporting of currencies or securities; and (B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States. (C) when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals, confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that he determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest, when, as, and upon the terms directed by the President, in such agency or person as the President may designate from time to time, and upon such terms and conditions as the President may prescribe, such interest or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes. These powers may be exercised "to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat." Presidents may invoke IEEPA under the procedures set forth in the NEA. When declaring a national emergency, the NEA requires that the President "immediately" transmit the proclamation declaring the emergency to Congress and publish it in the Federal Register . The President must also specify the provisions of law that he or she intends to use. In addition to the requirements of the NEA, IEEPA provides several further restrictions. Preliminarily, IEEPA requires that the President consult with Congress "in every possible instance" before exercising any of the authorities granted under IEEPA. Once the President declares a national emergency invoking IEEPA, he or she must immediately transmit a report to Congress specifying: (1) the circumstances which necessitate such exercise of authority; (2) why the President believes those circumstances constitute an unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States; (3) the authorities to be exercised and the actions to be taken in the exercise of those authorities to deal with those circumstances; (4) why the President believes such actions are necessary to deal with those circumstances; and (5) any foreign countries with respect to which such actions are to be taken and why such actions are to be taken with respect to those countries. The President subsequently is to report on the actions taken under the IEEPA at least once in every succeeding six-month interval that the authorities are exercised. As per the NEA, the emergency may be terminated by the President, by a privileged joint resolution of Congress, or automatically if the President does not publish in the Federal Register and transmit to Congress a notice stating that such emergency is to continue in effect after such anniversary. Amendments to IEEPA Congress has amended IEEPA eight times ( Table 1 ). Five of the eight amendments have altered civil and criminal penalties for violations of orders issued under the statute. Other amendments excluded certain informational materials and expanded IEEPA's scope following the terrorist attacks of September 11, 2001. Congress also amended the NEA in response to a ruling by the Supreme Court to require a joint rather than a concurrent resolution to terminate a national emergency. The Berman Amendment and Informational Materials As originally enacted, IEEPA protected the rights of U.S. persons to participate in the exchange of "any postal, telegraphic, telephonic, or other personal communication, which does not involve a transfer of anything of value" with a foreign person otherwise subject to sanctions. Amendments in 1988 and 1994 updated this list of protected rights to include the exchange of published information in a variety of formats. The act currently protects the exchange of "information or informational materials, including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds," provided such exchange is not otherwise controlled for national security or foreign policy reasons related to weapons proliferation or international terrorism. USA PATRIOT Act Amendments to IEEPA Unlike the Trading with the Enemy Act (TWEA), IEEPA did not allow the President to vest assets as originally acted. In 2001, at the request of George W. Bush Administration, Congress amended IEEPA as part of the USA PATRIOT Act to return to the President the authority to vest frozen assets, but only under certain circumstances: ... the President may ... when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals, confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that [the President] determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest, when, as, and upon the terms directed by the President, in such agency or person as the President may designate from time to time, and upon such terms and conditions as the President may prescribe, such interest or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes. Speaking about the efforts of intelligence and law enforcement agencies to identify and disrupt the flow of terrorist finances, Attorney General John Ashcroft told Congress: At present the President's powers are limited to freezing assets and blocking transactions with terrorist organizations. We need the capacity for more than a freeze. We must be able to seize. Doing business with terrorist organization must be a losing proposition. Terrorist financiers must pay a price for their support of terrorism, which kills innocent Americans. Consistent with the President's [issuance of E.O. 13224 ] and his statements [of September 24, 2001], our proposal gives law enforcement the ability to seize the terrorists' assets. Further, criminal liability is imposed on those who knowingly engage in financial transactions, money-laundering involving the proceeds of terrorist acts. The House Judiciary Committee report explaining the amendments described its purpose as follows: Section 203 of the International Emergency Economic Powers Act (50 U.S.C. § 1702) grants to the President the power to exercise certain authorities relating to commerce with foreign nations upon his determination that there exists an unusual and extraordinary threat to the United States. Under this authority, the President may, among other things, freeze certain foreign assets within the jurisdiction of the United States. A separate law, the Trading With the Enemy Act, authorizes the President to take title to enemy assets when Congress has declared war. Section 159 of this bill amends section 203 of the International Emergency Economic Powers Act to provide the President with authority similar to what he currently has under the Trading With the Enemy Act in circumstances where there has been an armed attack on the United States, or where Congress has enacted a law authorizing the President to use armed force against a foreign country, foreign organization, or foreign national. The proceeds of any foreign assets to which the President takes title under this authority must be placed in a segregated account can only be used in accordance with a statute authorizing the expenditure of such proceeds. Section 159 also makes a number of clarifying and technical changes to section 203 of the International Emergency Economic Powers Act, most of which will not change the way that provision currently is implemented. The government has apparently never employed the vesting power to seize Al Qaeda assets within the United States. Instead, the government has sought to confiscate them through forfeiture procedures. The first, and to date, apparently only, use of this power under IEEPA occurred on March 20, 2003. On that date, in Executive Order 13290, President George W. Bush ordered the blocked "property of the Government of Iraq and its agencies, instrumentalities, or controlled entities" to be vested "in the Department of the Treasury.... [to] be used to assist the Iraqi people and to assist in the reconstruction of Iraq." However, the President's order excluded from confiscation Iraq's diplomatic and consular property, as well as assets that had, prior to March 20, 2003, been ordered attached in satisfaction of judgments against Iraq rendered pursuant to the terrorist suit provision of the Foreign Sovereign Immunities Act and § 201 of the Terrorism Risk Insurance Act (which reportedly totaled about $300 million) . A subsequent executive order blocked the property of former Iraqi officials and their families, vesting title of such blocked funds in the Department of the Treasury for transfer to the Development Fund for Iraq (DFI) to be "used to meet the humanitarian needs of the Iraqi people, for the economic reconstruction and repair of Iraq's infrastructure, for the continued disarmament of Iraq, for the cost of Iraqi civilian administration, and for other purposes benefitting of the Iraqi people." The DFI was established by UN Security Council Resolution 1483, which required member states to freeze all assets of the former Iraqi government and of Saddam Hussein, senior officials of his regime and their family members, and transfer such assets to the DFI, which was then administered by the United States. Most of the vested assets were used by the Coalition Provision Authority (CPA) for reconstruction projects and ministry operations. The USA PATRIOT Act made three other amendments to Section 203 of IEEPA. After the power to investigate, it added the power to block assets during the pendency of an investigation. It clarified that the type of interest in property subject to IEEPA is an "interest by any person, or with respect to any property, subject to the jurisdiction of the United States." It also added subsection (c), which provides: In any judicial review of a determination made under this section, if the determination was based on classified information (as defined in section 1(a) of the Classified Information Procedures Act) such information may be submitted to the reviewing court ex parte and in camera. This subsection does not confer or imply any right to judicial review. As described in the House Judiciary Committee report, these provisions were meant to clarify and codify existing practices. IEEPA Trends Like TWEA prior to its amendment in 1977, the President and Congress together have often turned to IEEPA to impose economic sanctions in furtherance of U.S. foreign policy and national security objectives. While initially enacted to rein in presidential emergency authority, presidential emergency use of IEEPA has expanded in scale, scope, and frequency since the statute's enactment. The House report on IEEPA stated, "emergencies are by their nature rare and brief, and are not to be equated with normal, ongoing problems." National emergencies invoking IEEPA, however, have increased in frequency and length since its enactment. Since 1977, Presidents have invoked IEEPA in 54 declarations of national emergency. On average, these emergencies last nearly a decade. Most emergencies have been geographically specific, targeting a specific country or government. However, since 1990, Presidents have declared non-geographically-specific emergencies in response to issues like weapons proliferation, global terrorism, and malicious cyber-enabled activities. The erosion of geographic limitations has been accompanied by an expansion in the nature of the targets of sanctions issued under IEEPA authority. Originally, IEEPA was used to target foreign governments; however, Presidents have increasingly targeted groups and individuals. While Presidents usually make use of IEEPA as an emergency power, Congress has also directed the use of IEEPA or expressed its approval of presidential emergency use in several statutes. Presidential Emergency Use91 IEEPA is the most frequently cited emergency authority when the President invokes NEA authorities to declare a national emergency. ( Figure 1 ). Rather than referencing the same set of emergencies, as had been the case with TWEA, IEEPA has required the President to declare a national emergency for each independent use. As a result, the number of national emergencies declared under the terms of the NEA has proliferated over the past four decades. Presidents declared only four national emergencies under the auspices of TWEA in the four decades prior to IEEPA's enactment. In contrast, Presidents have invoked IEEPA in 54 of the 61 declarations of national emergency issued under the National Emergen cies Act. As of March 1, 2019, there were 32 ongoing national emergencies; all but three involved IEEPA. Each year since 1990, Presidents have issued roughly 4.5 executive orders citing IEEPA and declared 1.5 new national emergencies citing IEEPA. ( Figure 2 ). On average, emergencies invoking IEEPA last nearly a decade. The longest emergency was also the first. President Jimmy Carter, in response to the Iranian hostage crisis of 1979, declared the first national emergency under the provisions of the National Emergencies Act and invoked IEEPA. Six successive Presidents have renewed that emergency annually for nearly forty years. As of March 1, 2019, that emergency is still in effect, largely to provide a legal basis for resolving matters of ownership of the Shah's disputed assets. That initial emergency aside, the length of emergencies invoking IEEPA has increased each decade. The average length of an emergency invoking IEEPA declared in the 1980s was four years. That average extended to 10 years for emergencies declared in the 1990s and 11 years for emergencies declared in the 2000s ( Figure 3 ). As such, the number of ongoing national emergencies has grown nearly continuously since the enactment of IEEPA and the NEA ( Figure 4 ). Between January 1, 1979, and January 1, 2019, there were on average 14 ongoing national emergencies each year, 13 of which invoked IEEPA. In most cases, the declared emergencies citing IEEPA have been geographically specific ( Figure 5 ). For example, in the first use of IEEPA, President Jimmy Carter issued an executive order that both declared a national emergency with respect to the "situation in Iran" and "blocked all property and interests in property of the Government of Iran [...]." Five months later, President Carter issued a second order dramatically expanding the scope of the first EO and effectively blocked the transfer of all goods, money, or credit destined for Iran by anyone subject to the jurisdiction of the United States. A further order expanded the coverage to block imports to the United States from Iran. Together, these orders touched upon virtually all economic contacts between any place or legal person subject to the jurisdiction of the United States and the territory and government of Iran. Many of the executive orders invoking IEEPA have followed this pattern of limiting the scope to a specific territory, government, or its nationals. Executive Order 12513, for example, prohibited "imports into the United States of goods and services of Nicaraguan origin" and "exports from the United States of goods to or destined for Nicaragua." The order likewise prohibited Nicaraguan air carriers and vessels of Nicaraguan registry from entering U.S. ports. Executive Order 12532 prohibited various transactions with the "Government of South Africa or to entities owned or controlled by that Government." While the majority (38) of national emergencies invoking IEEPA have been geographically specific, ten have lacked explicit geographic limitations. President George H.W. Bush declared the first geographically nonspecific emergency in response to the threat posed by the proliferation of chemical and biological weapons. Similarly, President George W. Bush declared a national emergency in response to the threat posed by "persons who commit, threaten to commit, or support terrorism." President Barack Obama declared emergencies to respond to the threats of "transnational criminal organizations" and "persons engaging in malicious cyber-enabled activities." Without explicit geographic limitations, these orders have included provisions that are global in scope. These geographically nonspecific emergencies have increased in frequency over the past 40 years—three of the ten have been declared since 2015. In addition to the erosion of geographic limitations, the stated motivations for declaring national emergencies have expanded in scope as well. Initially, stated rationales for declarations of national emergency citing IEEPA were short and often referenced either a specific geography or the specific actions of a government. Presidents found that circumstances like "the situation in Iran," or the "policies and actions of the Government of Nicaragua," constituted "unusual and extraordinary threat[s] to the national security and foreign policy of the United States" and would therefore declare a national emergency. The stated rationales have, however, expanded over time in both the length and subject matter. Presidents have increasingly declared national emergencies, in part, to respond to human and civil rights abuses, slavery, denial of religious freedom, political repression, public corruption, and the undermining of democratic processes. While the first reference to human rights violations as a rationale for a declaration of national emergency came in 1985, most of such references have come in the past twenty years. Table A-2 . Presidents have also expanded the nature of the targets of IEEPA sanctions. Originally, the targets of sanctions issued under IEEPA were foreign governments. The first use of IEEPA targeted "Iranian Government Property." Use of IEEPA quickly expanded to target geographically defined regions. Nevertheless, Presidents have also increasingly targeted groups, such as political parties or terrorist organizations, and individuals, such as supporters of terrorism or suspected narcotics traffickers. The first instances of orders directed at groups or persons were limited to foreign groups or persons. For example, in Executive Order 12978, President Bill Clinton targeted specific "foreign persons" and "persons determined [...] to be owned or controlled by, or to act for or on behalf of" such foreign persons. An excerpt is included below: Except to the extent provided in section 203(b) of IEEPA (50 U.S.C. 1702(b)) and in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date, I hereby order blocked all property and interests in property that are or hereafter come within the United States, or that are or hereafter come within the possession or control of United States persons, of: (a) the foreign persons listed in the Annex to this order; (b)  foreign persons determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State: (i) to play a significant role in international narcotics trafficking centered in Colombia; or (ii) materially to assist in, or provide financial or technological support for or goods or services in support of, the narcotics trafficking activities of persons designated in or pursuant to this order; and (c) persons determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, to be owned or controlled by, or to act for or on behalf of, persons designated in or pursuant to this order. However, in 2001, President George W. Bush issued Executive Order 13219 to target "persons who threaten international stabilization efforts in the Western Balkans." While the order was similar to that of Executive Order 12978, it removed the qualifier "foreign." As such, persons in the United States, including U.S. citizens, could be targets of the order. The following is an excerpt of the order: Except to the extent provided in section 203(b)(1), (3), and (4) of IEEPA (50 U.S.C. 1702(b)(1), (3), and (4)), the Trade Sanctions Reform and Export Enhancement Act of 2000 (title IX, P.L. 106-387 ), and in regulations, orders, directives, or licenses that may hereafter be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date, all property and interests in property of: (i)  the persons listed in the Annex to this order; and (ii)  persons designated by the Secretary of the Treasury, in consultation with the Secretary of State, because they are found: (A) to have committed, or to pose a significant risk of committing, acts of violence... Several subsequent invocations of IEEPA have similarly not been limited to foreign targets. In sum, presidential emergency use of IEEPA was directed at foreign states initially, with targets that were delimited by geography or nationality. Since the 1990s, however, Presidents have expanded the scope of their declarations to include individual persons, regardless of nationality or geographic location, who are engaged in specific activities. Congressional Nonemergency Use and Retroactive Approval While IEEPA is often categorized as an emergency statute, Congress has used IEEPA outside of the context of national emergencies. When Congress legislates sanctions, it often authorizes or directs the President to use IEEPA authorities to impose those sanctions. In the Nicaragua Human Rights and Anticorruption Act of 2018, the most recent example, Congress directed the President to exercise "all powers granted to the President [by IEEPA] to the extent necessary to block and prohibit [certain transactions]." Penalties for violations by a person of a measure imposed by the President under the Act would be, likewise, determined by reference to IEEPA. The trend has been long-term. Congress first directed the President to make use of IEEPA authorities in 1986 as part of an effort to assist Haiti in the recovery of assets illegally diverted by its former government. That statute provided: The President shall exercise the authorities granted by section 203 of the International Emergency Economic Powers Act [50 USC 1702] to assist the Government of Haiti in its efforts to recover, through legal proceedings, assets which the Government of Haiti alleges were stolen by former president-for-life Jean Claude Duvalier and other individuals associated with the Duvalier regime. This subsection shall be deemed to satisfy the requirements of section 202 of that Act. [50 USC 1701] In directing the President to use IEEPA, Congress waived the requirement that he declare a national emergency (and none was declared). Subsequent legislation has followed this general pattern, with slight variations in language and specificity. The following is an example of current legislative language that has appeared in several recent statutes: (a) IN GENERAL.—The President shall impose the sanctions described in subsection (b) with respect to— ... (b) SANCTIONS DESCRIBED.— (1) IN GENERAL.—The sanctions described in this subsection are the following: (A) ASSET BLOCKING.—The exercise of all powers granted to the President by the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) to the extent necessary to block and prohibit all transactions in all property and interests in property of a person determined by the President to be subject to subsection (a) if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person. ... (2) PENALTIES.—A person that violates, attempts to violate, conspires to violate, or causes a violation of paragraph (1)(A) or any regulation, license, or order issued to carry out paragraph (1)(A) shall be subject to the penalties set forth in subsections (b) and (c) of section 206 of the International Emergency Economic Powers Act (50 U.S.C. 1705) to the same extent as a person that commits an unlawful act described in subsection (a) of that section. Congress has also expressed, retroactively, its approval of unilateral presidential invocations of IEEPA in the context of a national emergency. In the Countering Iran's Destabilizing Activities Act of 2017, for example, Congress declared, "It is the sense of Congress that the Secretary of the Treasury and the Secretary of State should continue to implement Executive Order No. 13382." Presidents, however, have also used IEEPA to preempt or modify parallel congressional activity. On September 9, 1985, President Reagan, finding "that the policies and actions of the Government of South Africa constitute an unusual and extraordinary threat to the foreign policy and economy of the United States," declared a national emergency and limited transactions with South Africa. The President declared the emergency despite the fact that legislation limiting transactions with South Africa was quickly making its way through Congress. In remarks about the declaration, President Reagan stated that he had been opposed to the bill contemplated by Congress because unspecified provisions "would have harmed the very people [the U.S. was] trying to help." Nevertheless, members of the press at the time (and at least one scholar since) noted that the limitations imposed by the Executive Order and the provisions in legislation then winding its way through Congress were "substantially similar." Current Uses of IEEPA In general, IEEPA has served as an integral part of the postwar international sanctions regime. The President, either through a declaration of emergency or via statutory direction, has used IEEPA to limit economic transactions in support of administrative and congressional national security and foreign policy goals. Much of the action taken pursuant to IEEPA has involved blocking transactions and freezing assets. Once the President declares that a national emergency exists, he may use the authority in Section 203 of IEEPA (Grants of Authorities; 50 U.S.C. § 1702) to investigate, regulate, or prohibit foreign exchange transactions, transfers of credit, transfers of securities, payments, and may take specified actions relating to property in which a foreign country or person has interest—freezing assets, blocking property and interests in property, prohibiting U.S. persons from entering into transactions related to frozen assets and blocked property, and in some instances denying entry into the United States. Pursuant to Section 203, Presidents have prohibited transactions with and blocked property of those designated as engaging in malicious cyber-enabled activities, including "interfering with or undermining election processes or institutions" [Executive Order 13694 of April 1, 2015, as amended; 50 U.S.C. § 1701 note. See also Executive Order 13848 of September 12, 2018; 83 F.R. 46843.]; prohibited transactions with and blocked property of those designated as illicit narcotics traffickers including foreign drug kingpins; prohibited transactions with and blocked property of those designated as engaging in human rights abuses or significant corruption; prohibited transactions related to illicit trade in rough diamonds; prohibited transactions with and blocked property of those designated as Transnational Criminal Organizations; prohibited transactions with "those who disrupt the Middle East peace process;" prohibited transactions related to overflights with certain nations; instituted and maintained maritime restrictions; prohibited transactions related to weapons of mass destruction, in coordination with export controls authorized by the Arms Export Control Act and the Export Administration Act of 1979, and in furtherance of efforts to deter the weapons programs of specific countries (i.e., Iran, North Korea); prohibited transactions those designated as "persons who commit, threaten to commit, or support terrorism;" maintained the dual-use export control system at times when its then-underlying authority, the Export Administration Act authority had lapsed; blocked property of and transactions with those designated as engaged in cyber activities that compromise critical infrastructures including election processes or the private sector's trade secrets; blocked property of and prohibited transactions with those designated as responsible for serious human rights abuse or engaged in corruption; blocked certain property of and transactions with foreign nationals of specific countries those designated as engaged in activities that constitute an extraordinary threat. No President has used IEEPA to place tariffs on imported products from a specific country or on products imported to the United States in general. However, IEEPA's similarity to TWEA, coupled with its relatively frequent use to ban imports and exports, suggests that such an action could happen. In addition, no President has used IEEPA to enact a policy that was primarily domestic in effect. Some scholars argue, however, that the interconnectedness of the global economy means it would probably be permissible to use IEEPA to take an action that was primarily domestic in effect. Use of Assets Frozen under IEEPA The ultimate disposition of assets frozen under IEEPA may serve as an important part of the leverage economic sanctions provide to influence the behavior of foreign actors. The President and Congress have each at times determined the fate of blocked assets to further foreign policy goals. Presidential Use of Foreign Assets Frozen under IEEPA Presidents have used frozen assets as a bargaining tool during foreign policy crises and to bring a resolution to such crises, at times by unfreezing the assets, returning them to the sanctioned entity or channeling them to a follow-on government. The following are some examples of how Presidents have made use of blocked assets to resolve foreign policy issues. President Carter invoked authority under IEEPA to impose trade sanctions against Iran, freezing Iranian assets in the United States, in response to the hostage crisis in 1979. On January 19, 1981, the United States and Iran entered into a series of executive agreements brokered by Algeria under which the hostages were freed, a portion of the blocked assets ($5.1 billion) was used to repay outstanding U.S. bank loans to Iran, another part ($2.8 billion) was returned directly to Iran, another $1 billion was transferred into a security account in the Hague to pay other U.S. claims against Iran as arbitrated by the Iran-U.S. Claims Tribunal (IUSCT), and an additional $2 billion remained blocked pending further agreement with Iran or decision of the Tribunal. The United States also undertook to freeze the assets of the former Shah's estate along with those of the Shah's close relatives pending litigation in U.S. courts to ascertain Iran's right to their return. Iran's litigation was unsuccessful, and none of the contested assets were returned to Iran. Presidents have also been able to channel frozen assets to opposition governments in cases where the United States continued to recognize a previous government that had been removed by coup d'état or otherwise replaced as the legitimate government of a country. For example, after Panamanian President Eric Arturo Delvalle tried to dismiss de facto military ruler General Manuel Noriega from his post as head of the Panamanian Defense Forces, which resulted in Delvalle's own dismissal by the Panamanian Legislative Assembly, President Reagan recognized Delvalle as the legitimate head of government and instituted economic sanctions against the Noriega regime. The Department of State advised U.S. banks not to disburse funds to the Noriega regime, and Delvalle was able to obtain court orders permitting him access to the funds. President Reagan issued Executive Order 12635, which blocked all property and interests in payments of the government of Panama, and the Department of the Treasury issued regulations requiring companies who owed money to Panama to pay those funds into an escrow account established at the Federal Reserve Bank of New York, which also held payments owed by the United States for the operation of the Panama Canal Commission. Some of the funds in the escrow account were used to pay the operating expenses of the Delvalle government. After the U.S. invasion of Panama, President George H.W. Bush lifted economic sanctions and used some of the frozen funds to repay debts owed by Panama to foreign creditors, with remaining funds returned to the successor government. In a similar more recent case, the Trump Administration's recognition of Venezuelan opposition leader Juan Guaidó as Venezuela's interim president permitted Guaidó access to Venezuelan government assets held at the United States Federal Reserve and other insured United States financial institutions. President Barrack Obama initially froze Venezuelan government assets in 2015, pursuant to IEEPA and the Venezuela Defense of Human Rights and Civil Society Act of 2014. After official recognition of Guaidó, the Trump Administration imposed new sanctions under IEEPA to freeze the assets of the main Venezuelan state-owned oil company, Petróleos de Venezuela (Pdvsa), which could both significantly reduce funds available to the regime of Nicolas Maduro and channel them to Guaidó. There is also precedent for using frozen foreign assets for purposes authorized by the U.N. Security Council. After the first war with Iraq, President George H.W. Bush ordered the transfer of frozen Iraqi assets derived from the sale of Iraqi petroleum held by U.S. banks to be transferred to a holding account in the Federal Reserve Bank of New York to fulfill "the rights and obligations of the United States under U.N. Security Council Resolution No. 778." The President cited a section of the United Nations Participation Act (UNPA), as well as IEEPA, as authority to take the action. The transferred funds were used to provide humanitarian relief and to finance the United Nations Compensation Commission, which was established to adjudicate claims against Iraq arising from the invasion. Other Iraqi assets remained frozen and accumulated interest until they were vested in 2003 (see below). In some cases, the United States has ended sanctions and returned frozen assets to successor governments. In the case of the former Yugoslavia, for example, in 2003, $237.6 million in frozen funds belonging to the Central Bank of the Socialist Federal Republic of Yugoslavia were transferred to the central banks of the successor states. In the case of Afghanistan, $217 million in frozen funds belonging to the Taliban were released to the Afghan Interim Authority in January 2002. Congressionally Mandated Use of Frozen Foreign Assets and Proceeds of Sanctions The executive branch has traditionally resisted congressional efforts to vest foreign assets to pay U.S. claimants without first obtaining a settlement agreement with the country in question. Congress has overcome such resistance in the case of foreign governments that have been designated as "State Supporters of Terrorism." U.S. nationals who are victims of state-supported terrorism involving designated states have been able to sue those countries for damages under an exception to the Foreign Sovereign Immunities Act (FSIA) since 1996. To facilitate the payment of judgments under the exception, Congress passed Section 117 of the Treasury and General Government Appropriations Act, 1999, which further amended the FSIA by allowing attachment and execution against state property with respect to which financial transactions are prohibited or regulated under Section 5(b) TWEA, Section 620(a) of the Foreign Assistance Act (authorizing the trade embargo against Cuba), or Sections 202 and 203 of IEEPA, or any orders, licenses or other authority issued under these statutes. Because of the Clinton Administration's continuing objections, however, Section 117 also gave the President authority to "waive the requirements of this section in the interest of national security," an authority President Clinton promptly exercised in signing the statute into law. The Section 117 waiver authority protecting blocked foreign government assets from attachment to satisfy terrorism judgments has continued in effect ever since, prompting Congress to take other actions to make frozen assets available to judgment holders. Congress enacted §2002 of the Victims of Trafficking and Violence Protection Act of 2000 (VTVPA) to mandate the payment from frozen Cuban assets of compensatory damages awarded against Cuba under the FSIA terrorism exception on or prior to July 20, 2000. The Department of the Treasury subsequently vested $96.7 million in funds generated from long-distance telephone services between the United States and Cuba in order to compensate claimants in Alejandre v. Republic of Cuba , the lawsuit based on the1996 downing of two unarmed U.S. civilian airplanes by the Cuban air force. Another payment of more than $7 million was made using vested Cuban assets to a Florida woman who had won a lawsuit against Cuba based on her marriage to a Cuban spy. As unpaid judgments against designated state sponsors of terrorism continued to mount, Congress enacted the Terrorism Risk Insurance Act (TRIA). Section 201 of TRIA overrode long-standing objections by the executive branch to make the frozen assets of terrorist states available to satisfy judgments for compensatory damages against such states (and organizations and persons) as follows: Notwithstanding any other provision of law, and except as provided in subsection (b), in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist party is not immune under section 1605(a)(7) of title 28, United States Code, the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable. Subsection (b) of Section 201 provided waiver authority "in the national security interest," but only with respect to frozen foreign government "property subject to the Vienna Convention on Diplomatic Relations or the Vienna Convention on Consular Relations." When Congress amended the FSIA in 2008 to revamp the terrorism exception, it provided that judgments entered under the new exception could be satisfied out of the property of a foreign state notwithstanding the fact that the property in question is regulated by the United States government pursuant to TWEA or IEEPA. Congress has also directed that the proceeds from certain sanctions violations be paid into a fund for providing compensation to the former hostages of Iran and terrorist state judgment creditors. To fund the program, Congress designated that certain real property and bank accounts owned by Iran and forfeited to the United States could go into the United States Victims of State Sponsored Terrorism Fund, along with the sum of $1,025,000,000, representing the amount paid to the United States pursuant to the June 27, 2014, plea agreement and settlement between the United States and BNP Paribas for sanctions violations. The fund is replenished through criminal penalties and forfeitures for violations of IEEPA or TWEA-based regulations, or any related civil or criminal conspiracy, scheme, or other federal offense related to doing business or acting on behalf of a state sponsor of terrorism. Half of all civil penalties and forfeitures relating to the same offenses are also deposited into the fund. Judicial Interpretation of IEEPA A number of lawsuits seeking to overturn actions taken pursuant to IEEPA have made their way through the judicial system, including challenges to the breadth of congressionally delegated authority and assertions of violations of constitutional rights. As demonstrated below, most of these challenges have failed. The few challenges that succeeded did not seriously undermine the overarching statutory scheme for sanctions. Dames & Moore v. Regan The breadth of presidential power under IEEPA is illustrated by the Supreme Court's 1981 opinion in Dames & Moore v. Regan . In Dames & Moore , petitioners had challenged President Carter's executive order establishing regulations to further compliance with the terms of the Algiers Accords, which the President had entered into to end the hostage crisis with Iran. Under these agreements, the United States was obligated (1) to terminate all legal proceedings in U.S. courts involving claims of U.S. nationals against Iran, (2) to nullify all attachments and judgments, and (3) to resolve outstanding claims exclusively through binding arbitration in the Iran-U.S. Claims Tribunal (IUSCT). The President, through executive orders, revoked all licenses that permitted the exercise of "any right, power, or privilege" with regard to Iranian funds, nullified all non-Iranian interests in assets acquired after a previous blocking order, and required banks holding Iranian assets to transfer them to the Federal Reserve Bank of New York to be held or transferred as directed by the Secretary of the Treasury. Dames and Moore had sued Iran for breach of contract to recover compensation for work performed. The district court had entered summary judgment in favor of Dames and Moore and issued an order attaching certain Iranian assets for satisfaction of any judgment that might result, but stayed the case pending appeal. The executive orders and regulations implementing the Algiers Accords resulted in the nullification of this prejudgment attachment and the dismissal of the case against Iran, directing that it be filed at the IUSCT. In response, Dames and Moore sued the government. The plaintiffs claimed that the President and the Secretary of the Treasury exceeded their statutory and constitutional powers to the extent they adversely affected Dames and Moore's judgment against Iran, the execution of that judgment, the prejudgment attachments, and the plaintiff's ability to continue to litigate against the Iranian banks. The government defended its actions, relying largely on IEEPA, which provided explicit support for most of the measures taken—nullification of the prejudgment attachment and transfer of the property to Iran—but could not be read to authorize actions affecting the suspension of claims in U.S. courts. Justice Rehnquist wrote for the majority: Although we have declined to conclude that the IEEPA…directly authorizes the President's suspension of claims for the reasons noted, we cannot ignore the general tenor of Congress' legislation in this area in trying to determine whether the President is acting alone or at least with the acceptance of Congress. As we have noted, Congress cannot anticipate and legislate with regard to every possible action the President may find it necessary to take or every possible situation in which he might act. Such failure of Congress specifically to delegate authority does not, "especially . . . in the areas of foreign policy and national security," imply "congressional disapproval" of action taken by the Executive. On the contrary, the enactment of legislation closely related to the question of the President's authority in a particular case which evinces legislative intent to accord the President broad discretion may be considered to "invite" "measures on independent presidential responsibility." At least this is so where there is no contrary indication of legislative intent and when, as here, there is a history of congressional acquiescence in conduct of the sort engaged in by the President. The Court remarked that Congress's implicit approval of the long-standing presidential practice of settling international claims by executive agreement was critical to its holding that the challenged actions were not in conflict with acts of Congress. For support, the Court cited to Justice Frankfurter's concurrence in Youngstown Sheet and Tube Co. v. Sawyer stating that "a systematic, unbroken, executive practice, long pursued to the knowledge of the Congress and never before questioned … may be treated as a gloss on 'Executive Power' vested in the President by § 1 of Art. II." Consequently, it may be argued that Congress's exclusion of certain express powers in IEEPA do not necessarily preclude the President from exercising them, at least where a court finds sufficient precedent exists. Lower courts have examined IEEPA under a number of other constitutional doctrines. Separation of Powers—Non-Delegation Doctrine Courts have reviewed whether Congress violated the non-delegation principle of separation of powers by delegating too much power to the President to legislate, in particular by creating new crimes. These challenges have generally failed. As the U.S. Court of Appeals for the Second Circuit explained while evaluating IEEPA, delegations of congressional authority are constitutional so long as Congress provides through a legislative act an "intelligible principle" governing the exercise of the delegated authority. Even if the standards are higher for delegations of authority to define criminal offenses, the court held, IEEPA provides sufficient guidance. The court stated: The IEEPA "meaningfully constrains the [President's] discretion," by requiring that "[t]he authorities granted to the President ... may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared." And the authorities delegated are defined and limited. The Second Circuit found it significant that "IEEPA relates to foreign affairs—an area in which the President has greater discretion," bolstering its view that IEEPA does not violate the non-delegation doctrine. Separation of Powers—Legislative Veto The U.S. Court of Appeals for the Eleventh Circuit considered whether Section 207(b) of IEEPA is an unconstitutional legislative veto. That provision states: The authorities described in subsection (a)(1) may not continue to be exercised under this section if the national emergency is terminated by the Congress by concurrent resolution pursuant to section 202 of the National Emergencies Act [50 U.S.C. § 1622] and if the Congress specifies in such concurrent resolution that such authorities may not continue to be exercised under this section. In U.S. v. Romero-Fernandez , two defendants convicted of violating the terms of an executive order issued under IEEPA argued on appeal that IEEPA was unconstitutional, in part, because of the above provision. The Eleventh Circuit accepted that the provision was an unconstitutional legislative veto (as conceded by the government) based on INS v. Chadha , in which the Supreme Court held that Congress cannot void the exercise of power by the executive branch through concurrent resolution, but can act only through bicameral passage followed by presentment of the law to the President. The Eleventh Circuit nevertheless upheld the defendants' convictions for violations of IEEPA regulations, holding that the legislative veto provision was severable from the rest of the statute. Fifth Amendment "Takings" Clause Courts have also addressed whether certain actions taken pursuant to IEEPA have effected an uncompensated taking of property rights in violation of the Fifth Amendment. The Fifth Amendment's Takings Clause prohibits "private property [from being] taken for public use, without just compensation." The Fifth Amendment's prohibitions apply as well to regulatory takings, in which the government does not physically take property but instead imposes restrictions on the right of enjoyment that decreases the value of the property or right therein. The Supreme Court has held that the nullification of prejudgment attachments pursuant to regulations issued under IEEPA was not an uncompensated taking, suggesting that the reason for this position was the contingent nature of the licenses that had authorized the attachments. The Court also suggested that the broader purpose of the statute supported the view that there was no uncompensated taking: This Court has previously recognized that the congressional purpose in authorizing blocking orders is "to put control of foreign assets in the hands of the President...." Such orders permit the President to maintain the foreign assets at his disposal for use in negotiating the resolution of a declared national emergency. The frozen assets serve as a "bargaining chip" to be used by the President when dealing with a hostile country. Accordingly, it is difficult to accept petitioner's argument because the practical effect of it is to allow individual claimants throughout the country to minimize or wholly eliminate this "bargaining chip" through attachments, garnishments, or similar encumbrances on property. Neither the purpose the statute was enacted to serve nor its plain language supports such a result. Similarly, a lower court held that the extinguishment of contractual rights due to sanctions enacted pursuant to IEEPA does not amount to a regulatory taking requiring compensation under the Fifth Amendment. Even though the plaintiff suffered "obvious economic loss" due to the sanctions regulations, that factor alone was not enough to sustain plaintiff's claim of a compensable taking. The court quoted long-standing Supreme Court precedent to support its finding: A new tariff, an embargo, a draft, or a war may inevitably bring upon individuals great losses; may, indeed, render valuable property almost valueless. They may destroy the worth of contracts. But whoever supposed that, because of this, a tariff could not be changed, or a non-intercourse act, or an embargo be enacted, or a war be declared? .... [W]as it ever imagined this was taking private property without compensation or without due process of law? Accordingly, it seems unlikely that entities whose business interests are harmed by the imposition of sanctions pursuant to IEEPA will be entitled to compensation from the government for their losses. Persons whose assets have been directly blocked by the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) pursuant to IEEPA have likewise found little success challenging the loss of the use of their assets as uncompensated takings. Many courts have recognized that a temporary blocking of assets does not constitute a taking because it is a temporary action that does not vest title in the United States. This conclusion is apparently so even if the blocking of assets necessitates the closing altogether of a business enterprise. In some circumstances, however, a court may analyze at least the initial blocking of assets under a Fourth Amendment standard for seizure. One court found a blocking to be unreasonable under a Fourth Amendment standard where there was no reason that OFAC could not have first obtained a judicial warrant. Fifth Amendment "Due Process" Clause Some persons whose assets have been blocked have asserted that their right to due process has been violated. The Due Process Clause of the Fifth Amendment provides that no person shall be deprived of life, liberty, or property, without due process of law. Where one company protested that the blocking of its assets without a pre-deprivation hearing violated its right to due process, a district court found that a temporary deprivation of property does not necessarily give rise to a right to notice and an opportunity to be heard. A second district court stated that the exigencies of national security and foreign policy considerations that are implicated in IEEPA cases have meant that OFAC historically has not provided pre-deprivation notice in sanctions programs. A third district court stated that OFAC's failure to provide a charitable foundation with notice or a hearing prior to its designation as a terrorist organization and blocking of its assets did not violate its right to procedural due process, because the OFAC designation and blocking order serve the important governmental interest of combating terrorism by curtailing the flow of terrorist financing. That same court also held that prompt action by the government was necessary to protect against the transfer of assets subject to the blocking order. In Al Haramain Islamic Foundation v. U.S. Department of Treasury , the U.S. Court of Appeals for the Ninth Circuit considered whether OFAC's use of classified information without any disclosure of its content in its decision to freeze the assets of a charitable organization, and its failure to provide adequate notice and a meaningful opportunity to respond, violated the organization's right to procedural due process. The court applied the balancing test set forth by the Supreme Court in its landmark administrative law case Mathews v. Eldridge to resolve these questions. Under the Eldridge test, to determine if an individual has received constitutional due process, courts must weigh: (1) [the person's or entity's] private property interest, (2) the risk of an erroneous deprivation of such interest through the procedures used, as well as the value of additional safeguards, and (3) the Government's interest in maintaining its procedures, including the burdens of additional procedural requirements." While weighing the interests and risks at issue in Al Haramain , the Ninth Circuit found the organization's property interest to be significant: By design, a designation by OFAC completely shutters all domestic operations of an entity. All assets are frozen. No person or organization may conduct any business whatsoever with the entity, other than a very narrow category of actions such as legal defense. Civil penalties attach even for unwitting violations. Criminal penalties, including up to 20 years' imprisonment, attach for willful violations. For domestic organizations such as AHIF–Oregon, a designation means that it conducts no business at all. The designation is indefinite. Although an entity can seek administrative reconsideration and limited judicial relief, those remedies take considerable time, as evidenced by OFAC's long administrative delay in this case and the ordinary delays inherent in our judicial system. In sum, designation is not a mere inconvenience or burden on certain property interests; designation indefinitely renders a domestic organization financially defunct. Nevertheless, the court found "the government's interest in national security [could not] be understated." In evaluating the government's interest in maintaining its procedures, the Ninth Circuit explained that the Constitution requires that the government "take reasonable measures to ensure basic fairness to the private party and that the government follow procedures reasonably designed to protect against erroneous deprivation of the private party's interests." While the Ninth Circuit had previously held that the use of undisclosed information in a case involving the exclusion of certain longtime resident aliens should be considered presumptively unconstitutional, the court found that the presumption had been overcome in this case. The Ninth Circuit noted that all federal courts that have considered the argument that OFAC may not use undisclosed classified information in making its determinations have rejected it. Although the court found that OFAC's failure to provide even an unclassified summary of the information at issue was a violation of the organization's due process rights, the court deemed the error harmless because it would not likely have affected the outcome of the case. In the same case, the Ninth Circuit also considered the organization's argument that it had been denied adequate notice and an opportunity to be heard. Specifically, the organization asserted that OFAC had refused to disclose its reasons for investigating and designating the organization, leaving it unable to respond adequately to OFAC's unknown suspicions. Because OFAC had provided the organization with only one document to support its designation over the four-year period between the freezing of its assets and the redesignation of the organization as a specially designated global terrorist (SDGT), the court agreed that the organization had been deprived of due process rights. However, the court found that this error too was harmless. First Amendment Challenges Some courts have considered whether asset blocking or penalties imposed pursuant to regulations promulgated under IEEPA have violated the subjects' First Amendment rights to free association, free speech, or religion. Challenges on these grounds have typically failed. Courts have held that there is no First Amendment right to support terrorists. The U.S. Court of Appeals for the District of Columbia Circuit distinguished advocacy from financial support and held that the blocking of assets affected only the ability to provide financial support, but did not implicate the organization's freedom of association. Similarly, a district court interpreted relevant case law to hold that government actions prohibiting charitable contributions are subject to intermediate scrutiny rather than strict scrutiny, a higher standard that applies to political contributions. With respect to a free speech challenge brought by a charitable organization whose assets were temporarily blocked during the pendency of an investigation, a district court explained that "when 'speech' and 'nonspeech' elements are combined in the same course of conduct, a sufficiently important government interest in regulating the nonspeech element can justify incidental limitations on First Amendment freedoms." Accordingly, the district court applied the following test to determine whether the designations and blocking actions were lawful. Citing the Supreme Court's opinion in United States v. O'Brien , the court stated that a government regulation is sufficiently justified if: it is within the constitutional power of the government; it furthers an important or substantial governmental interest; the governmental interest is unrelated to the suppression of free expression; and the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest. The court found the government's actions to fall within the bounds of this test: First, the President clearly had the power to issue the Executive Order. Second, the Executive Order promotes an important and substantial government interest—that of preventing terrorist attacks. Third, the government's action is unrelated to the suppression of free expression; it prohibits the provision of financial and other support to terrorists. Fourth, the incidental restrictions on First Amendment freedoms are no greater than necessary. However, with respect to an organization that was not itself designated as an SDGT but wished to conduct coordinated advocacy with another organization that was so designated, one appellate court found that an OFAC regulation barring such coordinated advocacy based on its content was subject to strict scrutiny. Accordingly, the court rejected the government's reliance on the Supreme Court's decision in Holder v. Humanitarian Law Project to find that the regulation impermissibly implicated the organization's right to free speech. Accordingly, there may be some circumstances where the First Amendment protects speech coordinated with (but not on behalf of) an organization designated as an SDGT. Use of IEEPA to Continue Enforcing the Export Administration Act (EAA) Until the recent enactment of the Export Control Reform Act of 2018, export of dual use goods and services was regulated pursuant to the authority of the Export Administration Act (EAA), which was subject to periodic expiry and reauthorization. President Reagan was the first President to use IEEPA as a vehicle for continuing the enforcement of the EAA's export controls. After Congress did not extend the expired EAA, President Reagan issued Executive Order 12444 in 1983, finding that "unrestricted access of foreign parties to United States commercial goods, technology, and technical data and the existence of certain boycott practices of foreign nations constitute, in light of the expiration of the Export Administration Act of 1979, an unusual and extraordinary threat to the national security." Although the EAA had been reauthorized for short periods since its initial expiration in 1983, every subsequent President utilized the authorities granted under IEEPA to maintain the existing system of export controls during periods of lapse. Figure 1 . In the latest iteration, President George W. Bush issued Executive Order 13222 in 2001, finding the existence of a national emergency with respect to the expiration of the EAA and directing—pursuant to the authorities allocated under IEEPA—that "the provisions for administration of the [EAA] shall be carried out under this order so as to continue in full force and effect…the export control system heretofore maintained." Presidents Obama and Trump annually extended the 2001 executive order. Courts have generally treated this arrangement as authorized by Congress, although certain provisions of the EAA in effect under IEEPA have led to challenges. The determining factor appears to be whether IEEPA itself provides the President the authority to carry out the challenged action. In one case, the U.S. Court of Appeals for the Fifth Circuit upheld a conviction for an attempt to violate the regulations even though the EAA had expired and did not expressly criminalize such attempts. The circuit court rejected the defendants' argument that the President had exceeded his delegated authority under the EEA by "enlarging" the crimes punishable under the regulations. Nevertheless, a district court held that the conspiracy provisions of the EAA regulations were rendered inoperative by the lapse of the EAA and "could not be repromulgated by executive order under the general powers that IEEPA vests in the President." The district court found that, even if Congress intended to preserve the operation of the EAA through IEEPA, that intent was limited by the scope of the statutes' substantive coverage at the time of IEEPA's enactment, when no conspiracy provision existed in either statute. The U.S. Court of Appeals for the D.C. Circuit upheld the application of the EAA as a statute permitting the government to withhold information under exemption 3 of the Freedom of Information Act (FOIA), which exempts from disclosure information exempted from disclosure by statute, even though the EAA had expired. Referring to legislative history it interpreted as congressional approval of the use of IEEPA to continue the EAA provisions during periods of lapse, the court stated: Although the legislative history does not refer to the EAA's confidentiality provision, it does evince Congress's intent to authorize the President to preserve the operation of the export regulations promulgated under the EAA. Moreover, it is significant for purposes of determining legislative intent that Congress acted with the knowledge that the EAA's export regulations had long provided for confidentiality and that the President's ongoing practice of extending the EAA by executive order had always included these confidentiality protections. The D.C. Circuit distinguished this holding in a later case involving appellate jurisdiction over a decision by the Department of Commerce to apply sanctions for a company's violation of the EAA regulations. Pursuant to the regulations and under the direction of the Commerce Department, the company sought judicial review directly in the D.C. Circuit. The D.C. Circuit, however, concluded that it lacked jurisdiction: This court would have jurisdiction pursuant to the President's order only if the President has the authority to confer jurisdiction—an authority that, if it exists, must derive from either the Executive's inherent power under the Constitution or a permissible delegation of power from Congress. The former is unavailing, as the Constitution vests the power to confer jurisdiction in Congress alone. Whether the executive order can provide the basis of our jurisdiction, then, turns on whether the President can confer jurisdiction on this court under the auspices of IEEPA…..We conclude that the President lacks that power. Nothing in the text of IEEPA delegates to the President the authority to grant jurisdiction to any federal court. Consequently, the appeal of the agency decision was determined to belong in the district court according to the default rule under the Administrative Procedure Act (APA). Issues and Options for Congress Congress may wish to address a number of issues with respect to IEEPA; two are addressed here. The first pertains to how Congress has delegated its authority under IEEPA and its umbrella statute, the NEA. The second pertains to choices made in the Export Control Reform Act of 2018. Delegation of Authority under IEEPA Although the stated aim of the drafters of the NEA and IEEPA was to restrain the use of emergency powers, the use of such powers has expanded by several measures. Presidents declare national emergencies and renew them for years or even decades. The limitation of IEEPA to transactions involving some foreign interest was intended to limit IEEPA's domestic application. However, globalization has eroded that limit, as few transactions today do not involve some foreign interest. Many of the other criticisms of TWEA that IEEPA was supposed to address—consultation, time limits, congressional review, scope of power, and logical relationship to the emergency declared—are criticisms that scholars levy against IEEPA today. In general, three common criticisms are levied by scholars with respect to the structure of the NEA and IEEPA that may be of interest to Congress. First, the NEA and IEEPA do not define the phrases "national emergency" and "unusual and extraordinary threat" and Presidents have interpreted these terms broadly. Second, the scope of presidential authority under IEEPA has become less constrained in a highly globalized era. Third, owing to rulings by the Supreme Court and amendments to the NEA, Congress would likely have to have a two-thirds majority rather than a simple majority to terminate a national emergency. Despite these criticisms, Congress has not acted to terminate or otherwise express displeasure with an emergency declaration invoking IEEPA. This absence of any explicit statement of disapproval, coupled with explicit statements of approval in some instances, may indicate congressional approval of presidential use of IEEPA thus far. Arguably, then, IEEPA could be seen as an effective tool for carrying out the will of Congress. Definition of "National Emergency" and "Unusual and Extraordinary Threat" Neither the NEA nor IEEPA define what constitutes a "national emergency." IEEPA conditions its invocation in a declaration on its necessity for dealing with an "unusual and extraordinary threat … to the national security, foreign policy, or economy of the United States." In the markup of IEEPA in the House, Fred Bergsten, then-Assistant Secretary for International Affairs in the Department of the Treasury, praised the requirement that a national emergency for the purposes of IEEPA be "based on an unusual and extraordinary threat" because such language "emphasizes that such powers should be available only in true emergencies." Because "unusual" and "extraordinary" are also undefined, the usual and ordinary invocation of the statute seems to conflict with those statutory conditions. If Congress wanted to refine the meaning of "national emergency" or "unusual and extraordinary threat," it could do so through statute. Additionally, Congress could consider requiring some sort of factual finding by a court prior to, or shortly after, the exercise of any authority, such as under the First Militia Act of 1792 or the Foreign Intelligence Surveillance Act. However, Congress may consider that the ambiguity in the existing statute provides the executive with the flexibility necessary to address national emergencies with the requisite dispatch. Scope of the Authority While IEEPA nominally applies only to foreign transactions, the breadth of the phrase, "any interest of any foreign country or a national thereof" has left a great deal of room for executive discretion. The interconnectedness of the modern global economy has left few major transactions in which a foreign interest is not involved. As a result, at least one scholar has concluded, "the exemption of purely domestic transactions from the President's transaction controls seems to be a limitation without substance." Presidents have used IEEPA since the 1980s to control exports by maintaining the dual-use export control system, enshrined in the Export Administration Regulations (EAR) in times when its underlying authorization, the Export Administration Act (EAA), periodically expired. During those times when Congress did not reauthorize the EAA, Presidents have declared emergencies to maintain the dual-use export control system. The current emergency has been ongoing since 2001. While Presidents have used IEEPA to implement trade restrictions against adversaries, it has not been used as a general way to impose tariffs. However, as noted above, President Nixon used TWEA to impose a 10% ad valorem tariff on goods entering the United States to avoid a balance of payments crisis after he ended the convertibility of the U.S. dollar to gold. Although the use of TWEA in this instance was criticized at the time, it does not appear that the subsequent reforms resulting in the enactment of IEEPA would prevent the President from imposing tariffs or other restrictions on trade. However, the availability of diverse other authorities for addressing trade, including for national security purposes, makes the use of IEEPA for this purpose unlikely. The scope of powers over individual targets is also extensive. Under IEEPA, the President has the power to prohibit all financial transactions with individuals designated by Executive Order. Such power allows the President to block all the assets of a U.S. citizen or permanent resident. Such uses of IEEPA may reflect the will of Congress or they may represent a grant of authority that may have gone beyond what Congress originally intended. Terminating National Emergencies or IEEPA Authorities The heart of the curtailment of presidential power by the NEA and IEEPA was the provision that Congress could terminate a state of emergency declared pursuant to the NEA with a concurrent resolution. When the "legislative veto" was struck down by the Supreme Court (see above), it left Congress with a steeper climb—presumably requiring passage of a veto-proof joint resolution—to terminate a national emergency declared under the NEA. Two such resolutions have ever been introduced and neither declarations of emergency involved IEEPA. The lack of congressional action here could be the result of the necessity of obtaining a veto-proof majority or it could be that the use of IEEPA has so far reflected the will of Congress. If Congress wanted to assert more authority over the use of IEEPA, it could amend the NEA or IEEPA to include a "sunset provision," terminating any national emergency after a certain number of days. At least one scholar has recommended such an amendment. Alternatively, Congress could amend IEEPA to provide for a review mechanism that would give Congress an active role. In the Senate during the 115 th Congress, for example, Senator Mike Lee introduced the Global Trade Accountability Act of 2017 required the President to report to Congress on any proposed trade action (including the use of IEEPA), including a description of the proposal together with a list of items to be affected, an economic impact study of the proposal including potential retaliation. Congress, using expedited procedures, would need to approve the President's action through a joint resolution within a 60-day period. The legislation would have provided for a temporary one-time unilateral trade action for a 90-day period. Similarly, in the 116 th Congress, Senator Lee introduced S. 764 , a bill to provide for congressional approval of national emergency declarations, and for other purposes, which would amend the NEA to require an act of Congress within 30 days to allow a national emergency to continue. Another approach would establish a means for Congress to pass a resolution of disapproval if IEEPA authorities are invoked. An example of this approach is the Trade Authority Protection Act (H.R. 5760). After the submission of similar reporting requirement to S. 177 (above), Congress could, under Congressional Review Act (CRA)-style procedures, pass a joint resolution of disapproval. Congress does have the authority to pass a joint resolution under IEEPA, as noted above, but the use of CRA procedures would allow for certain expedited consideration. Alternatively, Congress could use any of these mechanisms to amend the current disapproval resolution process in IEEPA or the NEA itself. The Status Quo In testimony before the House Committee on International Relations in 1977, Professor Harold G. Maier summed up the main criticisms of TWEA: Section 5(b)'s effect is no longer confined to "emergency situations" in the sense of existing imminent danger. The continuing retroactive approval, either explicit or implicit, by Congress of broad executive interpretations of the scope of powers which it confers has converted the section into a general grant of legislative authority to the President…" Like TWEA before it, IEEPA sits at the center of the modern U.S. sanction regime. Like TWEA before it, Congress has often approved explicitly of the President's use of IEEPA. In several circumstances, Congress has directed the President to impose a variety of sanctions under IEEPA and waived the requirement of an emergency declaration. Even when Congress has not given explicit approval, no Member of Congress has ever introduced a resolution to terminate a national emergency citing IEEPA. The NEA requires that both houses of Congress meet every six months to consider a vote on a joint resolution on terminating an emergency. Neither house has ever met to do so. In response to concerns over the scale and scope of the emergency economic powers granted by IEEPA, supporters of the status quo would argue that Congress has implicitly and explicitly expressed approval of the statute and its use. The Export Control Reform Act of 2018 In 2018, Congress passed the Export Control Reform Act (ECRA). The legislation repealed the expired Export Administration Act of 1979, the regulations of which had been continued by reference to IEEPA since 2001. The ECRA became the new statutory authority for Export Administration Regulations. Nevertheless, several export controls addressed in the Export Administration Act of 1979 were not updated in the Export Control Reform Act of 2018; instead, Congress chose to require the President to continue to use IEEPA to continue to implement the three sections of the Export Administration Act of 1979 that were not repealed. Going forward, Congress may wish to revisit these provisions, which all relate to deterring the proliferation of weapons of mass destruction. Appendix A. NEA and IEEPA Use

The International Emergency Economic Powers Act (IEEPA) provides the President broad authority to regulate a variety of economic transactions following a declaration of national emergency. IEEPA, like the Trading with the Enemy Act (TWEA) from which it branched, sits at the center of the modern U.S. sanctions regime. Changes in the use of IEEPA powers since the act's enactment in 1977 have caused some to question whether the statute's oversight provisions are robust enough given the sweeping economic powers it confers upon the President upon declaration of a state of emergency. Over the course of the twentieth century, Congress delegated increasing amounts of emergency power to the President by statute. The Trading with the Enemy Act was one such statute. Congress passed TWEA in 1917 to regulate international transactions with enemy powers following the U.S. entry into the First World War. Congress expanded the act during the 1930s to allow the President to declare a national emergency in times of peace and assume sweeping powers over both domestic and international transactions. Between 1945 and the early 1970s, TWEA became a critically important means to impose sanctions as part of U.S. Cold War strategy. Presidents used TWEA to block international financial transactions, seize U.S.-based assets held by foreign nationals, restrict exports, modify regulations to deter the hoarding of gold, limit foreign direct investment in U.S. companies, and impose tariffs on all imports into the United States. Following committee investigations that discovered that the United States had been in a state of emergency for more than 40 years, Congress passed the National Emergencies Act (NEA) in 1976 and IEEPA in 1977. The pair of statutes placed new limits on presidential emergency powers. Both included reporting requirements to increase transparency and track costs, and the NEA required the President to annually assess and extend, if appropriate, the emergency. However, some experts argue that the renewal process has become pro forma. The NEA also afforded Congress the means to terminate a national emergency by adopting a concurrent resolution in each chamber. A decision by the Supreme Court, in a landmark immigration case, however, found the use of concurrent resolutions to terminate an executive action unconstitutional. Congress amended the statute to require a joint resolution, significantly increasing the difficulty of terminating an emergency. Like TWEA, IEEPA has become an important means to impose economic-based sanctions since its enactment; like TWEA, Presidents have frequently used IEEPA to restrict a variety of international transactions; and like TWEA, the subjects of the restrictions, the frequency of use, and the duration of emergencies have expanded over time. Initially, Presidents targeted foreign states or their governments. Over the years, however, presidential administrations have increasingly used IEEPA to target individuals, groups, and non-state actors such as terrorists and persons who engage in malicious cyber-enabled activities. As of March 1, 2019, Presidents had declared 54 national emergencies invoking IEEPA, 29 of which are still ongoing. Typically, national emergencies invoking IEEPA last nearly a decade, although some have lasted significantly longer--the first state of emergency declared under the NEA and IEEPA, which was declared in response to the taking of U.S. embassy staff as hostages by Iran in 1979, may soon enter its fifth decade. IEEPA grants sweeping powers to the President to control economic transactions. Despite these broad powers, Congress has never attempted to terminate a national emergency invoking IEEPA. Instead, Congress has directed the President on numerous occasions to use IEEPA authorities to impose sanctions. Congress may want to consider whether IEEPA appropriately balances the need for swift action in a time of crisis with Congress' duty to oversee executive action. Congress may also want to consider IEEPA's role in implementing its influence in U.S. foreign policy and national security decision-making.

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New Markets Venture Capital Program Overview The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; venture capital programs, including the now inactive New Markets Venture Capital (NMVC) program, to foster small business expansion; programs to increase small business opportunities in federal contracting; direct loans for businesses, homeowners, and renters to assist their recovery from natural disasters; and access to entrepreneurial education to assist with business formation and expansion. Authorized by P.L. 106-554 , the Consolidated Appropriations Act, 2001 (Appendix H: the New Markets Venture Capital Program Act of 2000), the NMVC program is designed to promote economic development and the creation of wealth and job opportunities in low-income geographic areas and among individuals living in such areas by encouraging developmental venture capital investments in smaller enterprises primarily located in such areas; and address the unmet equity investment needs of small enterprises located in low-income geographic areas. Modeled on the SBA's Small Business Investment Company (SBIC) program, SBA-selected, privately owned and managed NMVC companies provide funding and operational assistance to small businesses. To do so, they use private capital the NMVC company has raised (called regulatory capital ) and up to 150% of that amount (called leverage ) from the sale of SBA-guaranteed 10-year debentures, or loan obligations , to third parties, subject to the availability of funds. Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest rates. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture. At least 80% of the investments must be in small businesses located in a low-income area, as defined in the statute. Specialized Small Business Investment Companies (SSBICs) established under the SBIC program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-to-dollar matching basis. Six NMVC companies participated in the program. The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and up to $30 million for operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. The SBA subsequently provided $72.0 million in leverage to NMVC companies in FY2002 and FY2003 ($12.5 million in FY2002 and $59.5 million in FY2003) and $14.4 million for operational assistance grants ($3.75 million in FY2002 and $10.65 million in FY2003). In 2003, the unobligated balances of $10.5 million for NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining in recent years as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance (which is comprised of the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. No bills have been introduced since the 112 th Congress concerning the NMVC program. However, more than 30 bills were introduced in previous Congresses to either expand or amend the program. Many of these bills would have increased the program's funding (a list and summary of bills introduced by Congress to provide the program additional funding appears in the Appendix ). For example, during the 112 th Congress, H.R. 2872 , the Job Creation and Urban Revitalization Act of 2011, would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $75 million of debentures and $15 million for operational assistance grants for FY2012 through FY2013. The bill was referred to the House Committee on Small Business, but no further action was taken on it. This report examines the NMVC program's legislative origins and describes the program's eligibility and performance requirements for NMVC companies, eligibility requirements for small businesses seeking financing, and definition of low-income areas. It also reviews regulations governing the SBA's financial assistance to NMVC companies and provides program statistics. This report concludes with an examination of (1) efforts to eliminate the program based on concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of the program's unobligated funding in 2003, and (3) congressional efforts to provide the program additional funds. Legislative Origins 105th Congress On September 15, 1998, the Senate Committee on Small Business conducted a markup of several bills pending before the committee, including H.R. 3412 , the Small Business Investment Company Technical Corrections Act of 1998, which the House had passed. Senator Christopher Bond, chair of the Senate Committee on Small Business, proposed an amendment in the nature of a substitute to H.R. 3412 incorporating the full texts of S. 2372 , the Year 2000 Readiness Act, and S. 2407 , the Small Business Programs Restructuring and Reform Act of 1998, as well as provisions from S. 2448 , the Small Business Loan Enhancement Act. The committee also debated and approved by unanimous voice votes seven amendments to the substitute amendment. One of the seven approved amendments was a precursor of the NMVC program. The Community Development Venture Capital Demonstration Program The amendment, offered by Senator Paul Wellstone, would have authorized a $20 million, four-year technical assistance program—the Community Development Venture Capital Demonstration Program—to provide grants, on a matching dollar-to-dollar basis, to experienced community development venture capital (CDVC) firms that invest in small businesses located in economically distressed areas, such as inner cities and poor rural counties. The grants would be used to provide technical expertise and operating assistance to new, emerging, less experienced CDVC organizations. The program's stated purpose was "to develop and expand a new but growing field of organizations that use the tools of venture capital to create good jobs, productive wealth, and entrepreneurial capacity that benefit disadvantaged people and economically distressed communities." The program's advocates argued that despite difficulties associated with making investments in economically distressed areas, some successful CDVCs had produced "a 'double bottom line' of not only financial returns, but also social benefits in the form of good jobs and healthier communities." On September 15, 1998, the committee reported H.R. 3412 , as amended, by a vote of 18-0. On September 30, 1998, the Senate passed the bill, with an amendment, by unanimous consent. The House did not act on the bill. 106th Congress On January 19, 1999, President Bill Clinton announced during his State of the Union Address support for what was later called the "New Markets Investment Initiative." The proposed initiative was comprised of several programs, including a New Markets Tax Credit program and a New Markets Venture Capital program, to encourage economic development in economically distressed areas. President Clinton subsequently drew attention to the initiative by taking three separate trips to underserved inner city and rural communities, visiting Phoenix, Arizona, and the Pine Ridge Indian Reservation in South Dakota on July 7, 1999, and Los Angeles, California, and Anaheim, California, on July 8, 1999 (trip 1); Newark, New Jersey, and Hartford, Connecticut, on November 4, 1999 (trip 2); and Hermitage, Arkansas, and Chicago, Illinois, on November 5, 1999 (trip 3). During his remarks in Chicago, President Clinton announced that he had reached an agreement with House Speaker Dennis Hastert (who was present) to develop a bipartisan legislative initiative on developing new market investments as a means to revitalize impoverished communities. SBA's Low- or Moderate-Income Initiative In a related development, on February 9, 1999, the SBA proposed several incentives to encourage companies participating in its SBIC program to "expand their investment activity into economically distressed inner cities and rural areas." After receiving public comments on several proposed incentives, the SBA issued a final rule on September 30, 1999, implementing the SBIC low- or moderate-income (LMI) initiative. The ongoing LMI initiative is designed to encourage SBICs to invest in small businesses located in inner cities and rural areas "that have severe shortages of equity capital" because investments in those areas "often are of a type that will not have the potential for yielding returns that are high enough to justify the use of participating securities." SBICs that invest in small businesses with at least 50% of their employees or tangible assets located in a low- or moderate-income area (LMI zone) or at least 35% of their full-time employees with their primary residence in an LMI zone are eligible for the incentives. For example, unlike regular SBIC debentures that typically have a 10-year maturity, LMI debentures are available in 2 maturities, 5 years and 10 years, plus the stub period. The stub period is the time between the debenture's issuance date and the next March 1 or September 1. The stub period allows all LMI debentures to have common March 1 or September 1 maturity dates to simplify administration of the program. In addition, LMI debentures are issued at a discount so that the proceeds an SBIC receives for the sale of a debenture are reduced by (1) the debenture's interest costs for the first five years, plus the stub period; (2) the SBA's annual fee for the debenture's first five years, plus the stub period; and (3) the SBA's 2% leverage fee. As a result, these interest costs and fees are effectively deferred, freeing SBICs from the requirement to make interest payments on LMI debentures or to pay the SBA's annual fees on LMI debentures for the first five years of a debenture, plus the stub period. As shown in Table 1 , in FY2018, SBICs made 609 investments in small businesses located in an LMI zone, totaling $1.026 billion — 18.6% of the total amount invested. The Community Development and Venture Capital Act of 2000 On September 16, 1999, Senator John Kerry introduced S. 1594 , the Community Development and Venture Capital Act of 2000. The bill included several provisions in President Clinton's New Markets Investment Initiative. The bill had three main parts: a New Markets Venture Capital Program, very similar to the present program, to encourage investment in economically distressed communities; a Community Development Venture Capital Assistance Program to expand the number of community development venture capital firms and professionals devoted to investing in economically distressed communities; and BusinessLINC, a mentoring program to link established, successful businesses with small business owners in economically stagnant or deteriorating communities to facilitate the development of small businesses in those areas. After conducting two hearings and sponsoring a roundtable discussion on the Community Development and Venture Capital Act of 2000, the Senate Committee on Small Business reported the bill, as amended, by a vote of 16-1, on July 26, 2000. In the report accompanying the bill, Senator Christopher Bond, chair of the Senate Committee on Small Business, argued that the SBIC program had "proven to be an extremely successful public-private sector partnership with the government" and mentioned the SBA's LMI initiative as a new means to encourage SBICs to make investments in LMI zones. However, he argued that "as successful as the SBIC program is, it does not sufficiently reach areas of our country that need economic development the most." He added that although SBICs invested $771 million in LMI zones in 1999, "the vast majority of those investments were very large and not at all comparable to the type of investments [NMVC] funds would make." Senator Bond argued that the committee was approving the bill because it was necessary to expand the number of smaller investments being made to small businesses in the poorest areas, low-income geographic areas, and to fill another gap in access to capital that small businesses face. Investments for NMVC funds typically will range from $50,000 to $300,000 versus the $300,000 to $5 million range found in the Agency's SBIC program." The Senate did not take further action on the bill. The New Markets Venture Capital Program Act of 2000 On December 14, 2000, Representative (later Senator) Jim Talent, chair of the House Committee on Small Business, introduced H.R. 5663 , the New Markets Venture Capital Program Act of 2000. The bill had two parts: the current New Markets Venture Capital Program and BusinessLINC. The next day, the bill was incorporated by reference in the conference report accompanying H.R. 4577 , the Consolidated Appropriations Act, 2001, which became law ( P.L. 106-554 ) on December 21, 2000. On January 22, 2001, the SBA published an interim final rule in the Federal Registe r indicating its intention to establish the NMVC program. The SBA's final rule, which formally established the NMVC program, was published in the Federal Registe r on May 23, 2001. NMVC Company Eligibility and Performance Requirements P.L. 106-554 specified that venture capital companies interested in participating in the program must submit a detailed application to the SBA that includes, among other items, a business plan describing how the company intends to make successful developmental venture capital investments in identified low-income geographic areas, and information regarding the community development finance or relevant venture capital qualifications and general reputation of the company's management. In addition, an NMVC company must be a newly formed for-profit entity or a newly formed for-profit subsidiary of an existing entity; be organized under state law solely for the purpose of performing the functions and conducting the activities contemplated under the act; be organized either as a corporation, a limited partnership, or a limited liability company; show, to the SBA's satisfaction, that its current or proposed management team is qualified and has the knowledge, experience, and capability in community development finance or relevant venture capital finance necessary for investing in the types of businesses contemplated by the act; and have a primary objective of economic development of low-income areas. On January 22, 2001, the SBA solicited applications from venture capital companies and SSBICs to participate in the NMVC program. The SBA had planned to offer another round of applications for the program during the first quarter of 2003. However, the second round of applications was canceled because, as mentioned previously, P.L. 108-7 , the Consolidated Appropriations Resolution, 2003, which became law on February 20, 2003, rescinded the program's unobligated funding. The SBA received 23 applicants from companies interested in participating in the NMVC program, and conditionally approved 7 of them. Final approval is subject to the applicant meeting several conditions. For example, applicants are required to raise, within 18 months of being conditionally approved, at least $5 million in private capital or in binding capital commitments from one or more investors (other than federal agencies or departments) that meet criteria established by the administrator (the private funds are called regulatory capital ). Applicants also must have in place binding commitments from sources other than the SBA that are payable or available over a multiyear period not to exceed 10 years that amount to not less than 30% of the total amount of regulatory capital and commitments raised (30% of $5 million = $1.5 million). This additional funding is necessary to guarantee the applicant's ability to meet the required dollar-to-dollar matching contribution for operational assistance grants. Six of the seven companies granted conditional approval subsequently met all of the program requirements (one in April 2002, three in March 2003, one in April 2003, and one in August 2003) and were accepted into the program after signing a formal participation agreement with the SBA. The six NMVC companies initially raised $48 million in private capital and were subsequently provided $72 million in leverage. The companies are Adena Ventures, L.P., Athens, Ohio, approved on April 24, 2002, with targeted low-income areas in Ohio, West Virginia, and Maryland; New Markets Venture Partners, College Park, Maryland, approved on March 5, 2003, with targeted low-income areas in Maryland, Virginia, and the District of Columbia; CEI Community Ventures Fund, LLC, Portland, Maine, approved on March 21, 2003, with targeted low-income areas in Maine, New Hampshire, and Vermont; Murex Investments I, L.P., Philadelphia, Pennsylvania, approved on March 31, 2003, with targeted low-income areas in Pennsylvania, New Jersey, and Delaware; Penn Venture Partners, LP, Harrisburg, Pennsylvania, approved on April 23, 2003, with targeted low-income areas in Pennsylvania; Southern Appalachian Fund, L.P., London, Kentucky, approved on August 8, 2003, with targeted low-income areas in Kentucky, Tennessee, Georgia, Alabama, and Mississippi. NMVC companies are subject to various reporting requirements. For example, for each fiscal year, NMVC companies must file an annual financial statement with the SBA that has been audited by an independent public accountant acceptable to the SBA. The statement must include an assessment of the social, economic, or community development impact of each financing; the number of full-time equivalent jobs created as a result of the financing; the impact on the revenues and profits of the business being financed; and the impact on the taxes paid by the business being financed and by its employees. The statement must also include a listing of the number and percentage of the business's employees that reside in a low-income area. In addition, NMVC companies are required to submit to the SBA a portfolio financing report for each financing made within 30 days of the closing date. Eligibility of Small Businesses and Low-Income Geographic Areas NMVC companies are required to provide financial assistance and operational assistance only to small businesses as defined under the SBA's SBIC program. The business must either meet the SBA's size standard for the industry in which it is primarily engaged or have a maximum net worth of no more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5 million. All of the company's subsidiaries, parent companies, and affiliates are considered in the size standard determination. In addition, at the close of each NMVC company's fiscal year, at least 80% of the company's total financings (in total dollars) and 80% of the total number of concerns in that company's portfolio must be small businesses that, at the time of the financing, had their principal offices located in a low-income area (low-income enterprises). NMVC companies that fail to reach these required percentages at the end of any fiscal year must be in compliance by the end of the following fiscal year. They are not eligible for additional leverage from the SBA until they reach the required percentages. The act defines a low-income area as any census tract, or equivalent county division as defined by the Bureau of the Census, that meets any of the following criteria: a poverty rate of 20% or more; if located in a metropolitan area, at least 50% of its households have an income that is below 60% of the area median gross income; if not located in a metropolitan area, has a median household income that does not exceed 80% of the statewide median household income; is located within a historically underutilized business zone (HUBZone); is located in an urban empowerment zone or urban enterprise community as designated by the Department of Housing and Urban Development; or is located in a rural empowerment zone or rural enterprise community as designated by the Department of Agriculture. NMVC Leverage NMVC companies invest funds they have raised themselves, their regulatory capital, in small businesses. In addition, they can receive up to 150% of that amount from the SBA, subject to the availability of funds. NMVC companies follow essentially the same process for obtaining SBA funding as prescribed under the SBIC program. The SBA's funding, or leverage, comes from the sale to third parties of 10-year securities (or debentures), which are backed by the full faith and credit of the United States. Because the SBA guarantees the timely payment of the principal and interest due on the securities, the SBA is able to obtain favorable interest rates. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture. NMVC debentures are deferred-interest debentures issued at a discount (less than face value) equal to the first five years' interest to eliminate the need for NMVC companies to make interest payments during that period. As a result, NMVC companies make no payments on the debenture for five years from the date of issuance, plus the stub period, which ensures that all NMVC debentures have common prepayment and maturity dates of either March 1 or September 1. NMVC companies make semiannual interest payments on the face amount of the debenture during years 6 to 10, and they are responsible for paying the debenture's principal amount when the debenture reaches its maturity date. NMVC companies receive leverage from the SBA in a two-step process. First, they submit a request to the SBA for a conditional commitment to reserve a specific amount of leverage for future use. This request authorizes the SBA to sell the requested debenture amount to a third party at an interest rate approved by the SBA or to pool the requested debenture amount with other requests, providing each request with the same maturity date, interest rates, and conditions. The NMVC companies then apply to the SBA to draw against the SBA's leverage commitment. These requests may come at any time during the term of the SBA's leverage commitment. Although authorized to do so, the SBA does not pool NMVC debentures. Through an agreement with the SBA, the Federal Home Loan Bank of Chicago (FHLB) has purchased and held all outstanding NMVC debentures since issuance. The interest rate on each NMVC debenture was determined by FHLB using a spread over FHLB's cost of funds as of the date of each issuance. The SBA does not allow NMVC companies to prepay their draws for a period of 12 months (plus the stub period) after issuance. Prepayments are permitted after that waiting period, but only on March 1 or September 1 of each year. The cost of prepayment is the present value of the NMVC debenture on the semiannual date chosen for prepayment. After receiving funds, NMVC companies make equity investments in small businesses of their choice. Equity investments are typically in the form of common or preferred stock and sometimes in the form of subordinated debt with equity features (as long as the debt is not amortized and provides for interest payments contingent upon and limited to the extent of earnings) or limited partnership interests, options, warrants, and similar equity investment instruments. Operational Assistance Grants The SBA is authorized to award grants to NMVC companies and SSBICs to provide free operational assistance to small businesses financed, or expected to be financed, under the program. The grants must be used to provide management, marketing, and other technical assistance to help a small business with its business development. The grants have a dollar-to-dollar matching requirement and cannot be used for general and administrative expenses, including overhead. Matching resources may be in the form of (1) cash; (2) in-kind contributions; (3) binding commitments for cash or in-kind contributions that are payable or available over a multiyear period acceptable to the SBA but not to exceed 10 years; or (4) an annuity, purchased with funds other than regulatory capital, from an insurance company acceptable to the SBA that may be payable over a multiyear period acceptable to the SBA but not to exceed 10 years. NMVC companies and SSBICs are eligible for an operational assistance grant award equal to the amount of matching resources the company has raised, subject to the availability of funds. NMVC companies must use at least 80% of both the grant funds and their matching resources to provide free operational assistance to small businesses located in a low-income area. SSBICs must use both the grant funds awarded by the SBA and their matching resources to provide free operational assistance to small businesses "in connection with a low-income investment made by the SSBIC with regulatory capital raised after September 21, 2000." Program Statistics As shown in Table 2 , NMVC companies received operational assistance grants in FY2002 and FY2003 and started making equity investments in small businesses in FY2002. Since the program's inception, NMVC companies invested more than $81.4 million in 71 different small businesses. The program reached its peak, in terms of the amount of financings, in FY2007, investing nearly $16.3 million in 35 different small businesses that year. Since then, the amount of financings each year generally declined—falling to no new financings in FY2016 as the program's initial investments expired and NMVC companies engaged only in additional follow-on financings with the small businesses in their portfolios. As mentioned previously, the NMVC program's active unpaid principal balance (including both the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. Congressional Issues The NMVC program has not received any additional funding since 2001. Opposition to the program within Congress began to gain momentum when President George W. Bush recommended in his FY2002 budget request that the NMVC program be eliminated, arguing that the program is relatively expensive and duplicative of other federal programs: The Administration supports the objectives of the New Markets Venture Capital (NMVC) program but believes those objectives can be achieved more efficiently and at a lower cost through other existing programs. Several vehicles and incentives to direct investment into economically distressed communities already exist. Communities targeted by NMVC have access to a wide range of private for-profit and economic development programs, including the federally supported community development financial institutions administered through the Department of Treasury. In addition, SBA's SBIC program, which has 412 licensed venture capital companies with total capital resources amounting to $17.7 billion, is implementing incentives to encourage investment in economically distressed areas. The NMVC program is also expensive relative to the impact that it is expected to have. The total cost of the program in FY2001 is $52 million, not including administrative cost of running the program. Since the program is expected to generate $150-$200 million of investment activity, it will yield only $3.00-$4.00 of investment for every taxpayer dollar spent. In comparison, under the Small Business Investment Company (SBIC) program, there is no cost associated with the debenture portion of the program. Others argued that the NMVC program's targeted clientele of small businesses located in economically distressed areas is inherently too risky for government involvement. In their view, NMVC companies are "designed and chartered to operate (as profit-making firms) in a market niche that mainstream venture capital firms will not touch." The program's advocates contended that the NMVC program is necessary precisely because mainstream venture capital firms generally avoided investments in small businesses located in economically distressed areas. In their view, the NMVC program is an essential part of a larger federal effort, which includes tax incentives, to fill a market niche in private-sector venture capital investments and, in the process, help to revitalize areas experiencing long-term economic difficulties. They also objected to the Bush Administration's argument that the program is duplicative of other federal programs. In their view, the NMVC program is targeted at a clientele that is not being adequately served by other federal programs. The Bush Administration continued to recommend the program's elimination in each of its subsequent budget requests. As mentioned previously, during congressional consideration of the FY2003 budget the unobligated balances of $10.5 million for NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. Since then, more than 30 bills have been introduced to amend the NMVC program, including bills to reduce the amount of capital NMVC companies must raise to become eligible for operational assistance grants, eliminate the matching requirement for operational assistance grants, create an Office of New Markets Venture Capital within the SBA, require the SBA to provide conditionally approved NMVC companies a full two years to meet all program requirements, provide increased financing to small manufacturers, and amend the program's definition for low-income area to correspond with the definition used by the New Market Tax Credits program (Section 45D(e) of the Internal Revenue Code of 1986) (26 U.S.C. 45D(e)). Many of these bills also included provisions to provide the NMVC program additional funding. Legislative Efforts to Provide Additional NMVC Funding As shown in Table A-1 in the Appendix , during the 108 th Congress, two bills were introduced, one in the House and one in the Senate, to provide the NMVC program "such subsidy budget authority as may be necessary to guarantee $75 million of debentures" and $15 million for operational assistance grants over FY2004 and FY2005. Neither bill was enacted. During the 109 th Congress, an amendment was offered during the House during floor debate on H.R. 2862 , the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006, to provide "$30 million in debenture guarantees and $5 million for operational assistance grants to fund the creation of a fresh round of New Market Venture Capital companies … paid for by using funds from the Small Business Administration's salary and expense account." The amendment failed by voice vote. A bill introduced in the House would have authorized an expansion of the NMVC program to include the selection of an NMVC company whose primary objective would be the economic development of small businesses located in Hurricane Katrina-affected areas. The bill would have authorized "such subsidy budget authority as may be necessary to guarantee … $50 million of debentures issued by the Gulf Region New Markets Venture Capital Company … and $10 million for grants to the Gulf Region New Markets Venture Capital Company." Another House bill would have provided the NMVC program "such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $25 million for operational assistance grants for FY2006 through FY2008." Neither bill was enacted. During the 110 th Congress, four bills were introduced, two in the House and two in the Senate, to provide the NMVC program additional funding. One of the House bills would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $25 million for operational assistance grants for FY2007 through FY2009. The other House bill would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $30 million of debentures and $5 million for operational assistance grants for FY2008 through FY2010. The two Senate bills would have provided the NMVC program $20 million for operational assistance grants. None of these bills was enacted. During the 111 th Congress, two bills were introduced in the House to provide the NMVC program additional funding. One of the bills would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $25 million for operational assistance grants for FY2009 through FY2011. The other bill would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $20 million for operational assistance grants for FY2010 through FY2011. During the 112 th Congress, one bill was introduced to provide additional funding for the NMVC program. Representative Nydia Velázquez introduced H.R. 2872 , the Job Creation and Urban Revitalization Act of 2011, on September 8, 2011. The bill would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $75 million of debentures and $15 million for operational assistance grants for FY2012 through FY2013. The bill was referred to the House Committee on Small Business on September 8, 2011. No further action was taken on the bill. As mentioned earlier, no bills have been introduced since the 112 th Congress concerning the NMVC program. Related SBIC Program Developments P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), included provisions designed to encourage SBIC investments in low-income areas. The act allowed an SBIC licensed on or after October 1, 2009, to elect to have a maximum leverage amount of $175 million instead of $150 million (later increased to $175 million) if that SBIC has invested at least 50% of its financings in low-income geographic areas, as defined under the NMVC program, and certified that at least 50% of its future investments will be in low-income geographic areas. ARRA also increased the maximum amount of leverage available for two or more licenses under common control to $250 million from $225 million if these requirements are met. In addition, on April 7, 2011, the SBA announced a $1 billion impact investment SBIC initiative (providing up to $150 million in leverage in FY2012 and up to $200 million in leverage per fiscal year thereafter until the limit is reached). Under this initiative, SBA-licensed impact investment debenture SBICs are required to invest at least 50% of their financings, "which target areas of critical national priority including underserved markets and communities facing barriers to access to credit and capital." To receive an impact investment, a small business must meet at least one of the following criteria: be located in or, at the time of the initial investment, have at least 35% of its full-time employees residing in an LMI zone as defined in 13 C.F.R. Section 107.50 or be located in an economically distressed area as defined by Section 3011 of the Public Works and Economic Development Act of 1965, as amended (an area with per capita income of 80% or less of the national average or an unemployment rate that is, for the most recent 24-month period for which data are available, at least 1% greater than the national average unemployment rate); or be in an industrial sector that the SBA has identified as a national priority (currently clean energy, education, and advanced manufacturing). Initially, an impact investment SBIC could receive up to $80 million in SBA leverage. On June 6, 2013, the SBA announced that it was increasing the maximum leverage available to impact investment SBICs to $150 million. On September 25, 2014, the SBA announced several changes to the impact investment program designed to "broaden access to the fund." The agency announced that it was continuing the program beyond FY2016. Additionally, effective October 1, 2014, among other changes, the SBA eliminated the program's $200 million collective, per-fiscal-year leverage cap; added advanced manufacturing to the list of eligible sectors; provided eligibility to businesses that receive Small Business Innovation Research or Small Business Technology Transfer grants; and permitted, through December 1, 2014, existing debenture SBICs to apply to opt into the program if they meet the program's requirements. Subject to the SBA's approval, impact investment SBICs may devise a customized definition of an "impact investment" during the licensing process. On February 3, 2016, the SBA published a proposed rule in the Federal Register to provide regulations for impact investment SBICs regarding licensing, leverage eligibility, fees, and reporting and compliance requirements. The proposed regulations were an indication of the SBA's intent at that time to continue the impact investment SBIC initiative indefinitely. At the end of FY2018, there were nine licensed, impact investment SBICs (two in 2011, one in 2012, two in 2014, two in 2015, and two in 2016). As of September 30, 2018, they managed more than $905 million in assets and had investments in 81 small businesses. During FY2018, these SBICs invested $106.8 million in 35 small businesses. After reviewing the impact investment SBIC initiative's performance, on September 28, 2017, the SBA's Office of Investment and Innovation (OII) published a letter addressed to SBIC participants, applicants, and all other interested parties indicating that as of November 1, 2017, it would no longer accept new management assessment questionnaires from applicants interested in participating in the impact investment SBIC initiative. The letter indicated that the SBA was also terminating the 2011/2012 Impact Investment Fund Policy letter that the SBA had used to form the initiative's impact investment fund. The OII's letter indicated that the SBA was taking these actions for several reasons, including that "few qualified funds applied to be licensed as Impact SBICs," that "many of these SBICs would have applied to the SBIC program regardless of the existence of the Impact Policy," and "the results produced were not commensurate with the time and resources expended by SBA to maintain it." In addition, on June 11, 2018, the SBA published a notice in the Federal Register withdrawing the proposed rule published on February 3, 2016, that would have created regulations for the impact investment SBIC initiative because the "SBA has determined that the cost is not commensurate with the benefits." Concluding Observations The SBA's LMI and impact investment initiatives are designed to encourage SBIC investments in LMI areas. In recent years, the amount of SBIC program investments in LMI zones has generally increased (see Table 1 ). The NMVC program is no longer active (it does not have any active unpaid principal balance) and the amount and number of its financings were lower than anticipated by its original sponsors and below levels desired by its advocates. Some argue that the increased levels of SBIC investments in LMI areas in recent years, coupled with the SBA's efforts to encourage SBIC investments in such areas, may diminish the need for the NMVC program. NMVC advocates disagree. In FY2018, SBICs provided 609 financings totaling $1.026 billion to small businesses located in a LMI income area, an average investment of $1.685 million. NMVC advocates argue, as Senator Bond did when the NMVC program was proposed, that the NMVC program targets small businesses seeking much smaller investments. The debate over the NMVC program's future, particularly whether the program should be provided additional funding, is, in many ways, reflective of broader disagreements about the role of government, and the SBA, in private enterprise. Some believe the federal government and the SBA should take an active role in assisting small businesses to access capital—through the provision of loan guarantees, equity financing, and management training—to further the economic recovery. In their view, the SBA's programs fill a market niche by providing loans to small businesses unable to get credit elsewhere, equity financings to small businesses often overlooked by private investors, and training for new and aspiring entrepreneurs unable to find affordable training elsewhere. They assert that increasing funding for the NMVC program will create jobs by making capital available to entrepreneurs unable to find it in the private marketplace. Others worry about the long-term adverse economic effects of the federal deficit. Instead of supporting increased funding for federal spending programs, they advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses, generate economic growth, and create jobs. They are particularly interested in achieving greater government efficiency by eliminating federal spending programs, such as the NMVC program, that they perceive are duplicative of others. Appendix. Legislative Efforts to Provide Additional Funding for the NMVC Program

Authorized by P.L. 106-554, the Consolidated Appropriations Act, 2001 (Appendix H: the New Markets Venture Capital Program Act of 2000), the New Markets Venture Capital (NMVC) program, which is no longer active, is designed to promote economic development and the creation of wealth and job opportunities in low-income geographic areas by addressing the unmet equity investments needs of small businesses located in those areas. Modeled on the Small Business Association's (SBA's) Small Business Investment Company (SBIC) program, SBA-selected, privately owned and managed NMVC companies provide funding and operational assistance to small businesses. To do so, they use private capital the NMVC company has raised (called regulatory capital) and up to 150% of that amount (called leverage) from the sale of SBA-guaranteed 10-year debentures, or loan obligations, to third parties, subject to the availability of funds. Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest rates. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture. At least 80% of the investments must be in small businesses located in a low-income area. Specialized Small Business Investment Companies (SSBICs) established under the SBIC program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-to-dollar matching basis. Six companies participated in the NMVC program. The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining in recent years as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. This report examines the NMVC program's legislative origins and describes the program's eligibility and performance requirements for NMVC companies, eligibility requirements for small businesses seeking financing, and definition of low-income areas. It also reviews regulations governing the SBA's financial assistance to NMVC companies and provides program statistics. The report concludes with an examination of (1) efforts to eliminate the program based on concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of the program's unobligated funding in 2003, and (3) congressional efforts to provide the program additional funds.

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Introduction This report provides responses to frequently asked questions about the Temporary Assistance for Needy Families (TANF) block grant. It is intended to serve as a quick reference to provide easy access to information and data. Appendix B presents a series of tables with state-level data. This report does not provide information on TANF program rules (for a discussion of TANF rules, see CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements , by Gene Falk). Funding and Expenditures What Is TANF's Funding Status? On January 24, 2019, the President signed legislation ( P.L. 116-4 ) that funds TANF and related programs through June 30, 2019. The legislation permits states to receive their quarterly TANF grants for the 2 nd quarter (January through March) and 3 rd quarter (April through June) of FY2019. Additional legislation would be required to pay TANF grants in the final quarter (July through September) of FY2019. How Are State TANF Programs Funded? TANF programs are funded through a combination of federal and state funds. In FY2018, TANF has two federal grants to states. The bulk of the TANF funding is in a basic block grant to the states, totaling $16.5 billion for the 50 states, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, and American Indian tribes. There is also a contingency fund available that provides extra federal funds to states that meet certain conditions. Additionally, states are required to expend a minimum amount of their own funds for TANF and TANF-related activities under what is known as the maintenance of effort (MOE) requirement. States are required to spend at least 75% of what they spent in FY1994 on TANF's predecessor programs. The minimum MOE amount, in total, is $10.3 billion per year for the 50 states, the District of Columbia, and the territories. How Much Has the Value of the TANF Basic Block Grant Changed Over Time? TANF was created in the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P.L. 104-193 ). A TANF basic block grant amount—both nationally and for each state—was established in the 1996 welfare reform law. The amount established in that law for the 50 states, District of Columbia, territories, and tribes was $16.6 billion in total. From FY1997 through FY2016, that amount remained the same. It was not adjusted for changes that occur over time, such as inflation, the size of the TANF assistance caseload, or changes in the poverty population. During this period, the real (inflation-adjusted) value of the block grant declined by one-third (33.1%). Beginning with FY2017, the state family assistance grant was reduced by 0.33% from its historical levels to finance TANF-related research and technical assistance. The reduced block grant amount is $16.5 billion. Table 1 shows the state family assistance grant, in both nominal (actual) and real (inflation-adjusted) dollars for each year, FY1997 through FY2018. In real (inflation-adjusted) terms, the FY2018 block grant was 36% below its value in FY1997. How Have States Used TANF Funds? Figure 1 shows the uses of federal TANF grants to states and state MOE funds in FY2017. In FY2017, a total of $31.1 billion of both federal TANF and state MOE expenditures were either expended or transferred to other block grant programs. Basic assistance—ongoing benefits to families to meet basic needs—represented 23% ($7.1 billion) of total FY2017 TANF and MOE dollars. TANF is a major contributor of child care funding. In FY2017, $5 billion (16% of all TANF and MOE funds) were either expended on child care or transferred to the child care block grant (the Child Care and Development Fund, or CCDF). TANF work-related activities (including education and training) were the third-largest TANF and MOE spending category at $3.3 billion, or 11% of total TANF and MOE funds. TANF also helps low-wage parents by helping to finance state refundable tax credits, such as state add-ons to the Earned Income Tax Credit (EITC). TANF and MOE expenditures on refundable tax credits in FY2017 totaled $2.8 billion, or 9% of total TANF and MOE spending. TANF is also a major contributor to the child welfare system, which provides foster care, adoption assistance, and services to families with children who either have experienced or are at risk of experiencing child abuse or neglect, spending about $2.2 billion on such activities. TANF and MOE funds also help fund state prekindergarten (pre-K) programs, with total FY2017 expenditures for that category also at $2.5 billion. TANF and MOE funds are also used for short-term and emergency benefits and a wide range of other social services. For state-specific information on the use of TANF funds, see Table B-1 and Table B-2 . How Much of the TANF Grant Has Gone Unspent? TANF law permits states to "reserve" unused funds without time limit. This permits flexibility in timing of the use of TANF funds, including the ability to "save" funds for unexpected occurrences that might increase costs (such as recessions or natural disasters). At the end of FY2017 (September 30, 2017, the most recent data currently available), a total of $5.1 billion of federal TANF funding remained neither transferred nor spent. However, some of these unspent funds represent monies that states had already committed to spend later. At the end of FY2017, states had made such commitments to spend—that is, had obligated—a total of $1.8 billion. At the end of FY2017, states had $3.3 billion of "unobligated balances." These funds are available to states to make new spending commitments. Table B-3 shows unspent TANF funds by state. The Caseload How Many Families Receive TANF- or MOE-Funded Benefits and Services? This number is not known. Federal TANF reporting requirements focus on families receiving only ongoing assistance . There is no complete reporting on families receiving other TANF benefits and services. Assistance is defined as benefits provided to families to meet ongoing, basic needs. It is most often paid in cash. However, some states use TANF or MOE funds to provide an "earnings supplement" to working parents added to monthly Supplemental Nutrition Assistance Program (SNAP) allotments. These "earnings supplements" are paid separately from the regular TANF cash assistance program. Additionally, TANF MOE dollars are used to fund food assistance for immigrants barred from regular SNAP benefits in certain states. These forms of nutrition aid meet an ongoing need, and thus are considered TANF assistance. As discussed in a previous section of this report, TANF basic assistance accounts for about 24% of all TANF expenditures. Therefore, the federal reporting requirements that pertain to families receiving "assistance" are likely to undercount the number of families receiving any TANF-funded benefit or service. How Many Families and People Currently Receive TANF- or MOE-Funded "Assistance"? Table 2 provides assistance caseload information. A total of 1.2 million families, composed of 3.1 million recipients, received TANF- or MOE-funded assistance in September 2018. The bulk of the "recipients" were children—2.3 million in that month. For state-by-state assistance caseloads, see Table B-4 . How Does the Current Assistance Caseload Level Compare with Historical Levels? Figure 2 provides a long-term historical perspective on the number of families receiving assistance from TANF or its predecessor program, from July 1959 to September 2017. The shaded areas of the figure represent months when the national economy was in recession. Though the health of the national economy has affected the trend in the cash assistance caseload, the long-term trend in receipt of cash assistance does not follow a classic countercyclical pattern. Such a pattern would have the caseload rise during economic slumps, and then fall again during periods of economic growth. Factors other than the health of the economy (demographic trends, policy changes) also have influenced the caseload trend. The figure shows two periods of sustained caseload increases: the period from the mid-1960s to the mid-1970s and a second period from 1988 to 1994. The number of families receiving assistance peaked in March 1994 at 5.1 million families. The assistance caseload fell rapidly in the late 1990s (after the 1996 welfare reform law) before leveling off in 2001. In 2004, the caseload began another decline, albeit at a slower pace than in the late 1990s. During the recent 2007-2009 recession and its aftermath, the caseload began to rise from 1.7 million families in August 2008, peaking in December 2010 at close to 2.0 million families. By September 2018, the assistance caseload had declined to 1.2 million families. Table B-5 shows recent trends in the number of cash assistance families by state. What Are the Characteristics of Families Receiving TANF Assistance? Before PRWORA, the "typical" family receiving assistance has been headed by a single parent (usually the mother) with one or two children. That single parent has also typically been unemployed. However, over the past 20 years the assistance caseload decline has occurred together with a major shift in the composition of the rolls. Figure 3 shows the change in the size and composition of the assistance caseload under both AFDC (1988 and 1994) and TANF. In FY1988, an estimated 84% of AFDC families were headed by an unemployed adult recipient. In FY2016, families with an unemployed adult recipient represented 32% of all cash assistance families. This decline occurred, in large part, as the number of families headed by unemployed adult recipients declined more rapidly than other components of the assistance caseload. In FY1994, a monthly average of 3.8 million families per month who received AFDC cash assistance had adult recipients who were not working. In FY2016, a monthly average of 485,000 families per month had adult recipients or work-eligible individuals, with no adult recipient or work-eligible individual working. With the decline in families headed by unemployed adults, the share of the caseload represented by families with employed adults and "child only" families has increased. In FY2017, families with all adult recipients unemployed and families with employed adult recipients each represented 31% of all assistance families. The latter category includes families in "earnings supplement" programs separate from the regular TANF cash assistance program. "Child-only" families are those where no adult recipient receives benefits in their own right; the family receives benefits on behalf of its children. The share of the caseload that was child-only in FY2017 was 38%. In FY2017, families with a nonrecipient, nonparent relative (grandparents, aunts, uncles) represented 14% of all assistance families. Families with ineligible, noncitizen adults or adults who have not reported their citizenship status made up 9% of the assistance caseload in that year. Families where the parent received Supplemental Security Income (SSI) and the children received TANF made up 9% of all assistance families in FY2017. TANF Cash Benefits: How Much Does a Family Receive in TANF Cash Per Month? There are no federal rules that help determine the amount of TANF cash benefits paid to a family. (There are also no federal rules that require states to use TANF to pay cash benefits, though all states do so.) Benefit amounts are determined solely by the states. Most states base TANF cash benefit amounts on family size, paying larger cash benefits to larger families on the presumption that they have greater financial needs. The maximum monthly cash benefit is usually paid to a family that receives no other income (e.g., no earned or unearned income) and complies with program rules. Families with income other than TANF often are paid a reduced benefit. Moreover, some families are financially sanctioned for not meeting a program requirement (e.g., a work requirement), and are also paid a lower benefit. Figure 4 shows the maximum monthly TANF cash benefit by state for a single mother caring for two children (family of three) in July 2016. The benefit amounts shown are those for a single-parent family with two children. For a family of three, the maximum TANF benefit paid in July 2017 varied from $170 per month in Mississippi to $1,201 per month in New Hampshire. The map shows a regional pattern to the maximum monthly benefit paid, with lower benefit amounts in the South than in other regions. Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income. TANF Work Participation Standards TANF's main federal work requirement is actually a performance measure that applies to the states, rather than individual recipients. States determine the work rules that apply to individual recipients. What Is the TANF Work Participation Standard States Must Meet? The TANF statute requires states to have 50% of their caseload meet standards of participation in work or activities—that is, a family member must be in specified activities for a minimum number of hours. There is a separate participation standard that applies to the two-parent portion of a state's caseload, requiring 90% of the state's two-parent caseload to meet participation standards. However, the statutory work participation standards are reduced by a "caseload reduction credit." The caseload reduction credit reduces the participation standard one percentage point for each percentage point decline in a state's caseload. Additionally, under a regulatory provision, a state may get "extra" credit for caseload reduction if it spends more than required under the TANF MOE. Therefore, the effective standards states face are often less than the 50% and 90% targets, and vary by state and by year. States that do not meet the TANF work participation standard are at risk of being penalized through a reduction in their block grant. However, penalties can be forgiven if a state claims, and the Secretary of HHS finds, that it had "reasonable cause" for not meeting the standard. Penalties can also be forgiven for states that enter into "corrective compliance plans," and subsequently meet the work standard. Have There Been Changes in the Work Participation Rules Enacted Since the 1996 Welfare Reform Law? The 50% and 90% target standards that states face, as well as the caseload reduction credit, date back to the 1996 welfare reform law. However, the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) made several changes to the work participation rules effective in FY2007 The caseload reduction credit was changed to measure caseload reduction from FY2005, rather than the original law's FY1995. The work participation standards were broadened to include families receiving cash aid in "separate state programs." Separate state programs are programs run with state funds, distinct from a state's "TANF program," but with expenditures countable toward the TANF MOE. HHS was instructed to provide definition to the allowable TANF work activities listed in law. HHS was also required to define what is meant by a "work-eligible" individual, expanding the number of families that are included in the work participation calculation. States were required to develop plans and procedures to verify work activities. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), a law enacted in response to the sharp economic downturn of 2007-2009, held states "harmless" for caseload increases affecting the work participation standards for FY2009 through FY2011. It did so by allowing states to "freeze" caseload reduction credits at pre-recession levels through the FY2011 standards. What Work Participation Rates Have the States Achieved? HHS computes two work participation rates for each state that are then compared with the effective (after-credit) standard to determine if it has met the TANF work standard. An "all-families" work participation rate is computed and compared with the all-families effective standard (50% minus the state's caseload reduction credit). HHS also computes a two-parent work participation rate that is compared with the two-parent effective standard (90% minus the state's caseload reduction credit). Figure 5 shows the national average all-families work participation rate for FY2002 through FY2017. For the period FY2002 through FY2011, states achieved an average all-families work participation rate hovering around 30%. The work participation rate increased since then. In FY2016, it exceeded 50% for the first time since TANF was established. However, it is important to note that the increase in the work participation rate has not come from an increase in the number of recipients in regular TANF assistance programs who are either working or in job preparation activities. This increase stems mostly from states creating new "earnings supplement" programs that use TANF funds to aid working parents in the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) or who have left the regular TANF assistance programs for work. How Many Jurisdictions Did Not Meet the All-Families Standard? Figure 6 shows which states did not meet the TANF all-families work participation standards from FY2006 through FY2017. Before FY2007, the first year that DRA was effective, only a few jurisdictions did not meet TANF all-families work participation standards. However, in FY2007, 15 jurisdictions did not meet the all-families standard. This number declined to 9 in FY2008 and 8 in FY2009. In FY2012, despite the uptick in the national average work participation rate, 16 states did not meet the all-family standard, the largest number of states that did not meet their participation standards in any one year since the enactment of TANF. FY2012 was the year that ARRA's "freeze" of the caseload reduction credit expired, and states were generally required to meet higher standards than in previous years. The number of jurisdictions that did not meet the all-families standard declined over the FY2012 to FY2017 period. In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam. Have States Met the Two-Parent Work Participation Standard? In addition to meeting a work standard for all families, TANF also imposes a second standard—90%—for the two-parent portion of its cash assistance caseload. This standard can also be lowered by caseload reduction. Figure 7 shows whether each state met its two-parent work participation standard for FY2006 through FY2017. However, the display on the table is more complex than that for reporting whether a state met or did not meet its "all family" rate. A substantial number of states have reported no two-parent families subject to the work participation standard. These states are denoted on the table with an "NA," indicating that the two-parent standard was not applicable to the state in that year. Before the changes made by the DRA were effective, a number of states had their two-parent families in separate state programs that were not included in the work participation calculation. When DRA brought families receiving assistance in separate state programs into the work participation rate calculations, a number of states moved these families into solely state-funded programs. These are state-funded programs with expenditures not countable toward the TANF maintenance of effort requirement, and hence are outside of TANF's rules. For states with two-parent families in their caseloads, the table reports "Yes" for states that met the two-parent standard, and "No" for states that did not meet the two-parent standard. Of the 28 jurisdictions that had two-parent families in their FY2017 TANF work participation calculation, 19 met the standard and 9 did not. Appendix A. Supplementary Tables Appendix B. State Tables

The Temporary Assistance for Needy Families (TANF) block grant funds a wide range of benefits and services for low-income families with children. TANF was created in the 1996 welfare reform law (P.L. 104-193). This report responds to some frequently asked questions about TANF; it does not describe TANF rules (see, instead, CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements, by Gene Falk). TANF Funding and Expenditures. TANF provides fixed funding for the 50 states, the District of Columbia, the territories, and American Indian tribes. The basic block grant totals $16.5 billion per year. States are also required in total to contribute, from their own funds, at least $10.3 billion annually under a maintenance-of-effort (MOE) requirement. Though TANF is best known for funding cash assistance payments for needy families with children, the block grant and MOE funds are used for a wide variety of benefits and activities. In FY2017, expenditures on basic assistance totaled $7.1 billion—23% of total federal TANF and MOE dollars. Basic assistance is often—but not exclusively—paid as cash. In addition to funding basic assistance, TANF also contributes funds for child care and services for children who have been, or are at risk of being, abused and neglected. Some states also count expenditures in prekindergarten programs toward the MOE requirement. The TANF Assistance Caseload. A total of 1.2 million families, composed of 3.1 million recipients, received TANF- or MOE-funded assistance in September 2018. The bulk of the "recipients" were children—2.3 million in that month. The assistance caseload is heterogeneous. The type of family once thought of as the "typical" assistance family—one with an unemployed adult recipient—accounted for 32% of all families on the rolls in FY2016. Additionally, 31% of cash assistance families had an employed adult, while 38% of all TANF families were "child-only" and had no adult recipient. Child-only families include those with disabled adults receiving Supplemental Security Income (SSI), adults who are nonparents (e.g., grandparents, aunts, uncles) caring for children, and families consisting of citizen children and ineligible noncitizen parents. Cash Assistance Benefits. TANF cash benefit amounts are set by states. In July 2017, the maximum monthly benefit for a family of three ranged from $1,021 in New Hampshire to $170 in Mississippi. Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income. Work Requirements. TANF's main federal work requirement is actually a performance measure that applies to the states. States determine the work rules that apply to individual recipients. TANF law requires states to engage 50% of all families and 90% of two-parent families with work-eligible individuals in work activities, though these standards can be reduced by "credits." Therefore, the effective standards states face are often less than the 50% or 90% targets, and vary by state. In FY2017, states achieved, on average, an all-family participation rate of 53.0% and a two-parent rate of 69.5%. In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam. This is a reduction from FY2012, when 16 states did not meet that standard. In FY2017, nine jurisdictions did not meet the two-parent standard. States that do not meet work standards are at risk of being penalized by a reduction in their block grant.

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Personnel Files: Military Service and Pension Records at the National Archives The Military Personnel Records division of the National Personnel Records Center (NPRC), a component of the National Archives and Records Administration (NARA) located in St. Louis, Missouri, holds most existing U.S. military personnel, health, and medical records of discharged and deceased veterans of all services from World War I to the present. Neither the NPRC nor the Department of Defense (DOD) intends to destroy the physical records of U.S. servicemembers. Some older records have been electronically scanned to reduce the handling of fragile records. See NARA's site "Access to Military Service and Pension Records" at https://www.archives.gov/research/order/order-vets-records.html . Official Military Personnel File (OMPF) records may be requested online at https://www.archives.gov/veterans/military-service-records , by using the Standard Form 180 and submitting by mail (the appropriate address listed on the back of the form), or fax (314-801-9195). Veterans and their next-of-kin (NOK) may request these records. According to the NPRC, for the Air Force, Navy, Marine Corps, and Coast Guard, the NOK is defined as the unremarried widow or widower, son, daughter, father, mother, brother or sister; for the Army, the NOK is defined as the surviving spouse, eldest child, father or mother, eldest sibling or eldest grandchild. If an individual does not meet the definition of a NOK, he or she is considered a member of the general public and may request military personnel records via the Freedom of Information Act (FOIA). See "Access to OMPFs for the General Public" at https://www.archives.gov/st-louis/military-personnel/public/general-public.html . In 1973, a fire at NPRC destroyed approximately 16 million to 18 million Army and Air Force official military personnel files. In such cases where files were lost, NPRC uses alternate sources of information to respond to requests. More information about obtaining military personnel files can be found on the NPRC website, http://www.archives.gov/st-louis/military-personnel/ , or by contacting the center at National Personnel Records Center Military Personnel Records 1 Archives Drive St. Louis, MO 63138 Tel: [phone number scrubbed] congressional line Tel: [phone number scrubbed] public line Status Update Request Form: https://www.archives.gov/st-louis/forms Older military personnel records (generally prior to 1917) are located at National Archives and Records Administration (NARA) Textual Archives Division Washington, DC 20408 http://www.archives.gov/veterans/military-service-records/pre-ww-1-records.html Correcting Military Service Records For guidance on the review of discharges and military corrections boards, see NARA's " Veterans' Service Records: Correcting Military Service Records " . For i nformation on the military service review boards (Air Force, Army, Coast Guard, and Navy and Marine Corps) , see " Boards for Correction of Military Records (BCMR) / Discharge Upgrades " site. NARA's site also provides the following BCMR guidance: " Prior to submitting a request to a Board for Correction of Military Records, ALL administrative avenues must be used. Generally, that means a request to NPRC for a correction (minor corrections can be made by NPRC), then a request to the military service department (service departments can make more corrections than NPRC), and finally if both these fail, then submit DD Form 149, with supporting evidence as instructed on the form ." Military Awards and Decorations The NPRC also provides information and guidance on how to request military awards and decorations online and by mail for veterans and their NOK; replacing certain military medals; and obtaining a Cold War Recognition Certificate. This is available for the records of a servicemember who separated before or during 1956. For records for individuals who separated after 1956, these records can be requested through FOIA. The general public may also purchase a copy of the veteran's OMPF to determine the awards due and obtain the medals from a commercial source. Individuals can request information on military service medals, decorations and awards online: https://www.archives.gov/personnel-records-center/awards-and-decorations . By military service (Army, Navy, Marine Corps, and Air Force including Army Air Corps & Army Air Forces) via mail: National Personnel Records Center 1 Archives Drive St. Louis, MO 63138 For Coast Guard: Coast Guard Personnel Service Center 4200 Wilson Blvd., Suite 900 (PSC-PSD-MA) Stop 7200 Arlington, VA 20598-7200 Cold War Recognition Certificate The National Defense Authorization Act (NDAA) for Fiscal Year 1998 ( P.L. 105-85 ) in Section 1084 required the Secretary of Defense to prepare a certificate recognizing the Cold War service of qualifying members of the Armed Forces and civilian personnel of DOD and other government agencies contributing to national security. This certificate, known as the "Cold War Recognition Certificate," may be awarded upon individual request to all members of the Armed Forces and qualified federal government civilian personnel who served the United States during the Cold War era from September 2, 1945, to December 26, 1991. Finding Unit Histories The Modern Military Records office of NARA has custody of records relating to World War I, World War II, Korea, and Vietnam. The records vary by conflict and branch of service; for example, the records for Army units active during the interwar periods (1920-1939 and 1945-1950) are incomplete. For more information, contact the Textual Records office at Textual Records Office National Archives and Records Administration at College Park 8601 Adelphi Road College Park, MD 20740-6001 Tel: [phone number scrubbed] Email: [email address scrubbed] If a military unit record is not publicly available, a FOIA request may be submitted to the agency where the record is held. For example, for special access records held at the National Archives at College Park, contact the Archives FOIA office at the following: Special Access and FOIA Division National Archives at College Park 8601 Adelphi Road College Park, MD 20740-6001 Tel: [phone number scrubbed] Email: [email address scrubbed] For more information on how to submit a FOIA request, visit https://www.foia.gov/how-to.html . Other types of auxiliary and organizational records, including Army morning reports, Army unit rosters, Army officer pay cards, Navy muster rolls, U.S. Army Surgeon General's office records and Veterans Administration index cards are maintained at the National Archives in St. Louis, Missouri. Further information regarding these records, as well as the timespan of available records for each category, are available at http://www.archives.gov/st-louis/archival-programs/other-records/index.html . Certain published unit histories can also be found in the collections of the military departments (see Table 1 ). Military Records for Veterans Compensation To support disability claims of exposure to hazardous materials (Agent Orange, asbestos, etc.), numerous veterans are culling through Army morning reports, unit rosters, pay cards, Navy muster rolls, Captain logs/Navy Deck logs, etc. during their military service. For more information on military exposures, see the VA's Military Exposure site: https://www.publichealth.va.gov/exposures/index.asp . At this time, VA continues to study the long-term health issues of deployed veterans and their exposure to burn pits used at military waste sites in Iraq and Afghanistan. Currently, there is no compensation available for exposure to burn pits. For more information, see the VA's Public Health site on Burn Pits at https://www.publichealth.va.gov/exposures/burnpits/ and related CRS products on VA health care and disability in the sources below. Selected Additional Sources for Research Selected CRS Reports CRS Report R41386, Veterans' Benefits: Burial Benefits and National Cemeteries , by Scott D. Szymendera CRS Report R42324, Who Is a "Veteran"?—Basic Eligibility for Veterans' Benefits , by Scott D. Szymendera CRS Report R42747, Health Care for Veterans: Answers to Frequently Asked Questions , by Sidath Viranga Panangala CRS Report R44837, Benefits for Service-Disabled Veterans , by Benjamin Collins, Scott D. Szymendera, and Libby Perl CRS Report 95-519, Medal of Honor: History and Issues , by Barbara Salazar Torreon CRS Report R42704, The Purple Heart: Background and Issues for Congress , by Barbara Salazar Torreon CRS Report RS21405, U.S. Periods of War and Dates of Recent Conflicts , by Barbara Salazar Torreon Selected Federal Government Web Resources American Battle Monuments Commission (ABMC) at http://www.abmc.gov The website contains databases of veterans interred or memorialized at overseas American military cemeteries and memorials. The Civil War Soldiers and Sailors System, National Park Service https://www.nps.gov/civilwar/soldiers-and-sailors-database.htm This website contains a database of the men who served in the Union and Confederate armies during the Civil War, as well as information on regiment histories, significant battles, and some prisoner-of-w ar records and cemetery records. Confederate States of America (CSA) Records at the Library of Congress https://www.loc.gov/collections/confederate-states-of-america-records/about-this-collection/ The records of the C SA span the years 1854-1889, with the bulk of the material concentrated in the period 1861-1865, during the Civil War . Provides links to Official Records of the Union and Confederate Armies External ; Official Records of the Union and Confederate Navies External ; and War Department Collection of Confederate Records. Military Resources: Veterans at the National Archives Library Information Center (ALIC) https://www.archives.gov/research/alic/reference/military/veterans-related.html This site provides links to v eterans ' i nformation , m ilitary c asualties , Prisoners of War/Missing in Action (POW/MIAs) , and m edals & h onors . Philippine Army and Guerilla Records at the National Archives http://www.archives.gov/st-louis/military-personnel/philippine-army-records.html The collection includes records of the Philippine Commonwealth Army of the United States Armed Forces Far East (USAFFE), including recognized Philippine Guerrilla forces ( not the Army of the United States or Philippine Scouts) during World War II. Veterans History Project (VHP) at the Library of Congress at http://www.loc.gov/vets/ VHP collects, preserves, and makes accessible the personal accounts of American veterans. Veterans Affairs (VA) Nationwide Gravesite Locator at http://gravelocator.cem.va.gov/ The database contains burial locations of veterans and their family members. Selected Bibliography Beers, Henry Putney. The Confederacy: A Guide to the Archives of the Government of the Confederate States of America . Washington, DC: National Archives and Records Administration, 1998. Borch, Fred L. For Military Merit: Recipients of the Purple Heart . Annapolis, MD: Naval Institute Press, 2010. Center of Military History. Order of Battle of the United States Land Force s in the World War. Washington, DC: Center of Military History, U.S. Army, 1988. 3 volumes. Controvich, James T. United States Army U nit and Organizational H istories: A B ibliography . Lanham, MD: Scarecrow Press, 2003. —— United States Air Force and I ts A ntecedents: P ublished and P rinted U nit H istories, a B ibliography . Lanham, MD: Scarecrow Press, 2004. Dinackus, Thomas D. Order of Battle: Allied Ground Forces of Operation Desert Storm. Central Point, OR: Hellgate Press, 2000. Dornbusch, C. E. Military Bibliography of the Civil War. New York: New York Public Library, 1971. Dyer, Frederick H. A Compendium of the War of the Rebellion. New York: T. Yoseloff, 1959. Johnson, Lt. Col. Richard S., and Debra Johnson Knox. How to Locate Anyone Who Is or Has Been in the Military: Armed Forces Locator Guide. Spartanburg, SC: MIE Publishing, 1999. Owens, Ron. Medal of Honor: Historical Facts and Figures. Paducah, KY: Turner Publishing Company, 2004. Plante, Trevor K. Military Service Records at the National Archives. Washington, DC: National Archives and Records Administration, 2009. Stanton, Shelby L. World War II O rder of B attle, U.S. Army ( G round F orce U nits ) . Mechanicsburg, PA: Stackpole Books, 2006. —— Vietnam Order of Battle. Mechanicsburg, PA: Stackpole Books, 2003. U.S. Department of the Army. Office of Military History. Order of Battle of the United States Army Ground Forces in World War II, Pacific Theater of Operations: Administrative and Logistical Commands, Armies, Corps, and Divisions. Washington, DC: Department of the Army, 1959. U.S. Naval War Records Office. Official Records of the Union and Confederate Navies in the War of the Rebellion. Harrisburg, PA: National Historical Society, 1987. 30 v. U.S. War Department. The War of the Rebellion: A Compilation of the Official Records of the Union and Confederate Armies . Washington, DC: GPO, 1880-1901. 70 v.

This guide provides information on locating military unit histories and individual service records of discharged, retired, and deceased military personnel. It also provides information on locating and replacing military awards and medals. Included is contact information for military history centers, websites for additional sources of research, and a bibliography of other publications, including related CRS reports.

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Introduction The President and Congress have historically played different roles when sending U.S. troops into hostile situations. The President has the power under Article II, Section 2, of the Constitution to use the Armed Forces to repel attacks. Congress under Article I, Section 8, has the power to declare war and raise and support the Armed Forces. The War Powers Resolution was enacted to ensure that the President and Congress share decisions where U.S. troops may become involved in hostilities. This sharing of power has often resulted in controversy, particularly when troops are sent into situations where there has not been a formal declaration of war. In most instances, Congress has used its legislative prerogatives through funding mechanisms or declarations of policy either to affirm or to place limits on presidential action. In three instances, Congress has authorized the use of military force in advance of hostilities: the Persian Gulf War (1991), military operations in Afghanistan (2001), and the "use of force against Iraq" resolution (2002). In each case, however, the President has maintained that while he may have sought congressional consultation and support, the President has the constitutional authority as Commander in Chief to use force, including the Armed Forces of the United States, to protect U.S. national security interests. Additionally, the executive branch has long viewed congressional enactment of defense appropriations bills as de facto authorization for operations funded under those measures, although Congress has often included provisions stating that no separate authorization for the use of force is implied by the appropriation of funds. Related CRS products CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications , by Jennifer K. Elsea and Matthew C. Weed. CRS Report R42699, The War Powers Resolution: Concepts and Practice , by Matthew C. Weed. CRS Report R42738, Instances of Use of United States Armed Forces Abroad, 1798-2018 , by Barbara Salazar Torreon and Sofia Plagakis. Report Content This report describes the congressional debate that often surrounds the issue of employing the U.S. military abroad. Initially written in response to a congressional request for a list of votes on this topic from 1982-1992, this report has been updated as needed since that time. The floor votes included are those directly related to the use and funding of U.S. troops abroad, often in the context of the War Powers Resolution, or to their continued presence or withdrawal. The laws, bills, and resolutions below are listed in the chronological order of the votes that were held. Links to the actual roll call votes are provided, when available (since 1990 in the House and 1989 in the Senate). These links include each Member's yea or nay vote. In some cases, House or Senate votes are voice votes, and, thus, no roll call vote exists. Moreover, the ultimate disposition of amendments listed in the report (i.e., whether such amendments were incorporated into any final law) may not be self-evident. Some amendments may appear as considered; some may have been further amended during subsequent proceedings or in conference; some may have been deleted in conference when one chamber receded from that amendment. In other instances, only one chamber of Congress may have voted on a particular measure; for example, a House or Senate simple resolution is a measure that expresses nonbinding opinions on policies or issues and is effective only in the chamber in which it is proposed. It does not require concurrence by the other chamber or approval by the President. Lebanon (1982-1983) On September 29, 1982, President Reagan deployed 1,200 marines to serve as part of a multinational observer force to restore the sovereignty of the Lebanese government. By March 30, 1984, the mission had ended. Related CRS products CRS Report R44759, Lebanon , by Carla E. Humud. Grenada (1983) On October 25, 1983, President Reagan sent U.S. Marines and Army troops to Grenada in order to protect American lives and restore law and order at the request of the Organization of Eastern Caribbean States. All U.S. troops were removed from Grenada by December 15, 1983. Panama (1989) On December 20, 1989, President George H.W. Bush deployed 14,000 U.S. military forces to Panama in order to protect American lives, restore Panamanian democracy, and apprehend General Manuel Noriega. Congress did not immediately react to the situation, as the 101 st Congress, first session had ended on November 22, 1989; the second session of the 101 st Congress did not begin until January 23, 1990. The 14,000 U.S. troops were removed from Panama by February 13, 1990. Related CRS products CRS In Focus IF10430, Panama , by Mark P. Sullivan. CRS Report RL30981, Panama: Political and Economic Conditions and U.S. Relations Through 2012 , by Mark P. Sullivan. Persian Gulf War (1990-1991) On August 2, 1990, Iraqi troops invaded Kuwait, seized its oil fields, ousted the Kuwaiti leadership, installed a new government in Kuwait City, and massed troops on the Saudi Arabian border. On August 9, President Bush reported that he had deployed U.S. troops to the region. Legislation in late 1990 (101 st Congress, second session) focused on imposing sanctions against Iraq, in seeking the withdrawal of Iraqi forces from the area, and in supporting the President in carrying out the provisions of the relevant United Nations Security Council resolutions. On January 12, 1991 (102 nd Congress, first session), the Congress authorized the "use of force" against Iraq in advance of the outbreak of hostilities with Iraq on January 16. Related CRS products CRS Report RS21513, Kuwait: Governance, Security, and U.S. Policy , by Kenneth Katzman. Somalia (1992-1995) On December 10, 1992, President George H.W. Bush reported that he had deployed U.S. troops into Somalia on December 8, in response to United Nations Security Council Resolution 794, which authorized the Secretary General to "use all necessary means to establish as soon as possible a secure environment for humanitarian relief operations in Somalia" and to provide military forces for accomplishing this mission. U.S. troops were deployed to assist United Nations Forces in Somalia (UNOSOM) throughout 1993 and 1994, ending on March 3, 1995. Related CRS products CRS In Focus IF10155, Somalia , by Lauren Ploch Blanchard and Katherine Z. Terrell. CRS Report R45428, Sub-Saharan Africa: Key Issues and U.S. Engagement , coordinated by Tomas F. Husted. Haiti (1993-1996) On October 20, 1993, President Bill Clinton reported that U.S. ships had begun enforcing a United Nations embargo against Haiti. On September 19, 1994, President Clinton had deployed 1,500 troops to Haiti to restore democracy; that level was ultimately increased to over 20,000. By March 21, 1995, U.S. troops were reduced to under 5,300 and incorporated into the United Nations Multinational Force in Haiti. By September 21, 1995, they were reduced to under 2,500 personnel. U.S. troops ended their deployment to Haiti by April 17, 1996. Related CRS products CRS Report R45034, Haiti's Political and Economic Conditions: In Brief , by Maureen Taft-Morales. Archived CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by Maureen Taft-Morales and Clare Ribando Seelke. Bosnia (1992-1998) The civil war in the former Yugoslav Republic of Bosnia-Herzegovina resulted in U.S. military participation in various efforts over several years to halt the fighting. The United States participated in both United Nations and NATO actions without explicit congressional authorization. Beginning in 1992, the United Nations Security Council adopted Resolution 770, which called on all nations to take "all measures necessary" to facilitate the delivery of humanitarian assistance to Sarajevo. On August 11, 1992, the Senate passed S.Res. 330 , which urged the President to work for such a resolution and pledged funds for participation, but also said that no U.S. military personnel should be introduced into hostilities without clearly defined objectives. On the same day, the House passed H.Res. 554 , which urged the Security Council to authorize measures, including the use of force, to ensure humanitarian relief. As the conflict in Bosnia continued and escalated over the next several years, U.S. troops were sent to participate in NATO and United Nations peacekeeping missions. Consequently, leaders in Congress began calling for greater congressional involvement in decisions. In 1994, for example, the Senate passed S. 2042 , which called for the United States to end unilaterally its arms embargo with Bosnia; the Senate also passed an amendment to S. 2042 which stated that no ground combat troops should be deployed to Bosnia unless previously authorized by Congress. The House did not act on the measure. With the signing of the Dayton Peace Agreement for Bosnia on December 14, 1995, NATO took over the ground operation from UNPROFOR (United Nations Protection Force). Consequently, in late 1995, over 20,000 U.S. combat troops were sent to Bosnia as part of the NATO-led peacekeeping force. In December 1995, Congress considered and voted on a number of bills and resolutions, but the House and Senate could not come to consensus on any single measure. In 1996, President Clinton agreed to provide up to 8,500 ground troops to participate in the NATO-led follow-on force in Bosnia termed the Stabilization Force (SFOR). Subsequent efforts by both the House and Senate to require the President to either limit funding for the Bosnia operations or to bring the troops home did not succeed. On March 18, 1998, for example, the House defeated by a vote of 193-225 H.Con.Res. 227 , which would have directed the President to remove U.S. Armed Forces from the Republic of Bosnia-Herzegovina, pursuant to Section 5(c) of the War Powers Resolution. On July 22, 2002, President Bush reported to Congress that U.S. Armed Forces contributions to SFOR in Bosnia-Herzegovina were approximately 2,400 personnel. U.S. troops ended their mission in Bosnia-Herzegovina when SFOR was replaced by the European Union Force (EUFOR Althea) in 2004. The following table includes legislation of what was introduced and voted on during the 102nd Congress-105th Congresses (1992-1998). Related CRS products CRS Insight IN10980, Postelection Issues in Bosnia and Herzegovina , by Sarah E. Garding. CRS Report RS21774, Bosnia and the European Union Military Force (EUFOR): Post-NATO Peacekeeping , by Julie Kim. CRS Report 96-723, Bosnia Implementation Force (IFOR) and Stabilization Force (SFOR): Activities of the 104th Congress , by Julie Kim. Kosovo (1999) On March 24, 1999, President Clinton ordered U.S. military forces to begin air strikes against the Federal Republic of Yugoslavia (Serbia and Montenegro) in cooperation with the NATO-led operation. The strike was ordered in response to Yugoslavia's campaign of violence against ethnic Albanians in the province of Kosovo. On June 3, 1999, Yugoslavia agreed to a peace plan calling for withdrawal of Yugoslav forces from Kosovo to include an international peacekeeping force. On June 10, 1999, NATO air strikes were halted, and Yugoslav forces withdrew their military forces from Kosovo by June 20, 1999. Congress, while not authorizing directly, and in advance, this military action, introduced and voted on several legislative measures related to deployment of U.S. military forces for combat or peacekeeping in the Balkan region. The House adopted H.Con.Res. 42 on March 11, 1999, which authorized the President to send troops as peacekeepers; the Senate passed a non-binding resolution ( S.Con.Res. 21 ) on March 23, 1999, that expressed the sense of Congress that the President was authorized to conduct military air operations in cooperation with NATO allies against Yugoslavia. However, the House later defeated the Senate resolution, on April 28, 1999. Other House or Senate votes sent conflicting signals in addressing funding related to troop deployments in the region, declaration of war issues, and executive and congressional roles in sending U.S. military forces abroad. The following legislation is representative of what was introduced and voted on in the 106 th Congress. Related CRS products CRS Report R44979, Kosovo: Background and U.S. Relations , by Vincent L. Morelli. CRS Report R44955, Serbia: Background and U.S. Relations , by Vincent L. Morelli and Sarah E. Garding. CRS Report RL31053, Kosovo and U.S. Policy: Background to Independence , by Julie Kim and Steven Woehrel. CRS Report RL30127, Kosovo Conflict Chronology: September 1998 - March 1999 , by Julie Kim. Terrorist Attack against the United States Legislation (2001-Present) On September 11, 2001, terrorists attacked the United States with a coordinated series of aircraft hijackings and suicide crashes into populated buildings. Two airplanes crashed into the twin towers of the World Trade Center in New York City, causing their complete destruction. Another airplane crashed into the Pentagon near Washington, DC, and a fourth airplane crashed in southwestern Pennsylvania (near Shanksville) after passengers attempted to take control of the aircraft in order to prevent it from crashing into an important symbol of democracy and freedom, perhaps in the Washington, DC, area. Over 3,000 people lost their lives in these terrorist attacks. Consequently, on September 14, 2001, Congress passed a joint resolution, which "authorizes the President to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations, or persons." It further states that the act is intended to constitute specific statutory authorization within the meaning of the War Powers Resolution. President George W. Bush signed the joint resolution into law on September 18, 2001. On October 9, 2001, President Bush reported in a letter to Congress that U.S. Armed Forces had begun combat action in Afghanistan against the Al Qaeda terrorists and their Taliban supporters starting at 12:30 p.m. (EDT) on October 7, 2001. Related CRS products CRS Report R43983, 2001 Authorization for Use of Military Force: Issues Concerning Its Continued Application , by Matthew C. Weed. Use of Force against Iraq (2002-2003) On October 10, 2002, after several days of debate, the House passed H.J.Res. 114 , which authorized the use of military force against Iraq. The Senate had considered its own measure, S.J.Res. 45 , beginning on October 3, but indefinitely postponed it, and instead passed H.J.Res. 114 on October 11, 2002. As enacted into law, the joint resolution provides authorization for the use of military force against Iraq and expresses support for the President's efforts to (1) strictly enforce through the United Nations Security Council all relevant Security Council resolutions regarding Iraq; and (2) obtain prompt and decisive action by the Security Council to ensure that Iraq abandons its strategy of delay, evasion, and noncompliance and promptly and strictly complies with all relevant Security Council resolutions. In addition, it authorizes the President to use the U.S. Armed Forces to (1) defend U.S. national security against the continuing threat posed by Iraq; and (2) enforce all relevant Security Council resolutions regarding Iraq. It directs the President, prior to or as soon as possible (but no later than 48 hours) after exercising such authority, to make available to the Speaker of the House of Representatives and the President pro tempore of the Senate his determination that (1) reliance on further diplomatic or peaceful means alone will not achieve the above purposes; and (2) acting pursuant to this joint resolution is consistent with the United States and other countries continuing to take necessary actions against international terrorists and terrorist organizations, including those who planned, authorized, committed, or aided the terrorist attacks of September 11, 2001. It declares that this section is intended to constitute specific statutory authorization for use of the Armed Forces, consistent with the requirements of the War Powers Resolution. Finally, it requires the President to report to Congress at least every 60 days on matters relevant to this resolution. The war with Iraq (Operation Iraqi Freedom) began on March 19, 2003, with an aerial attack against a location where Iraqi President Saddam Hussein was suspected to be meeting with top Iraqi officials. U.S. and British troops entered Iraq on March 20, 2003, and while the invasion encountered resistance, particularly in its early stages, U.S. forces had largely gained control of Baghdad by April 9, 2003. The northern cities of Kirkuk and Mosul fell shortly afterward, and on April 14, 2003, U.S. troops entered Tikrit, Saddam's birthplace and the last major population center outside coalition control. On April 15, 2003, President George W. Bush declared that "the regime of Saddam Hussein is no more." War in Iraq and Afghanistan (2001-present) U.S. military operations against Al Qaeda and Taliban forces in Afghanistan proceeded pursuant to the 2001 Authorization for Use of Military Force from October 2001 onward. U.S. military operations in Iraq proceeded pursuant to the 2002 Authorization for Use of Military Force in Iraq from March 2003 onward. On March 25, 2003, President George W. Bush requested $74.8 billion in the FY2003 Emergency Supplemental for the ongoing military operations in Iraq, postwar occupation, reconstruction and relief in Iraq, and international assistance to countries contributing to the war in Iraq or the global war on terrorism. The cost of the continued U.S. presence in Afghanistan and additional funds for homeland security were also included. H.R. 1559 , enacted into law as P.L. 108-11 on April 16, 2003, provided $78.49 billion in funding for these purposes. The Senate passed H.R. 1559 in lieu of its version, S. 762 , by unanimous consent. On September 17, 2003, President Bush formally requested an additional $87 billion for the ongoing military operations and for reconstruction assistance in Iraq, Afghanistan, and elsewhere. H.R. 3289 (FY2004 supplemental appropriations for Iraq, Afghanistan, and the global war on terrorism) was enacted into law as P.L. 108-106 on November 6, 2003, providing $87.5 billion in funding. The House approved the conference agreement by a roll call vote on October 31, 2003, and the Senate approved the conference agreement by voice vote on November 3, 2003. Earlier, on October 17, 2003, the Senate had approved its own version of the measure, S. 1689 , but vitiated its passage and returned the bill to the Senate Calendar. Related CRS products CRS Report R45025, Iraq: Background and U.S. Policy , by Christopher M. Blanchard. CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by Kenneth Katzman and Clayton Thomas. CRS Report R41070, Al Qaeda and Affiliates: Historical Perspective, Global Presence, and Implications for U.S. Policy , coordinated by John W. Rollins. Revolution and Aftermath in Libya The 2011 uprising against Libyan dictator Muammar Qadhafi prompted calls for Western military assistance to the rebels, initially in the form of a no-fly zone to prevent regime aircraft from attacking rebel forces and civilians. As the revolt progressed, air strikes were conducted by U.S. and NATO forces against regime targets under Operation Odyssey Dawn and Operation Unified Protector. The Qadhafi government was overthrown and Qadhafi himself was killed, leading to the lifting of strict regime political control in Libya but also to an uncertain security environment in which rival militias competed in the absence of any strong central authority. U.S. military operations began in March 2011 and ended in October 2011. A September 11, 2012, armed attack on a U.S. diplomatic compound in Benghazi, Libya resulted in the deaths of four Americans, including the U.S. ambassador. Related CRS products CRS Report RL33142, Libya: Transition and U.S. Policy , by Christopher M. Blanchard . Uprising and Armed Conflict In Syria What began as protests, then an internal armed uprising in Syria in 2011 became a broader conflict, with various factions of Syrian rebels and foreign fighters joined in combat with each other as well as with the forces of the Asad regime, itself aided by fighters from outside Syria. In summer 2013 the Obama Administration announced that the U.S. intelligence community had determined "with high confidence" that the Asad regime had used chemical weapons attacks against its own people, resulting in mass casualties. The United States has been providing nonlethal materiel support to selected opposition groups, and a congressionally authorized U.S. train-and-equip program continues. See section below, " Military Action against the Islamic State (IS, ISIS, ISIL) ." Related CRS products CRS Report RL33487, Armed Conflict in Syria: Overview and U.S. Response , coordinated by Carla E. Humud. Military Action against the Islamic State (IS, ISIS, ISIL) One group rose to prominence in the fighting against the Assad regime: the self-proclaimed "Islamic State" (IS), also known as ISIS (Islamic State in Iraq and Syria) and ISIL (Islamic State in Iraq and the Levant). A lineal descendant or continuation of the insurgent group al-Qaeda in Iraq, some of its senior operatives gained experience fighting American forces in Iraq. Particularly noted for sophisticated online media releases and extremely brutal tactics, IS in its self-released videos showed numerous massacres and beheadings, including those of a number of captured Westerners. It made significant territorial gains in Syria and also in Iraq, where its forces captured refineries and banks, thereby acquiring a self-financing capacity. The Iraqi military suffered high personnel losses through casualties and desertions, as well as enormous losses of materiel. After a series of online releases depicting the beheadings of American captives of IS, and in the wake of the success of the IS campaign in Iraq and Syria, President Obama authorized a program of aid to anti-IS forces, particularly the Iraqi military and the Kurds. In cooperation with a coalition of allies, he ordered air strikes designed to assist Iraqi and Kurdish forces battling IS and degrade IS military capabilities. IS has suffered extensive territorial losses in the combined campaign and today controls far less territory in Syria and Iraq than at the height of its power, but the potential for terrorist acts committed by IS foreign fighters returning to their countries of origin is a matter of concern for antiterrorism and police authorities. Related CRS products CRS Report R43612, The Islamic State and U.S. Policy , by Christopher M. Blanchard and Carla E. Humud. CRS Report R43760, A New Authorization for Use of Military Force Against the Islamic State: Issues and Current Proposals , by Matthew C. Weed. CRS Report R44135, Coalition Contributions to Countering the Islamic State , by Kathleen J. McInnis. CRS In Focus IF10604, Al Qaeda and Islamic State Affiliates in Afghanistan , by Clayton Thomas. Hostilities in Yemen Beginning in March 2015, Saudi Arabia and a coalition of partner countries (including the United Arab Emirates, Bahrain, Kuwait, Egypt, Jordan, Morocco, Senegal, and Sudan) engaged in conflict in Yemen against the Ansar Allah/Houthi movement and followers of the late president of Yemen, Ali Abdullah Saleh. The United States has been providing logistical and intelligence support, for a time including air-to-air refueling. Refueling operations ended in early November 2018. Civilian casualties in the conflict have been a matter of concern and congressional debate, along with humanitarian conditions in general in Yemen. Related CRS Products CRS Report R43960, Yemen: Civil War and Regional Intervention , by Jeremy M. Sharp. CRS Report R45046, The War in Yemen: A Compilation of Legislation in the 115th Congress , by Jeremy M. Sharp and Christopher M. Blanchard. Sources Consulted CRS Report R42738, Instances of Use of United States Armed Forces Abroad, 1798-2018 , by Barbara Salazar Torreon and Sofia Plagakis. CRS Report RL32492, American War and Military Operations Casualties: Lists and Statistics , by Nese F. DeBruyne. CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications , by Jennifer K. Elsea and Matthew C. Weed. CRS Report R42699, The War Powers Resolution: Concepts and Practice , by Matthew C. Weed. Legislative Information System (LIS) of the U.S. Congress at http://www.congress.gov/ . Congressional Quarterly searchable online floor vote database at http://www.cq.com . Congressional Quarterly Almanac . Washington, CQ Press. Annual. CQ Weekly . Washington, CQ Press. Various issues.

This report summarizes selected congressional roll call votes related to instances in which U.S. Armed Forces have been sent abroad in potentially hostile situations. These votes reflect the type of congressional actions that observers maintain bear directly on issues affecting policy and the funding of troops abroad, often in the context of the War Powers Resolution, continued presence or withdrawal of troops, and the "use of force." The cases of Lebanon (1982-1983), Grenada (1983), Panama (1989), the Persian Gulf War (1990-1991), Somalia (1992-1995), Haiti (1993-1996), Bosnia (1992-1998), Kosovo (1999), the terrorist attack against the United States (2001) (including the use of U.S. Armed Forces in Afghanistan), and the use of U.S. Armed Forces against Iraq (2002-2003) and Iraq and Afghanistan (2001-Present) are examined, as are the revolution in Libya and its aftermath, the uprising and war in Syria, and military action against the self-proclaimed Islamic State (IS a.k.a, ISIS/ISIL). The roll call votes that are available online (since 1990 in the House and 1989 in the Senate) are hyperlinked in the text.

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Recent Developments On January 21, 2019, Venezuela's government-aligned Supreme Court issued a ruling declaring the National Assembly illegitimate and its rulings unconstitutional. (See " Lead-Up to Maduro's January 2019 Inauguration and Aftermath ," below.) On January 21, 2019, Venezuelan military authorities announced the arrest of 27 members of the National Guard who allegedly stole weapons (since recovered) as they tried to incite an uprising against the government. (See " Lead-Up to Maduro's January 2019 Inauguration and Aftermath ," below.) On January 15, 2019, Venezuela's National Assembly declared that President Maduro had usurped the presidency. The legislature also established a framework for the formation of a transitional government led by Juan Guaidó of the Popular Will (VP) party, the president of the National Assembly who was elected on January 5, 2019, to serve until presidential elections can be held (per Article 233 of the constitution). In addition, the legislature approved amnesty from prosecution for public officials who facilitate the transition. (See " Lead-Up to Maduro's January 2019 Inauguration and Aftermath ," below.) On January 13, 2019, Venezuela's intelligence service detained, and then released, Juan Guaidó. Two days prior, Guaidó had said he would be willing to assume the presidency on an interim basis until new elections could be held; he also called for national protests to occur on January 23, 2019. (See " Lead-Up to Maduro's January 2019 Inauguration and Aftermath ," below.) On January 10, 2019, the U.S. Department of State issued a statement condemning Maduro's "illegitimate usurpation of power" and vowing to "work with the National Assembly ... in accordance with your constitution on a peaceful return to democracy." (See " U.S. Policy ," below.) On January 10, 2019, the Organization of American States (OAS) passed a resolution rejecting the legitimacy of Nicolas Maduro's new term. (See Appendix B , below.) On January 10, 2019, President Nicolas Maduro began a second term after a May 2018 election that has been deemed illegitimate by the democratically elected, opposition-controlled National Assembly and much of the international community. (See " Foreign Relations ," below.) On January 8, 2019, the U.S. Department of the Treasury imposed sanctions on seven individuals and 23 companies involved in a scheme that stole $2.4 billion through manipulation of Venezuela's currency exchange system under authority provided in Executive Order (E.O.) 13850 . (See " Targeted Sanctions Related to Antidemocratic Actions, Human Rights Violations, and Corruption ," below.) On December 17, 2018, a group of investors demanded the Venezuelan government pay off the interest and principal of a defaulted $1.5 billion bond, the first step in a potential legal process by creditors to recover their assets. (See " Prospects for 2019 ," below.) On December 14, 2018, El Nacional , Venezuela's last independent newspaper with national circulation, stopped publishing its print edition after 75 years. The move ame after numerous advertising restrictions, lawsuits, and threats from the Venezuelan government. (See " Human Rights," below.) On December 14, 2018, the United Nations launched an appeal for $738 million to support refugees and migrants from Venezuela in 2019. (See " Humanitarian Situation ," below.) Introduction Venezuela, long one of the most prosperous countries in South America with the world's largest proven oil reserves, continues to be in the throes of a deep political, economic, and humanitarian crisis. Whereas populist President Hugo Chávez (1998-2013) governed during a period of generally high oil prices, his successor, Nicolás Maduro of the United Socialist Party of Venezuela (PSUV), has exacerbated an economic downturn caused by low global oil prices through mismanagement and corruption. According to Freedom House, Venezuela has fallen from "partly free" under Chávez to "not free" under Maduro, an unpopular leader who has violently quashed dissent and illegally replaced the legislature with a National Constituent Assembly (ANC) elected under controversial circumstances in July 2017. President Maduro won reelection in early elections held in May 2018 that were dismissed as illegitimate by the United States, the European Union (EU), the G-7, and a majority of countries in the Western Hemisphere. U.S. relations with Venezuela, a major oil supplier, deteriorated during Chávez's rule, which undermined human rights, the separation of powers, and freedom of expression. U.S. and regional concerns have deepened as the Maduro government has manipulated democratic institutions; cracked down on the opposition, media, and civil society; engaged in drug trafficking and corruption; and refused most humanitarian aid. Efforts to hasten a return to democracy in Venezuela have failed thus far. President Maduro's convening of the ANC and early presidential elections have triggered international criticism and led to sanctions by Canada, the EU, Panama, Switzerland, the United States, and potentially others. This report provides an overview of the overlapping political, economic, and humanitarian crises in Venezuela, followed by an overview of U.S. policy toward Venezuela. Political Situation Legacy of Hugo Chávez (1999-2013)2 In December 1998, Hugo Chávez, a leftist populist representing a coalition of small parties, received 56% of the presidential vote (16% more than his closest rival). Chávez's commanding victory illustrated Venezuelans' rejection of the country's two traditional parties, Democratic Action (AD) and the Social Christian party (COPEI), which had dominated Venezuelan politics for the previous 40 years. Most observers attribute Chávez's rise to power to popular disillusionment with politicians whom they then judged to have squandered the country's oil wealth through poor management and corruption. Chavez's campaign promised constitutional reform; he asserted that the system in place allowed a small elite class to dominate Congress and waste revenues from the state oil company, Petróleos de Venezuela , S. A. (PdVSA). Venezuela had one of the most stable political systems in Latin America from 1958 until 1989. After that period, however, numerous economic and political challenges plagued the country. In 1989, then-President Carlos Andres Pérez (AD) initiated an austerity program that fueled riots in which several hundred people were killed. In 1992, two attempted military coups threatened the Pérez presidency, one led by Chávez, who at the time was a lieutenant colonel railing against corruption and poverty. Chávez served two years in prison for that failed coup attempt. In May 1993, the legislature dismissed Pérez from office for misusing public funds. The election of former President Rafael Caldera (1969-1974) as president in December 1993 brought a measure of political stability, but the government faced a severe banking crisis. A rapid decline in the price of oil caused a recession beginning in 1998, which contributed to Chávez's landslide election. Under Chávez, Venezuela adopted a new constitution (ratified by a plebiscite in 1999), a new unicameral legislature, and even a new name for the country—the Bolivarian Republic of Venezuela, named after the 19 th century South American liberator Simón Bolívar. Buoyed by windfall profits from increases in the price of oil, the Chávez government expanded the state's role in the economy by asserting majority state control over foreign investments in the oil sector and nationalizing numerous private enterprises. Chávez's charisma, use of oil revenue to fund domestic social programs and provide subsidized oil to Cuba and other Central American and Caribbean countries, and willingness to oppose the United States captured global attention. After Chávez's death, his legacy has been debated. President Chávez established an array of social programs and services known as missions that helped reduce poverty by some 20% and improve literacy and access to health care. Some maintain that Chávez also empowered the poor by involving them in community councils and workers' cooperatives. Nevertheless, his presidency was "characterized by a dramatic concentration of power and open disregard for basic human rights guarantees," especially after his brief ouster from power in 2002. Declining oil production, combined with massive debt and high inflation, have shown the costs involved in Chávez's failure to save or invest past oil profits, tendency to take on debt and print money, and decision to fire thousands of PdVSA technocrats after an oil workers' strike in 2002-2003. Venezuela's 1999 constitution, amended in 2009, centralized power in the presidency and established five branches of government rather than the traditional three branches. Those branches include the presidency, a unicameral National Assembly, a Supreme Court, a National Electoral Council (CNE), and a "Citizen Power" branch (three entities that ensure that government officials at all levels adhere to the rule of law and that can investigate administrative corruption). The president is elected for six-year terms and can be reelected indefinitely; however, he or she also may be made subject to a recall referendum (a process that Chávez submitted to in 2004 and survived but Maduro cancelled in 2016). Throughout his presidency, Chávez exerted influence over all the government branches, particularly after an outgoing legislature dominated by chavistas appointed pro-Chávez justices to dominate the Supreme Court in 2004 (a move that Maduro's allies would repeat in 2015). In addition to voters having the power to remove a president through a recall referendum process, the National Assembly has the constitutional authority to act as a check on presidential power, even when the courts fail to do so. The National Assembly consists of a unicameral Chamber of Deputies with 167 seats whose members serve for five years and may be reelected once. With a simple majority, the legislature can approve or reject the budget and the issuing of debt, remove ministers and the vice president from office, overturn enabling laws that give the president decree powers, and appoint the 5 members of the CNE (for 7-year terms) and the 32 members of the Supreme Court (for one 12-year term). With a two-thirds majority, the assembly can remove judges, submit laws directly to a popular referendum, and convene a constitutional assembly to revise the constitution. Maduro Government10 After the death of President Hugo Chávez in March 2013, Venezuela held presidential elections the following month in which acting President Nicolás Maduro defeated Henrique Capriles of the MUD by 1.5%. The opposition alleged significant irregularities and protested the outcome. Given his razor-thin victory and the rise of the opposition, Maduro sought to consolidate his authority. Security forces and allied civilian groups violently suppressed protests and restricted freedom of speech and assembly. In 2014, 43 people died and 800 were injured in clashes between pro-government forces and student-led protesters concerned about rising crime and violence. President Maduro imprisoned opposition figures, including Leopoldo López, head of the Popular Will (VP) party, who was sentenced to more than 13 years in prison for allegedly inciting violence. The Union of South American Nations (UNASUR) initiated a government-opposition dialogue in April 2014, but talks quickly broke down. In February 2015, the Maduro government again cracked down on the opposition. In the December 2015 legislative elections, the MUD captured a two-thirds majority in Venezuela's National Assembly—a major setback for Maduro. The Maduro government took actions to thwart the legislature's power. The PSUV-aligned Supreme Court blocked three MUD deputies from taking office, which deprived the opposition of the two-thirds majority needed to submit bills directly to referendum and remove Supreme Court justices. From January 2016 through August 2017 (when the National Constituent Assembly voted to give itself legislative powers), the Supreme Court blocked numerous laws and assumed many of the legislature's functions. In 2016, opposition efforts focused on attempts to recall President Maduro in a national referendum. The government used delaying tactics to slow the process considerably. On October 20, 2016, Venezuela's CNE suspended the recall effort after five state-level courts issued rulings alleging fraud in a signature collection drive that had amassed millions of signatures. In October 2016, after an appeal by Pope Francis, most of the opposition (with the exception of the Popular Will party) and the Venezuelan government agreed to talks mediated by the Vatican, along with the former leaders of the Dominican Republic, Spain, and Panama and the head of UNASUR. By December 2016, the opposition had left the talks due to what it viewed as a lack of progress on the part of the government in meeting its commitments. Repression of Dissent, Establishment of a Constituent Assembly in 2017 Far from meeting the commitments it made during the Vatican-led talks, the Maduro government continued to harass and arbitrarily detain opponents (see " Human Rights ," below). In addition, President Maduro appointed a hardline vice president, Tareck el Aissami, former governor of the state of Aragua and a sanctioned U.S. drug kingpin, in January 2017. Popular protests, which were frequent between 2014 and autumn 2016, had dissipated. In addition to restricting freedom of assembly, the government had cracked down on media outlets and journalists, including foreign media. Despite these obstacles, the MUD became reenergized in response to the Supreme Court's March 2017 rulings to dissolve the legislature and assume all legislative functions. After domestic protests, a rebuke by then-Attorney General Luisa Ortega (a Chávez appointee), and an outcry from the international community, President Maduro urged the court to revise those rulings, and it complied. In April 2017, the government banned opposition leader and two-time presidential candidate Henrique Capriles from seeking office for 15 years, which fueled more protests. From March to July 2017, the opposition conducted large, sustained protests against the government, calling for President Maduro to release political prisoners, respect the separation of powers, and hold an early presidential election. Clashes between security forces (backed by armed civilian militias) and protesters left more than 130 dead and hundreds injured. In May 2017, President Maduro announced that he would convene a constituent assembly to revise the constitution and scheduled July 30 elections to select delegates to that assembly. The Supreme Court ruled that Maduro could convoke the assembly without first holding a popular referendum (as the constitution required). The opposition boycotted, arguing that the elections were unconstitutional; a position shared by then-Attorney General Luisa Ortega and international observers (including the United States, Canada, the EU, and many Latin American countries). In an unofficial plebiscite convened on July 16 by the MUD, 98% of some 7.6 million Venezuelans cast votes rejecting the creation of a constituent assembly; the government ignored that vote. Despite an opposition boycott and protests, the government orchestrated the July 30, 2017, election of a 545-member National Constituent Assembly (ANC) to draft a new constitution. Venezuela's CNE reported that almost 8.1 million people voted, but a company involved in setting up the voting system alleged that the tally was inflated by at least 1 million votes. Many observers viewed the establishment of the ANC as an attempt by the ruling PSUV to ensure its continued control of the government even though many countries have refused to recognize its legitimacy. The ANC dismissed Attorney General Ortega, who had been critical of the government, voted to approve its own mandate for two years, and declared itself superior to other branches of government. Ortega fled Venezuela in August 2017 and has spoken out against the abuses of the Maduro government. The ANC also approved a decree allowing it to pass legislation, unconstitutionally assuming the powers of the National Assembly. Efforts to Consolidate Power Before the May 2018 Elections From mid-2017 to May 2018, President Maduro strengthened his control over the PSUV and gained the upper hand over the MUD despite international condemnation of his actions. In October 2017, the PSUV won 18 of 23 gubernatorial elections. Although fraud likely took place given the significant discrepancies between opinion polls and the election results, the opposition could not prove that fraud was widespread. There is evidence that the PSUV linked receipt of future government food assistance to votes for its candidates by placing food assistance card registration centers next to polling stations, a practice also used in subsequent elections. The MUD coalition initially rejected the election results, but four victorious MUD governors took their oaths of office in front of the ANC (rather than the National Assembly), a decision that fractured the coalition. With the opposition in disarray, President Maduro and the ANC moved to consolidate power and blamed U.S. sanctions for the country's economic problems. Maduro fired and arrested the head of PdVSA and the oil minister for corruption. He appointed a general with no experience in the energy sector as oil minister and head of the company, further consolidating military control over the economy. The ANC approved a law to further restrict freedom of expression and assembly. Although most opposition parties did not participate in municipal elections held in December 2017, a few, including A New Time (UNT), led by Manuel Rosales, and Progressive Advance (AP), led by Henri Falcón, fielded candidates. The PSUV won more than 300 of 335 mayoralties. The CNE required parties that did not participate in those elections to re-register in order to run in the 2018 presidential contest, a requirement that many of them subsequently rejected. May 2018 Elections The Venezuelan constitution established that the country's presidential elections were to be held by December 2018. Although many prominent opposition politicians had been imprisoned (Leopoldo López, under house arrest), barred from seeking office (Henrique Capriles), or in exile (Antonio Ledezma ) by late 2017, some MUD leaders sought to unseat Maduro through elections. Those leaders negotiated with the PSUV to try to obtain guarantees, such as a reconstituted CNE and international observers, to help ensure the elections would be as free and fair as possible. In January 2018, the ANC ignored those negotiations and called for elections to be moved up from December to May 2018, violating a constitutional requirement that elections be called with at least six months anticipation. The MUD declared an election boycott, but Henri Falcón (AP) broke with the coalition to run. Falcón, former governor of Lara, pledged to accept humanitarian assistance, dollarize the economy, and foster national reconciliation. Venezuela's presidential election proved to be minimally competitive and took place within a climate of state repression. President Maduro and the PSUV's control over the CNE, courts, and constituent assembly weakened Falcón's ability to campaign. State media promoted government propaganda. There were no internationally accredited election monitors. The government coerced its workers to vote and placed food assistance card distribution centers next to polling stations. The CNE reported that Maduro received 67.7% of the votes, followed by Falcón (21%) and Javier Bertucci, a little-known evangelical minister (10.8%). Voter turnout was much lower in 2018 (46%) than in 2013 (80%), perhaps due to the MUD's boycott. After independent monitors reported widespread fraud, Falcón and Bertucci called for new elections to be held. Lead-Up to Maduro's January 2019 Inauguration and Aftermath Since the May 2018 election, President Maduro has faced mounting economic problems (discussed below), coup attempts, and increasing international isolation (see " Foreign Relations ," below). His government has released some political prisoners, including U.S. citizen Joshua Holt, former Mayor Daniel Ceballos, opposition legislators (Gilber Caro and Renzo Prieto), and, in October 2018, former student leader Lorent Saleh. He reshuffled his Cabinet to establish Delcy Rodriguez, former head of the ANC and former foreign minister, as executive vice president in June 2018 and made additional changes in October 2018 within the judiciary and the intelligence services to strengthen his control. On December 9, 2018, Maduro's PSUV-dominated municipal council elections that most opposition parties boycotted, some 27% of eligible voters participated. During 2018, the opposition remained relatively weak and divided and Maduro focused on quashing coup plots and dissent within the military. His government arrested those perceived as threats, including military officers, an opposition legislator accused of involvement in an August 2018 alleged assassination attempt against Maduro, and a German journalist accused of being a spy. According to Foro Penal (a Venezuelan human rights group), the government held 278 political prisoners as of December 2018. Foro Penal and Human Rights Watch have documented several cases in which those accused of plotting coups were subjected to "beatings, asphyxiation and electric shocks" by the intelligence services The October 2018 death of Fernando Albán, an opposition politician who was also in custody for his reported involvement in the August 2018 alleged assassination attempt, has provoked domestic protests and international concern. Given that 70% of the population favored Maduro's resignation instead of his inauguration to a second term, observers predict he will face mounting protests and internal dissent. Maduro's regime also could see more defections. In early January, Christian Zerpa, a former ally of Maduro on the Supreme Court, fled the country to seek asylum in the United States; he maintains that the May election "was not free and competitive." Under the leadership of Juan Guaidó, a 35-year old industrial engineer from the VP party who was elected president of the National Assembly on January 5, 2019, the opposition has been reenergized. Guaidó, buoyed by widespread international condemnation of the May 2018 elections, has declared himself willing to serve as interim president of Venezuela until elections can be called as provided for in Article 233 of the 1999 constitution in the event that a president vacates power. Secret police detained and then subsequently released Guaidó on January 13, 2019; it is unclear whether they were acting under Maduro's authority. A government spokesman maintained that the detention "was an irregular and unilateral action" by officials who would be punished. While the Brazilian government and the Secretary General of the OAS have openly welcomed Guaidó as "interim president," the United States and others have expressed solidarity and urged Venezuelans to rally behind him but stopped short of recognizing him as the country's interim leader. The National Assembly has enacted resolutions to declare that President Maduro is no longer the legitimate president, establish a framework for the formation of a transition government, ask 48 countries to freeze Maduro government assets, and provide for amnesty for any public officials (including military members) that support a transition. The Maduro-aligned Supreme Court has ruled that the new leadership of the National Assembly has been acting outside of the law and invalidated its declarations. It remains to be seen how the security forces will respond to these developments, as well as to protests that have been called for January 23, 2019, and beyond. Human Rights Human rights organizations and U.S. officials have expressed concerns for more than a decade about the deterioration of democratic institutions and threats to freedom of speech and press in Venezuela. Human rights conditions in Venezuela have deteriorated even more under President Maduro than under former President Chávez. Abuses have increased, as security forces and allied armed civilian militias ( collectivos ) have been deployed to violently quash protests. In August 2017, the United Nations Office of the High Commissioner for Human Rights (UNOCHR) issued a report on human rights violations perpetrated by the Venezuelan security forces against the protestors. According to the report, credible and consistent accounts indicated that "security forces systematically used excessive force to deter demonstrations, crush dissent, and instill fear." The U.N. report maintained that many of those detained were subject to cruel, degrading treatment and that in several cases, the ill treatment amounted to torture. UNOCHR called for an international investigation of those abuses. In June 2018, UNOCHR issued another report documenting abuses committed by units involved in crime fighting, the scale of the health and food crisis, and the continued impunity in cases involving security officers who allegedly killed people during the protests. Other selected human rights reports from 2017-2018 include The Venezuelan human rights group Foro Penal and Human Rights Watch maintain that more than 5,300 Venezuelans were detained during the protests. Together, the organizations documented inhumane treatment of more than 300 detainees that occurred between April and September 2017. In February 2018, the Inter-American Commission on Human Rights (IACHR) released its third report on the situation of human rights in Venezuela. The report highlighted the violation of the separation of powers that occurred as President Maduro and the judiciary interfered in the work of the legislature and then replaced it with a constituent assembly. It then criticized state limits on social protests and freedom of expression and said that the government "must curtail the use of force against demonstrators." In March 2018, the State Department's Country Report on Human Rights Practices for 2017 found that "human rights deteriorated dramatically" in 2017 as the government tried hundreds of civilians in military courts and arrested 12 opposition mayors for their "alleged failure to control protests." In May 2018, an independent panel of human rights experts added a legal assessment to a report containing information and witness testimonies gathered by the OAS recommending that the International Criminal Court (ICC) should investigate credible reports that the Venezuelan government committed crimes against humanity. These reports published by international human rights organizations, the U.S. government, U.N. entities, and the OAS/IACHR reiterate the findings of PROVEA, one of Venezuela's leading human rights organizations. In its report covering 2017 (published in June 2018), PROVEA asserts that 2017 was the worst year for human rights in Venezuela since the report was first published in 1989. In addition to violating political and civil rights, PROVEA denounces the Maduro government's failure to address the country's humanitarian crisis, citing its "official indolence" as causing increasing deaths and massive emigration. For other sources on human rights in Venezuela, see Appendix C . In September 2017, several countries urged the U.N. Human Rights Council to support the High Commissioner's call for an international investigation into the abuses described in the U.N.'s August 2017 report on Venezuela. In June 2018, the High Commissioner for Human Rights urged the U.N. Human Rights Council to launch a commission of inquiry to investigate the abuses it documented in that and a follow-up report. It referred the report to the prosecutor of the ICC. On September 26, 2018, the U.N. Human Rights Council adopted a resolution on Venezuela expressing "its deepest concern" about the serious human rights violations described in the June 2018 report, calling upon the Venezuelan government to accept humanitarian assistance and requiring a UNOCHR investigation on the situation in Venezuela to be presented in 2019. In addition to the UNOCHR, former Venezuelan officials, the OAS, and neighboring countries have asked the ICC to investigate serious human rights violations committed by the Maduro government; the ICC prosecutor opened a preliminary investigation in February 2018. In November 2017, former Attorney General Luisa Ortega presented a dossier of evidence to the ICC that the police and military may have committed more than 1,800 extrajudicial killings as of June 2017. In the dossier, Ortega urged the ICC to charge Maduro and several officials in his Cabinet with serious human rights abuses. An exiled judge appointed by the National Assembly to serve on the "parallel" supreme court of justice also accused senior Maduro officials of systemic human rights abuses before the ICC. On September 26, 2018, the governments of Argentina, Canada, Chile, Colombia, Paraguay, and Peru requested an investigation of Venezuela's actions by the ICC—the first time fellow states party to the Rome Statute asked for an investigation into the situation of another treaty member. Economic Crisis48 For decades, Venezuela was one of South America's most prosperous countries. Venezuela has the world's largest proven reserves of oil, and its economy is built on oil. Oil traditionally has accounted for more than 90% of Venezuelan exports, and oil sales have funded the government budget. Venezuela benefited from the boom in oil prices during the 2000s. President Chávez used the oil windfall to spend heavily on social programs and expand subsidies for food and energy, and government debt more than doubled as a share of gross domestic product (GDP) between 2000 and 2012. Chávez also used oil to expand influence abroad through PetroC aribe , a program that allowed Caribbean Basin countries to purchase oil at below-market prices. Although substantial government outlays on social programs helped Chávez curry political favor and reduce poverty, economic mismanagement had long-term consequences. Chávez moved the economy in a less market-oriented direction, with widespread expropriations and nationalizations, as well as currency and price controls. These policies discouraged foreign investment and created market distortions. Government spending was not directed toward investment to increase economic productivity or diversify the economy from its reliance on oil. Corruption proliferated. When Nicolás Maduro took office in 2013, he inherited economic policies reliant on proceeds from oil exports. When oil prices crashed by nearly 50% in 2014, the Maduro government was ill-equipped to soften the blow. The fall in oil prices strained public finances. Instead of adjusting fiscal policies through tax increases and spending cuts, the Maduro government tried to address its growing budget deficit by printing money, which led to inflation. The government also tried to curb inflation through price controls, although these controls were largely ineffective in restricting prices, as supplies dried up and transactions moved to the black market. Meanwhile, the government continued to face a substantial debt burden, with debt owed to private bondholders, China, Russia, multilateral lenders, importers, and service companies in the oil industry. Initially, the government tried to service its debt, fearing legal challenges from bondholders. To service its debt, it cut imports, including of food and medicine, among other measures. In August 2018, the Trump Administration imposed sanctions restricting Venezuela's ability to access U.S. financial markets, which exacerbated the government's fiscal situation. By late 2017, the government had largely stopped paying its bondholders, and Maduro announced plans to restructure its debt with private creditors. It also restructured its debt with Russia. Developments in 2018 Economic output in Venezuela has collapsed. Venezuela's economy has contracted each year since 2014. As the economic crisis has continued and oil production has plummeted (see Figure 3 ), the pace of economic contraction has accelerated. In 2014, the economy contracted by 3.9%; in more recent years, the pace has increased to 16.5% in 2016, 14% in 2017, and 18% in 2018 (see Figure 2 ). In U.S. dollars, Venezuela's GDP has fallen from $331 billion in 2012 to $96 billion in 2018. Hyperinflation is rampant, creating shortages of critical supplies. The government has rapidly expanded the money supply to finance budget deficits, which has led to one of the worst cases of hyperinflation in history, comparable to Germany in 1923 or Zimbabwe in the late 2000s. In October 2018, the IMF forecast that inflation (as measured by average changes in consumer prices) increased from 254% in 2016 to 1,087% in 2017 to 1,370,000% in 2018 (see Figure 2 ). Hyperinflation, as well as low foreign exchange reserves, which make it difficult for Venezuela to import goods and services, has created shortages of critical supplies (including food and medicine), leading to a humanitarian disaster and fueling massive migration (see " Humanitarian Situation ," below). The government remains in default and continues to run unsustainable fiscal policies. Despite pledges to restructure the country's debt, the government has made no discernable progress in negotiations with private creditors and the country remains in default. According to one estimate, the government and state-owned companies owe nearly $8 billion in unpaid interest and principal. Meanwhile, the government continues to run large budget deficits, forecast at 30% of GDP in 2018, amid high debt levels (estimated to be 160% of GDP). By one measure, debt relative to exports, Venezuela is the world's most heavily indebted country. In general, the government has been slow to address the economic crisis or acknowledge the government role in creating it. Instead, the government has largely blamed the country's struggles on a foreign "economic war," a thinly veiled reference to U.S. sanctions. In February 2018, as a way to raise new funds, the cash-strapped government launched a new digital currency, the "petro," backed by oil and other commodities, which runs on blockchain technology. The government claims the petro raised $3.3 billion, but the amount raised has never been confirmed by an independent audit. Additionally, there are questions about the petro's operational viability: there are few signs of the petro being circulated within Venezuela or sold on any major cryptocurrency exchange. In August 2018, the government acknowledged, for the first time, its role in creating hyperinflation and announced a new set of policies for addressing the economic crisis. The new policies, reportedly developed in consultation with international advisers, included introducing a new "sovereign bolívar," which removed five zeros from the previous currency (the bolívar); cutting the government budget deficit from 30% in 2018 to zero, in part by raising value-added tax and increasing the price of petrol; speeding up tax collection; and increasing the minimum salary by more than 3,000%. Since the plan's rollout in August, there is little evidence that the government's policies have restored confidence in Venezuela's economy. In December 2018, Maduro visited Moscow seeking financial assistance. Although he announced investment deals with Russian partners—$5 billion for the oil industry and $1 billion for the gold industry—Russian officials cast doubt on these commitments. Prospects for 2019 The long-anticipated conflict between investors holding defaulted Venezuelan bonds and the government may be coming to a head. Venezuelan government and PdVSA dollar-denominated bonds were largely issued under New York law. It has been expected that bondholders would seek repayment through legal challenges against the Venezuelan government or PdVSA in the U.S. legal system. If successful in their legal challenges, creditors could receive compensation through seizure of Venezuela's assets in the United States, such as Citgo (whose parent company is PdVSA), oil exports, and cash payments for oil exports. Even though the government started missing payments in late 2017, creditors refrained from mounting legal challenges, presumably hoping for higher recovery rates during a more favorable economic environment and/or negotiations with new government. U.S. sanctions also complicate the restructuring process. However, in mid-December 2018, a group of creditors took an initial step toward launching the legal process, by demanding payment on a defaulted $1.5 billion bond. It is expected that other creditors will organize and follow suit. Venezuela's economic crisis has been ongoing for a number of years, and the outlook is bleak. There is neither a clear nor a quick resolution on the horizon, particularly given the concurrent political crisis. The government's policy responses to the economic crisis—even with the new reforms in August—have been widely criticized as inadequate. The government appears loathe to adopt policies widely viewed by economists as necessary to restoring the economy: removing price controls, creating an independent central bank, engaging with an IMF program, and restructuring its debt with private bondholders. The role of the IMF in particular is problematic, with the government resisting outside support from "imperialist" powers. Venezuela has not allowed the IMF to conduct routine surveillance of its economy since 2004, and the IMF has found the government in violation of its commitments as an IMF member. However, in December 2018, the IMF acknowledged that the Venezuelan government provided it with some economic data as required by all IMF members. It remains to be seen whether this will be a turning point in the Maduro government's willingness to engage with the IMF. Some analysts believe a change in Venezuela's overall economic strategy will only come if and when there is a change in government. Energy Sector Challenges67 Oil revenues are an important element of Venezuela's economy and account for approximately 98% of the country's export earnings. Venezuela holds the largest amount of oil reserves in the world with more than 300 billion barrels of proven reserves at the end of 2017. However, oil production and export volumes have been trending downward over the last four years. In 2015, oil production in Venezuela averaged 2.37 million barrels per day (b/d). Oil production declined to average 1.9 million b/d in 2017. In March 2018, the International Energy Agency projected that Venezuela's crude oil production would continue declining to just over 1 million b/d and remain at that level until 2023 (see Figure 3 ). Actual oil production in Venezuela has generally followed the projected trend with production in November 2018 averaging approximately 1.13 million b/d. PdVSA's performance has been affected by a number of factors. Since August 2017, the Maduro government has arrested many executives for alleged corruption, which dissidents within the company assert has been a false pretense for replacing technocrats with military officers. Workers at all levels reportedly are abandoning the company by the thousands. Production has been challenged by aging infrastructure, bottlenecks created by PdVSA's inability to pay service companies and producers, and shortages of inputs (such as light crudes for blending) used to process its heavy crude oil. Massive debt (estimated at some $25 billion), combined with U.S. sanctions limiting the willingness of banks to issue credit to PdVSA and the fact that much of its production does not generate revenue, have added to the company's woes. When Conoco sought to seize PdVSA facilities in the Caribbean over nonpayment of past debts in mid-2018, tankers with crude oil began backing up and the company could not satisfy all of its deliveries. Corruption remains a major drain on the company's revenues and an impediment to performance. In 2016, a report by the National Assembly estimated that some $11 billion disappeared at PdVSA from 2004 to 2014. In February 2018, U.S. prosecutors unsealed an indictment accusing former executives in Venezuela's energy ministry and PdVSA of laundering more than $1 billion in oil income. Corruption, as well as looting and misuse of infrastructure, has continued since a military general with no experience in the sector took control of the company in late 2017 and replaced technocrats with military officers and other loyalists. Declining production by PdVSA-controlled assets, through 2015 contrasted with the performance of joint ventures that PdVSA has with Chevron, CNPC, Gazprom, Repsol, and others. From 2010 to 2015, production declined by 27.5% in fields solely operated by PdVSA, whereas production in fields operated by joint ventures increased by 42.3%. The future of these ventures is uncertain, however, as Maduro's government arrested executives from Chevron in April 2018 after they reportedly refused to sign an agreement under unfair terms. Although they were released in June, Chevron and other companies have scaled back their operations. Instead of relying on experienced partners, military officials with little expertise have signed contracts for basic functions, including drilling, with little-known companies that lack experience. PdVSA has also been under pressure to make payments to bondholders and to Canadian miner Crystallex in order to prevent the transfer of Citgo ownership control. Crystallex was awarded a $1.4 billion settlement in 2011 by the International Court for Settlement of Investment Disputes that was linked to Venezuela seizing the company's gold prospects in 2007. A Delaware court issued a decision that would have allowed Crystallex to seize PDV Holding, the PdVSA subsidiary that is Citgo's parent company. Venezuela reached an agreement with Crystallex to make a payment installment towards the $1.4 billion settlement in November 2018. In December 2018, it was reported that Venezuela had violated terms of the settlement agreement. This results in some uncertainty about the path forward for Crystallex to collect on its arbitration award and the potential future of Citgo ownership control. The Administration has imposed sanctions on Venezuela that are designed to affect PdVSA business operations. Sanctions that specifically affect PdVSA include those that limit access to debt finance for business activities. Generally, limiting PdVSA's access to debt potentially results in difficulties for the company financing business activities and also results in PdVSA having to access non-U.S. sources of capital. To date, the Administration has not imposed sanctions that might target petroleum trade between the United States and Venezuela, which is bilateral but heavily weighted towards U.S. refinery purchases of Venezuelan crude oil (see " Energy Sector Concerns and Potential U.S. Sanctions ," below). Humanitarian Situation87 Growing numbers of people continue to leave Venezuela for urgent reasons, including insecurity and violence; lack of food, medicine, or access to essential social services; and loss of income. As the pace of arrivals from Venezuela has quickened, neighboring countries, particularly Colombia, are straining to absorb a population that is often malnourished and in poor health. According to a 2017 national survey on living conditions, the percentage of Venezuelans living in poverty increased from 48.4% in 2014 to 87% in 2017. Poverty has been exacerbated by shortages in basic consumer goods, as well as by bottlenecks and corruption in the military-run food importation and distribution system. Basic food items that do exist are largely out of reach for the majority of the population due to rampant inflation. Between 2014 and 2016, Venezuela recorded the greatest increase in malnourishment in Latin America and the Caribbean, a region in which only eight countries recorded increases in hunger. According to Caritas Venezuela (an organization affiliated with the Catholic Church), 15% of children surveyed in August 2017 suffered from moderate to severe malnutrition and 30% showed stunted growth. Venezuela's health system has been affected severely by budget cuts, with shortages of medicines and basic supplies, as well as doctors, nurses, and lab technicians. Some hospitals face critical shortages of antibiotics, intravenous solutions, and even food, and 50% of operating rooms in public hospitals are not in use. According to the Venezuelan Program of Education-Action in Human Rights (PROVEA), a 2018 national hospital survey, 88% of hospitals lack basic medicines and 79% lack basic surgical supplies. In addition, a June 2018 Pan-American Health Organization (PAHO) report estimated that some 22,000 doctors (33% of the total doctors that were present in 2014) and at least 3,000 nurses had emigrated. In February 2017, Venezuela captured international attention following the unexpected publication of data from the country's Ministry of Health (the country had not been releasing such data since 2015). The report revealed significant spikes in infant and maternal mortality rates. By 2017, the infant mortality rate in Venezuela was reportedly 79% higher than it had been in 2011, according to World Bank data. PAHO's June 2018 report also documented the spread of previously eradicated infectious diseases like diphtheria (detected in July 2016) and measles (detected in July 2017). Malaria, once under control, is also spreading rapidly, with more than 400,000 cases recorded in 2017 (a 198% increase over 2015). Increasing numbers of people have also reportedly died from HIV/AIDS in Venezuela due to the collapse of the country's once well-regarded HIV treatment program and the scarcity of drugs needed to treat the disease. Observers are concerned that the lack of access to reliable contraception may hasten the spread of sexually transmitted diseases, unwanted pregnancies, and dangerous clandestine abortions. The World Health Organization (WHO) is reportedly helping the government purchase and deliver millions of vaccines against measles, mumps, and rubella. Nevertheless, doctors and health associations have urged the U.N. entity to provide more assistance and exert more pressure on the government to address the health crisis. Moreover, while President Maduro has publicly rejected offers of international humanitarian assistance, in November 2018, the U.N. Central Emergency Response Fund (CERF) allocated $9.2 million for Venezuela to be provided through U.N. entities, such as the U.N. Children's Fund (UNICEF), WHO, and UNHCR. This emergency humanitarian funding is to support projects providing nutritional support to children under five years old, pregnant women and lactating mothers at risk, and emergency health care and other aid for the vulnerable, including the displaced and host communities in Venezuela. Regional Migration Crisis Based on conservative figures from UNHCR and other experts, more than 3 million Venezuelan refugees and migrants had left the country by November 2018, with the vast majority remaining in the Latin America and Caribbean region. As of November 2018, the U.N. High Commissioner for Refugees (UNHCR) estimated that there were over 1 million Venezuelans living in Colombia, 500,000 in Peru, 220,000 in Ecuador 130,000 in Argentina, 100,000 in Chile, 94,000 in Panama, and 85,000 in Brazil. Taken as a percentage of their overall population, Venezuelan arrivals have also significantly impacted smaller countries and territories in the Caribbean. For example, Trinidad and Tobago, a twin-island country with 1.4 million people, estimated in late 2018 that it was hosting some 60,000 Venezuelans, which increased its overall population by more than 4%. By the end of 2019, UNHCR and the International Organization for Migration (IOM) estimate that the number of Venezuelan refugees and migrants could reach over 5.3 million. Although not all of the Venezuelans who have fled the country in recent years may be considered refugees, a significant number are in need of international protection. Responses to the Venezuelan arrivals vary by country and continue to evolve with events on the ground. ( See Figure 4 .) Between September 2014 and 2018, roughly 400,000 Venezuelans in the region and beyond (in the United States, Canada, Spain, and elsewhere) applied for political asylum (specific legal protection for which most migrants do not qualify.) As of October 2018, a further 960,000 Venezuelan arrivals in Latin America had been granted alternative legal forms of stay (which typically enables access to social services and the right to work.) Humanitarian experts are most concerned about the roughly 60% of Venezuelans in neighboring countries who lack identification documents. The Venezuelan government has made it increasingly difficult for Venezuelans to obtain a valid passport and therefore legal status outside the country. Those who lack status are vulnerable to arrest and deportation by governments and to abuse by criminal groups, including human trafficking. This is a significant displacement crisis for the Western Hemisphere, which has in place some of the highest international and regional protection standards for displaced and vulnerable persons. Neighboring countries are under pressure to examine their respective migration and asylum policies and to address, as a region, the legal status of Venezuelans who have fled their country. Humanitarian organizations and governments are responding to the needs of displaced Venezuelans in the region. Protection and assistance needs are significant for arrivals and host communities. Services provided vary by country but include support for reception centers and options for shelter; emergency relief items, such as emergency food assistance, safe drinking water, and hygiene supplies; legal assistance with asylum applications and other matters; protection from violence and exploitation; and the creation of temporary work programs and education opportunities. International Humanitarian Assistance. U.N. agencies and other international organizations have launched appeals for additional international assistance, and the U.S. government is providing humanitarian assistance and helping to coordinate regional response efforts (see " U.S. Humanitarian and Related Assistance ," below). The U.N. Secretary-General appointed UNHCR and IOM to coordinate the international response, which includes U.N. entities, nongovernmental organizations, the Red Cross Movement, faith-based organizations, and civil society. Former Guatemalan Vice President Eduardo Stein has been appointed the U.N. Joint Special Representative for Venezuelan Refugees and Migrants to promote dialogue and consensus in the region and beyond on the humanitarian response. In mid-December 2018, UNHCR and IOM launched the regional Refugee and Migrant Response Plan (RMRP), which is the first of its kind in the Americas: an operational and coordination strategy "responding to the needs of Venezuelans on the move and securing their social and economic inclusion in the communities receiving them." The RMRP was put together by 95 organizations covering 16 countries. The RMRP is also an appeal for $738 million in funding to support over 2 million Venezuelans and half a million people in host communities. It focuses on four key areas: direct emergency assistance, protection, socio-economic and cultural integration and strengthening capacities in the receiving countries. Foreign Relations The Maduro government has maintained Venezuela's foreign policy alliance with Cuba and a few other leftist governments in Latin America, but the country's ailing economy has diminished its formerly activist foreign policy, which depended on its ability to provide subsidized oil to 17 other Caribbean Basin countries. President Maduro has increasingly relied on financial backing from China and Russia. Unlike under Chávez, an increasing number of countries have criticized authoritarian actions taken by the Maduro government, brought concerns about Venezuela to regional and global organizations, and implemented targeted sanctions against its officials. Since more than 50 countries did not recognize the results of the May 2018 presidential elections and do not consider his current presidency legitimate, Maduro is likely to face increasing international isolation. The OAS has voted not to recognize the legitimacy of Maduro's current term, mirroring the U.S. and EU positions. Paraguay has broken diplomatic ties with the Maduro government and Peru has recalled its last diplomat from Caracas and pledged not to permit Venezuelan officials to travel through its territory. Other countries may follow suit. Venezuela's foreign relations have become more tenuous as additional countries have sanctioned its officials. In September 2017, Canada implemented targeted sanctions against 40 Venezuelan officials deemed to be corrupt; it added another 14 individuals, including President Maduro's wife, following the May elections. In November 2017, the EU established a legal framework for targeted sanctions and adopted an arms embargo against Venezuela to include related material that could be used for internal repression. These actions paved the way for targeted EU sanctions on seven Venezuelan officials in January 2018. On June 25, 2018, the Council of the EU sanctioned 11 additional individuals for human rights violations and undermining democracy and called for new presidential elections to be held. Those sanctions will remain in place through late 2019. In March 2018, Panama and Switzerland sanctioned Venezuelan officials. Additional sanctions by these countries are possible now that they consider Maduro's mandate illegitimate. Latin America and the Lima Group Ties between Venezuela and a majority of South American countries have frayed with the rise of conservative governments in Argentina, Brazil, Chile, Colombia, and Peru and with Maduro's increasingly authoritarian actions. In December 2016, the South American Common Market (Mercosur) trade bloc suspended Venezuela over concerns that its government had violated the requirement that Mercosur's members have "fully functioning democratic institutions." Six UNASUR members—Uruguay, Argentina, Brazil, Chile, Colombia, and Paraguay—issued a joint statement opposing the Venezuelan Supreme Court's attempted power grab in March 2017. According to the Colombian government, it is working with other South American countries to create a new regional entity to replace UNASUR and isolate Venezuela. Concerned about potential spillover effects from turmoil in Venezuela, Colombia has supported OAS actions, provided humanitarian assistance to Venezuelan economic migrants and asylum seekers, and closely monitored the situation on the Venezuelan-Colombian border. Colombian President Ivan Duque and Brazilian President Jair Bolsonaro have pledged to support efforts to hasten Maduro's exit from power. Tensions remain high along the border with Guyana after the U.N. proved unable to resolve a long-standing border-territory dispute between the countries and referred the case to the International Court of Justice in January 2018. Venezuela's navy stopped ExxonMobile ships doing seismic surveys for the Guyanese government in December 2018. On August 8, 2017, 12 Western Hemisphere countries signed the Lima Accord, a document rejecting the rupture of democracy and systemic human rights violations in Venezuela, refusing to recognize the ANC, and criticizing the government's refusal to accept humanitarian aid. The signatory countries are Mexico; Canada; four Central American countries (Costa Rica, Guatemala, Honduras, and Panama); and six South American countries (Argentina, Brazil, Chile, Colombia, Paraguay, and Peru). Although the Lima Group countries support targeted U.S. economic sanctions, most reject any discussion of military intervention and most are not in favor of restrictions on U.S. petroleum trade with Venezuela. On February 13, 2018, Guyana and St. Lucia joined the Lima Group as it issued a statement calling for the Maduro government to negotiate a new electoral calendar that is agreed upon with the opposition and to accept humanitarian aid. These nations also backed Peru's decision to disinvite President Maduro to the Summit of the Americas meeting of Western Hemisphere heads of state in April 2018. The Lima Group did not recognize the results of the May 20, 2018, Venezuelan elections. Its members were among the 19 countries that voted in favor of an OAS resolution on Venezuela approved on June 5, 2018. The resolution said that the electoral process in Venezuela "lacks legitimacy" and authorized countries to take "the measures deemed appropriate," including sanctions, to assist in hastening a return to democracy in Venezuela . On January 4, 2019, thirteen members of the Lima Group (excluding Mexico) signed a declaration that urged President Maduro not to assume power on January 10, 2019 and to cede control of the country to the National Assembly until elections can be held. The signatories resolved to reassess their level of diplomatic engagement with Venezuela, implement travel bans or sanctions (where possible) on high-level Maduro government officials, suspend military cooperation and arms transfers to Venezuela, and evaluate whether to give loans to the Maduro government at regional and international financial institutions, among other measures. While Mexico had previously been an active member of the Lima Group, the leftist government of Andrés Manuel López Obrador has adopted policy of nonintervention in foreign affairs and did not vote for the measure. While some have criticized this policy shift, others maintain that Mexico could perhaps arbitrate between the government and the opposition. Those same thirteen countries also joined with the United States and five others to support a January 10, 2019 OAS resolution on Venezuela not recognizing the legitimacy of Maduro's second term. (See Appendix B for OAS efforts on Venezuela.) The Maduro government has continued to count on political support from Cuba, Bolivia, and Nicaragua, which, together with Venezuela, were key members of the Bolivarian Alliance of the Americas (ALBA), a group launched by President Chávez in 2004. Caribbean members of ALBA—Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, and St. Vincent and the Grenadines—had, until recently, been reluctant to take action that could anger the Maduro government. Since Lenín Moreno took office in May 2017, the Ecuadorian government (another ALBA member) has been critical of the Maduro government. Most of these governments abstained from the June 5, 2018, OAS vote on the legitimacy of the election in Venezuela, with only Bolivia, Dominica, and St. Vincent and the Grenadines voting with Venezuela and against the measure. In January 2019, Ecuador and Haiti voted in favor of the OAS measure that deemed Maduro's second term illegitimate, only Bolivia, Dominica, Nicaragua, St. Vincent and the Grenadines, and Suriname voted with Venezuela and against the measure. Cuba's close relationship with Venezuela was solidified in 2000, when the countries signed an agreement for Venezuela to provide Cuba at least 90,000 barrels of oil per day (b/d) in exchange for technical assistance and other services. Estimates of the number of Cuban personnel in Venezuela vary, but a 2014 study estimated that there were 40,000, 75% of whom were health care workers. At that time, the report said that the number of Cuban military and intelligence advisors in Venezuela may have ranged from hundreds to thousands, coordinated by Cuba's military attaché in Venezuela. It is unclear how many of those professionals have stayed in the country, but Cuban intelligence officers have reportedly helped the Maduro government identify and disrupt coup plots. Although Cuba has imported more oil from Russia and Algeria to make up for dwindling Venezuelan supplies since 2017, the Maduro government remains committed to providing what it can, even if it has to be purchased from other sources. China and Russia As Venezuela's economic situation has deteriorated, maintaining close relations with China and Russia, the country's largest sources of financing and investment, has become a top priority. From 2007 through 2016, China provided some $62.2 billion in financing to Venezuela. The money typically has been for funding infrastructure and other economic development projects, but has also included some lending for military equipment. It is being repaid through oil deliveries. Although the Chinese government has been patient when Venezuela has fallen behind on its oil deliveries, it reportedly stopped providing new loans to Venezuela in fall 2016. Some observers have criticized China for its continued support to the Venezuelan government and questioned whether a new Venezuelan government might refuse to honor the obligations incurred under Maduro. China refrained from negative commentary after the Constituent Assembly elections and accepted the May 2018 election results. It has responded to U.S. sanctions by stating that "unilateral sanctions will make the situation even more complicated." Russia has remained a strong ally of the Maduro government. It has called for the political crisis in Venezuela to be resolved peacefully, with dialogue, and without outside interference. Russia's trade relations with Venezuela currently are not significant, with $336 million in total trade in 2016, with $334 million, consisting of Russian exports to Venezuela. However, Venezuela had been a major market for Russian arms sales between 2001 and 2013, with over $11 billion in sales. Press reports in May 2017 asserted that Venezuela had more than 5,000 Russian-made surface-to-air missiles, raising concern by some about the potential for them being stolen or sold to criminal or terrorist groups. Russia's 2017 decision to allow Venezuela to restructure $3.15 billion in debt provided much-needed financial relief to the Maduro government. Russian state oil companies Rosneft and Gazprom have large investments in Venezuela. Both are seeking to expand investments in Venezuela's oil and gas markets (see " Energy Sector Concerns ," below). Russia congratulated President Maduro on his reelection and inauguration. Maduro visited Russia to seek investment in early December 2018 after which news reports suggested that Rosneft has lent PdVSA $6.5 billion, partly as a prepayment for crude oil. Russia then sent two nuclear-capable jets to Venezuela to conduct joint exercises (which also occurred in 2008 and 2013) in mid-December in a show of support for the government. U.S. Policy The United States historically has had close relations with Venezuela, a major U.S. foreign oil supplier, but friction in relations increased under the Chávez government and has intensified under the Maduro regime. For more than a decade, U.S. policymakers have had concerns about the deterioration of human rights and democratic conditions in Venezuela and the lack of bilateral cooperation on counternarcotics and counterterrorism efforts. U.S. officials have expressed increasing concerns regarding Colombian criminal and terrorist groups in Venezuela. U.S. democracy and human rights funding, which totaled $15 million in FY2018, and political support have bolstered democratic civil society in Venezuela. U.S. humanitarian assistance is supporting Venezuelans who have fled to neighboring countries. The United States has employed various sanctions in response to concerns about the activities of the Venezuelan government or Venezuela-linked individuals and entities. Targeted sanctions escalated after President Maduro usurped the power of the National Assembly by holding constituent assembly elections on July 30, 2017. In the wake of the May 2018 elections that the United States and much of the international community deemed illegitimate, the Trump Administration has sought to increase pressure on the Maduro government in order to hasten a return to democracy in Venezuela. The Administration has ratcheted up targeted sanctions on Venezuelan officials accused of corruption, antidemocratic actions, or human rights abuses under Executive Order (E.O.) 13692 (issued by President Obama in 2015) and on Venezuela-linked individuals and entities for drug trafficking. President Trump issued three executive orders restricting the government and PdVSA's ability to access the U.S. financial system (E.O. 13808), barring U.S. purchases of Venezuela's new digital currency (E.O. 13827), and prohibiting U.S. purchases of Venezuelan debt (E.O. 13835). E.O. 13850, issued in November 2018, created a framework to sanction those who operate in Venezuela's gold sector or those deemed complicit in corrupt transactions involving the government. Following President Maduro's second inauguration, Secretary of State Michael Pompeo pledged to "use the full weight of U.S. economic and diplomatic power to press for the restoration of Venezuelan democracy." National Security Adviser John Bolton lent support to National Assembly leader Juan Guaidó's decision "to invoke protections under Venezuela's constitution and declare that Maduro does not legitimately hold the country's presidency." Vice President Pence has also lent his support to Guaidó. According to U.S. officials, forthcoming U.S. actions could limit or prohibit petroleum trade with Venezuela. Some analysts maintain that oil sanctions could hasten the regime's demise, whereas others caution that such sanctions could inflict further suffering on the Venezuelan people. U.S. Democracy Assistance For more than a decade, the United States has provided democracy-related assistance to Venezuelan civil society through the U.S. Agency for International Development (USAID) and the National Endowment for Democracy (NED). From 2002 through 2010, USAID supported small-grant and technical assistance activities through its Office of Transition Initiatives (OTI) to provide assistance monitoring democratic stability and strengthening the county's democratic institutions. At the end of 2010, USAID's support for such activities in Venezuela was transferred from OTI to USAID's Latin America and Caribbean Bureau. U.S. democracy and human rights assistance to Venezuela amounted to $4.3 million in each of FY2014 and FY2015 and $6.5 million in FY2016, provided through the Economic Support Fund (ESF) funding account. U.S. assistance totaled $7 million in FY2017, provided through the Development Assistance Account. The Trump Administration did not request any assistance for democracy and human rights programs in Venezuela for FY2018. Nevertheless, Congress provided $15 million in democracy and human rights assistance to civil society groups in Venezuela in P.L. 115-141 . For FY2019, the Trump Administration requested $9 million to support democracy and human rights programs in Venezuela that strengthen civil society, democratic institutions and processes, and independent media. Congress has yet to enact a full-year FY2019 appropriations measure, although a series of continuing resolutions provided FY2019 funding through December 21, 2018. Legislation to fund foreign aid programs for the remainder of FY2019 could incorporate provisions from the State, Foreign Operations, and Related Programs appropriations measures that the House and Senate Appropriations Committees approved during the 115 th Congress. The House Committee bill ( H.R. 6385 ) recommended providing $15 million for programs in Venezuela, while the Senate Committee bill ( S. 3108 ) recommended $20 million. As noted above, NED has funded democracy projects in Venezuela since 1992. U.S. funding for NED is provided in the annual State Department and Foreign Operations appropriations measure, but country allocations for NED are not specified in the legislation. In FY2017, NED funded 43 projects in Venezuela totaling $2.6 million (up from $1.6 million in FY2016). U.S. Humanitarian and Related Assistance150 The U.S. government is providing humanitarian and emergency food assistance and helping to coordinate and support regional response efforts. As of September 30, 2018 (latest data available), U.S. government humanitarian funding for the Venezuela regional response totaled approximately $96.5 million for both FY2017 and FY2018 combined, of which $54.8 million was for Colombia. (Humanitarian funding is drawn primarily from the global humanitarian accounts in annual Department of State/Foreign Operations appropriations acts.) From October through the end of December, the U.S. Navy hospital ship USNS Comfort was on an 11-week medical support deployment to work with government partners in Ecuador, Peru, Colombia, and Honduras, in part to assist with arrivals from Venezuela. In Colombia, the U.S. response aims to help the Venezuelan arrivals as well as the local Colombian communities that are hosting them. In addition to humanitarian assistance, the United States is also providing $37 million in bilateral assistance to support medium and longer-term efforts by Colombia to respond to the Venezuelan arrivals. Targeted Sanctions Related to Antidemocratic Actions, Human Rights Violations, and Corruption151 In Venezuela, as in other countries, the U.S. government has used targeted sanctions to signal disapproval of officials who have violated U.S. laws or international human rights norms and to attempt to deter others from doing so. Targeted sanctions can punish officials or their associates who travel internationally and hold some of their assets in the United States without causing harm to the population as a whole. Some argue that sanctioning additional Venezuelan officials might help to increase pressure on the Maduro government to cede power or at least stop violating human rights, whereas others argue that increased sanctions would only encourage Maduro and his allies to harden their positions. In December 2014, the 113 th Congress enacted the Venezuela Defense of Human Rights and Civil Society Act of 2014 ( P.L. 113-278 ). Among its provisions, the law required (until December 31, 2016) the President to impose sanctions (asset blocking and visa restrictions) against those whom the President determined were responsible for significant acts of violence or serious human rights abuses associated with the 2014 protests or, more broadly, against anyone who had directed or ordered the arrest or prosecution of a person primarily because of the person's legitimate exercise of freedom of expression or assembly. In July 2016, Congress enacted legislation ( P.L. 114-194 ) extending the termination date of the requirement to impose sanctions until December 31, 2019. In March 2015, President Obama issued Executive Order (E.O.) 13692 , which implemented P.L. 113-278 and went beyond the requirements of the law. The E.O. authorized targeted sanctions against (1) those involved in actions or policies that undermine democratic processes or institutions; (2) those involved in significant acts of violence or conduct constituting a serious abuse or violation of human rights; (3) those involved in actions that prohibit, limit, or penalize the exercise of freedom of expression or peaceful assembly; or (4) those senior Venezuelan officials involved in public corruption. The Department of the Treasury has imposed sanctions on 65 Venezuelans pursuant to E.O. 13692. In March 2015, the Department of the Treasury froze the assets of six members of Venezuela's security forces and a prosecutor involved in repressing antigovernment protesters. Under the Trump Administration, the Department of the Treasury has imposed sanctions against an additional 65 Venezuelans pursuant to E.O. 13692, including members of the Supreme Court, CNE, Cabinet, Constituent Assembly, and security forces (army, national guard, and police). On July 31, 2017, the Administration imposed sanctions on President Maduro, one of four heads of state subject to U.S. sanctions. On May 18, 2018, the U.S. Department of the Treasury imposed sanctions on four current or former Venezuelan officials, including Diosdado Cabello. In September 2018, Treasury sanctioned four members of President Maduro's inner political circle, including his wife Celia Flores and executive vice president Delcy Rodriguez. Other Targeted Sanctions. On November 1, 2018, President Trump signed E.O. 13850, creating a framework to sanction those who operate in Venezuela's gold sector (where much of the gold is produced illegally) or those deemed complicit in corrupt transactions involving the government (see " Illegal Mining ," below). In January 2019, sanctions were imposed under that Executive Order against seven individuals including a former Venezuelan treasurer and a television magnate, and 23 companies involved in a scheme to bribe the government and steal $2.4 billion in state funds. Trafficking in Persons Sanctions . Since 2014, Venezuela has received a Tier 3 ranking in the State Department's annual Trafficking in Persons (TIP) reports. U.S. assistance to Venezuela has not been subject to TIP-related sanctions, since the democracy and human rights aid provided goes to nongovernmental organizations and has been deemed to be in the U.S. national interest. According to the June 2018 TIP report, although the government arrested seven trafficking suspects, it did not provide any data on prosecutions or convictions, victims identified, or any other anti-trafficking efforts. Sanctions Restricting Venezuela's Access to U.S. Financial Markets President Trump signed E.O. 13808, effective August 25, 2017, imposing new sanctions that restrict the Venezuelan government's access to U.S. financial markets, which has been an important source of capital for the government and PdVSA. According to the White House, the measures "are carefully calibrated to deny the Maduro dictatorship a critical source of financing to maintain its illegitimate rule, protect the U.S. financial system from complicity in Venezuela's corruption and in the impoverishment of the Venezuelan people, and allow for humanitarian assistance." Sanctions targeting sovereign debt are unusual, but not unprecedented. The sanctions seek to cut off new funds flowing from U.S. investors or through the U.S. financial system to the Maduro government. To this end, sanctions restrict transactions by U.S. investors or within the United States related to new debt issued by the Venezuelan government and PdVSA. U.S. persons are also prohibited from purchasing securities from the Venezuelan government. Additionally, CITGO—whose parent company is PdVSA—is prohibited from distributing profits to the Venezuelan government, though it can continue its operations in the United States. Additionally, the sanctions target new short-term debt (less than 30 days for the Venezuelan government and less than 90 days for PdVSA). This ensures continued access to short-term financing that facilitates U.S. trade with Venezuela, including U.S. imports of oil from Venezuela. Concurrent with the release of the Executive Order in August, Treasury issued licenses to minimize the impact of sanctions on U.S. economic interests and on the Venezuelan people. When the sanctions were announced in August 2017, there was debate about whether they would push Venezuela to default, or whether the government would find alternative sources of financing through new oil-for-loan deals with Russia and China or taking cash from PdVSA. Most economists agree that the sanctions made the fiscal position of the government more difficult, as many international banks ceased all financial transactions with Venezuela, and as sanctions accelerated the decline in Venezuelan oil exports to the United States. In 2018, the Trump Administration issued two additional executive orders to further tighten Venezuela's access to U.S. financial markets. Executive Order 13827, issued in March 2018, prohibits U.S. investors from purchasing or transacting in Venezuela's new digital currency, the petro, designed to help the government raise funds and circumvent U.S. sanctions. Executive Order 13835, issued in May 2018, prohibits U.S. investors from buying debt or accounts receivable with the Venezuelan government, including PdVSA, measures devised to close off an "avenue for corruption" used by Venezuelan government officials to enrich themselves. Organized Crime-Related Issues Venezuela has among the highest crime victimization and homicide rates in Latin America and the Caribbean, the region with the highest homicide rates in the world. According to the Venezuelan Violence Observatory (OVV), the homicide rate in Venezuela declined in 2018 (81.4 homicides per 100,000 people) as compared to a rate of 89.1 per 100,000 people in 2017, with part of that decline attributed to migration that has reduced the population. The impunity rate for homicide in Venezuela is roughly 92%. Although many homicides have been committed by criminal groups, extrajudicial killings by security forces and allied armed civilian militias ( collectivos ) also have been rising. In September 2018, Amnesty International published a report describing how security forces have adopted militarized approaches to public security that have resulted in numerous human rights abuses, including extrajudicial killings. A May 2018 report by Insight Crime identified more than 120 high-level Venezuelan officials who have engaged in criminal activity, which has blurred the lines between crime groups and the state. Many of those officials allegedly have engaged in drug trafficking (discussed below), but others reportedly have deputized illegal groups in the neighborhoods and prisons, run smuggling operations in border areas, and extracted revenue from state industries. In 2016, a National Assembly committee estimated that kleptocracy had cost the country some $70 billion. Counternarcotics Venezuela's pervasive corruption and extensive 1,370-mile border with Colombia have made the country a major transit route for cocaine destined for the United States and an attractive environment for drug traffickers and other criminals to engage in money laundering. In 2005, Venezuela suspended its cooperation with the U.S. Drug Enforcement Administration (DEA) after alleging that DEA agents were spying on the government, charges U.S. officials dismissed as baseless. Prior to that time, the governments had negotiated an antidrug cooperation agreement (an addendum to a 1978 Bilateral Counternarcotics agreement) that would have enhanced information-sharing and antidrug cooperation. Venezuela has yet to approve that agreement. Since 2005, Venezuela has been designated annually as a country that has failed to adhere to its international antidrug obligations, pursuant to international drug-control certification procedures in the Foreign Relations Authorization Act, FY2003 ( P.L. 107-228 ). In September 2018, President Trump designated Venezuela as one of two countries not adhering to its antidrug obligations. At the same time, President Trump waived economic sanctions that would have curtailed U.S. assistance for democracy programs. The State Department reported in its 2018 International Narcotics Control Strategy Report (INCSR) that Venezuela was one of the preferred trafficking routes for the transit of illicit drugs out of South America, especially cocaine, because of the country's porous border with Colombia, economic crisis, weak judicial system, sporadic international counternarcotics cooperation, and permissive and corrupt environment. The report notes the following: Cocaine is trafficked via aerial, terrestrial, and maritime routes, with most drug flights departing from Venezuelan states bordering Colombia and maritime trafficking that includes the use of large cargo containers, fishing vessels, and "go-fast" boats. Maritime trafficking may have increased in 2017. The vast majority of drugs transiting Venezuela in 2017 were destined for the Caribbean, Central America, the United States, West Africa, and Europe. Colombian drug-trafficking organizations—including multiple criminal bands, the FARC, and the National Liberation Army (ELN)—facilitate drug transshipment through Venezuela. Mexican drug-trafficking organizations also operate in the country. Despite a nearly 134% increase in coca cultivation from 2013 to 2016 and a more than 200% increase in potential cocaine production in Colombia, the report states that Venezuelan antidrug forces seized only 32 metric tons (MT) of drugs in the first six months of 2016 (the most recent data available), compared to 66 MT in the first eight months of 2015. They also reported seizing two cocaine labs in the state of Zulia in August 2017. "Venezuelan authorities do not effectively prosecute drug traffickers, in part due to political corruption," but Venezuelan law enforcement officers also "lack the equipment, training, and resources required to impede the operations of major drug trafficking organizations." Venezuela and the United States continue to use a 1991 bilateral maritime agreement to cooperate on interdiction. In 2016, Venezuela worked with the U.S. Coast Guard in six maritime drug interdiction cases (down from 10 in 2015). In addition to State Department reports, a report by Insight Crime entitled Drug Trafficking Within the Venezuelan Regime: the Cartel of the Suns describes in detail how the Venezuelan military, particularly the National Guard, has been involved in the drug trade since 2002. It names officials who have been sanctioned or accused of drug trafficking-related crimes, as well as others for whom there is significant evidence of their involvement in the drug trade. Insight Crime also has documented how the Cartel of the Suns has interacted with illegally armed groups and drug traffickers in Colombia, trafficked cocaine through the Dominican Republic and Honduras, and engaged in corruption with politicians and businesses in El Salvador. Recent cases in the United States also demonstrate the involvement of high-level Venezuelan officials or their relatives in international drug trafficking. President Maduro either has dismissed those cases or appointed the accused to Cabinet positions, where they presumably will be protected from extradition. Some observers have maintained that it may therefore be difficult to persuade officials to leave office through democratic means if, once out of power, they likely would face extradition and prosecution in the United States. On August 1, 2016, the U.S. Federal Court for the Eastern District of New York unsealed an indictment from 2015 against two Venezuelans for cocaine trafficking to the United States. The indictment alleged that General Néstor Luis Reverol Torres, former general director of Venezuela's National Anti-Narcotics Office (ONA) and former commander of Venezuela's National Guard, and Edylberto José Molina, former subdirector of ONA, participated in drug-trafficking activities from 2008 through 2010. President Maduro responded by appointing General Reverol as Minister of Interior and Justice in charge of the country's police forces. In December 2017, two nephews of First Lady Cilia Flores—Franqui Francisco Flores de Freitas and Efraín Antonio Campo Flores—were sentenced to 18 years in a U.S. federal prison for conspiring to transport cocaine into the United States. The two nephews had been arrested in Haiti in November 2015 and convicted in the United States in November 2016. The Department of the Treasury has imposed sanctions on at least 22 individuals and 27 companies with connections to Venezuela for narcotics trafficking by designating them as Specially Designated Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act, P.L. 106-120 , Title VIII; 21 U.S.C. 1901 et seq.). On February 13, 2017, the Department of the Treasury imposed drug-trafficking sanctions against then-Vice President Tareck el Aissami and an associate. Money Laundering In addition to drug trafficking, the 2018 INCSR discusses Venezuela's high level of vulnerability to money laundering and other financial crimes. According to the report, money laundering is widespread in the country and is evident in industries ranging from government currency exchanges to banks to real estate to metal and oil. Venezuela's currency-control system requires individuals and firms to purchase hard currency from the government's currency commission at a fixed exchange rate, which has created incentives for trade-based money laundering. Venezuela revised its laws against organized crime and terrorist financing in 2014 but excluded the government and state-owned industries from the scope of any investigations. The unit charged with investigating financial crimes has "limited operational capabilities," and there is a lack of political will in the judicial system to combat money laundering and corruption. The 2018 INCSR concludes that Venezuela's "status as a drug transit country, combined with weak AML supervision and enforcement, lack of political will, limited bilateral cooperation, an unstable economy, and endemic corruption" make the country vulnerable to money laundering. As an example, in mid-June 2018, a U.S. district judge sentenced the Florida owners of a construction equipment export company who had been found guilty of laundering and transferring $100 million from Venezuela to bank accounts in the United States and other countries. On September 20, 2017, the Department of the Treasury's Financial Crimes Enforcement Network advised U.S. financial institutions to report any suspicious financial transactions that could have a nexus with Venezuela. The advisory urges U.S. institutions to exercise increased scrutiny over transactions that may involve lesser-known state-owned enterprises connected to the government. It also warns that recent sanctions against Venezuelan officials could "increase the likelihood that other non-designated Venezuelan senior political figures may seek to protect their assets." Illegal Mining Although more than 95% of Venezuela's export revenue comes from oil and gas exports, gold mining, both licit and illicit, has accelerated as the country's economy has collapsed in the face of low global oil prices and an ongoing political crisis. According to the Global Initiative against Transnational Organized Crime, 91% of gold produced in Venezuela was mined illegally—the highest rate in Latin America, even prior to the current crisis. Over the past three years, a boom in illegal mining in Venezuela reportedly has contributed to deforestation and environmental degradation in indigenous areas, clashes between rival criminal gangs and violence committed by those gangs against miners whom they extort, and an outbreak of malaria (a disease that had been eradicated). According to numerous reports, the illegal mining industry also commits various human rights violations, reportedly including the forcible recruitment of child labor from the indigenous Yanomami tribe. Colombian Illegally Armed Groups Operating in Venezuela Illegally armed groups are active on both sides of the Colombia-Venezuelan border. Former Colombian paramilitaries (the Rastrojos), reportedly control important gasoline smuggling routes between Venezuela and Colombia. National Liberation Army (ELN) guerrillas from Colombia have sought to control illicit gold mining areas near the Colombia-Guyana border. Both the ELN, which is still engaged in armed conflict with the Colombian government, and its rival, the Popular Liberation Army (EPL) reportedly recruit Venezuelans to cultivate coca. Human trafficking and sexual exploitation of Venezuelan migrants is prevalent in Colombia and border regions straddling the countries. Finally, experts assert that dissident FARC guerrillas are using border areas to regroup; they may also be coordinating efforts with the ELN. Violence among these groups and between the groups and the Venezuelan government has escalated, threatening security on both sides of the border. Conflict between the ELN and the EPL over control of the cocaine trade led to an August 2018 daytime shootout in a town on the Colombian side of the border in which eight people died. Since early 2018, Freddy Bernal, an official on the U.S. Kingpin List who allegedly supplied arms to the FARC, has served as head of security in Táchira state bordering Colombia. After Bernal ordered an elite police unit to arrest members of the Rastrojos, the group attacked a Venezuelan military base in October 2018, killing three soldiers. The ELN reportedly killed three Venezuelan national guardsmen in Amazonas state in November 2018. As this violence has occurred, Colombia has also protested periodic crossings into its territory by Venezuelan troops. Terrorism The Secretary of State has determined annually, since 2006, that Venezuela has not been "cooperating fully with United States antiterrorism efforts" pursuant to Section 40A of the Arms Export Control Act (AECA). Per the AECA, such a designation subjects Venezuela to a U.S. arms embargo, which prohibits all U.S. commercial arms sales and retransfers to Venezuela. The most recent determination was made in May 2018. In 2008, the Department of the Treasury imposed sanctions (asset freezing and prohibitions on transactions) on two individuals and two travel agencies in Venezuela for providing financial support to Hezbollah, which the Department of State has designated a Foreign Terrorist Organization. The action was taken pursuant to E.O. 13224, aimed at impeding terrorist funding. The State Department's most recent annual terrorism report, issued in September 2018, stated that "country's porous borders offered a permissive environment to known terrorist groups." Unlike in years past, the report did not identify any specific terrorist groups or sympathizers present in the country. This designation would trigger an array of sanctions, including aid restrictions, requirement for validated export licenses for dual-use items, and other financial restrictions. Critics caution there is a lack of evidence to conclude that the Venezuelan government has "repeatedly provided support for acts of international terrorism," as required by law. Energy Sector Concerns and Potential U.S. Sanctions194 Petroleum trade between the United States and Venezuela is bilateral, although heavily weighted toward Venezuelan crude oil exports to U.S. refiners. Traditionally, Venezuela has been a major supplier of crude oil imports into the United States, but the amount, value, and relative share of U.S. oil imports from Venezuela declined in recent years. In 2017, Venezuela was the fourth-largest foreign supplier of crude oil to the United States (behind Canada, Saudi Arabia, and Mexico), providing an average of 618,000 b/d, down from 1.5 million b/d in 2015 (see Figure 5 ). U.S. oil imports from Venezuela have continued to decline in 2018 to a reported annual average of roughly 500,000 b/d, the lowest since 1989. Oil is by far Venezuela's major export to the United States. According to U.S. trade statistics, Venezuela's oil exports to the United States were valued at $11.7 billion in 2017, accounting for 95% of Venezuela's exports to the United States. This figure is down from $29 billion in 2014, reflecting the steep decline in the price of oil. In addition to importing crude oil from Venezuela, the United States also exports light crude oil and other product inputs to Venezuela needed to blend with and refine Venezuelan heavy crude oil. About half of U.S. exports to Venezuela consist of light crude oil and other oil product inputs. The decline in U.S. imports of oil from Venezuela is driven by a number of factors, including Venezuela's decreased production and increased U.S. oil imports from Canada. U.S. sanctions also are making oil imports from Venezuela more difficult. Under the sanctions, U.S. partners can extend new credit to PdVSA for up to 90 days only. PdVSA has dealt with its fiscal problems by delaying payments and paying service providers with promissory notes in lieu of payments. There are concerns that delayed payments and promissory notes would count as new credit and, if their maturity exceeds 90 days, would violate sanctions. These payment issues have contributed to the slowdown in oil production, although they have not halted it. Various sanction options on Venezuela's petroleum sector reportedly have been considered by the Trump Administration as a potential means of applying economic pressure on the Maduro government. Generally, the economic impact of sanctions will depend on the timing (e.g., immediate versus phased) of each option as well as whether or not such sanctions are unilateral (i.e., U.S. only) or multilateral (i.e., U.S. cooperation with other countries). The greatest impact could come from prohibiting Venezuelan petroleum exports to the United States, the largest element of petroleum trade between the countries. From Venezuela's perspective, the country would lose access to a close-proximity market that provides much-needed cash flow to the government. Venezuela would need to find alternative markets for these crude volumes, with India and China being likely destinations. Initially, in order to sell crude to alternative markets, Venezuelan oil may need to be price discounted. The magnitude of this discount is uncertain, and the financial impact would depend on the prevailing market price of crude oil at the time such a prohibition might be introduced. U.S. oil refiners also would be affected by a prohibition on Venezuelan oil imports. Initially, prices for substitute crude oils likely would rise to attract alternative sources of supply (e.g., Canada and Iraq). Although a limited number of U.S. refiners acquire crude oil from Venezuela, any crude oil price increase likely would impact all refiners. U.S. oil producers, however, would benefit financially from an increase in oil prices. U.S. Support for Organization of American States Efforts on Venezuela Over the past three years, the U.S. government has supported the organization's efforts under Secretary General Luis Almagro to address the situation in Venezuela. Although the United States' ability to advance its policy initiatives within the OAS generally has declined as Latin American governments have adopted more independent foreign policy positions, OAS efforts on Venezuela have complemented U.S. objectives. (See Appendix B for details on OAS efforts.) OAS Secretary General Almagro (who assumed his position in May 2015) has spoken out strongly about the situation in Venezuela. On May 31, 2016, the Secretary General invoked the Inter-American Democratic Charter, Article 20—a collective commitment to promote and defend democracy—when he called on the OAS Permanent Council to convene an urgent session on Venezuela to decide whether "to undertake the necessary diplomatic efforts to promote the normalization of the situation and restore democratic institutions." He issued a report on the political and economic situation in Venezuela, concluding that there were "serious disruptions of the democratic order" in the country. The Permanent Council received the report, but struggled until mid-2018 to achieve consensus on how to respond to the evolving crises. In March 2017, OAS Secretary General Almagro issued a new report to the Permanent Council, which called on the Venezuelan government to undertake a series of measures to resume the constitutional order, or face a suspension from the OAS. It called on OAS member states to apply Article 21 of the Inter-American Democratic Charter to suspend Venezuela from the organization if the Venezuelan government failed to address the report recommendations positively within 30 days. An affirmative vote of two-thirds of the member states (23) in a special session of the General Assembly would be necessary to suspend Venezuela from the organization. Although a suspension would demonstrate Venezuela's diplomatic isolation, it is unclear whether it would affect the Maduro government's policies. In May 2017, President Maduro instructed his foreign minister to begin the process for Venezuela to withdraw from the OAS in protest of its recent actions, the first time in OAS history that a country has sought to quit. The withdrawal process, which takes two years, would require Venezuela to pay $8.8 million in back dues. Despite the deteriorating situation in Venezuela, some countries were reluctant in 2017 to follow Almagro's lead in responding to the situation in Venezuela. During the OAS General Assembly meeting in June 2017, 20 countries voted in favor of adopting a resolution to press the Venezuelan government to take concrete actions, but it failed because it needed 23 votes. In the absence of consensus within the General Assembly, Secretary General Almagro continued to speak out against actions taken by the Maduro government. He issued a report in July 2017 describing abuses committed by the government against protesters and another in September 2017 denouncing the consolidation of Venezuela's "dictatorial regime" with the formation of the Constituent Assembly. The Secretary General initiated a process to analyze whether the Maduro government's abuses against its citizens constitute crimes against humanity meriting a referral to the ICC. The process culminated in the May 29, 2018 publication of a report with information gathered by the General Secretariat backed by a legal assessment by independent jurists that the Maduro government's actions merit a referral to the ICC. Although some observers have praised Secretary-General Almagro's outspoken activism on Venezuela, others have asserted that he and the OAS are unlikely to be trusted by anyone in the Maduro government as a mediator that could help resolve the current crisis. Since the May 2018 election, a majority of countries within the OAS Permanent Secretariat have voted against the Maduro government. On June 5, 2018, it approved a resolution declaring that the May 20, 2018, electoral process in Venezuela "lacks legitimacy" and authorizing countries to take "measures deemed appropriate," including financial sanctions, to assist in hastening a return to democracy in Venezuela. On January 10, 2019, the Permanent Council approved a resolution agreeing "to not recognize the legitimacy of Nicolas Maduro's new term." Secretary-General Almagro has gone further, announcing over social media that he "welcomes the assumption of Juan Guaidó as interim President of Venezuela in accordance with Article 233 of the Venezuelan constitution" on January 11, 2019. Outlook For some time, analysts have debated how long President Maduro can retain his grip on power amid a deepening economic and humanitarian crisis and how best to help hasten a return to electoral democracy in Venezuela. Despite his reelection and inauguration to a second term, President Maduro faces increasing threats to his control over the country. Under the leadership of a little-known figure, Juan Guaidó of the VP party, the National Assembly has issued a direct challenge to the legitimacy of Maduro's presidency. Maduro still controls the military, but recent arrests of high-level military officials have signaled dissent within the forces. It remains to be seen how they will respond to the National Assembly's approval of a framework for the formation of a transition government and an amnesty law for any military members who support that transition. It is yet unclear whether and under what circumstances Juan Guaidó would accept calls for him to declare himself interim president and how Maduro and the international community would respond to such a development. The Trump Administration has worked bilaterally and multilaterally to increase pressure on the Maduro government while also providing assistance to neighboring countries hosting more than 3 million Venezuelans who have fled the country. In addition to ratcheting up targeted sanctions, the Administration has implemented broader sanctions limiting Venezuela and PdVSA's access to the U.S. financial market. Until now, the Administration had stopped short of implementing even stronger measures, such a ban on petroleum trade with Venezuela, partially out of concern that this could worsen the country's humanitarian crisis. Vice President Pence and Secretary of State Pompeo have condemned Maduro's term as illegitimate, recognized the National Assembly as the only legitimate institution in the country, and lent support to Juan Guaidó and the National Assembly. While some have urged the Administration to take more aggressive measures even though they could contribute to unrest in the country, others have maintained that support for a negotiated solution is the best course of action. The 116 th Congress may consider a number of measures to address the deteriorating situation in Venezuela and its impact on the broader Latin American region. Congress is likely to continue to fund and oversee foreign assistance for democracy and human rights programs to bolster civil society in Venezuela as well as humanitarian assistance to Venezuelans in neighboring countries. Congress could consider a measure to authorize U.S. humanitarian assistance as well. Other measures may be introduced to adjust the immigration status of Venezuelans living in the United States or to provide certain Venezuelans temporary protected immigration status. Congress may consider taking additional steps to try to influence the Venezuelan government's behavior in promoting a return to democracy through additional sanctions or other policies. Oversight issues may examine the role of external actors operating in Venezuela (such as Russia and China) and the impact of the crisis in Venezuela on the broader region. Should a change in government occur, Congress may authorize additional support for reconstruction of the country. Appendix A. Legislative Initiatives in the 115 th Congress Enacted Legislation and Approved Resolutions P.L. 115-31 ( H.R. 244 ). Consolidated Appropriations Act, 2017. Introduced January 4, 2017, as the Honoring Investments in Recruiting and Employing American Military Veterans Act of 2017; subsequently, the bill became the vehicle for the FY2017 appropriations measure known as the Consolidated Appropriations Act, 2017. House agreed to Senate amendments (309-118) May 3, 2017; Senate agreed to House amendment to Senate amendments (79-18) May 4, 2017. President signed into law May 5, 2017. The explanatory statement accompanying the law recommends providing $7 million in democracy and human rights assistance to Venezuelan civil society. P.L. 115-141 ( H.R. 1625 ). Consolidated Appropriations Act, 2018 . Originally introduced March 20, 2017, as the Targeted Rewards for the Global Eradication of Human Trafficking Act, in March 2018, the bill became the vehicle for the FY2018 omnibus appropriations measure known as the Consolidated Appropriations Act, 2018. House agreed (256-167) to an amendment to the Senate amendment March 22, 2018; Senate agreed (65-32) to the House amendment to the Senate amendment March 23, 2018. President signed into law March 23, 2018. The law requires not less than $15 million in democracy and rule of law assistance to Venezuelan civil society. P.L. 115-232 ( H.R. 5515 ). John S. McCain National Defense Authorization Act for Fiscal Year 2019 . Introduced April 13, 2018. House passed (351-66) May 24, 2018. Senate passed (85-10) June 18, 2018, substituting the language of S. 2987 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019. Conference report ( H.Rept. 115-874 ) filed July 25, 2018; House agreed (359-54) to the conference July 26 and Senate agreed (86-10) August 1, 2018. Signed into law August 13, 2018. In the conference report, the conferees directed the Director of the Defense Intelligence Agency to submit a report to several key committees on security cooperation between the Russian Federation and Cuba, Nicaragua, and Venezuela. H.Res. 259 (DeSantis) . Introduced April 6, 2017; reported out of the House Foreign Affairs Committee July 27, 2017, approved by the House December 5, 2017. The resolution expressed concern about the multiple crises that Venezuela is facing; urged the Venezuelan government to hold elections, release political prisoners, and accept humanitarian aid; supported OAS efforts, including a potential temporary suspension of Venezuela from the organization if the government does not convene elections and release political prisoners in a timely manner; and encouraged President Trump to prioritize resolving the crisis in Venezuela, including through the use of targeted sanctions. S.Res. 35 (Cardin) . The resolution expresses support for a dialogue that leads to respect for Venezuela's constitutional mechanisms and a resolution to the multiple crises the country faces, as well as for OAS efforts to invoke the Inter-American Democratic Charter. The resolution urges full U.S. support for OAS efforts and calls for U.S. agencies to hold Venezuelan officials accountable for violations of U.S. law and international human rights standards. Introduced February 1, 2017. Agreed to in the Senate February 28, 2017. Select Additional Legislative Initiatives H.R. 2658 (Engel) . Venezuela Humanitarian Assistance and Defense of Democratic Governance Act of 2017. Introduced May 25, 2017; amended and reported out of the House Foreign Affairs Committee September 28, 2017; approved by the House on December 5, 2017. The bill would have directed the State Department and USAID to deliver a strategy within 90 days of the enactment of the act on how they will work through NGOs in Venezuela or in neighboring countries to channel basic medical supplies and services, food and nutritional supplements, and related technical assistance needed to assist the Venezuelan people; supported OAS efforts to invoke the Inter-American Democratic Charter; secured a Presidential Statement from the United Nations urging the Government of Venezuela to allow the delivery of humanitarian relief; required a report by the Secretary of State, acting through the Bureau of Intelligence and Research, on Venezuelan officials involved in grand corruption, and encourage the imposition of sanctions on those individuals; amended P.L. 113-278 to broaden the activities for which Venezuelans can be sanctioned to include engaging in undemocratic practices or public corruption, extend the date for imposing sanctions through 2022, and urge the Administration to encourage other countries to sanction those individuals; expressed the sense of the House that the President should take all necessary steps to prevent Rosneft from gaining control of U.S. energy infrastructure. required a strategy within 90 days on how U.S. assistance would be coordinated with those of other donors; called on the United States to advocate and, if possible, support an OAS election observation mission to Venezuela when it is appropriate; and required a report on other countries' activities in Venezuela (Russia, China, Iran, and Cuba) within 180 days of enactment. S. 1018 (Cardin) Venezuela Humanitarian Assistance and Defense of Democratic Governance Act of 2017. S. 1018 was introduced May 3, 2017; referred to the Committee on Foreign Relations. This bill would have included many of same provisions as H.R. 2658 . In addition to requiring a strategy on how U.S. humanitarian assistance would be coordinated, S. 1018 would have authorized $10 million in humanitarian assistance for Venezuela and would require the Secretary of State to provide a strategy on how that assistance would be provided; authorized $9.5 million for coordinated democracy and human rights assistance after the Secretary of State submits a strategy on how the funds would be implemented and would make $500,000 available to support any future OAS electoral missions to the country; and prioritized continued U.S. support to Caribbean countries that have been dependent on Venezuela for energy. S. 3486 (Menendez) Venezuela Humanitarian Relief, Reconstruction, and Rule of Law Act of 2018. S. 3486 contains many of the same provisions of H.R. 2658 . Introduced December 12, 2018, referred to the Committee on Foreign Relations. In addition to requiring a strategy on how U.S. humanitarian assistance would be coordinated, the bill would have authorized $40 million in additional humanitarian assistance and required the State Department to convene a donor's conference on Venezuela; provided support for international efforts to hold Venezuelan officials accountable for crimes against humanity; authorized $15 million for democratic actors and civil society; required the Departments of State, Treasury, and Justice to lead international efforts to recover assets stolen by corrupt Venezuelan officials; advanced planning for the economic reconstruction of Venezuela, contingent upon a change in governance in the country; required more intelligence reporting on Venezuelan officials' roles in drug trafficking and corruption, as well as the role of foreign actors in Venezuela; expanded U.S. sanctions on government officials, drug trafficking, and money laundering; required the State Department to work with other Latin American governments to develop their own sanctions regimes; and, codified existing crypto currency sanctions. Appendix B. Organization of American States Action on Venezuela On May 31, 2016, Organization of American States (OAS) Secretary-General Luis Almagro invoked the Inter-American Democratic Charter—a collective commitment to promote and defend democracy—when he called (pursuant to Article 20) on the OAS Permanent Council to convene an urgent session on Venezuela to decide whether "to undertake the necessary diplomatic efforts to promote the normalization of the situation and restore democratic institutions." Secretary-General Almagro issued a report concluding that there were "serious disruptions of the democratic order" in the country. The Permanent Council met on June 23, 2016, to receive the report, but did not take any further action. A group of 15 OAS member states issued two statements (in June and August 2016) supporting dialogue efforts but also urging the Venezuelan government to allow the recall referendum process to proceed. On November 16, 2016, the OAS Permanent Council adopted a declaration that encouraged the Maduro government and the MUD "to achieve concrete results within a reasonable timeframe" and to "avoid any action of violence" that could threaten the process. As dialogue efforts failed to advance, many observers contended that the Maduro government had used such efforts as a delaying tactic. Secretary-General Almagro published a second report to the Permanent Council in March 2017 calling on the Venezuelan government to undertake measures to resume the constitutional order, including holding general elections without delay, or face a possible suspension from the OAS. It concluded by calling on OAS member states to apply Article 21 of the Inter-American Democratic Charter to suspend Venezuela from the organization if the Venezuelan government fails to address the report recommendations positively. An affirmative vote of two-thirds of the member states (23) in a special session of the General Assembly would be necessary to suspend Venezuela from the organization. In the aftermath of the Supreme Court's March 2017 action, the Permanent Council met in a special meeting called by 20 OAS members on April 3, 2017, and approved a resolution by consensus expressing "grave concern regarding the unconstitutional alteration of the democratic order" in Venezuela. The body also resolved to undertake additional diplomatic initiatives as needed "to foster the restoration of the democratic institutional system." On April 26, 2017, the OAS Permanent Council voted to convene a meeting of the region's ministers of foreign affairs to discuss the situation in Venezuela. Nineteen countries voted in favor of convening the meeting. However, some countries objected to potential statements or actions (such as a temporary suspension from the OAS) opposed by the Venezuelan government based on the organization's principles of nonintervention and respect for national sovereignty. On May 31, 2017, the OAS convened a meeting of consultation of ministers of foreign affairs to discuss the situation in Venezuela. After much debate, the foreign ministers failed to approve a resolution to address the crisis. Some countries supported a draft resolution put forth by Canada, Panama, Peru, Mexico, and the United States, which called upon the Venezuelan government and the opposition to take a series of steps but also offered humanitarian assistance and willingness to create a "group or other mechanism of facilitation to support a new process of dialogue and negotiation." Other countries supported a resolution offered by the Caribbean Community (CARICOM) calling for dialogue and the creation of an external group to support dialogue between the government and the opposition without the specific preconditions on the government included in the other draft resolution. OAS member states were unable to reach consensus. Foreign ministers reconvened during the OAS General Assembly in Mexico in June 2017. At those meetings, 20 countries voted in favor of adopting the aforementioned resolution put forth by Peru (and backed by the United States) on Venezuela, six countries voted no, and eight abstained. The foreign ministers could reconvene to continue that meeting at any time. In September and November 2017, the OAS General Secretariat facilitated public hearings chaired by an International Panel of Experts it invited to analyze whether the Maduro government had committed crimes against humanity. Victims, legislators, mayors, judges, members of the armed forces, civil servants, human rights defenders and others participated. On February 23, 2018, 19 of 34 member states voted in favor of a resolution by the Permanent Council calling on the Venezuelan government to reconsider convening early presidential elections and to accept humanitarian assistance. While the resolution received more than the simple majority of votes (18) needed to be approved, 15 countries voted against the resolution, abstained, or were not present. On May 29, 2018, the Panel of Experts convened by the OAS published its findings that "reasonable grounds exist to believe that crimes committed against humanity have been committed in Venezuela" in a report that has been submitted to the ICC. On June 5, 2018, 19 of 34 member states voted in favor of a resolution stating that the electoral process in Venezuela "lacks legitimacy" and authorizing countries to take "the measures deemed appropriate," including sanctions, to assist in hastening a return to democracy in Venezuela. In September 2018, the OAS Secretary-General announced the creation of a new working group to analyze Venezuelan migration issues. From November 19-21, 2018 17 OAS member states sent representatives to examine humanitarian conditions along the Colombia-Venezuela border, including Ambassador Carlos Trujillo of the United States. On January 10, 2019, 19 of 34 member states voted "to not recognize the legitimacy of Nicolas Maduro's new term as of the 10 th of January of 2019." The resolution also urged all Member States to adopt any measures they can to hasten a return to democracy in Venezuela, call for new presidential elections in Venezuela with international observers, respond to the humanitarian needs of Venezuelan migrants, and demand the release of political prisoners. Appendix C. Online Human Rights Reporting on Venezuela

Venezuela remains in a deep political crisis under the authoritarian rule of President Nicolás Maduro of the United Socialist Party of Venezuela (PSUV). Maduro, narrowly elected in 2013 after the death of Hugo Chávez (1999-2013), is unpopular. Nevertheless, he has used the courts, security forces, and electoral council to repress the opposition. On January 10, 2019, Maduro began a second term after winning reelection on May 20, 2018, in an unfair contest deemed illegitimate by the opposition-controlled National Assembly and most of the international community. The United States, the European Union, the Group of Seven, and most Western Hemisphere countries do not recognize the legitimacy of his mandate. They view the National Assembly as Venezuela's only democratic institution. Maduro's inauguration capped his efforts to consolidate power. In 2017, protesters called for Maduro to release political prisoners and respect the opposition-led National Assembly. Security forces quashed protests, with more than 130 killed and thousands injured. Maduro then orchestrated the controversial July 2017 election of a National Constituent Assembly; this assembly has usurped most legislative functions. During 2018, Maduro's government arrested dissident military officers and others suspected of plotting against him. Efforts to silence dissent may increase, as the National Assembly (under its new president, Juan Guaidó), the United States, and the international community push for a transition to a new government. Venezuela also is experiencing a serious economic crisis, and rapid contraction of the economy, hyperinflation, and severe shortages of food and medicine have created a humanitarian crisis. President Maduro has blamed U.S. sanctions for these problems, while conditioning receipt of food assistance on support for his government and increasing military control over the economy. He maintains that Venezuela will seek to restructure its debts, although that appears unlikely. The government and state oil company Petróleos de Venezuela, S. A. (PdVSA) defaulted on bond payments in 2017. Lawsuits over nonpayment and seizures of PdVSA assets are likely. U.S. Policy The United States historically had close relations with Venezuela, a major U.S. oil supplier, but relations have deteriorated under the Chávez and Maduro governments. U.S. policymakers have expressed concerns about the deterioration of human rights and democracy in Venezuela and the country's lack of cooperation on counternarcotics and counterterrorism efforts. U.S. democracy and human rights funding, totaling $15 million in FY2018 (P.L. 115-141), has aimed to support civil society. The Trump Administration has employed targeted sanctions against Venezuelan officials responsible for human rights violations, undermining democracy, and corruption, as well as on individuals and entities engaged in drug trafficking. Since 2017, the Administration has imposed a series of broader sanctions restricting Venezuelan government access to U.S. financial markets and prohibiting transactions involving the Venezuelan government's issuance of digital currency and Venezuelan debt. The Administration provided almost $97 million in humanitarian assistance to neighboring countries sheltering more than 3 million Venezuelans. Congressional Action The 115th Congress took several actions in response to the situation in Venezuela. In February 2017, the Senate agreed to S.Res. 35 (Cardin), which supported targeted sanctions. In December 2017, the House passed H.R. 2658 (Engel), which would have authorized humanitarian assistance for Venezuela, and H.Res. 259 (DeSantis), which urged the Venezuelan government to accept humanitarian aid. For FY2019, the Administration requested $9 million in democracy and human rights funds for Venezuela. The 115th Congress did not complete action on the FY2019 foreign assistance appropriations measure. The House version of the FY2019 foreign aid appropriations bill, H.R. 6385, would have provided $15 million for programs in Venezuela; the Senate version, S. 3108, would have provided $20 million. The 116th Congress likely will fund foreign assistance to Venezuela and neighboring countries sheltering Venezuelans. Congress may consider additional steps to influence the Venezuelan government's behavior in promoting a return to democracy and to relieve the humanitarian crisis. Also see CRS In Focus IF10230, Venezuela: Political and Economic Crisis and U.S. Policy; CRS In Focus IF10715, Venezuela: Overview of U.S. Sanctions; and CRS In Focus IF11029, The Venezuela Regional Migration Crisis.

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Introduction This report presents background information and issues for Congress concerning the Navy's force structure and shipbuilding plans. The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years. The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. The issue for Congress is whether to approve, reject, or modify the Navy's proposed FY2020 shipbuilding program and the Navy's longer-term shipbuilding plans. Decisions that Congress makes on this issue can substantially affect Navy capabilities and funding requirements, and the U.S. shipbuilding industrial base. Detailed coverage of certain individual Navy shipbuilding programs can be found in the following CRS reports: CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of the Administration's FY2020 budget proposal, which the Administration withdrew on April 30, to not fund a mid-life refueling overhaul [called a refueling complex overhaul, or RCOH] for the aircraft carrier Harry S. Truman [CVN-75], and to retire CVN-75 around FY2024.) CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R43543, Navy LPD-17 Flight II Amphibious Ship Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of funding for the procurement of an amphibious assault ship called LHA-9.) CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke. For a discussion of the strategic and budgetary context in which U.S. Navy force structure and shipbuilding plans may be considered, see Appendix A . Background Navy's 355-Ship Ship Force-Structure Goal Introduction On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship force-level goal replaced a 308-ship force-level goal that the Navy released in March 2015. The 355-ship force-level goal is the largest force-level goal that the Navy has released since a 375-ship force-level goal that was in place in 2002-2004. In the years between that 375-ship goal and the 355-ship goal, Navy force-level goals were generally in the low 300s (see Appendix B ). The force level of 355 ships is a goal to be attained in the future; the actual size of the Navy in recent years has generally been between 270 and 290 ships. Table 1 shows the composition of the 355-ship force-level objective. 355-Ship Goal Resulted from 2016 Force Structure Assessment (FSA) The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. An FSA is an analysis in which the Navy solicits inputs from U.S. regional combatant commanders (CCDRs) regarding the types and amounts of Navy capabilities that CCDRs deem necessary for implementing the Navy's portion of the national military strategy and then translates those CCDR inputs into required numbers of ships, using current and projected Navy ship types. The analysis takes into account Navy capabilities for both warfighting and day-to-day forward-deployed presence. Although the result of the FSA is often reduced for convenience to single number (e.g., 355 ships), FSAs take into account a number of factors, including types and capabilities of Navy ships, aircraft, unmanned vehicles, and weapons, as well as ship homeporting arrangements and operational cycles. The Navy conducts a new FSA or an update to the existing FSA every few years, as circumstances require, to determine its force-structure goal. 355-Ship Goal Made U.S. Policy by FY2018 NDAA Section 1025 of the FY2018 National Defense Authorization Act, or NDAA ( H.R. 2810 / P.L. 115-91 of December 12, 2017), states the following: SEC. 1025. Policy of the United States on minimum number of battle force ships. (a) Policy.—It shall be the policy of the United States to have available, as soon as practicable, not fewer than 355 battle force ships, comprised of the optimal mix of platforms, with funding subject to the availability of appropriations or other funds. (b) Battle force ships defined.—In this section, the term "battle force ship" has the meaning given the term in Secretary of the Navy Instruction 5030.8C. The term battle force ships in the above provision refers to the ships that count toward the quoted size of the Navy in public policy discussions about the Navy. New FSA Now Being Done Could Change 355-Ship Figure and Force Mix The Navy states that a new FSA is now underway as the successor to the 2016 FSA, and that this new FSA is to be completed by the end of 2019. The new FSA, Navy officials state, will take into account the Trump Administration's December 2017 National Security Strategy document and its January 2018 National Defense Strategy document, both of which put an emphasis on renewed great power competition with China and Russia, as well as updated information on Chinese and Russian naval and other military capabilities and recent developments in new technologies, including those related to unmanned vehicles (UVs). Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both. Some observers, viewing statements by Navy officials, believe the new FSA in particular might shift the Navy's surface force to a more distributed architecture that includes a reduced proportion of large surface combatants (i.e., cruisers and destroyers), an increased proportion of small surface combatants (i.e., frigates and LCSs), and a newly created third tier of unmanned surface vehicles (USVs). Some observers believe the new FSA might also change the Navy's undersea force to a more distributed architecture that includes, in addition to attack submarines (SSNs) and bottom-based sensors, a new element of extremely large unmanned underwater vehicles (XLUUVs), which might be thought of as unmanned submarines. In presenting its proposed FY2020 budget, the Navy highlighted its plans for developing and procuring USVs and UUVs in coming years. Shifting to a more distributed force architecture, Navy officials have suggested, could be appropriate for implementing the Navy's new overarching operational concept, called Distributed Maritime Operations (DMO). Observers view DMO as a response to both China's improving maritime anti-access/area denial capabilities (which include advanced weapons for attacking Navy surface ships) and opportunities created by new technologies, including technologies for UVs and for networking Navy ships, aircraft, unmanned vehicles, and sensors into distributed battle networks. Figure 1 shows a Navy briefing slide depicting the Navy's potential new surface force architecture, with each sphere representing a manned ship or a USV. Consistent with Figure 1 , the Navy's 355-ship goal, reflecting the current force architecture, calls for a Navy with twice as many large surface combatants as small surface combatants. Figure 1 suggests that the potential new surface force architecture could lead to the obverse—a planned force mix that calls for twice as many small surface combatants than large surface combatants—along with a new third tier of numerous USVs. Observers believe the new FSA might additionally change the top-level metric used to express the Navy's force-level goal or the method used to count the size of the Navy, or both, to include large USVs and large UUVs. Navy's Five-Year and 30-Year Shipbuilding Plans FY2020 Five-Year (FY2020-FY2024) Shipbuilding Plan Table 2 shows the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan. The table also shows, for reference purposes, the ships funded for procurement in FY2019. The figures in the table reflect a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019. Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019. As shown in Table 2 , the Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. If the Navy had listed CVN-81 as a ship procured in FY2019 rather than a ship to be procured in FY2020, then the total numbers of ships in FY2019 and FY2020 would be 14 and 11, respectively. As also shown Table 2 , the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year. The Navy's FY2019 budget submission also included a total of 55 ships in the period FY2020-FY2024, but the mix of ships making up the total of 55 for these years has been changed under the FY2020 budget submission to include one additional attack submarine, one additional FFG(X) frigate, and two (rather than four) LPD-17 Flight II amphibious ships over the five-year period. The FY2020 submission also makes some changes within the five-year period to annual procurement quantities for DDG-51 destroyers, ESBs, and TAO-205s without changing the five-year totals for these programs. Compared to what was projected for FY2020 itself under the FY2019 budget submission, the FY2020 request accelerates from FY2023 to FY2020 the aircraft carrier CVN-81 (as a result of Congress's action to authorize the ship in FY2019), adds a third attack submarine, accelerates from FY2021 into FY2020 a third DDG-51, defers from FY2020 to FY2021 an LPD-17 Flight II amphibious ship to FY2021, defers from FY2020 to FY2023 an ESB ship, and accelerates from FY2021 to FY2020 a second TAO-205 class oiler. FY2020 30-Year (FY2020-FY2049) Shipbuilding Plan Table 3 shows the Navy's FY2020-FY2049 30-year shipbuilding plan. In devising a 30-year shipbuilding plan to move the Navy toward its ship force-structure goal, key assumptions and planning factors include but are not limited to ship construction times and service lives, estimated ship procurement costs, projected shipbuilding funding levels, and industrial-base considerations. As shown in Table 3 , the Navy's FY2020 30-year shipbuilding plan includes 304 new ships, or an average of about 10 per year. Projected Force Levels Under FY2020 30-Year Shipbuilding Plan Overview Table 4 shows the Navy's projection of ship force levels for FY2020-FY2049 that would result from implementing the FY2020 30-year (FY2020-FY2049) 30-year shipbuilding plan shown in Table 3 . As shown in Table 4 , if the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034. This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan. This is not primarily because the FY2020 30-year plan includes more ships than did the FY2019 plan: The total of 304 ships in the FY2020 plan is only three ships higher than the total of 301 ships in the FY2019 plan. Instead, it is primarily due to a decision announced by the Navy in April 2018, after the FY2019 budget was submitted, to increase the service lives of all DDG-51 destroyers—both those existing and those to be built in the future—to 45 years. Prior to this decision, the Navy had planned to keep older DDG-51s (referred to as the Flight I/II DDG-51s) in service for 35 years and newer DDG-51s (the Flight II/III DDG-51s) for 40 years. Figure 2 shows the Navy's projections for the total number of ships in the Navy under the Navy's FY2019 and FY2020 budget submissions. As can be seen in the figure, the Navy projected under the FY2019 plan that the fleet would not reach a total of 355 ships any time during the 30-year period. Adjustment Needed for Withdrawn Proposal Regarding CVN-75 RCOH The projected number of aircraft carriers in Table 4 , the projected total number of all ships in Table 4 , and the line showing the total number of ships under the Navy's FY2020 budget submission in Figure 2 all reflect the Navy's proposal, under its FY2020 budget submission, to not fund the mid-life nuclear refueling overhaul (called a refueling complex overhaul, or RCOH) of the aircraft carrier Harry S. Truman (CVN-75), and to instead retire CVN-75 around FY2024. On April 30, 2019, however, the Administration announced that it was withdrawing this proposal from the Navy's FY2020 budget submission. The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 in service past FY2024. As a result of the withdrawal of its proposal regarding the CVN-75 RCOH, the projected number of aircraft carriers and consequently the projected total number of all ships are now one ship higher for the period FY2022-FY2047 than what is shown in Table 4 , and the line in Figure 2 would be adjusted upward by one ship for those years. (The figures in Table 4 are left unchanged from what is shown in the FY2020 budget submission so as to accurately reflect what is shown in that budget submission.) 355-Ship Total Attained 20 Years Sooner; Mix Does Not Match FSA Mix As shown in Table 4 , although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA. Among other things, the Navy will have more than the required number of large surface combatants (i.e., cruisers and destroyers) from FY2030 through FY2040 (a consequence of the decision to extend the service lives of DDG-51s to 45 years), fewer than the required number of aircraft carriers through the end of the 30-year period, fewer than the required number of attack submarines through FY2047, and fewer than the required number of amphibious ships through the end of the 30-year period. The Navy acknowledges that the mix of ships will not match that called for by the 2016 FSA but states that if the Navy is going to have too many ships of a certain kind, DDG-51s are not a bad type of ship to have too many of, because they are very capable multi-mission ships. Issues for Congress Whether New FSA Will Change 355-Ship Goal and, If So, How One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways. As discussed earlier, Navy officials have suggested in their public remarks that this new FSA could shift the Navy toward a more distributed force architecture, which could change the 355-ship figure, the planned mix of ships, or both. The issue for Congress is how to assess the appropriateness of the Navy's FY2020 shipbuilding plans when a key measuring stick for conducting that assessment—the Navy's force-level goal and planned force mix—might soon change. Affordability of 30-Year Shipbuilding Plan Overview Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan. This issue has been a matter of oversight focus for several years, and particularly since the enactment in 2011 of the Budget Control Act, or BCA ( S. 365 / P.L. 112-25 of August 2, 2011). Observers have been particularly concerned about the plan's prospective affordability during the decade or so from the mid-2020s through the mid-2030s, when the plan calls for procuring Columbia-class ballistic missile submarines as well as replacements for large numbers of retiring attack submarines, cruisers, and destroyers. Figure 3 shows, in a graphic form, the Navy's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2020 30-year shipbuilding plan. The figure shows that during the period from the mid-2020s through the mid-2030s, the Navy estimates that implementing the FY2020 30-year shipbuilding plan would require roughly $24 billion per year in shipbuilding funds. Concern Regarding Potential Impact of Columbia-Class Program As discussed in the CRS report on the Columbia-class program, the Navy since 2013 has identified the Columbia-class program as its top program priority, meaning that it is the Navy's intention to fully fund this program, if necessary at the expense of other Navy programs, including other Navy shipbuilding programs. This led to concerns that in a situation of finite Navy shipbuilding budgets, funding requirements for the Columbia-class program could crowd out funding for procuring other types of Navy ships. These concerns in turn led to the creation by Congress of the National Sea-Based Deterrence Fund (NSBDF), a fund in the DOD budget that is intended in part to encourage policymakers to identify funding for the Columbia-class program from sources across the entire DOD budget rather than from inside the Navy's budget alone. Several years ago, when concerns arose about the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs, the Navy's shipbuilding budget was roughly $14 billion per year, and the roughly $7 billion per year that the Columbia-class program is projected to require from the mid-2020s to the mid-2030s (see Figure 3 ) represented roughly one-half of that total. With the Navy's shipbuilding budget having grown in more recent years to a total of roughly $24 billion per year, the $7 billion per year projected to be required by the Columbia-class program during those years does not loom proportionately as large as it once did in the Navy's shipbuilding budget picture. Even so, some concerns remain regarding the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs. Potential for Cost Growth on Navy Ships If one or more Navy ship designs turn out to be more expensive to build than the Navy estimates, then the projected funding levels shown in Figure 3 would not be sufficient to procure all the ships shown in the 30-year shipbuilding plan. As detailed by CBO and GAO, lead ships in Navy shipbuilding programs in many cases have turned out to be more expensive to build than the Navy had estimated. Ship designs that can be viewed as posing a risk of being more expensive to build than the Navy estimates include Gerald R. Ford (CVN-78) class aircraft carriers, Columbia-class ballistic missile submarines, Virginia-class attack submarines equipped with the Virginia Payload Module (VPM), Flight III versions of the DDG-51 destroyer, FFG(X) frigates, LPD-17 Flight II amphibious ships, and John Lewis (TAO-205) class oilers, as well as other new classes of ships that the Navy wants to begin procuring years from now. CBO Estimate The statute that requires the Navy to submit a 30-year shipbuilding plan each year (10 U.S.C. 231) also requires CBO to submit its own independent analysis of the potential cost of the 30-year plan (10 U.S.C. 231[d]). CBO is now preparing its estimate of the cost of the Navy's FY2020 30-year shipbuilding plan. In the meantime, Figure 4 shows, in a graphic form, CBO's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2019 30-year shipbuilding plan. This figure might be compared to the Navy's estimate of its FY2020 30-year plan as shown in Figure 3 , although doing so poses some apples-vs.-oranges issues, as the Navy's FY2019 and FY2020 30-year plans do not cover exactly the same 30-year periods, and for the years they do have in common, there are some differences in types and numbers of ships to be procured in certain years. CBO analyses of past Navy 30-year shipbuilding plans have generally estimated the cost of implementing those plans to be higher than what the Navy estimated. Consistent with that past pattern, as shown in Table 5 , CBO's estimate of the cost to implement the Navy's FY2019 30-year (FY2019-FY2048) shipbuilding plan is about 27% higher than the Navy's estimated cost for the FY2019 plan. ( Table 5 does not pose an apples-vs.-oranges issue, because both the Navy and CBO estimates in this table are for the Navy's FY2019 30-year plan.) More specifically, as shown in the table, CBO estimated that the cost of the first 10 years of the FY2019 30-year plan would be about 2% higher than the Navy's estimate; that the cost of the middle 10 years of the plan would be about 13% higher than the Navy's estimate; and that the cost of the final 10 years of the plan would be about 27% higher than the Navy's estimate. Treatment of Inflation The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is due in part to a technical difference between CBO and the Navy regarding the treatment of inflation. This difference compounds over time, making it increasingly important as a factor in the difference between CBO's estimates and the Navy's estimates the further one goes into the 30-year period. In other words, other things held equal, this factor tends to push the CBO and Navy estimates further apart as one proceeds from the earlier years of the plan to the later years of the plan. Designs of Future Classes of Ships The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is also due to differences between CBO and the Navy about the costs of certain ship classes, particularly classes that are projected to be procured starting years from now. The designs of these future ship classes are not yet determined, creating more potential for CBO and the Navy to come to differing conclusions regarding their potential cost. For the FY2019 30-year plan, the largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of SSNs that the Navy wants to begin procuring in FY2034 as the successor to the Virginia-class SSN design. This new class of SSN, CBO says, accounted for 42% of the difference between the CBO and Navy estimates for the FY2019 30-year plan, in part because there were a substantial number of these SSNs in the plan, and because those ships occur in the latter years of the plan, where the effects of the technical difference between CBO and the Navy regarding the treatment of inflation show more strongly. The second-largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of large surface combatant (i.e., cruiser or destroyer) that the Navy wants to begin procuring in the future, which accounted for 20% of the difference, for reasons that are similar to those mentioned above for the new class of SSNs. The third-largest source of difference was the new class of frigates (FFG[X]s) that the Navy wants to begin procuring in FY2020, which accounts for 9% of the difference. The remaining 29% of difference between the CBO and Navy estimates was accounted for collectively by several other shipbuilding programs, each of which individually accounts for between 1% and 4% of the difference. The Columbia-class program, which accounted for 4%, is one of the programs in this final group. Legislative Activity for FY2020 CRS Reports Tracking Legislation on Specific Navy Shipbuilding Programs Detailed coverage of legislative activity on certain Navy shipbuilding programs (including funding levels, legislative provisions, and report language) can be found in the following CRS reports: CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of the Administration's FY2020 budget proposal, which the Administration withdrew on April 30, to not fund a mid-life refueling overhaul [called a refueling complex overhaul, or RCOH] for the aircraft carrier Harry S. Truman [CVN-75], and to retire CVN-75 around FY2024.) CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R43543, Navy LPD-17 Flight II Amphibious Ship Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of funding for the procurement of an amphibious assault ship called LHA-9.) CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke. Legislative activity on individual Navy shipbuilding programs that are not covered in detail in the above reports is covered below. Summary of Congressional Action on FY2020 Funding Request The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships: 1 Gerald R. Ford (CVN-78) class aircraft carrier; 3 Virginia-class attack submarines; 3 DDG-51 class Aegis destroyers; 1 FFG(X) frigate; 2 John Lewis (TAO-205) class oilers; and 2 TATS towing, salvage, and rescue ships. As noted earlier, the above list of 12 ships reflects a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019. Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019. The Navy's proposed FY2020 shipbuilding budget also requests funding for ships that have been procured in prior fiscal years, and ships that are to be procured in future fiscal years, as well as funding for activities other than the building of new Navy ships. Table 6 summarizes congressional action on the Navy's FY2020 funding request for Navy shipbuilding. The table shows the amounts requested and congressional changes to those requested amounts. A blank cell in a filled-in column showing congressional changes to requested amounts indicates no change from the requested amount. Appendix A. Strategic and Budgetary Context This appendix presents some brief comments on elements of the strategic and budgetary context in which U.S. Navy force structure and shipbuilding plans may be considered. Shift in International Security Environment World events have led some observers, starting in late 2013, to conclude that the international security environment has undergone a shift over the past several years from the familiar post-Cold War era of the past 20-25 years, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different strategic situation that features, among other things, renewed great power competition with China and Russia, and challenges to elements of the U.S.-led international order that has operated since World War II. This situation is discussed further in another CRS report. World Geography and U.S. Grand Strategy Discussion of the above-mentioned shift in the international security environment has led to a renewed emphasis in discussions of U.S. security and foreign policy on grand strategy and geopolitics. From a U.S. perspective on grand strategy and geopolitics, it can be noted that most of the world's people, resources, and economic activity are located not in the Western Hemisphere, but in the other hemisphere, particularly Eurasia. In response to this basic feature of world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, on the grounds that such a hegemon could represent a concentration of power strong enough to threaten core U.S. interests by, for example, denying the United States access to some of the other hemisphere's resources and economic activity. Although U.S. policymakers have not often stated this key national strategic goal explicitly in public, U.S. military (and diplomatic) operations in recent decades—both wartime operations and day-to-day operations—can be viewed as having been carried out in no small part in support of this key goal. U.S. Grand Strategy and U.S. Naval Forces As noted above, in response to basic world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another. The traditional U.S. goal of preventing the emergence of a regional hegemon in one part of Eurasia or another has been a major reason why the U.S. military is structured with force elements that enable it to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. Force elements associated with this goal include, among other things, an Air Force with significant numbers of long-range bombers, long-range surveillance aircraft, long-range airlift aircraft, and aerial refueling tankers, and a Navy with significant numbers of aircraft carriers, nuclear-powered attack submarines, large surface combatants, large amphibious ships, and underway replenishment ships. The United States is the only country in the world that has designed its military to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. The other countries in the Western Hemisphere do not design their forces to do this because they cannot afford to, and because the United States has been, in effect, doing it for them. Countries in the other hemisphere do not design their forces to do this for the very basic reason that they are already in the other hemisphere, and consequently instead spend their defense money on forces that are tailored largely for influencing events in their own local region. The fact that the United States has designed its military to do something that other countries do not design their forces to do—cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival—can be important to keep in mind when comparing the U.S. military to the militaries of other nations. For example, in observing that the U.S. Navy has 11 aircraft carriers while other countries have no more than one or two, it can be noted other countries do not need a significant number of aircraft carriers because, unlike the United States, they are not designing their forces to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. As another example, it is sometimes noted, in assessing the adequacy of U.S. naval forces, that U.S. naval forces are equal in tonnage to the next dozen or more navies combined, and that most of those next dozen or more navies are the navies of U.S. allies. Those other fleets, however, are mostly of Eurasian countries, which do not design their forces to cross to the other side of the world and then conduct sustained, large-scale military operations upon arrival. The fact that the U.S. Navy is much bigger than allied navies does not necessarily prove that U.S. naval forces are either sufficient or excessive; it simply reflects the differing and generally more limited needs that U.S. allies have for naval forces. (It might also reflect an underinvestment by some of those allies to meet even their more limited naval needs.) Countries have differing needs for naval and other military forces. The United States, as a country located in the Western Hemisphere that has adopted a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, has defined a need for naval and other military forces that is quite different from the needs of allies that are located in Eurasia. The sufficiency of U.S. naval and other military forces consequently is best assessed not through comparison to the militaries of other countries, but against U.S. strategic goals. More generally, from a geopolitical perspective, it can be noted that that U.S. naval forces, while not inexpensive, give the United States the ability to convert the world's oceans—a global commons that covers more than two-thirds of the planet's surface—into a medium of maneuver and operations for projecting U.S. power ashore and otherwise defending U.S. interests around the world. The ability to use the world's oceans in this manner—and to deny other countries the use of the world's oceans for taking actions against U.S. interests—constitutes an immense asymmetric advantage for the United States. This point would be less important if less of the world were covered by water, or if the oceans were carved into territorial blocks, like the land. Most of the world, however, is covered by water, and most of those waters are international waters, where naval forces can operate freely. The point, consequently, is not that U.S. naval forces are intrinsically special or privileged—it is that they have a certain value simply as a consequence of the physical and legal organization of the planet. Uncertainty Regarding Future U.S. Role in the World The overall U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs. A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II. In addition to promoting and defending the open international order, the overall U.S. role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world. Certain statements and actions from the Trump Administration have led to uncertainty about the Administration's intentions regarding the U.S. role in the world. Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U.S. role in one or more ways. A change in the overall U.S. role could have profound implications for DOD strategy, budgets, plans, and programs, including the planned size and structure of the Navy. Declining U.S. Technological and Qualitative Edge DOD officials have expressed concern that the technological and qualitative edge that U.S. military forces have had relative to the military forces of other countries is being narrowed by improving military capabilities in other countries. China's improving military capabilities are a primary contributor to that concern. Russia's rejuvenated military capabilities are an additional contributor. DOD in recent years has taken a number of actions to arrest and reverse the decline in the U.S. technological and qualitative edge. Challenge to U.S. Sea Control and U.S. Position in Western Pacific Observers of Chinese and U.S. military forces view China's improving naval capabilities as posing a potential challenge in the Western Pacific to the U.S. Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U.S. Navy has faced since the end of the Cold War. More broadly, these observers view China's naval capabilities as a key element of an emerging broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific. Longer Ship Deployments U.S. Navy officials have testified that fully meeting requests from U.S. regional combatant commanders (CCDRs) for forward-deployed U.S. naval forces would require a Navy much larger than today's fleet. For example, Navy officials testified in March 2014 that a Navy of 450 ships would be required to fully meet CCDR requests for forward-deployed Navy forces. CCDR requests for forward-deployed U.S. Navy forces are adjudicated by DOD through a process called the Global Force Management Allocation Plan. The process essentially makes choices about how best to apportion a finite number forward-deployed U.S. Navy ships among competing CCDR requests for those ships. Even with this process, the Navy has lengthened the deployments of some ships in an attempt to meet policymaker demands for forward-deployed U.S. Navy ships. Although Navy officials are aiming to limit ship deployments to seven months, Navy ships in recent years have frequently been deployed for periods of eight months or more. Limits on Defense Spending in Budget Control Act of 2011 as Amended Limits on the "base" portion of the U.S. defense budget established by Budget Control Act of 2011, or BCA ( S. 365 / P.L. 112-25 of August 2, 2011), as amended, combined with some of the considerations above, have led to discussions among observers about how to balance competing demands for finite U.S. defense funds, and about whether programs for responding to China's military modernization effort can be adequately funded while also adequately funding other defense-spending priorities, such as initiatives for responding to Russia's actions in Ukraine and elsewhere in Europe and U.S. operations for countering the Islamic State organization in the Middle East. Appendix B. Earlier Navy Force-Structure Goals Dating Back to 2001 The table below shows earlier Navy force-structure goals dating back to 2001. The 308-ship force-level goal of March 2015, shown in the first column of the table, is the goal that was replaced by the 355-ship force-level goal released in December 2016. Appendix C. Comparing Past Ship Force Levels to Current or Potential Future Ship Force Levels In assessing the appropriateness of the current or potential future number of ships in the Navy, observers sometimes compare that number to historical figures for total Navy fleet size. Historical figures for total fleet size, however, can be a problematic yardstick for assessing the appropriateness of the current or potential future number of ships in the Navy, particularly if the historical figures are more than a few years old, because the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time; and the number of ships in the fleet in an earlier year might itself have been inappropriate (i.e., not enough or more than enough) for meeting the Navy's mission requirements in that year. Regarding the first bullet point above, the Navy, for example, reached a late-Cold War peak of 568 battle force ships at the end of FY1987, and as of May 7, 2019, included a total of 289 battle force ships. The FY1987 fleet, however, was intended to meet a set of mission requirements that focused on countering Soviet naval forces at sea during a potential multitheater NATO-Warsaw Pact conflict, while the May 2019 fleet is intended to meet a considerably different set of mission requirements centered on influencing events ashore by countering both land- and sea-based military forces of China, Russia, North Korea, and Iran, as well as nonstate terrorist organizations. In addition, the Navy of FY1987 differed substantially from the May 2019 fleet in areas such as profusion of precision-guided air-delivered weapons, numbers of Tomahawk-capable ships, and the sophistication of C4ISR systems and networking capabilities. In coming years, Navy missions may shift again, and the capabilities of Navy ships will likely have changed further by that time due to developments such as more comprehensive implementation of networking technology, increased use of ship-based unmanned vehicles, and the potential fielding of new types of weapons such as lasers or electromagnetic rail guns. The 568-ship fleet of FY1987 may or may not have been capable of performing its stated missions; the 289-ship fleet of May 2019 may or may not be capable of performing its stated missions; and a fleet years from now with a certain number of ships may or may not be capable of performing its stated missions. Given changes over time in mission requirements, ship mixes, and technologies, however, these three issues are to a substantial degree independent of one another. For similar reasons, trends over time in the total number of ships in the Navy are not necessarily a reliable indicator of the direction of change in the fleet's ability to perform its stated missions. An increasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform its stated missions is increasing, because the fleet's mission requirements might be increasing more rapidly than ship numbers and average ship capability. Similarly, a decreasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform stated missions is decreasing, because the fleet's mission requirements might be declining more rapidly than numbers of ships, or because average ship capability and the percentage of time that ships are in deployed locations might be increasing quickly enough to more than offset reductions in total ship numbers. Regarding the second of the two bullet points above, it can be noted that comparisons of the size of the fleet today with the size of the fleet in earlier years rarely appear to consider whether the fleet was appropriately sized in those earlier years (and therefore potentially suitable as a yardstick of comparison), even though it is quite possible that the fleet in those earlier years might not have been appropriately sized, and even though there might have been differences of opinion among observers at that time regarding that question. Just as it might not be prudent for observers years from now to tacitly assume that the 286-ship Navy of September 2018 was appropriately sized for meeting the mission requirements of 2018, even though there were differences of opinion among observers on that question, simply because a figure of 286 ships appears in the historical records for 2016, so, too, might it not be prudent for observers today to tacitly assume that the number of ships of the Navy in an earlier year was appropriate for meeting the Navy's mission requirements that year, even though there might have been differences of opinion among observers at that time regarding that question, simply because the size of the Navy in that year appears in a table like Table H-1 . Previous Navy force structure plans, such as those shown in Table B-1 , might provide some insight into the potential adequacy of a proposed new force-structure plan, but changes over time in mission requirements, technologies available to ships for performing missions, and other force-planning factors, as well as the possibility that earlier force-structure plans might not have been appropriate for meeting the mission demands of their times, suggest that some caution should be applied in using past force structure plans for this purpose, particularly if those past force structure plans are more than a few years old. The Reagan-era goal for a 600-ship Navy, for example, was designed for a Cold War set of missions focusing on countering Soviet naval forces at sea, which is not an appropriate basis for planning the Navy today, and there was considerable debate during those years as to the appropriateness of the 600-ship goal. Appendix D. Industrial Base Ability for, and Employment Impact of, Additional Shipbuilding Work This appendix presents background information on the ability of the industrial base to take on the additional shipbuilding work associated with achieving and maintaining the Navy's 355-ship force-level goal and on the employment impact of additional shipbuilding work. Industrial Base Ability The U.S. shipbuilding industrial base has some unused capacity to take on increased Navy shipbuilding work, particularly for certain kinds of surface ships, and its capacity could be increased further over time to support higher Navy shipbuilding rates. Navy shipbuilding rates could not be increased steeply across the board overnight—time (and investment) would be needed to hire and train additional workers and increase production facilities at shipyards and supplier firms, particularly for supporting higher rates of submarine production. Depending on their specialties, newly hired workers could be initially less productive per unit of time worked than more experienced workers. Some parts of the shipbuilding industrial base, such as the submarine construction industrial base, could face more challenges than others in ramping up to the higher production rates required to build the various parts of the 355-ship fleet. Over a period of a few to several years, with investment and management attention, Navy shipbuilding could ramp up to higher rates for achieving a 355-ship fleet over a period of 20-30 years. An April 2017 CBO report stated that all seven shipyards [currently involved in building the Navy's major ships] would need to increase their workforces and several would need to make improvements to their infrastructure in order to build ships at a faster rate. However, certain sectors face greater obstacles in constructing ships at faster rates than others: Building more submarines to meet the goals of the 2016 force structure assessment would pose the greatest challenge to the shipbuilding industry. Increasing the number of aircraft carriers and surface combatants would pose a small to moderate challenge to builders of those vessels. Finally, building more amphibious ships and combat logistics and support ships would be the least problematic for the shipyards. The workforces across those yards would need to increase by about 40 percent over the next 5 to 10 years. Managing the growth and training of those new workforces while maintaining the current standard of quality and efficiency would represent the most significant industrywide challenge. In addition, industry and Navy sources indicate that as much as $4 billion would need to be invested in the physical infrastructure of the shipyards to achieve the higher production rates required under the [notional] 15-year and 20-year [buildup scenarios examined by CBO]. Less investment would be needed for the [notional] 25-year or 30-year [buildup scenarios examined by CBO]. A January 13, 2017, press report states the following: The Navy's production lines are hot and the work to prepare them for the possibility of building out a much larger fleet would be manageable, the service's head of acquisition said Thursday. From a logistics perspective, building the fleet from its current 274 ships to 355, as recommended in the Navy's newest force structure assessment in December, would be straightforward, Assistant Secretary of the Navy for Research, Development and Acquisition Sean Stackley told reporters at the Surface Navy Association's annual symposium. "By virtue of maintaining these hot production lines, frankly, over the last eight years, our facilities are in pretty good shape," Stackley said. "In fact, if you talked to industry, they would say we're underutilizing the facilities that we have." The areas where the Navy would likely have to adjust "tooling" to answer demand for a larger fleet would likely be in Virginia-class attack submarines and large surface combatants, the DDG-51 guided missile destroyers—two ship classes likely to surge if the Navy gets funding to build to 355 ships, he said. "Industry's going to have to go out and procure special tooling associated with going from current production rates to a higher rate, but I would say that's easily done," he said. Another key, Stackley said, is maintaining skilled workers—both the builders in the yards and the critical supply-chain vendors who provide major equipment needed for ship construction. And, he suggested, it would help to avoid budget cuts and other events that would force workforce layoffs. "We're already prepared to ramp up," he said. "In certain cases, that means not laying off the skilled workforce we want to retain." A January 17, 2017, press report states the following: Building stable designs with active production lines is central to the Navy's plan to grow to 355 ships. "if you look at the 355-ship number, and you study the ship classes (desired), the big surge is in attack submarines and large surface combatants, which today are DDG-51 (destroyers)," the Assistant Secretary of the Navy, Sean Stackley, told reporters at last week's Surface Navy Association conference. Those programs have proven themselves reliable performers both at sea and in the shipyards. From today's fleet of 274 ships, "we're on an irreversible path to 308 by 2021. Those ships are already in construction," said Stackley. "To go from there to 355, virtually all those ships are currently in production, with some exceptions: Ohio Replacement, (we) just got done the Milestone B there (to move from R&D into detailed design); and then upgrades to existing platforms. So we have hot production lines that will take us to that 355-ship Navy." A January 24, 2017, press report states the following: Navy officials say a recently determined plan to increase its fleet size by adding more new submarines, carriers and destroyers is "executable" and that early conceptual work toward this end is already underway.... Although various benchmarks will need to be reached in order for this new plan to come to fruition, such as Congressional budget allocations, Navy officials do tell Scout Warrior that the service is already working—at least in concept—on plans to vastly enlarge the fleet. Findings from this study are expected to inform an upcoming 2018 Navy Shipbuilding Plan, service officials said. A January 12, 2017, press report states the following: Brian Cuccias, president of Ingalls Shipbuilding [a shipyard owned by Huntington Ingalls Industries (HII) that builds Navy destroyers and amphibious ships as well as Coast Guard cutters], said Ingalls, which is currently building 10 ships for four Navy and Coast Guard programs at its 800-acre facility in Pascagoula, Miss., could build more because it is using only 70 to 75 percent of its capacity. A March 2017 press report states the following: As the Navy calls for a larger fleet, shipbuilders are looking toward new contracts and ramping up their yards to full capacity.... The Navy is confident that U.S. shipbuilders will be able to meet an increased demand, said Ray Mabus, then-secretary of the Navy, during a speech at the Surface Navy Association's annual conference in Arlington, Virginia. They have the capacity to "get there because of the ships we are building today," Mabus said. "I don't think we could have seven years ago." Shipbuilders around the United States have "hot" production lines and are manufacturing vessels on multi-year or block buy contracts, he added. The yards have made investments in infrastructure and in the training of their workers. "We now have the basis ... [to] get to that much larger fleet," he said.... Shipbuilders have said they are prepared for more work. At Ingalls Shipbuilding—a subsidiary of Huntington Ingalls Industries—10 ships are under construction at its Pascagoula, Mississippi, yard, but it is under capacity, said Brian Cuccias, the company's president. The shipbuilder is currently constructing five guided-missile destroyers, the latest San Antonio-class amphibious transport dock ship, and two national security cutters for the Coast Guard. "Ingalls is a very successful production line right now, but it has the ability to actually produce a lot more in the future," he said during a briefing with reporters in January. The company's facility is currently operating at 75 percent capacity, he noted.... Austal USA—the builder of the Independence-variant of the littoral combat ship and the expeditionary fast transport vessel—is also ready to increase its capacity should the Navy require it, said Craig Perciavalle, the company's president. The latest discussions are "certainly something that a shipbuilder wants to hear," he said. "We do have the capability of increasing throughput if the need and demand were to arise, and then we also have the ability with the present workforce and facility to meet a different mix that could arise as well." Austal could build fewer expeditionary fast transport vessels and more littoral combat ships, or vice versa, he added. "The key thing for us is to keep the manufacturing lines hot and really leverage the momentum that we've gained on both of the programs," he said. The company—which has a 164-acre yard in Mobile, Alabama—is focused on the extension of the LCS and expeditionary fast transport ship program, but Perciavalle noted that it could look into manufacturing other types of vessels. "We do have excess capacity to even build smaller vessels … if that opportunity were to arise and we're pursuing that," he said. Bryan Clark, a naval analyst at the Center for Strategic and Budgetary Assessments, a Washington, D.C.-based think tank, said shipbuilders are on average running between 70 and 80 percent capacity. While they may be ready to meet an increased demand for ships, it would take time to ramp up their workforces. However, the bigger challenge is the supplier industrial base, he said. "Shipyards may be able to build ships but the supplier base that builds the pumps … and the radars and the radios and all those other things, they don't necessarily have that ability to ramp up," he said. "You would need to put some money into building up their capacity." That has to happen now, he added. Rear Adm. William Gallinis, program manager for program executive office ships, said what the Navy must be "mindful of is probably our vendor base that support the shipyards." Smaller companies that supply power electronics and switchboards could be challenged, he said. "Do we need to re-sequence some of the funding to provide some of the facility improvements for some of the vendors that may be challenged? My sense is that the industrial base will size to the demand signal. We just need to be mindful of how we transition to that increased demand signal," he said. The acquisition workforce may also see an increased amount of stress, Gallinis noted. "It takes a fair amount of experience and training to get a good contracting officer to the point to be [able to] manage contracts or procure contracts." "But I don't see anything that is insurmountable," he added. At a May 24, 2017, hearing before the Seapower subcommittee of the Senate Armed Services Committee on the industrial-base aspects of the Navy's 355-ship goal, John P. Casey, executive vice president–marine systems, General Dynamics Corporation (one of the country's two principal builders of Navy ships) stated the following: It is our belief that the Nation's shipbuilding industrial base can scale-up hot production lines for existing ships and mobilize additional resources to accomplish the significant challenge of achieving the 355-ship Navy as quickly as possible.... Supporting a plan to achieve a 355-ship Navy will be the most challenging for the nuclear submarine enterprise. Much of the shipyard and industrial base capacity was eliminated following the steep drop-off in submarine production that occurred with the cancellation of the Seawolf Program in 1992. The entire submarine industrial base at all levels of the supply chain will likely need to recapitalize some portion of its facilities, workforce, and supply chain just to support the current plan to build the Columbia Class SSBN program, while concurrently building Virginia Class SSNs. Additional SSN procurement will require industry to expand its plans and associated investment beyond the level today.... Shipyard labor resources include the skilled trades needed to fabricate, build and outfit major modules, perform assembly, test and launch of submarines, and associated support organizations that include planning, material procurement, inspection, quality assurance, and ship certification. Since there is no commercial equivalency for Naval nuclear submarine shipbuilding, these trade resources cannot be easily acquired in large numbers from other industries. Rather, these shipyard resources must be acquired and developed over time to ensure the unique knowledge and know-how associated with nuclear submarine shipbuilding is passed on to the next generation of shipbuilders. The mechanisms of knowledge transfer require sufficient lead time to create the proficient, skilled craftsmen in each key trade including welding, electrical, machining, shipfitting, pipe welding, painting, and carpentry, which are among the largest trades that would need to grow to support increased demand. These trades will need to be hired in the numbers required to support the increased workload. Both shipyards have scalable processes in place to acquire, train, and develop the skilled workforce they need to build nuclear ships. These processes and associated training facilities need to be expanded to support the increased demand. As with the shipyards, the same limiting factors associated with facilities, workforce, and supply chain also limit the submarine unique first tier suppliers and sub-tiers in the industrial base for which there is no commercial equivalency.... The supply base is the third resource that will need to be expanded to meet the increased demand over the next 20 years. During the OHIO, 688 and SEAWOLF construction programs, there were over 17,000 suppliers supporting submarine construction programs. That resource base was "rationalized" during submarine low rate production over the last 20 years. The current submarine industrial base reflects about 5,000 suppliers, of which about 3,000 are currently active (i.e., orders placed within the last 5 years), 80% of which are single or sole source (based on $). It will take roughly 20 years to build the 12 Columbia Class submarines that starts construction in FY21. The shipyards are expanding strategic sourcing of appropriate non-core products (e.g., decks, tanks, etc.) in order to focus on core work at each shipyard facility (e.g., module outfitting and assembly). Strategic sourcing will move demand into the supply base where capacity may exist or where it can be developed more easily. This approach could offer the potential for cost savings by competition or shifting work to lower cost work centers throughout the country. Each shipyard has a process to assess their current supply base capacity and capability and to determine where it would be most advantageous to perform work in the supply base.... Achieving the increased rate of production and reducing the cost of submarines will require the Shipbuilders to rely on the supply base for more non-core products such as structural fabrication, sheet metal, machining, electrical, and standard parts. The supply base must be made ready to execute work with submarine-specific requirements at a rate and volume that they are not currently prepared to perform. Preparing the supply base to execute increased demand requires early non-recurring funding to support cross-program construction readiness and EOQ funding to procure material in a manner that does not hold up existing ship construction schedules should problems arise in supplier qualification programs. This requires longer lead times (estimates of three years to create a new qualified, critical supplier) than the current funding profile supports.... We need to rely on market principles to allow suppliers, the shipyards and GFE material providers to sort through the complicated demand equation across the multiple ship programs. Supplier development funding previously mentioned would support non-recurring efforts which are needed to place increased orders for material in multiple market spaces. Examples would include valves, build-to-print fabrication work, commodities, specialty material, engineering components, etc. We are engaging our marine industry associations to help foster innovative approaches that could reduce costs and gain efficiency for this increased volume.... Supporting the 355-ship Navy will require Industry to add capability and capacity across the entire Navy Shipbuilding value chain. Industry will need to make investment decisions for additional capital spend starting now in order to meet a step change in demand that would begin in FY19 or FY20. For the submarine enterprise, the step change was already envisioned and investment plans that embraced a growth trajectory were already being formulated. Increasing demand by adding additional submarines will require scaling facility and workforce development plans to operate at a higher rate of production. The nuclear shipyards would also look to increase material procurement proportionally to the increased demand. In some cases, the shipyard facilities may be constrained with existing capacity and may look to source additional work in the supply base where capacity exists or where there are competitive business advantages to be realized. Creating additional capacity in the supply base will require non-recurring investment in supplier qualification, facilities, capital equipment and workforce training and development. Industry is more likely to increase investment in new capability and capacity if there is certainty that the Navy will proceed with a stable shipbuilding plan. Positive signals of commitment from the Government must go beyond a published 30-year Navy Shipbuilding Plan and line items in the Future Years Defense Plan (FYDP) and should include: Multi-year contracting for Block procurement which provides stability in the industrial base and encourages investment in facilities and workforce development Funding for supplier development to support training, qualification, and facilitization efforts—Electric Boat and Newport News have recommended to the Navy funding of $400M over a three-year period starting in 2018 to support supplier development for the Submarine Industrial Base as part of an Integrated Enterprise Plan Extended Enterprise initiative Acceleration of Advance Procurement and/or Economic Order Quantities (EOQ) procurement from FY19 to FY18 for Virginia Block V Government incentives for construction readiness and facilities / special tooling for shipyard and supplier facilities, which help cash flow capital investment ahead of construction contract awards Procurement of additional production back-up (PBU) material to help ensure a ready supply of material to mitigate construction schedule risk.... So far, this testimony has focused on the Submarine Industrial Base, but the General Dynamics Marine Systems portfolio also includes surface ship construction. Unlike Electric Boat, Bath Iron Works and NASSCO are able to support increased demand without a significant increase in resources..... Bath Iron Works is well positioned to support the Administration's announced goal of increasing the size of the Navy fleet to 355 ships. For BIW that would mean increasing the total current procurement rate of two DDG 51s per year to as many as four DDGs per year, allocated equally between BIW and HII. This is the same rate that the surface combatant industrial base sustained over the first decade of full rate production of the DDG 51 Class (1989-1999).... No significant capital investment in new facilities is required to accommodate delivering two DDGs per year. However, additional funding will be required to train future shipbuilders and maintain equipment. Current hiring and training processes support the projected need, and have proven to be successful in the recent past. BIW has invested significantly in its training programs since 2014 with the restart of the DDG 51 program and given these investments and the current market in Maine, there is little concern of meeting the increase in resources required under the projected plans. A predictable and sustainable Navy workload is essential to justify expanding hiring/training programs. BIW would need the Navy's commitment that the Navy's plan will not change before it would proceed with additional hiring and training to support increased production. BIW's supply chain is prepared to support a procurement rate increase of up to four DDG 51s per year for the DDG 51 Program. BIW has long-term purchasing agreements in place for all major equipment and material for the DDG 51 Program. These agreements provide for material lead time and pricing, and are not constrained by the number of ships ordered in a year. BIW confirmed with all of its critical suppliers that they can support this increased procurement rate.... The Navy's Force Structure Assessment calls for three additional ESBs. Additionally, NASSCO has been asked by the Navy and the Congressional Budget Office (CBO) to evaluate its ability to increase the production rate of T-AOs to two ships per year. NASSCO has the capacity to build three more ESBs at a rate of one ship per year while building two T-AOs per year. The most cost effective funding profile requires funding ESB 6 in FY18 and the following ships in subsequent fiscal years to avoid increased cost resulting from a break in the production line. The most cost effective funding profile to enable a production rate of two T-AO ships per year requires funding an additional long lead time equipment set beginning in FY19 and an additional ship each year beginning in FY20. NASSCO must now reduce its employment levels due to completion of a series of commercial programs which resulted in the delivery of six ships in 2016. The proposed increase in Navy shipbuilding stabilizes NASSCO's workload and workforce to levels that were readily demonstrated over the last several years. Some moderate investment in the NASSCO shipyard will be needed to reach this level of production. The recent CBO report on the costs of building a 355-ship Navy accurately summarized NASSCO's ability to reach the above production rate stating, "building more … combat logistics and support ships would be the least problematic for the shipyards." At the same hearing, Brian Cuccias, president, Ingalls Shipbuilding, Huntington Ingalls Industries (the country's other principal builder of Navy ships) stated the following: Qualifying to be a supplier is a difficult process. Depending on the commodity, it may take up to 36 months. That is a big burden on some of these small businesses. This is why creating sufficient volume and exercising early contractual authorization and advance procurement funding is necessary to grow the supplier base, and not just for traditional long-lead time components; that effort needs to expand to critical components and commodities that today are controlling the build rate of submarines and carriers alike. Many of our suppliers are small businesses and can only make decisions to invest in people, plant and tooling when they are awarded a purchase order. We need to consider how we can make commitments to suppliers early enough to ensure material readiness and availability when construction schedules demand it. With questions about the industry's ability to support an increase in shipbuilding, both Newport News and Ingalls have undertaken an extensive inventory of our suppliers and assessed their ability to ramp up their capacity. We have engaged many of our key suppliers to assess their ability to respond to an increase in production. The fortunes of related industries also impact our suppliers, and an increase in demand from the oil and gas industry may stretch our supply base. Although some low to moderate risk remains, I am convinced that our suppliers will be able to meet the forecasted Navy demand.... I strongly believe that the fastest results can come from leveraging successful platforms on current hot production lines. We commend the Navy's decision in 2014 to use the existing LPD 17 hull form for the LX(R), which will replace the LSD-class amphibious dock landing ships scheduled to retire in the coming years. However, we also recommend that the concept of commonality be taken even further to best optimize efficiency, affordability and capability. Specifically, rather than continuing with a new design for LX(R) within the "walls" of the LPD hull, we can leverage our hot production line and supply chain and offer the Navy a variant of the existing LPD design that satisfies the aggressive cost targets of the LX(R) program while delivering more capability and survivability to the fleet at a significantly faster pace than the current program. As much as 10-15 percent material savings can be realized across the LX(R) program by purchasing respective blocks of at least five ships each under a multi-year procurement (MYP) approach. In the aggregate, continuing production with LPD 30 in FY18, coupled with successive MYP contracts for the balance of ships, may yield savings greater than $1 billion across an 11-ship LX(R) program. Additionally, we can deliver five LX(R)s to the Navy and Marine Corps in the same timeframe that the current plan would deliver two, helping to reduce the shortfall in amphibious warships against the stated force requirement of 38 ships. Multi-ship procurements, whether a formal MYP or a block-buy, are a proven way to reduce the price of ships. The Navy took advantage of these tools on both Virginia-class submarines and Arleigh Burke-class destroyers. In addition to the LX(R) program mentioned above, expanding multi-ship procurements to other ship classes makes sense.... The most efficient approach to lower the cost of the Ford class and meet the goal of an increased CVN fleet size is also to employ a multi-ship procurement strategy and construct these ships at three-year intervals. This approach would maximize the material procurement savings benefit through economic order quantities procurement and provide labor efficiencies to enable rapid acquisition of a 12-ship CVN fleet. This three-ship approach would save at least $1.5 billion, not including additional savings that could be achieved from government-furnished equipment. As part of its Integrated Enterprise Plan, we commend the Navy's efforts to explore the prospect of material economic order quantity purchasing across carrier and submarine programs. At the same hearing, Matthew O. Paxton, president, Shipbuilders Council of America (SCA)—a trade association representing shipbuilders, suppliers, and associated firms—stated the following: To increase the Navy's Fleet to 355 ships, a substantial and sustained investment is required in both procurement and readiness. However, let me be clear: building and sustaining the larger required Fleet is achievable and our industry stands ready to help achieve that important national security objective. To meet the demand for increased vessel construction while sustaining the vessels we currently have will require U.S. shipyards to expand their work forces and improve their infrastructure in varying degrees depending on ship type and ship mix – a requirement our Nation's shipyards are eager to meet. But first, in order to build these ships in as timely and affordable manner as possible, stable and robust funding is necessary to sustain those industrial capabilities which support Navy shipbuilding and ship maintenance and modernization.... Beyond providing for the building of a 355-ship Navy, there must also be provision to fund the "tail," the maintenance of the current and new ships entering the fleet. Target fleet size cannot be reached if existing ships are not maintained to their full service lives, while building those new ships. Maintenance has been deferred in the last few years because of across-the-board budget cuts.... The domestic shipyard industry certainly has the capability and know-how to build and maintain a 355-ship Navy. The Maritime Administration determined in a recent study on the Economic Benefits of the U.S. Shipyard Industry that there are nearly 110,000 skilled men and women in the Nation's private shipyards building, repairing and maintaining America's military and commercial fleets.1 The report found the U.S. shipbuilding industry supports nearly 400,000 jobs across the country and generates $25.1 billion in income and $37.3 billion worth of goods and services each year. In fact, the MARAD report found that the shipyard industry creates direct and induced employment in every State and Congressional District and each job in the private shipbuilding and repairing industry supports another 2.6 jobs nationally. This data confirms the significant economic impact of this manufacturing sector, but also that the skilled workforce and industrial base exists domestically to build these ships. Long-term, there needs to be a workforce expansion and some shipyards will need to reconfigure or expand production lines. This can and will be done as required to meet the need if adequate, stable budgets and procurement plans are established and sustained for the long-term. Funding predictability and sustainability will allow industry to invest in facilities and more effectively grow its skilled workforce. The development of that critical workforce will take time and a concerted effort in a partnership between industry and the federal government. U.S. shipyards pride themselves on implementing state of the art training and apprenticeship programs to develop skilled men and women that can cut, weld, and bend steel and aluminum and who can design, build and maintain the best Navy in the world. However, the shipbuilding industry, like so many other manufacturing sectors, faces an aging workforce. Attracting and retaining the next generation shipyard worker for an industry career is critical. Working together with the Navy, and local and state resources, our association is committed to building a robust training and development pipeline for skilled shipyard workers. In addition to repealing sequestration and stabilizing funding the continued development of a skilled workforce also needs to be included in our national maritime strategy.... In conclusion, the U.S. shipyard industry is certainly up to the task of building a 355-ship Navy and has the expertise, the capability, the critical capacity and the unmatched skilled workforce to build these national assets. Meeting the Navy's goal of a 355-ship fleet and securing America's naval dominance for the decades ahead will require sustained investment by Congress and Navy's partnership with a defense industrial base that can further attract and retain a highly-skilled workforce with critical skill sets. Again, I would like to thank this Subcommittee for inviting me to testify alongside such distinguished witnesses. As a representative of our nation's private shipyards, I can say, with confidence and certainty, that our domestic shipyards and skilled workers are ready, willing and able to build and maintain the Navy's 355-ship Fleet. Employment Impact Building the additional ships that would be needed to achieve and maintain the 355-ship fleet could create many additional manufacturing and other jobs at shipyards, associated supplier firms, and elsewhere in the U.S. economy. A 2015 Maritime Administration (MARAD) report states, Considering the indirect and induced impacts, each direct job in the shipbuilding and repairing industry is associated with another 2.6 jobs in other parts of the US economy; each dollar of direct labor income and GDP in the shipbuilding and repairing industry is associated with another $1.74 in labor income and $2.49 in GDP, respectively, in other parts of the US economy. A March 2017 press report states, "Based on a 2015 economic impact study, the Shipbuilders Council of America [a trade association for U.S. shipbuilders and associated supplier firms] believes that a 355-ship Navy could add more than 50,000 jobs nationwide." The 2015 economic impact study referred to in that quote might be the 2015 MARAD study discussed in the previous paragraph. An estimate of more than 50,000 additional jobs nationwide might be viewed as a higher-end estimate; other estimates might be lower. A June 14, 2017, press report states the following: "The shipbuilding industry will need to add between 18,000 and 25,000 jobs to build to a 350-ship Navy, according to Matthew Paxton, president of the Shipbuilders Council of America, a trade association representing the shipbuilding industrial base. Including indirect jobs like suppliers, the ramp-up may require a boost of 50,000 workers." Appendix E. A Summary of Some Acquisition Lessons Learned for Navy Shipbuilding This appendix presents a general summary of lessons learned in Navy shipbuilding, reflecting comments made repeatedly by various sources over the years. These lessons learned include the following: At the outset, get the operational requirements for the program right. Properly identify the program's operational requirements at the outset. Manage risk by not trying to do too much in terms of the program's operational requirements, and perhaps seek a so-called 70%-to-80% solution (i.e., a design that is intended to provide 70%-80% of desired or ideal capabilities). Achieve a realistic balance up front between operational requirements, risks, and estimated costs. Impose cost discipline up front. Use realistic price estimates, and consider not only development and procurement costs, but life-cycle operation and support (O&S) costs. Employ competition where possible in the awarding of design and construction contracts. Use a contract type that is appropriate for the amount of risk involved , and structure its terms to align incentives with desired outcomes. Minimize design/construction concurrency by developing the design to a high level of completion before starting construction and by resisting changes in requirements (and consequent design changes) during construction. Properly supervise construction work. Maintain an adequate number of properly trained Supervisor of Shipbuilding (SUPSHIP) personnel. Provide stability for industry , in part by using, where possible, multiyear procurement (MYP) or block buy contracting. Maintain a capable government acquisition workforce that understands what it is buying, as well as the above points. Identifying these lessons is arguably not the hard part—most if not all these points have been cited for years. The hard part, arguably, is living up to them without letting circumstances lead program-execution efforts away from these guidelines. Appendix F. Some Considerations Relating to Warranties in Shipbuilding and Other Defense Acquisition This appendix presents some considerations relating to warranties in shipbuilding and other defense acquisition. In discussions of Navy (and also Coast Guard) shipbuilding, one question that sometimes arises is whether including a warranty in a shipbuilding contract is preferable to not including one. The question can arise, for example, in connection with a GAO finding that "the Navy structures shipbuilding contracts so that it pays shipbuilders to build ships as part of the construction process and then pays the same shipbuilders a second time to repair the ship when construction defects are discovered." Including a warranty in a shipbuilding contract (or a contract for building some other kind of defense end item), while potentially valuable, might not always be preferable to not including one—it depends on the circumstances of the acquisition, and it is not necessarily a valid criticism of an acquisition program to state that it is using a contract that does not include a warranty (or a weaker form of a warranty rather than a stronger one). Including a warranty generally shifts to the contractor the risk of having to pay for fixing problems with earlier work. Although that in itself could be deemed desirable from the government's standpoint, a contractor negotiating a contract that will have a warranty will incorporate that risk into its price, and depending on how much the contractor might charge for doing that, it is possible that the government could wind up paying more in total for acquiring the item (including fixing problems with earlier work on that item) than it would have under a contract without a warranty. When a warranty is not included in the contract and the government pays later on to fix problems with earlier work, those payments can be very visible, which can invite critical comments from observers. But that does not mean that including a warranty in the contract somehow frees the government from paying to fix problems with earlier work. In a contract that includes a warranty, the government will indeed pay something to fix problems with earlier work—but it will make the payment in the less-visible (but still very real) form of the up-front charge for including the warranty, and that charge might be more than what it would have cost the government, under a contract without a warranty, to pay later on for fixing those problems. From a cost standpoint, including a warranty in the contract might or might not be preferable, depending on the risk that there will be problems with earlier work that need fixing, the potential cost of fixing such problems, and the cost of including the warranty in the contract. The point is that the goal of avoiding highly visible payments for fixing problems with earlier work and the goal of minimizing the cost to the government of fixing problems with earlier work are separate and different goals, and that pursuing the first goal can sometimes work against achieving the second goal. The Department of Defense's guide on the use of warranties states the following: Federal Acquisition Regulation (FAR) 46.7 states that "the use of warranties is not mandatory." However, if the benefits to be derived from the warranty are commensurate with the cost of the warranty, the CO [contracting officer] should consider placing it in the contract. In determining whether a warranty is appropriate for a specific acquisition, FAR Subpart 46.703 requires the CO to consider the nature and use of the supplies and services, the cost, the administration and enforcement, trade practices, and reduced requirements. The rationale for using a warranty should be documented in the contract file.... In determining the value of a warranty, a CBA [cost-benefit analysis] is used to measure the life cycle costs of the system with and without the warranty. A CBA is required to determine if the warranty will be cost beneficial. CBA is an economic analysis, which basically compares the Life Cycle Costs (LCC) of the system with and without the warranty to determine if warranty coverage will improve the LCCs. In general, five key factors will drive the results of the CBA: cost of the warranty + cost of warranty administration + compatibility with total program efforts + cost of overlap with Contractor support + intangible savings. Effective warranties integrate reliability, maintainability, supportability, availability, and life-cycle costs. Decision factors that must be evaluated include the state of the weapon system technology, the size of the warranted population, the likelihood that field performance requirements can be achieved, and the warranty period of performance. Appendix G. Some Considerations Relating to Avoiding Procurement Cost Growth vs. Minimizing Procurement Costs This appendix presents some considerations relating to avoiding procurement cost growth vs. minimizing procurement costs in shipbuilding and other defense acquisition. The affordability challenge posed by the Navy's shipbuilding plans can reinforce the strong oversight focus on preventing or minimizing procurement cost growth in Navy shipbuilding programs, which is one expression of a strong oversight focus on preventing or minimizing cost growth in DOD acquisition programs in general. This oversight focus may reflect in part an assumption that avoiding or minimizing procurement cost growth is always synonymous with minimizing procurement cost. It is important to note, however, that as paradoxical as it may seem, avoiding or minimizing procurement cost growth is not always synonymous with minimizing procurement cost, and that a sustained, singular focus on avoiding or minimizing procurement cost growth might sometimes lead to higher procurement costs for the government. How could this be? Consider the example of a design for the lead ship of a new class of Navy ships. The construction cost of this new design is uncertain, but is estimated to be likely somewhere between Point A (a minimum possible figure) and Point D (a maximum possible figure). (Point D, in other words, would represent a cost estimate with a 100% confidence factor, meaning there is a 100% chance that the cost would come in at or below that level.) If the Navy wanted to avoid cost growth on this ship, it could simply set the ship's procurement cost at Point D. Industry would likely be happy with this arrangement, and there likely would be no cost growth on the ship. The alternative strategy open to the Navy is to set the ship's target procurement cost at some figure between Points A and D—call it Point B—and then use that more challenging target cost to place pressure on industry to sharpen its pencils so as to find ways to produce the ship at that lower cost. (Navy officials sometimes refer to this as "pressurizing" industry.) In this example, it might turn out that industry efforts to reduce production costs are not successful enough to build the ship at the Point B cost. As a result, the ship experiences one or more rounds of procurement cost growth, and the ship's procurement cost rises over time from Point B to some higher figure—call it Point C. Here is the rub: Point C, in spite of incorporating one or more rounds of cost growth, might nevertheless turn out to be lower than Point D, because Point C reflected efforts by the shipbuilder to find ways to reduce production costs that the shipbuilder might have put less energy into pursuing if the Navy had simply set the ship's procurement cost initially at Point D. Setting the ship's cost at Point D, in other words, may eliminate the risk of cost growth on the ship, but does so at the expense of creating a risk of the government paying more for the ship than was actually necessary. DOD could avoid cost growth on new procurement programs starting tomorrow by simply setting costs for those programs at each program's equivalent of Point D. But as a result of this strategy, DOD could well wind up leaving money on the table in some instances—of not, in other words, minimizing procurement costs. DOD does not have to set a cost precisely at Point D to create a potential risk in this regard. A risk of leaving money on the table, for example, is a possible downside of requiring DOD to budget for its acquisition programs at something like an 80% confidence factor—an approach that some observers have recommended—because a cost at the 80% confidence factor is a cost that is likely fairly close to Point D. Procurement cost growth is often embarrassing for DOD and industry, and can damage their credibility in connection with future procurement efforts. Procurement cost growth can also disrupt congressional budgeting by requiring additional appropriations to pay for something Congress thought it had fully funded in a prior year. For this reason, there is a legitimate public policy value to pursuing a goal of having less rather than more procurement cost growth. Procurement cost growth, however, can sometimes be in part the result of DOD efforts to use lower initial cost targets as a means of pressuring industry to reduce production costs—efforts that, notwithstanding the cost growth, might be partially successful. A sustained, singular focus on avoiding or minimizing cost growth, and of punishing DOD for all instances of cost growth, could discourage DOD from using lower initial cost targets as a means of pressurizing industry, which could deprive DOD of a tool for controlling procurement costs. The point here is not to excuse away cost growth, because cost growth can occur in a program for reasons other than DOD's attempt to pressurize industry. Nor is the point to abandon the goal of seeking lower rather than higher procurement cost growth, because, as noted above, there is a legitimate public policy value in pursuing this goal. The point, rather, is to recognize that this goal is not always synonymous with minimizing procurement cost, and that a possibility of some amount of cost growth might be expected as part of an optimal government strategy for minimizing procurement cost. Recognizing that the goals of seeking lower rather than higher cost growth and of minimizing procurement cost can sometimes be in tension with one another can lead to an approach that takes both goals into consideration. In contrast, an approach that is instead characterized by a sustained, singular focus on avoiding and minimizing cost growth may appear virtuous, but in the end may wind up costing the government more. Appendix H. Size of the Navy and Navy Shipbuilding Rate Size of the Navy Table H-1 shows the size of the Navy in terms of total number of ships since FY1948; the numbers shown in the table reflect changes over time in the rules specifying which ships count toward the total. Differing counting rules result in differing totals, and for certain years, figures reflecting more than one set of counting rules are available. Figures in the table for FY1978 and subsequent years reflect the battle force ships counting method, which is the set of counting rules established in the early 1980s for public policy discussions of the size of the Navy. As shown in the table, the total number of battle force ships in the Navy reached a late-Cold War peak of 568 at the end of FY1987 and began declining thereafter. The Navy fell below 300 battle force ships in August 2003 and as of April 26, 2019, included 289 battle force ships. As discussed in Appendix C , historical figures for total fleet size might not be a reliable yardstick for assessing the appropriateness of proposals for the future size and structure of the Navy, particularly if the historical figures are more than a few years old, because the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time, and because the number of ships in the fleet in an earlier year might itself have been inappropriate (i.e., not enough or more than enough) for meeting the Navy's mission requirements in that year. For similar reasons, trends over time in the total number of ships in the Navy are not necessarily a reliable indicator of the direction of change in the fleet's ability to perform its stated missions. An increasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform its stated missions is increasing, because the fleet's mission requirements might be increasing more rapidly than ship numbers and average ship capability. Similarly, a decreasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform stated missions is decreasing, because the fleet's mission requirements might be declining more rapidly than numbers of ships, or because average ship capability and the percentage of time that ships are in deployed locations might be increasing quickly enough to more than offset reductions in total ship numbers. Shipbuilding Rate Table H-2 shows past (FY1982-FY2019) and requested or programmed (FY2020-FY2024) rates of Navy ship procurement.

The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years. On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. The Navy states that a new FSA is now underway as the successor to the 2016 FSA. This new FSA, Navy officials state, is to be completed by the end of 2019. Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both. The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. The Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year. The Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan includes 304 ships, or an average of about 10 per year. If the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034. This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan—an acceleration primarily due to a decision announced by the Navy in April 2018, after the FY2019 plan was submitted, to increase the service lives of all DDG-51 destroyers to 45 years. Although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA. One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways. Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan. Decisions that Congress makes regarding Navy force structure and shipbuilding plans can substantially affect Navy capabilities and funding requirements and the U.S. shipbuilding industrial base.

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Introduction This report provides background information and potential issues for Congress on the Navy's irregular warfare (IW) and counterterrorism (CT) operations. The Navy's IW and CT activities pose a number of potential oversight issues for Congress, including how much emphasis to place on IW and CT activities in Navy budgets, particularly in a context of constraints on Navy budgets and Navy desires to devote resources to developing "high end" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia. Congress's decisions regarding Navy IW and CT operations can affect Navy operations and funding requirements, and the implementation of the nation's overall IW and CT strategies. This report focuses on Navy IW and CT operations. Another CRS report discusses U.S. special operations forces (SOF) across the military services. For an overview of the strategic and budgetary context in which Navy IW and CT operations may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. Background Navy Irregular Warfare (IW) Operations Note on Terminology The Navy has sometimes used the phrase confronting irregular challenges (CIC) instead of the term irregular warfare. For purposes of convenience, this report continues to use the term irregular warfare and the abbreviation IW. Navy IW Operations in Middle East and Afghanistan In the years following the terrorist attacks of September 11, 2001, the Navy carried out a variety of irregular warfare (IW) and counterterrorism (CT) activities. Among the most readily visible of these were operations carried out by Navy sailors serving ashore in the Middle East and Afghanistan. Regarding current operations in the Middle East, the Department of the Navy (DON) states the following in its FY2020 budget highlights book: The Marine Corps has an active duty force of approximately 1,300 Marines ashore in the U.S. CENTCOM area of operations (AOR) and another roughly 850 Marine Reserve members supporting CENTCOM. Beyond the Marines participating in counterinsurgency, security cooperation, and civil-military operations; on any given day there are about 1,000 Sailors ashore and another roughly 6,500 afloat throughout the CENTCOM AOR. These sailors are conducting activities such as air operations, maritime infrastructure protection, combat construction engineering, cargo handling, combat logistics, maritime security, detainee operations, customs inspections, civil affairs, base operations, and other forward presence activities. Navy IW Operations Elsewhere In addition to participating in U.S. military operations in the Middle East and Afghanistan, Navy IW operations in the years following the terrorist attacks of September 11, 2011, have also included the following: security force assistance operations , in which forward-deployed Navy ships have exercised and worked with foreign navies, coast guards, and maritime police forces, so as to improve their abilities to conduct maritime security operations; civic assistance operations , in which forward-deployed Navy units, including Navy hospital ships, expeditionary medical teams, fleet surgical teams, and naval construction units have provided medical and construction services in foreign countries as a complement to other U.S. diplomatic and development activities in those countries; disaster relief operations , of which Navy forces have performed several in recent years; and counter-piracy operations , particularly off the Horn of Africa. DON states in its FY2020 budget highlights book that In the past year, the Marine Corps executed 170 operations, eight amphibious operations, 115 theater security cooperation events and participated in 51 exercises and relief operations for Hurricanes Maria, Florence, and Michael. Within the context of these efforts, Amphibious Ready Groups / Marine Expeditionary Units (ARG/MEU) supported Combatant commands along-side regional partners providing a range of deliberate and crisis response options. Major exercises were held in Romania, Israel, Jordan, Malaysia, and off the coast of Djibouti. The Marine Corps also participated in theater security cooperation (TSC) exercises held in Brazil, Latvia, Jordan, Mexico, and Philippines that enhanced military cooperation, capability, and interoperability with partner nations while sustaining a ready, forward presence in support of the Combatant Commander requirements…. The Navy has active and reserve forces continually deployed in support of contingency operations overseas serving as members of Carrier Strike Groups, Expeditionary Strike Groups, Special Operating Forces, Seabee units, Marine forces, and medical units; some also serve as Individual Augmentees (IAs). Navy Individual Augmentees (IAs) Some of the Navy's contributions to IW operations around the world in the years following the terrorist attacks of September 11, 2001, were made by Navy individual augmentees (IAs)—individual Navy sailors assigned to various DOD operations. DON stated in 2014 that Navy IAs are providing combat support and combat service support for Army and Marine Corps personnel in Afghanistan. As IAs they are fulfilling vital roles by serving in traditional Navy roles such as USMC support, maritime and port security, cargo handling, airlift support, Seabee units, and as a member of joint task force/Combatant Commanders staffs. Non-traditional roles include detainee operations, custom inspections teams, and civil affairs. Navy Counterterrorism (CT) Operations In General Navy CT operations (and anti-terrorism/force protection activities) at various points since the late 1990s, and particularly in the years following the terrorist attacks of September 11, 2001, have included the following: Operations by Navy special operations forces, known as SEALs (an acronym standing for Sea, Air, and Land), that have been directed against terrorists; Tomahawk cruise missile attacks on suspected terrorist training camps and facilities, such as those reportedly conducted in Somalia on March 3 and May 1, 2008, and those conducted in 1998 in response to the 1998 terrorist bombings of U.S. embassies in East Africa; surveillance by Navy ships and aircraft of suspected terrorists overseas; maritime intercept operations (MIO) that were aimed at identifying and intercepting terrorists or weapons of mass destruction at sea, or potentially threatening ships or aircraft that are in or approaching U.S. territorial waters—an activity that has included Navy participation in the multilateral Proliferation Security Initiative (PSI); protection of forward-deployed Navy ships, an activity that was intensified following the terrorist attack on the Navy Aegis destroyer Cole (DDG-67) in October 2000 in the port of Aden, Yemen; protection of domestic and overseas Navy bases and facilities; working with the Coast Guard to build maritime domain awareness (or MDA, meaning a real-time understanding of activities on the world's oceans), and engaging with the U.S. Coast Guard to use the National Strategy for Maritime Security to more rapidly develop capabilities for Homeland Security, particularly in the area of MDA; assisting the Coast Guard in port-security operations; developing Global Maritime Intelligence Integration (GMII) as part of Joint Force Maritime Component Command (JFMCC) and Maritime Domain Awareness (MDA); and operations by the Naval Criminal Investigative Service (NCIS), for which combating terrorism is a core mission area. DON stated in 2014 that While forward, acting as the lead element of our defense-in-depth, naval forces will be positioned for increased roles in combating terrorism.... Expanded Maritime Interdiction Operations are authorized by the President and directed by the Secretary of Defense to intercept vessels identified to be transporting terrorists and/or terrorist-related materiel that poses an imminent threat to the United States and its allies..... We have done small, precise attacks against terrorist cells and missile attacks against extremist sanctuaries. DON stated in 2013 that Our defense efforts are aimed at countering violent extremists and destabilizing threats, as well as upholding our commitments to allies and partner states. These armed adversaries such as terrorists, insurgents, and separatist militias are a principal challenge to U.S. interests in East Africa. An April 8, 2013, press report about U.S. counterterrorism operations stated, regarding one particular operation, that The uncertainties were evident nine months into Mr. Obama's first term, when intelligence agencies tracked down Saleh Ali Saleh Nabhan, a suspect in the attacks on two American embassies in East Africa in 1998. The original plan had been to fire long-range missiles to hit Mr. Nabhan and others as they drove in a convoy from Mogadishu, Somalia, to the seaside town of Baraawe. But that plan was scrubbed at the last minute, and instead a Navy SEALs team helicoptered from a ship and strafed Mr. Nabhan's convoy, killing him and three others. The SEALs landed to collect DNA samples to confirm the identities of the dead. May 1-2, 2011, U.S. Military Operation That Killed Osama Bin Laden The May 1-2, 2011, U.S. military operation in Abbottabad, Pakistan, that killed Osama bin Laden—reportedly called Operation Neptune's Spear—reportedly was carried out by a team of 23 Navy special operations forces, known as SEALs (an acronym standing for Sea, Air, and Land). The SEALs reportedly belonged to an elite unit known unofficially as Seal Team 6 and officially as the Naval Special Warfare Development Group (DEVGRU). The SEALs reportedly were flown to and from Abbottabad by Army special operations helicopters. Bin Laden's body reportedly was flown by a U.S. military helicopter from Abbottabad to a base in Afghanistan, and from there by a Marine Corps V-22 tilt-rotor aircraft to the aircraft carrier Carl Vinson (CVN-70), which was operating at the time in the Northern Arabian Sea. A few hours later, bin Laden's body reportedly was buried at sea from the ship. Differing accounts have been published regarding certain details of the operation. Press reports in July 2010 stated that U.S. forces in Afghanistan included at that time a special unit called Task Force 373, composed of Navy SEALs and Army Delta Force personnel, whose mission is "the deactivation of top Taliban and terrorists by either killing or capturing them." A July 2015 Government Accountability Office (GAO) report and a separate CRS report provide additional background information on the SEALs. Another CRS report provides further discussion of the operation that killed Osama bin Laden. Detention of Terrorist Suspects on U.S. Navy Ships An August 16, 2015, press report stated the following: After a suspected militant was captured last year to face charges for the deadly 2012 attacks on Americans in Benghazi, Libya, he was brought to the U.S. aboard a Navy transport ship on a 13-day trip that his lawyers say could have taken 13 hours by plane. Ahmed Abu Khattala faced days of questioning aboard the USS New York from separate teams of American interrogators, part of a two-step process designed to obtain both national security intelligence and evidence usable in a criminal prosecution. The case, still in its early stages, is focusing attention on an interrogation strategy that the Obama administration has used in just a few recent terrorism investigations and prosecutions. Abu Khattala's lawyers already have signaled a challenge to the process, setting the stage for a rare court clash over a tactic that has riled civil liberties groups but is seen by the government as a vital and appropriate tool in prosecuting suspected terrorists captured overseas. "I think they view it as important to show that terrorists can be prosecuted in U.S. courts, and this is an attempt to find a compromise between using people they capture as intelligence assets and prosecuting them in U.S. courts," said David Deitch, a former Justice Department terrorism prosecutor. "It's a very hard balance to strike—and may not be possible." The administration has turned to questioning in international waters as an alternative to past practices in which suspects were sent to the U.S. detention facility at Guantanamo Bay, Cuba, or secret CIA prisons. The process ordinarily begins with questioning from a specialized team of interrogators who collect intelligence that can inform government decisions, such as for drone strikes, but cannot be used in court. Then a team of FBI investigators starts from scratch, advising the detainee of his Miranda rights, such as the right to remain silent, and gathering statements that prosecutors can present as evidence in a trial. Some legal experts expect the hybrid interrogation technique to survive legal challenges. But defense lawyers are concerned that such prolonged detention can be used to wrangle a confession or amounts to an end-run around the government's obligation to promptly place a suspect before a judge. "Basically by holding the suspects on a ship and delaying their presentment in federal court, they're able to get a leg up in interrogations," said Seton Hall University law professor Jonathan Hafetz, who has handled terrorism cases. Abu Khattala is facing charges in Washington in the Sept. 11-12, 2012, attack on the U.S. diplomatic mission in Benghazi that killed U.S. Ambassador Chris Stevens and three other Americans. Following his June 2014 capture in Libya by U.S. special forces, he was placed aboard a Navy ship that his lawyers say made its way to the U.S. as slowly as possible to allow maximum time for interrogation. They say Abu Khattala was questioned for days by representatives from the High Value Detainee Interrogation Group, then for another stretch by FBI agents.... One early point of contention in the court case is the onboard interrogation. Abu Khattala's lawyers submitted court filings this month contending that the government held him "captive on a military ship—without the protection of and in spite of constitutional guarantees—for the explicit purpose of illegally interrogating him for almost two weeks." Federal prosecutors have yet to respond. Whatever a judge decides, the case taps into a broader legal debate about the prosecution of terrorist suspects and presents a rare opportunity for a possible ruling on the admissibility of statements gathered aboard a military vessel. For additional background information on detention of terrorist suspects on U.S. Navy ships, see Appendix E . Navy Initiatives to Improve Its IW and CT Capabilities In the years following the terrorist attacks of September 11, 2001, the Navy took certain actions intended to improve its IW and CT capabilities and activities, including those discussed below. Some of the actions the Navy took during those years are described briefly below. Navy Irregular Warfare Office (NIWO)/Navy Warfare Group (NWG) The Navy in July 2008 established the Navy Irregular Warfare Office (NIWO) so as to "institutionalize current ad hoc efforts in IW missions of counterterrorism and counterinsurgency and the supporting missions of information operations, intelligence operations, foreign internal defense and unconventional warfare as they apply to [CT] and [counterinsurgency]." In January 2013, the Navy directed the establishment of a Navy Warfare Group (NWG) "to provide a dedicated organization to systematically evaluate, develop, and implement new strategic concepts deemed useful to the service...." NIWO was disbanded, and its responsibilities were transferred to NWG, which is to "[s]erve as the Navy lead for irregular warfare (IW) to incorporate IW into Navy capstone documents and to inform the PPBE [Planning, Programming, Budgeting, and Execution] process." 2010 Navy Vision Statement for Countering Irregular Challenges The Navy in January 2010 published a vision statement for countering irregular challenges, which stated the following in part: The U.S. Navy will meet irregular challenges through a flexible, agile, and broad array of multi-mission capabilities. We will emphasize Cooperative Security as part of a comprehensive government approach to mitigate the causes of insecurity and instability. We will operate in and from the maritime domain with joint and international partners to enhance regional security and stability, and to dissuade, deter, and when necessary, defeat irregular forces. The full text of the vision statement is reproduced in Appendix C . Navy Community of Interest (COI) for Countering Irregular Challenges The Navy in December 2010 established "a community of interest [COI] to develop and advance ideas, collaboration and advocacy related to confronting irregular challenges (CIC)." Navy Expeditionary Combat Command (NECC) The Navy Expeditionary Combat Command (NECC), headquartered at Naval Amphibious Base, Little Creek, VA, was established informally in October 2005 and formally on January 13, 2006. NECC consolidated and facilitated the expansion of a number of Navy organizations that have a role in IW operations. DON stated in 2014 that Navy Expeditionary Combat Command (NECC) is a global force provider of expeditionary combat service support and force protection capabilities to joint warfighting commanders. It is responsible for centrally managing the current and future readiness, resources, manning, training and equipping of a scalable, self-sustaining, integrated expeditionary force of active and reserve sailors. Expeditionary sailors are deployed from around the globe, supporting contingency operations and Combatant Commanders' Theater Security Cooperation Plans, providing a forward presence of waterborne and ashore anti-terrorism force protection; theater security cooperation and engagement; and humanitarian assistance and disaster relief. DON also stated in 2014 that The Reserve Component expeditionary forces are integrated with the Active Component forces to provide a continuum of capabilities unique to the maritime environment within NECC. Blending the AC and RC brings strength to the force and is an important part of the Navy's ability to carry out the Naval Maritime Strategy from blue water into green and brown water and in direct support of the Joint Force. The Navy Reserve trains and equips over half of the Sailors supporting NECC missions, including naval construction and explosive ordnance disposal in the CENTCOM region, as well as maritime expeditionary security, expeditionary logistics (cargo handling battalions), maritime civil affairs, expeditionary intelligence, and other mission capabilities seamlessly integrated with operational forces around the world. In addition, Coastal Riverine Group 2 has taken on a new armed escort mission for High Value Units (HVU) which has traditionally been provided by the U.S. Coast Guard. The escort enhances force protection for HVUs while transiting into and out of CONUS ports during restricted maneuvering. Global Maritime Partnership The Global Maritime Partnership was a U.S. Navy initiative to achieve an enhanced degree of cooperation between the U.S. Navy and foreign navies, coast guards, and maritime police forces, for the purpose of ensuring global maritime security against common threats. DON stated in 2014 that "through partnerships with a growing number of nations, including those in Africa and Latin America, we will strive for a common vision of freedom, stability, and prosperity." Partnership Stations The Southern Partnership Station (SPS) and the Africa Partnership Station (APS) were Navy ships, such as amphibious ships or high-speed sealift ships, that deployed to the Caribbean and to waters off Africa, respectively, to support U.S. Navy engagement with countries in those regions, particularly for purposes of building security partnerships with those countries, and for increasing the capabilities of those countries for performing maritime-security operations. The SPS and APS can be viewed as specific measures for promoting the above-mentioned global maritime partnership. A July 2010 Government Accountability Office (GAO) report discussed the APS. Coastal Riverine Force The Navy in May 2006 reestablished its riverine force by standing up Riverine Group 1 at Naval Amphibious Base, Little Creek, VA (now part of Joint Expeditionary Base Little Creek-Fort Story, or JEBLC-FS). Riverine Group 1 included three active-duty riverine squadrons of 12 boats each that were established in 2006-2007. Operations of the squadrons from 2006 to 2011 included multiple deployments to Iraq for the purpose, among other things, of relieving Marines who until 2006 had been conducting maritime security operations in Iraqi ports and waterways. On June 1, 2012, the Navy merged the riverine force and the Maritime Expeditionary Security Force (MESF) to create Coastal Riverine Force (CORIVFOR). The Navy stated that CORIVFOR "performs core maritime expeditionary security missions in the green and brown waters, bridging the gap between traditional Navy blue water operations and land-based forces, providing port and harbor security for vital waterways and protection of high value assets and maritime infrastructure." The Navy stated that CORIVFOR was scheduled to reach initial operating capability (IOC) in October 2012 and full operational capability (FOC) in October 2014, and that "all current and scheduled routine deployments will continue as normal." A July 14, 2014, news report states the following: In 2012, the Navy merged Riverine Forces and Maritime Expeditionary Security Forces to form the Coastal Riverine Force. There are currently seven squadrons. Squadrons 1, 3 and 11 are home ported on the west coast and Squadrons 2, 4, 8 and 10 are home ported on the east coast. The force currently consists of both active and reserve service members who man and operate more than 100 boats, ranging from rubber combat raiding crafts to 53-foot command boats that can carry up to 26 personnel. A January 18, 2013, Navy news report stated the following: Sailors, former Riverines, and family members attended a disestablishment ceremony for Naval Expeditionary Combat Command's Riverine Squadron (RIVRON) 3 at Naval Weapons Station Yorktown, Jan. 17. The disestablishment marks the merger of offensive Riverine forces with defensive Maritime Expeditionary Security Forces to form the Coastal Riverine Force (CORIVFOR), formally established June 1[, 2012].... CORIVFOR's primary mission is to conduct maritime security operations across all phases of military operations by defending high value assets, critical maritime infrastructure, ports and harbors, both inland and on coastal waterways, and when commanded, conduct offensive combat operations. The budget-initiated merger moved portions of the force to San Diego as part of the National Defense Strategy's rebalance to the Pacific, which will bring Riverine capability to the West coast for the first time since 1974, according to Capt. Eric B. Moss, commander of Coastal Riverine Group 1, formerly Maritime Expeditionary Security Group 1. "The Riverine forces will do what they've always done, which is continuing to hone their skills and work in brown water and green water areas," said Moss. "There is no abatement of requirements. We continue to get missions and are sourced to meet those requirements. We're doing the same with less." The merge cuts the former seven active Maritime Expeditionary Security Force (MESF) squadrons and three active RIVRONs down to three active Coastal Riverine squadrons and four reserve squadrons. "This is a reduction in capacity, but not in capability," said Moss. "I would say this is a very affordable force. We are light, expeditionary, and bring a lot capability in small packages. We are familiar with disaggregated operations, so immediately we give the combatant commander a tailor-able and scalable force."... Commissioned July 6, 2007, RIVRON 3 served two deployments in Iraq, fulfilling a total of 502 combat missions, 268 water security operations and countless U.S./Iraq tactical convoy operations. Other Organizational Initiatives Other Navy initiatives in recent years for supporting IW and CT operations include establishing a reserve civil affairs battalion, a Navy Foreign Area Officer (FAO) community consisting of officers with specialized knowledge of foreign countries and regions, a maritime interception operation (MIO) intelligence exploitation pilot program, and an intelligence data-mining capability at the National Maritime Intelligence Center (NMIC). Appendices with Additional Background Information For additional information on Navy and Marine Corps special operations forces, see the prepared statements of the Navy and Marine Corps witnesses for an April 1,1 2018, hearing before the Senate Armed Services Committee reprinted in Appendix A . The Navy outlined its IW activities as of 2011 in its prepared statement for a November 3, 2011, hearing on the services' IW activities before the Emerging Threats and Capabilities subcommittee of the House Armed Services Committee. For the text of the Navy's prepared statement, see Appendix B . As noted earlier, for the text of the Navy's January 2010 vision statement for irregular warfare, see Appendix C . A 2012 report on maritime irregular warfare from RAND Corporation, a research firm, provides additional background information on U.S. maritime irregular warfare operations, both historical and more recent (i.e., up to the time of the report's writing). The report also made a series of findings and recommendations relating to U.S. maritime irregular warfare; for a summary of these findings and recommendations, see Appendix D . As noted earlier, for additional background information on detention of terrorist suspects on U.S. Navy ships, see Appendix E . FY2020 Funding Request Overview DON states that the proposed FY2020 budget "continues funding to counter the Islamic State of Iraq and the Levant (ISIL) and for operations in Afghanistan, the Horn of Africa, and other locations in theater, as well as for the European Deterrence Initiative," and "supports building a more experienced, better trained, and more capable force by increasing the number of Marines with special skills, like those required for special operations, intelligence operations, electronic, information, and cyber warfare." Special Operations Command's (SOCOM's) proposed FY2020 budget requests, among other things, $72.6 million in the FY2020 Research, Development, Test, and Evaluation, Defense-Wide (RDT&EDW) account for Program Element (PE) 1160483BB, maritime systems (line 263 in the FY2020 RDT&EDW account), including $45.2 million for Project S0417: Underwater Systems, and $27.4 million for S1684: Surface Craft; and $59.0 million in the FY2020 Procurement, Defense-Wide (PDW) appropriation account for procurement of underwater systems for SOCOM (line 63 in the FY2020 PDW account). For additional background information on the FY2020 funding requests for lines 263 and 63, see Appendix F . Potential Oversight Issues for Congress Degree of Emphasis on IW in Navy Budgets One potential oversight issue for Congress concerns how much emphasis to place on IW activities in Navy budgets, particularly in a context of constraints on Navy budgets and Navy desires to devote resources to developing "high end" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia. Although the Navy, as discussed earlier in this report, took actions in the years following the terrorist attacks of September 11, 2001, that were intended to improve its IW capabilities, the Navy in more recent years has taken other actions that might be viewed as reflecting a reduced Navy emphasis on IW. In that connection, the following points were provided to CRS by the Joint Staff J-7 Irregular Warfare office in August 2016: "US Navy IW funding and force structure have declined over the last few years." "NIWO's responsibilities now belong to OPNAV N515 [i.e., the office within the Chief of Naval Operations that oversees the NWG], with dedicated IW staff decreasing from 13 government/military personnel along with 6 contractors led by a RDML [rear admiral] to 2 contractors and one O-5 [an officer that in the Navy is a commander] under O-6 [an officer that in the Navy is a captain] oversight." In May 2014, the Navy closed its Maritime Civil Affairs and Security Training Command (MCAST), an action "which reduced civil affairs (CA) and security force assistance (SFA) capacity. The MCAST's mission was to train sailors to perform civil-military affairs and security force assistance missions. It also provided approximately 50 percent of Navy expeditionary training.... MCAST functions are now distributed across the Navy. The Naval Education and Training Security Assistance Field Activity serves as the focal point for security assistance training issues. The Expeditionary Combat Readiness Center processes individual augmentees for deployment. Civil affairs functions were not replaced." A July 2015 Navy memo states "that the Navy does not 'possess dedicated CA units or members.'" The Navy's FY2017 budget requested funding to preserve Helicopter Sea Combat (HSC) Squadron 85, a unit that "supports Naval Special Warfare and other SOCOM [Special Operations Command] assets," which was "a positive development." On the other hand, the Navy in March 2016 "disbanded HSC 84, a sister squadron providing similar support.... This action essentially cut experienced, operational capacity in half. Whether the TSUs [i.e., the two Tactical Support Units that are to be stood up under the Navy's proposed FY2017 budget] will meet SOF requirements remains to be seen." The Navy Community of Interest (COI) for Countering Irregular Challenges "does not extend beyond the Navy Analytic Group. This body, tied to the Community of Interest, submits IW program gap, technical demonstration, and study initiatives to N515 for funding. Members include Fleet Forces Command, the NECC, the Navy Undersea Warfare Center, and the Navy War College. The larger COI has not [as of August 2016] had a formal meeting in approximately 3 years." A January 17, 2019, press report stated: After spending the better part of the past two decades supporting wars in a desert region, the U.S. Navy is starting to bring the SEALs back into the fold as it faces threats from major powers such as China and Russia. The Navy is incorporating its elite special warfare teams into strategic calculations for every potential major power combat scenario, from China and Russia to Iran and North Korea, said Vice Chief of Naval Operations Adm. Bill Moran in a round-table with reporters at the Surface Navy Association's annual symposium. The movement toward reconnecting with the blue water force (the Navy's regular ships, aircraft and submarine forces) started under former Naval Special Warfare Command head Rear Adm. Brian Losey, who retired in 2016. The effort has continued to grow under subsequent commanders, said Moran. "It's to the point now where we include them in all of our exercises, our war games, our tabletops — because as much as it is their chance to 're-blue,' it's our chance to reconnect from the blue side," he added. "We've grown used to not having them in a lot of those situations. Now as we've done the tabletops, the exercises and the war games, we see: 'Wow, there is some great capability here that can set the conditions for the kind of operations in every single one of those campaigns.' And that will continue to grow, I think." There have been indications that the SEALs are specifically eyeing environments similar to those in the South China Sea. A recent environmental assessment obtained by the Honolulu Star Advertiser revealed that the SEALs were looking to triple the amount of training time spent in the Hawaiian islands, expanding from Oahu and Hawaii island to Kauai, Maui, Molokai and Lanai. A January 30, 2019, press report similarly stated: Having spent 17 years conducting counterinsurgency and counterterrorism operations in the deserts and mountains of the Middle East, the Naval Special Warfare community is shifting its focus to threats from China, Russia and aspiring adversaries. Navy operations planners are including Navy SEALs in all aspects of planning and training, such as war games, exercises and tabletop scenarios, Vice Chief of Naval Operations Adm. Bill Moran told reporters Jan. 16 at the Surface Navy Association's annual conference. The shift began in 2013 when Rear Adm. Brian Losey, then-commander of Naval Special Warfare Command, began making "a concerted effort to talk to his teams about getting back to the 'blue side,'" Moran said, referring to the Navy's large fighting forces of ships, submarines and aircraft. That focus has continued since Losey retired in 2016, Moran added. "[Losey] saw the 'great power competition,' he saw the threats of an emerging Russia, China, North Korea and Iran," Moran said. [SEALs] have a very specific and important role to play in all situations." Since the U.S. insertion into Afghanistan in 2001, special operations forces, including the SEALs, have focused on a specific selection of their skill sets, including small-scale strikes and offensive actions, counterinsurgency, hostage rescue, counterterrorism and countering weapons of mass destruction. But these forces have other expertise that is relevant to both large-scale military conflicts as well as the type of posturing and competing for regional and global dominance that currently is happening, according to a 2017 report by David Broyles and Brody Blankenship, analysts at CNA, an Arlington, Virginia-based think tank that concentrates on the U.S. Navy. Those skills include preparing an environment for operations, reconnaissance, unconventional operations, military information support operations and foreign humanitarian assistance, according to the report, The Role of Special Operations Forces in Global Competition. "Special operations forces have a greater role to play in today's global competition through a counteractive approach to adversary maneuvers," Broyles and Blankenship wrote. "The United States has only recently recognized that adversaries are exploiting the U.S. view of 'preparing for future war' vice 'competing in the here and now.' " Moran agreed that Navy SEALs have a unique talent set that the "blue side" had largely forgotten. "We've grown used to not having them in a lot of situations. ... Wow, there are some great capabilities here that can set the conditions in the world for the kind of operations we are going to need in every single one of our campaigns," he said. A draft environmental assessment published by the Navy on Nov. 8 indicated that the SEALs are planning to increase training in Hawaii, asking to increase the number of exercises from the 110 events allowed now on non-federally owned land to as many as 330 training events on non-federal land or waterways and 265 training events on federal property. The proposed training also would expand the area for conducting exercises to include Kauai, Lanai, Maui and Molokai, in addition to Oahu and Hawaii. The training, in a location relatively near to and similar in climate to the South China Sea, where China continues to assert its dominance, is necessary to enhance the Navy Special Warfare Command's traditional skill sets, including diving and swimming; operating with submersibles and unmanned aircraft systems; insertion and extraction; reconnaissance and parachuting; and rope suspension training activities, according to the report. Moran said the SEALs' return to their roots will bolster lethality of the Navy as a whole. "As much as it's their chance to re-blue, it's our chance to reconnect from the blue side," he said. "That will continue to grow, I think." Potential oversight questions for Congress include the following: How do current Navy IW capabilities and capacity compare with those of 5 or 10 years ago? Under proposed Navy budgets, how will Navy IW capabilities and capacity in coming years compare to those of today? In a context of constraints on Navy budgets and Navy desires to devote resources to developing "high end" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia, is the Navy striking the right balance between funding for IW capabilities and capacity and funding for other Navy priorities? Does Congress have sufficient visibility into the operations of U.S. SOF, including Navy SEALs, to support congressional oversight over those operations? Role of Naval Special Warfare Development Group (Seal Team 6) Another potential oversight issue for Congress concerns the role of Seal Team 6 in Navy CT and IW operations. A June 6, 2015, press report states the following: They have plotted deadly missions from secret bases in the badlands of Somalia. In Afghanistan, they have engaged in combat so intimate that they have emerged soaked in blood that was not their own. On clandestine raids in the dead of the night, their weapons of choice have ranged from customized carbines to primeval tomahawks. Around the world, they have run spying stations disguised as commercial boats, posed as civilian employees of front companies and operated undercover at embassies as male-female pairs, tracking those the United States wants to kill or capture. Those operations are part of the hidden history of the Navy's SEAL Team 6, one of the nation's most mythologized, most secretive and least scrutinized military organizations. Once a small group reserved for specialized but rare missions, the unit best known for killing Osama bin Laden has been transformed by more than a decade of combat into a global manhunting machine. That role reflects America's new way of war, in which conflict is distinguished not by battlefield wins and losses, but by the relentless killing of suspected militants. Almost everything about SEAL Team 6, a classified Special Operations unit, is shrouded in secrecy—the Pentagon does not even publicly acknowledge that name—though some of its exploits have emerged in largely admiring accounts in recent years. But an examination of Team 6's evolution, drawn from dozens of interviews with current and former team members, other military officials and reviews of government documents, reveals a far more complex, provocative tale. While fighting grinding wars of attrition in Afghanistan and Iraq, Team 6 performed missions elsewhere that blurred the traditional lines between soldier and spy. The team's sniper unit was remade to carry out clandestine intelligence operations, and the SEALs joined Central Intelligence Agency operatives in an initiative called the Omega Program, which offered greater latitude in hunting adversaries. Team 6 has successfully carried out thousands of dangerous raids that military leaders credit with weakening militant networks, but its activities have also spurred recurring concerns about excessive killing and civilian deaths.... When suspicions have been raised about misconduct, outside oversight has been limited. Joint Special Operations Command, which oversees SEAL Team 6 missions, conducted its own inquiries into more than a half-dozen episodes, but seldom referred them to Navy investigators. "JSOC investigates JSOC, and that's part of the problem," said one former senior military officer experienced in special operations, who like many others interviewed for this article spoke on the condition of anonymity because Team 6's activities are classified. Even the military's civilian overseers do not regularly examine the unit's operations. "This is an area where Congress notoriously doesn't want to know too much," said Harold Koh, the State Department's former top legal adviser, who provided guidance to the Obama administration on clandestine war.... Like the C.I.A.'s campaign of drone strikes, Special Operations missions offer policy makers an alternative to costly wars of occupation. But the bulwark of secrecy around Team 6 makes it impossible to fully assess its record and the consequences of its actions, including civilian casualties or the deep resentment inside the countries where its members operate. The missions have become embedded in American combat with little public discussion or debate. Legislative Activity for FY2020 DOD's proposed FY2020 budget requests, among other things, $72.6 million in the FY2020 Research, Development, Test, and Evaluation, Defense-Wide (RDT&EDW) account for Program Element (PE) 1160483BB, (Special Operations Command [SOCOM]) maritime systems (line 263 in the FY2020 RDT&EDW account), including $45.2 million for Project S0417: Underwater Systems, and $15.6 million for S1684: Surface Craft; and $27.4 million in the FY2020 Procurement, Defense-Wide (PDW) appropriation account for procurement of underwater systems for SOCOM (line 63 in the FY2020 PDW account). Table 1 summarizes congressional action on the above funding requests. Appendix A. April 2018 Navy and Marine Corps Testimony on Special Operations Forces This appendix reprints the prepared statements of Rear Admiral Tim Szymanski, U.S. Navy, Commander, Naval Warfare Special Warfare Command, and Major General Carl E. Mundy, III, U.S. Marine Corps, Commander, U.S. Marine Corps Forces Special Operations Command, for an April 11, 2018, hearing the Special Operations Command's efforts to transform the force for future security challenges. Prepared Statement of Rear Admiral Szymanski The text of Admiral Szymanski's statement is as follows: Chairwoman Ernst, Ranking Member Heinrich and distinguished Members of the Committee, I am honored to appear before you, and proud to provide an update on your Navy's Special Operations Force and the U.S. Special Operations Command's maritime component. As you are aware, the security challenges facing our nation today are numerous, and are made more difficult by adversaries who are exploiting emerging technologies and gaining ground. We will continue to face Violent Extremist Organizations (VEOs), while the battlefield expands and becomes more complex and chaotic. Today, our most pressing security concerns involve the aggressive, coercive, and disruptive actions of near-peer competitors and rogue regimes. Exerting power by fighting below the level of armed conflict favors these players to the point that they are gaining advantages that threaten our national security. We must continue to be smarter, stronger, quicker, and more lethal than our adversaries, in order to protect our nation in a world that grows more complex every day. As an enterprise of nearly 10,000 personnel—2,810 SEALs; 780 Special Warfare Combatant-craft Crewmen; 4,100 support personnel; 780 reservists; 1,240 civilians—your Naval Special Warfare (NSW) Command accounts for only 2.4 percent of the Navy's personnel. Our budget accounts for less than one percent of the Department of the Navy's budget, and approximately 12 percent of U.S. Special Operations Command (USSOCOM) budget. We continue to have a global presence—operating in more than 35 countries on any given day. We are networked with the U.S. Navy and Joint Forces, the interagency, and allies and foreign partners, executing missions in support of USSOCOM, the U.S. Navy, geographic Combatant Commanders, and ultimately, national objectives across a full range of political and operational environments. NSW's ALIGNMENT TO THE NATIONAL DEFENSE STRATEGY The National Defense Strategy (NDS) published earlier this year charged the Department of Defense (DoD) to be more agile, more lethal, and more innovative in order to maintain our competitive advantage. The Chief of Naval Operations, in turn, laid out the maritime responsibilities articulated in the NDS, focusing on increasing Naval Power through balancing capability and capacity with readiness and sustainment. As the Commander, my challenge is to man, train, and equip the Force to be better positioned to support the NDS, the National Military Strategy and the Navy's Strategy for Maintaining Maritime Superiority, while supporting the operational requirements of the theater commanders. Furthermore, the long-term sustainment, health, and well-being of our people remains my highest priority. NSW RESOURCING After nearly 17 years of war in Afghanistan and Iraq, we are focused on reasserting our capabilities as the maritime component to Special Operations, properly postured to meet the threats of the future, enhancing our partnership with the Navy and exploring opportunities for increased integration and interoperability, while building capabilities and capacity with fleet, submarine, aviation and cyber forces. Acknowledging that manpower requirements have outpaced authorized and actual growth, we have spent the last year taking a hard look at our force structure to determine how we can best use the resources we have to optimize the impacts we are making on the battlefield. We looked at how to eliminate redundancy, redirect resources and merge assets to build depth and agility and how to meet transregional threats and provide increased combat lethality to the Theater Special Operation Commands. Optimizing our Force is paramount to meeting current operational requirements and provide greater agility to meet future requirements. We recently collaborated with the Naval Post graduate school to conduct a maritime, multi-thread experiment in Southern California. The exercise allowed us to explore a realistic scenario using unmanned systems in a multi-domain (sea, air and land) environment. We learned a lot and advanced the potential use of artificial intelligence and human-machine teaming in current conflicts which will eventually increase our lethality while reducing risk. We have made necessary investments aimed at increasing our lethality, and refining our capabilities that enable access to contested areas. We have made significant increases in our unmanned aerial vehicle lethality by adding targeting capabilities, increasing the capabilities of current sensor suites, and using algorithms and artificial intelligence to speed up the targeting cycle. We have modernized numerous small arms systems, including procuring a purpose built, full-time suppressed, medium range weapons system; a lighter weight medium machine gun that matches and, in some cases, surpasses the effective range of a .50 caliber machine gun; a sniper weapons system with optics and wind sensing technology; and shoulder-launched munitions that allow for very precise engagements through hardened structures. We have made great strides in modernizing our maritime mobility platforms. In fact, our partnerships with maritime industries has never been stronger. We have introduced high performance surface combatant craft into our fleet to serve across the spectrum of maritime operations. They include our new Combatant Craft Assault which replaced the NSW 11-meter rigid-hull inflatable boat and our Combatant Craft Medium which replaced the Mark V Special Operations Craft and the introduction of the new Combatant Craft Heavy. Special Operations Force (SOF) undersea mobility platforms provide uniquely capable, clandestine means to access peer/near-peer locations. To that end, we expect to introduce two new undersea submersibles this year– the Shallow Water Combat Submersible (SWCS), which will replace our legacy SEAL Delivery Vehicle (SDV), and the Dry Combat Submersible (DCS), a new platform to our inventory. Nearly a year ago, we piloted a deliberate effort to realize the Secretary of Defense's guidance of exploiting Industry's investment in technology to relentlessly pursue innovative and advanced operational capabilities for our warfighters at a greater speed, relevant to the pace of technology in order to outpace our adversaries. This venture allowed us to understand and take advantage of new DoD contracting and procurement authorities as well as maximizing the utilization of DoD and USSOCOM outreach-to-industry platforms such as Defense Innovation Unit Experimental (DIUx) and SOFWERX. NSW has learned and applied how to effectively make use of these and other new and emerging opportunities to rapidly bring future operational concepts to the present: such as our realization of Artificial Intelligence-Autonomy of ISR Drones. This example among others, show promise to have exponential impacts on our capabilities to accomplish our mission in a more agile, lethal and sustainable manner. Our efforts—to rapidly prototype, experiment with and lead in new and emerging technologies are aimed at delivering capabilities at the speed of relevancy to our warfighters. Finally, bottom up, operator-inspired innovation drives experimentation during exercises, and training eventually equates to relevancy and leads to greater success on the battlefield. With our component partners and throughout USSOCOM, innovation is happening at the unit level up and through headquarters. Our focus on innovation is driven by our people – buying down risk to our force while increasing our speed, accuracy, and lethality. PEOPLE: THE FIRST SOF TRUTH Our primary weapons system remains The Operator. We continue to invest heavily in our personnel, whether it's to train, retain or sustain them. We select, train and maintain persons of character, who are mature, highly skilled, culturally attuned and trusted to execute our nation's most sensitive missions. Thank you for your role in the preservation of our Force with the 10-year, $1 billion Silver Strand Training Center-South, the single most important military construction effort impacting the current and future operational readiness of the NSW Force. Once complete, the complex will consolidate the training requirements of today's force, creating efficiencies and synergy of improved operational planning and preparedness, but also allow our operators to spend more time with their families and communities. We remain committed to the physical and mental health of our operators, as we have a moral obligation to ensure their well-being. Preservation of the Force and Families, our Human Performance Program, and our most important initiatives involving Cognitive Health are about keeping our warriors in the fight, extending their service life, and giving them a high quality life post-service. With strong Congressional support, the USSOCOM Preservation of the Force and Family program continues to meet and exceed the intent to build resilience and facilitate the long-term care of our operators and their families, while never forgetting our fallen teammates with ongoing support to our Gold Star Families. Embedded professional care providers working within validated programs have helped turn the corner on many of the negative trends that have impacted those who have been in this long fight. Our usage data shows an increase in service members and families going to see clinical psychologists, licensed clinical social workers, nurse case managers, which speaks directly to de-stigmatization and trust. Similarly, there is a high number of cross referrals among the various care providers that demonstrates mutual support and clinical trust and reliance. In regard to Human Performance, our athletic trainers, strength coaches and physical therapists provide tailored and operationally relevant programs have resulted in injury reduction and increased recovery time from injuries with a direct impact to overall team readiness. Our Warrior and Family Support staff provide hands on, personal touch and connection to our families and children, connecting them to all the Service-provided and SOF-unique programs that are so vital to the strength and resilience of our family members. We have also learned that long-term physical and psychological challenges may result in impacts to one's memory, attention, processing speed, problem-solving, visuospatial function and impulse control which can affect operational performance and mission accomplishment. Given that we are in the longest continuous stretch of armed conflict in our history, learning about the cognitive health of our force is a critical initiative. We have initiated a Cognitive Surveillance Program that will be a more pre-emptive approach to intervention where cognitive impacts are indicated. More broadly, this initiative will seek to identify injuries earlier, track individual trends, and assist in developing comprehensive treatment plans to aid in the recovery of our service members. The end-state is to get NSW operators back into the fight while contributing to their long-term wellness. The Surveillance Program entails an initial baseline screening of all SEAL/SWCC operators within NSW by 30 June 2018; and ongoing re-testing every two years to assess significant change, similar to other routine exams such as dental or audiogram. Aggressive efforts include increasing awareness of potential issues and not waiting for perfect solutions. Therefore, we are actively 'driving the science' through our blast exposure research efforts, ultimately looking to create a 'dive-table-like' approach to heavy weapons/breaching exposure levels and mitigation needs. NSW continues to seek and offer best practices as we develop our cognitive health emphases. We rely on education, informed research efforts, and leadership support across the continuum of care to help mitigate the range of brain injuries and increase recovery rates for our members. Part of that continuum of care focuses on our transitioning veterans, whether at four years or after forty, with a holistic, SOF-unique initiative called Future Former Frogmen, or F3. F3 focuses on ensuring the successful transition of our active duty into civilian life by leveraging our neurocognitive science initiatives, continuum of leadership development efforts, readiness support programs, and veteran's resources. F3 provides structure, process and guidance throughout the complex transition experience giving the service member access to existing programs to ensure NSW veterans remain resilient. SOF for Life, a powerful support network, continues from active duty life to veteran life. Today in Coronado, California, at the Basic Underwater and Demolition / SEAL school, otherwise known as BUD/S, there are approximately 100 of America's best and brightest going through training to be part of the Navy's elite special operations maritime force as part of the most recent class, Class 330. Just like those seeking to be part of my brethren's communities, those seeking to be part of the SEAL community, those who succeed in the 63-week course will earn their Trident. At the end of 63 weeks, each student will have swam 48 miles; hiked or patrolled over 150 miles; and conducted at least 40 dives while spending a minimum of 60 hours, or two and a half days under water. As a class, at the end of those 63 weeks, they will have completed the equivalent of swimming from Cuba to the southern tip of Florida, then running to New York City. And that is just a snapshot of what we ask them to do before they have taken their first step into their first operation in defense of our country. It is precisely because of what we ask them to do, starting in Coronado, then around the world, through operation after operation, that we are focused on their long-term health, and the well-being of our Force and Families. Naval Special Warfare Command will continue to place priority on strengthening, equipping and protecting our people; outpacing our enemies in the employment of new technologies and accelerating trends, enabling us to compete below the threshold of conflict. We will refine and adapt our organizational structure to ensure Naval Special Warfare remains relevant and lethal, and when necessary, stands ready, willing and able to engage in combat to fight and win decisively for many years to come. Thank you for your time, your care for our Naval Special Warfare community, and I welcome the opportunity today to answer your questions. Prepared Statement of Major General Mundy The text of Major General Mundy's statement is as follows: Introduction Marine Raiders are the Marine Corps' contribution to United States Special Operations Command (USSOCOM). Through specialized and advanced training, MARSOC builds upon its unique attributes and ethos as Marines to produce agile, scalable, fully-enabled, and responsive special operations forces (SOF) comprised of operators and special operations-specific combat support and combat service support specialists. MARSOC formations task organize for every assigned mission and leverage their robust command and control capability and their ability to fuse operations with intelligence down to the team level. All of these factors enable our Raiders to succeed in distributed environments and enable partners at the tactical and operational levels of war. MARSOC contributes to the SOF enterprise and US combatant commands by providing full spectrum special operations capabilities to combat complex transregional problems. Established in 2006, our organization continues to address the most immediate threats to our Nation and has become a key participant in the ongoing fight against violent extremist organizations. Accepting this, we are also cognizant that we must work to minimize pressure on our force and our families as we simultaneously prepare for future threats. We ensure preparedness by adapting our training methods using feedback from currently deployed forces to better prepare our Raiders for what they will encounter while deployed. Simultaneously, we minimize pressure on the force by ensuring adequate access to Preservation of the Force and Families (POTFF) resources. We recognize that our operational capability ultimately rests upon a foundation of outstanding individuals and their families. In order to safeguard and sustain MARSOC's human capital, our most valuable resource, we continually strive to balance operational commitments with time Raiders spend at home station. Part of our effort to take care of families involves ensuring that our POTFF program not only delivers responsive and effective support, but that it continues to evolve with changing demands and needs of our force. Background During my tenure as the Commander of MARSOC, I have continually been impressed by the caliber of our individuals, be they Marines, Sailors, or civilians. They are well trained, well equipped, and provide the full spectrum special operations capability that has been crucial to success on the modern battlefield in places as diverse as Mali in West Africa, contested areas of Iraq, and Marawi in the Philippines. Twelve years on, MARSOC is maturing into a full and integral member of the SOF enterprise just as it continues to provide Raiders to counter our Nation's threats. Taking into account where MARSOC is today, we would be remiss if we did not acknowledge some of the formative episodes in the history of our Marine Corps that got us here. The United States Marines Corps' rich history is one that is replete with expeditionary operations against what we know today as irregular threats. These actions serve as the foundation for what is Marine Corps Special Operations today. Although the United States Marine Corps (USMC) did not provide a service component to the United States Special Operations Command (USSOCOM) until 2005, the Marine Corps has demonstrated an ability to conduct and support special operations throughout its history. In the early years of America's involvement in World War II, President Franklin Delano Roosevelt was determined to bring the war to our enemies as rapidly as possible. Because of the Marine Corps' historical successes in small wars and its recent development of amphibious operational concepts, it was considered to be the ideal parent organization for the president's vision for "commando" operations. In January 1942 the United States Marine Corps established two Raider battalions. The mission of the new Raider units was to spearhead amphibious landings, conduct raiding expeditions against Japanese held territory, as well as conduct guerilla-type operations behind enemy lines for extended periods. Marine Raiders were intellectually dynamic, morally disciplined, and physically fit with an irrepressible sense of duty, loyalty to one another, and imbued with a "Gung Ho" spirit in the face of adversity… much like the Marines and Sailors we select and train as Raiders today. During the Vietnam War and throughout the Cold War era, the Marine Corps did not formally possess a specialized unit. However, many Marines were members of specialized Joint and certain, tailored conventional units, such as force reconnaissance and Marine Expeditionary Units (Special Operations Capable). These units performed some of the types of missions we associate with Special Operations today. The complex global environment produced by the end of the Cold War as well as the world changing events of September 11, 2001, prompted an almost immediate need for additional special operations capacity capable of achieving operational and strategic effects. In light of these events and the pressing need for more SOF, Secretary of Defense Donald Rumsfeld called for the Marines to work more closely with USSOCOM. After validating an initial proof of concept in 2004 known as the Marine Corps Special Operations Command Detachment (DET One), the Secretary of Defense directed the Marine Corps to provide a permanent contribution to USSOCOM – what would become Marine Corps Forces, Special Operations Command – in November 2005. On 24 February 2006, MARSOC activated at Camp Lejeune, North Carolina as a service component assigned to USSOCOM. MARSOC today comprises a headquarters, one Marine Raider Regiment, one Marine Raider Support Group, and the Marine Raider Training Center. The Command has forces on both the east coast at Camp Lejeune, North Carolina, and on the west coast at Camp Pendleton, California. Presiding over a total force of approximately 3,000 Marines, Sailors, and 200 Federal Civilians, the Command is employed across the globe executing special operations missions in support of SOCOM and the geographic combatant commands that span the SOF core activities. With a focus on counterterrorism, direct action, special reconnaissance, foreign internal defense, security force assistance, and counterinsurgency, your modern-day Raiders also have the capability to directly support hostage rescue and recovery, countering of weapons of mass destruction, unconventional warfare, foreign humanitarian assistance, military information, and civil affairs operations. In order to achieve success and provide full spectrum capability across this wide swathe of core activities, we must prioritize our efforts. MARSOC Priorities Understanding our role as a force provider and capability generator within the SOF enterprise, we have taken the SOCOM Commander's priorities of "Win, Transform, and People," and applied them to how we prepare our forces to accomplish assigned missions. To this end, MARSOC currently focuses on four priority areas: the provision of integrated full spectrum SOF, capabilities integration between SOF and Marine Air Ground Task Forces (MAGTF), future force development, and the preservation of the force and families. Priority 1: Force Provider Our first priority is to provide integrated full spectrum SOF that are task organized, trained and equipped to accomplish assigned special operations tasks. At any given point in the year, MARSOC has approximately 400 Raiders deployed across 18 countries carrying out assigned missions. We maintain three, forward task organized Marine Special Operations Companies; one each in Central Command, Africa Command, and the Pacific Command areas of responsibility. In addition to company-level deployments, we maintain one persistent O-5 (Lieutenant Colonel) level Special Operations Task Force in Central Command and a one-third rotational split with Naval Special Warfare Command for an O-6 (Colonel) level Combined/Joint Special Operations Task Force Headquarters, also in Central Command. At every level, these deployed formations bring integrated capabilities across all functional areas and allow us to operate across the full range of special operations missions. We believe that it is these high-end capabilities that provide our forces with a competitive edge against the adversaries we face. Providing our force begins with the recruitment process and continues through our assessment, selection, and individual training pipeline. We are focused on recruiting the best individuals from across the Marine Corps. Based on the results of our deployed forces and feedback from supported commanders, our recruiting and selection methods are working. Our training is progressive. As individuals earn new special operations specialties, they are moved to teams or special skills training environments. This training continues until deployment and covers everything from individual skill sets to high-end, advanced, complex unit collective training. In order to assess and certify Marine Special Operations Companies for deployment, MARSOC has created the RAVEN exercise. Held six times each year, RAVEN emphasizes realistic decision making for company and team commanders and provides a venue to practice the full planning, decision, execution, and assessment cycle. Alternating between Gulfport, Mississippi and Smyrna, Tennessee, RAVEN is a living exercise that enables MARSOC to incorporate the most current lessons from our deployed units as well as anticipated enemy actions inform and support ongoing joint contingency planning. For example, our most recent RAVEN conducted in Tennessee, featured a more robust foreign intelligence threat that undertook both physical and technical surveillance against our Marine Special Operations Teams. During this RAVEN we also exposed our teams to the degraded communications environment we would expect to encounter when facing a near-peer/emerging competitor. The training environments we create are dynamic. Not only do they prepare our Raiders for the current operational challenge, but they also evolve based on emerging threats and our expected participation in support of standing operational plans. Another benefit of the RAVEN exercises is its utility as a venue for integrating conventional Marine Corps resources into what is otherwise a SOF-centric exercise. Priority 2: Capabilities Integration with MAGTFs (Interoperability, Integration, and Interdependence) Second, we provide a bridge for routine capabilities integration with SOF and the deployed Marine Air Ground Task Forces to fully maximize the complimentary capabilities of each formation; especially in light of near-peer/emerging competitors. Given the threats present on contemporary battlefields and considering those we expect to face in the future, it has become increasingly important for SOF to be able to integrate "seamlessly" with the conventional forces and vice versa. Conventional forces offer capabilities and a capacity that simply do not exist in our small formations. In today's complex operating environment, the extent to which we, across the Joint Force, are able to leverage one another's strengths, and thereby offset our vulnerabilities, could determine the difference between success and failure. Cyber and space based capabilities, intelligence exploitation, mobility, fire support, logistics and medical support, are all examples of capabilities that we partially rely on conventional forces to provide– especially in scenarios involving high intensity combat. Examples of interoperability and capabilities integration occur every day across the globe from Syria and Iraq, Afghanistan, the Philippines and remote locations in Africa. With deliberate efforts to participate in each other's wargames, exercises, and training, we can institutionalize these efforts to the point that they become routine. Priority 3: Future Force Development As the operating environment evolves and more complex threats emerge, MARSOC must adapt its force to meet these new challenges. Constant and deliberate innovation, and evolution is critical to our success. Our concept for development is based on both a bottom-up driven process that incorporates immediate battlefield feedback into our training curricula, equipment research, testing, procurement; and a top-down approach that combines more traditional capability acquisition processes with longer-term future concept and wargaming efforts. Regarding equipment development and acquisition, we are tightly integrated with SOCOM and the Marine Corps and look forward to benefiting from the ongoing efforts of SOCOM's Acquisition Technology &Logistics, SOFWERX, and the Marine Corps' Rapid Capabilities Office. All of these organizations offer us an expedited procurement process for emerging technology. We have already taken steps to bring our vision to fruition with regard to capability development in particular technology areas. These include freeze dried plasma, semi-autonomous seeing and sensing capability, organic precision fires, counter-UAS rapid self-defense, unmanned cargo UAS and ground systems, rapid fusion of big data analytics and machine assisted learning, broadband tactical edge communications, and specialized insertion capabilities. As we research and improve our warfighting capabilities, we must kept in mind that our near-peer/emerging competitors are also making similar advances and investing in emerging technology. It is critical that we ensure that the technological capabilities we opt for are able to operate, communicate, and self-heal in a signals degraded environment. Likewise from a training perspective, we recognize the need to simulate operations in a degraded/denied communications environment that reflect what we might face when confronting near-peer/emerging competitors. We also plan to continue to improve our proficiency in the critical combined arms skills that both increase our lethality and allow us to maintain a tactical advantage over our adversaries. Last, we acknowledge that we must be able to operate in any clime and place, therefore we are committed to training in environments that replicate the full range of what we may experience on the battlefield. Complementing our near and mid-term efforts at capability development is longer term work on the development of a MARSOC-specific futures concept. Although this concept bears a resemblance to similar initiatives undertaken with the Department, it very much reflects MARSOC's unique place within SOF and interpretation of what the future operating environment might look like. We see a world overwhelmingly influenced by a resurgence of regional competition and instability. As these two themes collide, the complexity of the operating environment will dramatically challenge the ability of leaders at all levels to first, understand what is happening and, second, make sound decisions. This is the very situation in which Raider formations of the future must be prepared to operate; an urgent, volatile, complex, high-stakes problem that comprises multiple actors and defies the application of traditional US strengths and solutions. The results of our futures analysis, conducted over the past 18 months, have provided broad implications for the force as well as options which MARSOC can use to shape future capability to meet the challenges posed by the future operating environment. Throughout our internal wargame series, four discrete concepts or 'themes' consistently emerged. Each theme describes a distinct aspect of a vision for MARSOC, but at the same time each built upon the others such that the four are interconnected and mutually supporting. Together they provide a strong conceptual basis for a future MARSOC force that outpaces changes in the operating environment and remains a reliable force across warfighting and Title X functions. Collectively, these themes have come together to form the four, core pathways of innovation: MARSOF as a Connector, Combined Arms for the Connected Arena, The Cognitive Operator, and Enterprise Level Agility. Our futures vision document, MARSOF 2030 explains each of these innovation pathways in depth and also explores how they interconnect with one another. I will briefly introduce them here for the benefit of the committee. 'MARSOF as a Connector' is intended to capture MARSOC's facility in building cohesive, task organized teams. It is the idea that MARSOC can be the ideal integrator and synchronizer of U.S. Governmental capabilities with USSOF and partner nation actions. It also acknowledges the non-military nature of many of the problems we face and the need to look beyond for more durable solutions that involve tools other than the military. 'Combined Arms for the Connected Arena' aims to get at the requirement to 'sense' and 'make sense of' what is happening in diverse and multi-dimensional environments. This second pathway also speaks to the use of cyber and information 'domains' as potential venues for conflict now, but certainly with increasing relevance as we look toward the future. From our standpoint, we must become as comfortable operating in these 'virtual' domains as we are in the physical. Perhaps the most foundational of all of our innovation pathways is 'the Cognitive Operator'. This pathway touches all others. At its core is the idea that the future requires a SOF operator with an equal amount of brains to match the brawn; foresight in addition to fortitude. Your future Raiders must preside over expanded capabilities that include the ability to influence allies and partners; understand complex problems; apply a broad set of national, theater, and interagency capabilities to those problems; and fight as adeptly in the virtual space as the physical. The last innovation pathway, 'Enterprise Level Agility', leverages MARSOC's relatively small size as an advantage. MARSOC possesses the advantage of being a relatively small force with its own component headquarters – this allows the command to rapidly reorient the organization to confront new challenges as they emerge. In other words, MARSOC's organizational dexterity can provide SOCOM with an agile, adaptable force to meet unexpected or rapidly changing requirements. In this context, MARSOC's small size becomes a strength; one that can provide both institutional and operational agility to the SOCOM Commander. Priority 4: Preservation of the Force and Families Calling to mind the SOF Truth that "people are more important than hardware," our fourth priority is the preservation of our force and families program that provide our Raiders and their families with the access to resources promoting personal resiliency increasing longevity in service. Although listed as my fourth priority, preservation of the force and families is equally as important as the previous three priorities because people are at the heart of all we do. Currently, MARSOF special operators average 1 day overseas for every 1.9 days at home. Our capability specialists that enable communications, intelligence, air support, explosive ordnance disposal, and our canine handlers, vary by occupational specialty but average between 1 to 1.7 and 1 to 1.2 days deployed as opposed to days spent at home station. What these numbers do not reflect is the additional time that is spent away from home while training in CONUS. Although difficult to measure, Personnel Tempo or PERSTEMPO receives significant attention at all leadership levels within the Command such that we aim to balance our service members' schedules between training at and training away from home station. Because of this high operational tempo, POTFF has become an integral tool for maintaining the overall health of our force through programs that are focused on improving human performance, providing resources for behavioral health, developing spiritual fitness, and offering other family-oriented opportunities that are designed to strengthen the family unit. We appreciate the continual support from Congress on providing the funding for programs and specialized capabilities to make these programs effective. Culture of accountability: Closely tied to these efforts, in concert with both SOCOM and the Marine Corps, is our command-wide push to enhance our culture of accountability as it relates to issues such as sexual misconduct, illicit drug use, personal accountability, and unauthorized media release. As an example, our reported number of sexual assault cases remains in the low single digits and we have not had any victim reported incidents in Fiscal Year 18. We attribute this low number of incidents to our constant command level messaging campaign and our strong Sexual Assault Prevention and Response (SAPR) program. While we believe that even a single incident is one too many, we continue to strive to eradicate sexual and other forms of misconduct from our force. We strive each day to provide you SOF personnel that continue to embody the values of accountability, integrity, and commitment in honorable service to our nation. Conclusion: In conclusion, I am committed to providing Marine Raiders that provide the nation with full spectrum special operations capability and whose actions continually demonstrate our motto of Spiritus Invictus, or 'unconquerable spirit'. Your Marine Special Operators will remain always faithful, always forward. I thank the committee for your continued support of our military members and their families and also for your commitment to national security. Appendix B. November 2011 Navy Testimony on Navy IW Activities This appendix presents the text of the Navy's prepared statement for a November 3, 2011, hearing before the Emerging Threats and Capabilities subcommittee of the House Armed Services Committee on the IW activities of the military services. The text of the statement, by Rear Admiral Sinclair Harris, Director, Navy Irregular Warfare Office, is as follows: Chairman Thornberry, Congressman Langevin, and distinguished members of the House Armed Services Emerging Threats and Capabilities Subcommittee, it is an honor for me to be here with you today to address the U.S. Navy's efforts to institutionalize and develop proficiency in irregular warfare mission areas. These efforts are vital to our national interests and, as part of a comprehensive approach for meeting complex global challenges, remain relevant in a time of uncertainty and constant change. To meet these challenges Admiral Greenert, Chief of Naval Operations, recently provided his Sailing Directions to our Navy emphasizing the mission to deter aggression and, if deterrence fails, to win our Nation's wars. Today, the Navy is engaged around the world conducting preventive activities that stabilize, strengthen, and secure our partners and allies providing regional deterrence against state and non-state actors, while at the same time fighting, and winning, our Nation's wars. We expect the demand for these activities to increase in the future security environment as a capacity constrained Navy seeks to maintain access and presence. Emphasis on increased training and education will enable our continued readiness to effectively meet global demand. As demand for our Navy continues to grow, we continue to leverage our Maritime Strategy with our partners, the Marine Corps and Coast Guard. The maritime domain supports 90% of the world's trade and provides offshore options to help friends in need, and to confront and defeat aggression far from our shores as part of a defense in depth approach to secure our homeland. CNO's Sailing Directions, coupled with an enduring Maritime Strategy, underscore the Navy's focus on multi-mission platforms and highly trained Sailors that conduct activities across the operational spectrum. Key tenets of the force are readiness to fight and win today while building the ability to win tomorrow; to provide offshore options to deter, influence, and win; and to harness the teamwork, talent and imagination of our diverse force. While the Maritime Strategy spans the spectrum of warfare, the Navy's Vision for Confronting Irregular Challenges (CIC), released in January 2010, addresses mission areas of irregular warfare as well as maritime activities to prevent, limit, and interdict irregular threats and their influence on regional stability through, insurgency, crime, and violent extremism. The CIC Vision is derived from our Maritime Strategy with the intention to implement steps towards increasing the Navy's proficiency in supporting direct and indirect approaches that dissuade and defeat irregular actors who exploit uncontrolled or ungoverned spaces in order to employ informational, economic, technological, and kinetic means against civilian populations to achieve their objectives. The CIC Vision is guiding the alignment of organizations, investments, innovation, procedures, doctrine, and training needed to mainstream CIC capabilities within the Fleet. These efforts are focused on outcomes of increased effectiveness in stabilizing and strengthening regions, enhancing regional awareness, increasing regional maritime partner capacity, and expanding coordination and interoperability with joint, interagency, and international partners. These outcomes support promoting regional security and stability and advancing the rule of law allowing good governance and promoting prosperity by helping partners better protect their people and resources. In addition to preventive activities, the Vision guides efforts to inhibit the spread of violent extremism and illicit, terrorist, and insurgent activities. To achieve these outcomes, the Navy is actively reorienting doctrine and operational approaches, rebalancing investments and developmental efforts, and refining operations and partnerships to better support a comprehensive approach to U.S. efforts. These efforts will provide a Navy capable of confronting irregular challenges through a broad array of multi-mission capabilities and a force proficient in the CIC missions of security force assistance, maritime security, stability operations, information dominance, and force application necessary to support counterinsurgency, counterterrorism, and foreign internal defense missions. In line with its strategy for confronting irregular challenges the Navy has leveraged key force providers, such as the Navy Expeditionary Combat Command, and established Maritime Partnership Stations, and Maritime Headquarters with Maritime Operations Centers to meet the demands and missions consistent with its strategy and vision. The evolution of intelligence and strike capabilities has enabled the Navy to meet urgent Combatant Commander requirements for counterterrorism and counterinsurgency operations and highlighted further opportunities for the Navy as an important joint partner. While these operational organizations and activities deliver Navy capabilities in theater, the Navy Irregular Warfare Office, established by the CNO in July 2008, has guided the implementation and institutionalization of the CIC Vision. The Navy Irregular Warfare Office, working closely with USSOCOM, other Combatant Commanders, Services, interagency and international partners, has rapidly identified and deployed Navy capabilities to today's fight, and is institutionalizing confronting irregular challenges concepts in the Navy's planning, investment, and capability development. The Navy Irregular Warfare Office operates under three primary imperatives consistent with the Maritime Strategy, CNO's Sailing Directions, and the Navy's Vision for Confronting Irregular Challenges. They provide integration and institutionalization in CIC mission areas and are; (1) improve the level of understanding concerning the maritime contribution to the joint force; (2) increase proficiency of the whole of Navy to confront irregular challenges; and (3) drive maritime and special operations forces to seamless integration in addressing irregular challenges. These three imperatives focus the Navy's implementation efforts and mainstream the concept that preventing wars is as important as winning them. Our Navy must be ready to transition seamlessly between operational environments, with the capability and training inherent in the Fleet. Department of Defense Directive 3000.07 directs the services to "improve DoD proficiency for irregular warfare, which also enhances its conduct of stability operations" and directs reporting to the Chairman of the Joint Chiefs of Staff annually. Navy efforts to institutionalize and provide proficiency in confronting irregular challenges, includes proficiency in irregular warfare missions along with missions of maritime security operations and information dominance, a key enabler for CIC. Currently, the Navy leverages its access and persistent presence to both better understand and respond to irregular challenges and is actively evolving its proficiency to prevent and counter irregular threats while maintaining its ability to conduct the full spectrum of naval warfare. Its access, presence, and emphasis on maritime partnerships enable broader government efforts to address underlying conditions of instability that enhance regional security. Through its mix of multi-mission capabilities, the Navy provides political leaders with a range of offshore options for limiting regional conflict through assurance, deterrence, escalation and de-escalation, gaining and maintaining access, and rapid crisis response. In addition to its inherent ability to protect the maritime commons, its effectiveness in building maritime partner capability and capacity contributes to achieving partner security and economic objectives. Operating in and from the maritime domain with joint and international partners, the Navy is enhancing regional security while dissuading, deterring, and when necessary, defeating irregular threats. The Navy acknowledges the complexity of the future security environment and continues to explore balanced approaches. Following are the Navy's current focus areas: Fleet-SOF Integration: Navy's afloat basing support to special operations forces has extended their reach into denied or semi-permissive areas enabling highly successful counterterrorism missions. Navy provides inherent combat capabilities, multi-mission ships and submarines collecting mission critical information, approval for 1052 support billets for Naval Special Warfare, two dedicated HCS squadrons, and shipboard controlled UAV orbits supporting counterterrorism operations. The Navy is aligned to improve this integration through pre-deployment training, mission rehearsals, improvements to fleet bandwidth allocation, shipboard C4I enhancements, and C2 relationships needed to prosecute time sensitive targets. Maritime Partnerships: Establishing enduring maritime partnerships is a long-term strategy for securing the maritime commons. Legal, jurisdictional, and diplomatic considerations often complicate efforts to secure the maritime commons, especially from exploitation by highly adaptive irregular actors. In recognition of these considerations, the Navy is emphasizing partnership engagements with U.S. and international maritime forces to strengthen regional security. Information Sharing Initiatives: In an information dominated environment, initiatives that link joint warfighters, the technology community, and academia are crucial to rapidly fielding solutions to emerging irregular challenges. These initiatives are the basis for longer-term efforts to adapt and improve proficiency of Navy platforms to address irregular challenges. Doctrine: Development of Tri-Service (Navy, Marine Corps, and Coast Guard) Maritime Stability Operations doctrine that will enable a more effective response to instability in the littorals. Organization: Navy Expeditionary Combat Command, which continues to provide in-demand capabilities such as Maritime Civil Affairs Teams, Riverine Forces, Maritime Security Forces, Explosive Ordnance Disposal Teams, and Expeditionary Intelligence Teams. Today, the Navy continues to meet planned global operational commitments and respond to crises as they emerge. Overseas Contingency Operations continue with more than 12,000 active and reserve Sailors serving around the globe and another 15,000 at sea in Central Command. Navy's Carrier Strike Groups provide 30 percent of the close air support for troops on the ground in Afghanistan and our Navy and Marine Corps pilots fly almost 60% of electronic attack missions. Yet, as our national interests extend beyond Iraq and Afghanistan, so do the operations of our Navy. Over the last year, more than 50 percent of our Navy has been underway daily; globally present, and persistently engaged. Last year, our Navy conducted counter-piracy operations in the Indian Ocean and North Arabian Sea with a coalition of several nations, trained local forces in maritime security as part of our Global Maritime Partnership initiatives in Europe, South America, Africa and the Pacific and forces in the Sixth Fleet supported NATO in complex operations in Libya. Navy responded with humanitarian assistance and disaster relief to the earthquake in Haiti, the flooding in Pakistan, and the earthquake and tsunami in Japan; and, conducted the world's largest maritime exercise, Rim of the Pacific (RIMPAC), which brought together 14 nations and more than 20,000 military personnel, to improve coordination and trust in multi-national operations in the Pacific. Our Sailors continue to deploy forward throughout the world, projecting US influence, responding to contingencies, and building international relationships that enable the safe, secure, and free flow of commerce that underpins our economic prosperity and advances the mission areas that address irregular challenges. The future vision of the Navy in meeting the uncertain challenges around the globe remains a force forward, present, and persistent in areas critical to the national interests of the United States. CNO, in previous testimony, stated: Our Navy continues to conduct a high tempo of global operations, which we expect to continue even as forces draw down in Afghanistan. Global trends in economics, demographics, resources, and climate change portend an increased demand for maritime presence, power, and influence. America's prosperity depends on the seas… and as disruption and disorder persist in our security environment, maritime activity will evolve and expand. Seapower allows our nation to maintain U.S. presence and influence globally and, when necessary, project power without a costly, sizeable, or permanent footprint ashore. We will continue to maintain a forward-deployed presence around the world to prevent conflict, increase interoperability with our allies, enhance the maritime security and capacity of our traditional and emerging partners, confront irregular challenges, and respond to crises. To continue as a global force in the preventive and responsive mission areas that confront irregular challenges, including those of irregular warfare, the Navy will be faced with increasing demand in a fiscally induced capacity constrained environment. Constrained capacity requires a prioritization of areas requiring persistent presence, to include those regions of current or forecast instability. Also required is an understanding of the risk incurred to mission, and to force, if we do not get that priority correct. We must ensure our Navy remains the finest, best trained, and most ready in the world to sustain key mission areas that support confronting irregular challenges, and has the ability to face a highly capable adversary. The Navy looks forward to working with Congress to address our future challenges and thank you for your support of the Navy's mission and personnel at this critical crossroads in U.S. history. Appendix C. 2010 Navy Irregular Warfare Vision Statement This appendix reproduces the Navy's January 2010 vision statement for irregular warfare. Appendix D. 2012 RAND Corporation Report Findings and Recommendations This appendix presents findings and recommendations from a 2012 report on maritime regular warfare by RAND Corporation, a research firm. Findings The report made the following findings, among others: The study's main findings span the strategic, operational, and tactical levels. Several are specific to MIW, while others have implications both for MIW [maritime irregular warfare] and for IW operations more broadly. First, the maritime force is generally considered to play a supportive role to ground forces in IW and therefore has the potential to be underutilized even in IW operations conducted in a predominantly maritime environment .... Second, countries that have a prevalent maritime dimension associated with an insurgency could potentially benefit from the enhancement of civil-military operations (CMOs) in the maritime arena .... Third, maritime operations in IW can allow the United States to scale its ground involvement in useful ways .... Fourth, if one assumes that future MIW engagements that entail building a partner's capacity will resemble OEF-P [Operation Enduring Freedom—Philippines], it is important to manage strategic expectations based on realistic assessments of the partner's capabilities .... Fifth, when building partner capacity, either in MIW or land-based IW, the United States should make efforts to provide equipment and technology that the partner will be able to maintain and operate without difficulty .... Sixth, with regard to operational methods, coastal maritime interdiction can play an instrumental role in setting the conditions for success in IW by cutting the supply lines that sustain an insurgency .... Seventh, as the [1980s] Nicaragua case illustrates, U.S. partners in MIW may only have to influence and monitor the sensibilities of a local population, but the legitimacy of U.S. involvement may be tested in worldwide public opinion .... Finally, international cooperation in confronting MIW adversaries is often necessary, and the U.S. Navy should make an effort to ensure that it is tactically and operationally interoperable with partner navies in order to facilitate coordination .... Recommendations The report made the following recommendations, among others: The findings presented here have several direct implications for the U.S. conventional Navy and Naval Special Warfare Command (NSW). First, U.S. naval forces should continue to provide U.S. partners with suitable equipment that they will be able to operate and maintain and should continually strive to increase their interoperability with partner forces. Second, U.S. naval forces may have to continue or expand training of partner forces to confront future MIW threats. Third, when conducting MIW, operating from a sea base offers advantages to NSW. However, due to the costs of such a practice, both NSW and the conventional Navy must also recognize that decisions regarding when and where to support sea basing of this sort need to be made carefully. Fourth, in support of future MIW operations, NSW is likely to have ongoing requirements for maritime interdiction and containment. Fifth, the United States could benefit from maintaining operational and tactical capabilities with which to assist its partners in surveillance, particularly against small submarines and mining threats. Sixth, NSW should consider increasing its capacity to conduct maritime-based CMOs. Conventional U.S. naval forces should similarly consider their role in supporting significant irregular ground operations launched from the sea, as well as their role in interdiction and containment campaigns. In contrast to those of NSW, conventional U.S. Navy capabilities to support IW might entail CMOs and related activities to a greater extent than direct action. Appendix E. Detention of Terrorist Suspects on U.S. Navy Ships This appendix presents additional background information on detention of terrorist suspects on U.S. Navy ships. On July 6, 2011, it was reported that The U.S. military captured a Somali terrorism suspect [named Ahmed Abdulkadir Warsame] in the Gulf of Aden in April and interrogated him for more than two months aboard a U.S. Navy ship before flying him this week to New York, where he has been indicted on federal charges.... Other U.S. officials, interviewed separately, said Warsame and another individual were apprehended aboard a boat traveling from Yemen to Somalia by the U.S. military's Joint Operations Command. The vessel was targeted because the United States had acquired intelligence that potentially significant operatives were on board, the officials said. Court documents said the capture took place April 19. One of the senior administration officials who briefed reporters said that the other suspect was released "after a very short period of time" after the military "determined that Warsame was an individual that we were very much interested in for further interrogation." According to court documents, Warsame was interrogated on "all but a daily basis" by military and civilian intelligence interrogators. During that time, officials in Washington held a number of meetings to discuss the intelligence being gleaned, Warsame's status and what to do with him. The options, one official said, were to release him, transfer him to a third country, keep him prisoner aboard the ship, subject him to trial by a military commission or allow a federal court to try him. The decision to seek a federal indictment, this official said, was unanimous. Administration officials have argued that military commission jurisdiction is too narrow for some terrorism cases - particularly for a charge of material support for terrorist groups - and the Warsame case appeared to provide an opportunity to try to prove the point. But some human rights and international law experts criticized what they saw as at least a partial return to the discredited "black site" prisons the CIA maintained during the Bush administration.... Warsame was questioned aboard the ship because interrogators "believed that moving him to another facility would interrupt the process and risk ending the intelligence flow," one senior administration official said. The official said Warsame "at all times was treated in a manner consistent with all Department of Defense policies" - following the Army Field Manual - and the Geneva Conventions. Warsame was not provided access to an attorney during the initial two months of questioning, officials said. But "thereafter, there was a substantial break from any questioning of the defendant of four days," court documents said. "After this break, the defendant was advised of his Miranda rights" - including his right to legal representation – "and, after waiving those rights, spoke to law enforcement agents." The four-day break and separate questioning were designed to avoid tainting the court case with information gleaned through un-Mirandized intelligence interrogation, an overlap that has posed a problem in previous cases. The questioning continued for seven days, "and the defendant waived his Miranda rights at the start of each day," the documents said.... U.S. Navy Vice Adm. William H. McRaven alluded to the captures in testimony before a Senate committee last week in which he lamented the lack of clear plans and legal approvals for the handling of terrorism suspects seized beyond the war zones of Iraq and Afghanistan. At one point in the hearing, Sen. Carl Levin (D-Mich.), the chairman of the Senate Armed Services Committee, referred to "the question of the detention of people" and noted that McRaven had "made reference to a couple, I think, that are on a ship." McRaven replied affirmatively, saying, "It depends on the individual case, and I'd be more than happy to discuss the cases that we've dealt with." Another press report on July 6, 2011, stated the following: In a telephone briefing with reporters, senior administration officials said Mr. Warsame and another person were captured by American forces somewhere "in the Gulf region" on April 19. Another official separately said the two were picked up on a fishing trawler in international waters between Yemen and Somalia. That other person was released. Mr. Warsame was taken to a naval vessel, where he was questioned for the next two months by military interrogators, the officials said. They said his detention was justified by the laws of war, but declined to say whether their theory was that the Shabab are covered by Congress's authorization to use military force against the perpetrators of the Sept. 11, 2001, attacks; whether the detention was justified by his interactions with Al Qaeda's Yemen branch; or something else. The officials also said interrogators used only techniques in the Army Field Manual, which complies with the Geneva Conventions. But they did not deliver a Miranda warning because they were seeking to gather intelligence, not court evidence. One official called those sessions "very, very productive," but declined to say whether his information contributed to a drone attack in Somalia last month. After about two months, Mr. Warsame was given a break for several days. Then a separate group of law enforcement interrogators came in. They delivered a Miranda warning, but he waived his rights to remain silent and have a lawyer present and continued to cooperate, the officials said, meaning that his subsequent statements would likely be admissible in court. Throughout that period, administration officials were engaged in deliberations about what to do with Mr. Warsame's case. Eventually, they "unanimously" decided to prosecute him in civilian court. If he is convicted of all the charges against him, he would face life in prison. Last week, Vice Adm. William H. McRaven, who was until recently in charge of the military's Joint Special Operations Command, told a Senate hearing that detainees are sometimes kept on Navy ships until the Justice Department can build a case against them, or they are transferred to other countries for detention. Another senior administration official said Tuesday that such detentions are extremely rare, and that no other detainees are now being held on a Navy ship. A July 7, 2011, press report stated the following: In interrogating a Somali man for months aboard a Navy ship before taking him to New York this week for a civilian trial on terrorism charges, the Obama administration is trying out a new approach for dealing with foreign terrorism suspects. The administration, which was seeking to avoid sending a new prisoner to Guantánamo Bay, Cuba, drew praise and criticism on Wednesday [July 6] for its decisions involving the Somali suspect, Ahmed Abdulkadir Warsame, accused of aiding Al Qaeda's branch in Yemen and the Shabab, the Somali militant group. A July 6, 2011, entry in a blog that reports on naval-related events stated that the U.S. Navy ship to which Warsame was taken was the amphibious assault ship Boxer (LHD-4). An October 24, 2012, press report stated the following: Over the past two years, the Obama administration has been secretly developing a new blueprint for pursuing terrorists, a next-generation targeting list called the "disposition matrix." The matrix contains the names of terrorism suspects arrayed against an accounting of the resources being marshaled to track them down, including sealed indictments and clandestine operations. U.S. officials said the database is designed to go beyond existing kill lists, mapping plans for the "disposition" of suspects beyond the reach of American drones. Although the matrix is a work in progress, the effort to create it reflects a reality setting in among the nation's counterterrorism ranks: The United States' conventional wars are winding down, but the government expects to continue adding names to kill or capture lists for years.... The database is meant to map out contingencies, creating an operational menu that spells out each agency's role in case a suspect surfaces in an unexpected spot. "If he's in Saudi Arabia, pick up with the Saudis," the former official said. "If traveling overseas to al-Shabaab [in Somalia] we can pick him up by ship. If in Yemen, kill or have the Yemenis pick him up." Officials declined to disclose the identities of suspects on the matrix. They pointed, however, to the capture last year of alleged al-Qaeda operative Ahmed Abdulkadir Warsame off the coast of Yemen. Warsame was held for two months aboard a U.S. ship before being transferred to the custody of the Justice Department and charged in federal court in New York. "Warsame was a classic case of 'What are we going to do with him?'" the former counterterrorism official said. In such cases, the matrix lays out plans, including which U.S. naval vessels are in the vicinity and which charges the Justice Department should prepare. An October 6, 2013, press report stated the following: An accused operative for Al Qaeda seized by United States commandos in Libya over the weekend is being interrogated while in military custody on a Navy ship in the Mediterranean Sea, officials said on Sunday [October 6]. He is expected eventually to be sent to New York for criminal prosecution. The fugitive, known as Abu Anas al-Libi, is seen as a potential intelligence gold mine, possessing perhaps two decades of information about Al Qaeda, from its early days under Osama bin Laden in Sudan to its more scattered elements today. The decision to hold Abu Anas and question him for intelligence purposes without a lawyer present follows a pattern used successfully by the Obama administration with other terrorist suspects, most prominently in the case of Ahmed Abdulkadir Warsame, a former military commander with the Somali terrorist group Shabab.... "Warsame is the model for this guy," one American security official said.... Abu Anas is being held aboard the U.S.S. San Antonio, a vessel brought in specifically for this mission, officials said. A June 27, 2014, press report stated the following: Right now, a suspected terrorist is sitting in the bowels of a U.S. Navy warship somewhere between the Mediterranean Sea and Washington, D.C. Ahmed Abu Khattala, the alleged leader of the September 2012 attack on the U.S. embassy in Benghazi, Libya, is imprisoned aboard the USS New York, likely in a bare cell normally reserved for U.S. military personnel facing disciplinary action at sea. En route to the United States for more than a week, he's being questioned by military and civilian interrogators looking for critical bits of intelligence before he's read his Miranda rights, formally arrested, and transferred to the U.S. District Court in Washington, where he'll face trial. Meanwhile, the sailors aboard are going about the daily business of operating an amphibious transport ship—even as the ship's mission has been redefined by the new passenger in their midst. This isn't the first time the Navy has played such a critical, curious, and largely under-reported role in U.S. counterterrorism efforts. In 2011, Ahmed Abdulkadir Warsame, a military commander for the Somali terrorist group al-Shabab, was captured aboard a fishing boat in the Gulf of Aden and detained by the Navy, on the high seas, for two months. In 2013, Abu Anas al-Libi, the alleged mastermind of the 1998 terrorist attacks on American embassies in Kenya and Tanzania, was held aboard the USS San Antonio—an identical ship to the one being used this week. Both men were interrogated at sea before being flown to the United States to face criminal charges in federal courts.... In many ways, it's not surprising that the U.S. government has been turning Navy assets into floating prisons for these dangerous men. Taking the slow route back to the United States offers interrogators the time and space to gather crucial intelligence from high-value sources like al-Qaeda-linked operatives. During the two months that Warsame was at sea, a select team of FBI, CIA, and Defense Department officials, part of the Obama administration's High-Value Detainee Interrogation Group, questioned the Somali terrorist on "all but a daily basis." He was cooperative throughout and some reports suggest that subsequent U.S. counterterrorism operations, including a drone attack in Somalia shortly after his capture, were a direct result of intelligence Warsame provided to authorities. While al-Libi was only detained at sea for about a week—a chronic medical condition prevented him from being held on a ship for an extended period—reports suggest that similar intelligence-collection efforts were underway in his case as well. The U.S. government has also embraced the approach because it has limited options for holding and interrogating men like Abu Khattala after capture. The Obama administration remains committed to ending detention operations at Guantánamo Bay, Cuba. While the facility is still home to almost 150 alleged terrorists, the United States has not sent any new detainees there since March 2008. Detaining suspected terrorists at other overseas facilities is likewise not an option. For a time, U.S.-run prisons in Afghanistan were a possibility. But the detention facility in Parwan is now an Afghan-run prison, and using facilities in other countries would raise a host of legal, operational, and humanitarian concerns. Even if U.S. officials were willing to forgo the opportunity to question Abu Khattala before he's arraigned in federal court and provided with a lawyer, flying alleged terrorists to the United States immediately presents its own set of problems. Seemingly small operational and political considerations about the ways in which the United States transports terrorists captured abroad have major strategic implications, particularly given lingering questions about U.S. rendition efforts under the Bush administration. In this context, the Navy has taken on the role of high-seas prison warden, even as lawyers continue to debate whether and what international legal rules apply to terrorists captured abroad and detained, temporarily, on a ship. Appendix F. Background Information on FY2020 Funding Requests for Lines 263 and 63 As noted earlier in this report, DOD's proposed FY2020 budget requests, among other things, $72.6 million in the FY2020 Research, Development, Test, and Evaluation, Defense-Wide (RDT&EDW) account for Program Element (PE) 1160483BB, (Special Operations Command [SOCOM]) maritime systems (line 263 in the FY2020 RDT&EDW account), including $45.2 million for Project S0417: Underwater Systems, and $15.6 million for S1684: Surface Craft; and $27.4 million in the FY2020 Procurement, Defense-Wide (PDW) appropriation account for procurement of underwater systems for SOCOM (line 63 in the FY2020 PDW account). Research and Development for Maritime Systems (Line 263) Regarding the FY2020 funding request for line 263, DOD states that This program element provides for engineering and manufacturing development (EMD) of Special Operations Forces (SOF) Surface and Undersea Mobility platforms. This program element also provides for pre-acquisition activities to quickly respond to new requirements for SOF surface and undersea mobility, looking at multiple alternatives to include cross-platform technical solutions, service-common solutions, Commercial-Off-The-Shelf technologies, and new development efforts. Middle-Tier Acquisition (2016 NDAA, Section 804) to accommodate rapid prototyping, may be utilized. The Underwater Systems project provides for EMD of combat submersibles, SOF operator diving systems, underwater support systems, and underwater equipment. This project also provides for pre-acquisition activities (material solutions analysis, advanced component, prototype development, and exploitation of emerging technology opportunities to deliver enhanced capabilities) to respond to emergent requirements. These submersibles, equipment, and diving systems are used by SOF in the conduct of infiltration/extraction, personnel/material recovery, hydrographic/inland reconnaissance, beach obstacle clearance, underwater ship attack, and other missions. The capabilities of the submersible systems, diving systems, and unique equipment provide small, highly trained forces the ability to successfully engage the enemy and conduct clandestine operations associated with SOF maritime missions. The Surface Craft project provides for EMD of medium and heavy surface combatant craft, combatant craft mission equipment, and pre-planned product improvement and technology insertion engineering changes to meet the unique requirements of SOF. This project element also provides for pre-acquisition activities (materiel solutions analysis, advanced component development and prototypes) to quickly respond to new requirements for maritime craft and subsystems. The craft capabilities and unique equipment provide small, highly trained forces the ability to successfully engage the enemy and conduct operations associated with SOF maritime missions…. [S0417: Underwater Systems] provides for engineering and manufacturing development of combat underwater submersibles, Special Operations Forces (SOF) operator diving systems, underwater support systems, and underwater equipment. This project also provides for pre-acquisition activities (materiel solutions analysis, advanced component development and prototypes) to respond to emergent requirements. Middle-Tier acquisitions to accommodate rapid prototyping may be utilized. These submersibles, equipment, and diving systems are used by SOF in the conduct of infiltration/extraction, personnel/material recovery, hydrographic/inland reconnaissance, beach obstacle clearance, underwater ship attack, and other missions. The capabilities of the submersible systems, diving systems, and unique equipment provides small, highly trained forces the ability to successfully engage the enemy and conduct clandestine operations associated with SOF maritime missions…. [Within Project S0417, the subproject for Shallow Water Combat Submersible (SWCS)] provides for the design, development, test, manufacturing and sustainment of one Engineering Development Model (EDM) and ten production units to replace the legacy MK 8 MOD 1 Seal Delivery Vehicle (SDV) system. SWCS is a free-flooding combat submersible mobility platform suitable for transporting and deploying SOF and their payloads for a variety of SOF missions. SWCS will be deployable from a Dry Deck Shelter (DDS), surface ships, and land. The SWCS system includes the SWCS vehicle and SWCS support Equipment, comprised of Mission Support Equipment (MSE), Pack-Up Kit (PUK), and Transportation and Handling (T&H). It also includes integration efforts with the current Dry Deck Shelter (DDS) and development of product improvements accomplished throughout the lifecycle of the system…. [The sub-project for Dry Deck Shelter (DDS) Modernization] provides for the pre-planned product improvements, testing, and integration of specialized underwater systems to meet the unique requirements of SOF, and compatibility with the submarine fleet. The current DDS is a certified diving system which attaches to modified host submarines that provides for insertion of SOF forces and platforms. Funding supports product improvements to the current DDS, as well as associated diver equipment for in-service submarine support systems, unmanned underwater vehicles, and follow on development efforts for future SOF payloads…. [The sub-project for combat diving] is a Middle Tier of Acquisition designated program which provides for the development, testing, and rapid fielding and prototyping of SOF peculiar diving equipment providing the SOF combat diver the ability to engage the enemy and conduct operations. SOF Combat Diving will support the SDV, SWCS, and DCS with the conduct of infiltration/extraction, material recovery, underwater ship attack, beach clearance, and other missions. Technologies include, but are not limited to, commercial and developmental life support, maneuverability and propulsion, diver navigational accuracy and situation awareness, environmental protection, and communications between dive teams as well as between divers and external vessels/craft…. [The sub-project for Undersea Craft Mission Equipment (UCME)] provides a rapid response capability to support SOF underwater craft and diver systems, subsystems, and their emerging requirements. UCME provides technology refresh efforts to correct system deficiencies, improve asset life, and enhance mission capability to leverage and exploit emerging technologies within the maritime Special Operations Forces undersea capability portfolio…. [Project S1684: Surface Craft] provides for engineering and manufacturing development of medium and heavy surface combatant craft, combatant craft mission equipment, and preplanned product improvement (P3I) and technology insertion engineering changes to meet the unique requirements of Special Operations Forces (SOF). This project also provides for pre-acquisition activities (materiel solutions analysis, advanced component development and prototypes) to quickly respond to new requirements for maritime craft and subsystems Middle-Tier acquisition to accommodate rapid prototyping, may be utilized. The craft capabilities and unique equipment provide small, highly trained forces the ability to successfully engage the enemy and conduct operations associated with SOF maritime missions…. [The sub-project for Combatant Craft Medium (CCM) Mk 1] is a semi-enclosed multi-mission combatant craft for platoon-size maritime mobility in maritime denied environments. It is multi-mission capable, including Maritime Interdiction, Insert / Extract, and Visit, Board, Search, and Seizure (VBSS) Operations. CCM is Naval Special Warfare's (NSW) craft-of-choice for long-range, high-payload SOF mobility operations in denied environments up to high threat. CCM has NSW's best Iron Triangle: 40 knot (kt) speed; 4 crew + 19 passengers (pax) / 10,000 pound (lb) payload; and 600 nautical miles (nm) range. CCM Mk 1 payload capacity enables inclusion of shock mitigating seats, which is critical for ride quality, operator tactical readiness, and operator health. At 60 feet long, CCM is C-17 / C5 transportable and can launch/recover by well deck or shore based trailer…. [The sub-project for Combatant Craft Heavy (CCH)] represents a family of solutions that provides platoon-size maritime surface mobility. The current CCH is the Sea, Air, Land Insertion, Observation, and Neutralization (SEALION) craft. SEALION is a fully-enclosed, climate- controlled, semi-submersible craft that operates in denied environments up to high-threat. SEALION is NSW's most versatile and survivable combatant craft and the craft-of-choice for sensitive maritime intelligence, surveillance, and reconnaissance missions. Iron Triangle: 40 kt speed; 7 crew + 12 pax / 3,300 lb payload; and 400 nm range. SEALION payload capacity enables inclusion of shock mitigating seats, which is critical for ride quality, operator tactical readiness, and operator health. At 77+ feet long, SEALION is C-17/C-5 transportable and can launch/recover by well deck or shore based mobile travel lift or crane…. [The sub-project for Combatant Craft Mission Equipment (CCME)] provides a rapid response capability to support SOF combatant craft systems, subsystems, and their emerging requirements. CCME provides technology refresh efforts to correct system deficiencies, improve asset life, and enhance mission capability. Demonstrations and modifications may be made to support emerging capability enhancements such as, but not limited to, conformal antennas, identification friend-or-foe capabilities, enhanced communications, weapon integration, software refresh, and navigation subsystems in support of future missions. Solutions to these emerging requirements may be commercial-off-the-shelf leveraged from other government agencies, or new solutions…. [The sub-project for Combatant Craft Assault (CCA)] is a combatant craft for squad-size maritime mobility operations in maritime denied environments. CCA is NSW's best craft for VBSS in maritime denied environments up to and including medium threat. It is the craft-of-choice for maritime interdiction and boarding operations because of the open deck space, maneuverability, and interoperability with an Afloat Forward Staging Base. Iron Triangle: 40 kt speed; 3 crew + 12 pax / 5,000 lb payload; and 300 nm range. At 41 feet long, CCA is air transportable by C-130 / C-17 / C-5 and can launch/recover by crane, davit, well deck, or shore based trailer…. [The sub-project for Threat Awareness System (TAS)] provides SOF with an Electronic Intelligence capability for enhanced force protection of SOF in Maritime denied environments by allowing them to identify and avoid enemy detection capabilities. TAS will utilize technological advancements to gain significant improvements in capability such as miniaturization and marinization to enable seamless craft integration…. [The sub-project for Maritime Precision Engagement (MPE)] is a family of standoff, loitering, man-in-the-loop weapons systems deployed on combatant craft and capable of targeting individuals, groups, vehicles, high value targets, and small oceangoing craft with low collateral damage. The program consists of combatant craft alterations, launcher systems, and munitions. Procurement of Underwater Systems (Line 63) Regarding the FY2020 funding request for line 63, DOD states that The Underwater Systems line item procures dry and wet combat submersibles, modifications, field changes to the Dry Deck Shelter (DDS), and various systems and components for Special Operations Forces (SOF) Combat Diving. Current acquisition procurement programs of record are the Shallow Water Combat Submersible (SWCS) program, Dry Combat Submersible (DCS), SOF Combat Diving and Dry Deck Shelter (DDS). Middle-Tier Acquisition (2016 NDAA, Section 804) to accommodate rapid fielding, may be utilized. SWCS is the next generation free-flooding combat submersible that transports SOF personnel and their combat equipment in hostile waters for a variety of missions. SOF units require specialized underwater systems that improve their warfighting capability and survivability in harsh operating environments. The DCS will provide the capability to insert and extract SOF and/or payloads into denied areas from strategic distances. The program is structured to minimize technical, cost, and schedule risks by leveraging commercial technologies, procedures, and classing methods to achieve an affordable DCS. SOF Combat Diving supports the unique requirements impacting fully equipped operators while conducting underwater, real-world missions. Examples of underwater systems and maritime equipment include, underwater navigation, diving equipment, and underwater propulsion systems. These systems and equipment are used for infiltration/extraction, reconnaissance, beach obstacle clearance, and other missions. The capabilities of submersible systems and unique equipment provides small, highly trained forces the ability to successfully engage the enemy and conduct operations associated with SOF maritime missions…. Justification: 1. DDS: The DDS is a certified diving system that attaches to modified host submarines and provides for insertion of SOF forces and platforms. SOCOM has a cost share agreement with the Navy to support the modernization of the DDS in order to accommodate current and future Naval Special Warfare payloads as well as large U.S. Navy payloads. FY 2020 PROGRAM JUSTIFICATION: Funding continues the support of the DDS modernization effort, which includes relocation of equipment inside the DDS Hangar to support current and future payloads. Funding also includes field changes for product improvements developed to overcome obsolescence and Diminishing Manufacturing Sources and Material Shortages (DMSMS). 2. SWCS: Shallow Water Combat Submersible (SWCS) is a free-flooding combat submersible mobility platform suitable for transporting and deploying SOF and their payloads for a variety of SOF missions. SWCS will be deployable from a DDS, surface ships, and land. FY 2020 PROGRAM JUSTIFICATION: Purchases two SWCS vehicles and support equipment, Government Furnished Equipment (GFE), engineering change proposals (ECP), detachment deployment packages, and initial spares. 3. DCS: The DCS provides SOF with a dry diver lock-in and lock-out capability that transports personnel and their combat equipment in hostile waters for a variety of missions. FY 2020 PROGRAM JUSTIFICATION: Purchases initial spares, GFE, ECP, system integration lab, and simulator. 4. SOF Combat Diving: This is designated a Middle-tier Acquisition program allowing for rapid fielding which provides the transition of SOF peculiar diving technologies for the SOF combat diver while conducting underwater, real-world missions. FY 2020 PROGRAM JUSTIFICATION: Procures total of 10 divers' maritime environmental protection and diver navigation. Press Reports A November 30, 2016, press report states the following: USSOCOM is currently pursuing two programmes to enhance the sub-surface capabilities of US Navy (USN) SEALs including the Shallow Water Combat Submersible (SWCS) and Dry Combat Submersible (DCS). Both solutions are fully enclosed vehicles for operators, thereby reducing any requirement for teams to wear rebreathing equipment during mission insertions and extractions.... The main difference between SWCS and DCS is range, with the latter solution providing a longer insertion distance with a greater depth capability. The SWCS, for example, is being designed to replace legacy Mk 8 Mod 1 SEAL Swimmer Delivery Vehicles (SDVs), bringing an improved electronic architecture and software on top of the requirements list for NSWC. SOF sources associated with USSOCOM explained to IHS Jane's how the first SWCS could be delivered to the Command in 2017. This would be followed by extensive operational evaluation with NSWC elements ahead of initial and full entry into service, sources added. According to USSOCOM officials, a total of two SWCS platforms will be procured by the DoD in 2017, along with associated batteries, trailers, mission system suites, and spares. Capable of transporting six operators at low-level depths close to the surface, the SWCS can carry a total payload of 10,000 lb (4,535 kg). SWCS contractor Teledyne Brown Engineering was unable to provide further details to IHS Jane's because of operational security reasons. However, industry sources have suggested that the SWCS measures approximately 22 ft (6.7 m) in length and 5 ft in width. The SWCS has yet to be officially designated, but the nomenclature Mk 9 is expected to be granted to the platform type. Teledyne Brown Engineering beat the incumbent manufacturer of the Mk 8 Mod 1, Columbus Group, to the programme in 2011 when it was awarded a USD383 million contract by the DoD. Ahead of SWCS's entry into service, General Dynamics Information Technology (GDIT) continues to assist the NSWC with ongoing support for legacy Mk 8 Mod 1 SDV systems. Work will include projects relating to SDVs as well as other NSWC-specific efforts associated with the Maritime Mission Systems Division. The latest support contract, worth USD4 million, was signed in December 2015. Elsewhere, the DCS solution has been designed as a dry diver lock-in/lock-out solution, capable of inserting and extracting personnel and all associated combat equipment, including in hostile waters, according to USSOCOM sources. The development of this option follows the cancellation of the Advanced SEAL Delivery System (ASDS) in 2006. Designed to carry six operators, the DCS has a larger payload capacity than the SWCS, with the ability to carry up to 40,000 lb at depths as low as 58 m. Sources also informed IHS Jane's that the DCS could have a maximum operating range of 60 n miles. In July 2016, it was announced that Lockheed Martin and Submergence Group would jointly design, develop, and manufacture the DCS for USSOCOM, with industry figures reiterating the vessel's ability to provide improved endurance and operating depths. According to Lockheed Martin, a USD166 million contract will involve the delivery of three DCS vehicles over a five-year period, with the gross weight for each vessel being more than 30 tons. A company spokesperson explained to IHS Jane's how NSWC concepts of operations would see the DCS launched at a stand-off position from surface vessels, before inserting SEAL operators over "long distances underwater" onto objectives and target areas.... Details regarding the DCS design remain scarce. However, sources indicated to IHS Jane's that the solution will feature technology drawn from Lockheed Martin's S302 Manned Combat Submersible (MCS) craft, which is capable of carrying six personnel as well as a pilot and navigator. According to Lockheed Martin company literature, "The dry one-atmosphere environment of these vehicles provides an alternative to traditional wet submersibles being used by the US and international Special Forces communities today, and will deliver operators to their destination in better physical condition to complete a mission." Vessels are fitted with standard inertial navigation systems and Doppler velocity logs, as well as a communications suite featuring an underwater telephone and a UHF radio; obstacle avoidance sonar; and fathometer. Additional sensor payloads, dependent upon mission requirements, can also be integrated, Lockeed Martin explained. The S302 MCS measures 31 ft in length, and can operate 100 m below the surface for more than 24 hours. The craft can travel up to 60 n miles at a 5 kt cruising speed, although it has a top speed of more than 7.5 kt for rapid reaction. USSOCOM continues to integrate Dry Deck Shelter (DDS) technology on board a variety of Ohio-class nuclear-powered ballistic missile submarines (SSBNs) and Virginia-class nuclear-powered attack submarines (SSNs) for special operations support.... Although a total of six DDS systems are currently in service with the USN and USSOCOM, by the end of 2016 nine submarines will possess DDS capabilities, enabling them to launch and recover SDVs, sources explained. Featuring automated launch-and-recovery technology, DDS enables combat divers to enter and leave the dry dock individually, as was explained during a press briefing by NSWC officials at the Special Operations Forces Industry Conference (SOFIC) in Tampa, Florida, in May 2016. In 2017, the USN aims to concentrate on a series of modifications to the DDS in order to allow for the integration of DCS and SWCS, including the relocation of equipment stowage in the DDS and upgrades in lighting, cameras, and mechanical noise reduction. Industry sources have noted that DDS solutions are being extended by 50 inches to enable the integration of DCS and SWSC variants, thereby supporting a 'mothership' concept of operations (CONOPS) for maritime special forces. This would enable SOF teams to insert at greater distances from submarines and surface vessels, before entering the water at a suitable stand-off range from target areas and inserting via onboard DCS or SWCS craft. A September 15, 2016, press report states the following: SEALs will soon have new underwater vehicles delivering them to targets that officials say will make a huge difference during missions. SEALs now use a delivery vehicle that one SEAL described as a kind of underwater sled. SEALs ride in the sled in full scuba gear completely exposed to the water, in often freezing cold and in "pure blackout" conditions and total silence for eight to 10 hours. Ask a SEAL what that's like, and they'll say it's like being locked in a cold, dark, wet closet for hours.... The new vehicles, which are called dry combat submersibles, will be akin to mini-submarines, and allow SEALs to stay warmer and drier for longer, and more physically ready, as they close in on their target. That's a huge advantage for missions that one retired SEAL who is now a congressman described as "can't fail."... The vehicles will also allow the SEALs to communicate before a mission, compared with "only seeing your buddy's eyes" and a glow stick for 10 hours, the SEAL joked. The first submersible is due to arrive in July 2018, and it will be operational as early as the fall. Final testing is to be completed in 2019. As SEALs await the delivery of the first vehicle, they have two "demonstrator" vehicles to experiment with.... That demonstrator is about 39 feet long, is about 7 to 8 feet in diameter, and weighs about 30 tons. So far, it has gone up to five knots for 60 nautical miles.... It is also surface-launched, which means it is launched into the water by a crane or from a surface ships with a crane, versus from a submarine. The vehicle is able to hold up to eight SEALs and their gear, in addition to a pilot and navigator. The submersible consists of three compartments: a swimmers' compartment where the SEALs will ride for the duration of the time, a "line in and line out" compartment where they exit and enter the submersible, and a compartment for the navigator and pilot. The swimmers' compartment is only about 10 to 12 feet long, which could be a tight squeeze for eight SEALs. Still, officials say it'll be a huge improvement over the current systems. "The DCS Program is on track to provide a capability that our warfighters have not had in a long time," said Navy Capt. Kate Dolloff, who is in charge of all maritime programs for Special Operations Command Acquisition, Technology and Logistics. "We still have a long way to go, but a stepped approach using technology demonstrators to mitigate risk and a close relationship with the user community has been extremely successful to date and led to contract award," she said. The U.S. Special Operations Command (SOCOM) finalized a contract in July with Lockheed Martin for the first submersible to be delivered in July 2018, with the option of two more by 2020—an unusually fast schedule for acquiring new technology. The total cost for the three submersibles is $236 million. The timeline and cost is years shorter and hundreds of millions cheaper than a previous submersible program, which was killed in 2006 after cost overruns and other issues. That program would have cost $1 billion for one submersible and have taken two to three times longer to build, officials said. Officials say the costs are much lower because they're taking off-the-shelf commercial technology developed by Lockheed Martin and modifying it to fit their needs, whereas the previous program started from scratch. Officials say the new vehicles will have 80 to 90 percent of the same capability, but will be delivered much faster at a much lower cost. The new program also comes with a "fixed price incentive fee" structure, where the cost of the program is fixed and any overruns are shared with the manufacturer. A July 22, 2016, press report states that ... a new 'missile sub' promises to deliver to battle underwater far more easily—and keep them dry when they travel. Called the Swimmer Delivery Vehicle, it will be built by Lockheed Martin and Submergence Group after winning a US$166 million contract to supply the US Special Operations Command (USSOCOM) with a new class of combat submersibles. According to Lockheed, the three 30-ton (27-tonne) DCS [Dry Combat Submersible] vehicles that it is contracted to build will allow warfighters to travel deeper and farther underwater than today. The craft are dry submersibles that support two operators (pilot and navigator) plus up to six swimmers with the ability to lock them out and in. 'The dry one-atmosphere environment of these vehicles provides an alternative to traditional wet submersibles being used by the U.S. and international Special Forces communities today, and will deliver operators to their destination in better physical condition to complete a mission,' Lockheed Martin says.... It will carry two pilots and six passengers, have a depth rating of 328 ft (100 m), a lock-out depth of 98 ft (30 m), and a top speed of 5 knots (6 mph, 9 km/h). Lockheed says the new DCS will boast improved hydrodynamics and propulsion compared to the previous vehicles. An August 20, 2014, blog post states the following: The U.S. Navy is hard at work developing new underwater transports for its elite commandos. The SEALs expect the new craft—and improvements to large submarine "motherships" that will carry them—to be ready by the end of the decade. SEALs have ridden in small submersibles to sneak into hostile territory for decades. For instance, the special operators reportedly used the vehicles to slip into Somalia and spy on terrorists in 2003. Now the sailing branch is looking to buy two new kinds of mini-subs. While details are understandably scarce, the main difference between the two concepts appears to be the maximum range. The Shallow Water Combat Submersible will haul six or more naval commandos across relatively short distances near the surface. The SWCS, which weighs approximately 10,000 pounds, will replace older Mark 8 Seal Delivery Vehicles, or SDVs. The other sub, called the Dry Combat Submersible, will carry six individuals much farther and at greater depths. The most recent DCS prototype weighs almost 40,000 pounds and can travel up to 60 nautical miles while 190 feet below the waves. Commandos could get further into enemy territory or start out a safer distance away with this new vehicle. SEALs could also use this added range to escape any potential pursuers. Both new miniature craft will also be fully enclosed. The current SDVs are open to water and the passengers must wear full scuba gear—seen in the picture above. In addition, the DCS appears to pick up where a previous craft, called the Advanced SEAL Delivery System, left off. The Pentagon canceled that project in 2006 because of significant cost overruns. But the Navy continued experimenting with the sole ASDS prototype for two more years. The whole effort finally came to a halt when the mini-sub was destroyed in an accidental fire. Special Operations Command hopes to have the SWCS ready to go by 2017. SOCOM's plan is to get the DCS in service by the end of the following year. Underwater motherships SOCOM and the sailing branch also want bigger submarines to carry these new mini-subs closer to their targets. For decades now, attack and missile submarines have worked as motherships for the SEALs. Eight Ohio- and Virginia-class subs currently are set up to carry the special Dry-Deck Shelter used to launch SDVs, according to a presentation at the Special Operations Forces Industry Conference in May. The DDS units protect the specialized mini-subs inside an enclosed space. Individual divers also can come and go from the DDS airlocks. The first-in-class USS Ohio—and her sisters Michigan, Florida and Georgia—carried ballistic missiles with nuclear warheads during the Cold War. The Navy had expected to retire the decades-old ships, but instead spent billions of dollars modifying them for new roles. Today they carry Tomahawk cruise missiles and SEALs. The Virginias—Hawaii, Mississippi, New Hampshire, North Carolina and the future North Dakota—are newer. The Navy designed these attack submarines from the keel up to perform a variety of missions. SOCOM projects that nine submersible motherships—including North Carolina as a backup—will be available by the end of the year. The Navy has a pool of six shelters to share between the subs. SOCOM expects the DDS to still be in service in 2050. But prototype DCS mini-subs cannot fit inside the current shelter design. As a result, a modernization program will stretch the DDS units by 50 inches, according to SOCOM's briefing. The project will also try to make it easier to launch undersea vehicles and get them back into the confines of the metal enclosure. Right now, divers must manually open and close the outside hatch to get the SDVs out. Crews then have to drive the craft back into the shelter without any extra help at the end of a mission—underwater and likely in near-total darkness. The sailing branch wants to automate this process. With any luck, the SEALs will have their new undersea chariots and the motherships to carry them ready before 2020.

In the years following the terrorist attacks of September 11, 2001, the Navy has carried out a variety of irregular warfare (IW) and counterterrorism (CT) activities. Among the most readily visible of these were operations carried out by Navy sailors serving ashore in the Middle East and Afghanistan, as well as the May 1-2, 2011, U.S. military operation in Abbottabad, Pakistan, that killed Osama bin Laden. During these years, the Navy took certain actions intended to improve its IW capabilities. For example, the Navy established the Navy Expeditionary Combat Command (NECC) informally in October 2005 and formally in January 2006. NECC consolidated and facilitated the expansion of a number of Navy organizations that have a role in IW operations. The Navy also established the Navy Irregular Warfare Office in July 2008, published a vision statement for irregular warfare in January 2010, and established "a community of interest" (COI) to develop and advance ideas, collaboration, and advocacy related to IW in December 2010. The Navy during these years also reestablished its riverine force and initiated The Global Maritime Partnership, which was a U.S. Navy initiative to achieve an enhanced degree of cooperation between the U.S. Navy and foreign navies, coast guards, and maritime police forces, for the purpose of ensuring global maritime security against common threats. In addition, the Navy operated the Southern Partnership Station (SPS) and the Africa Partnership Station (APS), which were Navy ships, such as amphibious ships or high-speed sealift ships, that deployed to the Caribbean and to waters off Africa, respectively, to support U.S. Navy engagement with countries in those regions, particularly for purposes of building security partnerships with those countries and for increasing the capabilities of those countries for performing maritime-security operations. The Navy's current IW and CT activities pose a number of potential oversight issues for Congress, including how much emphasis to place on IW and CT activities in Navy budgets, particularly in a context of constraints on Navy budgets and Navy desires to devote resources to developing "high end" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia.

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Introduction The Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , hereinafter the Stafford Act) authorizes the President to issue a major disaster declaration in response to natural or man-made incidents that overwhelm state, local, or tribal capacities. The declaration makes a wide range of federal activities available to support state and local efforts to respond and recover from the incident. Major disaster declarations also authorize the Federal Emergency Management Agency (FEMA) to provide grant assistance to state, local, and tribal governments, residences, and certain private nonprofit (PNP) facilities that provide critical services. Businesses that suffer uninsured loss as a result of a major disaster declaration are not eligible for FEMA grant assistance, and grant assistance from other federal sources is limited. On some occasions, Congress has provided assistance to businesses through the Community Development Block Grant (CDBG) program. The CDBG program provides loans and grants to eligible businesses to help them recover from disasters as well as grants intended to attract new businesses to the disaster-stricken area. In a few cases, CDBG has also been used to compensate businesses and workers for lost wages or revenues. CDBG assistance, however, is not available for all major disasters. Rather, it is used by Congress on a case-by-case basis in response to large-scale disasters. The United States Department of Agriculture and the Department of Commerce are also authorized to provide assistance to certain types of businesses such as agricultural producers or fisheries. While these programs are important sources of assistance following a disaster, they are generally limited in scope (available for only certain types of businesses) or provide limited grant amounts. Most businesses will need to apply for a Small Business Administration (SBA) disaster loan if they want assistance from the federal government for uninsured loss resulting from a disaster. SBA is authorized to provide grants to SBA resource partners, including Small Business Development Centers, Women's Business Centers, and SCORE (formerly the Service Corps of Retired Executives), to provide training and other technical assistance to small businesses affected by a disaster, but is not authorized to provide direct grant assistance to businesses. Overview of SBA Business Disaster Loans As indicated above, federal assistance to businesses that suffer uninsured loss as a result of a disaster is mainly limited to SBA disaster loans. Disaster loans address certain types of loss and fall into two categories: (1) Business Physical Disaster Loans, and (2) Economic Injury Disaster Loans (EIDL). If Congress were to replace SBA business disaster loans with a grant program, it might consider providing grants for similar types of loss. Alternatively, Congress might implement a small business disaster grant program and continue to provide loan assistance through the SBA. If that is the case, it might consider how the small business disaster grant program would complement the existing loan program. The following sections describe SBA business disaster loans in more detail. Business Physical Disaster Loans Business Physical Disaster Loans are available to almost any business located in a declared disaster area. Business Physical Disaster Loans provide businesses up to $2 million to repair or replace damaged physical property including machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. Damaged vehicles normally used for recreational purposes may be repaired or replaced with SBA loan proceeds if the borrower can submit evidence that the vehicles were used for business purposes. Businesses may also apply up to 20% of the verified loss amount for mitigation measures (e.g., grading or contouring of land, relocating or elevating utilities or mechanical equipment, building retaining walls, safe rooms or similar structures designed to protect occupants from natural disasters, or installing sewer backflow valves) in an effort to prevent loss should a similar disaster occur in the future. Interest rates for Business Physical Disaster Loans cannot exceed 8% per annum or 4% per annum if the business cannot obtain credit elsewhere. Borrowers generally pay equal monthly installments of principal and interest starting five months from the date of the loan. Business Physical Disaster Loans can have maturities up to 30 years. Economic Injury Disaster Loans (EIDLs) EIDLs are available to businesses located in a declared disaster area, that have suffered substantial economic injury, are unable to obtain credit elsewhere, and are defined as small by SBA size regulations. Size standards vary according to many factors including industry type, average firm size, and start-up costs and entry barriers. Small agricultural cooperatives and most private and nonprofit organizations that have suffered substantial economic injury as the result of a declared disaster are also eligible for EIDLs. Businesses can secure both an EIDL and a Business Physical Disaster loan to rebuild, repair, and recover from economic loss. The combined loan amount cannot exceed $2 million. Interest rate ceilings are statutorily set at 4% per annum or less and loans can have maturities up to 30 years. Arguments for and Against Small Business Disaster Grants The following sections outline some of the arguments for and against implementing a business disaster grant program including the rationale for keeping the current federal business disaster policy the same. Arguments for a Small Business Disaster Grant Program Throughout the years, Congress has expressed interest and concern for businesses recovering from disasters. More recently, Congress has contemplated whether grants should be made available to small businesses after major disasters. Advocates of a small business disaster grant program might argue that providing grants would address three areas of congressional concern: (1) equity, (2) small business vulnerability to disasters, and (3) protecting the economy. Equity Concerns Over the years some have questioned why residences, nonprofit groups, and state and local governments are eligible for disaster grants but not small businesses. Some view the policy as being unfair to businesses. Providing disaster grants to businesses, they argue, would remove this disparity and make federal disaster policy more equitable and uniform across all sectors. Opponents of providing small business disaster grants might object to the equity argument by pointing out that businesses benefit indirectly from grants provided to state, local, and tribal governments. For instance, repairing and replacing damaged roads and bridges, debris removal, and utility restoration are commonly needed for successful business operations. It is notable too that FEMA reimburses state and local governments for debris removal—even on commercial property. Vulnerability Concerns Small business disaster grant advocates could also argue that studies suggest that small businesses are particularly vulnerable to disasters and many fail to fully recover. While reports vary on the number of small businesses that fail after a disaster, even the low estimates could be considered significant. According to FEMA, "roughly 40-60% of small businesses fail to reopen following a disaster." The Institute for Business and Home Safety found that 25% of businesses that close following a disaster never reopen. Businesses that do recover often take a long time to resume operations. A study on businesses in New Orleans recovering from Hurricane Katrina found that 12% of businesses remained closed 26 months after the storm. The same study indicated that smaller businesses had lower reopening probabilities than larger ones. And while SBA provides low-interest disaster loans with loan maturities up to 30 years for uninsured loss, some see a 30-year loan as an additional burden to full recovery. Finally, proponents argue that the need to recover and reopen quickly is not only important to small businesses—it is also important to local governments because they rely on these businesses for tax revenue. Congress could use small business disaster grants to help vulnerable businesses recover and rebuild following a disaster. Protecting the Economy Advocates could also argue that grant assistance could help counteract negative economic outcomes associated with disasters by helping businesses keep people employed and recover from economic loss. When major disasters take place, they not only cause immense damage to public infrastructure, they also severely damage the stock of private capital and disrupt economic activity. The typical economic pattern following large-scale disasters consists of large immediate losses of output, income, and employment. Small businesses play a significant role in the national economy. For example, in 2013, small businesses employed 56.8 million people (48% of the private workforce) in the United States. These small firms accounted for 33.6% of the nation's total known export value and produced roughly 46% of the nation's nonfarm gross domestic product (GDP). Opponents of a small business disaster grant program could point out, however, that studies suggest that market mechanisms may restore economic order without grant assistance. According to these studies, the long-term economic benefits of rebuilding from a major disaster can offset their initial economic disruption. For example, research on Hurricane Sandy recovery found that the storm initially resulted in net negative effects on state GDP, employment, income, and tax revenues. According to the study, spending on large-scale cleanup and repair efforts not only offset, but exceeded the initial economic negative effects. Arguments Against Small Business Disaster Grants Opponents would argue there are three main reasons why disaster grants should not be provided to small businesses: (1) it might encourage businesses to become underinsured for disasters, (2) it would be costly, and (3) the Stafford Act is an inappropriate means to provide disaster grants to businesses. Underinsured Businesses Opponents could argue that small businesses are responsible for obtaining adequate insurance coverage to recover from a disaster. To them, providing grants to small businesses could create an incentive for them to be underinsured (or not obtain insurance) to cut costs. Advocates for small business disaster grants might counter argue that other sectors are also responsible for insurance coverage yet are still eligible for grant assistance. Fiscal Implications Opponents could also argue that providing disaster grants to small businesses could be very expensive. SBA disaster loans are designed to be repaid, and though the interest rates are relatively low and some of these loans are not repaid due to defaults, the cost to the federal government for providing loans is much less than the cost of providing grants. Grants are not repaid to the federal government. The Stafford Act As discussed later in this report, opponents might consider the Stafford Act to be an inappropriate vehicle for providing disaster assistance to businesses. To support this argument, they would point out that Section 101(b) of the Stafford Act states that it "is the intent of the Congress, by this Act, to provide an orderly and continuing means of assistance by the federal government to state and local governments in carrying out their responsibilities to alleviate the suffering and damage which result from such disasters...." They may therefore conclude that if the federal government were to provide disaster grants to businesses, those grants should be provided under the Small Business Act or some other authorization statute. Elements of the arguments for and against small business disaster grants outlined above will be explored in greater detail in " Policy Considerations and Options for Congress ." Historical Developments Some question why the federal government provides grant assistance to individuals and households, state, local, and tribal governments, and nonprofit organizations, among others, but not to businesses. A review of congressional hearings, bill reports, agency reports, academic journals, and other authoritative sources did not identify specific language explaining why Congress distinguishes between the types of disaster assistance that should be provided to businesses while not applying the same restrictions to other sectors. It appears that current federal policy on business disaster assistance first emerged in the 1930s. At that time, the United States had no overarching federal disaster policy or permanent program in place to respond to major disasters. Response, repair, and recovery activities were generally organized and carried out under local auspices and financial assistance was typically provided by states, municipalities, churches, and other nonprofit organizations such as the American Red Cross and the Salvation Army. When Congress did provide financial assistance, it was generally on an ad hoc basis. Further, Congress wanted the measures limited to relieving "human distress and for such things as food, clothing, shelter, medicine and hospitalization" rather the reconstruction of buildings, businesses, or anything else. The Great Depression also heightened concerns about federal costs. Thus, Congress sought to keep federal costs to a minimum by limiting assistance to individuals and households, and, to the extent possible, returning the federal expenditures back to the Treasury. For example, in 1933, Congress debated whether to provide funding to the American Red Cross (the main source of disaster assistance at that time) in response to an earthquake in Long Beach California. The Red Cross sought the funding because it could not meet assistance needs through its traditional fundraising efforts. Businesses, which were already struggling because of the Great Depression, suffered a great deal of damage as a result of the incident. While sympathetic to struggling businesses, Congress was resolute that federal assistance for the earthquake be limited to immediate needs such as food and clothing. During a hearing before the Subcommittee of House Committee on Appropriations, the Vice Chairman in charge of Domestic Operations for the American Red Cross clarified that Red Cross did not have a role in business recovery: There will always arise the question as to business rehabilitation, businesses and factories that have been affected. Then, there is the question of the solvency or insolvency of public corporations, schools, school boards, and so forth, and the replacement of their losses. For that reason I made the statement at the outset delimiting the scope of Red Cross work to family problems as against those of business and government. Congress decided that it would make disaster loans available to nonprofit organizations with loan maturities not to exceed 10 years through the Reconstruction Finance Corporation (RFC). The restriction that limited loans to nonprofit organizations was removed in 1936, and RFC was "authorized to make disaster loans to corporations, partnerships, individuals, and municipalities or other political subdivisions of states and territories." The RFC continued to make disaster loans available until Congress dissolved the RFC and transferred its disaster loan authority to SBA in 1953 (P.L. 83-163). Around the same time, Congress passed the Federal Disaster Relief Act of 1950 (P.L. 81-875). The Disaster Relief Act established a permanent authority that committed the federal government to provide specific types of assistance to states and localities (but not businesses) following a major disaster declaration. It appears that the creation of a separate authority to provide assistance to states and localities may have placed them on a separate policy trajectory from businesses. Though interlaced to a degree, assistance to businesses remained in the form of loans, while the scope and nature of federal assistance to other entities expanded as the Disaster Relief Act was amended in the 1960s, 1970s, and replaced in the 1980s by the Stafford Act. Selected Examples of Business Disaster Grants Proposals The long-standing policy of providing disaster loans for businesses instead of grants has been reexamined by Congress in the last decade. In recent Congresses, legislation has been introduced that would establish business disaster grant programs. These legislative attempts include: (1) the Small Business Owner Disaster Relief Act of 2008 (H.R. 6641) in the 110 th Congress, and (2) the Hurricane Harvey Small Business Recovery Grants Act (H.R. 3930) in the 115 th Congress. The Small Business Owner Disaster Relief Act of 2008 H.R. 6641 would have amended Section 406(a) of the Stafford Act to allow businesses with 25 or fewer employees to receive grants to repair, restore, or replace damaged facilities. The assistance was limited to $28,000—the maximum amount of assistance a family could receive at that time under Section 408 of the Stafford Act (FEMA's Individuals and Households program). H.R. 6641 was referred to the Committee on Transportation and Infrastructure, Subcommittee on Economic Development, Public Buildings and Emergency Management on July 30, 2008. A hearing on H.R. 6641 provided an opportunity for some to voice their concern over the perceived disparity in disaster assistance. For example, in his testimony before the Subcommittee, Representative Steve King of Iowa stated that "we have structured ... federal government relief in grant form for every sector of our economy ... except for private enterprise, and the ones that are the most vulnerable are small businesses." Later in the hearing, Chairwoman Eleanor Holmes Norton of Washington, DC, asked: "how are we to convince for the first time since the Stafford Act was passed ... [that] Congress faced with an extraordinary deficit that this is the time to start giving what amounts to money to private enterprises?" To which Representative King stated: "we have justified providing relief for not-for-profits, even some churches who qualify ... and every political subdivision—city, county, state, and of course federal." In addition to voicing concerns about the equity of disaster assistance, the hearing also highlighted some of the challenges businesses face when recovering from a disaster, including a lack of capital, revenue gaps, and a weakened ability to generate revenue. It is possible that some of the programmatic concerns would have been addressed had the bill continued to advance in the legislative process, but the measure saw no further legislative action. Hurricane Harvey Small Business Recovery Grants Act H.R. 3930 in the 115 th Congress would have established a temporary "Office of Hurricane Harvey Small Business Grants" in the SBA to provide grants to businesses that suffered substantial economic injury as a result of Hurricane Harvey. H.R. 3930 would have authorized grants up to $100,000; the SBA Administrator, however, could increase that amount to $250,000 if deemed appropriate. Businesses could use the grants for a wide-range of recovery activities including uninsured property loss, damages or destruction of physical infrastructure, overhead costs, employee wages for unperformed work, temporary relocation, and debris removal. The grants could also be used for insurance deductibles, but not to repay government loans. H.R. 3930 was introduced in the House of Representatives, but saw no further legislative action. Policy Considerations and Options for Congress Implementing a small business disaster grant program may address congressional concerns about disaster relief equity, protecting the economy and vulnerable businesses. A business grant program, however, could have some unintended policy consequences. Some of the considerations Congress may contemplate for a potential small business disaster grant program include: (1) preventing the duplication of administrative functions and benefits; (2) the selection of the authorization statute; (3) whether (and what type of) declarations and designations will put the disaster grant program into effect; (4) what size businesses should be eligible for disaster grant assistance; and (5) the types of activities eligible for grant assistance. In addition, Congress could explore alternative options to a small business disaster grant program that could also address business disaster recovery concerns including (1) loan forgiveness; (2) reduced interest rates; and (3) measures that could help small (and large) businesses develop continuity and disaster recovery plans to help them prepare for and recover from disasters. Preventing Duplication of Administrative Functions and Benefits Preventing duplication of administrative functions and benefits would likely be of concern if Congress authorized a small business disaster grant program. Duplication of administrative functions occurs when an office or staff at two or more federal entities performs the same types of operations. This type of duplication might be addressed through program consolidation. In the context of disaster assistance, duplication of benefits occurs when compensation from multiple sources exceeds the need for a particular recovery purpose. Preventing Duplication of Administrative Functions To prevent duplication of administrative functions Congress could opt to authorize the implementation of a new small business disaster grant program by either SBA or FEMA, but not both. The selection and authorization debate could, to some extent, resemble policy discussions Congress had during FEMA's formation. In 1978, President Jimmy Carter signed Executive Order 12127 which merged many disaster-related responsibilities of separate federal agencies into FEMA. Congress determined that SBA would continue to provide disaster loans through the Disaster Loan Program rather than transfer that function to FEMA. At the 1978 hearing before a subcommittee of the Committee on Government Operations, Chairman Jack Brooks questioned the rationale for keeping the loan program outside of FEMA. According to James T. McIntyre, Director, Office of Management and Budget (OMB), the rationale was as follows: [O]ne of the fundamental principles underlying this proposal is that whenever possible emergency responsibilities should be an extension of the regular missions of federal agencies. I believe the Congress also subscribed to this principle in considering disaster legislation in the past. The Disaster Relief Act of 1974 provides for the direction and coordination, in disaster situations, of agencies which have programs which can be applied to meeting disaster needs. It does not provide that the coordinating agency should exercise direct operational control.... [I]f the programs ... were incorporated in the new agency we would be required to create duplicate sets of skills and resources.... [S]ince the Small Business Administration administers loan programs other than those just for disaster victims, both the SBA and the new agency [FEMA] would have to maintain separate staffs of loan officers and portfolio managers if the disaster loan function were transferred to the new Agency.... [O]ne of our basic purposes for reorganization ... would be thwarted if we were to have to maintain a duplicate staff function in two or more agencies. Similarly, Congress may consider whether issuing small business disaster grants either through FEMA or SBA would duplicate skills and resources in one or the other agency. Congress could examine existing administrative functions at each agency and determine which most closely aligns with a potential small business disaster grant program. Preventing Duplication of Benefits In addition to duplication of administrative functions, duplication of benefits is more likely to occur as more recovery resources become available. The range of resources can include insurance payouts, state and local government assistance, charitable donations from private institutions and individuals, as well as certain forms of federal assistance. While SBA disaster loans must be repaid, they are still considered a benefit. Duplication of benefits sometimes happens at the individual and household level wherein a range of resources become available to assist in the response, recovery, and rebuilding process. It could be inferred that providing businesses with disaster loans and grants could lead to the same outcome. Instances of duplication could increase if businesses become eligible for loans and grants. Section 312 of the Stafford Act requires that disaster assistance is distinct and not duplicative. Under Section 312 The President, in consultation with the head of each Federal agency administering any program providing financial assistance to persons, business concerns, or other entities suffering losses as a result of a major disaster or emergency, shall assure that no such person, business concern, or other entity will receive such assistance with respect to any part of such loss as to which he has received financial assistance under any other program or from insurance or any other source. FEMA and SBA use a computer matching agreement (CMA) in the application process to share real-time disaster assistance to prevent duplication of benefits. Despite the use of such mechanisms, duplication can still occur. Under 44 C.F.R. §206.191, a federal agency providing disaster assistance is responsible for identifying and rectifying instances of duplicative assistance. If identified, the recipient is required to repay the duplicated assistance. In some cases the federal government does not identify instances of duplication, and the improper payments are never recovered. In others cases, it may take a prolonged period of time to identify the duplication and the repayment notification may come as a surprise to disaster victims who did not realize they have to repay their assistance if that assistance is found to be duplicative. The payment may be an additional financial and emotional burden if the grantee has spent all of their assistance proceeds on recovery needs. If Congress authorizes a small business disaster grant program, it may consider conducting investigations and holding hearings to help determine which authorization statute would be best at reducing duplication of administrative functions and benefits. Authorization Statute Congress would need to identify an authorizing statute should it create a disaster grant program for businesses. Congress could decide to authorize a small business disaster grant program under the Stafford Act (as was proposed by H.R. 6641 ), the Small Business Act, or other statute. Authorization Under the Stafford Act FEMA would most likely be solely responsible for administering a small business disaster grant program if it were authorized under the Stafford Act. Having FEMA administer the program may have a number benefits. First, FEMA already has grant processing operations in place. It might be relatively easier to expand the operations to include small businesses disaster grants rather than establishing new grant-making operations within SBA. Second, having FEMA administer the small business disaster grant program may help limit duplication of administrative functions between FEMA and SBA. Third, FEMA has an existing account called the Disaster Relief Fund (DRF) that receives annual and supplemental appropriations to fund its disaster assistance programs. DRF appropriations could be increased to pay for small business disaster grants. In contrast, Congress would likely need to make statutory changes to SBA's existing disaster loan account, or authorize a new account, if a small business disaster grant program was administered by SBA. Authorization Under the Small Business Act SBA would probably administer a small business disaster grant program if it were authorized under the Small Business Act. As mentioned previously, SBA currently has authority under the Small Business Act to provide grants to SBA resource partners to provide training and other technical assistance to small businesses affected by a disaster, but it does not have specific authority to provide disaster grants to businesses or individuals. Congress could decide to have SBA administer the program because it already has a framework in place to evaluate business disaster needs and disaster loan eligibility. Congress may need to make statutory changes to SBA's disaster loan account or authorize a new account to receive appropriations for disaster grants. Another legislative approach Congress could consider is allowing SBA to draw funds from FEMA's DRF to pay for small business disaster grants. Some may question this funding approach because it would allow SBA to draw funds from another agency's account. The funding arrangement could also be problematic if DRF became low on funds and there are competing priorities for scarce resources. Declarations and Designations Under current laws, FEMA grants and SBA disaster loans are triggered by a "declaration" under the Stafford Act, an SBA declaration, or both. The type (or category) of declaration determines what types of federal assistance are made available. Declarations are a necessary, but not sufficient condition for federal disaster assistance to businesses. The types of assistance made available are further influenced by the "designations" contained within the declaration. Declarations and designations may have a similar influence on a small business disaster grant program. The following describes the nexus between federal disaster assistance and declarations in more detail. Stafford Act Declarations If the current declaration framework were applied to a small business disaster grant program, relatively fewer businesses may be eligible for grant assistance if authorized under the Stafford Act compared to the Small Business Act. This is because the thresholds and criteria used to make Stafford Act declaration determinations are relatively higher than the ones used to provide disaster assistance under the Small Business Act. The Stafford Act authorizes the President to issue major disaster declarations that provide states, tribes, and localities with a range of federal assistance in response to natural and human-caused incidents. Each presidential major disaster declaration includes a designation. The designation determines what FEMA grants are available for the incident. It also designates which counties are eligible for the grants. The potential types of FEMA grant assistance include (1) Public Assistance (PA) for infrastructure repair; (2) Hazard Mitigation Grant Program (HMGP) grants to lessen the effects of future disaster incidents; and (3) Individual Assistance (IA) for aid to individuals and households. Under FEMA regulations: The Assistant Administrator for the Disaster Assistance Directorate has been delegated authority to determine and designate the types of assistance to be made available. The initial designations will usually be announced in the declaration. Determinations by the Assistant Administrator for the Disaster Assistance Directorate of the types and extent of FEMA disaster assistance to be provided are based upon findings whether the damage involved and its effects are of such severity and magnitude as to be beyond the response capabilities of the state, the affected local governments, and other potential recipients of supplementary federal assistance. The Assistant Administrator for the Disaster Assistance Directorate may authorize all, or only particular types of, supplementary federal assistance requested by the governor. The "findings" referenced above are known as "factors" that are used by FEMA to evaluate a governor's or chief executive's request for a major disaster declaration and make IA and PA recommendations to the President (a full description of the factors can be located in the Appendix ). While all major disaster declarations have HMGP designations, not all declarations designate IA and PA. In rare cases, only IA and HMGP are designated. More commonly, PA and HMGP are designated (these are sometimes referred to as "PA-only" major disaster declarations). This is because major disasters often cause greater damage to public infrastructure relative to damaged households. Stafford Act declarations also trigger the SBA Disaster Loan Program and the types of loans are determined by the designation. If IA is designated, then all SBA disaster loans types are made available to eligible businesses. If PA is designated, then only private nonprofit organizations are eligible for disaster loans (see Figure 1 ). In other words, most private businesses would not be able to obtain a disaster loan under a PA-only major disaster declaration. If the existing declaration framework is applied to a small business disaster grant program, then small businesses would generally be eligible for disaster grants for Stafford Act major disaster declarations that included an IA designation. By comparison, disaster loans would likely only be made available to private nonprofit organizations under a PA-only declaration. Some might be concerned that too few businesses would be eligible for disaster grants if the existing declaration and designation framework were applied to a small business disaster grant program. They may also question the relevance of the IA designation because the factors used to determine IA do not evaluate business damages or economic loss. For example, it is conceivable that an incident could cause significant damage to public infrastructure and businesses but not to households. Consequently, businesses could be denied assistance because it was determined that damages to residences did not warrant assistance to individuals and households. There are, however, at least four reasons why some might argue that the existing declaration and designation framework should be applied to a small business disaster grant program: 1. It could help ensure that small business disaster grants were only provided for large-scale incidents. 2. It could help limit grant costs because not all declarations would trigger small business disaster grants. 3. Applying the declaration and designation framework uniformly to the grant and loan programs would align the two programs and reduce the potential for administrative confusion or duplication. 4. Conversely, using different designations could create a perceived disparity between the loan and grant programs because some business owners may question why grants are available for some major disasters (because they are designated IA and PA), but not others (because they have PA-only designations). If Congress authorized a small business disaster grant program under the Stafford Act, it could consider using the existing declaration and IA designation framework used to trigger eligibility for the SBA Disaster Loan Program. This would align the implementation of the two programs and potentially smooth administrative processes and potentially limit costs. An alternative policy option Congress might consider is a "business designation" rather than existing designations to determine whether the incident warrants a grant, a loan, or both. The business designation could use a separate set of factors or criteria similar to the ones FEMA currently uses to evaluate declaration requests and make IA and PA recommendations. This could align the designation with damages that are specific to small businesses. SBA Declarations Congress could consider using SBA declarations to provide disaster grants to small businesses rather than Stafford Act declarations. The following describes how SBA declarations are used to make disaster loans available and examines the potential policy implications of using the same structure to provide disaster grants to small businesses. The SBA Administrator has authority under the Small Business Act to make two types of disaster declarations: (1) a physical disaster declaration (commonly referred to as an "SBA declaration"), and (2) an Economic Injury Disaster Loan (EIDL) declaration (see Figure 1 ). Each declaration could make certain forms of assistance available if SBA disaster declarations were to be applied to a small business disaster grant program: 1. The SBA Administrator may issue a physical disaster declaration in response to a gubernatorial request for assistance. This type of declaration is often made for relatively smaller incidents. The criterion used to determine whether to issue this type of declaration is generally the presence of at least 25 homes or businesses (or some combination of the two) that have sustained uninsured losses of 40% or more in any county or other smaller political subdivision of a state or U.S. possession. When the SBA Administrator issues a physical disaster declaration, both SBA disaster loan types become available to eligible homeowners, renters, businesses of all sizes, and nonprofit organizations within the disaster area or contiguous counties and other political subdivisions (see Figure 1 ). If SBA physical disaster declarations were to be applied to a small business disaster grant program, the grants could be made available to small businesses for incidents that do not meet the damage threshold of a major disaster declaration under the Stafford Act. 2. The SBA Administrator may make an EIDL declaration when SBA receives a certification from a state governor that at least five small businesses have suffered substantial economic injury as a result of a disaster. Alternatively, the SBA Administrator may issue an EIDL declaration based on the determination of a natural disaster by the Secretary of Agriculture. The SBA Administrator may also issue an EIDL declaration based on the determination of the Secretary of Commerce that a fishery resource disaster or commercial fishery failure has occurred. Only EIDLs are available under this type of declaration (see Figure 1 ). EIDL assistance helps businesses meet financial obligations and operating expenses that could have been met had the disaster not occurred. Loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. The assistance is designed to help businesses that did not suffer direct damages, but rather businesses that have suffered economic loss as a result of an incident. For example, disasters such as hurricanes can disrupt tourism. In such cases, there may have been some businesses that did not suffer direct damages, but still lost tourism revenue as a result of the hurricane. If EIDL declarations were to be applied to a small business disaster grant program, the grants could be used to provide similar economic assistance to businesses suffering from economic loss as a result of a disaster. A comparison of Stafford Act declarations (including designations) and SBA declarations from 2008 to 2017 provides context to the SBA declarations outlined above. As shown in Figure 2 and Table 1 , during this period, 2,869 declarations were issued under the Stafford Act and the Small Business Act. A total of 791 declarations were issued under the Stafford Act. Of these, 194 (6.8% of total declarations) included IA and PA assistance, while 597 (20.8% of total declarations) were PA-only. In contrast, during the same period, a total of 2,078 (72.4%) declarations were issued under the Small Business Act. Of these, 512 (17.8% of total declarations) were SBA physical disaster declarations, 97 (3.4%) were EIDL declarations, and 1,469 (51.2%) were EIDL declarations based on the determination of a natural disaster by the Secretary of Agriculture. There were no declarations issued during the 10-year period based on the determination of the Secretary of Commerce that a fishery resource disaster or commercial fishery failure had occurred. The following applies various types of declarations and designations to a potential small business disaster grant program to the above data to draw some inferences on how many businesses might get grants in certain situations. If the small business disaster grant program is only triggered by Stafford Act declarations that designate IA and PA, then roughly 6.8% of the declarations (194) issued in Figure 2 and Table 1 would have made disaster grants available to small businesses. That could be a concern for those who want to provide small business grants for incidents that are too small to qualify for assistance under the Stafford Act. As mentioned previously, SBA declarations often provide assistance to incidents that impact a locality or a region but do not cause enough state-wide damage to warrant a major disaster declaration under the Stafford Act. If the small business disaster grant program is triggered by the SBA Administrator issuing a physical disaster declaration, then roughly 17% of the declarations (512) issued in Figure 2 and Table 1 would have made disaster grants available to small businesses. This type of declaration could arguably make more incidents eligible for grant assistance because the 512 incidents in Figure 2 and Table 1 were presumably issued for incidents that did not meet the per capita threshold for a major disaster declaration under the Stafford Act. It should be noted, however, that the number of grants made available under an SBA Administrator physical disaster declaration would likely depend on whether the grants would only provide assistance for repairing and rebuilding damaged structure or if they would also provide assistance for economic loss. Policymakers could consider making the grants available through either an SBA Administrator physical declaration or an EIDL declaration so that the grants could be used for repairs and rebuilding or for economic loss. If so, then 2,078 declarations during the time period could have made the small business disaster grants available. It could be argued that the greatest number of businesses would benefit from small business disaster grants by applying the existing declaration framework under the combined authorities and making the grants available for either physical damages or economic loss. In other words, the same conditions under which SBA disaster loans are made available. Doing so would make small business disaster grants available in all of the declarations in Figure 2 and Table 1 with the exception of the PA-only Stafford Act declarations, under which only private nonprofit organizations are eligible (see Figure 1 ). While some may favor making small business disaster grants available for a wide-range of incidents others may want to limit their use. For example, those concerned about the cost implications of a small business disaster grant program may prefer Stafford Act declarations over SBA declarations. As mentioned previously, the thresholds used to determine SBA declarations are lower and generally based on (1) at least 25 homes or businesses (or some combination of the two) sustaining uninsured losses of 40% or more in any county or other smaller political subdivision of a state or U.S. possession; or (2) at least three businesses in the disaster area sustaining uninsured losses of 40% or more of the estimated fair replacement value of the damaged property (whichever is lower). The lower thresholds help provide disaster loans for incidents that are locally damaging, but do not cause enough widespread damage to warrant a major disaster declaration. In contrast, the threshold used by FEMA under the Stafford Act to a recommend major disaster declaration is significantly higher. In general, public infrastructure damages must meet or exceed $1.43 per capita (based on the most recent census figures) to be recommended for major disaster assistance. Applying the per capita threshold to a small business disaster grant program could help ensure that grants are only provided in cases of large-scale disasters. SBA declaration thresholds might be lower than FEMA thresholds because federal costs associated with loans (which are supposed to be repaid) are less than grants. If costs are a concern, policymakers might consider using criteria similar to FEMA's per capita threshold used for major disaster declarations to issue small business disaster grants. Finally, another factor to consider is whether the declaration is properly aligned with the agency administering the small business disaster grant program. For example, it could be problematic if small business disaster grants are triggered by SBA declarations but administered by FEMA. SBA would essentially be putting another agency's program into effect. Consequently, it could be argued that a small business disaster grant program should be administered by FEMA if Stafford Act declarations are used to trigger the program, or administered by SBA if SBA declarations are used to put the program into effect. Eligible Recovery Activities The small business disaster grant program proposed by H.R. 6641 would have provided grants to "private business damaged or destroyed by a major disaster for the repair, restoration, reconstruction, or replacement of the facility and for the associated expenses incurred by the person." Congress could consider similar legislative language if it authorized a small business disaster grant program, or it may wish to develop a detailed list of what damage types and economic loss amounts would be eligible for grant assistance. Similarly, Congress could also consider whether grants could be used for economic loss and/or mitigation measures. Grants for Economic Loss As mentioned previously, in some cases a disaster can disrupt services and create economic hardship for businesses without causing structural damages. SBA EIDL provides businesses with up to $2 million in loans to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. These loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. Loan amounts for EIDLs are based on actual economic injury and financial needs, regardless of whether the business suffered any property damage. Some may suggest that small business disaster grants should be limited to small businesses that need assistance to repair and rebuild their business. Others may think that grants should also be provided for economic loss. For example, as mentioned previously H.R. 3930 authorized grants for business interruption, overhead costs, and employee wages as well as for rebuilding and repairs. If Congress were to authorize a small business disaster grant program, it may also consider whether the grants should be available for economic loss or limit them to specific types of damage. Mitigation Businesses obtaining an SBA physical disaster loan may use up to 20% of the verified loss amount for mitigation measures (e.g., grading or contouring of land; relocating or elevating utilities or mechanical equipment; building retaining walls, safe rooms, or similar structures designed to protect occupants from natural disasters; or installing sewer backflow valves) in an effort to prevent loss should a similar disaster occur in the future. If Congress decided to allow small businesses that receive a disaster grant to use the funds for mitigation purposes, it could limit those expenditures to a percentage of the total grant amount, or it could allow the entire grant to be used for mitigation measures. In addition, if Congress decided to allow disaster grants to be used for mitigation, Congress could consider whether to provide the grant prior to a disaster or without a declaration. For example, Congress could model small business mitigation grants on the Pre-Disaster Mitigation pilot program. P.L. 106-24 amended Section 7(b)(1) of the Small Business Act to include a Pre-Disaster Mitigation pilot program administered by SBA during fiscal years 2000 through 2004. The program allowed SBA to make low-interest (4% or less) fixed-rate loans of no more than $50,000 per year to small businesses to implement mitigation measures (such as relocating utilities, grading, and building retaining or sea walls) designed to protect the small business from future disaster-related damage. Business Size Considerations Congress may consider business size as a criterion for receiving small business disaster grants as a means to target the assistance to businesses of specific sizes. One option could be using SBA's size standards. The SBA uses two measures to determine if a business qualifies as small for its loan guaranty and venture capital programs: industry specific size standards or a combination of the business's net worth and net income. For example, the SBA's Small Business Investment Company (SBIC) program allows businesses to qualify as small if they meet the SBA's size standard for the industry in which the applicant is primarily engaged, or a maximum tangible net worth of not more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5 million. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. For contracting purposes, firms are considered small if they meet the SBA's industry specific size standards. Overall, the SBA currently classifies about 97% of all employer firms as small. These firms represent about 30% of industry receipts. The SBA's industry size standards vary by industry, and are based on one of the following four measures: the firm's (1) average annual receipts in the previous three years, (2) number of employees, (3) asset size, or (4) for refineries, a combination of number of employees and barrel per day refining capacity. Historically, the SBA has used the number of employees (ranging from 50 or fewer to no more than 1,500 employees) to determine if manufacturing and mining companies are small and average annual receipts (ranging from no more than $5.5 million per year to no more than $38.5 million per year) for most other industries. Congress, however, may want to limit disaster grant assistance to small businesses that have fewer employees that are particularly vulnerable to disaster. For example, it could consider providing grants only to businesses of 10 or fewer employees to target "mom and pop shops." As mentioned previously, H.R. 6641 (the Small Business Owner Disaster Relief Act of 2008) would have allowed businesses with 25 or fewer employees to receive grants to repair, restore, or replace damage facilities. Based on data compiled by SBA on business disaster loan applications from FY2013 to FY2017, Figure 3 provides a rough estimate of how many businesses over a five-year period could potentially receive a small business disaster grant under several different size standards. Based on the FY2013 through FY2017 SBA data, if small business disaster grants were limited to businesses of 10 employees or fewer, roughly 10,000 businesses over a five-year period could be eligible for a small business disaster grant. Over that same time period, nearly 11,000 small businesses could be eligible if the cap were 25 employees or fewer employees. That number would not change substantially if the cap were 50, 75, or 100 or fewer employees (see Figure 3 ). Finally, SBA applications for disaster loans currently rely on self-reporting of their number of employees. Congress may consider whether this data should be verified by SBA, or if doing so might inappropriately delay the receipt of the grant. Grant Amounts H.R. 6641 would have capped small business disaster grants at the maximum amount of assistance a family could receive from FEMA's Individuals and Households program (currently $34,900). Error! Reference source not found. and Table 2 provide cost estimates based on businesses of 25 or fewer employees that applied for disaster loans from FY2013 to FY2017. Based on the data, if disaster grants were capped at $35,000, and all of the businesses that received a loan received a grant instead, the grants would have totaled roughly $384 million. If capped at $25,000, the grants would have totaled roughly $274 million. Finally, if capped at $10,000, the grants would have totaled roughly $110 million. If Congress authorizes a small business disaster grant program, it could consider capping the amount based on Section 408 of the Stafford Act, or some other amount. Congress may also decide to examine business recovery costs to ensure grant amounts are appropriate for business recovery needs. Business Disaster Grant Pilot Program One potential approach Congress could consider is creating a pilot program which could be used to evaluate the program's effectiveness and costs. This information could be used to help determine if the program should be made permanent. For example, Congress established a Pre-Disaster Mitigation pilot program to be administered by SBA during fiscal years 2000 through 2004 ( P.L. 106-24 ). The program authorized SBA to issue low-interest (4% or less) fixed-rate loans of no more than $50,000 per year to small businesses to implement mitigation measures (such as relocating utilities, grading, and building retaining or sea walls) designed to protect the small business from future disaster-related damage. Congress could consider implementing a similar pilot program that would provide disaster grants to small businesses over a specified period of time. To some, a pilot program would be a more cautious approach to implementing a small business disaster grant program. If Congress determined that the grant program was too costly or ineffective, it could decide not to reauthorize the program. Alternatives to a Disaster Grant Program Some may suggest that rather than providing small businesses with disaster grants, Congress could explore alternative methods for helping small businesses recover from a disaster. Some alternative methods include loan forgiveness, decreased disaster loan interest rates, and providing assistance to help businesses develop continuity and disaster response plans. Loan Forgiveness and Decreased Interest Rates Congress could consider authorizing loan forgiveness to businesses under certain circumstances. Loan forgiveness is rare, but has been used in the past to help businesses that were having difficulty repaying their loans. For example, loan forgiveness was granted after Hurricane Betsy, when President Lyndon B. Johnson signed the Southeast Hurricane Disaster Relief Act of 1965. Section 3 of the act authorized the SBA Administrator to grant disaster loan forgiveness or issue waivers for property lost or damaged in Florida, Louisiana, and Mississippi as a result of the hurricane. The act stated that to the extent such loss or damage is not compensated for by insurance or otherwise, (1) shall at the borrower's option on that part of any loan in excess of $500, (A) cancel up to $1,800 of the loan, or (B) waive interest due on the loan in a total amount of not more than $1,800 over a period not to exceed three years; and (2) may lend to a privately owned school, college, or university without regard to whether the required financial assistance is otherwise available from private sources, and may waive interest payments and defer principal payments on such a loan for the first three years of the term of the loan. Congress could also consider reducing interest rates for businesses under specific circumstances or for specific types of disasters. Interest rate ceilings for business physical disaster loans are statutorily set at 8% per annum or 4% per annum if the applicant is unable to obtain credit elsewhere. The interest rate ceiling for EIDL is 4% per annum. Interest floors have not been established in statute. Providing relief to businesses through the use of reduced interest rates or loan forgiveness as opposed to grants may have the following advantages: (1) they could provide Congress with a flexible method to provide assistance to struggling businesses that can be applied on a case-by-case basis; (2) they would likely be less expensive than grants; and (3) they may reduce the possibility of duplication of benefits between grants and loans. On the other hand, it could be argued that providing relief to businesses through reduced interest rates or loan forgiveness as opposed to grants may not provide timely assistance because providing relief on a case-by-case basis would require Congress to debate and pass legislation before the relief could be provided. There may also be concern this approach could be applied too arbitrarily. Grants for Continuity and Disaster Response Plans Research indicates that many businesses do not have contingency or disaster recovery plans. For example, a survey of Certified Public Accounting (CPA) firms located on Staten Island, NY, indicated that only 7% of the respondents had a formal continuity or disaster recovery plan in place prior to Hurricane Sandy and nearly 42% of those firms that had a formal continuity or disaster recovery plan admitted that they never tested their plan. Approximately 40% had an informal plan that had been discussed but not documented. More than half of the responding firms did not have a contingency or disaster recovery plan. Of those that did not have any type of a plan, 60% thought the plans were unnecessary and 20% said that establishing a plan was too time-consuming. Congress could investigate methods that would incentivize businesses to develop contingency and disaster recovery plans. This could be done through new programs or through existing ones such as FEMA's Ready Business Program which is designed to help businesses plan and prepare for disasters by providing businesses various online toolkits that can help them identify their risks and develop a plan to address those risks. Congress could also investigate the extent to which the Ready Business Program is collaborating with SBA's efforts to help businesses with emergency preparedness. Similarly, Congress could consider the pros and cons of providing grants to businesses to help them plan and prepare for disasters. For example, providing grants for this purpose could be more expensive than mitigation loans, but cost less than a small business disaster grant program designed to assist businesses following a disaster. Advocates for mitigation grants could further argue that providing grants for mitigation rewards businesses that take the initiative to plan ahead for potential disasters and could reduce, as least to some extent, future costs. Opponents, on the other hand, might believe that existing mitigation programs are sufficient. Concluding Observations Congress has contemplated how to help businesses rebuild and recover from disasters for nearly a century. Historically, the federal policy for providing disaster assistance to businesses has primarily been limited to low-interest loans. While disaster loans have been instrumental in helping business recover from incidents, over the years Congress has considered whether grant assistance might be needed in addition to, or instead of business disaster loans. Changing the federal government's disaster policy approach to businesses could be complex and require careful decisionmaking. Steps would need to be taken to avoid and remedy potential grant and loan duplication. Congress would also have to determine under what circumstances and situations the grant program would be put into effect. Eligibility requirements would need to be developed to determine under what situations and circumstances grants would be provided as well as what types of business should be eligible to receive grants. Similarly, Congress might consider whether grants could be used for rebuilding, mitigation, or economic loss, in addition to other recovery activities. In addition to these concerns and others, Congress may want to investigate the potential cost implications of a small business disaster grant program. Alternatively, Congress could leave the current policy in place. Those advocating no change are generally supportive of the view that federal disaster assistance should be supplemental in nature and that private insurance and access to low-interest loans should remain the primary means of helping small businesses recover after a disaster. Appendix. Public Assistance and Individual Assistance Factors Public Assistance Factors Estimated Cost of the Assistance Estimated cost of assistance is perhaps the most important factor FEMA considers when evaluating whether a governor's or chief executive's request warrants PA because it is a strong indicator of whether 'the situation is of such severity and magnitude that an effective response is beyond the capacities of the State and affected local governments." FEMA generally relies on two thresholds to evaluate whether to recommend PA. The first threshold is $1 million in public infrastructure damages. This threshold is set "in the belief that even the lowest population states can cover this level of public assistance damages." The second threshold used by FEMA is determined by multiplying the state's population (according to the most recent census) by a specified statewide per capita impact indicator—currently $1.43. In general, FEMA will recommend a major disaster declaration that includes PA if public infrastructure damages exceed $1 million and meet or exceed $1.43 per capita. The underlying rationale for using a per capita threshold is that tax revenues that support a state's disaster response capacity should be sufficient if damages and costs fall under the per capita amount. Localized Impacts FEMA also considers impacts to localities (e.g., counties, parishes, boroughs). While capacity to respond to, and recover from, an incident are evaluated on the state level, PA and IA are provided only to the specific counties designated in a declaration. As specified in FEMA regulations The Assistant Administrator for the Disaster Assistance Directorate also has been delegated authority to designate the affected areas eligible for supplementary federal assistance under the Stafford Act. These designations shall be published in the Federal Register. An affected area designated by the Assistant Administrator for the Disaster Assistance Directorate includes all local government jurisdictions within its boundaries. To this end, FEMA uses a countywide per capita impact indicator of $3.61 per capita in infrastructure damage to assess localized impacts. In general, it is expected that a locality that meets or exceeds the $3.61 per capita threshold will be designated by FEMA for PA funding. Insurance Coverage Insurance coverage is considered in PA determinations when reviewing a governor's or tribal chief executive's request for major disaster assistance. As part of the assessment of disaster related damage, FEMA subtracts the amount of insurance coverage that is in force or that should have been in force as required by law and regulation at the time of the disaster from the total estimated eligible cost of PA for units of government and certain private nonprofit organizations. Hazard Mitigation FEMA encourages hazard mitigation efforts by considering how previous measures may have decreased the overall damages and costs following an incident. This could include rewarding states that have a statewide building code. If the requesting state can prove, by way of cost-benefit analyses or other related estimates, that its per capita amount of infrastructure damage falls short of the statewide per capita impact threshold due to mitigation efforts, FEMA will consider that favorably in its recommendation to the President. In these instances, FEMA may also consider whether the mitigation work has been principally financed with previous FEMA disaster assistance funding through the Hazard Mitigation Grant Program (HMGP), through the Pre-Disaster Mitigation (PDM) program, or by state or local resources. Recent Multiple Disasters If a state or tribal nation has suffered multiple disasters—whether declared or not—in the previous 12 months, FEMA considers the financial and human toll of those recent incidents in its consideration of whether to recommend PA. For example, if a state has responded on its own to a series of tornadoes, FEMA may consider a request for a declaration more favorably than they would have otherwise. Programs of Other Federal Assistance FEMA also considers whether other federal disaster assistance is available when reviewing a major disaster request. In some cases, other federal programs are arguably more suitable for addressing the types of damage caused by an incident. For example, damage to federal-aid roads and bridges are eligible for assistance under the Emergency Relief Program of the Federal Highway Administration (FHWA). Other federal programs may have more specific authority to respond to certain types of disasters, such as damage to agricultural areas. Assistance may also be provided under authorities separate from the Stafford Act with or without a Stafford Act declaration. For example, assistance for droughts is frequently provided through authorities of the U.S. Department of Agriculture (USDA) and the Secretary of Health and Human Services (HHS) can provide assistance to states in response to a public health threat without the President's involvement via Stafford Act authorities. Individual Assistance Factors Concentration of Damages According to FEMA regulations, highly concentrated damages "generally indicate a greater need for federal assistance than widespread and scattered damages throughout a state." The assumption that underlies this regulation is that the local support networks available to recover from an incident are increasingly undermined as more members of those local support networks become survivors of the incident. The dispersion of damage, however, is not necessarily an indication of total individual and household needs. Rural incidents, in particular, can be more difficult to assess because damages tend to be geographically less concentrated. As mentioned under the factors considered for PA, Congress has sought to address the challenges posed by rural incidents in receiving major disaster declarations and assistance packages. Trauma FEMA regulations cite three conditions that indicate a high degree of trauma to a community: (1) large numbers of injuries and deaths; (2) large-scale disruption of normal community functions and services; and (3) emergency needs such as extended or widespread loss of power or water. FEMA considers the trauma caused by injuries and loss of life in determining whether IA, or specific programs under IA, is warranted in an affected area. For IA-eligible medical and funeral expenses under Section 408 of the Stafford Act, this factor can carry some weight in making a determination. Large-scale disruption of normal community functions and emergency needs such as extended or widespread loss of power or water are also indicative of trauma and are considered when evaluating a governor's or chief executive's request. Assessing these indicators can be problematic because they are not currently defined in law or regulation. Consequently, discretionary judgments are significant aspects of the evaluation of IA needs for large-scale disruptions of normal community functions and extended or widespread emergency needs. Special Populations FEMA considers the unique needs of certain demographic groups within an affected area when evaluating an IA request. These "special populations" include low-income and elderly populations, and American Indian and Alaskan Native tribal populations. Although special populations are a distinct factor in the consideration of a governor's or chief executive's request, special populations may also contribute to the overall number of IA-eligible households in an affected area. Voluntary Agency Assistance As with PA, FEMA considers whether state, local, or tribal governments "can meet the needs of disaster victims" prior to offering supplemental assistance through IA. Additionally for IA, FEMA considers the extent to which voluntary agency assistance can meet those needs. Insurance Similar to insurance coverage of public and certain private, nonprofit facilities for PA, insurance coverage of private residences is an important consideration for IA. Per FEMA regulation, "by law, federal disaster assistance cannot duplicate insurance coverage ." Therefore, the calculation of IA-eligible losses must deduct those losses covered by insurance. FEMA assumes owner-occupied homes with a mortgage are insured against many natural disasters under their homeowner insurance policies. Under that assumption, FEMA uses census data to determine homeowner insurance penetration. Further, if the home is located in a flood - prone area then purchasing insurance for those disasters is often a legal requirement if the owner h as a federally-backed mortgage. FEMA administers the N ational F lood I nsurance P rogram (NFIP) which allows officials to more directly determine the status of flood insurance in communities and the number of policies in place in an affected area. Average Amount of Individual Assistance by State FEMA compares the total IA cost estimate from the Preliminary Damage Assessment (PDA) to the average amount of individual assistance by state. More specifically, regulations published in 1999 include a table of the average amount of IA per disaster, by state population, from July 1994 to July 1999 (reproduced as Table A-1 ). FEMA stresses that these averages are not to be used as thresholds but rather as a guide that "may prove useful to states and voluntary agencies as they develop plans and programs to meet the needs of disaster victims." It should be noted that some have questioned the relevance of this factor given the amounts have not been updated since 1999 and are based on 1990 census data.

Throughout the years, Congress has expressed interest and concern for businesses recovering from disasters. For nearly a century, the federal government's policy for providing disaster assistance to businesses has been limited primarily to low interest loans rather than grant assistance. More recently, Congress has contemplated whether grants should be made available to small businesses after a major disaster. During this debate, some have questioned why small businesses are not eligible for disaster grants when residences, nonprofit groups, and state and local governments are eligible. In addition to concerns about equity, proponents of small business disaster grants argue that small businesses should be eligible for grant assistance because of the important role they play in the national economy. Major disasters can severely disrupt economic activity by causing immediate losses of output, income, and employment. While reports vary on the number of small businesses that fail after a disaster, even the low estimates could be considered significant. The Institute for Business and Home Safety found that 25% of businesses that close following a disaster fail to reopen, and a study on businesses in New Orleans recovering from Hurricane Katrina found that 12% of businesses remained closed 26 months after the storm. The number of failing businesses after a disaster reported by Federal Emergency Management Agency (FEMA) are higher. According to FEMA, "roughly 40%-60% of small businesses never reopen their doors following a disaster." To some, these findings suggest that the federal government should play a greater role in business disaster recovery. As part of this expanded role, Congress could consider providing grants to businesses to help them rebuild and recover from disasters. Changing the federal government's approach to business disaster policy, however, could be complex and require some careful decisionmaking. Steps would need to be taken to avoid and remedy potential grant and loan duplication. Congress would also have to determine under what circumstances and situations the grant program would be put into effect. Eligibility requirements would need to be developed to determine under what situations and circumstances grants would be provided as well as what types of businesses should be eligible to receive grants. Similarly, Congress might consider whether grants could be used for rebuilding, mitigation, or economic loss, in addition to other recovery activities. In addition to these concerns and others, Congress may want to investigate the potential cost implications of a small business disaster grant program. This report examines the historical development of federal disaster assistance to help explain possible reasons why businesses are currently provided disaster loans rather than grants. This is followed by a discussion of policy considerations and options related to a potential disaster grant program for small businesses, including how to minimize duplication of operations and benefits; whether to authorize the program in the Small Business Act, the Stafford Act, or other statute; the potential cost implications of a small business disaster grant program; and eligibility requirements (such as business size standards, eligible activities, and grant award amounts). Alternatively, Congress could explore other policy options to support small businesses struggling to recover from a disaster, including loan forgiveness; decreased interest rates; and establishing programs to help small (and large) businesses develop disaster and business continuity plans.

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Introduction South Africa is a majority black, multiracial country of nearly 58 million people. South African President Cyril Ramaphosa was elected by the parliament in February 2018 after his predecessor, Jacob Zuma, resigned. Zuma did so under the threat of a parliamentary no confidence vote after defying a decision by leaders of his African National Congress (ANC) removing him as its national presidential nominee. The ANC, the majority party in parliament, replaced Zuma with then-Vice President Ramaphosa, whom the ANC elected as its leader in late 2017. Zuma had faced intense pressure to step down after years of weak economic growth and multiple corruption scandals under his tenure. Ramaphosa is leading a reform agenda to address these challenges. He is serving out the rest of Zuma's term, which ends in May 2019, and is eligible to run for two additional five-year terms of his own. Local and international expectations of him are high, but he faces diverse fiscal, structural, and political challenges. U.S. Relations U.S.-South Africa ties are cordial, based in part on shared democratic values and broad bilateral accord on regional development goals, and the State Department describes South Africa as a strategic U.S partner. U.S. high-level bilateral engagement with South Africa is not, however, as frequent or as multifaceted as that with some other U.S. strategic country partners. South Africa has also not been the focus of substantial congressional legislative attention in recent years. In general, as set out below, South Africa-related congressional activity has mainly focused on U.S. healthcare assistance, trade issues, and consultations during periodic congressional travel to the country. Given South Africa's economic and political influence in Africa and on African and developing country positions in multilateral contexts—which often do not align with those of the United States—some Members of Congress may see a scope for increased congressional and other U.S. engagement with South Africa. There is a large U.S. diplomatic presence in South Africa, which has periodically hosted high-level U.S. leadership visits, including two presidential visits by former President Barack Obama. South Africa has been a top African recipient of U.S. assistance for years. For over a decade, such assistance has centered primarily on healthcare, notably HIV/AIDS-related programs implemented under the U.S. President's Emergency Plan for AIDS Relief (PEPFAR), announced by President George W. Bush in 2003. The United States has also supported South African-implemented development and crisis response activities in other African countries. In 2010, the Obama Administration and the South African government initiated a U.S.-South African Strategic Partnership. While it remains in effect, a biennial dialogue that accompanied the partnership was last held in 2015. The partnership has focused on cooperation in such areas as health, education, food security, law enforcement, trade, investment, and energy, all long-standing U.S. priorities. Since 2014, South Africa has been the largest U.S. trade partner in Africa. South Africa is also a key regional export and investment destination for U.S. firms. South Africa has long enjoyed a significant trade surplus in goods with the United States, but there is a substantial U.S. surplus in trade in services. In general, while U.S.-South African economic ties are positive, trade has been a source of occasional friction. Differences over foreign policy issues also periodically roil ties. South African officials are critical of Israel's policies toward the Palestinians, for instance, and South Africa maintains cordial relations with Iran, a key U.S. adversary. There have also been divergences on other issues, as illustrated by a lack of congruence between South African and U.S. votes in the United Nations, and regarding responses to the crisis in Venezuela. South Africa also opposed the Trump Administration's decision to withdraw the United States from the U.N. Framework Convention on Climate Change, a shift from the general bilateral policy congruence that prevailed on this issue during the Obama Administration. South African officials have periodically made remarks suggesting anti-U.S. biases. Anti-U.S. rhetoric, when it occurs, may be influenced by historic grievances over U.S. policy toward the ANC during the era of apartheid—a codified, state-enforced system of racial segregation and socioeconomic and legal discrimination favoring the white minority that was operational until the early 1990s. During the anti-apartheid struggle, the Reagan Administration categorized the ANC as a terrorist organization and President Reagan vetoed the Comprehensive Anti-Apartheid Act of 1986 ( P.L. 99-440 ). The Reagan Administration had sought to promote change within the apartheid regime—with which it shared anti-communist goals—by engaging it in a dialogue-based approach dubbed "constructive engagement." The Trump Administration has not pursued any major changes in bilateral ties, but in late 2018, President Trump acted to fill the post of U.S. ambassador to South Africa, vacant since late 2016, by nominating South African-born luxury handbag designer Lana Marks to the position. The Senate did not act on her nomination by the end of the 115 th Congress; she was renominated in early 2019. In early 2017, President Trump spoke to President Zuma by telephone on "ways to expand" trade and advance bilateral cooperation in other areas, including counter-terrorism and, according to the South African government, multilateral and African peace and stability issues. No notable new engagement has since occurred, but in August 2018, President Trump sparked controversy in South Africa and among some U.S. observers after posting a tweet on land reform. It stated that the South African Government was "seizing land from white farmers" and referred to "farm seizures and expropriations and the large scale killing of farmers." His comments drew criticism and were questioned on factual and other grounds by U.S. and South African commentators and by the South African government. While the South African government is pursuing efforts to change the constitution to allow for the uncompensated expropriation of land, such expropriation was not underway in 2018. Congress has long played an active role in U.S.-South African relations. This was particularly true during the struggle against apartheid, from the late 1960s until the first universal franchise vote in 1994. Starting in the 1960s, Congress sought to induce democratic change by repeatedly imposing conditions and restrictions on U.S. relations with the apartheid regime. These actions culminated in Congress's passage of the sanctions-focused Comprehensive Anti-Apartheid Act of 1986 ( P.L. 99-440 )—an action that overrode President Reagan's veto. Congressional attention toward South Africa remained strong during its continuing transition over the following decade. In recent years, congressional engagement with South Africa has mainly focused on oversight of foreign aid program—particularly South Africa's relative progress in building its capacity to address its HIV/AIDS crisis and gradually assuming greater responsibility for HIV program financing and implementation, key goals under PEPFAR. Efforts to bolster trade and investment ties with South Africa, as with Africa generally, have also drawn attention in recent congresses. In 2015 and 2016, congressional action, including Congress's mandating of a special review of South Africa's eligibility for U.S. trade benefits, helped to resolve a poultry and meat-related trade dispute. Several Members also sought to reverse the Trump Administration's 2018 application of steel and aluminum tariffs to South Africa, which had raised concerns in the country. No South Africa-centered bills have been introduced in the 116 th Congress, and none were introduced in the 115 th Congress, apart from three commemorative resolutions. Members periodically travel to South Africa to foster such aims as improved bilateral and U.S.-Africa ties and enhanced trade and investment relations. U.S. Assistance11 According to the State Department's FY2019 foreign aid budget request, South Africa is a key player for U.S. engagement in Africa and a critical partner to boost U.S. trade and economic growth, improve regional security, and mitigate public health crises. South Africa is the economic and security anchor of the region but grapples with political and socioeconomic challenges, including high-level corruption and poor accountability, a slowing economy, high youth unemployment, critical levels of violent crime, a weak education system, a high rate of HIV/AIDS, water scarcity, and wildlife trafficking. South Africa continues to work with the United States to address the region's social and economic challenges […]. The Trump Administration requested $172.1 million for South Africa for FY2020, a 70.7% decrease relative to the actual FY2018 total of $586.6 million, and a 66.3% decrease relative to the FY2019 requested level of $510.5 million. Aid trends are shown in Figure 1 and Table 1 . Since 1994, South Africa has been a top African recipient of U.S. State Department and U.S. Agency for International Development (USAID) aid, the vast majority devoted to PEPFAR and other health programs, including responses to the tuberculosis epidemic and efforts to end child and maternal deaths. After the enactment of the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 )—which authorized PEPFAR programs and funding—aid rose to nearly $580 million in FY2010. Aid levels then declined to a low of $286 million in FY2014 before rising again, to a peak of nearly $587 million in FY2018. Cumulative FY2004 through FY2018 PEPFAR funding in South Africa totaled $6.26 billion. The Trump Administration proposed to use the bulk of $500 million in requested Global Health Program PEPFAR funds in FY2019 to maintain current levels of HIV/AIDS antiretroviral drug treatment access through support for direct service delivery and treatment services. The State Department has proposed to cut PEPFAR funding by 67.6% in FY2020, to $161.8 million, after issuing sharp criticism of the PEPFAR in South Africa in its FY2019 PEPFAR Country Operational Plan "Planning Level Letter." While praising a number of successes under the U.S. PEPFAR partnership with the South African government and commending efforts to improve the program, the letter, by U.S. Global AIDS Coordinator and U.S. Special Representative for Global Health Diplomacy Deborah L. Birx, took note of "several fundamental problems in PEPFAR's core treatment program in South Africa." The letter stated Despite a significant infusion of resources by the U.S. government especially over the last three years, progress has been grossly sub-optimal and insufficient to reach epidemic control, including the targets of the Surge Plan [an effort to accelerate HIV testing, treatment, and retention]. The PEPFAR program has demonstrated extremely poor performance in ensuring every person who is started on treatment is retained, particularly from FY 2017 to FY 2018 where results have been relatively stagnant at 479,912 to 481,014 respectively, despite an increase in resources. In fact, the PEPFAR program lost more people on treatment than it gained in FY 2018. Across PEPFAR/South Africa programming, FY 2018 overspending and underperformance at the partner level is a program management and oversight issue. [..] The full expenditure of PEPFAR resources without improvement of results is unacceptable. This represents a serious, continued problem and program failure–linkage and retention must improve in South Africa now in COP 2018 implementation. Other recent-year U.S. development aid for South Africa has supported programs focusing on basic education; civil society capacity-building aimed at fostering accountable and responsive governance and public service delivery advocacy, and support for the office of the Public Protector [a public ombudsman; see below]; business-government cooperation in support of development; and support for sexual assault and gender-based-violence victims. The USAID-led, South Africa-based Power Africa initiative also supports energy projects in South Africa and USAID provides indirect credit for small enterprise activity. Through its Africa Private Capital Group, USAID also facilitates development-focused financing, including though efforts to foster local municipal bond and pension fund investment in public goods and services. It has also provided support for development-centered policymaking. USAID also administers the Trilateral Assistance Program (discussed below), under which the United States supports South African foreign aid efforts in Africa. South Africa has served as a "Strategic Partner" under the Feed the Future U.S. global food security and agricultural development initiative by providing agricultural technical assistance to other African countries. South Africa also participates in the joint State Department/USAID Young African Leaders Initiative, which helps develop the leadership skills of young business, civic, and public sector professionals. Most U.S. development assistance programs in South Africa are administered by the State Department or USAID. These agencies sometimes collaborate with and transfer funds to other, technically specialized U.S. agencies, notably the U.S. Centers for Disease Control and Prevention (CDC), which plays a key technical role in PEPFAR implementation. U.S. export promotion agencies also periodically provide loans, credit guarantees, or other financial services to U.S. firms aimed at boosting U.S. exports and fostering development and economic growth. There is a Peace Corps program in South Africa and the small U.S. African Development Agency (USADF) provides a few grants in South Africa. Some project-centered grant aid is also provided to civil society entities, and South Africa periodically benefits from U.S. regional programs focused on such issues as environmental management and trade capacity-building. U.S. trade and export promotion agencies are also active in South Africa. Security cooperation efforts are diverse but are funded at far lower levels than development programs. In FY2017 and prior years, International Narcotics Control and Law Enforcement (INCLE) funds were used for law enforcement and criminal justice technical support. Except in FY2018, Nonproliferation, Antiterrorism, Demining and Related Programs (NADR)-Export Control and Related Border Security (EXBS) funds have supported technical training relating to trade and border control, with a focus on controlling trade in military and dual-use technologies. The International Military Education and Training (IMET) program is long-standing, and in past years Foreign Military Financing (FMF) aid has supported the South African military's capacity to respond to regional crises and participate in peacekeeping. This has included past-year funding technical support and training for U.S.-sourced South African military C-130 aircraft. Since 2005, South Africa has received peacekeeping training under the U.S. Africa Contingency Operations Training and Assistance program (ACOTA), a component of the Global Peace Operations Initiative (GPOI, a multi-country State Department training program) and other U.S. military professionalization programs. South African troops also regularly join their U.S counterparts in military training exercises. There is a South Africa-New York National Guard State Partnership Program, and the U.S. Department of Defense also regularly supports South Africa's biennial African Aerospace Defense Exhibition. Country Overview South Africa is influential on the African continent due to its investment and political engagement in many African countries and its active role and leadership within the inter-governmental African Union (AU). It also has one of the largest, most diverse and developed economies, and has made substantial progress in spurring post-apartheid socioeconomic transformation. For summary data on the country, see Figure 2 . Many negative socioeconomic effects of apartheid persist, however. Apartheid ended after a tumultuous negotiated transition, between 1990 and 1994, when South Africa introduced a system of universal suffrage and multi-party democracy—after a decades-long struggle by the ANC and other anti-apartheid groups. Following the release of long-imprisoned ANC leader Nelson Mandela and the ANC's legalization in 1990, political dialogue led to an interim constitution in 1993 and elections in 1994, in which Mandela was elected president. Further post-electoral negotiations led to the adoption in 1996 of a new constitution and the creation of the Truth and Reconciliation Commission (TRC, in operation until 2002). The TRC documented crimes and human rights abuses by the apartheid regime and anti-apartheid forces from 1960 until 1994, and oversaw processes of restorative justice, accountability, and assistance for victims of such abuses. It has since served as a model for similar efforts around the world. Mandela died in 2013. The ANC currently holds 249 of 400 National Assembly seats. It has held a parliamentary majority since the first post-apartheid elections in 1994 and, since the National Assembly elects the president, also controlled the executive branch. Successive ANC-led governments have sought to redress the effects of apartheid, notably through efforts to improve the social welfare of the black majority and by promoting a pan-racial, multiethnic national identity. While racial relations have improved, divisions remain; references to race in politics and social media sometimes spur heated debate, and racially motivated criminal acts periodically occur. Despite diverse investments and policies aimed at overcoming the negative effects of apartheid, many of its most damaging socioeconomic effects endure, posing persistent, profound challenges for development and governance. Among these are high levels of poverty, social inequality, and unemployment, as well as unequal access to education, municipal services, and other resources. Such problems disproportionately affect the black population. Racial disparities have gradually declined, but most black South Africans live in poverty and their average per capita incomes are roughly one-sixth as large as those of the historically privileged white minority. Income and consumption distribution are notably unequal. Recent measures suggest the wealthiest top 10% and top 20% in South Africa enjoy the highest share of income of any country. South Africa's GINI coefficient—a measure of income or consumption inequality—is consistently among the highest globally, and is often the highest. There are also significant regional, rural-urban, and intra-racial socioeconomic disparities. Large segments of the poor majority lack access to decent housing and adequate infrastructure services (e.g., electricity and water), especially in rural areas and in the vast, high-density informal settlements surrounding most cities. Known as townships, such settlements are populated mostly by poor black and mixed race "coloured" inhabitants. Lack of legal property ownership sometimes subjects township dwellers to municipal squatter eviction and slum clearance operations. There is also extreme racial disparity in access to land, despite implementation of land redistribution and restitution initiatives since 1994. Under such programs, the state has purchased large amounts of land intended to be transferred to populations that had limited or no ability to own land under the apartheid system—primarily those of black, "coloured" or Indian descent. While, black ownership and other access to land has risen markedly in some provinces since 1994, redistribution and restitution processes have been slow and resulted in les extensive transfers than initially projected. As a result, the small minority white population continues to own over 70% of land nationally. This has spurred growing demands for uncompensated state expropriation of private land and pushed the ANC to pursue an ongoing effort to amend the constitution to permit such expropriation. South Africa also faces a range of other socioeconomic challenges. Labor strikes and unrest are common, particularly in the mining sector. Rates of violent crime—notably murder and rape, along with gender violence more broadly, and gun crime—are high. The causes are diverse. South Africa also faces criminal justice system capacity challenges. Although the country has a relatively well-resourced national police force, there are periodic reports of vigilante mob justice, and police sometimes use heavy-handed, abusive tactics to respond to crime and public unrest. Several police leaders have been implicated in professional misconduct inquiries or corruption. South Africa also faces broad challenges to social cohesion linked to grievances and fractures stemming from socioeconomic inequality and marginalization, social biases, and criminal activity. Examples include periodic xenophobic mob attacks on African immigrants and their businesses, crime-motivated attacks on white farmers, and frequent de facto residential racial and socioeconomic segregation. While many of the poor live in townships, the wealthy, including many whites, often live in gated, highly secured communities. Another key challenge is South Africa's high HIV prevalence. Statistics South Africa, a state agency, estimates that 18.99% of adults were HIV-positive in 2018, up from 2017 (18.88%). Despite this moderate increase, which is partially attributable to increased survival rates due to improved access to anti-retroviral treatment, there has been a steady decline in the annual growth rate of HIV prevalence (total cases) and incidence (new infections). National efforts to counter HIV have received considerable international support, notably under U.S. PEPFAR programs. Citizens' expectations and their demands for rapid socioeconomic transformation have exceeded what the South African state has been able to provide, due to fiscal, technical, and governance shortfalls. Despite large investments in housing, services, infrastructure, and state technical capacities, public goods and services delivery rates and quality have often been inadequate. This has spurred frequent, sometimes violent demonstrations. While known as service protests, they center on many issues, including local public corruption and cronyism, and can have political repercussions. In April 2018, President Ramaphosa cut short an overseas trip to address a spate of interrelated unrest that featured service delivery protests, attacks on foreigners, anger over alleged corruption by the affected province's then-Premier (governor), and clashes between local rival ANC members. In 2015 and 2016, South Africa also experienced mass student protests, some violent, over university education costs and alleged institutional racism in higher education. The current government is implementing a pledge, made just before the end of the Zuma administration, to fund free higher education for the poor and freeze certain other fees. Despite such challenges, and indications of an increased politicization of the state bureaucracy under Zuma, many national state agencies (e.g., the central bank, the statistical agency, the courts, some ministries, and the treasury) possess substantial institutional and technical capacity. South Africa ranked second globally on the International Budget Partnership's 2017 Open Budget Index , a measure of public budget transparency. While some state-owned enterprises (SOE) are struggling to recover from reported mismanagement and malfeasance under Zuma, these entities manage large, sophisticated national transport, telecommunication, energy, and other infrastructure systems. The state also administers a large welfare system that supported about 17.6 million grants as of September 2018 and had a 2017/2018 annual budget of about $10.5 billion. It is viewed by many observers as a key anti-poverty tool, albeit a costly one that is expected to grow in size and expense. Despite its role in helping to reduce extreme poverty, the system's administration has been the subject of considerable controversy in recent years. Politics and Governance The ANC party is ideologically leftist, but in practice it has melded pragmatic support for private sector-led growth with state-centric economic planning under what it terms the "developmental state" model. The ANC's political credibility is largely founded on its leading role in the anti-apartheid struggle and its efforts to end South Africa's deep-rooted, enduring social inequalities. It has struggled to build on this legacy, however, amid the country's persistent challenges. Increasingly, voters appear to be judging the ANC on its current performance, and it faces a growing number of opposition parties. Nevertheless, notwithstanding a marginal loss of electoral strength in recent elections, it has maintained its parliamentary dominance. Rivalry within the ANC at the provincial and local levels—often regarding appointments to local state bodies and the selection of slates of delegates to national party decision-making bodies—is often fierce, and numerous cases has led to political assassinations. National Assembly elections take place under a party-list proportional representation system, in which voters select a party and each party allocates its share of elected seats according to an internal party list. As a result, internal ANC politics and leadership selections play a key role in national politics. The most important ANC post is that of party president, since the ANC usually nominates its party leader to serve as national president. The Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP) also exert influence within the ANC. They do so through a compact called the Tripartite Alliance, under which the ANC appoints top members of COSATU and the SACP to party leadership and state posts, and the latter organizations do not independently contest elections. The Alliance weakened during Zuma's tenure due to SACP and COSATU criticism of Zuma, intra-COSATU splits linked to the emergence of new unions, and discontent within the ANC's labor constituency. The Democratic Alliance (DA) is the second-largest party in parliament, with 89 of 400 National Assembly seats. The DA has its origins in various historical liberal-leaning party coalitions. For many years, its leaders were predominantly white, but it has built an increasingly strong base among blacks. Now led by a charismatic young black leader, Mmusi Maimane, the DA has often confronted the ANC in parliament, at times in league with the Economic Freedom Fighters (EFF), a populist hard-left party centered on black empowerment. The EFF was formed in 2013 by a former dissident ANC Youth League leader, Julius Malema, and won 25 seats in the 2014 elections, becoming the third-largest party. Malema, a political firebrand, is a former key Zuma supporter who later broke with Zuma. The ANC expelled him in 2012, and he became one of Zuma's most vocal critics, notably regarding corruption—though he and his EFF co-founder have themselves faced corruption allegations. The EFF styles itself as a workers' party and draws its support from socioeconomically marginalized groups (e.g., jobless youth, low-wage workers, and poor communities). The EFF operates as a disruptive force, both in its radical policy proposals and through its often-boisterous obstruction of parliamentary proceedings. The Inkatha Freedom Party, with origins in Zulu-dominated KwaZulu-Natal province, was a fierce ANC rival during the end of the anti-apartheid period. It is now a self-described centrist party and holds 10 seats, making it South Africa's fourth largest political party. The remaining 27 seats are distributed among nine small parties. A key target campaign demographic for all parties is the "Born Free" generation, those born in 1994 or later, who make up roughly 47% of the population and about 14% of the eligible electorate. They share discontent over corruption, public services, and poverty with their older counterparts, and suffer even higher unemployment rates, but they are reportedly less engaged in formal politics and vote at lower rates than older citizens. Checks and Balances During Zuma's presidency, both the DA and the EFF, as well as private foundations and NGOs, sought to use the courts as a check on executive power by regularly suing state officials, including Zuma. These suits, relating to alleged executive branch overreach, agency malfeasance, and illicit actions, were often successful. In March 2016, for instance, the Constitutional Court ruled that Zuma had failed to uphold the constitution by defying a binding recommendation by the Public Protector that he partially reimburse the state for the cost of a state-funded upgrade to his private compound, a matter of long-standing controversy. The ruling was used as the basis for a DA impeachment motion against Zuma that failed but was seen as a political blow against Zuma. In a separate case, also brought by the DA, a High Court panel ordered in April 2016 that the National Prosecuting Authority (NPA) review its 2009 decision to dismiss a 1990s arms purchasing corruption case against Zuma (see below). The Zuma administration faced a third legal setback in March 2016, when the Supreme Court of Appeal ruled that the government had unlawfully ignored a court order—and violated local and international law obligations—by not detaining then-Sudanese President Omar Al Bashir when he attended a mid-2015 African Union (AU) summit in South Africa. Bashir faces an International Criminal Court (ICC) arrest warrant. The government subsequently initiated an effort to formally withdraw South Africa as a party to the ICC. This spurred further litigation. In early 2017, a court determined that the withdrawal was unconstitutional. Former Public Protector Thuli Madonsela also repeatedly issued reports that documented alleged acts of malfeasance, non-compliance with laws and regulations, corruption, and operational shortcomings by the executive branch and state agencies under its purview. Her reports also ordered corrective actions. Most notably, in late 2016, she issued State of Capture , a highly critical report centering on Zuma and the Guptas, a family of business owners that reportedly maintained very close and allegedly often corrupt relations with Zuma and a network of his political and business associates (see below). The report alleged that these actors had engaged in extensive high-level state malfeasance, and mandated the establishment of the now-ongoing judicial commission of inquiry. Zuma fought an unsuccessful legal battle to prevent the report's release, claiming that Madonsela had violated his due process rights. The clash was closely watched, as it was seen as a test of Madonsela's transformation of her office into a key independent institutional check on executive power. Ramaphosa Administration The parliament elected Ramaphosa national president a day after Zuma's February 2018 resignation. Ramaphosa—an ex-labor leader turned corporate leader, anti-apartheid activist, and former close associate of Nelson Mandela—assumed the post after also narrowly winning a highly contentious late 2017 ANC party leadership election based largely on his pledge to fight corruption and heal the economy. His victory resulted in the defeat of the influential ANC faction linked to Zuma and its favored candidate, Nkosazana Dlamini-Zuma (Zuma's ex-wife and a former government minister and African Union Commission chair). Analysts speculated that if she had been elected, she might have enabled Zuma to remain national president until general elections in 2019 and potentially helped to avert his prosecution for corruption. President Ramaphosa's priorities are to reverse what many observers contend was a marked, extensive deterioration in governance under Zuma and to enhance state agency operational efficacy, especially with regard to state-owned enterprises (SOEs). Another key goal is to spur faster, more inclusive economic growth by stimulating public and private investment in order to create jobs, enhance social services and infrastructure, and expand gross domestic product (GDP). Particular emphases include "transformation" efforts aimed at expanding and equalizing access to economic opportunities, particularly for the black population. Efforts in this vein include small business promotion, preferential state procurement, and actions to boost industrial growth. Additional priorities are reform and growth in mining and trade, along with efforts to attract local and international investment, spur digital sector growth, and expand agricultural production. The Ramaphosa administration backs a proposed constitutional amendment to permit the expropriation of private land without compensation for redistribution to victims of apartheid-era discrimination and land seizures. In early 2018, the parliament provisionally endorsed this goal, which the ANC had adopted as a party policy in late 2017. In late 2018, after holding nationwide hearings, a parliamentary constitutional review committee formally recommended the adoption of this change. Parliament endorsed the recommendation and appointed a committee to craft and introduce the amendment. This effort is highly controversial. It has raised fears that such seizures would primarily target white minority farmers, who own most farmland, and sparked concern that it might cause international investors to question the security of private property ownership in South Africa. Ramaphosa, seeking to dampen such fears, has contended that expropriation would apply mainly in cases involving "unused land, derelict buildings, purely speculative land holdings, or… where occupiers have strong historical rights and title holders do not occupy or use their land, such as labour tenancy, informal settlements and abandoned inner-city buildings." Governance Reform and Accountability Public Enterprises Minister Pravin Gordhan—who twice served as finance minister under Zuma but clashed fiercely with him—is spearheading efforts to strengthen State-owned enterprise (SOE) governance and efficacy. President Ramaphosa is directly involved in these efforts; in April 2018, he ordered probes into irregularities and mismanagement at two major SOEs: Eskom, the national power utility, and Transnet, a transport and logistics firm. His administration also replaced these SOEs' boards, along with that of Denel, an important but ailing defense sector SOE. In late 2018, Ramaphosa also fired the head of the tax service—a key Zuma ally and Gordhan foe—after earlier suspending him and appointing a commission of inquiry into alleged malfeasance at the agency. A separate parliamentary commission also probed systematic irregularities at Eskom. Broader state investigations into and accountability for an allegedly widespread, deep-seated pattern of alleged corruption and influence peddling under Zuma, known locally as "state capture," also continue to roil politics and draw intense public attention. State capture refers, in particular, to the activities of a network of Zuma-allied ANC and business associates, notably the Guptas, an Indian émigré family that accumulated a range of business holdings after arriving in South Africa in the 1990s. This network allegedly participated in corrupt high-level state-business collusion to influence and even control state enterprises and other agency decisions, contracts, regulatory processes, and fiscal assets to advance their financial and political interests. Ongoing, high-profile hearings by a judicial commission of inquiry into state capture are a key component of such investigations. Several separate commissions of inquiry have also examined or are probing alleged malfeasance at several state agencies and the politicization of state security agencies. Zuma established the judicial commission in early 2018, as ordered by a court, after he had earlier resisted doing so. While its proceedings center on developments during his administration, the matters under consideration remain key issues of current policymaking concern. Witnesses have implicated the Guptas in efforts to influence state agency decisions and top official appointments under Zuma, which the Guptas have denied. The inquiry has revealed evidence of systematic corruption by other actors, notably Bosasa, a public and prison services provider. Its contracts were cancelled and its leaders arrested after hearings in early 2019. To supplement the work of the various commissions of inquiry, in February 2019, President Ramaphosa appointed a special tribunal to fast-track recovery of public assets lost to graft. The hearings could reveal evidence leading to new charges against Zuma and the Guptas, who reportedly fled to Dubai, from where the government tried to extradite them. They could also bring renewed negative attention to the ANC ahead of the 2019 election. The proceedings could also shape the current political environment and undermine Ramaphosa's standing, should members of his administration be implicated in malfeasance. Finance Minister Nhlanhla Nene, a once-reputed anti-Zuma reformer, resigned after testifying to having links to the Guptas. His successor is Tito Mboweni, a business executive and former head of the central bank, whose appointment drew business support. In late 2018, Minister of Home Affairs Malusi Gigaba—a close Zuma ally who was popular within the ANC and whom Ramaphosa had retained—resigned over a perjury accusation and a sex tape scandal. Meanwhile, Zuma is being tried on 16 charges of fraud, corruption, racketeering, and money laundering in a long-running corruption case centering on a 1990s-era state arms deal scandal. Zuma fended off the case for years, allegedly aided by the National Prosecuting Authority (NPA). In March 2018, however, the NPA was forced to reinstate the charges after an appeals court upheld a 2016 High Court ruling that the NPA's dismissal in 2009 of the case against Zuma had been "irrational" and made under political pressure. The trial is likely to proceed for months, including during elections in 2019, with possible implications for the ANC's prospects. The NPA's alleged improper favoritism toward Zuma drew substantial attention, notably under its former Director, Shaun Abrahams, but also under several of his Zuma-appointed predecessors. In August 2018, a court voided Abrahams's appointment in a case linked to litigation over his predecessors' appointments. In late 2018, Ramaphosa appointed Shamila Batohi, a career prosecutor and former International Criminal Court legal adviser, to head the NPA. She is expected to actively pursue state capture and public agency malfeasance cases. Hours prior to Batohi's appointment, the NPA provisionally withdrew a key criminal case against the Guptas. Ramaphosa: Political Prospects President Ramaphosa took power slightly more than a year prior to South Africa's forthcoming May 2019 elections, which present him with both challenges and opportunities. If his administration can show significant economic and governance improvements, he may be able to consolidate his power within the ANC and unify the now-splintered party. He may also be able to sideline the opposition, as he has arguably already done by appropriating one of their key political themes: fighting corruption within the ANC. Ramaphosa's ability to pursue his agenda, however, may be constrained by divisions within the top tiers of the ANC and a need to cooperate with powerful state and party allies of Zuma, some of whom face corruption allegations. Some of these actors have sought to obstruct his reform efforts and blunt his political prospects. Public anger over poor public services and continuing economic malaise also pose challenges for Ramaphosa. Nevertheless, although some press reports caution that he faces substantial political headwinds, opinion polls and many press accounts suggest that he enjoys substantial popularity. The Economy South Africa has the most diversified, industrialized economy in Africa. It also has one of the top-five-highest GDPs per capita ($6,560 in 2018) in sub-Saharan Africa, and is one of very few upper-middle-income countries in the region. As earlier noted, however, income distribution is highly unequal. South Africa is a top producer of mined raw and processed commodities (e.g., platinum, steel, gold, diamonds, and coal). Other major industries include automobile, chemical, textile, and food manufacturing. These sectors, part of an overall industrial base that contributed just under 26% of GDP in 2017, are important sources of jobs. There are also well-developed tourism, financial, energy, legal, communications, and transport sectors, which are part of an overall services sector that contributed nearly 62% of GDP in 2017. Recent GDP trends are provided in Table 2 . South Africa regularly hosts large global development and business events, and South African firms are active across Africa, particularly in the mobile phone, retail, and financial sectors. Some also operate internationally, and the Johannesburg Stock Exchange is among the 20 largest global bourses. South Africa is also a famed wine producer and exports diverse agricultural products, but only about 10% of its land is arable and agriculture makes up less than 3% of GDP. Despite its substantial economic strength, South Africa's annual GDP growth, which stood in the 5% range in the mid-2000s, has slowed. It dropped from almost 2.5% in 2013 to under 0.6% in 2016. Despite a rise to 1.3% in 2017, the International Monetary Fund (IMF) projects a decline to 0.8% in 2018. While the nominal value of GDP has slowly risen in constant local Rand terms since 2010, exchange rate volatility has caused the value of GDP in dollars to fluctuate greatly, which has major implications for the country's terms of trade, international debt servicing, and integration into global manufacturing chains. In dollar terms, GDP fell from a peak of $417 billion in 2011 to $296 billion in 2016, as the Rand weakened sharply against the dollar, before rising to $349 billion in 2017, as the Rand appreciated. Global factors contributing to low growth in recent years have included weak investor confidence—attributed to uncertain economic policy trends and alleged poor governance under Zuma—and periods of weak prices and sluggish global demand for key commodity exports, especially to China. While weak commodity prices may hurt South African export earnings, they can also reduce the cost of raw material imports used by many local producers, including exporters. South Africa has a generally open foreign direct investment (FDI) regime, although investors face high taxes, currency exchange volatility, substantial regulatory burdens, large locally entrenched firms, and Black Economic Empowerment policy compliance costs (see below). Moreover, some foreign investors have expressed discontent over the enactment in late 2015 of a law known as the Protection of Investment Act, which removed most special FDI rights and requires foreign investors to settle most disputes through the South African legal system. This has raised concern about potentially unequal treatment under the law and the possibility of expropriation, which South African law permits in some narrow instances. FDI flows into South Africa have dropped sharply in recent years. They totaled $1.3 billion in 2017, down from $8.3 billion in 2013 and a peak of $9.2 billion in 2008. Meanwhile, outward flows have risen sharply, and were valued at more than five times the worth of inflows in 2017. See Table 3 for information on summary trade and FDI trends. The auto industry has been an important source of job-intensive FDI; South Africa has long hosted Ford plants, and other automakers (e.g., Toyota, BMW, and Nissan) have announced significant manufacturing capacity investments in recent years. Rail locomotive manufacturing has also attracted FDI. The World Economic Forum (WEF) ranked South Africa as the second most competitive economy in 2018 in sub-Saharan Africa (after Mauritius), but assesses it as 67 th globally. The WEF cites as economic strengths South Africa's large market size, relatively good infrastructure, advanced financial system, and innovation capability, but views its research and development capacities as inadequate. The country's World Bank Doing Business 2018 rankings (82 nd globally and fourth in Africa) are middling, and its ranking has dropped over the past decade. The survey also suggests that ease of doing business varies within sub-regions of the country, and that national improvements are possible. South Africa's private sector is relatively dynamic, although firms face a highly unionized labor force, rigid labor laws and, in some industries, sector-wide wage and working condition agreements negotiated between large firms and unions. Such factors arguably tend to protect incumbent jobholders, reduce labor market flexibility, and limit formal sector economic opportunities for the unemployed and poor—thus contributing to the country's chronically high unemployment rates. South Africa has long had a minimum wage in select sectors, but has only recently enacted a general minimum wage law. Sectoral labor agreements have mixed outcomes. They can help firms and industry groups to maintain predictable and stable labor costs and work rules, but often favor the incumbent firms and unions who negotiate them. Oligopolies in some sectors also hinder competition and spur high prices for some locally produced goods. There are also skill and geographical mismatches between labor demand and supplies, and low skill levels in some segments of the labor force. This is, in part, an enduring legacy of population and economic controls and discriminatory education and training patterns under apartheid. Chronically high unemployment may also suggest that the labor pool is under-utilized, whether due to skills deficits or a lack of jobs, which may undercut income earning, spending, demand, and other economic growth potentials. Information and communication (ICT) adoption rates are low and uneven, and education quality ranks poorly in international comparisons, despite large investments in the sector, which has negative impacts on workforce capabilities. Key tools for reversing structural racial disparities are Black Economic Empowerment (BEE) policies, which seek to promote racial equality and economic inclusion using market-based incentives. As a condition of obtaining public contracts, private firms must also comply with BEE requirements, in particular a scorecard-based system ranking firms by factors such as racial inclusiveness in ownership and management, investment in skills development for historically disadvantage persons, and prioritization of commercial ties with other BEE-compliant firms. BEE policies can impose compliance costs on firms and limit hiring choices, and have been criticized in some instances for favoring the interests of middle- and upper-income blacks. The private sector also faces state competition, as state-owned firms enjoy regulatory preferences in some sectors, even though their performance has often been poor. According to the IMF, SOEs play a major role, often with limited competition, in providing key products/services, such as power, telecommunications, and transportation (e.g., ports, airways). Their performance thus affects not only the public finances and the borrowing costs of the whole economy, but also economic growth and job creation through the cost of important inputs for a wide range of businesses and households. […G]enerally, there is a need to allow private firms to compete on a more equal footing with large SOEs. South Africa's sovereign credit ratings are low and have fallen sharply in recent years. Rising public deficits and debt are also a challenge. Other domestic factors hindering growth include social service delivery challenges and unmet infrastructure needs, which undercut productivity potentials and hurt South Africa's attractiveness as an investment destination. Electricity generation deficits and plant maintenance delays have led to periodic rolling power blackouts (see below). The country also has faced several recent droughts, including one that resulted in extreme water shortages in Cape Town, a global tourist destination with a population of 3.7 million people. Continuing water shortage challenges are likely. Ramaphosa has been spearheading an initiative to attract $100 billion worth of new investment over five years. As of October 2018, the government had solicited $55 billion in FDI commitments. Local and foreign firms reportedly pledged $20 billion worth of cross-sectoral investments during the government-led South Africa Investment Conference in late October 2018. This augmented more than $35 billion in prior investment commitments, mostly from China, Saudi Arabia, the UK, and the United Arab Emirates. The government is also continuing a range of efforts to reduce unemployment, poverty, and socioeconomic inequality, to improve education and healthcare, and to unite a geographically and racially divided society. Such actions are guided by the 20-year National Development Plan (NDP). Crafted by a Ramaphosa-headed commission and issued under Zuma, it is supplemented by multiple shorter-term, sector-specific plans. The NDP emphasizes investments in social services and state operational capacities. It fosters efforts to boost employment and incomes, including labor-intensive growth strategies and state investment in large-scale infrastructure, especially in the transport, communications, and power sectors. NDP implementation has been hampered by the poor governance and policy inconsistency under Zuma, the intractability and extensive scope of the country's challenges, and financing limitations. Energy and Natural Resource Issues Energy issues—particularly electrical power sector challenges—are a sensitive political topic, as they have the potential to influence the economy and political prospects for the ANC and have in some cases been tied to state capture allegations. Power Sector . Periodic rolling electricity blackouts caused by power generation shortages due to plant maintenance shortfalls and breakdowns are a key energy challenge. They are attributable to multiple factors, including years-long delays and overspending on the construction of two massive new coal-fired plants. Other factors include poor performance by the state-owned national power utility, Eskom. It suffers from massive debt, low credit ratings, and chronic liquidity problems, and has been plagued by reported mismanagement and malfeasance, including in relation to questionable Gupta-related coal and uranium supply deals. This has spurred substantial public and opposition party ire and government criticism, especially when Eskom has requested power rate hikes. Eskom has also drawn criticism for continuing to rely heavily on coal, despite pledging to expand renewable power generation, a government-supported goal. Eskom's generation shortfalls are a key policy challenge because they affect economy-wide productivity, and its $30 billion in state-backed debt hurts the country's sovereign debt rating and ability to borrow. Amidst worsening power shortages, the government plans to fund a three-year, $4.9 billion restructuring of Eskom that is to split it into three state-owned entities focused on generation, transmission and distribution respectively. Eskom had sought the transfer of some Eskom debt to the general public debt ledger, and recently won part of a requested 15% rate increase, despite mining industry opposition. Nuclear Power Generation. South Africa is the only African country with a commercial nuclear power plant. The Zuma administration planned to increase the county's 51,309 MW of power generation capacity by 9,600 megawatts (MW) by 2030 by constructing six to eight new nuclear power plants. It pursued pre-bid negotiations with firms from Russia, France, China, the United States, and South Korea, all countries that had signed bilateral commercial nuclear cooperation agreements with South Africa. The project's estimated cost ranged widely, between $30 billion and $100 billion. Cost and environmental concerns spurred substantial opposition to the plan, as did opacity surrounding pre-bid negotiations with Russia. Due to the lack of concrete cost estimates, the Treasury refused to authorize the release of a formal vendor request for proposals. Leaked details regarding accords with Russia and its Rosatom SOE suggested that a deal would have strongly favored Russian SOE financial interests. Broader concern grew after reports that Shiva Uranium—a firm controversially acquired by the Guptas—was in the running to produce fuel for the plants, amid indications of possible initial procurement irregularities. In April 2017, the High Court invalidated the nascent procurement process on procedural grounds. It also voided bilateral pre-procurement agreements with Russia and broad nuclear technical cooperation agreements with the United States (signed in 1995) and South Korea (signed in 2010). The court's ruling essentially required the government to begin its procurement effort anew. The Ramaphosa administration, while remaining open to a mix of energy source options, has not expressed support for an expansion of nuclear power in South Africa. Russia, however, is actively pressing for a new nuclear power deal with South Africa. Natural Gas. The prospect of significant domestic natural gas production from hydraulic fracturing of natural gas-rich shale ("fracking") is also hotly debated. Supporters see natural gas as a less polluting alternative to coal, South Africa's main electricity generation fuel, and local gas production as a way to reduce reliance on energy imports and generate jobs. Opponents, especially farmers, have cited possible contamination and overuse of water resources, notably in the environmentally sensitive semi-desert Karoo region, where most of an estimated 390 trillion cubic feet of recoverable shale gas reserves are located. Such concerns spurred a 2011 moratorium on exploration. It was later lifted, but a 2017 High Court ruling invalidated national fracking regulations. The Ramaphosa administration has pledged to fast-track applications and regulatory requirements to enable new exploration. Mining. Mining sector reform is another focus of debate. In 2017, the Zuma administration issued a draft mining charter—a document setting out industry-wide policy requirements with the aim of increasing black economic participation and benefit. It drew widespread industry concern. The charter would have required renewed compliance with a black mine ownership share quota of 30% if current black owners sold or transferred their shares in a mining asset. It would also have required firms to give partial in-kind ownership rights to mine workers and nearby community groups, and pay them dividends. The Ramaphosa administration revised and later adopted a new charter that allows firms to remain compliant with black ownership requirements once they are met—even if black ownership shares fall below the 30% threshold. It also permits firms to make payment in place of worker and community shares and recover the value of such shares, eliminates dividends for such owners, and requires compliance with BEE regulations for mining firms involved in public procurement transactions. U.S. Trade and Investment Issues South Africa has been the largest U.S. trade partner in Africa since 2014, though its global significance is relatively moderate. In 2017, it was the 35 th -largest source of U.S. imports and the 43 rd -largest U.S. export destination globally. Bilateral trade in goods in 2017 totaled $13 billion ($5 billion in U.S. exports and $8 billion in U.S. imports), down from a peak of $16.7 billion in 2011, while trade in services in 2017 totaled $4.8 billion ($2.9 billion in U.S. exports and $1.9 billion in U.S. imports). In 2017, the stock of U.S. FDI in South Africa stood at $7.34 billion, and centered on manufacturing (51%), notably of chemicals and food, professional and technical services (9.6%), and wholesale trade (8%). South African FDI stock in the United States totaled $4.1 billion. A U.S.-South Africa Trade and Investment Framework Agreement (TIFA) signed in 2012 facilitates bilateral trade and investment dialogues, and there is a bilateral tax enforcement and cooperation treaty, and a double taxation treaty. South Africa also is eligible for duty-free benefits under the African Growth and Opportunity Act (AGOA, P.L. 106-200 , Title I, reauthorized in 2015 for 10 years under P.L. 114-27 ), but not for special AGOA apparel benefits. Its $2.9 billion in AGOA exports to the United States in 2017 (21% of all such exports) made it the largest non-oil-focused AGOA beneficiary and the second largest overall, although the value of its exports under AGOA has fallen since peaking at $3.6 billion in 2013. An April 2018 U.S. International Trade Commission study, U.S. Trade and Investment with Sub-Saharan Africa: Recent Developments , found potential for significantly greater bilateral trade in a range of goods. During the 2015 AGOA reauthorization debate, various stakeholders raised questions about South Africa's continued AGOA eligibility. Two issues drew particular attention. The first was concern over South Africa's reciprocal trade agreements with other advanced economies, in particular the European Union (EU). Some in the U.S. private sector argued that the agreement places them at a competitive disadvantage vis-à-vis EU firms, as it gives the latter preferential tariff treatment in South Africa. (In contrast, AGOA gives South African firms preferential access to U.S. markets, but does not give U.S. firms reciprocal access to South African markets.) AGOA eligibility criteria include rules on reciprocal third-party agreements, but no country has lost its eligibility under these criteria. The second issue was concern over the large size and advanced character of South Africa's economy—particularly relative to its African peers—which some have argued make it a U.S. competitor in some sectors. South Africa is the only country to make significant use of AGOA in the export of advanced manufactured products, in particular motor vehicles and related parts. In 2017, South Africa's auto exports under AGOA were worth $1.2 billion and comprised over a fourth of all African non-oil exports under the program. Some stakeholders cited these two issues to argue that stricter income requirements were needed to ensure that AGOA benefits target the least-developed countries in Africa, and to encourage South Africa to negotiate a reciprocal U.S. trade agreement. Others contended, conversely, that South Africa's exports of high-value items show that AGOA preferences were working as intended, by helping to improve South Africa's economic development. They also asserted that removing South Africa from AGOA might undermine intra-regional trade, since South Africa is a key trade partner of many other African countries, which AGOA is designed to encourage. While no significant changes were made affecting South Africa's AGOA eligibility, these issues may continue to draw congressional scrutiny. South African import restrictions on certain agriculture products also temporarily threatened its AGOA eligibility—both before and after the 2015 AGOA reauthorization—and led to a bilateral trade dispute. It focused on South African anti-dumping duties and other restrictions on imports of certain U.S. poultry, pork, and beef products. The dispute was resolved in 2016, when South Africa lifted these restrictions following intensive bilateral engagement initiated under an out-of-cycle 2015 review of South Africa's eligibility. The Trump Administration's use of Section 232 of the Trade Expansion Act of 1962 (P.L. 87-794, as amended) to impose tariffs have roiled bilateral trade ties. In March 2018, the Trump Administration imposed additional U.S. tariffs on steel (25%) and aluminum (10%) under Section 232. In 2017, U.S. imports from South Africa of affected steel and aluminum products were worth $279 million and $340 million, respectively. In September, several Members of Congress requested an exemption from these tariffs for South Africa, which had unsuccessfully sought their removal. In October, the South African government reported that the Trump Administration had granted Section 232 duty exclusions for U.S. imports of 161 aluminum and 36 steel products, largely allaying South African concerns. The action came in response to U.S. firms' requests for these exclusions, which are for products not produced in the United States in sufficient amounts or of satisfactory quality, according to the Commerce Department. An additional U.S. Section 232 investigation on autos and auto parts could result in the imposition of additional U.S. tariffs on such products—reportedly up to 25%—including from South Africa. In July 2018, a South African government representative argued against such tariffs on a variety of grounds at a U.S. Commerce Department hearing on the matter. On February 17, 2019, the Commerce Department submitted a report on its investigation to President Trump. He has 90 days to act on recommendations in the report, which were not publicly disclosed. Other issues with implications for South Africa's AGOA participation include intellectual property concerns set out by the U.S.-based International Intellectual Property Alliance (IIPA), regarding South Africa's 2017 Copyright Amendment Bill. The IIPA testified at an August 2018 U.S. Trade Representative annual AGOA eligibility review hearing that the bill would weaken IPR holders' rights, make South Africa noncompliant with AGOA and other international IPR agreements, impose burdens on IPR holders, and disincentivize intellectual property development. South Africa's government, academics, and the U.S. and Europe-based Computer and Communications Industry Association disputed such claims. The National Assembly passed the bill in late 2018 and it now must be considered by the upper house. South Africa's move to expropriate land without compensation could also potentially affect South Africa's AGOA eligibility, although there are no overt signs of such a shift. A range of other issues with implications for U.S. investment in South Africa are addressed in the State Department's annual Investment Climate Statements publication. Foreign Policy Issues U.S.-South Africa bilateral relations are generally friendly, although there are periodic differences over foreign policy issues. While there is often broad U.S.-South African accord on selected multilateral issues (e.g., nuclear proliferation), African regional development goals and, in some cases, responses to political or military crises in the region, in multilateral fora, South Africa backs developing country positions that are at times inconsistent with stated U.S. interests. South Africa has also criticized some U.S.-backed international interventions (e.g., in Iraq and Libya) and taken stances toward Cuba, the Palestinian cause, and Iran that are at odds with U.S. positions. It has also forged increasingly close economic ties with China. Such ties may be viewed negatively by the Trump Administration; it has alleged that Chinese activities in Africa are "corrupting elites, dominating extractive industries, and locking countries into unsustainable and opaque debts and commitments." South African Efforts in Africa Sub-Saharan Africa is a key focus of South African foreign policy. Its regional activities are multifaceted, but focus on investment; peacekeeping, stabilization, and conflict mediation; and the economic and other development priorities of the African Union (AU) and other sub-regional organizations (e.g., the Southern African Development Community or SADC). It also often helps coordinate or represent African views in multilateral fora on such issues as climate change, African peace and security issues, U.N.-African cooperation, and developing country priorities. South Africa is serving as a non-permanent member of the U.N. Security Council during 2019 and 2020; some analysts see this as affording South Africa with an opportunity to revitalize its international role following what some see as a period of foreign policy drift under Zuma. Regional Efforts. South Africa played key roles in the formation of the African Union (AU) and the establishment of the New Partnership for Africa's Development (NEPAD), the AU's strategic socioeconomic development policy framework. It hosts the NEPAD Planning and Coordinating Agency, now being transformed into the permanent AU Development Agency. In late 2018, South Africa ratified the AU-backed African Continental Free Trade Area (AfCFTA), an emergent free trade area intended to increase intra-African trade among as many as 49 AU member states by sharply reducing tariffs. Former South African Foreign Affairs Minister Nkosazana Dlamini-Zuma served as Chair of the African Union Commission from 2012 to 2017, although her tenure received mixed reviews. President Ramaphosa is currently the First Vice Chairperson of the AU, which he is slated to chair in 2020. Migration, Conflict Resolution, and Peacekeeping . South Africa hosts roughly 273,000 refugees, asylum-seekers, stateless persons, and other populations of international humanitarian concern, as well as many economic migrants. Most of these populations are from Africa. South Africa has repeatedly sought to resolve the political crises and halt or mitigate armed conflicts that contribute to these and other population flows and humanitarian emergencies across the African continent. It has been particularly active in this respect in southern Africa, on behalf of SADC—as in Zimbabwe, after violent, internationally questioned elections in 2008, and in Lesotho, in response to repeated periods of political instability. Since 2009, former South African President Thabo Mbeki has chaired the African Union High Level Implementation Panel on Sudan and South Sudan (AUHIP). South Africa has also played mediating roles in conflicts in Cote d'Ivoire, the Democratic Republic of the Congo (DRC), Burundi, and elsewhere. South Africa has also long deployed uniformed personnel to U.N. peacekeeping operations and contributed troops to periodic AU military interventions. As of January 2019, there were 1,171 South African troops, police, and experts serving with U.N. peacekeeping missions in South Sudan, Darfur, Sudan, and DRC. In DRC, South Africa helped spearhead the formation of the Force Intervention Brigade, a special U.N. peacekeeping unit authorized to carry out contingent offensive operations in coordination with the DRC military to counter armed groups in DRC's highly unstable east. South Africa's Foreign A id and U.S. Cooperation . To advance its policy goals across the continent, South Africa is endeavoring to establish a foreign aid agency, the South African Development Partnership Agency (SADPA), but progress has been slow and limited since the plan was announced in 2009. SADPA is intended to coordinate South Africa's foreign aid, with a focus on other African countries regarding democracy and good governance, conflict prevention, development, and other ends. These are all priorities of South Africa's current foreign aid mechanism, the African Renaissance Fund (ARF), which the Department of International Relations and Co-operation administers, along with multilateral agency and initiative funding. SADPA and a SADPA Fund would replace the ARF. Multiple other state agencies also administer foreign aid programs, although reporting on aid levels and program activities is fragmentary. Since 2005, the United States has partnered with South Africa under the USAID-administered Trilateral Assistance Program (TAP). TAP seeks to promote U.S. regional goals by leveraging South Africa's "democratic systems, regulatory practices, and innovative scientific research" to tackle development, natural disaster, and security challenges in Africa. It provides training, exchange programs, and funding to support South Africa's provision of technical development assistance to other African countries. TAP projects have addressed such issues as constitution-making in South Sudan, food security in Mozambique, adjudication of gender-based violence in Malawi and Angola, and climate change responses and water conservation in southern Africa. China and the BRICS South Africa established diplomatic relations with China in 1998, after severing ties with Taiwan, and the two countries maintain close political, trade, and investment ties. China is South Africa's largest trade partner. Bilateral relations take place under a 2010 comprehensive strategic partnership pact and a host of subsidiary cooperation agreements. The most recent such agreements were signed in September 2018 during a heads of state summit of the Forum on China-Africa Cooperation (FOCAC). Held in Beijing, it was co-hosted by China and South Africa, which hosted the prior FOCAC summit in 2015. The 2018 summit followed the 10 th summit of the Brazil, Russia, India, China, and South Africa (BRICS) cooperation group, hosted by South Africa July 2018. In 2014, the BRICS established the New Development Bank (NDB) to finance infrastructure and sustainable development efforts, which include ongoing South African projects worth $680 million, focusing on clean energy development, transport infrastructure, and renewable energy transmission. During a state visit to China by President Ramaphosa alongside the FOCAC 2018 summit, China reportedly agreed to provide $10 billion in financing for South Africa, adding to $14.7 billion in investments pledged by China during the BRICS summit. This financing is to fund a South African state economic stimulus package and infrastructure and industrial development projects. The government has not made public the terms and conditions of the deal; the opposition Democratic Alliance (DA) has pledged to request these details. In October 2018, the DA also threatened to sue for the details of a separate R33 billion ($2.2 billion) China Development Bank (CDB) loan to the state utility, ESKOM. The DA fears that these loans will increase South Africa's indebtedness to China. The transparency of Chinese loans has also drawn concern. Other notable China-South African business transactions include a May 2018 commitment by nine large Chinese firms, including SOE affiliates, to invest $10 billion in a South African special economic zone, and a possible $900 million purchase of Chevron's South Africa and Botswana assets by Sinopec, a Chinese oil and gas SOE. In 2016, Chinese auto SOE Beijing Automotive International Corp. invested $759 million in a vehicle-production facility. As of late 2017, Chinese investment stock in South Africa reportedly exceeded $25 billion. Middle East Issues South Africa maintains cordial relations with multiple Middle East countries, including Iran, Saudi Arabia, and the United Arab Emirates (UAE). These ties have recently attracted attention in light of reported pledges by the latter two countries to invest $10 billion each in South Africa, and because South Africa's Denel arms manufacturing SOE could be the target of these investments. South Africa has exported arms to Saudi Arabia and the UAE in recent years, and the Saudi military has reportedly used those arms in attacks in the ongoing war in Yemen. Such attacks have killed or injured thousands of Yemeni civilians, and analysts have suggested that these exports may violate South African human-rights-related controls on arms sales. Closer relations with Riyadh have the potential to affect long-standing South African relations with Iran—which take place through a bilateral Joint Commission of Cooperation created in 1995 and multiple cooperative agreements—as well as South Africa's reported role as a back-channel intermediary between Iran and Saudi Arabia regarding the war in Yemen. Outlook South Africa experienced a rise in alleged corruption and deterioration in economic performance during the Zuma administration. Since taking office in early 2018, President Ramaphosa has taken steps to reverse these trends. Multiple inquiries into public sector corruption and malfeasance are under way, along with efforts to reform SOEs. The ultimate success of these efforts will depend on the degree to which public sector agency performance improves, guilty parties are successfully prosecuted, and management and regulatory reforms are implemented. Such efforts are likely to be politically challenging for Ramaphosa, since they may threaten the influence of some top ANC party members and state office holders with ties to former president Zuma, who retains clout within the ANC. Ramaphosa also faces pressure from the political left on issues such as land reform and planned expropriation of land. He will have to balance such pressures with the demands of private property owners and investors. His relative power to pursue policy and institutional reforms will also depend, in part, on the success of the ANC in the May 2019 elections and his degree of influence within the party. Reversing a long-anemic pattern of growth will also likely prove challenging. Ramaphosa has made some progress, eliciting substantial investment pledges, initiating a youth employment scheme, and pushing reforms that may allow SOEs to contribute substantially more to economic growth. Many of the reasons for the weak growth, however, are structural, long-term phenomena that are not amenable to quick fixes. Nevertheless, South Africa's economy is large and diversified, and may have the capacity to expand moderately in the coming years, notably if the large pool of unemployed can be better integrated into the economy. If South Africa can make positive economic progress, there is potential for increased international trade, including trade with the United States—although additional U.S. trade restrictions, particularly potential Section 232 tariffs on autos and parts, could hinder trade growth. Because of its market size and economic position, South Africa is well placed to grow as a key U.S. investment and export destination in Africa. This may also be aided by ongoing U.S. government and private sector efforts to expand trade and investment ties—including by tapping opportunities created by South Africa's long-term infrastructure investment efforts. There is also possible scope for greater U.S.-African cooperation regarding development in South Africa and the sub-continent more broadly, as demonstrated by South Africa's role as a strategic partner under the Feed the Future and TAP programs. USAID's Power Africa program is based in South Africa and could potentially play a role in helping South Africa to address its electrical sector challenges. South Africa could also provide a source of partnership and potential investment targets for the emergent U.S. International Development Finance Corporation. While there have been occasional strains in U.S.-South African relations on some international issues, South Africa's two-year membership on the U.N. Security Council could also provide a springboard for greater bilateral cooperation on international matters of interest to both countries.

South Africa is a majority black, multiracial country of nearly 58 million people. It has cordial relations with the United States, notwithstanding some occasional strains, and is the largest U.S. trade partner in Africa. South African President Cyril Ramaphosa is spearheading efforts to address years of weak economic growth and multiple corruption scandals under his predecessor, Jacob Zuma. These issues helped spur Zuma's resignation in early 2018—prior to a likely vote of no confidence by parliament—and led to the election of Ramaphosa, who was selected to lead the African National Congress (ANC) party in late 2017. If the ANC wins a majority in forthcoming elections in May 2019, as polls suggest is probable, he will likely remain president. Corruption linked to Zuma and a network of business and political associates was reportedly so systematic that it was dubbed "state capture." Multiple efforts to address this problem are underway, including a high-profile commission of judicial inquiry. Zuma is also being tried on charges linked to a 1990s-era arms procurement scandal. Broader challenges include high levels of poverty, social inequality, and unemployment, and unequal access to public services. Such problems disproportionately affect the generally poor black majority, the main victims of apartheid—a codified system of racial bias that ended in 1994, when the first universal suffrage elections were held. Unequal access to land is a particularly sensitive issue. State land redistribution efforts have sought to ensure greater access to land by blacks and other historically disadvantaged groups, but progress has been slow. In 2018, pressure to speed this process prompted the government to launch an ongoing effort to amend the constitution to permit uncompensated land expropriation. South Africa also struggles with violent crime, labor unrest, and protests over public service delivery and corruption. South Africa has the most diversified and industrialized economy in Africa, but has suffered years of anemic growth attributable to a range of international and domestic factors. The Ramaphosa administration has made economic growth a priority, and is pursuing a range of efforts to reduce unemployment, poverty, and socioeconomic inequality; improve education and healthcare; and unite a socioeconomically, geographically, and racially divided society. It is also seeking to attract $100 billion in new investment over five years and has elicited at least $55 billion to date. Congress played a leading international role in efforts to end apartheid, although some South African decisionmakers appear to harbor abiding resentments toward the United States as a result of the Reagan Administration's approach to achieving this goal and its posture toward the ANC. Contemporary U.S.-South African ties are cordial, based on shared democratic values and often-concordant views on regional development goals. The two countries maintain a bilateral strategic dialogue, and the United States provides substantial aid to South Africa, primarily to combat the country's HIV/AIDS epidemic. U.S.-South African views regularly diverge, however, on international policy matters (e.g., Palestinian statehood, and responses to Iran and Venezuela). There have also been periodic trade frictions; in 2015-2016 the two countries had a poultry and meat trade dispute and in 2018 the Trump Administration imposed tariffs on U.S. imports of steel and aluminum, including from South Africa. South Africa was later exempted from many of these tariffs, but prospective U.S. tariffs on autos and auto parts could spur renewed strains. The Trump Administration has not otherwise pursued any major changes in the bilateral relationship. An August 2018 tweet by President Trump alleging that South Africa's government was seizing white-owned farmland and that large numbers of farmers were being killed, however, drew criticism from the South African government. U.S.-South African relations arguably have the potential to deepen, although such an outcome might require dedicated efforts by the two sides. If President Ramaphosa demonstrates concrete progress in reasserting the rule of law and turning around the ailing economy, following substantial deterioration in these areas under former President Zuma, the country may become more attractive as a U.S. partner. Greater cooperation and collaboration can be envisioned regarding bilateral trade and investment, responses to political-military and development challenges in Africa, educational and cultural exchange, and technical cooperation in multiple areas. In recent years, South Africa-related congressional activity has mainly focused on U.S. healthcare assistance, trade issues, and consultations during periodic congressional travel to the country. Given South Africa's economic and political influence with in Africa and on African and developing country positions in multilateral contexts—which do not always dovetail with those of the United States—some Members of Congress may see a need to expand the scope and broaden the focus of congressional and other U.S. engagement with South Africa.

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Introduction Federal policymakers statutorily established the U.S. Department of Education (ED) as a Cabinet-level agency in 1980. Its mission is to "promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access." Like most federal agencies, ED receives funds in support of its mission through various federal budget and appropriations processes. These processes are complex. For example, ED receives both mandatory and discretionary appropriations; ED is annually provided forward funds and advance appropriations for some—but not all—discretionary programs; ED awards both formula and competitive grants; and a portion of ED's budget subsidizes student loan costs (through both direct loans and loan guarantees). Because of this complexity, analyzing ED's budget requires an understanding of a broad range of federal budget and appropriations concepts. This report provides an introduction to these concepts as they are used specifically in the context of the congressional appropriations process for ED. It was designed for readers who are new or returning to the topic of ED budget and appropriations. The first section of this report provides an introduction to key terms and concepts in the federal budget and appropriations process with special relevance for ED. The second section answers frequently asked questions (FAQs) about federal funding for the department, as well as closely related questions about education funding in general. The third section includes a brief description of, and links to, reports and documents that provide more information about budget and appropriations concepts. The scope of this report is generally (but not exclusively) limited to concepts associated with funding provided to ED through the annual appropriations process. It does not address all possible sources of federal funding for education, training, or related activities. For example, it does not seek to address education tax credits, student loans, or education and training programs at agencies other than ED. Where this report does address such topics, it does so in order to provide broad context for questions and key terms related to the appropriations process for ED. This report also addresses some frequently asked questions about education funding in general. Key Concepts and Terms The following section provides an introduction to selected key terms and concepts used in the congressional debate about federal funding for ED . Budget Authority, Obligation, Outlay, and Rescission In the federal budget process, the concept of spending is broken down into three related but distinct phases—budget authority, obligation, and outlay. Budget authority is the authority provided by federal law to enter into financial obligations that will result in immediate or future expenditures (or outlays ) involving federal government funds. For reasons that are explained below, the amounts of budget authority, obligations, and outlays in a fiscal year are rarely the same for a budget account (or activity in that account). For example, ED's Education for the Disadvantaged account in FY2017 had $16.805 billion in total budget authority. That is, ED had legal authority to spend up to $16.805 billion in federal funds for the purposes associated with this account (which consists primarily of grants allocated to local educational agencies). During that same fiscal year, ED newly obligated (i.e., committed to spend) $16.789 billion of that available budget authority. Total outlays during FY2017 in the Education for the Disadvantaged account were $16.237 billion. Budget authority can only be provided through the enactment of law, and generally its amount, purpose, and the time period in which it may be used is specified. Budget authority may be for a broad set of purposes (e.g., improving the academic achievement of disadvantaged children) or for a particular purpose (e.g., obtaining annually updated local educational agency-level census poverty data from the Bureau of the Census). The amount of the budget authority is usually defined in specific terms (e.g., $10 billion) but sometimes is indefinite (e.g., "such sums as may be necessary"). The time element of budget authority provides a deadline as to when the funds must be obligated—one fiscal year, multiple fiscal years, or without fiscal year restriction (referred to as "no year" budget authority). Once an agency receives its budget authority, it may take actions to obligate it legally, for example, by signing contracts or grant agreements. Over the course of a fiscal year, an agency may obligate budget authority that was first provided during that year or was provided in a prior fiscal year with a multiyear or no-year period of availability. Generally, all obligations must occur prior to the deadline associated with the budget authority. It is not until those obligations are due to be paid (i.e., become outlays) that federal funds from the Treasury are used to make the payments. In addition to the amount of budget authority that is available to be obligated, the primary factor that affects the total amount of obligations in a fiscal year is when they are due. For example, outlays to pay salaries usually occur over the course of the year that the budget authority is made available because those payments must occur regularly (e.g., every two weeks). In contrast, outlay s for a construction project may be structured to occur over several years as various stages of the project are completed. Outlays are reported in the fiscal year in which they occur, even those outlays that result from budget authority that first became available in previous fiscal years. Budget authority that reaches the end of its period of availability is considered to have "expired." At this point, no new obligations may be incurred, although outlays to liquidate existing obligations are generally allowable, usually up to five fiscal years after the budget authority expired. Once that liquidation period has ended, it is generally the case that no further outlays may occur and the agency is to take administrative steps to cancel any remaining budget authority. Rescissions are generally provisions of law that repeal unobligated budget authority prior to its expiration. Such provisions may be used to eliminate budget authority for purposes that are considered to be outdated or no longer desirable. Rescissions also may be used to offset increases in budget authority for higher-priority activities. Authorizations and Appropriations The congressional budget process generally distinguishes between two types of measures— authorizations , which create or modify federal government programs or activities, and appropriations , which fund those activities. The provisions within authorization measures may be further distinguished as either enabling or organic provisions (e.g., statutory language or acts that authorize certain programs, policies, or activities) or express authorizations of appropriations provisions (e.g., statutory language or acts that recommend a future funding level for authorized programs, policies, or activities). These distinctions between authorizations and appropriations, and between the types of authorization provisions, are important for understanding why programs with "expired" authorizations can continue to function. This section focuses on the distinction between appropriations and enabling or organic authorizations; the section titled "Authorization of Appropriations " addresses the authorization of funding levels. Enabling or organic authorizations may be generally described as statutory provisions that define the authority of the government to act. These acts establish, alter, or terminate federal agencies, programs, policies, and activities. For example, the Economic Opportunity Act of 1964 (P.L. 88-452) contained statutory provisions that established the Federal Work-Study (FWS) program. The Higher Education Opportunity Act of 2008 (HEOA, P.L. 110-315 ) contained statutory provisions that altered and continued (e.g., "reauthorized") FWS. Authorization measures may also address organizational and administrative matters, such as the number or composition of offices within a department. Authorization measures are under the jurisdiction of legislative committees, such as the House Committee on Education and Labor and the Senate Committee on Health, Education, Labor and Pensions. Authorizations may be permanent or limited-term. Permanent authorizations remain in place until Congress and the President enact a law or laws to amend or repeal the authorization. Most ED authorizations are permanent. For example, Title I-A of the Elementary and Secondary Education Act of 1965, as amended and reauthorized by the Every Student Succeeds Act (ESSA, P.L. 114-95 ), gives ED the authority to provide aid to local educational agencies (LEAs) for the education of disadvantaged children. In general, unless Congress and the President enacted legislation to repeal provisions of Title I-A, ED may distribute any budget authority it receives for such aid in accordance with the program parameters defined in such statutory language. Limited-term authorizations end after a specified period of time, typically without requiring further legislative action. (These are sometimes called sunset provisions .) For example, the statute authorizing the Advisory Committee for Student Financial Assistance (ACSFA, 20 U.S.C. 1098(k)) specifies that ACSFA was authorized from the date of enactment until October 1, 2015. At that point, ACSFA was disbanded. The authorizations for some programs are intended to receive legislative action on a regular basis, as the authorities for those programs expire, while others are expected to receive legislative action as needed and not on a regular schedule. Appropriations measures, on the other hand, are typically enacted annually and provide new budget authority for agencies, programs, policies, and activities that are already authorized and are under the jurisdiction of the House Appropriations Committee and the Senate Appropriations Committee. That is, appropriations give federal agencies the authority to use a certain amount of federal funds for program purposes that are usually specified in authorization acts. For example, the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 ( P.L. 115-245 ) appropriated $71.4 billion in discretionary budget authority to ED, of which $22.5 billion was specifically for the Pell Grant program. Budget authority that is provided in appropriations measures may be available for a single fiscal year, multiple fiscal years (or portions thereof), or an indefinite period of time. For example, P.L. 115-245 provided budget authority that was available for one year for ED's Indian Education account, a year-and-a-quarter for Special Education, and two years for Impact Aid. In general, during a calendar year Congress may consider the following: 12 regular appropriations bills for the fiscal year that begins on October 1 (often referred to as the budget year) to provide the annual funding for the agencies, projects, and activities funded therein; one or more continuing resolutions for that same fiscal year, to provide temporary funding if all 12 regular appropriations bills are not enacted by the start of the fiscal year; and one or more supplemental appropriations measures for the current fiscal year, to provide additional funding for selected activities over and above the amount provided through annual or continuing appropriations. Congress typically includes most regular annual ED appropriations in the Departments of Labor, Health and Human Services, and Education, and Related Agencies appropriations bill. "Authorization of Appropriations" In addition to enabling or organic authorizations that establish the authority for federal government activities and appropriations that provide the authority to actually expend federal funds on those activities, laws may include provisions that provide an explicit authorization of appropriations . An authorization of appropriations (or, alternatively, appropriations authorization) is a provision of law that essentially recommends a funding level for a program or agency in a given fiscal year. Appropriations authorizations may include a range of fiscal years and a specific funding level for each fiscal year within that range (e.g., $10 million in FY2007, $12 million in FY2008, etc.); may be indefinite (e.g., "such sums as may be necessary"); or may not be provided at all. For example, Section 1002 of the Elementary and Secondary Education Act of 1965, as amended and reauthorized by the Every Student Succeeds Act (ESSA, P.L. 114-95 ), includes an authorization of appropriations provision effectively recommending a specific funding level ($15.9 billion) for the Title I-A program in a certain fiscal year (FY2019). Contrary to common misconception, an authorization of appropriations does not convey actual budget authority. Further, a lapse or gap in the fiscal years covered by an authorization of appropriations (its "expiration") does not usually affect the underlying organic authorization, which provides authority to the federal government to engage in the programs or activities to which the authorization of appropriations relates. If appropriations are provided for programs with an expired authorization of appropriations, federal agencies generally would have sufficient legal authority to implement and operate these programs. This is because an authorization of appropriations is "basically a directive to Congress itself, which Congress is free to follow or alter (up or down) in the subsequent appropriation act." Authorizations of appropriations, however, are significant for the purposes of congressional rules. House and Senate rules require that a purpose must have been "authorized" prior to when discretionary appropriations are provided. While simply establishing an entity, program, or activity in law generally satisfies that authorization requirement, sometimes provisions are enacted that explicitly authorize future appropriations ("authorizations of appropriations"). If the period of time for which an authorization of appropriations has been provided lapses and is not renewed—for example, at the start of FY2010, if the authorization of appropriations ended in FY2009—then subsequent appropriations for those purposes are sometimes described as being "unauthorized" from the perspective of House and Senate rules and could be subject to a point of order during floor consideration. However, such points of order are frequently waived. Discretionary and Mandatory Spending (Including Appropriated Mandatory Spending) There are two broad categories of budget authority in the federal budget and appropriations process: discretionary spending and mandatory spending . ED receives both kinds of spending, but there are important distinctions between them that are relevant to understanding both how ED receives federal funding and how much it receives. Discretionary spending is budget authority that is provided and controlled by appropriations acts. This spending is for programs and activities that are authorized by law, but the amount of budget authority for those programs and activities is determined through the annual appropriations process. Even if a discretionary spending program has been authorized previously, Congress is not required to provide appropriations for it or to provide appropriations at authorized levels. For example, Section 399 of the Higher Education Act, as amended (HEA), authorized discretionary appropriations of $75 million in FY2010 for the Predominantly Black Institutions (PBIs) program authorized under HEA, Section 318. However, actual discretionary appropriations for the Section 318 PBI program in FY2010 were $10.8 million. Mandatory spending is budget authority that is controlled by authorizing acts. Such spending includes "entitlements," which are programs that require payments to persons, state or local governments, or other entities if those entities meet specific eligibility criteria established in the authorizing law. This budget authority may be provided through a one-step process in which the authorizing act sets the program parameters (usually eligibility criteria and a payment formula) and provides the budget authority for that program. Such funding remains available automatically each year for which it is provided, without the need for further legislative action by Congress. For example, HEA, Section 420R provides mandatory appropriations for Iraq and Afghanistan Service Grants (IASG). Sometimes, however, the authorizing statute for an entitlement does not include language providing authority to make the payment to fulfill the legal obligation that it creates. Under this approach to mandatory spending, the budget authority is provided in appropriations measures. Such spending is referred to as appropriated mandatory spending or an "appropriated entitlement" and occurs through a two-step process. First, authorizing legislation becomes law that sets program parameters (through eligibility requirements and benefit levels, for example), then the appropriations process is used to provide the budget authority needed to finance the commitment. As with mandatory spending, congressional appropriations committees have limited control over the amount of budget authority provided for appropriated mandatory spending because the amount needed is the result of previously enacted commitments in law. In other words, the authorizing statute for appropriated mandatory spending establishes a legal obligation to make payments (such as an entitlement) and the funding in annual appropriations acts is provided to fulfill that legal financial obligation. Because the cost of appropriated mandatory programs may vary from year to year, the funding that is provided through the annual appropriations process is based on a projection of costs for the relevant fiscal year. Most ED line items included in regular annual appropriations acts are discretionary. One exception to this is the Vocational Rehabilitation State Grants program, which is appropriated mandatory spending. 302(a) and 302(b) Allocations The concepts in this section relate to how Congress decides the amount of discretionary and mandatory funding to appropriate each fiscal year, which ultimately impacts how much funding ED is provided. Generally speaking, Congress does not start by estimating the cost of every ED program and adding those amounts to reach a total. What happens instead (typically) is that the House and the Senate agree on a total for all federal spending through a budget resolution. That amount is then divided between appropriations and authorizing committees. The appropriations committees then divide their portions among each of their subcommittees. Each subcommittee then determines funding levels for the agencies within its jurisdiction. This is called the 302(a) and 302(b) allocation process. More specifically, the Congressional Budget and Impoundment Control Act of 1974 (CBA) requires that Congress adopt a concurrent resolution on the budget each fiscal year. This budget resolution constitutes a procedural agreement between the House and the Senate that establishes overall budgetary and fiscal policy to be carried out through subsequent legislation. The spending elements of the agreement establish total new budget authority and outlay levels for each fiscal year covered by the resolution. The agreement also allocates federal spending among 20 functional categories (such as national defense; transportation; and education, training, employment, and social services), setting budget authority and outlay levels for each function. Within each chamber, the total new budget authority and outlays for each fiscal year are also allocated among committees with jurisdiction over spending, thereby setting spending ceilings for each committee. These ceilings are referred to as the 302(a) allocations . The 302(a) allocation to each of the authorizing committees (such as the Senate Health, Education, Labor and Pensions Committee) establishes spending ceilings on the mandatory spending under each committee's jurisdiction. The 302(a) allocations to the House and the Senate appropriations committees include discretionary spending and also appropriated mandatory spending. Once the appropriations committees receive their spending ceilings, they separately subdivide the amount among their respective subcommittees, providing spending ceilings for each subcommittee. These spending ceilings are referred to as 302(b) suballocations . For example, for FY2019 the amount of the initial 302(a) allocation to the House Appropriations Committee was $1.2 trillion for discretionary budget authority and $955 billion for appropriated mandatory budget authority. The appropriations subcommittee that is responsible for funding ED is the Labor, Health and Human Services, Education, and Related Agencies (LHHS) subcommittee. When the committee apportioned that allocation among its 12 subcommittees, the initial suballocation for the LHHS subcommittee was $177 billion for discretionary budget authority and $783 billion for appropriated mandatory budget authority. The congressional allocations are of budget authority for the upcoming fiscal year. Budget authority enacted in previous fiscal years that first becomes available for obligation in the upcoming fiscal year counts against the congressional allocations for the upcoming fiscal year. (This type of budget authority is referred to as "advance appropriations" and is discussed further in the section " "Carry Forward," Advance Appropriations, and Forward Funding .") Fiscal Year, Award Year, and Other Units of Time Department of Education budget, appropriations, and program-related data may be reported using a variety of different "years" or units of time. These units of time include the fiscal year, calendar year, academic or school year, and the award year. Readers are cautioned to remain alert to the unit of time when considering and comparing various funding levels reported for ED activities. To be strictly comparable, the units of time must be the same. When the federal government accounts for the funds it has budgeted, appropriated, or spent, the unit of time it uses is the fiscal year (FY). The federal fiscal year is generally the 12-month period between October 1 and the following September 30. The current year is the fiscal year that is in progress; the prior year is the fiscal year immediately preceding the current year. Outyears are any future fiscal years beyond the current year. The fiscal year is the standard unit of time used in the congressional appropriations process; most funding levels in appropriations bills and committee documents are reported by fiscal year. The federal fiscal year differs from the calendar year (January 1 to December 31), the typical academic or school year (fall to spring), and the federal student aid award year (July 1 through the following June 30). Annual funding levels reported in ED budget and program-related documents may use one or more of these different units of time. For example, ED's FY2019 congressional budget justification includes both fiscal year and award year funding levels for the Pell Grant program. These funding levels are not strictly comparable. "Carry Forward," Advance Appropriations, and Forward Funding Funding for federal programs that is provided in regular appropriations acts is usually available for obligation at the start of the fiscal year and may only be obligated during that fiscal year unless otherwise specified. Budget authority also may be provided for more than one fiscal year ("multiyear") or without fiscal year limitation ("no-year"). (See section on " Authorizations and Appropriations .") In other words, in some cases, budget authority may be obligated over multiple fiscal years or may be available to be obligated indefinitely (until it is exhausted). The concept of carry forward (or carry over ) applies to budget authority that was enacted and became available in a previous fiscal year and is still available for obligation in the next fiscal year. (If a federal agency has not entirely obligated its multi- or no-year budget authority by the end of the fiscal year, any unexpired multiyear budget authority and all remaining no-year budget authority may continue to be available for obligation in the next fiscal year.) Such carry forward budget authority is typically notated as "unobligated balances brought forward" in the OMB Appendix to the annual budget. For example, the FY2019 OMB Appendix reports that budgetary resources available to the Education for the Disadvantaged account in FY2017 included $660 million in unobligated balances brought forward (of $16.805 billion, total). The concepts of advance appropriations and forward funding relate to when such funding first becomes available to be obligated relative to the timing of its enactment and thus differ significantly from carry forward. With advance appropriations and forward funding, the budget authority becomes available for obligation at a point in time that is delayed beyond the start of the fiscal year. Advance appropriations become available for obligation starting at least one fiscal year after the budget year. Forward funding becomes available beginning late in the budget year and is carried into at least one following fiscal year. Federal accounts and programs may receive annual appropriations, advance appropriations, forward funding, or a mixed approach. The most common mixed approach used in ED appropriations combines advance appropriations and forward funding. Figure 1 illustrates the period of availability for annual appropriations, forward funding, and advance appropriations. It also includes an illustration of the default (or typical) period of availability for annual appropriations. The period of availability for budget authority in ED's accounts does not usually follow a single rule. In a typical appropriations act, some ED accounts and programs will receive annual appropriations (e.g., Indian Education), while others will receive appropriations under a mixed approach including advance appropriations and forward funding (e.g., ESEA Title I). In general, the advance appropriations-forward funding combination is used for accounts that provide funds to recipients (such as elementary and secondary schools) who might experience service disruptions if they received funds aligned with the federal fiscal year and not the academic or school year. One advantage of this approach is that it allows schools to obligate funds prior to the start of the school year. It also gives schools time to plan for, and adjust to, changes in federal funding levels. Budget Caps and Sequestration The Budget Control Act of 2011 (BCA, P.L. 112-25 ) sought to reduce the federal budget deficit through a variety of budgetary mechanisms, including the establishment of limits (or caps ) on discretionary spending and automatic spending reductions (known as sequestration ) for both discretionary and mandatory spending. The BCA only places limits on discretionary spending, and the purpose and triggers for budgetary reductions through sequestration differ significantly between discretionary and mandatory spending. In addition to describing how the BCA operates in light of these key distinctions, the following sections discuss the implications of the BCA for ED. Discretionary Spending Limits The BCA imposes separate limits on "defense" and "nondefense" discretionary spending each fiscal year from FY2012 to FY2021. The defense category includes all discretionary spending under budget function 050 (defense). The nondefense category includes discretionary spending in all the other budget functions. In general, discretionary budget authority for ED is subject to the nondefense limit. If discretionary spending is enacted in excess of the statutory limits, enforcement primarily occurs through sequestration, which is the automatic cancelation of budget authority through largely across-the-board reductions of nonexempt programs and activities. The purpose of sequestration is to reduce the level of spending subject to the discretionary spending limit so that it no longer exceeds that limit. Any across-the-board reductions through sequestration affect only nonexempt spending subject to the breached limit, and they are in the amount necessary to reduce spending so that it complies with the limit. Pursuant to procedures under the BCA, the discretionary spending limits initially established by that act are to be further lowered each fiscal year to achieve certain additional budgetary savings. The amount of the revised limits for the upcoming fiscal year is calculated by OMB and reported with the President's budget submission each year. The timing of this calculation, which occurs many months prior to the beginning of the fiscal year, is intended to allow time for congressional consideration of appropriations measures that comply with the revised limits. Since the enactment of the BCA, however, a series of laws have been enacted that supersede the spending limit level that otherwise would have been established by the OMB calculation. The effect of these laws in most cases has been to increase the limits above what they otherwise would have been. The most recent such law, which increased the spending limits for FY2018 and FY2019, was the Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-123 ). Mandatory Spending Sequestration In addition to the lowered discretionary spending limits, the BCA provides for reductions to mandatory spending each fiscal year, which are also achieved through sequestration. (Some mandatory spending is exempt from these automatic reductions.) However, mandatory spending sequestration differs from discretionary spending sequestration in that it occurs automatically each fiscal year, and is not triggered by spending levels or other budgetary factors. In other words, mandatory spending sequestration in the BCA context is used as a means to automatically reduce that type of spending each fiscal year on a largely across-the-board basis. The amount of the reduction to defense and nondefense mandatory spending is calculated by OMB and announced at the same time as the reductions to the statutory discretionary spending limits each fiscal year (with the President's budget submission). Nonexempt mandatory budget authority at ED is subject to the nondefense reduction. The BCA and ED Funding The BCA affects funding levels at ED in several ways. In establishing caps on total federal discretionary budget authority—caps which are the basis for the allocations of both total federal spending and the division of that amount to each of the appropriations subcommittees through the 302(a) and 302(b) processes (discussed above)—the BCA can impact total discretionary funding at ED. Further, if those caps are exceeded, ED's discretionary budget authority may be subject to sequestration. Since the BCA has been in effect, a discretionary spending sequestration has only occurred once—in FY2013. For ED programs that receive nonexempt mandatory funding, the BCA requires an annual sequester in an amount calculated by OMB. The dollar amount of the reduction for a particular ED account is based on the percentage by which nonexempt mandatory spending in the nondefense category needs to be cut to achieve the total required savings. For example, in FY2018 mandatory funds in the Rehabilitation Services and Disability Research, Higher Education, TEACH Grant Program, IASG, and Student Financial Assistance Debt Collection accounts were subject to the nondefense mandatory sequestration that was calculated based on a reduction of 6.6%. For FY2019, this reduction is 6.2%. For both mandatory and discretionary spending sequestration, the dollar amount that is canceled in each account differs depending on the amount of sequesterable budgetary resources in that account. For example, for the FY2013 sequester, OMB calculated that nondefense discretionary spending would need to be reduced by 5%. The English Language Learner account, which had total sequesterable budgetary resources of $737 million, would thus be reduced by $37 million (5% of $737 million). Likewise, Impact Aid had sequesterable budgetary resources of $1.299 billion and was reduced by $65 million (5% of $1.3 billion). Some ED programs, such as the Pell Grant program, are exempt from sequestration or follow special rules. For example, during periods when a sequestration order is in effect for mandatory spending, the BCA directs that origination fees charged on federal student loans made under the William D. Ford Federal Direct Loan program must be increased by the nondefense, mandatory sequestration percentage. For more information, see CRS Report R42050, Budget "Sequestration" and Selected Program Exemptions and Special Rules . Readers are cautioned, when comparing or analyzing funding levels for ED accounts and programs, to assess whether such funding levels reflect pre- or post-sequestration funding levels. Administration and congressional budget and appropriations materials may use pre- or post-sequestration amounts, or both. Transfer and Reprogramming Both authorization and appropriations measures may also provide transfer authority. Transfers shift budget authority from one account or fund to another or allow agencies to make such shifts. Agencies are prohibited from making transfers between accounts without statutory authority. For example, in FY2019 the appropriations act that funded ED provided that up to 1% of any discretionary budget authority appropriated to the department could be transferred between accounts, subject to certain restrictions. Agencies may, however, generally shift budget authority from one activity or program to another within an account without additional statutory authority. This is referred to as reprogramming . For example, in FY2016 ED shifted $158,336 from the Strengthening Native American-serving Nontribal Institutions program that would have otherwise lapsed to the Fund for the Improvement of Postsecondary Education/First in the World (FIPSE/FITW) program using reprogramming authority. The appropriations subcommittees have established notification and other oversight procedures for various agencies to follow regarding reprogramming actions. Generally, these procedures differ with each subcommittee. For instance, in FY2019 reprogramming requirements applicable to ED were carried in the appropriations act that funded the department. Those requirements included consultation with the House and the Senate appropriations committees, as well as written notification, ahead of reprogramming actions that met certain criteria. Formula and Competitive Grants The Department of Education uses one of two processes to distribute the funds it receives for grant making. It may distribute such funds by mathematical formula —usually such formulas are predetermined and established in statute—or through merit-based competitions . ED's Title I, Part A program, for example, is a formula grant program. It provides funding to local educational agencies (through state educational agencies) using various mathematical formulas that consider the number of school-age children in poverty, state average per-pupil expenditures, and similar variables. The Innovative Approaches to Literacy program, on the other hand, is a merit-based competitive grant program. Applicants must meet certain criteria (such as whether they promote science, technology, engineering, and math education) and are awarded points based on how well they meet those criteria. Applicants with the highest weighted scores receive grants. Block and Categorical Grants Policy debates about education funding sometimes focus on whether funds ought to be provided through block grants or categorical grants . Block grants are general or multipurpose grants that, in the federal education context, are typically awarded to states through a formula-based process. Block grant funding may be used for a wide variety of purposes. Awardees (not federal officials) determine how to use such funds within a broad set of options. For example, the Elementary and Secondary Education Act, as amended by ESSA ( P.L. 114-95 ), authorized a new block grant program at ED called "Student Support and Academic Enrichment Grants." Formula funding provided through this block grant could serve a variety of purposes. Such purposes include providing all students with access to a well-rounded education, improving school conditions for student learning, and improving the use of technology in order to improve the academic achievement and digital learning of all students. Categorical grants, on the other hand, are typically available for a more narrow and defined set of purposes or program activities. They may be distributed by formula or competition. ED's Carol M. White Physical Education program, which provides funds to schools and community-based organizations to initiate, expand, or enhance physical education programs, is an example of a competitively awarded categorical grant. (ESSA incorporated this program into the Student Support and Academic Enrichment block grant.) Matching Funds or Requirements Some federal grants include what are known as matching requirements. In such scenarios, federal funds or assistance are granted to awardees who are willing and able to "match" federal funds with a nonfederal contribution (such as funding from state government or private sources). This nonfederal contribution is called the "nonfederal share." Typically, matching fund requirements specify that the nonfederal share must meet or exceed a certain percentage of the federal award amount (such as 20% or 50%). Depending on the grant requirements, nonfederal matching contributions may be in cash or what is known as "in-kind" (such as computer equipment or staff time), or a combination of the two. For example, the maximum federal share of compensation in the Federal Work-Study program (which provides funding to support part-time employment of needy college and university students) is 75% (with certain exceptions). Institutions participating in the Work-Study program are required to provide the remaining 25%. Frequently Asked Questions The following section includes frequently asked questions about the budget and appropriations process for ED (and closely related topics). How much funding does the Department of Education receive annually? ED's annual budget includes two types of spending: discretionary and mandatory. In FY2019, ED received approximately $71 billion in budget authority through the annual discretionary appropriations process. About three-quarters of these funds ($52 billion) were distributed to local educational agencies to provide supplementary educational and related services for disadvantaged and disabled children or to low-income postsecondary students (in the form of Pell Grants, which provide financial assistance for college). ED also has programs that receive mandatory funding directly through their authorizing statutes. These programs received about $2.5 billion in net funding in FY2019. However, most of ED's mandatory funding is for student loan subsidies. In some years, the net cost of student loan subsidies is positive (i.e., there is a cost to the government for providing the subsidy); in other years the net cost of student loan subsidies is negative (i.e., the government received fees and other receipts in excess of subsidy costs). Because of this dynamic, ED's "total" budget can vary widely from year to year. (See Table 1 .) How much does the federal government spend on education? In short, the answer depends on what federal accounts or activities are defined as "education spending," on the point in the fiscal year when budget authority is estimated, and which federal agency is reporting. Any aggregation of federal funding provided for educational purposes across agencies or accounts requires judgements about which activities should be counted (in whole or in part) and about how such activities should be grouped (e.g., higher education, K-12, etc.). Moreover, any such exercise may be limited by the granularity of information available about the use of the funds. Complicating the situation is the fact that federal funding for education overlaps with (but is not the same as) funding for ED. The following sections explore and describe two commonly referenced ways that the federal government accounts for the funds it spends on education: by Treasury Department function code and as calculated and tracked in ED's Digest of Education Statistics . Function 500 The Treasury Department classifies all federal funding according to certain numbered functions (e.g., Health (550) and Transportation (400)) and by numbered subfunctions (e.g., Health Care Services (551) and Health Research and Training (552)). The Congressional Budget Office (CBO), Office of Management and Budget (OMB), and congressional budget process also use this same taxonomy. Federal education funding is included in function 500 (Education, Training, Employment, and Social Services). Within function 500, subfunction 501 includes elementary, secondary, and vocational education; and subfunction 502 includes higher education. While these are two of the primary areas in which federal education funding is concentrated, simply adding the totals for these two subfunctions does not capture all federal funding for education. For example, other subfunctions, such as 503 (research and general education aids) and 504 (training and employment), could be considered federal education spending as well. Additionally, subfunction 506 (social services) includes ED's Rehabilitation Services and Disability Research Account. Furthermore, only a portion of total outlays for subfunctions 501 and 502 were spent by ED, and not all ED funding is classified as function 500. For example, other agencies (such as the National Science Foundation and National Institutes of Health) provide federal funds for educational programs and activities that may be captured in the totals for subfunctions 501 and 502. In addition, some ED programs and activities are classified under other functional categories, such as the Office for Civil Rights (subfunction 751, federal law enforcement activities). Digest of Education Statistics ED's National Center for Education Statistics (NCES) tracks federal funding for education and related activities in the periodically updated Digest of Education Statistics ( Digest ). Funding data in Digest tables may represent appropriations or outlays. Major Digest federal education funding tables present data on federal support for education broken down by program, agency, state, education level, and other facets. As per Table 401.10, "Federal support and estimated federal tax expenditures for education, by category," the federal government provided $228.4 billion in direct budget authority (measured primarily as outlays, but sometimes as obligations) for education (broadly defined to include research grants to universities) in FY2017. If nonfederal funds generated by federal legislation are included, the amount was $322.6 billion. Where can information be found about the President's budget request and congressional appropriations for the Department of Education? The ED congressional budget justifications, which provide details about the President's budget request for the department, are published on the department's website. Appropriations for many (but not all) ED accounts are typically included in annual Departments of Labor, Health and Human Services, and Education, and Related Agencies appropriations acts. The Congressional Research Service (CRS) tracks these acts—including related bills and committee reports—each year. How much ED funding is in the congressional budget resolution? As discussed in the " 302(a) and 302(b) Allocations " section of this report, the budget resolution sets procedural parameters for the consideration of mandatory and discretionary spending legislation; those parameters are enforceable by points of order. The budget resolution does not provide actual funding for ED or any other purpose. While the procedural parameters in the budget resolution do involve underlying assumptions about levels of funding for particular purposes, there are two general reasons why the amount of funding assumed for ED (or education-related purposes) in the annual congressional budget resolution cannot be determined by CRS. First, the procedural parameters in the budget resolution allocate funding by congressional committee and not by department. Because the jurisdiction of the relevant authorizing committees and appropriations subcommittees encompasses more than ED, it is not possible to determine the assumed amount of funding for ED through those allocations. Second, although the basis of those authorizing committee and appropriations subcommittee allocations is a distribution of funding based on "functional categories," those functional categories do not neatly correspond to ED or education-related purposes. (Functional categories are discussed in the section " How much does the federal government spend on education? ") As a result, absent specific information with regard to the budget resolution from the House or the Senate budget committees, it is not possible for CRS to determine amounts of funding for ED or education-related purposes that are assumed by the budget resolution. What is the difference between the amounts in appropriations bills and report language? The answer to this question centers on the force of law. Funding levels included in House and Senate appropriations bills are proposed until enacted. That is to say, until an appropriations bill is signed by the President (i.e., it is enacted), the funding levels included therein simply represent what each appropriations committee or subcommittee—or if the bill has passed the House or the Senate, that chamber—proposes to appropriate for the various programs and agencies included in that bill. Once Congress and the President enact an appropriations measure, the funding levels included in that act are statutorily established and provide a legal basis for agencies to obligate and expend that funding. Appropriations acts, therefore, carry the force of law. Funding levels and program directives included in House and Senate appropriations committee reports are committee recommendations and are not usually legally binding. (In some cases, report language is enacted by reference in the appropriations act that it accompanies, giving it statutory effect.) However, while report language itself generally is not law, agencies usually seek to comply with it because it represents congressional intent. Typically, report language is used to supplement legislative text at either of two stages in the congressional appropriations process. First, as noted, reports may accompany annual appropriations bills reported by the House or the Senate appropriations committees. If these committee reports differ with respect to a particular funding level or program directive (e.g., the House Appropriations Committee report recommends setting the maximum discretionary portion of Pell Grants at $5,035 and the Senate report recommends setting it at $5,135), a joint explanatory statement (JES) may be used to reconcile conflicting language and also provide additional instructions. (The JES is sometimes referred to colloquially as a conference report , though from a technical standpoint, it is not. The JES accompanies the conference report, which contains only legislative text.) For appropriations measures that are not reported from an appropriations committee but still receive congressional consideration—or when differences are resolved through an amendment exchange and not a conference committee process—an explanatory statement from an appropriations committee is sometimes entered into the Congressional Record . This language may be regarded similarly to report language. When this text is used during the resolving differences phase of the legislative process, such statements can serve the same purposes and function as a JES. What happens to education funding if annual appropriations are not enacted before the start of the federal fiscal year? It depends. First, Congress and the President may provide partial-year funding through a temporary appropriations law, often referred to as a "continuing resolution" (CR), while they negotiate agreement on annual appropriations that have yet to be enacted. CRs typically (but not always) provide appropriations at a rate based on the previous fiscal year's appropriations acts and for the same purposes as those provided in the previous fiscal year. (Adjustments in funding levels or allowable activities must be specified in the CR.) The typical effect, then, of providing federal education funding through a continuing resolution is that planned or proposed changes to federal education programs may not occur or may be delayed. In addition, while a CR is in effect, ED makes limited obligations until budget authority for the entire fiscal year is enacted. If appropriations actually lapse, the effects of that lapse—including whether a shutdown of agency operations commences—will depend on a variety of factors. Several factors that might mitigate the effects of a lapse include the extent to which unexpired budget authority is available for ED to obligate during the period of the lapse (generally, such funding would be multiyear or no-year budget authority enacted in prior fiscal years, including as forward funds or advance appropriations); the extent to which ED staff who would regularly administer programs or funds are furloughed as a consequence of the lapse; the timing of the grant cycle for individual grant programs and the type of funds that are typically awarded and distributed; and the availability of alternative sources of funding that can be used (temporarily or on an ongoing basis) to sustain supported activities. What happens if an ED program authorization "expires"? As discussed in the sections titled " Authorizations and Appropriations " and "Authorization of Appropriations," most of ED's enabling or organic program authorizations are permanent. Therefore, unless the program's enabling authorization specifically includes a sunset provision, or Congress and the President enact legislation repealing the enabling authorization, the program can continue so long as Congress continues to fund it through the appropriations process. This remains true, in general (but not always), even if the program's authorization of appropriations has expired and the GEPA extension has lapsed. (See text box titled, "GEPA and Appropriations Authorizations at ED.") This is because an authorization of appropriations is a directive from Congress to itself and does not typically function as a sunset provision for the program or purpose to which it relates. An expired authorization of appropriations may, however, lead to a point of order during floor consideration against an appropriations measure or amendment under certain circumstances. They are, therefore, significant from the perspective of congressional procedure. For More Information Readers seeking additional information on any of the key terms, concepts, and answers to the FAQs included in this report are referred to the authors of this report and to CRS reports on budget and appropriations in general and on education funding in particular. Such reports have been footnoted and linked in the relevant sections of this report. Additionally, readers may wish to consult glossary and budget concepts documents produced by ED, the Congressional Budget Office (CBO), Government Accountability Office (GAO), and Office of Management and Budget (OMB). These include the following: Department of Education, Budget Process in the U.S. Department of Education , last modified January 19, 2017, http://www2.ed.gov/about/overview/budget/process.html ; Congressional Budget Office, Glossary , updated July 2016, https://www.cbo.gov/publication/42904 ; U.S. Government Accountability Office, A Glossary of Terms Used in the Federal Budget Progress , GAO-05-734SP, September 1, 2005, http://www.gao.gov/products/GAO-05-734SP ; and Executive Office of the President, Office of Management and Budget, "Budget Concepts," Fiscal Year 2019 Analytical Perspectives of the U.S. Government , https://www.govinfo.gov/content/pkg/BUDGET-2019-PER/pdf/BUDGET-2019-PER-5-1.pdf .

Like most federal agencies, the Department of Education (ED) receives funds in support of its mission through various federal budget and appropriations processes. While not unique, the mechanisms by which ED receives, obligates, and expends funds can be complex. For example, ED receives both mandatory and discretionary appropriations; ED is annually provided forward funds and advance appropriations for some—but not all—discretionary programs; ED awards both formula and competitive grants; and a portion of ED's budget subsidizes student loan costs (direct loans and loan guarantees). As such, analyzing ED's budget requires an understanding of a broad range of federal budget and appropriations concepts. This report provides an introduction to these concepts as they are used specifically in the context of the congressional appropriations process for ED. The first section of this report provides an introduction to key terms and concepts in the federal budget and appropriations process for ED. In addition to those mentioned above, the report includes explanations of terms and concepts such as authorizations versus appropriations; budgetary allocations, discretionary spending caps, and sequestration; transfers and reprogramming; and matching requirements. The second section answers frequently asked questions about federal funding for ED or education in general. These are as follows: How much funding does ED receive annually? How much does the federal government spend on education? Where can information be found about the President's budget request and congressional appropriations for ED? How much ED funding is in the congressional budget resolution? What is the difference between the amounts in appropriations bills and report language? What happens to education funding if annual appropriations are not enacted before the start of the federal fiscal year? What happens if an ED program authorization "expires"? The third section includes a brief description of, and links to, reports and documents that provide more information about budget and appropriations concepts.

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Introduction Article I, Section 9, of the U.S. Constitution provides, "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." The Constitution does not, however, prescribe any specific structure or process for making appropriations. The committee structure established by Congress during the 20 th century assigns a prominent role to the Appropriations Committees of the House and Senate for both the development of appropriations legislation and oversight over budget execution. The Appropriations Committees, in turn, have created a system of subcommittees designed to facilitate their ability to carry out these tasks. The number and jurisdictions of appropriations subcommittees have evolved to meet changing needs and circumstances. For example, reorganization was undertaken at the beginning of the 108 th Congress in response to the creation of a new Department of Homeland Security. After the legislation establishing the new department was enacted, the House Appropriations Committee established a new subcommittee. This modification of subcommittee structure affected eight of the existing subcommittees and was one of the most extensive reorganizations of the Appropriations Committees since the 1920s. Shortly thereafter, a similar change was made in the Senate Appropriations Committee. Reorganization can also be undertaken to adapt to changes in congressional priorities. For example, in the reorganization that occurred at the start of the 109 th Congress, both the House and the Senate undertook a major change in subcommittee structure. This resulted in the elimination of three appropriations subcommittees in the House and one in the Senate and ultimately affected the jurisdictions of 10 appropriations subcommittees in the House and 8 in the Senate. Another major reorganization at the beginning of the 110 th Congress again shifted subcommittee jurisdiction to reestablish parallel House and Senate subcommittees. This report details the evolution of the House and Senate Appropriations Committees' subcommittee structure from the 1920s to the present. Consolidation and Initial Stability: 1920-1946 By the end of the First World War, the idea that the President should play a prominent role in a more centralized budgetary process gained prominence, ultimately resulting in passage of the Budget and Accounting Act of 1921. In anticipation of the more centralized executive budget system provided under the act, the House also changed its rules to require that all appropriations be considered by the Appropriations Committee. During the late 19 th century, congressional rules had assigned jurisdiction over certain general appropriations bills to committees other than the House and Senate Appropriations Committees. Notably, the appropriations bills for the District of Columbia, Indian affairs, Agriculture Department, Army, Navy, Post Office Department, and rivers and harbors (i.e., public works) were all considered by their respective legislative committees. A subsequent, additional change involved the organization of appropriations bills. Prior to the Budget and Accounting Act, appropriations bills (and subcommittees) tended to be organized along topical lines. For example, the military activities of the War Department were considered in appropriations bills reported by the Military Affairs Committee, and the activities of the Corps of Engineers were considered in River and Harbor appropriations bills reported by the Commerce Committee. The salaries and contingent expenses for the civilian administration of the department, however, were carried in the Legislative, Executive, and Judicial bill, which was within the jurisdiction of the Appropriations Committee. A similar division existed for most departments and was true even for agencies whose appropriations were wholly within the jurisdiction of the Appropriations Committee. Funding for the activities of agencies as disparate as the Interstate Commerce Commission, the Coast Guard, and the Bureau of Mines was carried in the Sundry Civil bill, which was frequently the largest of the general appropriations bills. Nevertheless, their salaries and expenses were generally funded in the Legislative, Executive, and Judicial bill. Concurrent with the congressional consolidation of jurisdiction over appropriations, the newly established Bureau of the Budget recommended that appropriations bills be reorganized along administrative lines, where appropriations for salaries and expenses would be carried in the same bill as funding for programs and activities administered by a department. This arrangement had previously existed only for the Department of Agriculture appropriations bill. The House Appropriations Committee adopted the bureau's concept and reorganized the structure of general appropriations bills and its subcommittees so extensively that only the structure of the Agriculture bill remained essentially unchanged. After its reorganization, the House Appropriations Committee comprised the following subcommittees: 1. Agriculture Department; 2. Commerce and Labor Departments; 3. Deficiencies; 4. District of Columbia; 5. Independent Offices (including the Executive Office of the President); 6. Interior Department; 7. Legislative Establishment; 8. Navy Department and the Navy; 9. Post Office Department; 10. State and Justice Departments (including the judiciary); 11. Treasury Department; and 12. War Department and the Army (both military and civil functions). By long-standing custom, the House originates all general appropriations bills. As a consequence, historically, the House has generally determined the initial content of the bills. By originating appropriations bills corresponding to its new administratively based organizational structure, the House created a jurisdictional problem for the Senate, which retained a system based on topical organization of appropriations bills, as well as multiple committees sharing jurisdiction over general appropriations bills. Confronted with the difficulty of considering the reorganized appropriations bills with its now outmoded system, the Senate reorganized its appropriations jurisdiction and subcommittees in 1922. Information available on congressional subcommittees, including those of the Appropriations Committees, is generally sparse and unsystematic prior to enactment of the Legislative Reorganization Act of 1946. From available hearings and other committee documents, however, it appears that during this era the Appropriations Committees continued the practice of each subcommittee (other than the Deficiencies Subcommittee) being responsible for drafting one of the regular appropriations bills. Using data on appropriations bills to identify subcommittee structure during this period, one may conclude that the subcommittee structure of the Appropriations Committees was relatively stable. Other than name changes, the salient changes in appropriations bill structure (and, presumably, subcommittee structure) between 1922 and 1946 seem to have been limited to the following: The combination of the bills for the Treasury and Post Office Departments beginning in the second session of the 68 th Congress (1924); The combination of the Commerce and Labor Departments bill with the State and Justice Departments bill beginning in the second session of the 68 th Congress (1924); The separation of the War Department and Army bill into two bills, one for the Military Establishment and the other for War Department Civil Functions, beginning in the first session of the 75 th Congress (1937); The separation of the Labor Department (and the Federal Security Agency) from the Departments of State, Justice, Commerce, and Labor bill beginning in the first session of the 76 th Congress (1939); and The inclusion of the Judiciary in the Legislative Branch bill during the 78 th Congress (1943-1944). Reorganization and Multiple Changes: 1947-1970 One of the chief aims of the Legislative Reorganization Act of 1946 was to bring about a modernization of Congress's committee system, including its subcommittees. As a result, unlike the earlier period, information on subcommittee structure since 1946 is more readily available. In the 80 th Congress (1947-1948), the Appropriations Committees in both chambers had these 12 subcommittees: 1. Agriculture; 2. Deficiencies; 3. District of Columbia; 4. Government Corporations; 5. Independent Offices; 6. Interior Department; 7. Legislative; 8. State, Justice, and Commerce Departments and the Judiciary; 9. Treasury Department and Post Office; 10. Labor Department and Federal Security Agency; 11. War Department; and 12. Navy Department. The idea of modernizing congressional committee structure and operations embodied in the Legislative Reorganization Act was paralleled by an interest in developing a more modern federal administrative apparatus to supplant the one that had grown in episodic bursts to meet the challenges of the Depression and World War II. Because appropriations bills continued to be organized along administrative lines, these changes in the executive branch had an impact on appropriations subcommittee structure. The four changes in party control of the House between 1947 and 1955 also contributed to an environment conducive to revision of appropriations subcommittee jurisdiction. This evolution saw the number of subcommittees fluctuate between a low of 10 and a high of 15. Despite this fluctuation, it appears that the Appropriations Committees generally continued the practice of each subcommittee being responsible for drafting one of the regular appropriations bills. Subcommittee Development Appropriations Subcommittees that were created, abolished, or reorganized from the 80 th Congress through the 91 st Congress (1947-1970) are as follows: Government Corporations A subcommittee (and appropriations bill) specifically pertaining to government corporations operated in both the House and Senate during the 80 th Congress (1947-1948). Public Works Jurisdiction over Army civil functions was transferred to the Deficiencies Subcommittees in both the House and Senate for the 81 st Congress (1949-1950). The Senate subsequently transferred jurisdiction over deficiencies to the full committee and established a separate subcommittee for Army civil functions in the 82 nd Congress, which lasted through the 83 rd (1951-1954). The House continued to operate a Deficiencies and Army Civil Functions Subcommittee in the 82 nd Congress (1951-1952) but transferred jurisdiction over deficiencies to the full committee and created a subcommittee combining Army civil functions with military construction in the 83 rd Congress (1953-1954). A Public Works Subcommittee (including the Army civil functions as well as the Atomic Energy Commission, Bureau of Reclamation, and power marketing administrations) was established by both the House and Senate Appropriations Committees beginning in the first session of the 84 th Congress (1955). The Senate maintained separate subunits within the Public Works Subcommittee to consider matters related to the Atomic Energy Commission and Tennessee Valley Authority and related to the Bureau of Reclamation and Department of the Interior power marketing associations. These subunits operated beginning in the 84 th Congress (1955-1956), continuing through the 90 th Congress (1967-1968). A single bill was reported from the subcommittee for each fiscal year during this period. Deficiencies A separate subcommittee to consider deficiencies was discontinued in the Senate after the 81 st Congress (1949-1950) and in the House after the 82 nd Congress (1951-1952). Jurisdiction over deficiencies and supplemental was subsequently exercised by the full committee. A Deficiencies Subcommittee was reestablished by the House Appropriations Committee for the 86 th through 88 th Congresses (1959-1964), after which the jurisdiction was again exercised by the full committee. The Senate Subcommittee on Deficiencies was reestablished for the second session of the 87 th Congress and met through the 91 st Congress (1962-1970). Department of Defense The War and Navy Departments were consolidated to create a National Military Establishment (later the Department of Defense) during the first session of the 80 th Congress (1947), and their respective appropriations subcommittees were combined to create an Armed Services Subcommittee at the beginning of the 81 st Congress (1949). Renamed the Department of Defense Subcommittee in the first session of the 84 th Congress (1955), the House Subcommittee maintained three separate subunits for consideration of Army, Navy, and Air Force matters during the 84 th and 85 th Congresses (1955-1958), and the Senate maintained a separate subunit for intelligence activities between the 91 st and 94 th Congresses (1968-1976). During these years, there continued to be a single Department of Defense appropriations bill. Military Construction Military construction was considered part of the Defense Appropriations bill prior to the 83 rd Congress. Between the 83 rd Congress and the first session of the 85 th Congress (1953-1957), appropriations for military construction were carried primarily in deficiency and supplemental appropriations measures. In the 83 rd Congress (1953-1954), the House operated a Civil Functions and Military Construction Subcommittee, but it is otherwise not clear whether military construction matters were considered by a subcommittee in this period. A separate Military Construction Subcommittee was created by the House Appropriations Committee beginning in the second session of the 85 th Congress (1958), and a separate bill for military construction matters was considered for the first time that same year. The Senate Appropriations Committee established a separate subunit for military construction within the Defense Subcommittee in the 86 th Congress (1959-1960) and then a separate subcommittee beginning in the first session of the 87 th Congress (1961). Legislative Branch The House and Senate Appropriations Committees established a subcommittee to consider both legislative and judiciary matters in the 83 rd Congress (1953-1954). The two chambers subsequently returned to the former practice of a separate Legislative Subcommittee, with judiciary matters being considered by the same subcommittee as the Departments of State, Justice, and Commerce beginning in the first session of the 84 th Congress (1955). Foreign Operations A separate bill to fund foreign aid programs (then called the Mutual Security bill) was considered beginning in the first session of the 83 rd Congress (1953), with jurisdiction exercised by the full committee in both the House and Senate. A separate subcommittee was established by the House Appropriations Committee beginning in the first session of the 84 th Congress (1955). Foreign operations jurisdiction continued to be exercised at the full committee level by the Senate Appropriations Committee until the first session of the 91 st Congress (1969). Commerce Jurisdiction over Commerce Department appropriations was exercised by a separate subcommittee in the 84 th through 86 th Congresses (1955-1960). The subcommittee's jurisdiction was combined with the General Government Subcommittee for the first session of the 87 th Congress (1961). Beginning in the second session of the 87 th Congress (1962), jurisdiction was transferred to a subcommittee with jurisdiction over the State, Justice, and Commerce Departments and the judiciary. General Government In the House, a separate subcommittee was established for general government matters (including the Executive Office of the President) in the 84 th through 86 th Congress (1955-1960). In the Senate, jurisdiction over general government matters was exercised by a Subcommittee on Independent Offices and General Government Matters beginning in the 84 th Congress (1955-1956), although separate appropriations bills for independent offices and general government matters were considered. In both the House and Senate, jurisdiction over general government matters was combined with the Commerce Department Subcommittee in the first session of the 87 th Congress (1961). Jurisdiction over general government matters was subsequently combined with the Treasury Department and Post Office Subcommittee in both chambers beginning in the second session of the 87 th Congress (1962). Transportation A separate subcommittee was established to consider appropriations for the newly created Transportation Department by both the House and Senate Appropriations Committees beginning in the 90 th Congress (1967). Stability: 1971-2002 With the creation of the Transportation Subcommittee by the House Appropriations Committee in 1967, the total number of appropriations subcommittees in the House stabilized at 13. The last subcommittee added in the Senate was the Foreign Operations Subcommittee in 1969, bringing the total in that body to 14. Once the Subcommittee on Deficiencies in the Senate was eliminated at the end of the 91 st Congress (1970), the two chambers' appropriations subcommittee structures both totaled 13 and remained parallel during this period. There were no additions, and few major changes, in the subcommittee structure of either the House or Senate Appropriations Committees between 1971 and 2002. The changes that did occur were primarily changes in subcommittee names to reflect changes in agency and departmental status. For example, the title of the Independent Offices bill evolved with the creation of the Departments of Housing and Urban Development in 1965 and Veterans' Affairs in 1988, the Public Works bill became known as the Energy and Water bill after the creation of the Department of Energy in 1977, and the title of the Departments of Labor and Health Education and Welfare was modified to reflect the creation of a separate Department of Education in 1979. However, these changes did not represent major shifts in appropriations subcommittee jurisdictions. At the beginning of the 107 th Congress, the House and Senate had the following 13 subcommittees: 1. Subcommittee on Agriculture, Rural Development, and Related Agencies; 2. Subcommittee on Commerce, Justice, State, and Judiciary; 3. Subcommittee on Defense; 4. Subcommittee on the District of Columbia; 5. Subcommittee on Energy and Water Development; 6. Subcommittee on Foreign Operations; 7. Subcommittee on Interior and Related Agencies; 8. Subcommittee on Labor, Health and Human Services, Education, and Related Agencies; 9. Subcommittee on Legislative Branch; 10. Subcommittee on Military Construction; 11. Subcommittee on Transportation; 12. Subcommittee on Treasury and General Government; and 13. Subcommittee on Veteran's Affairs, Housing and Urban Development, and Independent Agencies. Major Changes and Renewed Stability: 2003-Present In response to the establishment of a Department of Homeland Security (DHS), in January 2003, the chairman of the House Appropriations Committee announced that a new appropriations subcommittee would be created. This new subcommittee, consolidating appropriations jurisdiction from eight existing subcommittees over the various entities comprising the DHS, was the first major reorganization of appropriations subcommittee structure in either chamber in over 30 years. The new subcommittee was formally established when the committee organized for the 108 th Congress in February 2003. In order to keep the number of appropriations subcommittees at 13, the committee also merged the subcommittees responsible for Department of Transportation appropriations with that responsible for Treasury, Postal Service, and General Government appropriations. The Senate Appropriations Committee made a similar change when it organized in March 2003. At the beginning of the 109 th Congress (2005), the House Appropriations Committee undertook another substantial reorganization, reducing the number of subcommittees from 13 to 10. This reduction was achieved by eliminating the Subcommittees on the Legislative Branch, District of Columbia, and the Departments of Veterans Affairs, Housing and Urban Development, and Independent Agencies (VA-HUD). The jurisdiction over the Legislative Branch appropriations bill was retained by the full committee, and the following major changes were made in House appropriations subcommittee organization: A new subcommittee on Military Quality of Life and Veterans Affairs was created. This was accomplished by combining the previous jurisdiction of the Military Construction subcommittee with jurisdiction over the Department of Veterans Affairs (formerly exercised by the VA-HUD subcommittee), as well as those portions of the Department of Defense concerning the Defense Health Program and military facilities sustain ment and housing accounts. The former Transportation and Treasury subcommittee gained jurisdiction over three new areas: The Department of Housing and Urban Development was transferred from the eliminated VA-HUD subcommittee; the federal judiciary was transferred from the former Commerce, Justice, State, and the Judiciary subcommittee; and jurisdiction over the District of Columbia was transferred from the eliminated District of Columbia subcommittee. Jurisdiction over NASA, the National Science Foundation, and the Office of Science and Technology Policy was transferred from the eliminated VA-HUD subcommittee to the newly named Subcommittee on Science, State, Justice and Commerce, and Related Agencies. Jurisdiction over other agencies formerly exercised by the VA-HUD Subcommittee was transferred to the Interior Subcommittee (the Environmental Protection Agency) and Labor-HHS Subcommittee (AmeriCorps). Jurisdiction over Weatherization Assistance Grants exercised by the Labor-HHS Subcommittee, and energy-related accounts exercised by the Interior Subcommittee, was transferred to the Energy and Water Development Subcommittee. This reorganization left the House with the following 10 subcommittees: 1. Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; 2. Subcommittee on Defense; 3. Subcommittee on Energy and Water Development, and Related Agencies; 4. Subcommittee on Foreign Operations, Export Financing, and Related Programs; 5. Subcommittee on Homeland Security; 6. Subcommittee on Interior, Environment, and Related Agencies; 7. Subcommittee on Labor, Health and Human Services, Education, and Related Agencies; 8. Subcommittee on Military Quality of Life and Veterans Affairs and Related Agencies; 9. Subcommittee on Science, State, Justice and Commerce, and Related Agencies; and 10. Subcommittee on Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia. The Senate Appropriations Committee subsequently adopted a reorganization plan as well, eliminating the Subcommittee on Veterans Affairs, Housing and Urban Development, and Independent Agencies and making the following major changes: Jurisdiction over Veterans Affairs was transferred to the Subcommittee on Military Construction. Jurisdiction over the Department of Housing and Urban Development and the federal judiciary was transferred to the former Subcommittee on Transportation, Treasury and General Government. Jurisdiction over NASA, the National Science Foundation, and the Office of Science and Technology Policy was transferred to the former Subcommittee on Commerce, Justice, State, and the Judiciary. Jurisdiction over AmeriCorps was transferred to the Subcommittee on Labor, Health and Human Services, Education, and Related Agencies. Jurisdiction over the Environmental Protection Agency was transferred to the Subcommittee on Interior and Related Agencies. Jurisdiction over energy related accounts formerly exercised by the Interior Subcommittee was transferred to the Subcommittee on Energy and Water Development. Jurisdiction over the State Department was transferred to the former Subcommittee on Foreign Operations. This reorganization left the Senate with the following 12 subcommittees: 1. Subcommittee on Agriculture, Rural Development, and Related Agencies; 2. Subcommittee on Commerce, Justice and Science; 3. Subcommittee on Defense; 4. Subcommittee on the District of Columbia; 5. Subcommittee on Energy and Water Development; 6. Subcommittee on Homeland Security; 7. Subcommittee on Interior and Related Agencies; 8. Subcommittee on Labor, Health and Human Services, Education, and Related Agencies; 9. Subcommittee on Legislative Branch; 10. Subcommittee on Military Construction and Veterans Affairs; 11. Subcommittee on State and Foreign Operations, and Related Programs; and 12. Subcommittee on Transportation, Treasury, the Judiciary, and Housing and Urban Development. At the beginning of the 110 th Congress (2007), further major changes were made as follows: Jurisdiction over the Departments of Transportation, Treasury, and Housing and Urban Affairs was divided to create subcommittees in both chambers on Transportation, Housing and Urban Development, and related agencies and on Financial Services and General Government (including the Treasury Department, the Judiciary, the Executive Office of the President, the Office of Personnel Management, the Postal Service, the District of Columbia, and other related agencies, such as the Federal Elections Commission, Federal Trade Commission, Securities and Exchange Commission, and Small Business Administration). Jurisdiction over defense health programs and military facilities sustainment and housing accounts was transferred from the House Military Quality of Life subcommittee to the Defense subcommittee. Jurisdiction over the State Department was transferred from the House Science, State, Justice and Commerce, and Related Agencies subcommittee to the Foreign Operations subcommittee. In addition, the House reestablished a subcommittee with jurisdiction over the legislative branch, and the Senate eliminated a separate subcommittee on the District of Columbia. The reorganization left the two chambers with the following 12 subcommittees: 1. Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; 2. Subcommittee on Commerce, Justice, Science, and Related Agencies; 3. Subcommittee on Defense; 4. Subcommittee on Energy and Water Development, and Related Agencies; 5. Subcommittee on Financial Services and General Government; 6. Subcommittee on the Department of Homeland Security; 7. Subcommittee on Interior, Environment, and Related Agencies; 8. Subcommittee on the Departments of Labor, Health and Human Services, Education, and Related Agencies; 9. Subcommittee on Legislative Branch; 10. Subcommittee on Military Construction, Veterans Affairs, and Related Agencies; 11. Subcommittee on State, Foreign Operations, and Related Programs; 12. Subcommittee on Transportation and Housing and Urban Development, and Related Agencies. These 12 subcommittees have remained in place since 2007. In most respects, the jurisdictions of subcommittees for both the House and Senate Appropriations Committees were made parallel. The one salient exception was jurisdiction over funding for the Commodity Futures Trading Commission (CFTC). In the House, funding for CFTC is included in the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations bill, while the Senate includes it in the Financial Services and General Government Appropriations bill. Since 2007, the two chambers have alternated which of these two measures includes CFTC funding when enacted. During the first session of the 110 th Congress (2007), based on the recommendations of the 9/11 Commission, the House created the Select Intelligence Oversight Panel of the Appropriations Committee to oversee spending on federal intelligence activities. This panel was established for three major purposes: to review and study on a continuing basis budget requests for and execution of intelligence activities, to make recommendations to relevant subcommittees of the Appropriations Committee, and to prepare an annual report to the Defense subcommittee containing budgetary and oversight observations and recommendations for use by such subcommittee in preparation of the classified annex to the bill making appropriations for the Department of Defense. This panel did not have any spending jurisdiction. At the beginning of the 112 th Congress (2011), the Select Intelligence Oversight Panel was eliminated by H.Res. 5 , adopted on January 5, 2011.

This report details the evolution of the House and Senate Appropriations Committees' subcommittee structure from the 1920s to the present. In 1920, the House adopted a change in its rules to consolidate jurisdiction over all appropriations in the Appropriations Committee. After the enactment of the Budget and Accounting Act of 1921, the House reorganized its Appropriations Committee by establishing for the first time a set of subcommittees to consider appropriations bills based on the administrative organization of the executive branch. The Senate followed suit in 1922, and the two chambers have continued under that basic organizational approach since that time. It is possible to divide the evolution of the modern Appropriations subcommittee structure into four eras. The first era, stretching roughly from the initial reorganization in the 1920s until the end of the Second World War, was marked by stability. Most of the changes in Appropriations structure resulted from combining bills (e.g., the Treasury Department bill with the Post Office Department bill beginning in 1924), although one new bill (and subcommittee) was created when the appropriations bill for the Department of Labor was split off from the Departments of State, Justice, Commerce, and Labor bill in 1939. The second era, from the end of the Second World War through 1970, saw a number of significant changes. During this period, Congress attempted to keep pace with executive branch reorganizations (e.g., creation of subcommittees to consider appropriations for the new Departments of Defense in 1947 and Transportation in 1967) and changing national priorities (e.g., creation of a separate appropriations bill, and later subcommittee, for foreign operations). The third era, from 1971 through 2003, was marked by a renewed stability. While some appropriations subcommittees were renamed to reflect changes in agency and departmental status, these changes did not represent major shifts in jurisdiction. Following major changes in organization involving nearly every subcommittee in the 108th, 109th, and 110th Congresses, the two chambers have once again settled into an era of stable organization. In 2003, both the House and Senate Appropriations Committees merged their subcommittees on Transportation and Treasury and created new subcommittees to consider appropriations for the newly created Department of Homeland Security. In 2005, both chambers undertook major reorganizations, eliminating three subcommittees in the House and one in the Senate. This reorganization, however, left the two chambers with differing subcommittee jurisdictions. In 2007 the two Appropriations Committees reorganized again to reestablish parallel subcommittees that have remained in place since. During the first session of the 110th Congress (2007), the House created the Select Intelligence Oversight Panel of the appropriations committee to oversee spending on federal intelligence activities. This panel was eliminated in 2011 at the beginning of the 112th Congress. This report will be updated to reflect any changes in Appropriations subcommittee structure.

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Background The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee that serves the President in overseeing the national security implications of foreign direct investment (FDI) in the economy. Since its inception, CFIUS has operated at the nexus of shifting concepts of national security and major changes in technology, especially relative to various notions of national eco nomic security, and a changing global economic order that is marked in part by emerging economies such as China that are playing a more active role in the global economy. As a basic premise, the U.S. historical approach to international investment has aimed to establish an open and rules-based international economic system that is consistent across countries and in line with U.S. economic and national security interests. This policy also has fundamentally maintained that FDI has positive net benefits for the U.S. and global economy, except in certain cases in which national security concerns outweigh other considerations and for prudential reasons. Recently, some policymakers argued that certain foreign investment transactions, particularly by entities owned or controlled by a foreign government, investments with leading-edge or foundational technologies, or investments that may compromise personally identifiable information, are affecting U.S. national economic security. As a result, they supported greater CFIUS scrutiny of foreign investment transactions, including a mandatory approval process for some transactions. Some policymakers also argued that the CFIUS review process should have a more robust economic component, possibly even to the extent of an industrial policy-type approach that uses the CFIUS national security review process to protect and promote certain industrial sectors in the economy. Others argued, however, that the CFIUS review process should be expanded to include certain transactions that had not previously been reviewed, but that CFIUS' overall focus should remain fairly narrow. The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) In 2018, Congress and the Trump Administration adopted the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), Subtitle A of Title XVII of P.L. 115-232 (Aug. 13, 2018), which became effective on November 11, 2018. The impetus for FIRRMA was based on concerns that ''the national security landscape has shifted in recent years, and so has the nature of the investments that pose the greatest potential risk to national security ....'' As a result, FIRRMA provided for some programs to become effective upon passage, while a pilot program was developed to address immediate concerns relative to other provisions and allow time for additional resources to be directed at developing a more permanent response in these areas. Interim rules for the pilot program developed by the Treasury Department cover an expanded scope of transactions subject to a review by CFIUS to include noncontrolling investments by foreign persons in U.S. firms involved in critical technologies. A second part of the pilot program implements FIRRMA's mandatory declarations provision for all transactions that fall within the specific scope of the pilot program. The pilot program is to end no later than March 5, 2020. Upon enactment, FIRRMA: (1) expanded the scope and jurisdiction of CFIUS by redefining such terms as "covered transactions" and "critical technologies"; (2) refined CFIUS procedures, including timing for reviews and investigations; and (3) required actions by CFIUS to address national security risks related to mitigation agreements, among other areas. Treasury's interim rules updated and amended existing regulations in order to implement certain provisions immediately. FIRRMA also required CFIUS to take certain actions within prescribed deadlines for various programs, reporting, and other plans. FIRRMA also broadened CFIUS' mandate by explicitly including for review certain real estate transactions in close proximity to a military installation or U.S. government facility or property of national security sensitivities. In addition, FIRRMA: provides for CFIUS to review any noncontrolling investment in U.S. businesses involved in critical technology, critical infrastructure, or collecting sensitive data on U.S. citizens; any change in foreign investor rights; transactions in which a foreign government has a direct or indirect substantial interest; and any transaction or arrangement designed to evade CFIUS. Through a "sense of Congress" provision in FIRRMA, CFIUS reviews potentially can discriminate among investors from certain countries that are determined to be a country of "special concern" (specified through additional regulations) that has a "demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect U.S. leadership in areas related to national security." Foreign Investment Data Information on international investment and production collected and published by the United Nations indicates that global annual inflows of FDI peaked in 2015, surpassing the previous record set in 2007, but has fallen since, as indicated in Figure 1 . Similarly, from 2012 through 2014, international flows of FDI fell below the levels reached prior to the 2008-2009 financial crisis, but revived in 2015. Between 2015 and 2017, FDI inflows fell by nearly $500 million to $1.4 billion, largely reflecting lower inflows to developed economies as a result of a 22% decline in cross-border merger and acquisition activity (M&As). FDI inflows to developing economies also declined, but at a slower rate than among flows to developed economies, while investment flows to economies in transition continued to increase at a steady pace. Other cross-border capital flows (portfolio investments and bank loans) continued at a strong pace in 2017, contrary to the trend in direct investment. Globally, the foreign affiliates of international firms employed 73 million people in 2017, as indicted in Table 1 . Globally, the stock, or cumulative amount, of FDI in 2017 totaled about $31 trillion. Other measures of international production, sales, assets, value-added production, and exports generally indicate higher nominal values in 2017 than in the previous year, providing some indication that global economic growth was recovering. According to the United Nations, the global FDI position in the United States, or the cumulative amount of inward foreign direct investment, was recorded at around $7.8 trillion in 2017, with the U.S. outward FDI position of about $7.9 trillion. The next closest country in investment position to the United States was Hong Kong with inward and outward investment positions of about one-fourth that of the United States. In comparison, the 28 counties comprising the European Union (EU) had an inward investment position of $9.1 trillion in 2017 and an outward position of $10.6 trillion. Origins of CFIUS Established by an Executive Order of President Ford in 1975, CFIUS initially operated in relative obscurity. According to a Treasury Department memorandum, the Committee was established in order to "dissuade Congress from enacting new restrictions" on foreign investment, as a result of growing concerns over the rapid increase in investments by Organization of the Petroleum Exporting Countries (OPEC) countries in American portfolio assets (Treasury securities, corporate stocks and bonds), and to respond to concerns of some that much of the OPEC investments were being driven by political, rather than by economic, motives. Thirty years later in 2006, public and congressional concerns about the proposed purchase of commercial port operations of the British-owned Peninsular and Oriental Steam Navigation Company (P&O) in six U.S. ports by Dubai Ports World (DP World) sparked a firestorm of criticism and congressional activity during the 109 th Congress concerning CFIUS and the manner in which it operated. As a result of the attention by the public and Congress, DP World officials decided to sell off the U.S. port operations to an American owner. On December 11, 2006, DP World officials announced that a unit of AIG Global Investment Group, a New York-based asset management company with large assets, but no experience in port operations, had acquired the U.S. port operations for an undisclosed amount. The DP World transaction revealed that the September 11, 2001, terrorist attacks fundamentally altered the viewpoint of some Members of Congress regarding the role of foreign investment in the economy and the potential impact of such investment on U.S. national security. Some Members argued that this change in perspective required a reassessment of the role of foreign investment in the economy and of the implications of corporate ownership on activities that fall under the rubric of critical infrastructure. The emergence of state-owned enterprises as commercial economic actors has raised additional concerns about whose interests and whose objectives such firms are pursuing in their foreign investment activities. More than 25 bills were introduced in the second session of the 109 th Congress that addressed various aspects of foreign investment following the proposed DP World transaction. In the first session of the 110 th Congress, Congress passed, and President Bush signed, the Foreign Investment and National Security Act of 2007 (FINSA) ( P.L. 110-49 ), which altered the CFIUS process in order to enable greater oversight by Congress and increased transparency and reporting by the Committee on its decisions. In addition, the act broadened the definition of national security and required greater scrutiny by CFIUS of certain types of foreign direct investment. Not all Members were satisfied with the law: some Members argued that the law remained deficient in reviewing investment by foreign governments through sovereign wealth funds (SWFs). Also left unresolved were issues concerning the role of foreign investment in the nation's overall security framework and the methods that are used to assess the impact of foreign investment on the nation's defense industrial base, critical infrastructure, and homeland security. Establishment of CFIUS President Ford's 1975 Executive Order established the basic structure of CFIUS, and directed that the "representative" of the Secretary of the Treasury be the chairman of the Committee. The Executive Order also stipulated that the Committee would have "the primary continuing responsibility within the executive branch for monitoring the impact of foreign investment in the United States, both direct and portfolio, and for coordinating the implementation of United States policy on such investment." In particular, CFIUS was directed to (1) arrange for the preparation of analyses of trends and significant developments in foreign investment in the United States; (2) provide guidance on arrangements with foreign governments for advance consultations on prospective major foreign governmental investment in the United States; (3) review investment in the United States which, in the judgment of the Committee, might have major implications for U.S. national interests; and (4) consider proposals for new legislation or regulations relating to foreign investment as may appear necessary. President Ford's Executive Order also stipulated that information submitted "in confidence shall not be publicly disclosed" and that information submitted to CFIUS be used "only for the purpose of carrying out the functions and activities" of the order. In addition, the Secretary of Commerce was directed to perform a number of activities, including (1) Obtaining, consolidating, and analyzing information on foreign investment in the United States; (2) Improving the procedures for the collection and dissemination of information on such foreign investment; (3) Observing foreign investment in the United States; (4) Preparing reports and analyses of trends and of significant developments in appropriate categories of such investment; (5) Compiling data and preparing evaluation of significant transactions; and (6) Submitting to the Committee on Foreign Investment in the United States appropriate reports, analyses, data, and recommendations as to how information on foreign investment can be kept current. The Executive Order, however, raised questions among various observers and government officials who doubted that federal agencies had the legal authority to collect the types of data that were required by the order. As a result, Congress and the President sought to clarify this issue, and in the following year President Ford signed the International Investment Survey Act of 1976. The act gave the President "clear and unambiguous authority" to collect information on "international investment." In addition, the act authorized "the collection and use of information on direct investments owned or controlled directly or indirectly by foreign governments or persons, and to provide analyses of such information to the Congress, the executive agencies, and the general public." By 1980, some Members of Congress raised concerns that CFIUS was not fulfilling its mandate. Between 1975 and 1980, for instance, the Committee met only 10 times and seemed unable to decide whether it should respond to the political or the economic aspects of foreign direct investment in the United States. One critic of the Committee argued in a congressional hearing in 1979 that, "the Committee has been reduced over the last four years to a body that only responds to the political aspects or the political questions that foreign investment in the United States poses and not with what we really want to know about foreign investments in the United States, that is: Is it good for the economy?" From 1980 to 1987, CFIUS investigated a number of foreign investment transactions, mostly at the request of the Department of Defense. In 1983, for instance, a Japanese firm sought to acquire a U.S. specialty steel producer. The Department of Defense subsequently classified the metals produced by the firm because they were used in the production of military aircraft, which caused the Japanese firm to withdraw its offer. Another Japanese company attempted to acquire a U.S. firm in 1985 that manufactured specialized ball bearings for the military. The acquisition was completed after the Japanese firm agreed that production would be maintained in the United States. In a similar case in 1987, the Defense Department objected to a proposed acquisition of the computer division of a U.S. multinational company by a French firm because of classified work conducted by the computer division. The acquisition proceeded after the classified contracts were reassigned to the U.S. parent company. The "Exon-Florio" Provision In 1988, amid concerns over foreign acquisition of certain types of U.S. firms, particularly by Japanese firms, Congress approved the Exon-Florio amendment to the Defense Production Act, which specified the basic review process of foreign investments. The statute granted the President the authority to block proposed or pending foreign "mergers, acquisitions, or takeovers" of "persons engaged in interstate commerce in the United States" that threatened to impair the national security. Congress directed, however, that the President could invoke this authority only after he had concluded that (1) other U.S. laws were inadequate or inappropriate to protect the national security; and (2) "credible evidence" existed that the foreign interest exercising control might take action that threatened to impair U.S. national security. This same standard was maintained in an update to the Exon-Florio provision in 2007, the Foreign Investment and National Security Act of 2007, and in FIRRMA. After three years of often contentious negotiations between Congress and the Reagan Administration, Congress passed and President Reagan signed the Omnibus Trade and Competitiveness Act of 1988. During consideration of the Exon-Florio proposal as an amendment to the omnibus trade bill, debate focused on three controversial issues: (1) what constitutes foreign control of a U.S. firm?; (2) how should national security be defined?; and (3) which types of economic activities should be targeted for a CFIUS review? Of these issues, the most controversial and far-reaching was the lack of a definition of national security. As originally drafted, the provision would have considered investments which affected the "national security and essential commerce" of the United States. The term "essential commerce" was the focus of intense debate between Congress and the Reagan Administration. The Treasury Department, headed by Secretary James Baker, objected to the Exon-Florio amendment, and the Administration vetoed the first version of the omnibus trade legislation, in part due to its objections to the language in the measure regarding "national security and essential commerce." The Reagan Administration argued that the language would broaden the definition of national security beyond the traditional concept of military/defense to one which included a strong economic component. Administration witnesses argued against this aspect of the proposal and eventually succeeded in prodding Congress to remove the term "essential commerce" from the measure and narrow substantially the factors the President must consider in his determination. The final Exon-Florio provision was included as Section 5021 of the Omnibus Trade and Competitiveness Act of 1988. The provision originated in bills reported by the Commerce Committee in the Senate and the Energy and Commerce Committee in the House, but the measure was transferred to the Senate Banking Committee as a result of a dispute over jurisdictional responsibilities. Through Executive Order 12661, President Reagan implemented provisions of the Omnibus Trade Act. In the Executive Order, President Reagan delegated his authority to administer the Exon-Florio provision to CFIUS, particularly to conduct reviews, undertake investigations, and make recommendations, although the statute itself does not specifically mention CFIUS. As a result of President Reagan's action, CFIUS was transformed from an administrative body with limited authority to review and analyze data on foreign investment to an important component of U.S. foreign investment policy with a broad mandate and significant authority to advise the President on foreign investment transactions and to recommend that some transactions be suspended or blocked. In 1990, President Bush directed the China National Aero-Technology Import and Export Corporation (CATIC) to divest its acquisition of MAMCO Manufacturing, a Seattle-based firm producing metal parts and assemblies for aircraft, because of concerns that CATIC might gain access to technology through MAMCO that it would otherwise have to obtain under an export license. Part of Congress's motivation in adopting the Exon-Florio provision apparently arose from concerns that foreign takeovers of U.S. firms could not be stopped unless the President declared a national emergency or regulators invoked federal antitrust, environmental, or securities laws. Through the Exon-Florio provision, Congress attempted to strengthen the President's hand in conducting foreign investment policy, while limiting its own role as a means of emphasizing that, as much as possible, the commercial nature of investment transactions should be free from political considerations. Congress also attempted to balance public concerns about the economic impact of certain types of foreign investment with the nation's long-standing international commitment to maintaining an open and receptive environment for foreign investment. Furthermore, Congress did not intend to have the Exon-Florio provision alter the generally open foreign investment climate of the country or to have it inhibit foreign direct investment in industries that could not be considered to be of national security interest. At the time, some analysts believed the provision could potentially widen the scope of industries that fell under the national security rubric. CFIUS, however, is not free to establish an independent approach to reviewing foreign investment transactions, but operates under the authority of the President and reflects his attitudes and policies. As a result, the discretion CFIUS uses to review and to investigate foreign investment cases reflects policy guidance from the President. Foreign investors also are constrained by legislation that bars foreign direct investment in such industries as maritime, aircraft, banking, resources, and power. Generally, these sectors were closed to foreign investors prior to passage of the Exon-Florio provision in order to prevent public services and public interest activities from falling under foreign control, primarily for national defense purposes. Treasury Department Regulations After extensive public comment, the Treasury Department issued its final regulations in November 1991 implementing the Exon-Florio provision. Although these procedures were amended through FINSA, they continued to serve as the basis for the Exon-Florio review and investigation until new regulations were released on November 21, 2008. These regulations created an essentially voluntary system of notification by the parties to an acquisition, and they allowed for notices of acquisitions by agencies that are members of CFIUS. Despite the voluntary nature of the notification, firms largely complied with the provision, because the regulations stipulate that foreign acquisitions that are governed by the Exon-Florio review process that do not notify the Committee remain subject indefinitely to possible divestment or other appropriate actions by the President. Under most circumstances, notice of a proposed acquisition that is given to the Committee by a third party, including shareholders, is not considered by the Committee to constitute an official notification. The regulations also indicated that notifications provided to the Committee would be considered confidential and the information would not be released by the Committee to the press or commented on publicly. The "Byrd Amendment" In 1992, Congress amended the Exon-Florio statute through Section 837(a) of the National Defense Authorization Act for Fiscal Year 1993 ( P.L. 102-484 ). Known as the "Byrd" amendment after the amendment's sponsor, Senator Byrd, the provision requires CFIUS to investigate proposed mergers, acquisitions, or takeovers in cases where two criteria are met: (1) the acquirer is controlled by or acting on behalf of a foreign government; and (2) the acquisition results in control of a person engaged in interstate commerce in the United States that could affect the national security of the United States. This amendment came under scrutiny by the 109 th Congress as a result of the DP World transaction. Many Members of Congress and others believed that this amendment required CFIUS to undertake a full 45-day investigation of the transaction because DP World was "controlled by or acting on behalf of a foreign government." The DP World acquisition, however, exposed a sharp rift between what some Members apparently believed the amendment directed CFIUS to do and how the members of CFIUS interpreted the amendment. In particular, some Members of Congress apparently interpreted the amendment to direct CFIUS to conduct a mandatory 45-day investigation if the foreign firm involved in a transaction is owned or controlled by a foreign government. Representatives of CFIUS argued they interpreted the amendment to mean that a 45-day investigation was discretionary and not mandatory. In the case of the DP World acquisition, CFIUS representatives argued they had concluded as a result of an extensive review of the proposed acquisition prior to the case being formally filed with CFIUS and during the then-existing 30-day review that the DP World case did not warrant a full 45-day investigation. They conceded that the case met the first criterion under the Byrd amendment, because DP World was controlled by a foreign government, but that it did not meet the second part of the requirement, because CFIUS had concluded during the 30-day review that the transaction "could not affect the national security." The intense public and congressional reaction that arose from the proposed Dubai Ports World acquisition spurred the Bush Administration in late 2006 to make an important administrative change in the way CFIUS reviewed foreign investment transactions. CFIUS and President Bush approved the acquisition of Lucent Technologies, Inc. by the French-based Alcatel SA, which was completed on December 1, 2006. Before the transaction was approved by CFIUS, however, Alcatel-Lucent was required to agree to a national security arrangement, known as a Special Security Arrangement, or SSA, that restricts Alcatel's access to sensitive work done by Lucent's research arm, Bell Labs, and the communications infrastructure in the United States. The most controversial feature of this arrangement was that it allowed CFIUS to reopen a review of a transaction and to overturn its approval at any time if CFIUS believed the companies "materially fail to comply" with the terms of the arrangement. This marked a significant change in the CFIUS process. Prior to this transaction, CFIUS reviews and investigations were portrayed and considered to be final. As a result, firms were willing to subject themselves voluntarily to a CFIUS review, because they believed that once an investment transaction was scrutinized and approved by the members of CFIUS the firms could be assured that the investment transaction would be exempt from any future reviews or actions. This administrative change, however, meant that a CFIUS determination may no longer be a final decision, and it added a new level of uncertainty to foreign investors seeking to acquire U.S. firms. A broad range of U.S. and international business groups objected to this change in the Bush Administration's policy. Recent Legislative Reforms In the first session of the 110th Congress, Representative Maloney introduced H.R. 556 , the National Security Foreign Investment Reform and Strengthened Transparency Act of 2007, on January 18, 2007. The House Financial Services Committee approved it on February 13, 2007, with amendments, and the full House amended and approved it on February 28, 2007, by a vote of 423 to 0. On June 13, 2007, Senator Dodd introduced S1610, the Foreign Investment and National Security Act of 2007 (FINSA). On June 29, 2007, the Senate adopted S. 1610 in lieu of H.R. 556 by unanimous consent. On July 11, 2007, the House accepted the Senate's version of H.R. 556 by a vote of 370-45 and sent the measure to President Bush, who signed it on July 26, 2007. On January 23, 2008, President Bush issued Executive Order 13456 implementing the law. FINSA made a number of major changes, including: Codified the Committee on Foreign Investment in the United States (CFIUS), giving it statutory authority. Made CFIUS membership permanent and added the Secretary of Energy, the Director of National Intelligence (DNI), and Secretary of Labor as ex officio members with the DNI providing intelligence analysis; also granted authority to the President to add members on a case-by-case basis. Required the Secretary of the Treasury to designate an agency with lead responsibility for reviewing a covered transaction. Increased the number of factors the President could consider in making his determination. Required that an individual no lower than an Assistant Secretary level for each CFIUS member must certify to Congress that a reviewed transaction has no unresolved national security issues; for investigated transactions, the certification must be at the Secretary or Deputy Secretary level. Provided Congress with confidential briefings upon request on cleared transactions and annual classified and unclassified reports. FIRRMA Legislation: Key Provisions During the 115 th Congress, many Members expressed concerns over China's growing investment in the United States, particularly in the technology sector. On November 8, 2017, Senators John Cornyn and Dianne Feinstein and Representative Robert Pittenger introduced companion measures in the Senate ( S. 2098 ) and the House ( H.R. 4311 ), respectively, identified as the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) to provide comprehensive revision of the CFIUS process. On May 22, 2018, the Senate Banking and House Financial Services Committees held their respective markup sessions and approved different versions of the legislation. The Senate version of FIRRMA was added as Subtitle A of Title 17 of the Senate version of the National Defense Authorization Act for Fiscal Year 2019 ( S. 2987 , incorporated into the Senate amendments to H.R. 5515 ), which passed the Senate on June 18, 2018. The House version of FIRRMA, H.R. 5841 was passed as a standalone bill under suspension vote on June 26, 2018. On August 13, 2018, President Trump signed FIRRMA, identified as P.L. 115-232 . Similar to previous measures, FIRRMA grants the President the authority to block or suspend proposed or pending foreign "mergers, acquisitions, or takeovers" by or with any foreign person that could result in foreign control of any United States business, including such a merger, acquisition, or takeover carried out through a joint venture that threaten to impair the national security. Congress directed, however, that before this authority can be invoked the President must conclude that (1) other U.S. laws are inadequate or inappropriate to protect the national security; and (2) he/she must have "credible evidence" that the foreign interest exercising control might take action that threatens to impair the national security. According to CFIUS, it has interpreted this last provision to mean an investment that poses a risk to the national security. In assessing the national security risk, CFIUS looks at (1) the threat, which involves an assessment of the intent and capabilities of the acquirer; (2) the vulnerability, which involves an assessment of the aspects of the U.S. business that could impact national security; and (3) the potential national security consequences if the vulnerabilities were to be exploited. In general, FIRRMA: Broaden s the scope of transactions under CFIUS ' purview by including for review real estate transactions in close proximity to a military installation or U.S. Government facility or property of national security sensitivities; any nonpassive investment in a critical industry or critical technologies; any change in foreign investor rights regarding a U.S. business; transactions in which a foreign government has a direct or indirect substantial interest; and any transaction or arrangement designed to evade CFIUS regulations. Mandates various deadlines , including: a report on Chinese investment in the United States, a plan for CFIUS members to recuse themselves in cases that pose a conflict of interest, an assessment of CFIUS resources and plans for additional staff and resources, a feasibility study of assessing a fee on transactions reviewed unofficially prior to submission of a written notification, and a report assessing the national security risks related to investments by state-owned or state-controlled entities in the manufacture or assembly of rolling stock or other assets used in freight rail, public transportation rail systems, or intercity passenger rail system in the United States. Allows CFI US to discriminate among foreign investors by country of origin in reviewing investment transactions by labeling some countries as "a country of special concern"—a country that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security. Shift s the filing process for foreign firms from voluntary to mandatory in certain cases and provides for a two-track method for reviewing investment transactions, with some transactions requiring a declaration to CFIUS and receiving an expedited process, while transactions involving investors from countries of special concern would require a written notification of a proposed transaction and would receive greater scrutiny. Provide s for additional factors for consideration that CFIUS and the President may use to determine if a transaction threatens to impair U.S. national security, as well as formalizes CFIUS' use of risk-based analysis to assess the national security risks of a transaction by assessing the threat, vulnerabilities, and consequences to national security related to the transaction. Lengthen s most time periods for CFIUS reviews and investigations and for a national security analysis by the Director of National Intelligence. Provide s for more staff to ha ndle an expected increased work load and provide s for additional funding for CFIUS through a filing fee structure for firms involved in a transaction and a $20 million annual appropriation. Modif ies CFIUS' annual reporting requirements , including its annual classified report to specified Members of Congress and nonclassified reports to the public to provide for more information on foreign investment transactions. Mandate s separate reforms related to export controls , with requirements to establish an interagency process to identify so-called "emerging and foundational technologies"—such items are to also fall under CFIUS review of critical technologies—and establish controls on the export or transfer of such technologies. CFIUS: Major Provisions As indicated in Figure 2 below, the CFIUS foreign investment review process is comprised of an informal step and three formal steps: a Declaration or written notice; a National Security Review; and a National Security Investigation. Depending on the outcome of the reviews, CFIUS may forward a transaction to the President for a Presidential Determination. FIRRMA increases the allowable time for reviews and investigations: (1) 30 days to review a declaration or written notification to determine of the transaction involves a foreign person in which a foreign government has a substantial interest; (2) a 45-day national security review (from 30 days), including an expanded time limit for analysis by the Director of National Intelligence (from 20 to 30 days); (3) a 45-day national security investigation, with an option for a 15 day extension for "extraordinary circumstances;" and a 15-day Presidential determination (unchanged). Neither Congress nor the Administration has attempted to define the term "national security." Treasury Department officials have indicated, however, that during a review or investigation each CFIUS member is expected to apply that definition of national security that is consistent with the representative agency's specific legislative mandate. The concept of national security was broadened by P.L. 110-49 to include, "those issues relating to 'homeland security,' including its application to critical infrastructure." As presently construed, national security includes "those issues relating to 'homeland security,' including its application to critical infrastructure," and "critical technologies." FIRRMA broadens CFIUS' role by explicitly including for review certain real estate transactions in close proximity to a military installation or U.S. government facility or property of national security sensitivities; any noncontrolling investment in U.S. businesses involved in critical technology, critical infrastructure, or collecting sensitive data on U.S. citizens; any change in foreign investor rights; transactions in which a foreign government has a direct or indirect substantial interest; and any transaction or arrangement designed to evade CFIUS. While specific countries are not singled out, FIRRMA allows CFIUS to potentially discriminate among foreign investors by country of origin in reviewing certain investment transactions. Greater scrutiny could be directed on transactions tied to certain countries, pending specific criteria defined by regulations. FIRRMA provides a "sense of Congress" concerning six additional factors that CFIUS and the President may consider to determine if a proposed transaction threatens to impair U.S. national security. These include: 1. Covered transactions that involve a country of "special concern" that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect U.S. leadership in areas related to national security; 2. The potential effects of the cumulative control of, or pattern of recent transactions involving, any one type of critical infrastructure, energy asset, critical material, or critical technology by a foreign government or person; 3. Whether any foreign person engaged in a transaction has a history of complying with U.S. laws and regulations; 4. Control of U.S. industries and commercial activity that affect U.S. capability and capacity to meet the requirements of national security, including the availability of human resources, products, technology, materials, and other supplies and services; 5. The extent to which a transaction is likely to expose personally identifiable information, genetic information, or other sensitive data of U.S. citizens to access by a foreign government or person that may exploit that information to threaten national security; and 6. Whether a transaction is likely to exacerbate or create new cybersecurity vulnerabilities or is likely to result in a foreign government gaining a significant new capability to engage in malicious cyber-enabled activities. National Security Reviews Informal Actions Over time, the three-step CFIUS process has evolved to include an informal stage of unspecified length of time that consists of an unofficial CFIUS determination prior to the formal filing with CFIUS. This type of informal review likely developed because it serves the interests of both CFIUS and the firms that are involved in an investment transaction. According to Treasury Department officials, this informal contact enabled "CFIUS staff to identify potential issues before the review process formally begins." FIRMMA directed CFIUS to analyze the feasibility and potential impact of charging a fee for conducting such informal reviews. Firms that are party to an investment transaction apparently benefit from this informal review in a number of ways. For one, it allows firms additional time to work out any national security concerns privately with individual CFIUS members. Secondly, and perhaps more importantly, it provides a process for firms to avoid risking potential negative publicity that could arise if a transaction were blocked or otherwise labeled as impairing U.S. national security interests. For some firms, public knowledge of a CFIUS investigation has had a negative effect on the value of the firm's stock price. For CFIUS members, the informal process is beneficial because it gives them as much time as they deem necessary to review a transaction without facing the time constraints that arise under the formal CFIUS review process. This informal review likely also gives CFIUS members added time to negotiate with firms involved in a transaction to restructure the transaction in ways that can address any potential security concerns or to develop other types of conditions that members feel are appropriate in order to remove security concerns. According to anecdotal evidence, some firms believe the CFIUS process is not market neutral, but adds to market uncertainty that can negatively affect a firm's stock price and lead to economic behavior by some firms that is not optimal for the economy as a whole. Such behavior might involve firms expending resources to avoid a CFIUS investigation, or terminating a transaction that potentially could improve the optimal performance of the economy to avoid a CFIUS investigation. While such anecdotal accounts generally are not a basis for developing public policy, they raise concerns about the possible impact a CFIUS review may have on financial markets and the potential costs of redefining the concept of national security relative to foreign investment. Formal Actions FIRRMA shifts the filing requirement for foreign firms from voluntary to mandatory in certain cases and provides a two-track method for reviewing transactions. Some firms are permitted to file a declaration with CFIUS and could receive an expedited review process, while transactions involving a foreign person in which a foreign government has, directly or indirectly, a substantial interest (to be defined by regulations, but not including stakes of less than 10% voting interest) would be required to file a written notification and receive greater scrutiny. Mandatory declarations may be subject to other criteria as defined by regulations. The chief executive officer of any party to a merger, acquisition, or takeover must certify in writing that the information contained in a written notification to CFIUS fully complies with the CFIUS requirements and that the information is accurate and complete. This written notification would also include any mitigation agreement or condition that was part of a CFIUS approval. The mandatory filing and review process (via a declaration) are required for foreign investments in certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies in 27 specified industries. This requirement applies to critical technologies that are used either in connection with the U.S. business's activity in one or more of the industries specified under the pilot program, or designed by the U.S. business specifically for use in one or more of the specified industries. The shift also expands CFIUS reviews of transactions beyond those that give foreign investors a controlling interest to include investments in which foreign investors do not have a controlling interest in a U.S. firm as a result of the foreign investment. Specifically, such noncontrolling investments are covered, or subject to a review, if they would grant the foreign investor access to "material nonpublic technical information" in possession of the U.S. business; membership or observer rights on the board of directors; or any involvement in substantive decisionmaking regarding critical technology. Prior to this change, a controlling interest was determined to be at least 10% of the voting shares of a publicly traded company, or at least 10% of the total assets of a nonpublicly traded U.S. company. This shift was precipitated by concerns that investments in which foreign firms have a noncontrolling interest could nevertheless "affect certain decisions made by, or obtain certain information from, a U.S. business with respect to the use, development, acquisition, or release of critical technology." New authorities granted by FIRRMA for CFIUS to review noncontrolling investments were not immediately effective upon passage of the Act, but were included as part of the Treasury Department's pilot program. The Treasury Department's pilot program also includes provisions for declarations and written notices. The program indicates that declarations and written notices are distinguished according to three criteria: the length of the submission, the time for CFIUS' consideration of the submission, and the Committee's options for disposition of the submission. Declarations are described as short notices that do not exceed five pages. The parties to a transaction could voluntarily stipulate that a transaction is a covered transaction, whether the transaction could result in control of a U.S. business by a foreign person, and whether the transaction is a foreign-government controlled transaction. CFIUS would be required to respond within 30 days to the filing of a declaration, whereas CFIUS would have 45 days to respond to a written notification. CFIUS would also be required to respond in one of four ways to a declaration: (1) request that the parties file a written notice; (2) inform the parties that CFIUS cannot complete the review on the basis of the declaration and that they can file a notice to seek a written notification from the Committee that it has completed all the action relevant to the transaction; (3) initiate a unilateral review of the transaction through an agency notice; or (4) notify the parties that CFIUS has completed its action under the statute. At any point during the CFIUS process, parties can withdraw and refile their notice, for instance, to allow additional time to discuss CFIUS's proposed resolution of outstanding issues. Under FINSA and FIRRMA, the President retains his authority as the only officer capable of suspending or prohibiting mergers, acquisitions, and takeovers, and the measures place additional requirements on firms that resubmitted a filing after previously withdrawing a filing before a full review was completed. National Security Review After a transaction is filed with CFIUS and depending on an initial assessment, the transaction can be subject to a 45-day national security review. During a review, CFIUS members are required to consider the 12 factors mandated by Congress through FINSA and six new factors in FIRRMA that reflect the "sense of Congress" in assessing the impact of an investment. If during the 45-day review period all members conclude that the investment does not threaten to impair the national security, the review is terminated. During the 45-day review stage, the Director of National Intelligence (DNI), an ex officio member of CFIUS, is required to carry out a thorough analysis of "any threat to the national security of the United States" of any merger, acquisition, or takeover. This analysis is required to be completed "within 30 days" (modified by FIRRMA from 20 to 30 days) of the receipt of a notification by CFIUS. This analysis could include a request for information from the Department of the Treasury's Director of the Office of Foreign Assets Control and the Director of the Financial Crimes Enforcement Network. In addition, the Director of National Intelligence is required to seek and to incorporate the views of "all affected or appropriate" intelligence agencies. CFIUS also is required to review "covered" investment transactions in which the foreign entity is owned or controlled by a foreign government, but the law provides an exception to this requirement. If the Secretary of the Treasury and certain other specified officials determine that the transaction in question will not impair the national security, the investment is not subject to a formal review. National Security Investigation If a national security review indicates that at least one of three conditions exists, the President, acting through CFIUS, is required to conduct a National Security Investigation and to take any "necessary" actions as part of an additional 45-day investigation, with a possible 15-day extension. The three conditions are: (1) CFIUS determines that the transaction threatens to impair the national security of the United States and that the threat has not been mitigated during or prior to a review of the transaction; (2) the foreign person is controlled by a foreign government; or (3) the transaction would result in the control of any critical infrastructure by a foreign person, the transaction could impair the national security, and such impairment has not been mitigated. At the conclusion of the investigation or 45-day review period, whichever comes first, the Committee can decide to offer no recommendation or it can recommend to the President that he/she suspend or prohibit the investment. During a review or an investigation, CFIUS and a designated lead agency have the authority to negotiate, impose, or enforce any agreement or condition with the parties to a transaction in order to mitigate any threat to U.S. national security. Such agreements are based on a "risk-based analysis" of the threat posed by the transaction. Also, if a notification of a transaction is withdrawn before any review or investigation by CFIUS is completed, the amended law grants the Committee the authority to take a number of actions. In particular, the Committee could develop (1) interim protections to address specific concerns about the transaction pending a resubmission of a notice by the parties; (2) specific time frames for resubmitting the notice; and (3) a process for tracking any actions taken by any parties to the transaction. Presidential Determination As noted above, CFIUS authorities allow the President to block or suspend proposed or pending foreign "mergers, acquisitions, or takeovers" that threaten to impair the national security. The President, however, is under no obligation to follow the recommendation of the Committee to suspend or prohibit an investment. Congress directed that before this authority can be invoked (1) the President must conclude that other U.S. laws are inadequate or inappropriate to protect the national security; and (2) the President must have "credible evidence" that the foreign investment will impair the national security. As a result, if CFIUS determines, as was the case in the Dubai Ports transaction, that it does not have credible evidence that an investment will impair the national security, then it may argue that it is not required to undertake a full 45-day investigation, even if the foreign entity is owned or controlled by a foreign government. After considering the two conditions listed above (other laws are inadequate or inappropriate, and he has credible evidence that a foreign transaction will impair national security), the President is granted almost unlimited authority to take " such action for such time as the President considers appropriate to suspend or prohibit any covered transaction that threatens to impair the national security of the United States ." In addition, such determinations by the President are not subject to judicial review, although the process by which the disposition of a transaction is determined may be subject to judicial review to ensure that the constitutional rights of the parties involved are upheld, as was emphasized in the ruling by the U.S. District Court for the District of Columbia in the case of Ralls vs. the Committee on Foreign Investment in the United States . Committee Membership President Bush's January 23, 2008, Executive Order 13456 implementing FINSA made various changes to the law. The Committee consists of nine Cabinet members, including the Secretaries of State, the Treasury, Defense, Homeland Security, Commerce, and Energy; the Attorney General; the United States Trade Representative; and the Director of the Office of Science and Technology Policy. The Secretary of Labor and the Director of National Intelligence serve as ex officio members of the Committee. The Executive Order added five executive office members to CFIUS in order to "observe and, as appropriate, participate in and report to the President:" the Director of the Office of Management and Budget; the Chairman of the Council of Economic Advisors; the Assistant to the President for National Security Affairs; the Assistant to the President for Economic Policy; and the Assistant to the President for Homeland Security and Counterterrorism. The President can also appoint members on a temporary basis to the Committee as he determines. FIRRMA did not alter the membership of the Committee, but added two new positions within the Treasury Department. Both of the new positions are designated to be at the level of Assistant Secretary, with one of the positions an Assistant Secretary for Investment Security, whose primary responsibilities will be with CFIUS, under the direction of the Treasury Secretary. Covered Transactions The statute requires CFIUS to review all "covered" foreign investment transactions to determine whether a transaction threatens to impair the national security, or the foreign entity is controlled by a foreign government, or it would result in control of any "critical infrastructure that could impair the national security." A covered foreign investment transaction is defined as any merger, acquisition, or takeover "that could result in foreign control of any United States business, including such a merger, acquisition, or takeover carried out through a joint venture." The term 'national security' is defined to include those issues relating to 'homeland security,' including its application to critical infrastructure and critical technologies. In addition, in reviewing a covered transaction, Congress directed that CFIUS and the President "may" consider the following: the control of United States industries and commercial activity by foreign persons as it affects the capability and capacity of the United States to meet the requirements of national security, including the availability of human resources, products, technology, materials, and other supplies and services, and in considering ''the availability of human resources,'' should construe that term to include potential losses of such availability resulting from reductions in the employment of United States persons whose knowledge or skills are critical to national security, including the continued production in the United States of items that are likely to be acquired by the Department of Defense or other Federal departments or agencies for the advancement of the national security of the United States; and the extent to which a covered transaction is likely to expose, either directly or indirectly, personally identifiable information, genetic information, or other sensitive data of United States citizens to access by a foreign government or foreign person that may exploit that information in a manner that threatens national security . FIRRMA also expanded CFIUS reviews to include unaffiliated businesses that may be affected by a foreign investment transaction if the business: (1) owns, operates, manufactures, supplies, or services critical infrastructure; (2) produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies; or (3) maintains or collects sensitive personal data of United States citizens that may be exploited in a manner that threatens national security. FIRRMA also amended the existing CFIUS statute by mandating certain changes be adopted through new regulations. Seven of 15 changes mandated through regulations concern the definition of a covered transaction and broadening the scope of a CFIUS review. No deadlines were specified for these regulatory changes. The regulatory changes mandated by FIRRMA include: Definition of a foreign investment transaction .Real Estate. CFIUS can prescribe criteria for the definition of a covered transaction beyond those specified in the statute that include certain real estate transactions that are located in the United States. In order to qualify under this provision, the real estate must: be located within, or function as part of, an air or maritime port; be in "close proximity" to a U.S. military installation or another facility or property of the U.S. government that is sensitive for reasons relating to national security; reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such an installation, facility, or property; or otherwise expose national security activities at such an installation, facility, or property to the risk of foreign surveillance. CFIUS is also directed to develop regulations concerning the definition of "close proximity" in describing real estate transactions subject to review. Unaffiliated business . CFIUS can promulgate regulations governing foreign investments in an unaffiliated U.S. business that: owns, operates, manufactures, supplies, or services critical infrastructure; produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies; or maintains or collects sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security. Changes in investor rights and other structures . Covered transactions also entail any change in the rights that a foreign person has with respect to a U.S. business in which the foreign person has an investment if that change could result in foreign control of the U.S. business. It also includes any other transaction, transfer, agreement, or arrangement that is designed or intended to evade or circumvent the application of the statute, subject to regulations prescribed by CFIUS. Real estate exceptions . Changes by FIRRMA that broaden the scope of a CFIUS review of certain real estate transactions do not include reviews of single housing units or real estate in "urbanized areas," subject to regulations by CFIUS in consultation with the Secretary of Defense. Material nonpublic technical information . CFIUS is directed to develop regulations concerning the term "material nonpublic technical information," which is defined as "information that provides knowledge, know-how, or understanding, not available in the public domain, of the design, location, or operation of critical infrastructure; or is not available in the public domain, and is necessary to design, fabricate, develop, test, produce, or manufacture critical technologies, including processes, techniques, or methods." Critical infrastructure . CFIUS is directed to prescribe regulations concerning investments in U.S. businesses that own, manufacture, supply, or service critical infrastructure that limit the designation to critical infrastructure that is likely to be of importance to U.S. national security (i.e., "systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems or assets would have a debilitating impact on national security"). Indirect investment . CFIUS is directed to develop regulations concerning an indirect investment by a foreign person in a U.S. business and exceptions for "extraordinary circumstances." CFIUS is also directed to develop regulations concerning waivers for an investment fund that does constitute control of investment decisions of the fund or decisions relating to entities in which the fund is invested. Foreign person . CFIUS is directed to define further the term "foreign person" by specifying criteria to limit the application of the term to investments by foreign persons that are in certain categories. The categories can consider how a foreign person is connected to a foreign country or foreign government, and whether the connection may affect U.S. national security. Substantial interest . Regarding covered transactions with foreign government interests, CFIUS is directed to define the term "substantial interest." In defining the term, CFIUS is directed to consider the means by which a foreign government could influence the actions of a foreign person, including through board membership, ownership interest, or shareholder rights. An interest that is excluded under indirect investment or less than 10% is not considered a substantial interest. Other provisions required by regulation .Transfer of assets pursuant to bankruptcy . CFIUS is required to prescribe regulations for covered transactions that include any transaction that arises pursuant to a bankruptcy proceeding or other form of default on debt. Information required for a declaration . CFIUS is required to develop regulations concerning the type and extent of information parties to an investment transaction are required to provide when submitting a declaration that should not exceed five pages. CFIUS also is required to develop regulations specifying the types of transactions that are required to submit a mandatory declaration. Other declarations . CFIUS may develop regulations that require parties with respect to any investment transaction to submit a declaration. Cooperation with allies and partners. The CFIUS chairperson, in consultation with other members of the Committee, is directed to establish a formal process for exchanging information with governments of countries that are allies or partners of the United States to protect U.S. national security and that of the allies and partners. The process is required to be designed to facilitate the "harmonization" of trends in investment and technology that could pose risks to the national security of the United States and its allies and partners; provide for sharing information on specific technologies and entities acquiring technologies to ensure national security; and include consultation with representatives of allied and partner governments on a recurring basis. Additional compliance measures . CFIUS is required to develop methods for evaluating compliance with any mitigation agreement or condition entered into or agreed relative to an investment transaction that allows CFIUS to adequately ensure compliance without unnecessarily diverting resources from assessing new transactions. Filing fees . CFIUS is granted the authority to determine in regulations the amounts of fees and to collect fees on each covered foreign investment transaction for which a written notice was submitted to CFIUS; the amount of fees collected are limited to the costs of administering CFIUS's reviews. CFIUIS can also periodically reconsider and adjust the amount of the fees to ensure that the amount of fees does not exceed the costs of administering the program. Since the review process involves numerous federal government agencies with varying missions, CFIUS seeks consensus among the member agencies on every transaction. Any agency that has a different assessment of the national security risks posed by a transaction has the ability to push that assessment to a higher level within CFIUS and, ultimately, to the President. As a matter of practice, before CFIUS clears a transaction to proceed, each member agency confirms to Treasury, at politically accountable levels, that it has no unresolved national security concerns with the transaction. CFIUS is represented through the review process by Treasury and by one or more other agencies that Treasury designates as a lead agency based on the subject matter of the transaction. At the end of a review or investigation, CFIUS provides a written certification to Congress that it has no unresolved national security concerns. This certification is executed by Senate-confirmed officials at these agencies at either the Assistant Secretary or Deputy Secretary level, depending on the stage of the process at which the transaction is cleared. According to Treasury Department regulations, investment transactions that are not considered to be covered transactions and, therefore, not subject to a CFIUS review are those that are undertaken "solely for the purpose of investment," or an investment in which the foreign investor has "no intention of determining or directing the basic business decisions of the issuer." In addition, investments that are solely for investment purposes are defined as those (1) in which the transaction does not involve owning more than 10% of the voting securities of the firm; or (2) those investments that are undertaken directly by a bank, trust company, insurance company, investment company, pension fund, employee benefit plan, mutual fund, finance company, or brokerage company "in the ordinary course of business for its own account." Other transactions not covered include (1) stock splits or a pro rata stock dividend that does not involve a change in control; (2) an acquisition of any part of an entity or of assets that do not constitute a U.S. business; (3) an acquisition of securities by a person acting as a securities underwriter, in the ordinary course of business and in the process of underwriting; and (4) an acquisition pursuant to a condition in a contract of insurance relating to fidelity, surety, or casualty obligations if the contract was made by an insurer in the ordinary course of business. In addition, Treasury regulations stipulate that the extension of a loan or a similar financing arrangement by a foreign person to a U.S. business will not be considered a covered transaction and will not be investigated, unless the loan conveys a right to the profits of the U.S. business or involves a transfer of management decisions. Critical Infrastructure / Critical Technologies An element of the CFIUS process added by FINSA and reinforced by FIRRMA is the addition of "critical industries" and "homeland security" as broad categories of economic activity that could be subject to a CFIUS national security review, ostensibly broadening CFIUS's mandate. The precedent for this action was set in the Patriot Act of 2001 and the Homeland Security Act of 2002, which define critical industries and homeland security and assign responsibilities for those industries to various federal government agencies. FINSA references those two acts and borrows language from them on critical industries and homeland security. After the September 11 th terrorist attacks, Congress passed and President Bush signed the USA PATRIOT Act of 2001 (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism). In this act, Congress provided for special support for "critical industries," which it defined as systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters. This broad definition is enhanced to some degree by other provisions of the act, which identify certain sectors of the economy that are likely candidates for consideration as components of the national critical infrastructure. These sectors include telecommunications, energy, financial services, water, transportation sectors, and the "cyber and physical infrastructure services critical to maintaining the national defense, continuity of government, economic prosperity, and quality of life in the United States." The following year, Congress adopted the language in the Patriot Act on critical infrastructure into The Homeland Security Act of 2002. In addition, the Homeland Security Act added key resources to the list of critical infrastructure (CI/KR) and defined those resources as "publicly or privately controlled resources essential to the minimal operations of the economy and government." Through a series of directives, the Department of Homeland Security identified 17 sectors of the economy as falling within the definition of critical infrastructure/key resources and assigned primary responsibility for those sectors to various federal departments and agencies, which are designated as Sector-Specific Agencies (SSAs). On March 3, 2008, Homeland Security Secretary Chertoff signed an internal DHS memo designating Critical Manufacturing as the 18 th sector on the CI/KR list. In 2013, the list of critical industries was altered through a Presidential Policy Directive (PPD-21). The directive listed three "strategic imperatives" as drivers of the Federal approach to strengthening "critical infrastructure security and resilience:" 1. Refine and clarify functional relationships across the Federal Government to advance the national unity of effort to strengthen critical infrastructure security and resilience; 2. Enable effective information exchange by identifying baseline data and systems requirements for the Federal Government; and 3. Implement an integration and analysis function to inform planning and operations decisions regarding critical infrastructure. The directive assigns the main responsibility to the Department of Homeland Security for identifying critical industries and coordinating efforts among the various government agencies, among a number of responsibilities. The directive also assigns roles to other agencies and designated 16 sectors as critical to the U.S. infrastructure. The sectors are (1) chemical; (2) commercial facilities; (3) communications; (4) critical manufacturing; (5) dams; (6) defense industrial base; (7) emergency services; (8) energy; (9) financial services; (10) food and agriculture; (11) government facilities; (12) health care and public health; (13) information technology; (14) nuclear reactors, materials, and waste; (15) transportation systems; and (16) water and wastewater systems. FIRRMA added language on critical technologies, which are defined as: Defense articles or defense services included on the United States Munitions List set forth in the International Traffic in Arms Regulations under subchapter M of chapter I of title 22, Code of Federal Regulations. Items included on the Commerce Control List set forth in Supplement No. 1 to part 774 of the Export Administration Regulations under subchapter C of chapter VII of title 15, Code of Federal Regulations, and controlled— pursuant to multilateral regimes, including for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology; for reasons relating to regional stability or surreptitious listening. Specially designed and prepared nuclear equipment, parts and components, materials, software, and technology covered by part 810 of title 10, Code of Federal Regulations (relating to assistance to foreign atomic energy activities). Nuclear facilities, equipment, and material covered by part 110 of title 10, Code of Federal Regulations (relating to export and import of nuclear equipment and material). Select agents and toxins covered by part 331 of title 7, Code of Federal Regulations, part 121 of title 9 of such Code, or part 73 of title 42 of such Code. Emerging and foundational technologies controlled pursuant to section 1758 of the Export Control Reform Act of 2018. Foreign Ownership Control The CFIUS statute itself does not provide a definition of the term "control," but such a definition is included in the Treasury Department's regulations and enhanced through FIRRMA to include reviews of transactions that do not involve a controlling interest. According to those regulations, control is not defined as a numerical benchmark, but instead focuses on a functional definition of control, or a definition that is governed by the influence the level of ownership permits the foreign entity to affect certain decisions by the firm. According to the Treasury Department's regulations: The term control means the power, direct or indirect, whether or not exercised, and whether or not exercised or exercisable through the ownership of a majority or a dominant minority of the total outstanding voting securities of an issuer, or by proxy voting, contractual arrangements or other means, to determine, direct or decide matters affecting an entity; in particular, but without limitation, to determine, direct, take, reach or cause decisions regarding: (1) The sale, lease, mortgage, pledge or other transfer of any or all of the principal assets of the entity, whether or not in the ordinary course of business; (2) The reorganization, merger, or dissolution of the entity; (3) The closing, relocation, or substantial alternation of the production operational, or research and development facilities of the entity; (4) Major expenditures or investments, issuances of equity or debt, or dividend payments by this entity, or approval of the operating budget of the entity; (5) The selection of new business lines or ventures that the entity will pursue; (6) The entry into termination or nonfulfillment by the entity of significant contracts; (7) The policies or procedures of the entity governing the treatment of nonpublic technical, financial, or other proprietary information of the entity; (8) The appointment or dismissal of officers or senior managers; (9) The appointment or dismissal of employees with access to sensitive technology or classified U.S. Government information; or (10) The amendment of the Articles of Incorporation, constituent agreement, or other organizational documents of the entity with respect to the matters described at paragraph (a) (1) through (9) of this section. Treasury Department regulations also provide some guidance to firms that are deciding whether they should notify CFIUS of a proposed or pending merger, acquisition, or takeover. The guidance states that proposed acquisitions that need to notify CFIUS are those that involve "products or key technologies essential to the U.S. defense industrial base." This notice is not intended for firms that produce goods or services with no special relation to national security, especially toys and games, food products (separate from food production), hotels and restaurants, or legal services. CFIUS has indicated that in order to ensure an unimpeded inflow of foreign investment it would implement the statute "only insofar as necessary to protect the national security," and "in a manner fully consistent with the international obligations of the United States." FIRRMA defines the term control to mean: "the power, direct or indirect, whether exercised or not exercised, to determine, direct, or decide important matters affecting an entity, subject to regulations prescribed by the Committee." Also, Congress added six additional factors through FIRRMA that CFIUS and the President "may" consider in reviewing investment transactions, including the fourth factor, as indicated in the section below on factors for consideration. Factors for Consideration The CFIUS statute includes a list of 12 factors the President must consider in deciding to block a foreign acquisition, although the President is not required to block a transaction based on these factors. Additionally, CFIUS members can consider the factors as part of their own review process to determine if a particular transaction threatens to impair the national security. This list includes the following elements: (1) domestic production needed for projected national defense requirements; (2) capability and capacity of domestic industries to meet national defense requirements, including the availability of human resources, products, technology, materials, and other supplies and services; (3) control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the U.S. to meet the requirements of national security; (4) potential effects of the transactions on the sales of military goods, equipment, or technology to a country that supports terrorism or proliferates missile technology or chemical and biological weapons; and transactions identified by the Secretary of Defense as "posing a regional military threat" to the interests of the United States; (5) potential effects of the transaction on U.S. technological leadership in areas affecting U.S. national security; (6) whether the transaction has a security-related impact on critical infrastructure in the United States; (7) potential effects on United States critical infrastructure, including major energy assets; (8) potential effects on United States critical technologies; (9) whether the transaction is a foreign government-controlled transaction; (10) in cases involving a government-controlled transaction, a review of (A) the adherence of the foreign country to nonproliferation control regimes, (B) the foreign country's record on cooperating in counter-terrorism efforts, (C) the potential for transshipment or diversion of technologies with military applications; (11) long-term projection of the United States requirements for sources of energy and other critical resources and materials; and (12) such other factors as the President or the Committee determine to be appropriate. Factors 6-12 were added through the FINSA Act potentially broadening the scope of CFIUS's reviews and investigations. As previously indicated, instead of adding new factors to this section of the statute, FIRRMA offered six new elements CFIUS and the President "may" consider as part of their deliberations through a sense of Congress provision. Previously, CFIUS had been directed by Treasury Department regulations to focus its activities primarily on investments that had an impact on U.S. national defense security. The additional factors, however, incorporate economic considerations into the CFIUS review process in a way that was specifically rejected when the original Exon-Florio amendment was adopted and refocuses CFIUS's reviews and investigations on considering the broader rubric of economic security, although the term is not specifically mentioned. In particular, CFIUS is required to consider the impact of an investment on critical infrastructure and critical technologies as factors for considering a recommendation to the President that a transaction be blocked or postponed. As previously indicated, critical infrastructure is defined in broad terms as "any systems and assets, whether physical or cyber-based, so vital to the United States that the degradation or destruction of such systems or assets would have a debilitating impact on national security, including national economic security and national public health or safety." The six factors added by FIRRMA through a sense of Congress that CFIUS and the President may consider in evaluating the national security implications of an investment are: 1. a transaction involves a country of special concern that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security; 2. the potential national security-related effects of the cumulative control of, or pattern of recent transactions involving, any one type of critical infrastructure, energy asset, critical material, or critical technology by a foreign government or foreign person; 3. whether any foreign person engaging in a covered transaction with a United States business has a history of complying with United States laws and regulations; 4. control of United States industries and commercial activity by foreign persons as it affects the capability and capacity of the United States to meet the requirements of national security, including the availability of human resources, products, technology, materials, and other supplies and services, and in considering ''the availability of human resources'', should construe that term to include potential losses of such availability resulting from reductions in the employment of United States persons whose knowledge or skills are critical to national security, including the continued production in the United States of items that are likely to be acquired by the Department of Defense or other Federal departments or agencies for the advancement of the national security of the United States ; 5. the extent to which a covered transaction is likely to expose, either directly or indirectly, personally identifiable information, genetic information, or other sensitive data of United States citizens to access by a foreign government or foreign person that may exploit that information in a manner that threatens national security; and 6. a transaction that is likely to have the effect of exacerbating or creating new cybersecurity vulnerabilities in the United States or is likely to result in a foreign government gaining a significant new capability to engage in malicious cyber-enabled activities against the United States, including such activities designed to affect the outcome of any election for Federal office. 52 As originally drafted, the Exon-Florio provision also would have applied to joint ventures and licensing agreements in addition to mergers, acquisitions, and takeovers. Joint ventures and licensing agreements subsequently were dropped from the proposal because the Reagan Administration and various industry groups argued at the time that such business practices were deemed to be beneficial arrangements for U.S. companies. In addition, they argued that any potential threat to national security could be addressed by the Export Administration Act and the Arms Control Export Act. FIRRMA added joint ventures as a matter for consideration during a CFIUS review or investigation. Confidentiality Requirements FINSA codified, and FIRRMA maintains, confidentiality requirements that are similar to those that appeared in the Exon-Florio amendment and Executive Order 11858 by stating that any information or documentary material filed under the provision may not be made public "except as may be relevant to any administrative or judicial action or proceeding." The provision does state, however, that this confidentiality provision "shall not be construed to prevent disclosure to either House of Congress or to any duly authorized committee or subcommittee of the Congress." The provision provides for the release of proprietary information "which can be associated with a particular party" to committees only with assurances that the information will remain confidential. Members of Congress and their staff members are accountable under current provisions of law governing the release of certain types of information. Current statute requires the President to provide a written report to the Secretary of the Senate and the Clerk of the House detailing his decision and his actions relevant to any transaction that was subject to a 45-day investigation. Mitigation and Tracking Since the implementation of the Exon-Florio provision in the 1980s, CFIUS had developed several informal practices that likely were not envisioned when the statute was drafted. In particular, members of CFIUS on occasion negotiated conditions with firms to mitigate or to remove business arrangements that raised national security concerns among the CFIUS members. Such agreements often were informal arrangements that had an uncertain basis in statute and had not been tested in court. These arrangements often were negotiated during the formal review period, or even during an informal process prior to the formal filing of a notice of an investment transaction. FINSA required CFIUS to designate a lead agency to negotiate, modify, monitor, and enforce agreements in order to mitigate any threat to national security. Such agreements are required to be based on a "risk-based analysis" of the threat posed by the transaction. CFIUS is also required to develop a method for evaluating the compliance of firms that have entered into a mitigation agreement or condition that was imposed as a requirement for approval of the investment transaction. Such measures, however, are required to be developed in such a way that they allow CFIUS to determine that compliance is taking place without also (1) "unnecessarily diverting" CFIUS resources from assessing any new covered transaction for which a written notice had been filed; and (2) placing "unnecessary" burdens on a party to an investment transaction. If a notification of a transaction is withdrawn before any review or investigation by CFIUS is completed, CFIUS can take a number of actions, including (1) interim protections to address specific concerns about the transaction pending a resubmission of a notice by the parties; (2) specific time frames for resubmitting the notice; and (3) a process for tracking any actions taken by any party to the transaction. Also, any federal entity or entities that are involved in any mitigation agreement are to report to CFIUS if there is any modification that is made to any agreement or condition that had been imposed and to ensure that "any significant" modification is reported to the Director of National Intelligence and to any other federal department or agency that "may have a material interest in such modification." Such reports are required to be filed with the Attorney General. FIRRMA further authorizes CFIUS to: conduct periodic reviews of mitigation agreements to determine if the agreements should be phased out or modified if a threat no longer requires mitigation; negotiate, enter into or impose, and enforce any agreement or condition with any party to an investment transaction during and after consideration of a transaction to mitigate any risk to the national security of the United States as a result of the transaction; and review periodically the appropriateness of an agreement or condition and terminate, phase out, or otherwise amend the agreement or condition if a threat no longer requires mitigation through the agreement or condition. In agreeing to a mitigation agreement, CFIUS must determine that the agreement will resolve the national security concerns posed by the transaction, taking into consideration whether the agreement or condition is reasonably calculated to: be effective, verifiable, monitored, and enforceable. Funding and Staff Requirements FIRRMA established a fund within Treasury and appropriates $20 million to CFIUS for each of fiscal years 2019 through 2023. FIRRMA also authorizes CFIUS to develop a fee schedule, determined through regulation, for each transaction, in addition to an expedited process for hiring additional staff. The fee is restricted to be 1% of the value of the transaction, or three hundred thousand dollars. In developing regulations, CFIUS is also required to consider the impact on small businesses, the expenses to CFIUS associated with conducting reviews, and the impact on foreign investment. Also, the total amount of fees collected are limited to not exceed the costs of administering the fees. FIRRMA also directs CFIUS to study the feasibility of establishing a fee or a fee structure to prioritize a response to informal notices prior to the submission of a formal written notice of an impending or proposed transaction. FIRRMA also requires the President to determine whether and to what extent the expansion of CFIUS' responsibilities as a result of the additional duties designated by FIRRMA requires additional resources. If additional resources are necessary, the President is required to make such a request in the Administration's annual budget. Congressional Oversight Both FINSA and FIRRMA increased the types and number of reports that CFIUS is required to send to certain specified Members of Congress. In particular, CFIUS is required to brief certain congressional leaders if they request such a briefing and to report annually to Congress on any reviews or investigations it has conducted during the prior year. CFIUS provides a classified report to Congress each year and a less extensive report for public release. Each report is required to include a list of all concluded reviews and investigations, information on the nature of the business activities of the parties involved in an investment transaction, information about the status of the review or investigation, and information on any transactions that were withdrawn from the process, any roll call votes by the Committee, any extension of time for any investigation, and any presidential decision or action. In the classified report, FIRRMA imposed new reporting requirements on CFIUS concerning: the outcome of each review or investigation, including whether a mitigation agreement or condition was entered into and any action by the President; basic information concerning the parties involved; the nature of the business activities or products; statistics on compliance plans and cumulative and trend information on declarations and actions taken; methods used by the Committee to identify nonnotified and nondeclared transactions; a summary of the hiring practices and policies of the Committee; in cases where the Committee has recommended that the President suspend or prohibit a transaction because it threatens to impair the national security, CFIUS is required to notify Congress of the recommendation and, upon request, provide a classified briefing on the recommendation; not later than two years after enactment of FIRRMA, and every two years thereafter through 2026, the Secretary of Commerce is required to submit to Congress and CFIUS a report on foreign direct investment transactions made by entities of the People's Republic of China in the United States. In addition, CFIUS is required to report on trend information on the numbers of filings, investigations, withdrawals, and presidential decisions or actions that were taken. The report must include cumulative information on the business sectors involved in filings and the countries from which the investments originated; information on the status of the investments of companies that withdrew notices and the types of security arrangements and conditions CFIUS used to mitigate national security concerns; the methods the Committee used to determine that firms were complying with mitigation agreements or conditions; and a detailed discussion of all perceived adverse effects of investment transactions on the national security or critical infrastructure of the United States. The Secretary of the Treasury, in consultation with the Secretaries of State and Commerce, is directed by FINSA to conduct a study on investment in the United States, particularly in critical infrastructure and industries affecting national security, by (1) foreign governments, entities controlled by or acting on behalf of a foreign government, or persons of foreign countries which comply with any boycott of Israel; or (2) foreign governments, entities controlled by or acting on behalf of a foreign government, or persons of foreign countries which do not ban organizations designated by the Secretary of State as foreign terrorist organizations. In addition, CFIUS is required to provide an annual evaluation of any credible evidence of a coordinated strategy by one or more countries or companies to acquire U.S. companies involved in research, development, or production of critical technologies in which the United States is a leading producer. The report must include an evaluation of possible industrial espionage activities directed or directly assisted by foreign governments against private U.S. companies aimed at obtaining commercial secrets related to critical technologies. Recent CFIUS Reviews According to the annual report filed by CFIUS, CFIUS activity dropped sharply in 2009 as a result of tight credit markets and hesitation by banks to fund acquisitions and takeovers during the global financial crisis, but rebounded in 2010, as indicated in Table 2 . During the eight-year period 2008-2015 (the latest years for which such data are available), foreign investors sent 925 notices to CFIUS of plans to acquire, take over, or merge with a U.S. firm. In comparison, the Commerce Department reports there were over 1,800 foreign investment transactions in 2015, slightly less than half of which were acquisitions of existing U.S. firms. Acquisitions, however, accounted for 96% of the total annual value of foreign direct investments. Of the investment transactions notified during the 2008-2015 period, about 4% were withdrawn during the initial 30-day review; about 36% of the total notified transactions required a 45-day investigation. Also, of the transactions investigated, about 6% were withdrawn before a final determination was reached. As a result, of the 925 proposed investment transactions notified to CFIUS during this period, 822 transactions, or 89% of the transactions, were completed. As noted earlier in this report, but not in the 2017 CFIUS report, a presidential decision was made in six cases to date. The CFIUS report indicates that 43% of foreign investment transactions notified to CFIUS from 2008 to 2015 were in the manufacturing sector. Investments in the finance, information, and services sectors accounted for another 31% of the total notified transactions, as indicated in Table 3 . Within the manufacturing sector, 43% of all investment transactions notified to CFIUS between 2013 and 2015 were in the computer and electronic products sectors, a share that rose to 49% in 2015. The next three sectors with the highest number of transactions were the transportation equipment sector, which was recorded at 12% in the 2013-2015 period and in 2015, the machinery sector, which fell from 13% in the 2013-2015 period to 12% in 2015, and the electrical equipment and computer sector, which fell from 11% of manufacturing transactions in 2013-2015 to 3% in 2015. Within the finance, information, and services sector, professional services accounted for 20% of transactions 2015, down from 37% recorded in the 2013-2015 period. Notified transactions in publishing (21%), telecommunications (17%), and real estate (10%) comprised the next most active sectors. Table 4 shows foreign investment transactions by the home country of the foreign investor and the industry composition of the investment transactions. According to data based on notices provided to CFIUS by foreign investors, Chinese investors were the most active in acquisitions, takeovers, or mergers during the 2013-2015 period, accounting for 19% of the total number of transactions. The United Kingdom and Canada join China as the top three countries of origin for investors providing notifications to CFIUS. For China and the UK, investment notifications were concentrated in the manufacturing, finance, information, and services sectors, although nearly one-fifth of Chinese transactions were in the mining, construction, and utilities sectors. The ranking of countries in Table 4 differs in a number of important ways from data published by the Bureau of Economic Analysis on the cumulative amount, or the total book value, of foreign direct investment in the United States, which places the United Kingdom, Japan, the Netherlands, Germany, Canada, and Switzerland as the most active countries of origin for foreign investment in the United States. Table 5 provides information on notified foreign investment transactions by in critical technology classified by types of foreign investment. According to CFIUS, the Committee reviewed 130 transactions in 2015 (126 transactions were reported by CFIUS for the data in Table 5 ) involving acquirers from 32 countries to determine if it could detect a coordinated strategy. Solo acquisitions accounted for 86% of the total number of transactions. According to CFIUS, the largest number of transactions in critical technology occurred in the Information Technology and the Aerospace & Defense sectors. The CFIUS annual report also provides some general information on the total number of cases in which it applied legally binding mitigation measures. The report did not list any specific cases or measures, but it did indicate that CFIUS applied mitigation measures to 40 cases in the 2013-2015 period. According to the CFIUS report, in 2015 CFIUS agencies negotiated, and parties adopted, mitigation measures for 11 covered transactions. These mitigation measures have included a number of different approaches, including Ensuring that only authorized persons have access to certain technologies and information. Establishing a Corporate Security Committee and other mechanisms to ensure compliance with all required actions, including the appointment of a U.S. government-approved security officer or member of the board of directors and requirements for security policies, annual reports, and independent audits. Establishing guidelines and terms for handling existing or future U.S. government contracts, U.S. government customer information, and other sensitive information. Ensuring only U.S. citizens handle certain products and services, and ensuring that certain activities and products are located only in the United States. Notifying security officers or relevant U.S. government parties in advance of foreign national visits to the U.S. business for approval. Security protocols to ensure the integrity of goods or software sold to the U.S. Government. Notifying customers regarding the change of ownership. Assurances of continuity of supply for defined periods, and notification and consultation prior to taking certain business decisions, with certain rights in the event that the company decides to exit a business line. Established meetings to discuss business plans that might affect U.S. Government or national security considerations. Exclusion of certain sensitive assets from the transaction. Providing the U.S. Government with the right to review certain business decisions and object if they raise national security concerns. CFIUS also implemented procedures to evaluate and ensure that parties to an investment transaction remain in compliance with any risk mitigation measures that were adopted to gain approval of the investment. These procedures include the following: Periodic reporting to U.S. Government agencies by the companies. On-site compliance reviews by U.S. Government agencies. Third party audits when provided for by the terms of the mitigation measures. Investigations and remedial actions if anomalies or breaches are discovered or suspected. Assigning staff responsibilities to monitor compliance. Designating tracking systems to monitor required reports. Instituting internal instructions and procedures to ensure that in-house expertise is drawn upon to analyze compliance with measures. Issues for Congress The U.S. policy approach to international investment generally aimed to establish an open and rules-based system that is consistent across countries and in line with U.S. interests as the largest global foreign direct investor and largest recipient of foreign direct investment. In addition, U.S. foreign direct investment policy has been founded on the concept that the net benefits of such investment are positive and benefit both the United States and the foreign investor, except in certain circumstances concerning risks to national security and for prudential reasons. Even in these cases, however, the U.S. approach generally has been to limit any market distorting impact of the national security review process. Under the CFIUS statute, Congress set a legal standard for the President to meet before he could block or suspend investment transactions: no other laws apply, and he determines that there is "credible evidence" that the action does not simply affect national security, but that it "threatens to impair the national security," or that it poses a risk to national security In 2018, Congress and the Trump Administration amended the CFIUS statute through the Foreign Investment Risk Review Modernization Act (FIRRMA) to address a broader range of issues concerning foreign direct investment in the U.S. economy. In part, the motivation for the change in the CFIS statute reflects differing views of the role CFIUS should play in overseeing foreign investment transactions and the concept of national security, particularly as it relates to national economic interests. In some ways, current discussions regarding the role of CFIUS mirror previous debates over a working set of parameters that establish a functional definition of the national economic security implications of foreign direct investment and expose differing assessments of the economic impact of foreign investment on the U.S. economy and differing political and philosophical convictions. Previous congressional efforts to amend the CFIUS statute were driven in large part by national security concerns related to a particular foreign investment transaction, such as the Dubai Ports transaction. More recently, concerns have arisen from a combination of issues, including (1) an increase in foreign investment activity by Chinese state-owned firms; (2) the perception that such investment is part of a government-coordinated approach that serves official strategic purposes, rather than purely commercial interests; and (3) that investments by Chinese firms are receiving government support through subsidized financing or other types of government support that give Chinese firms an "unfair" competitive advantage over other private investors. While Members of Congress and others have expressed concerns over investments by Chinese entities, the broader issue of the role of foreign investment in the economy and the interaction between foreign investment and national security predate the creation of CFIUS. Such concerns arguably are heightened by a changing global economic order that is marked by rising emerging economies such as China and India that are more active internationally and changing notions of national economic interests. Changes to CFIUIS through FIRRMA broaden CFIUS' mandate beyond the original narrow focus on the national security implications of individual investment transactions to a more comprehensive assessment of the impact of a combination of transactions. In addition, CFIUS is now required to analyze the impact of certain types of real estate transactions and the potential impact of foreign investment in start-up companies with potentially foundational technologies. These issues and others raise questions for Congress to consider, including: Through FIRRMA, Congress expanded the role of CFIUS in protecting U.S. national security interests. What rubric should CFIUS use to weigh national security interests against economic interests, particularly at the state and local levels that seek foreign investment to support local jobs and tax revenues? The United States is the single largest recipient of foreign investment and the largest overseas direct investor in the world. How should Congress assess the role of CFIUS in protecting U.S. national security interests while supporting the stated policy of the United States to support international efforts to maintain policies that accommodate foreign direct investment? In any year, the level of foreign investment activity is driven in large part by broad economic fundamentals, including merger and acquisition (M&A) activity. As a result, CFIUS' activities could vary substantially from year to year, depending on forces outside its control. How should Congress evaluate CFIUS' activities given these circumstances? Congress has expressed its concerns through FIRRMA about foreign access to critical technologies through investments and acquisitions developed by U.S. firms. How can CFIUS satisfy congressional concerns about the potential loss of leading-edge technologies while avoiding potential conflicts that inhibit the development of new technologies by start-up firms? In response to FIRRMA, Treasury Department regulations identify 27 industries as critical industries for consideration by CFIUS and the President in deciding to block or suspend a foreign investment transaction. How should CFIUS weigh concerns over foreign investments concentrated in certain industries relative to capital needs and requirements in fast-growing industries that may rely on foreign funds in order to expand? What rubric is CFIUS using to determine how much foreign investment in an industry is considered too concentrated? Without providing a definition of national security, Congress has directed CFIUS to protect the United States against investments that threaten to impair the national security. What rubric should CFIUS use to evaluate the national security implications of such items as personally identifiable information?

The Committee on Foreign Investment in the United States (CFIUS) is an interagency body comprised of nine Cabinet members, two ex officio members, and other members as appointed by the President, that assists the President in reviewing the national security aspects of foreign direct investment in the U.S. economy. While the group often operated in relative obscurity, the perceived change in the nation's national security and economic concerns following the September 11, 2001, terrorist attacks and the proposed acquisition of commercial operations at six U.S. ports by Dubai Ports World in 2006 placed CFIUS's review procedures under intense scrutiny by Members of Congress and the public. In 2018, prompted by concerns over Chinese and other foreign investment in U.S. companies with advanced technology, Members of Congress and the Trump Administration enacted the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which became effective on November 11, 2018. This measure marked the most comprehensive revision of the foreign investment review process under CFIUS since the previous revision in 2007, the Foreign Investment and National Security Act (FINSA). Generally, efforts to amend CFIUS have been spurred by a specific foreign investment transaction that raised national security concerns. Despite various changes to the CFIUS statute, some Members and others question the nature and scope of CFIUS reviews. The CFIUS process is governed by statute that sets a legal standard for the President to suspend or block a transaction if no other laws apply and if there is "credible evidence" that the transaction threatens to impair the national security, which is interpreted as transactions that pose a national security risk. The U.S. policy approach to international investment traditionally established and supported an open and rules-based trading system that is in line with U.S. economic and national security interests. Recent debate over CFIUS reflects long-standing concerns about the impact of foreign investment on the economy and the role of economics as a component of national security. Some Members question CFIUS's performance and the way the Committee reviews cases involving foreign governments, particularly with the emergence of state-owned enterprises, and acquisitions involving leading-edge or foundational technologies. Recent changes expand CFIUS's purview to include a broader focus on the economic implications of individual foreign investment transactions and the cumulative effect of foreign investment on certain sectors of the economy or by investors from individual countries. Changes in U.S. foreign investment policy have potentially large economy-wide implications, since the United States is the largest recipient and the largest overseas investor of foreign direct investment. To date, six investments have been blocked, although proposed transactions may have been withdrawn by the firms involved in lieu of having a transaction blocked. President Obama used the FINSA authority in 2012 to block an American firm, Ralls Corporation, owned by Chinese nationals, from acquiring a U.S. wind farm energy firm located near a Department of Defense (DOD) facility and to block a Chinese investment firm in 2016 from acquiring Aixtron, a Germany-based firm with assets in the United States. In 2017, President Trump blocked the acquisition of Lattice Semiconductor Corp. by the Chinese investment firm Canyon Bridge Capital Partners; in 2018, he blocked the acquisition of Qualcomm by Broadcom; and in 2019, he directed Beijing Kunlun Co. to divest itself of Grindr LLC, an online dating site, over concerns of foreign access to personally identifiable information of U.S. citizens. Given the number of regulatory changes mandated by FIRRMA, Congress may well conduct oversight hearings to determine the status of the changes and their implications.

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Introduction The federal government supports the development of airport infrastructure in three different ways. First, the Airport Improvement Program (AIP) provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations such as runways and taxiways. Second, Congress has authorized airports to assess a local passenger facility charge (PFC) on each boarding passenger, subject to specific federal approval. PFC revenues can be used for a broader range of projects than AIP funds, including "landside" projects such as passenger terminals and ground access improvements. Third, federal law grants investors preferential income tax treatment on interest income from bonds issued by state and local governments for airport improvements (subject to compliance with federal rules). Airports may also draw on state and local funds and on operating revenues, such as lease payments and landing fees. A federal role in airport infrastructure first developed during World War II. Prior to the war, airports were a local or private responsibility, with federal support limited to the tax exclusion of municipal bond interest. National defense needs led to the first major federal support for airport construction. After the war, the Federal Airport Act of 1946 (P.L. 79-377) continued federal a id, although at lower levels than during the war years. Initially, much of this spending supported conversion of military airports to civilian use. In the 1960s, substantial funding also was used to upgrade and extend runways for use by commercial jets. In 1970, Congress responded to increasing congestion, both in the air and on the ground at U.S. airports, by passing two laws. The first, the Airport and Airway Development Act, established the forerunner programs of AIP: the Airport Development Aid Program and the Planning Grant Program. The second, the Airport and Airway Revenue Act of 1970, dealt with the revenue side of airport development, establishing the Airport and Airway Trust Fund (AATF, also referred to as the Aviation Trust Fund, and in this report, the trust fund). The Airport and Airway Improvement Act of 1982 ( P.L. 97-248 ; the 1982 Act) created the current AIP and reactivated the trust fund. For a more detailed legislative history of AIP, see Appendix A of this report. Eight years later, amid concerns that the existing sources of funds for airport development would be insufficient to meet national airport needs, the Aviation Safety and Capacity Expansion Act of 1990 (Title IX of the Omnibus Budget Reconciliation Act of 1990, P.L. 101-508 ) allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a passenger facility charge on each paying passenger boarding an aircraft at their airports. Different airports use different combinations of AIP funding, PFCs, tax-exempt bonds, state and local grants, and airport revenues to finance particular projects. Small airports are more likely to be dependent on AIP grants than large or medium-sized airports. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs. Each of these funding sources places various legislative, regulatory, or contractual constraints on airports that use it. The availability and conditions of one source of funding may also influence the availability and terms of other funding sources. In a 2015 study, the U.S. Government Accountability Office (GAO) found that airport-generated net income financed about 38% of airports' capital spending, AIP 33%, PFCs 18%, capital contributions by airport sponsor (often a state or municipality) or by other sources such as an airline or tenant 6%, and state grants nearly 5%. Airport Improvement Program (AIP) AIP provides federal grants to airports for airport development and planning. Participants range from very large publicly owned commercial airports to small general aviation airports that may be privately owned but are available for public use. AIP funding is usually limited to construction of improvements related to aircraft operations, such as runways and taxiways. Commercial revenue-producing facilities are generally not eligible for AIP funding, nor are operating costs. The structure of AIP funds distribution reflects congressional priorities and the objectives of assuring airport safety and security, increasing airport capacity, reducing congestion, helping fund noise and environmental mitigation costs, and financing small state and community airports. The main financial advantage of AIP to airports is that, as a grant program, it can provide funds for capital projects without the financial burden of debt financing, although airports are required to provide a modest local match to the federal funds. Limitations on the use of AIP grants include the range of projects that AIP can fund and the requirement that recipients adhere to all program regulations and grant assurances. Federal law requires the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States. This appears as a biannual Federal Aviation Administration (FAA) publication called the National Plan of Integrated Airport System s (NPIAS) . For an airport to receive AIP funds, it must be listed in the NPIAS. AIP program structure and authorizations are set in FAA authorization acts. Modifications have been made to AIP through the years, but the basic program structure remains the same. The most recent act, the FAA Reauthorization Act of 2018 ( P.L. 115-254 ), authorized AIP funding through FY2023. The Airport and Airway Trust Fund7 The trust fund was designed to assure an adequate and consistent source of funds for federal airport and airway programs. It is the primary funding source for most FAA activities in addition to federal grants to airports. These include facilities and equipment (F&E); research, engineering, and development (R, E&D); and FAA operations and maintenance (O&M). Congress determines how much the trust fund will be allowed to expend for various purposes, including the AIP. The money flowing into the Airport and Airway Trust Fund comes from a variety of aviation-related taxes. These taxes were authorized by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) and reauthorized by the 2018 FAA reauthorization act. Revenue sources include the following: 7.5% ticket tax, $4.20 flight segment tax, 6.25% tax on cargo waybills, 4.4 cents per gallon on commercial aviation fuel, 19.4 cents per gallon on general aviation gasoline, 21.9 cents per gallon on general aviation jet fuel, 14.1 cents per gallon fractional ownership surtax on general aviation jet fuel, $18.60 international arrival tax, $18.60 international departure tax, and 7.5% "frequent flyer" award tax. In most years since the trust fund was established, the revenues plus interest on the unexpended balances brought in more money than was being paid out. This led to the growth in the end-of-year unexpended balances in the trust fund. At times these unexpended balances are inaccurately referred to as a surplus. In practice, FAA may have committed unexpended balances to fund particular airport projects, so those balances may not be available for other purposes. Most air carriers have altered their pricing structures in ways that have implications for the trust fund. Ancillary fees are now commonly charged for services such as checked baggage that in the past were included in the ticket price. Such fees are not subject to the 7.5% ticket tax. Had the $4.57 billion in baggage fees collected in 2017 been subject to the ticket tax, the trust fund might have received more than $343 million in additional revenue. AIP Funding AIP spending authorized and the amounts actually made available for grants from the aviation trust fund since FY2000 are illustrated in Table 1 . After trending upward from FY1982 to FY1992, grant funding approved in annual appropriations declined through the mid-1990s as part of federal deficit reduction efforts, leaving large gaps between authorized AIP spending levels and the amounts the program was actually allowed to expend. This occurred despite provisions in place since 1976 designed to ensure that federal capital spending for airports is fully funded at the authorized level (see Text B ox ). The Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century (AIR21; P.L. 106-181 ), enacted in 2000, provided major increases in AIP's authorization, starting in FY2001. During FY2001-FY2006 AIP was funded near its fully authorized levels. The amount available for grants peaked at $3.47 billion in FY2008. From FY2008 through FY2011, when AIP was authorized by a series of authorization extension acts, appropriators set the program's annual obligation limitation at $3.515 billion. The 2012 FAA Modernization and Reform Act authorized funding through FY2015 at an annual level of $3.35 billion. In July 2016, the FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) was passed to further extend the authorization of AIP at the annual level of $3.35 billion through September 30, 2017. The 115 th Congress passed a six-month extension ( P.L. 115-63 ) of aviation funding and programs through the end of March 2018. Subsequently, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), provided a further extension through the end of FY2018. In addition to the annual funding of $3.35 billion, the 2018 appropriations act provided a $1.0 billion appropriation from the general fund to the AIP discretionary grants program. The Secretary of Transportation was directed to keep this supplemental funding available through September 30, 2020, and to give priority to nonprimary, nonhub, and small hub airports. These supplemental funds are not included in the AIP funding summary or discussion in this report, as FAA is in the process of evaluating applications and distributing funds. The FAA Reauthorization Act of 2018 ( P.L. 115-254 ) funded AIP from FY2019 through FY2023 at an annual level of $3.35 billion. It also authorized supplemental annual funding from the general fund to the AIP discretionary grants program ($1.02 billion in FY2019, $1.04 billion in FY2020, $1.06 billion in FY2021, $1.09 billion in FY2022, and $1.11 billion in FY2023), and required at least 50% of these additional funds to be available to nonhub and small hub airports. In February 2019, Congress passed the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). The act provided a $500 million supplemental appropriation from the general fund to the AIP discretionary grants program and required that this money remain available through September 30, 2021. AIP Funding Distribution The distribution system for AIP grants is complex. It is based on a combination of formula grants (also referred to as apportionments or entitlements) and discretionary funds. Each year the entitlements are first apportioned by formula to specific airports or types of airports. Once the entitlements are satisfied, the remaining funds are defined as discretionary funds. Airports apply for discretionary funds for projects in their airport master plans. Formula grants and discretionary funds are not mutually exclusive, in the sense that airports receiving formula funds may also apply for and receive discretionary funds. Grants are generally awarded directly to airports. Legislation sets forth definitions of airports that are relevant both in discussions of the airport system in general and of AIP funding distribution in particular (see Appendix B ). The statutory provisions for the allocation of both formula and discretionary funds are based on these definitions. Entitlements (Formula Funds) Entitlements are funds that are apportioned by formula to airports and may generally be used for any eligible airport improvement or planning project. These funds are divided into four categories: primary airports, cargo service airports, general aviation airports, and Alaska supplemental funds (see Appendix B for a full list of airport definitions). Each category distributes AIP funds by a different formula (49 U.S.C. §47114). Most airports have up to three years to use their apportionments. Nonhub commercial service airports have up to four years. The formula distributions are contingent on an annual AIP obligation limitation of $3.2 billion or more. If this threshold is not met in a particular fiscal year, most formulas revert to prior authorized funding formulas. Primary Airports. The apportionment for airports that board more than 10,000 passengers each year is based on the number of boardings (also referred to as enplanements) during the prior calendar year. The amount apportioned for each fiscal year is equal to double the amount that would be received according to the following formulas: $7.80 for each of the first 50,000 passenger boardings; $5.20 for each of the next 50,000 passenger boardings; $2.60 for each of the next 400,000 passenger boardings; $0.65 for each of the next 500,000 passenger boardings; and $0.50 for each passenger boarding in excess of 1 million. The minimum allocation to any primary airport is $1 million. The maximum is $26 million. Cargo Service Airports. Some 3.5% of AIP funds subject to apportionment are apportioned to airports served by all-cargo aircraft with a total annual landed weight of more than 100 million pounds. The allocation formula is the proportion of the individual airport's landed weight to the total landed weight at all cargo service airports. General Aviation Airports. General aviation, reliever, and nonprimary commercial service airports are apportioned 20% of AIP funds subject to apportionment. From this share, all airports, excluding all nonreliever primary airports, receive the lesser of the following: $150,000; or one-fifth of the estimated five-year costs for airport development for each of these airports as listed in the most recent NPIAS. Any remaining funds are distributed according to a state-based population and area formula. FAA makes the project decisions on the use of these funds in consultation with the states. Although FAA has ultimate control, some states view these funds as an opportunity to address general aviation needs from a statewide, rather than a local or national, perspective. Alaska Supplemental Funds. Funds are apportioned to airports in Alaska to assure that Alaskan airports receive at least twice as much funding as they did under the Airport Development Aid Program in 1980. Foregone Apportionments. Large and medium hub airports that collect a passenger facility charge of $3 or less have their AIP formula entitlements reduced by an amount equal to 50% of their projected PFC revenue for the fiscal year until they forgo or give back 50% of their AIP formula grants. In the case of PFC above the $3 level the percentage forgone is 75%. A special small airport fund, which provides grants on a discretionary basis to airports smaller than medium hub, gets 87.5% of these foregone funds. The discretionary fund gets the remaining 12.5%. Discretionary Funds The discretionary funds (49 U.S.C. §§47115-47116) include the money not distributed under the apportioned entitlements, as well as the forgone PFC revenues that were not deposited into the small airport fund. AIP discretionary funding for FY2018 was about 9.4% of the total AIP funding. Discretionary grants are approved by FAA based on project priority and other selection criteria. Figure 1 illustrates the composition of both apportioned and discretionary grants, based on FY2018 data. Despite its name, the discretionary fund is not allocated solely at FAA's discretion. Allocations are subject to the following three set-asides and certain other spending criteria: Airport Noise Set-Asides . At least 35% of discretionary funds are set aside for noise compatibility planning and for carrying out noise abatement and compatibility programs. Military Airport Program . At least 4% of discretionary funds are set aside for conversion and dual use of up to 15 current and former military airports. The program allows funding of some projects not normally eligible under AIP. Grants for Reliever Airports . There is a set-aside of two-thirds of 1% of discretionary funds for reliever airports in metropolitan areas suffering from flight delays. The Secretary of Transportation is also directed to see that 75% of the grants made from the discretionary fund are used to preserve and enhance capacity, safety, and security at primary and reliever airports, and also to carry out airport noise compatibility planning and programs at these airports. From the remaining 25%, FAA is required to set aside $5 million for the testing and evaluation of innovative aviation security systems. Subject to these limitations and the three set-asides, the Secretary of Transportation, through FAA, has discretion in distribution of grants from the remainder of the discretionary fund. State Block Grant Program24 Under this program, FAA provides funds directly to participating states for projects at airports classified as other than primary airports. Each participating state receives a block grant made up of the state's apportionment (formula) funds and available discretionary funds. A block grant program state is responsible for selecting and funding AIP projects at the small airports in the state. In making the selections, the participating states are required to comply with federal priorities. Each block grant state is responsible for project administration as well as most of the inspection and oversight roles normally assumed by FAA. The states that currently participate in the state block grant program are Georgia, Illinois, Michigan, Missouri, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin. The Federal Share of AIP Matching Funds For AIP projects, the federal government share differs depending on the type of airport. The federal share, whether funded by formula or discretionary grants, is as follows: 75% for large and medium hub airports (80% for noise compatibility projects); 90% for other airports; "not more than" 90% for airport projects in states participating in the state block grant program; 70% for projects funded from the discretionary fund at airports receiving exemptions under 49 U.S.C. §47134, the pilot program for private ownership of airports; airports reclassified as medium hubs due to increased passenger volumes may retain eligibility for up to a 90% federal share for a two-year transition period; certain economically distressed communities receiving subsidized air service may be eligible for up to a 95% federal share of project costs. This cost-share structure means that smaller airports pay a lower share of AIP-funded project costs than larger airports. The airports themselves must raise the remaining share from other sources. Distribution of AIP Grants by Airport Size Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, such as general aviation and reliever airports, which received over 25% of AIP grants distributed in FY2018. Air carriers have objected to this allocation, pointing out that their passengers and freight shippers pay the vast majority of revenue flowing into the trust fund. General aviation interests, however, defend AIP grants to noncommercial airports. Figure 2 shows the share of AIP grants awarded in FY2018, by value, broken out by airport type. What AIP Money Is Spent On Figure 3 displays AIP grants awarded by type of project for FY2018. For the most part, AIP development grants support "airside" development projects such as runways, taxiways, aprons, navigation aids, lighting, and airside safety projects. Substantial AIP funds also go for state block grants and noise planning and abatement. AIP spending on roads is generally restricted to roads on or entering airport property. Letters of Intent (LOI) In cases in which a primary or reliever airport may want to begin an AIP-eligible project without waiting for the funds to become available, FAA is authorized to issue a letter of intent (LOI). If it does so, the LOI states that eligible project costs, up to the allowable federal share, will be reimbursed according to a schedule set forth in the letter. Although the LOI technically does not obligate the federal government, it is an indication of FAA's approval of the scope and timing of the project, as well as the federal intent to fund the project in future years. Because most primary airports fund their major development projects with tax-exempt revenue bonds, the evidence of federal support that the LOI provides is likely to lead to favorable bond interest rates. The airport may proceed with the project with assurance that all AIP-allowable costs specified in the LOI will remain eligible for reimbursement over the life of the LOI. Both entitlement and discretionary funds are used to fulfill LOIs. FAA limits the total of discretionary funds in all LOIs subject to future obligation to roughly 50% of forecast available discretionary funds. LOIs have certain eligibility restrictions. They can only be issued to cover projects at primary and reliever airports. The proposed airport development project or action must "enhance airfield capacity in terms of increased aircraft operations, increased aircraft seating or cargo capacity, or reduced airfield operational delays." For large and medium hub airports, the project must enhance "system-wide airport capacity significantly." AIP Grant Assurances Airports' grant applications are conditioned on assurances regarding future airport operations. Examples of such assurances include making the airport available for public use on reasonable conditions and without unjust economic discrimination (against all types, kinds, and classes of aeronautical activities); charging air carriers making similar use of the airport substantially comparable amounts; maintaining a current airport layout plan; making financial reports to FAA; and expending airport revenue only on capital or operating costs at the airport. Within the AIP context, assurances are a means of guaranteeing the implementation of federal policy. Obligations derived from airports' assurances extend beyond the formal closure of AIP grant-supported projects. Obligations related to the use, operation, and maintenance of an airport remain in effect for the expected life of the improvement, up to 20 years. In the case of the purchase of land with AIP funds, the federal obligations do not expire. Airports may request that FAA release them from their AIP contractual obligations. Typically, as a condition of the release, the airport sponsor must either reimburse the federal government for the AIP grants (in the case of land grants, the federal share of the fair market value of the land) or reinvest the amount in an approved AIP project (see Text B ox ). When airport managers or interest groups express concerns about the "strings attached" to AIP funding, they are usually referring to AIP grant assurances. Passenger Facility Charges In 1990, federal deficits and expected tight budgets led to concerns that the Airport and Airway Trust Fund and other existing sources of funds for airport development would be insufficient to meet national airport needs. This led to authorization of a new user charge, the Passenger Facility Charge (PFC). The PFC was seen as a complementary funding source to AIP. The Aviation Safety and Capacity Expansion Act of 1990 allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a fee on each paying passenger boarding an aircraft at their airports. Initially, there was a $3 cap on each airport's PFC and a $12 limit on the total PFCs that a passenger could be charged per round trip. The PFC is a state, local, or port authority fee, not a federally imposed tax deposited into the Treasury. Because of the complementary relationship between AIP and PFCs, PFC provisions are generally folded into the sections of FAA reauthorization legislation dealing with AIP. The money raised from PFCs must be used to finance eligible airport-related projects. Unlike AIP funds, PFC funds may be used to service debt incurred to carry out projects. Legislation in 2000 raised the PFC ceiling to $4.50, with an $18 limit on the total PFCs that a passenger can be charged per round trip. To impose a PFC above $3 an airport has to show that the funded projects will make significant improvements in air safety, increase competition, or reduce congestion or noise impacts on communities, and that these projects could not be fully funded by using the airport's AIP formula funds or AIP discretionary grants. Large and medium hub airports imposing PFCs above the $3 level forgo 75% of their AIP formula funds. PFCs at large and medium hub airports may not be approved unless the airport has submitted a written competition plan to FAA, which includes information about the availability of gates, leasing arrangements, gate-use requirements, controls over airside and ground-side capacity, and intentions to build gates that could be used as common facilities. The FAA Modernization and Reform Act of 2012 included minor changes to the PFC program. The act made permanent the trial program that authorized nonhub small airports to impose PFCs. The act also required GAO to study alternative means of collecting PFCs without including the PFC in the ticket price. The FAA Reauthorization Act of 2018 did not include significant changes to the PFC program and maintained the $4.50 PFC cap, with a maximum charge of $18 per round-trip flight. It did include a provision, however, that required a qualified organization to conduct a study assessing the infrastructure needs of airports and existing financial resources for commercial service airports and to make recommendations on the actions needed to upgrade the national aviation infrastructure system. Unlike AIP grants, of which over 67% in FY2018 went to airside projects (runways, taxiways, aprons, and safety-related projects), PFC revenues are heavily used for landside projects, such as terminals and transit systems on airport property, and for interest payments. Table 2 shows the AIP grant awards and PFC approvals by project type in FY2018. Annual system-wide PFC collections grew from $85.4 million in 1992 to over $3.4 billion in 2018. The PFC statutory language lends itself to a broader interpretation of "capacity enhancing" projects, and the implementing regulations are less constraining than those for AIP funds. Air carriers, which historically have preferred funding to be dedicated to airside projects, must be notified and provided with an opportunity for consultation about airports' proposals to fund projects with PFC revenues. They are generally less involved in the PFC project planning and decisionmaking process than is the case with AIP projects. The difference in the pattern of project types may also be influenced by the fact that larger airports, which collect most of the PFC revenue, tend to have substantial landside infrastructure, whereas smaller airports that are much more dependent on AIP funding have comparatively limited landside facilities. Bonds Bonds have long been a major source of funding for capital projects at primary airports. According to Bond Buyer, a trade publication, airports raised approximately $17.4 billion in 84 bond issues in 2018, a substantial increase over the $14.7 billion raised in 116 issues in 2017. Most airport-related bonds are classified as tax-exempt private activity bonds (PABs). These bonds, issued by a local government or public authority, allow the use of landing fees, charges on airport users, and property taxes on privately controlled on-airport buildings, such as cargo facilities, to service debt without obligating tax revenue. Their tax-exempt status enables airports to raise funds more cheaply than would otherwise be the case because investors enjoy a federal income tax exclusion on interest paid on the bonds. In some cases, revenue from PFCs may be used to service the bonds. PABs may be used to build facilities that are directly related and essential to servicing aircraft, enabling aircraft to take off and land, and transferring passengers or cargo to or from aircraft. Normally, airport bonds might be classified as taxable PABs because they are used to finance facilities where more than 90% of the activity is private and more than 90% of the repayment is from revenue generated by the facility. Issuers of taxable PABs must pay higher interest rates than required on tax-exempt bonds, to compensate investors for the taxes due on interest income. Congress therefore created an exception allowing airports that are owned by governmental entities to issue "qualified" PABs that are tax-exempt.  The majority of airport bonds are considered by the Internal Revenue Service to be "qualified" PABs. Some recent proposals would allow privately owned airports to receive the same tax-preferred treatment of their bonds as airports owned by public authorities. A possible precedent for this is the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ( P.L. 109-59 , §1143; SAFETEA-LU), which allowed for up to $15 billion in tax-exempt bond financing for highways or freight transfer facilities that would otherwise not qualify for tax-exempt financing. Many of the supporters of the SAFETEA-LU provisions envisioned expanded eligibility for PABs as a means of facilitating public-private partnerships between a public authority and an outside investor. In the airport context, this would be analogous to an airport authority agreeing to a long-term lease with a private investor who would have the ability to enter the market for tax-exempt bonds to finance improvements at the airport and, perhaps, also to finance the purchasing costs of the lease itself. Congressional Issues By statute, the safe operation of airports is the highest aviation priority. Other priorities established by Congress include increasing capacity to the maximum feasible extent, minimizing noise impacts, and encouraging efficient service to state and local communities (i.e., support for general aviation airports). But there are significant disagreements about the appropriate degree of federal participation in airport development and finance and about the specific types of expenditure that should be given priority within AIP. Airline and airport operators tend to view the fully authorized funding of the program as a good thing. An alternative view, however, is that too much has been spent on AIP, particularly at smaller airports that do not play a significant role in commercial aviation. Airport Capital Needs Assessments The assessment of airport capital needs is fundamental to determining the appropriate federal support needed to foster a safe and efficient national airport system. The federal government's interest goes beyond capacity issues to include implementation of federal safety and noise policies. Both FAA and the Airports Council International-North America (ACI-NA) have issued projections of airports' long-term financial needs. In its most recent NPIAS report, FAA estimated that the national system's capital needs for FY2019-FY2023 will total $35.1 billion (an annual average of approximately $7 billion). The ACI-NA infrastructure needs survey resulted in an estimate of $128.1 billion over the same years (an annual average of approximately $25.6 billion). The main reason for the widely differing estimates was disparate views on what kinds of airport projects to include. The NPIAS report was based on information taken from airport master plans and state system plans, but FAA planners screened out planned projects not justified by aviation activity forecasts or not eligible for AIP grants. Only designated NPIAS airports were included in the FAA study. Implicit in this methodology is that the planning has been carried through to the point where financing is identified. Not all projects used to develop the NPIAS estimates are actually completed, or in some cases even begun, within the range of years covered in the NPIAS estimates. ACI-NA argues that the NPIAS underestimates AIP eligible needs because not all such needs will be in the current airport plans. The ACI-NA study reflects the broader business view of major airport operators and casts a substantially wider net. It includes projects funded by PFCs, bonds, or state or local funding; airport-funded air traffic control facilities; airport- or TSA-funded security projects; "necessary" AIP-ineligible projects such as parking facilities, hangars, revenue portions of terminals, and off-airport roads/transit facilities; and AIP-eligible projects not reported to FAA in the belief that there would be a low probability of receiving additional AIP funding. Its 2019-2023 infrastructure needs survey, for example, included major airport terminal projects that are ineligible for AIP grants. The ACI-NA study also includes projects without identified funding sources. The ACI-NA estimate is higher than the FAA estimate because of the wider net it casts and because it is adjusted for projected inflation. The estimates are important because the primary AIP reauthorization issue is the program's appropriate level of funding. Because the ACI-NA airport needs projection includes much that is not eligible for AIP grants, its accuracy may not be as critical in evaluating appropriate AIP funding levels as that of the NPIAS projections. On the other hand, the broader ACI-NA estimate may be more significant for policy choices related to bond issuance and PFCs, since these sources fund a broader range of projects than AIP. FAA Revises Demand Forecasts Downward In 2004, then-FAA Administrator Marion C. Blakey stated that the agency's goal was to increase total capacity at the top 35 U.S. airports by 30% over a 10-year period. FAA's Operational Evolution Plan (OEP) is intended to increase the capacity and efficiency of the National Airspace System (NAS) over a 10-year period to keep up with the expected growth in demand for air travel and air cargo. In support of that goal, FAA released a study focused on the 35 busiest airports, Capacity Needs in the National Airspace System: An Analysis of Airport and Metropolitan Area Demand and Operational Capacity in the Future (also referred to as FACT1). The study projected 18 airports would need additional capacity by 2020. In 2007, FACT1 was updated by a second study, FACT2. FACT2 expanded the study to include 21 non-OEP airports that were identified as having the potential to be capacity constrained or were in capacity-constrained metropolitan areas. The study examined airports that would need capacity increases and also projected which airports would need capacity increases in 2015 and 2025. It identified four airports plus the New York metropolitan area that needed additional capacity in 2007. It further identified 14 hub airports as likely to be capacity-constrained in 2025. FACT2 found that, in comparison to FACT1, many non-OEP airports "... have higher capacities than originally presumed and thus less need for additional capacity." A further update, FACT3, was released in January 2015. FACT3 forecasted that the 2007-2009 recession, volatile fuel costs, airline consolidation, and replacement of many 50-seat regional jets with larger aircraft would result in 32% fewer operations and about 23% fewer enplanements in 2025 at the 30 core airports than forecast in FACT2. It projected that airport delays would remain concentrated at a few major hub airports, notably the three New York City-area airports, Philadelphia International Airport, and Hartsfield-Jackson Atlanta International Airport. This study may have implications for the reauthorization of AIP. The large runway projects that are the focus of the OEP can require long lead times—10 or more years from concept to initial construction is not unusual. At large and medium hub airports, runway projects are usually paid for, in part, by AIP funds. Therefore, some projects needed by 2025 may require AIP funding in earlier years. Because large and medium airports that levy PFCs must forgo either 50% or 75% of their AIP formula entitlement funds, most federal funding for their runway projects would probably need to take the form of AIP discretionary funds. The pool of discretionary funds is primarily the remainder of annual funding after the entitlement formula requirements are satisfied. Of the forgone PFC funds, 87.5% are reserved for the small airport fund and are also not available for OEP airports. If the AIP budget is constrained in the future, either under a reauthorization bill or during the annual appropriations process, and the entitlement formulas remain as they are, the discretionary portion of the AIP budget may be squeezed, limiting large airports' ability to draw on AIP funds for major capacity expansion projects. Program Restructuring and Apportionment Changes Many of the attributes of AIP's programmatic structure are similar to those of the 1982 act that created the program. Over the years these attributes have been modified based on perceived needs and on the practical politics of passing the periodic FAA reauthorization bills that contain the AIP provisions. These considerations make a major overhaul of the AIP structure unlikely, but may leave room for programmatic adjustments in the distribution of apportionments. One such adjustment might shift AIP funds to enhancing capacity at large and medium hub airports. There are several ways Congress might accomplish this. One would be to eliminate the requirement that large and medium hub airports that impose the maximum PFCs forgo 75% of their entitlements. This change would give larger airports a greater share of entitlement funding, but at the cost of reducing AIP grants to small airports. Alternatively, changes in the statutory set-asides of discretionary funds could give FAA more flexibility to use that money for capacity enhancement, but might reduce funding for noise mitigation and other purposes. Changes in the last several FAA authorization acts increased entitlements and broadened the range of landside projects eligible for AIP grants. These changes generally benefitted airports smaller than medium hub size. In particular, the increased amount of apportioned funds has limited the availability of funds for discretionary grants at major airports. Further changes giving airports increased flexibility in the use of their entitlements might benefit smaller airports not served by commercial aviation, in line with the national goal of having an "extensive" national airport system, but this use of funds might conflict with the goal of reducing congestion at major commercial airports. The current apportionment system relies on a $3.2 billion funding level trigger mechanism to lift most of the apportionments to twice their formula level. This has been in place for two reauthorization cycles. Should that trigger be breached, entitlements for all airports would be reduced drastically. The entitlement formulas may not be sustainable, without depleting discretionary funds, in the absence of additional funding for AIP. One way to reduce the amount of trust fund revenue needed for AIP would be to allow large and medium hub airports to opt out of AIP and rely exclusively on PFCs to finance capital projects. This would require raising or eliminating the federal cap on PFCs. These "defederalized" airports could then be released from some or all of the AIP grant assurances under which they now operate, such as land use requirements and airport revenue use restrictions. If airports exit the program, AIP spending could be reduced or could be redirected to other NPIAS airports. Airport Privatization56 Airport privatization denotes a change in ownership from a public entity (such as a local government or an airport authority established by a state government) to a private one. In a number of countries, such as Great Britain, government-owned airports have been privatized by sale to private owners. In the United States, some airports have allowed private ownership of certain on-airport facilities or management functions, but the ownership of all major airports remains in the hands of government entities. The Airport Privatization Pilot Program (49 U.S.C. §47134; Section 149 of the Federal Aviation Reauthorization Act of 1996, P.L. 104-264 , as amended) authorizes FAA to exempt up to 10 airports from certain federal restrictions on the use of airport revenue off-airport. Participating airports may be also exempted from certain requirements on the repayment of federal grants. Privatized airports may still participate in the AIP, but at a lower federal share (70%). The pilot program was renamed the Airport Investment Partnership Program (AIPP) in the 2018 FAA reauthorization act and expanded to admit more than 10 airports. The AIPP provides that at primary airports, the airport sponsor may only recover from the sale or lease an amount approved by at least 65% of the scheduled air carriers serving the airport, as well as by both scheduled and unscheduled air carriers that together account for 65% of the total landed weight at the airport for the year. The requirement that air carriers approve the use of airport revenue for nonairport purposes, such as profit distribution, may have served to limit interest in the program. To date, only two airports have completed the privatization process established under the provisions of the AIPP. One of those, Stewart International Airport in New York State, subsequently reverted to public ownership when it was purchased by the Port Authority of New York and New Jersey. Luis Muñoz Marín International Airport in San Juan, PR, is now the only commercial service airport operating under private management after privatization under the APPP. As of 2018, there are three applicants under active FAA consideration: Hendry County Airglades Airport in Clewiston, FL; Westchester Airport in White Plains, NY; and St. Louis Lambert International Airport in St. Louis, MO. There is no certainty that any AIP cost savings from privatization would be retained for use by the other AIP-eligible airports. AIP spending is determined by the authorization and appropriations process, and Congress could choose to use any savings to reduce the program size, to marginally assist in deficit reduction, to reduce general fund portions of FAA operations funding, or to make money available for spending elsewhere. Grant Assurances Debate over FAA reauthorization generally brings forth proposals to alter the AIP grant assurances, such as ensuring that workers on airport construction projects receive prevailing wages set under the Davis-Bacon Act and pledging to use airport revenue solely for spending on airport operations and capital costs. If AIP spending remains constrained, critics are likely to argue that the grant assurances raise the cost of projects to increase airport capacity and complicate the closure and reuse of underutilized airports or airports that are locally unpopular due to noise or safety concerns. Noise Mitigation Historically, a basic funding issue is whether to change the existing discretionary fund set-aside for noise mitigation and abatement. The noise set-aside, however, has been increased in previous reauthorization acts and is now 35% of discretionary funding. Demand to use AIP funds for noise mitigation could increase if Congress grants FAA the flexibility to fund noise mitigation projects that are outside the DNL 65 decibel (dB) noise impact area, but this could divert resources from capacity and safety projects. A related issue is whether to make the planning for noise-mitigating air traffic control procedures at individual airports eligible for AIP funding. Passenger Facility Charge Issues The central issue related to PFCs is whether to raise the $4.50 per enplaned passenger ceiling or to eliminate the ceiling altogether. In general, airports argue for increasing or eliminating the ceiling, whereas most air carriers and some passenger advocates oppose higher limits on the PFCs. A 2015 GAO study analyzed the effects by raising the PFC cap under three scenarios: setting the cap at $6.47, $8.00, or $8.50. The study found raising PFC would significantly increase airport funding, but could also marginally slow passenger growth and therefore the growth in revenues to the trust fund. PFC supporters feel that the PFC is more reliable than AIP funding, which is subject to the authorization and appropriations process. They also argue that PFCs are procompetitive, helping airports build gates and facilities that both encourage new entrant carriers and allow incumbent carriers to expand. Advocates of an increase in the cap also argue that over time, the value of the PFC has been eroded by inflation and an adjustment is therefore necessary. The permissible uses of revenues are an ongoing point of contention. Airport operators, in particular, would like more freedom to use PFC funds for off-airport projects, such as transportation access projects, and want the process of obtaining FAA approval to be streamlined. Carriers, on the other hand, often complain that airports use PFC funds to finance proposals of dubious value, especially outside airport boundaries, instead of high-priority projects that offer meaningful safety or capacity enhancements. The major air carriers are also unhappy with their limited influence over project decisions, as airports are required only to consult with resident air carriers instead of having to get their agreement on PFC-funded projects. Alternative Minimum Tax Unlike interest income from governmental bonds, which is not subject to the alternative minimum tax (AMT), interest from private activity bonds is still subject to the AMT. ACI-NA has proposed broadening the definition of governmental airport bonds to, in effect, include either all airport bonds or at least those bonds issued for public-use projects that meet AIP or PFC eligibility requirements. Opponents of such changes express concerns that these changes would reduce U.S. Treasury revenues. Some also argue it would make more sense to change the AMT as part of a tax bill rather than including a specific exemption for income on airport bonds in an FAA reauthorization bill. In either case, such a change would not be under the jurisdiction of the congressional committees that will have jurisdiction over most reauthorization provisions. Changes to the AMT would be under the jurisdiction of the congressional tax-writing committees, the House Committee on Ways and Means and the Senate Committee on Finance. Appendix A. Legislative History of Federal Grants-in-Aid to Airports Prior to World War II the federal government viewed airports as a local responsibility. During the 1930s, it spent about $150 million a year on airports through work relief agencies such as the Works Progress Administration (WPA). The first federal support for airport construction was granted during World War II. After the war, the Federal Airport Act of 1946 (P.L. 79-377) created the Federal Aid to Airports Program, using funds appropriated annually from the general fund. Initially much of this spending supported conversion of military airports to civilian use. In the 1960s substantial funding went to upgrade and extend runways for use by commercial jets. By the end of the 1960s, congestion, both in the air and on the ground at U.S. airports, was seen as evidence that airport capacity was inadequate. Airport and Airway Development and Revenue Acts of 1970 (P.L. 91-258) In 1970, Congress responded to the capacity concerns by passing two acts. The first, the Airport and Airway Development Act (Title I of P.L. 91-258), established the Airport Development Aid Program (ADAP) and the Planning Grant Program (PGP), and set forth the programs' grant criteria, distribution guidelines, and authorization of grant-in-aid funding for the first five years of the program. The second, the Airport and Airway Revenue Act of 1970 (Title II of P.L. 91-258), established the Airport and Airway Trust Fund. Revenues from levies on aviation users and fuel were dedicated to the fund. Under the 1970 acts the trust fund could pay capital costs and, when excess funds existed, could also help cover FAA's administrative and operations costs. Airport and Airway Development and Revenue Acts Amendments of 1971 (P.L. 92-174) The Nixon Administration's FAA budget requests for FY1971 and FY1972 under the new trust fund system brought it into immediate conflict with Congress over the budgetary treatment of trust fund revenues. The Administration treated the new financing system as a user-pay system, whereas many Members of Congress viewed the trust fund as primarily a capital fund. The 1971 Amendments Act made the trust fund a capital-only account (although only through FY1976), disallowing the use of trust fund revenues for FAA operations. Airport and Airway Development Amendments Act of 1976 ( P.L. 94-353 ) The 1976 act made a number of adjustments to the ADAP and reauthorized the Airport and Airway Trust Fund through FY1980. The act again allowed the use of trust fund resources for the costs of air navigation services (a part of operations and maintenance). However, in an attempt to assure adequate funding of airport grants, the act included "cap and penalty" provisions which placed an annual cap on spending for costs of air navigation systems and a penalty that reduced these caps if airport grants were not funded each year at the airport program's authorized levels. This cap was altered multiple times in reauthorization acts in the following decades. ADAP grants totaled about $4.1 billion from 1971 through 1980. Congress did not pass authorizing legislation for ADAP during FY1981 and FY1982, during which the aviation trust fund lapsed, although spending for airport grants continued. Airport and Airway Improvement Act of 1982 ( P.L. 97-248 ) The 1982 act created the current AIP and reactivated the Airport and Airway Trust Fund. It altered the funding distribution among the newly defined categories of airports, extending aid eligibility to privately owned general aviation airports, increasing the federal share of eligible project costs, and earmarking 8% of total funding for noise abatement and compatibility planning. The act also required the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States. This biannual publication, the National Plan of Integrated Airport Systems (NPIAS) , identifies airports that are considered important to the national aviation system. For an airport to receive AIP funds it must be listed in the NPIAS. Although the 1982 act was amended often in the 1980s and early 1990s, the general structure of AIP remained the same. The Airport and Airway Safety and Capacity Expansion Act of 1987 ( P.L. 100-223 ; 1987 act) authorized significant spending increases for AIP and added a cargo service apportionment. It also included provisions to encourage full funding of AIP at the authorized level. Title IX of P.L. 101-508 , the Omnibus Budget Reconciliation Act of 1990 (OBRA1990), included the Aviation and Airway Safety and Capacity Act of 1990, which allowed airports, under certain conditions, to levy a Passenger Facility Charge (PFC) to raise revenue and also established the Military Airport Program (MAP), which provided AIP funding for capacity and/or conversion-related projects at joint-use or former military airports. The Airport Noise and Capacity Act of 1990 (OBRA 1990, Title IX, Subtitle D) set a national aviation noise policy. OBRA1990 included the Revenue Reconciliation Act of 1990, which reauthorized the Aviation Trust Fund and adjusted some of the aviation taxes. The Federal Aviation Reauthorization Act of 1994 ( P.L. 103-305 ) reauthorized AIP for two more years and again made modifications in the cap and penalty provisions. Federal Aviation Reauthorization Act of 1996 ( P.L. 104-264 ) The 1996 reauthorization of the AIP made a number of adjustments to entitlement funding and discretionary set-aside provisions. It also included directives concerning intermodal planning, cost reimbursement rules, letters of intent, and the small airport fund. A demonstration airport privatization program and a demonstration program for innovative financing techniques were established. The demonstration status of the state block grant program was removed. The act did not reauthorize the taxes that supported the Airport and Airway Trust Fund. This was done by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), which extended, subject to a number of modifications, the existing aviation trust fund taxes through September 30, 2007. The Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century of 2000 (AIR21; P.L. 106-181 ) The enactment of AIR21 was the culmination of two years of legislative effort to pass a multiyear FAA reauthorization bill. The initial debate focused on provisions to take the aviation trust fund off-budget or erect budgetary "firewalls" to assure that all trust fund revenues and interest would be spent each year for aviation purposes. These proposals, however, never emerged from the conference committee. Instead, the enacted legislation included a so-called "guarantee" that all of each year's receipts and interest credited to the trust fund would be made available annually for aviation purposes. AIR21 did not make major changes in the structure or functioning of AIP. It did, however, greatly increase the amount available for airport development projects. The AIP funding authorization rose from $1.9 billion in FY2000 to $3.4 billion in FY2003. The formula funding and minimums for primary airports were doubled starting in FY2001. The state apportionment for general aviation airports was increased from 18.5% to 20%. The noise set-aside was increased from 31% to 34% of discretionary funding and a reliever airport discretionary set-aside of 0.66% was established. AIR21 also increased the PFC maximum to $4.50 per boarding passenger. In return for imposing a PFC above the $3 level, large and medium hub airports would forgo 75% of their AIP formula funds. This had the effect of making a greater share of AIP funding available to smaller airports. Vision 100: Century of Aviation Reauthorization Act of 2003 ( P.L. 108-176 ; H.Rept. 108-334 ) Vision 100, signed by President George W. Bush on December 12, 2003, included significant changes to AIP. The law codified the AIR21 spending "guarantees" through FY2007. It increased the discretionary set-aside for noise compatibility projects from 34% to 35%. It increased the amount that an airport participating in the Military Airport Program (MAP) could receive to $10 million for FY2004 and FY2005, but in FY2006 and FY2007 it returned the maximum funding level to $7 million. The act allowed nonprimary airports to use their entitlements for revenue-generating aeronautical support facilities, including fuel farms and hangars, if the Secretary of Transportation determines that the sponsor has made adequate provisions for the airside needs of the airport. The law permitted AIP grants at small airports to be used to pay interest on bonds issued to finance airport projects. The act included a trial program to test procedures for authorizing small airports to impose PFCs. Vision 100 repealed the authority to use AIP or PFC funds for most airport security purposes. FAA Modernization and Reform Act of 2012 ( P.L. 112-95 ) The 2012 FAA reauthorization act funded AIP for four years from FY2012 to FY2015 at an annual level of $3.35 billion. A new provision, Section 138, permitted small airports reclassified as medium hubs due to increased passenger volumes to retain eligibility for up to a 90% federal share for a two-year transition period. This provision also allows certain economically distressed communities receiving subsidized air service to be eligible for up to a 95% federal share of project costs. The 2012 act maintained the $4.50 PFC cap, with a maximum charge of $18 per round-trip flight. It included a provision that instructed GAO to study alternative means for collecting PFCs. The act also expanded the number of airports that could participate in the airport privatization pilot program from 5 to 10. This law was extended through July 15, 2016. The FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) The 2016 FAA extension act funded AIP through FY2017 at an annual level of $3.35 billion. A new provision, Section 2303, provided temporary relief to small airports that had 10,000 or more passenger boardings in 2012 but had fewer than 10,000 during the calendar year used to calculate the AIP apportionment for FY2017. This provision allowed such airports to receive apportionment for FY2017 an amount based on the number of passenger boardings at the airport during calendar year 2012. The FAA Reauthorization Act of 2018 ( P.L. 115-254 ) The 2018 FAA reauthorization act funded AIP for five years from FY2019 through FY2023 at an annual level of $3.35 billion. It also authorized supplemental annual funding from the general fund to the AIP discretionary funds—$1.02 billion in FY2019, $1.04 billion in FY2020, $1.06 billion in FY2021, $1.09 billion in FY2022, and $1.11 billion in FY2023—and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011. The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports. The law included a provision that forbids states or local governments from levying or collecting taxes on a business on an airport that "is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes." Appendix B. Definitions of Airports Included in the NPIAS Commercial Service Airports Publicly owned airports that receive scheduled passenger service and board at least 2,500 passengers each year (506 airports). Primary Airports . Airports that board more than 10,000 passengers each year. There are four subcategories: Large Hub Airports . Board 1% or more of system -wide boardings ( 30 airports, 72 % of all enplanements)Medium Hub Airports . Board 0.25% but less than 1% (31 airports, 16% of all enplanements) Small Hub Airports . Board 0.05% but less than 0.25% (72 airports, 8% of all enplanements) Non hub Primary Airports . Board more than 10,000 but less than 0.05% (247 airports, 3% of all enplanements) Non primary Commercial Service Airports . Board at least 2,500 but no more than 10,000 passengers each year (126 airports, 0.1% of all enplanements). Other Airports General Aviation Airports . General aviation airports do not receive scheduled commercial or military service but typically do support business, personal, and instructional flying; agricultural spraying; air ambulances; on-demand air-taxies; and/or charter aircraft service (2,554 airports). Reliever Airports . Airports designated by FAA to relieve congestion at commercial airports and provide improved general aviation access (261 airports). Cargo Service Airports . Airports served by aircraft that transport cargo only and have a total annual landed weight of over 100 million pounds. An airport may be both a commercial service and a cargo service airport. New Airports Seven airports are anticipated to be built between 2019 and 2023. They include two primary airports, two nonprimary commercial service airports, and three general aviation airports.

There are five major sources of airport capital development funding: the federal Airport Improvement Program (AIP); local passenger facility charges (PFCs) imposed pursuant to federal law; tax-exempt bonds; state and local grants; and airport operating revenue from tenant lease and other revenue-generating activities such as landing fees. Federal involvement is most consequential in AIP, PFCs, and tax-exempt financing. The AIP has been providing federal grants for airport development and planning since the passage of the Airport and Airway Improvement Act of 1982 (P.L. 97-248). AIP funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. The funds obligated for AIP are drawn from the airport and airway trust fund, which is supported by a variety of user fees and fuel taxes. Different airports use different combinations of these sources depending on the individual airport's financial situation and the type of project being considered. Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, which received over 25% of AIP grants distributed in FY2018. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs. The FAA Reauthorization Act of 2018 (P.L. 115-254) provided annual AIP funding of $3.35 billion from the airport and airway trust fund for five years from FY2019 to FY2023. The act left the basic structure of AIP unchanged, but authorized supplemental annual funding of over $1 billion from the general fund to the AIP discretionary funds, starting with $1.02 billion in FY2019, and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive a 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011. The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports. The law included a provision that forbids states or local governments from levying or collecting taxes on a business at an airport that "is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes." The airport improvement issues Congress generally faces in the context of FAA reauthorization include the following: Should airport development funding be increased or decreased? Should the $4.50 ceiling on PFCs be eliminated, raised, or kept as it is? Could AIP be restructured to address congestion at the busiest U.S. airports, or should a large share of AIP resources continue to go to noncommercial airports that lack other sources of funding? Should Congress set tighter limits on the purposes for which AIP and PFC funds may be spent? This report provides an overview of airport improvement financing, with emphasis on AIP and the related passenger facility charges. It also discusses some ongoing airport issues that are likely to be included in a future FAA reauthorization debate.

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Introduction This report describes and analyzes annual appropriations for the Department of Homeland Security (DHS) for FY2019. It compares the enacted FY2018 appropriations for DHS, the Donald J. Trump Administration's FY2019 budget request, and the appropriations measures developed and considered by Congress in response to it. This report identifies additional informational resources, reports, and products on DHS appropriations that provide context for the discussion, and it provides a list of Congressional Research Service (CRS) policy experts with whom clients may consult on specific topics. The suite of CRS reports on homeland security appropriations tracks legislative action and congressional issues related to DHS appropriations, with particular attention paid to discretionary funding amounts. These reports do not provide in-depth analysis of specific issues related to mandatory funding—such as retirement pay—nor do they systematically follow other legislation related to the authorizing or amending of DHS programs, activities, or fee revenues. Discussion of appropriations legislation involves a variety of specialized budgetary concepts. The Appendix to this report explains several of these concepts, including budget authority, obligations, outlays, discretionary and mandatory spending, offsetting collections, allocations, and adjustments to the discretionary spending caps under the Budget Control Act (BCA; P.L. 112-25 ). A more complete discussion of those terms and the appropriations process in general can be found in CRS Report R42388, The Congressional Appropriations Process: An Introduction , coordinated by James V. Saturno, and the Government Accountability Office's A Glossary of Terms Used in the Federal Budget Process . Note on Data and Citations All amounts contained in the suite of CRS reports on homeland security appropriations represent budget authority. For precision in percentages and totals, all calculations in these reports used unrounded data, which are presented in each report's tables. However, amounts in narrative discussions are rounded to the nearest million (or 10 million, in the case of numbers larger than 1 billion), unless noted otherwise. Data used in this report for FY2018 amounts are derived from the explanatory statement accompanying P.L. 115-141 , the Consolidated Appropriations Act, 2017—Division F of which is the Department of Homeland Security Appropriations Act, 2018. The explanatory statement also includes data on FY2018 supplemental appropriations for DHS enacted prior to the development of the consolidated appropriations act for FY2018. Data for the FY2019 requested levels and enacted levels are drawn from H.Rept. 116-9 , the explanatory statement accompanying P.L. 116-6 . Data on the Senate Appropriations Committee recommendation are drawn from S.Rept. 115-283 , and data for the House Appropriations Committee recommendation are drawn from H.Rept. 115-948 . Scoring methodology is consistent across this report, relying on data provided by the Appropriations Committees that has been developed with Congressional Budget Office (CBO) methodology. CRS does not attempt to compare this data with Office of Management and Budget (OMB) data because technical scoring differences do not allow precise comparisons. Legislative Action on FY2019 DHS Appropriations This section provides an overview of the process of enactment of appropriations for the Department of Homeland Security for FY2019, from the Administration's initial request, through committee action in the House and Senate, continuing appropriations (and their lapse), and enactment of the consolidated appropriations bill that contained DHS annual appropriation. Annual Appropriations Trump Administration FY2019 Request On February 12, 2018, the Trump Administration released its budget request for FY2019. The enactment of the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) three days before had established discretionary spending limits for FY2018 and FY2019, replacing the limits prescribed by the Budget Control Act of 2011 ( P.L. 112-25 ). The Administration chose to submit an addendum to their request in a letter accompanying the formal request documentation, which included additional requests for resources for DHS and several other departments and agencies. The Trump Administration requested $47.43 billion in adjusted net discretionary budget authority for DHS for FY2019, as part of an overall budget that the Office of Management and Budget estimated to be $74.88 billion (including fees, trust funds, and other funding that is not annually appropriated or does not score against discretionary budget limits). The request amounted to a $0.29 billion (0.6%) decrease from the $47.72 billion in annual appropriations enacted for FY2018 through the Department of Homeland Security Appropriations Act, 2018 ( P.L. 115-141 , Division F). The Trump Administration also requested discretionary funding for DHS components that does not count against discretionary spending limits set by the Budget Control Act (BCA; P.L. 112-25 ) and is not reflected in the above totals. The Administration requested an additional $6.65 billion for the Federal Emergency Management Agency (FEMA) in disaster relief funding, as defined by the BCA, and in the budget request for the Department of Defense, $165 million in Overseas Contingency Operations/Global War on Terror designated funding (OCO), to be transferred to the Coast Guard. Senate Committee Action On June 21, 2018, the Senate Appropriations Committee reported out S. 3109 , the Department of Homeland Security Appropriations Act, 2019, accompanied by S.Rept. 115-283 . Committee-reported S. 3109 included $48.33 billion in adjusted net discretionary budget authority for FY2019. This was $901 million (1.9%) above the level requested by the Administration, and $611 million (1.3%) above the enacted level for FY2018. The Senate committee-reported bill also included the Administration-requested levels for disaster relief funding, and $163 million in OCO-designated funding directly for the Coast Guard, as had been done in FY2018, rather than as a transfer, as had been requested by the Administration. This bill was never taken up for action on the Senate floor. House Committee Action On July 26, 2018, the House Appropriations Committee marked up H.R. 6776 , its version of the Department of Homeland Security Appropriations Act, 2019. H.Rept. 115-948 was filed September 12, 2018. Committee-reported H.R. 6776 included $51.44 billion in adjusted net discretionary budget authority. The House committee-reported bill included the Administration-requested levels for disaster relief funding, but unlike S. 3109 , did not include the OCO funding for the Coast Guard. This bill did not see action on the House floor. Continuing Resolutions and Lapse in Annual Appropriations As some of the annual appropriations for FY2019 remained unfinished, a consolidated appropriations bill that included a continuing resolution was passed by Congress and signed into law on September 28, 2018, as P.L. 115-245 . The continuing resolution (Division C) continued funding for DHS at a rate of operations equal to that of the Department of Homeland Security Appropriations Act, 2018, with some exceptions. The continuing resolution was extended through December 21, 2018, at which point it expired, and annual appropriations for DHS lapsed, resulting in a partial shutdown of DHS for 35 days. Continuing appropriations were restored at the FY2018 rate of operations with the enactment of P.L. 116-4 on January 25, 2019. Enactment On February 14, 2019, the House took up H.J.Res. 31 , a consolidated appropriations bill that included eight annual appropriations bills. Division A, the Department of Homeland Security Appropriations Act, 2019, included $49.41 billion in adjusted net discretionary budget authority, $1.69 billion (3.5%) more than had been provided for FY2018, and $2.04 billion more than had been requested by the Administration in February 2018. In addition to that total, the bill included $12 billion designated for the costs of major disasters—$5.35 billion (80.4%) more than had been requested, and the requested $165 million in OCO funding appropriated for the Coast Guard operating budget, rather than a transfer from the Navy. The bill passed the House by a vote of 300-128, and the Senate that same day by a vote of 83-16. The President signed it into law the next day. Summary of DHS Appropriations Generally, the homeland security appropriations bill includes all annual appropriations provided for DHS, allocating resources to every departmental component. Discretionary appropriations provide roughly two-thirds to three-fourths of the annual funding for DHS operations, depending how one accounts for disaster relief spending and funding for overseas contingency operations. The remainder of the budget is a mix of fee revenues, trust funds, and mandatory spending. Appropriations measures for DHS typically have been organized into five titles. The first four are thematic groupings of components, while the fifth provides general direction to the department, and sometimes includes provisions providing additional budget authority. Prior to the FY2017 act, the legislative language of many appropriations included directions to components or specific conditions on how the budget authority it provided could be used. Similarly, general provisions provided directions or conditions to one or more components. In the FY2017 act, a number of these provisions within appropriations and component-specific general provisions were grouped at the ends of the titles where their targeted components are funded, and identified as "administrative provisions." This practice has continued in subsequent years. The DHS Common Appropriations Structure When DHS was established in 2003, components of other agencies were brought together over a matter of months, in the midst of ongoing budget cycles. Rather than developing a new structure of appropriations for the entire department, Congress and the Administration continued to provide resources through existing account structures when possible. At the direction of Congress, in 2014 DHS began to work on a new Common Appropriations Structure (CAS), which would standardize the format of DHS appropriations across components. In an interim report in 2015, DHS noted that operating with "over 70 different appropriations and over 100 Programs, Projects, and Activities ... has contributed to a lack of transparency, inhibited comparisons between programs, and complicated spending decisions and other managerial decision-making." After several years of work and negotiations with Congress, DHS made its first budget request in the CAS for FY2017, and implemented it while operating under the continuing resolutions funding the department in October 2016. For FY2017 and FY2018, all DHS components requested appropriations under the CAS except for the Coast Guard, due to constraints of its financial management system. For FY2019, all the components' requests generally conformed to the CAS. A visual representation of the FY2019 requested funding in this new structure follows in Figure 1 . On the left, CAS appropriations categories are listed next to a black bar representing the total FY2018 funding levels requested for DHS for each category. A catch-all "other" category is included for budget authority associated with the legislation that does not fit the CAS categories. Colored lines flow to the DHS components listed on the right, showing how the amount of funding for each appropriations category is distributed across DHS components. Wider lines indicate greater funding levels, so it is possible to understand how components may be funded differently. For example, while Customs and Border Protection (CBP) gets most of its funding from Operations and Support appropriations, the Federal Emergency Management Agency (FEMA) receives most of its discretionary funding from the Disaster Relief Fund appropriation. DHS Appropriations: Summary by Title The following sections present textual and tabular comparisons among FY2018 enacted appropriations, FY2019 requested appropriations, the FY2019 appropriations bills developed by the appropriations committees, and the final enacted annual appropriation in Division A of the FY2019 Consolidated Appropriations Act ( P.L. 116-6 ). The structure of the appropriations reflects the organization outlined in the detail table of the explanatory statement accompanying the act ( H.Rept. 116-9 ). The tables summarize enacted appropriations for FY2018, and those requested by the Administration, and proposed in appropriations committee-developed legislation under development for FY2019. Only the formal request for FY2019 annual appropriations is reflected in the "Request" column. The tables include data on enacted annual and supplemental appropriations. Instances where appropriations are provided for a title's components in other parts of the bill (such as in general provisions or by transfer) are shown separately. Supplemental appropriations provided with an emergency designation for a given component in FY2018 are displayed after the subtotal of annual appropriations. Following the methodology used by the appropriations committees, totals of "appropriations" do not include resources provided by transfer or under adjustments to discretionary spending limits (i.e., for emergency requirements, overseas contingency operations for the Coast Guard or the cost of major disasters under the Stafford Act for the Federal Emergency Management Agency). Amounts covered by adjustments are included with discretionary appropriations in a separate total for "discretionary funding." A subtotal for each component of total estimated budgetary resources that would be available under the legislation and from other sources (such as fees, mandatory spending, and trust funds) for the given fiscal year is also provided at the end of each component section. Totals at the bottom of each table indicate the total net discretionary appropriation for the title on its own, the total net discretionary funding from the annual appropriations bill and any supplemental appropriations (when such were provided), and the projected total estimated budgetary resources for each phase in the appropriations process shown in the table. Title I—Departmental Management and Operations Title I, Departmental Management and Operations, the smallest of the component-specific titles, contains appropriations for the Office of the Secretary and Executive Management, the Management Directorate, Analysis and Operations (A&O), and the Office of the Inspector General (OIG). For FY2018, these components received $1.36 billion in net discretionary funding through the appropriations process, including $25 million in FY2018 supplemental appropriations. The Trump Administration requested $1.60 billion in FY2019 net discretionary funding for components included in this title. In addition, $24 million was requested as a transfer from the FY2019 appropriation for the Disaster Relief Fund to the OIG. Not including the transfer, the appropriations request was $241 million (17.7%) more than the amount provided for FY2018. Senate Appropriations Committee-reported S. 3109 included $1.47 billion in FY2019 net discretionary funding for the components funded in this title. This was $137 million (8.6%) less than requested by the Trump Administration and $103 million (7.6%) more than the amount provided for FY2018. S. 3109 included $72 million in discretionary budget authority drawn from unobligated prior-year balances from the DRF, but did not include the proposed transfer of FY2019 DRF resources to the OIG. As a result, the gross budgetary resources provided to components funded in Title I was $89 million (5.5%) less than the request, and $176 million (12.9%) more than provided in FY2018. House Appropriations Committee-reported H.R. 6776 included $1.48 billion in FY2019 net discretionary funding for the components funded in this title. This was $119 million (7.4%) less than requested by the Trump Administration and $122 million (8.9%) more than the amount provided for FY2018. H.R. 6776 , like the Senate committee-reported bill, did not include the proposed transfer of FY2019 DRF resources to the OIG. As a result, the gross budgetary resources provided to components funded in Title I were $143 million (8.8%) less than the request, and $122 million (8.9%) more than provided in FY2018. P.L. 116-6 included a total of $1.88 billion in FY2019 net discretionary funding for the components funded in this title. This included $51 million in a general provision for financial systems modernization, controlled by the management directorate. The total was $513 million (37.7%) more than was provided in FY2018, and $248 million (15.2%) more than was requested by the Administration, if one included the Administration's proposed transfer of $24 million from the Disaster Relief Fund to the Office of the Inspector General. Table 1 shows these comparisons in greater detail. As resources were requested or provided for the Management Directorate and Office of the Inspector General in some cases from outside Title I, separate lines are included for each of those components showing a total for what is provided solely within Title I, then the individual items funded outside the title, followed by the total annual appropriation for the components. Title II—Security, Enforcement, and Investigations Title II, Security, Enforcement, and Investigations, contains appropriations for U.S. Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), the Coast Guard (USCG), and the U.S. Secret Service (USSS). Title II funding represents the majority of DHS's budget, comprising roughly three-quarters of the funding appropriated annually for the department. For FY2018, these components received $39.52 billion in net discretionary funding, as part of $47.13 billion in projected total budget authority. This included $1.06 billion in supplemental appropriations. The Trump Administration formally requested $38.41 billion in FY2019 net discretionary funding for components included in this title, as part of a total budget request for these components of $47.08 billion for FY2019. The funding request was $45 million (0.1%) less than the amount provided for FY2018, setting aside FY2018 supplemental appropriations. Again setting aside FY2018 supplemental appropriations, the total resources proposed for FY2019 was $1.01 billion (2.2%) more than projected for FY2018. The Administration reportedly sought additional funding in this title for construction of border barriers, above the formally requested level. In January 2019, the acting director of the Office of Management and Budget sent a letter to congressional leaders officially seeking an additional $4.1 billion. Those amounts are not included in these comparative calculations or in the table below. Senate Appropriations Committee-reported S. 3109 included $38.68 billion in FY2019 net discretionary funding for the components funded in this title. This was $271 million (0.7%) more than formally requested by the Trump Administration and $227 million (0.6%) more than the amount provided for FY2018, setting aside FY2018 supplemental appropriations. The total budgetary resources projected under S. 3109 were $614 million (1.3%) less than the Administration's request (largely due to rejection of a proposed TSA fee increase), but $391 million (0.8%) more than projected for FY2018, again setting aside FY2018 supplemental appropriations. House Appropriations Committee-reported H.R. 6776 included $41.28 billion in FY2019 net discretionary funding for the components funded in this title. This was $2.87 billion (7.5%) more than formally requested by the Trump Administration and $2.82 billion (7.3%) more than the amount provided for FY2018, setting aside FY2018 supplemental appropriations. The total budgetary resources projected under H.R. 6776 were $2.08 billion (4.4%) more than formally requested by the Administration and $3.12 billion (6.8%) more than projected for FY2018, again setting aside FY2018 supplemental appropriations. H.R. 6776 would have provided $2.59 billion (6.7%) more than S. 3019 , largely due to the House Appropriations Committee recommending $3.35 billion more than its Senate counterpart for CBP's Border Security Assets and Infrastructure activity. P.L. 116-6 included $40.00 billion in net discretionary funding for the components funded in this title. The enacted annual appropriations were $1.59 billion (4.1%) more than requested, and $486 million (1.2%) more than the amount provided in FY2018. Setting aside FY2018 supplemental funding, FY2019 enacted net discretionary funding exceeded FY2018 levels by $1.55 billion (4.0%). The total budgetary resources projected for components funded in this title were $47.82 billion, $704 million (1.5%) more than was formally requested by the Administration, and $1.75 billion (3.8%) more than was provided in FY2018, setting aside the FY2018 supplemental funding. Table 2 shows these comparisons in greater detail. Title III—Protection, Preparedness, Response, and Recovery Title III, Protection, Preparedness, Response, and Recovery, contains appropriations for the Cybersecurity and Infrastructure Security Agency (CISA), the Office of Health Affairs (OHA), and the Federal Emergency Management Agency (FEMA). It is the second largest of the component-specific titles. For FY2018, these components received $7.22 billion in net discretionary appropriations and $7.37 billion in specially designated funding for disaster relief through the annual appropriations process. In addition to that annual funding, $58.23 billion was provided for FEMA in emergency supplemental appropriations in FY2018. Incorporating all these elements, the total net discretionary funding level for all Title III components was $72.61 billion for FY2018. The Trump Administration requested $6.19 billion in FY2019 net discretionary appropriations for components included in this title, and $6.65 billion in specially designated funding for disaster relief as part of a total net discretionary funding level for these components of $12.84 billion for FY2019. Setting aside the $58.23 billion in FY2018 supplemental appropriations, the appropriations request was $1.54 billion (10.7%) less than the amount provided for FY2018 in net discretionary funding. Senate Appropriations Committee-reported S. 3109 included $13.54 billion in FY2019 net discretionary funding for the components funded in this title. This was $694 million (5.4%) more than requested by the Trump Administration and $847 million (5.9%) less than the amount provided for FY2018, setting aside supplemental funding. The total budgetary resources projected would be $718 million (3.8%) more than the Administration's request, but $1.29 billion (6.2%) less than projected for FY2018, setting aside supplemental funding. The Senate committee-reported bill included within these totals the requested disaster relief funding of $6.65 billion, and offset $228 million in its Federal Assistance appropriation from unobligated DRF balances. House Appropriations Committee-reported H.R. 6776 included $13.70 billion in FY2019 net discretionary funding for the components funded in this title. This was $861 million (6.7%) more than requested by the Trump Administration and $681 million (4.7%) less than the amount provided for FY2018, setting aside supplemental funding. The total budgetary resources projected would be $885 million (4.7%) more than the Administration's request, but $1.13 billion (5.4%) less than projected for FY2018, setting aside supplemental funding. The House committee-reported bill included within these totals the requested disaster relief funding of $6.65 billion. P.L. 116-6 included $18.27 billion in FY2019 net discretionary funding for the components funded in this title. The enacted discretionary funding level was $5.43 billion (42.3%) more than requested, and $3.89 billion (27.1%) more than the amount provided for FY2018, setting aside the historically high level of supplemental appropriations. The total budgetary resources projected for FY2019 was $5.46 billion (29.0%) more than was requested, and $3.44 billion (16.5%) more than was projected for FY2018, setting aside FY2018 supplemental funding. Table 3 shows these comparisons in greater detail. As some annually appropriated resources were provided for FEMA from outside Title III in FY2018, a separate line is included for FEMA showing a total for what is provided solely within Title III, then the non-Title III appropriation, followed by the total annual appropriation for FEMA. Title IV—Research and Development, Training, and Services Title IV, Research and Development, Training, and Services, the second smallest of the component-specific titles, contains appropriations for the U.S. Citizenship and Immigration Services (USCIS), the Federal Law Enforcement Training Center (FLETC), the Science and Technology Directorate (S&T), and the Domestic Nuclear Detection Office (DNDO). In FY2018, these components received $1.57 billion in net discretionary funding, as part of a projected total budget of $5.92 billion. This included $10 million in supplemental appropriations for FLETC. The Trump Administration requested $1.53 billion in FY2019 net discretionary funding for components included in this title, as part of a total budget for these components of $6.11 billion for FY2018. The funding request was $36 million (2.3%) less than the amount provided for FY2018, setting aside supplemental appropriations, although the overall budget request was $201 million (3.3%) higher than the annual budget projected for FY2018 (again, setting aside supplemental funding). This is due to changes in anticipated fee collections for USCIS and reorganization of most of the Office of Health Affairs and DNDO into the new CWMD component reflected in the request. Senate Appropriations Committee-reported S. 3109 included $1.53 billion in net discretionary funding for components included in this title, as part of a projected total budget of $6.23 billion. This was $115 million (7.5%) more than requested, and $79 million (5.0%) less than the amount provided for FY2018, not including supplemental funding. The total budgetary resources projected under S. 3109 would have been $115 million (1.9%) more than the Administration's request, and $316 million (5.3%) more than projected for FY2018, setting aside supplemental funding. House Appropriations Committee-reported H.R. 6776 included $1.64 billion in net discretionary funding for components included in this title, as part of a projected total budget of $6.21 billion. This was $97 million (6.3%) more than requested, and $60 million (3.9%) more than the amount provided for FY2018, not including supplemental funding. The total budgetary resources projected under H.R. 6776 would have been $97 million (1.6%) more than the Administration's request, and $297 million (5.0%) more than projected for FY2018, setting aside supplemental funding. P.L. 116-6 included $1.62 billion in FY2019 net discretionary funding for the components funded in this title. Enacted FY2019 appropriations were $199 million (3.3%) more than was requested by the Administration, and $163 million (10.4%) more than was provided in FY2018, setting aside FY2018 supplemental funding. Total budgetary resources projected for FY2019 are $199 million (3.3%) more than were requested by the Administration, and $400 million (6.8%) more than was projected for FY2018, setting aside FY2018 supplemental funding. Table 4 shows these comparisons in greater detail. Title V—General Provisions As noted above, the fifth title of the FY2019 DHS appropriations act contains general provisions, the impact of which may reach across the entire department, affect multiple components, or focus on a single activity. Rescissions of prior-year appropriations—cancellations of budget authority that reduce the net funding level in the bill—are found in this title. For FY2018, Division F of P.L. 115-141 included $489 million in rescissions. For FY2019, the Administration proposed rescinding $300 million in prior-year funding from the DRF. S. 3109 included $137 million in rescissions from other appropriations, but specifically directed the $300 million the Administration had proposed rescinding from the DRF to other activities within DHS. H.R. 6776 did not include any rescissions, although an amendment from Representative Palazzo was passed in full committee markup on a voice vote redirecting unobligated balances from the Science and Technology Directorate to the Coast Guard. Division A of P.L. 116-6 included $303 million in rescissions, and a provision directing that $300 million of DRF unobligated balances be used to offset new DRF appropriations. In FY2018, funding was also included in Title V for the Financial Systems Modernization initiative and a grant program for Presidential Residence Protection costs, which are reflected in the tables for Title I and Title III, respectively, as those titles fund the components that manage these resources. For FY2019, Title V of S. 3109 only funded the Financial Systems Modernization initiative, and Title V of H.R. 6776 only funded Presidential Residence Protection costs. Title V of P.L. 116-6 , Division A, included funding for both the Financial Systems Modernization initiative and Presidential Residence Protection costs. The detail table in the back of H.Rept. 115-948 also notes the discretionary cost of several policy changes in H.R. 6776 . Four amendments adopted in House Appropriations Committee markup resulted in a net $13 million increase in the score of the bill, which is reflected in the detail table, but not in the tables of this report. No such costs are reflected in the detail table of H.Rept. 116-9 . For Further Information For additional perspectives on FY2019 DHS appropriations, see the following: CRS Report R44604, Trends in the Timing and Size of DHS Appropriations: In Brief ; CRS Report R44052, DHS Budget v. DHS Appropriations: Fact Sheet ; and CRS Report R45262, Comparing DHS Component Funding, FY2019: In Brief . Congressional clients also may wish to consult CRS's experts directly. The following table lists CRS analysts and specialists who have expertise in policy areas linked to DHS appropriations. Appendix. Appropriations Terms and Concepts Budget Authority, Obligations, and Outlays Federal government spending involves a multistep process that begins with the enactment of budget authority by Congress. Federal agencies then obligate funds from enacted budget authority to pay for their activities. Finally, payments are made to liquidate those obligations; the actual payment amounts are reflected in the budget as outlays. Budget authority is established through appropriations acts or direct spending legislation and determines the amounts that are available for federal agencies to spend. The Antideficiency Act prohibits federal agencies from obligating more funds than the budget authority enacted by Congress. Budget authority also may be indefinite in amount, as when Congress enacts language providing "such sums as may be necessary" to complete a project or purpose. Budget authority may be available on a one-year, multiyear, or no-year basis. One-year budget authority is available for obligation only during a specific fiscal year; any unobligated funds at the end of that year are no longer available for spending. Multiyear budget authority specifies a range of time during which funds may be obligated for spending, and no-year budget authority is available for obligation for an indefinite period of time. Obligations are incurred when federal agencies employ personnel, enter into contracts, receive services, and engage in similar transactions in a given fiscal year—which create a legal requirement for the government to pay. Outlays are the funds that are actually spent during the fiscal year. Because multiyear and no-year budget authorities may be obligated over a number of years, outlays do not always match the budget authority enacted in a given year. Additionally, budget authority may be obligated in one fiscal year but spent in a future fiscal year, especially with certain contracts. In sum, budget authority allows federal agencies to incur obligations and authorizes payments, or outlays, to be made from the Treasury. Discretionary funded agencies and programs, and appropriated entitlement programs, are funded each year in appropriations acts. Discretionary and Mandatory Spending Gross budget authority , or the total funds available for spending by a federal agency, may be composed of discretionary and mandatory spending. Discretionary spending is not mandated by existing law and is thus appropriated yearly by Congress through appropriations acts. The Budget Enforcement Act of 1990 defines discretionary appropriations as budget authority provided in annual appropriations acts and the outlays derived from that authority, but it excludes appropriations for entitlements. Mandatory spending , also known as direct spending , consists of budget authority and resulting outlays provided in laws other than appropriations acts and is typically not appropriated each year. Some mandatory entitlement programs, however, must be appropriated each year and are included in appropriations acts. Within DHS, Coast Guard retirement pay is an example of appropriated mandatory spending. Offsetting Collections Offsetting funds are collected by the federal government, either from government accounts or the public, as part of a business-type transaction such as collection of a fee. These funds are not considered federal revenue. Instead, they are counted as negative outlays. DHS net discretionary budget authority , or the total funds appropriated by Congress each year, is composed of discretionary spending minus any fee or fund collections that offset discretionary spending. Some collections offset a portion of an agency's discretionary budget authority. Other collections offset an agency's mandatory spending. These mandatory spending elements are typically entitlement programs under which individuals, businesses, or units of government that meet the requirements or qualifications established by law are entitled to receive certain payments if they establish eligibility. The DHS budget features two mandatory entitlement programs: the Secret Service and the Coast Guard retired pay accounts (pensions). Some entitlements are funded by permanent appropriations, and others are funded by annual appropriations. Secret Service retirement pay is a permanent appropriation and, as such, is not annually appropriated. In contrast, Coast Guard retirement pay is annually appropriated. In addition to these entitlements, the DHS budget contains offsetting Trust and Public Enterprise Funds. These funds are not appropriated by Congress. They are available for obligation and included in the President's budget to calculate the gross budget authority. 302(a) and 302(b) Allocations In general practice, the maximum budget authority for annual appropriations (including DHS) is determined through a two-stage congressional budget process. In the first stage, Congress sets overall spending totals in the annual concurrent resolution on the budget. Subsequently, these totals are allocated among the appropriations committees, usually through the statement of managers for the conference report on the budget resolution. These amounts are known as the 302(a) allocations . They include discretionary totals available to the House and Senate Committees on Appropriations for enactment in annual appropriations bills through the subcommittees responsible for the development of the bills. In the second stage of the process, the appropriations committees allocate the 302(a) discretionary funds among their subcommittees for each of the appropriations bills. These amounts are known as the 302(b) allocations . These allocations must add up to no more than the 302(a) discretionary allocation and form the basis for enforcing budget discipline, since any bill reported with a total above the ceiling is subject to a point of order. The 302(b) allocations may be adjusted during the year by the respective appropriations committee issuing a report delineating the revised suballocations as the various appropriations bills progress toward final enactment. No subcommittee allocations are developed for conference reports or enacted appropriations bills. Table A-1 shows comparable figures for the 302(b) allocation for FY2018, based on the adjusted net discretionary budget authority included in Division F of P.L. 115-141 , the President's request for FY2019, and the House and Senate subcommittee allocations for the Homeland Security appropriations bills for FY2019. The Budget Control Act, Discretionary Spending Caps, and Adjustments The Budget Control Act established enforceable discretionary limits, or caps, for defense and nondefense spending for each fiscal year from FY2012 through FY2021. Subsequent legislation, including the Bipartisan Budget Act of 2013, amended those caps. Most of the budget for DHS is considered nondefense spending. In addition, the Budget Control Act allows for adjustments that would raise the statutory caps to cover funding for overseas contingency operations/Global War on Terror, emergency spending, and, to a limited extent, disaster relief and appropriations for continuing disability reviews and control of health care fraud and abuse. Three of the four justifications outlined in the Budget Control Act for adjusting the caps on discretionary budget authority have played a role in DHS's appropriations process. Two of these—emergency spending and overseas contingency operations/Global War on Terror—are not limited. The third justification—disaster relief—is limited. Under the Budget Control Act, the allowable adjustment for disaster relief was determined by the Office of Management and Budget (OMB), using the following formula until FY2019: Limit on disaster relief cap adjustment for the fiscal year = Rolling average of the disaster relief spending over the last ten fiscal years (throwing out the high and low years) + the unused amount of the potential adjustment for disaster relief from the previous fiscal year. The Bipartisan Budget Act of 2018 amended the above formula, increasing the allowable size of the adjustment by adding 5% of the amount of emergency-designated funding for major disasters under the Stafford Act, calculated by OMB as $6.296 billion. The act also extended the availability of unused adjustment capacity. In August 2018, OMB released a sequestration update report for FY2019 that provided a preview estimate of the allowable adjustment for FY2019 of $14.965 billion —the second-largest allowable adjustment for disaster relief in the history of the mechanism. $12 billion of that adjustment was exercised in P.L. 116-6 , Division A, in appropriations for the Disaster Relief Fund. No other annual appropriations used the disaster relief adjustment for FY2019.

This report provides an overview and analysis of FY2019 appropriations for the Department of Homeland Security (DHS). The primary focus of this report is on congressional direction and funding provided to DHS through the appropriations process. It includes an Appendix with definitions of key budget terms used throughout the suite of Congressional Research Service reports on homeland security appropriations. It also directs the reader to other reports providing context for specific component appropriations. As part of an overall DHS budget that the Office of Management and Budget (OMB) estimated to be $74.88 billion, the Trump Administration requested $47.43 billion in adjusted net discretionary budget authority through the appropriations process for DHS for FY2018. The request amounted to a $0.29 billion (0.6%) decrease from the $47.72 billion in annual appropriations enacted for FY2018 through the Department of Homeland Security Appropriations Act, 2018 (P.L. 115-141, Division F). The Administration also requested discretionary funding for DHS components that does not count against discretionary spending limits and is not reflected in the adjusted net discretionary budget authority total. The Administration requested an additional $6.65 billion for the Federal Emergency Management Agency (FEMA) in disaster relief funding, as defined by the Budget Control Act (P.L. 112-25; BCA), and in the budget request for the Department of Defense (DOD), $165 million in Overseas Contingency Operations designated funding (OCO) from the Operations and Maintenance budget of the U.S. Navy. On June 21, 2018, the Senate Committee on Appropriations reported out S. 3109, the Department of Homeland Security Appropriations Act, 2019, accompanied by S.Rept. 115-283. Committee-reported S. 3109 included $48.33 billion in adjusted net discretionary budget authority for FY2019. This was $901 million (1.9%) above the level requested by the Administration, and $611 million (1.3%) above the enacted level for FY2018. The Senate committee-reported bill included the Administration-requested levels for disaster relief funding, and included the OCO funding in an appropriation to the Coast Guard, rather than as a transfer from the U.S. Navy. On July 26, 2018, the House Appropriations Committee marked up H.R. 6776, its version of the Department of Homeland Security Appropriations Act, 2019. H.Rept. 115-948 was filed September 12, 2018. Committee-reported H.R. 6776 included $51.44 billion in adjusted net discretionary budget authority. The House committee-reported bill included the Administration-requested levels for disaster relief funding, but unlike S. 3109, did not include the OCO funding for the Coast Guard. As some of the annual appropriations for FY2019 remained unfinished, a consolidated appropriations bill that included a continuing resolution was passed by Congress and signed into law on September 28, 2018. The resolution, which covered DHS along with several other departments and agencies, continued funding at a rate of operations equal to FY2018 with some exceptions. This continuing resolution was extended through December 21, 2018, after which point annual appropriations lapsed. A partial government shutdown ensued for 35 days until continuing appropriations were resumed January 25, 2019, by P.L. 116-5. P.L. 116-6, the Consolidated Appropriations Act, 2019, was passed by Congress on February 14, 2019, and signed into law the following day. Division A of the act included the Homeland Security Appropriations Act, 2019, which included $49.41 billion in adjusted net discretionary budget authority, $12 billion designated for the costs of major disasters, and $165 million in OCO funding for the Coast Guard. This report will be updated in the event of FY2019 supplemental appropriations actions.

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Introduction1 This report summarizes and analyzes selected forest management provisions enacted in the 115 th Congress and compares them with prior law or policy. These provisions were enacted through two legislative vehicles The Stephen Sepp Wildfire Suppression Funding and Forest Management Activities Act, enacted as Division O of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 , commonly referred to as the FY2018 omnibus) and signed into law on March 23, 2018. The Agricultural Improvement Act of 2018 ( P.L. 115-334 , Title VIII), signed into law on December 20, 2018. This law is commonly referred to as the 2018 farm bill. Both laws included provisions that address forest management through three general perspectives: (1) management of forested federal land, (2) federal programs to support forest management on nonfederal lands, known as forest assistance programs , and (3) programs to promote or conduct forestry research (to benefit both federal and nonfederal forests). This report focuses primarily on the provisions related to management of forested federal land. The federal forest management provisions change how the Forest Service (FS, within the Department of Agriculture (USDA)) and the Bureau of Land Management (BLM, within the Department of the Interior (DOI)) manage their lands. FS is responsible for managing the 193 million acres of the National Forest System (NFS), and BLM manages 246 million acres of public lands under its jurisdiction. This report begins with background information on the NFS and BLM's public lands and an overview of two laws: the National Environmental Policy Act (NEPA), and the Healthy Forests Restoration Act (HFRA). These laws, among others, authorize specific forest management activities and establish procedures relevant to the respective agency's decisionmaking processes for those activities. The 115 th Congress enacted provisions that affect how FS and BLM implement those activities and procedural requirements. The report summarizes and analyzes the provisions in the following categories: project planning and implementation, wildland fire management, forest management and restoration programs, and miscellaneous. Within each of those categories, the report broadly discusses relevant issues, summarizes the changes made in the 115 th Congress, and discusses potential issues for Congress related to that category. Some provisions or sections are covered in more depth than others, generally reflecting the complexity of the issue, nature of the enacted changes, or level of congressional interest. A separate section at the end of the report discusses overall issues for Congress. The Appendix contains side-by-side tables comparing all of the forest-related provisions in each law to prior law (including provisions related to forestry assistance programs and forestry research). Background National Forest System Approximately 145 million acres of the 193-million-acre NFS consists of forests and woodlands. Congress directed that management of the national forests shall be to protect watersheds and forests and provide a "continuous supply of timber for the use and necessities of citizens of the United States" and authorized the sale of "dead, matured, or large growth of trees." Congress added recreation, livestock grazing, energy and mineral development, and protection of wildlife and fish habitat as official uses of the national forests, in addition to watershed protection and timber production, in the Multiple-Use Sustained-Yield Act of 1960 (MUSY). Pursuant to MUSY, management of the resources is to be coordinated for multiple use —considering the relative values of the various resources but not necessarily maximizing dollar returns or requiring that any one particular area be managed for all or even most uses—and sustained yield , meaning maintaining a high level of resource outputs in perpetuity without impairing the productivity of the land. The National Forest Management Act of 1976 (NFMA) requires FS to prepare and update comprehensive land and resource management plans (also referred to as forest plans ) for each NFS unit. NFMA, as amended, specifies that the plans must be developed and revised with public involvement. Plans, like all discretionary actions taken by the FS, must also comply with any cross-cutting laws that apply broadly to all federal agency actions. This includes compliance with NEPA, as well as Section 7 of Endangered Species Act (ESA), and Section 106 of the National Historic Preservation Act (NHPA), among others. Each forest plan broadly describes a range of desired resource conditions across the specified NFS unit but does not authorize individual projects or specific on-the-ground actions. Projects are the on-the-ground actions that implement the forest plan prepared for that site. These may include activities such as timber harvests, watershed restoration, trail maintenance, and hazardous fuel reduction, among many others. Projects must be consistent with the resource objectives established in the forest plans. These projects must be planned, evaluated, and implemented using FS procedures intended to ensure compliance with applicable requirements (e.g., NEPA, ESA, NHPA). The timing and scope of review for a given project may vary based on the specific statutory authority underpinning each project's implementation, the types of resources that could be affected at the site, and the level of those potential effects. Bureau of Land Management Public Lands BLM manages 246 million acres of public lands, primarily in the western United States. Approximately 38 million acres of those public lands are woodlands and forests. The public lands—forested and otherwise—are managed under the principles of multiple use and sustained yield, as directed by the Federal Land Policy and Management Act (FLPMA). These principles are similar to those that govern the NFS. The 2.6 million acres of Oregon and California Railroad (O&C) Lands and Coos Bay Wagon Road (CBWR) Lands in western Oregon, however, are forested lands managed under a statutory direction for permanent forest production under the principle of sustained yield and with the purposes of providing timber, protecting watersheds, providing recreational opportunities, and contributing to the economic stability of the local communities. Similar to the requirements applicable to FS decisionmaking, FLPMA directs BLM to prepare and maintain comprehensive resource management plans and to revise them as necessary. Any proposed on-the-ground activities or projects must be consistent with those plans and must be planned, evaluated, and implemented using BLM's procedures for ensuring compliance with the laws that apply broadly to any federal agency action (e.g., NEPA, ESA, NHPA). National Environmental Policy Act (NEPA)14 Broadly, NEPA requires federal agencies to identify the environmental impacts of a proposed action before making a final decision about that action. How a federal agency demonstrates compliance with NEPA depends on the level of the proposal's impacts. A proposed action that would significantly affect the "quality of the human environment" requires the preparation of an environmental impact statement (EIS) leading to a Record of Decision. If the impacts are uncertain, an agency may prepare an environmental assessment (EA) to determine whether an EIS is necessary, or whether a finding of no significant impact (FONSI) may be issued through a Decision Notice. For actions that require an EA or EIS, an agency generally must evaluate the impacts of the proposed action and reasonable alternatives to it, including the alternative of taking no action (i.e., a no-action alternative ). The analysis included in the EIS or EA/FONSI is used to inform the agency's decisionmaking process regarding the proposal. Under NEPA implementing regulations, categorical exclusions (CEs) refer broadly to categories of actions that do not individually or cumulatively have a significant effect on the environment and hence are excluded from the requirement to prepare an EIS or an EA. FS and BLM have identified CEs based on each agency's past experience with similar actions. Some CEs have been explicitly established in statute by Congress, as discussed in the " Statutorily Established NEPA CEs " section of this report. Individual agencies also may determine whether or what additional documentation may be required for a CE. In its list of CEs, FS distinguishes between actions that generally do not require any further documentation and those that generally require the preparation of a decision memorandum as part of an administrative record supporting the decision to approve the proposal as a CE. In their agency-specific procedures implementing NEPA, each federal agency has identified and listed actions it is authorized to approve that normally require an EIS, or an EA resulting in a FONSI, or that can be approved using a CE. FS and BLM regulations also provide for and identify the resource conditions in which a normally excluded action may have the potential for a significant environmental effect and warrant further analysis in an EA or EIS. The presence of these resource conditions is termed extraordinary circumstances. For example, FS has identified the presence of flood plains, municipal watersheds, endangered species or their habitat, wilderness areas, inventoried roadless areas, and archaeological sites, among others, as potential extraordinary circumstances that may preclude the use of a CE for an otherwise eligible project. As commonly implemented, the process of identifying potential environmental impacts pursuant to NEPA serves as a framework to identify any other environmental requirements that may apply to that project as a result of those impacts. In this way, an agency's procedures to implement NEPA may serve as an umbrella compliance process. For example, within the framework of determining the resources affected and level of effects of a given proposal, the agency's NEPA process would identify project impacts that may trigger additional environmental review and consultation requirements under ESA and NHPA, among other laws. If compliance with NEPA was waived for a given category of action, the requirements triggered by impacts to those resources under other federal laws would still apply. Healthy Forests Restoration Act (HFRA) HFRA, among other purposes, was intended to expedite the planning and review process for hazardous fuel reduction and forest restoration projects on NFS and BLM lands. Hazardous fuel reduction projects are intended to reduce the risk of catastrophic wildfire by removing or modifying the availability of biomass (e.g., trees, shrubs, grasses, needles, leaves, and twigs) that fuel a wildland fire through a variety of methods and measures. HFRA defined specific hazardous fuel reduction projects and authorized an expedited planning and review process for those projects. The authorization is available to be used for projects covering up to a cumulative total of 20 million acres of federal land. HFRA defined several other relevant terms, some of which are summarized below At-Risk Community : an area that is comprised of an interface community as defined in the notice published in 66 Federal Register 753, or a group of homes and other structures with basic infrastructure and services within or adjacent to federal land, and an area in which conditions are conducive to a large-scale wildland fire disturbance event and for which a significant threat to human life or property exists as a result of significant wildland fire disturbance event. Authorized H azardous F uels R eduction P roject s (HFRA P rojects) : methods and measures for reducing hazardous fuels including prescribed fire, wildland fire use, and various mechanical methods (e.g., pruning or thinning, which is the removal of small-diameter trees to produce commercial and pre-commercial products). Fire R egimes and C ondition C lasses : terms used to describe the relative change between the historical frequency and intensity of fire patterns across a vegetated landscape to the current fire patterns. These terms are used to prioritize and assess hazardous fuel reduction projects. For a complete definition, see the shaded text box and Figure 1 . Wildland-Urban Interface (WUI) : an area within or adjacent to an at-risk community with a community wildfire protection plan (CWPP), or an area within a specified distance to an at-risk community without a CWPP and with specified characteristics (e.g., steep slopes). HFRA projects may be conducted in the WUI; on specified areas within a municipal watershed and with moderate or significant departure from the historical fire regimes (see shaded text box); on wind-, ice-, insect-, or disease-damaged land, or land at risk of insect or disease damage; or on lands with threatened and endangered species habitat threatened by wildfire. HFRA explicitly excluded projects that would occur on designated wilderness areas, wilderness study areas, or areas that otherwise prohibit vegetation removal by an act of Congress or presidential proclamation. Also, HFRA projects must be consistent with the land and resource management plan in place for the area. Certain covered projects —basically, any HFRA project except those in response to or anticipation of wind, ice, insect, or disease damage—must focus on thinning, prescribed fire, or removing small-diameter trees to modify fire behavior, while maximizing large or old-growth tree retention (if retention promotes fire resiliency). HFRA also directed FS to establish a pre-decisional administrative review process—referred to as an objection process—for proposed HFRA projects. The review is called pre-decisional because HFRA explicitly requires objections to be filed within 30 days of the agency's publication of the draft decision documents associated with the proposed project (e.g., a draft Decision Notice and final EA, or draft Record of Decision and final EIS). Objections are limited to parties that submitted specific comments during the comment periods and may only be on issues raised within those comments. If no comments were received on a project, no objections will be accepted. HFRA also set forth requirements for judicial review. If the objector is still not satisfied with the agency's decision after the administrative review (i.e., objections) process has been exhausted, the next step is judicial review in federal court. However, only issues that were raised during the public comment period and the pre-decisional administrative review process may be considered during judicial proceedings, unless significant new issues arise after the conclusion of the administration review. Congress later directed FS to replace the post-decisional administrative appeals process used for non-HFRA projects with the pre-decisional objection process used by HFRA projects. As a result, all FS projects fall under the same pre-decisional objection process, although there are some differences between HFRA and non-HFRA projects. For example, the Chief of the Forest Service may declare a non-HFRA project an emergency situation and proceed directly to implementation after the publication of the decision document. HFRA Insect and Disease Designation Areas The Agricultural Act of 2014 (the 2014 farm bill) added a new Section 602 to HFRA and authorized the establishment of landscape-scale insect and disease treatment areas within the NFS, by state, as requested by the state governor and then designated by the Chief of the Forest Service. To be eligible for this insect and disease treatment area designation, the NFS area must be experiencing declining forest health based on annual forest health surveys, at risk of experiencing substantial tree mortality over the next 15 years, or in an area in which hazard trees pose an imminent risk to public safety. In total, FS has designated approximately 74.5 million acres nationwide (see Figure 2 ). (Hereinafter this report refers to these designated areas as I&D areas . ) The act specified that FS may prioritize projects that reduce the risk or extent of, or increase the resilience to, insect or disease infestations within the I&D areas. The act further specified that such projects initiated prior to the end of FY2018 are to be considered hazardous fuel reduction projects pursuant to HFRA. Thus, these projects also are subject to HFRA's pre-decisional objections process; must be developed through a collaborative process with state, local, and tribal government collaboration and participation of interested persons; consider the best available science; and maximize the retention of old-growth and large trees, as appropriate for the forest type and to the extent it would promote insect and disease resiliency. Also pursuant to HFRA, projects planned within the WUI require the analysis of the proposed action and one action alternative during the preparation of an EA or EIS. If the proposed action is within 1.5 miles to an at-risk community, then only analysis of the proposed action is required (i.e., the no-action alternative does not need to be analyzed). For projects outside of the WUI, the no-action alternative must also be considered. In sum, Congress authorized FS to identify eligible NFS areas for designation as I&D areas, prioritize projects in those designated areas, and plan and implement those projects through a potentially expedited process. In some states, all eligible lands were designated. In those states, the expedited project planning procedures are thus broadly available, but any prioritization benefit is effectively nullified. As of March, 2019, FS reports 206 projects across 59 national forests and 18 states have been proposed under these authorities. Of those, FS evaluated or is evaluating 20 using the EA analysis procedures and three using an EIS. The remaining 183 projects are being processed or were processed using a CE, described below. 2014 Farm Bill Insect and Disease NEPA Categorical Exclusion (CE) The 2014 farm bill also added a new Section 603 to HFRA, which specified in statute that certain projects intended to reduce the risk or extent of insect or disease infestations within I&D areas would be considered actions categorically excluded from the requirements of NEPA (commonly referred to as the F arm B ill CE ). (The 2018 farm bill added hazardous fuels projects as a priority project category eligible to be implemented through the CE, discussed in the " Planning and Project Implementation Requirements " section). The law specified that these projects are exempt from the pre-decisional administrative review objections process. To be eligible for the 2014 Farm Bill CE, projects must either 1. comply with the eligibility requirements of the Collaborative Forest Landscape Restoration Program (CFLRP), or 2. consider the best available science; maximize the retention of old-growth and large trees, as appropriate for the forest type and to the extent that it would promote insect and disease resiliency; and be developed through a collaborative process that is transparent and nonexclusive, or which meets specified requirements. Projects may not establish any new permanent roads, and any temporary roads must be decommissioned within three years of the project's completion. However, maintenance and repairs of existing roads may be performed as needed to implement the project. Projects cannot exceed 3,000 acres. The projects must be located within designated I&D areas. In addition, projects may be located within the WUI, or outside of the WUI but in areas classified as Condition Classes 2 or 3 in Fire Regime Group I, II, or III, as defined by HFRA. FS policy is to document its decision on a proposal using the Farm Bill CE through a decision memorandum, after determining whether resource conditions at the site result in any extraordinary circumstances subject to further review and consultation. Planning and Project Implementation Requirements The FY2018 omnibus and the 2018 farm bill both changed certain FS and BLM planning and project implementation requirements. For example, both laws expanded various HFRA authorities The FY2018 omnibus (§203) amended HFRA to expand the definition of an authorized fuel reduction project to include the installation of fuel breaks (e.g., measures that change fuel characteristics in an attempt to modify the potential behavior of future wildfires) and fire breaks (e.g., natural or constructed barriers to stop, or establish an area to work to stop, the spread of a wildfire). Thus, projects to build fuel or fire breaks may be planned and implemented using the procedures authorized under HFRA, such as requiring analysis of a specific number of alternatives depending on the proposed action's location. The 2018 farm bill reauthorized (through FY2023) the use of the procedures intended to expedite priority projects in I&D areas. It also added projects to reduce hazardous fuels as a priority project category (§8407(b)). This means that hazardous fuels reduction projects may be planned and implemented using the Farm Bill CE, if those actions are located within I&D areas and meet the other eligibility requirements. In addition, both the FY2018 omnibus and the 2018 farm bill each established a new statutory NEPA CE. The 2018 farm bill also included provisions affecting the interagency consultation requirements under the Endangered Species Act (ESA). These changes are each discussed in the following sections. Statutorily Established NEPA CEs Both laws established new statutory CEs intended to expedite the planning and implementation of specific projects. The FY2018 omnibus established a CE for wildfire resilience projects, which is effectively available only for FS. The 2018 farm bill established a CE for projects related to greater sage grouse or mule deer habitat, which is available to both FS and BLM. The provisions of each CE share some similarities with the Farm Bill CE (see Table 1 for a side-by-side comparison of the three CEs). It is difficult to assess the potential impact of these new CEs, either on the pace of project planning and implementation or on various forest management goals. Both of the statutory CEs—as well as the 2014 Farm Bill CE—allow FS (and BLM, as applicable) to plan for larger projects (up to 3,000 to 4,500 acres) through a CE. Some say larger project sizes—with or without a CE—will allow FS to achieve landscape-level goals more efficiently. Some also contend that using a CE for the environmental review will allow FS to proceed from project planning to project implementation at a faster pace, improving agency efficiency. For example, a 2014 Government Accountability Office (GAO) report found that FS took an average of 177 days to complete CEs, compared with 565 days to complete EAs, in FY2012. That same GAO report found that from FY2008 to FY2012, FS used CEs less frequently and the process took longer to complete compared with other agencies. However, the analysis period occurred before Congress authorized the Farm Bill CE, and it is possible that FS trends have since changed. In contrast, others are concerned that conducting landscape-scale projects without more detailed environmental reviews and documentation, or implementing projects of additional types and larger areas through CEs, may lead to undesirable resource effects. Wildfire Resilience CE Section 202 of the FY2018 omnibus added a new Section 605 to HFRA and established a Wildfire Resilience CE for specified hazardous fuel reduction projects. The Wildfire Resilience CE is similar to the Farm Bill CE. Projects must be located within designated I&D areas on NFS lands. FS policy is to document the decision to use the Farm Bill CE through a decision memo, after determining if there are any extraordinary circumstances present that could have a significant environmental effect, as specified in the statute and consistent with FS regulations. Eligible projects must either 1. comply with the CFLRP eligibility requirements, or 2. maximize the retention of old-growth and large trees to the extent that the trees promote resiliency; consider best available science; and be developed through a collaborative process that is transparent and nonexclusive, or which meets specified requirements. Projects may not establish any new permanent roads, and temporary roads must be decommissioned within three years of project completion. However, maintenance and repairs of existing roads may be performed as needed to implement the project. Projects cannot exceed 3,000 acres. In addition to being located within I&D areas, the law specifies that projects located within the WUI are prioritized, but projects may be located outside the WUI if they are located in areas classified as Condition Class 2 or 3 in Fire Regime groups I, II, or III that contain very high wildfire hazard potential. The law further requires the Secretary to submit an annual report on the use of the CEs authorized under this section to specified congressional committees and GAO. FS reports that seven projects were proposed using the authority in FY2018. Many of the same location and purpose requirements for projects planned under the 2014 Farm Bill CE are required for projects that could be planned and implemented under the Wildfire Resilience CE (see Table 1 ). For example, both CEs require projects to be located within designated I&D areas. Both CEs also require projects located outside of the WUI to be in the same specified fire regime condition classes, but the Wildfire Resilience CE also specifies that those projects should be located in areas that also contain very high wildfire hazard potential. In addition, the Wildfire Resilience CE specifies that projects located within the WUI should be prioritized; the Farm Bill CE does not include that prioritization. The Wildfire Resilience CE is available only for specified hazardous fuels reduction projects, while the Farm Bill CE is also available for projects to address insect and disease infestation. In the Wildfire Resilience CE, Congress explicitly directed FS to apply its procedures for evaluating if the resource conditions identified as extraordinary circumstances are present on the project site, and if the presence of those extraordinary circumstances may thus preclude the use of the CE and require further analysis of potential impacts through an EA or EIS. Although similar legislative language was not included, FS must still also assess if there are extraordinary circumstances present that may preclude the use of the Farm Bill CE (and all other CEs). Sage Grouse/Mule Deer CE Section 8611 of the 2018 farm bill directs the Secretary of Agriculture, for NFS lands, and the Secretary of the Interior, for BLM lands, to establish a CE for specified projects to protect, restore, or improve greater sage-grouse and/or mule-deer habitat within one year of enactment. It also specifies requirements for applying the CE. Projects must protect, restore, or improve habitat in a sagebrush steppe ecosystem for either species, or concurrently for both species if the project is located in both mule deer and sage-grouse habitat. Projects must be consistent with the existing resource management plan and for projects on BLM lands, comply with DOI Secretarial Order 3336. The law also described the specific activities that may be part of a project, such as removal of juniper trees, cheat grass, and other nonnative or invasive vegetation; targeted use of livestock grazing to manage vegetation; and targeted herbicide use, subject to applicable legal requirements. Projects may not occur in designated wilderness areas, wilderness study areas, inventoried roadless areas, or any area where the removal of vegetation is restricted or prohibited. Projects may not include any new permanent roads, but may repair existing permanent roads. Temporary roads shall be decommissioned within three years of project completion, or when no longer needed. Projects may not be larger than 4,500 acres. On NFS lands, projects may occur only within designated I&D areas. The law directs each agency to apply its respective extraordinary circumstances procedures in determining whether to use the CE. In addition, the law directs the agencies to consider the relative efficacy of landscape-scale habitat projects, the likelihood of continued population declines in the absence of landscape-scale vegetation management, and the need for habitat restoration. The agencies must also develop a 20-year monitoring plan prior to using the CE. This CE has some basic similarities to the other two CEs—such as requirements for projects to be developed through a collaborative process—but the project purposes and requirements differ significantly (see Table 1 ). Endangered Species Act Section 7 Consultation Requirements57 The Endangered Species Act (ESA) has a stated purpose of conserving species identified as endangered or threatened with extinction and conserving ecosystems on which these species depend. It is administered primarily by the Fish and Wildlife Service (FWS, in DOI) for terrestrial and freshwater species, but also by the National Marine Fisheries Service (NMFS, in the Department of Commerce) for certain marine species. Under the ESA, individual species of plants and animals (both vertebrate and invertebrate) can be listed as either endangered or threatened according to assessments of the risk of their extinction. Once a species is listed, a set of prohibitions applies to the species. The ESA provides federal agencies with an opportunity to gain an exemption from the prohibitions under certain circumstances. Federal agencies must ensure that their actions—or the actions of nonfederal parties granted a federal approval, permit, or funding—are "not likely to jeopardize the continued existence" of any endangered or threatened species, or adversely modify their critical habitat. The federal agencies must consult with either FWS or NMFS if such an action might adversely affect a listed species as determined by the Secretary of the Interior or the Secretary of Commerce. This is referred to as a Section 7 consultation . Where a federal action is dictated by statute, a Section 7 consultation is not required, as it applies to only discretionary actions. If the appropriate Secretary finds that an action would neither jeopardize a species nor adversely modify the critical habitat of that species, the Secretary issues a biological opinion (BiOp) to that effect. The BiOp specifies the terms and conditions under which the federal action may proceed to avoid jeopardy or adverse modification of critical habitat. Alternatively, if the proposed action is judged to jeopardize listed species or adversely modify critical habitat, the Secretary must suggest any reasonable and prudent alternatives that would avoid harm to the species. The great majority of consultations result in "no jeopardy" opinions, and nearly all of the rest find that the project has reasonable and prudent alternatives, which will permit it to go forward. Summary of Changes and Discussion The FY2018 omnibus enacted changes to how the Section 7 consultation requirements interact with the development of land and resources management plans for the NFS and for the O&C and CBWR lands managed by the BLM in Oregon (§§208, 209). The law specifies that the listing of a species as threatened or endangered or the designation of critical habitat pursuant to the ESA does not require the Secretary of Agriculture (for NFS lands) or the Secretary of the Interior (for the O&C and CBWR lands) to engage in Section 7 consultation to update or revise a forest plan, unless the plan is older than 15 years and 5 years has passed since either the date of enactment or the listing of the species, whichever is later. The law further specifies, however, that this does not affect the requirements for Section 7 consultation for projects implementing forest plans or for plan updates or amendments. The changes in the FY2018 omnibus are controversial, because some argue that they set a new precedent for implementing ESA. According to some, the provisions were needed to override a decision by the Ninth Circuit Court of Appeals that required FS to conduct re-consultation on its land management plans after critical habitat was designated for the Canada lynx. Those in favor of the enacted changes contend that not requiring Section 7 consultations for existing land management plans due to a species listing or designation of critical habitat will provide more flexibility in implementing plans, allow for consistency in keeping the plans in place, and enable plan and project implementation to proceed with fewer delays. The exceptions in the law would allow for changes in plans after a certain time, thereby reflecting changes to listed species and their critical habitat. Those opposed to these provisions contend that not allowing for consultation or re-consultation to take place due to changes in listing species and critical habitat could negatively affect species if plans prescribe harmful activities and are allowed to be kept in place. In addition, some contend that the time lag before consultation is required could be long enough to harm species and negatively affect their habitat. Proponents of the change, however, note that projects under a plan are still required to undergo consultation, thereby making the consultation of the plan redundant. However, critics of the provision contend that plans address projects and activities at a higher level and could influence the cumulative effect of all projects and activities under the plan. Wildland Fire Management The federal government's wildland fire management responsibilities—fulfilled primarily by FS and DOI—include fuel reduction, preparedness, prevention, detection, response, suppression, and recovery activities. The FY2018 omnibus and 2018 farm bill contained provisions that changed how Congress appropriates funding specifically for wildfire suppression purposes, added specific requirements for wildfire risk mapping (part of preparedness), and added specific reporting requirements. This section provides some background information on wildland fire appropriations and then discusses those changes in more detail. The laws also changed aspects of FS and DOI's hazardous fuel reduction programs. This included reauthorizing the use of procedures intended to expedite the priority projects in NFS areas designated as I&D areas and expanding the definition of an authorized fuel reduction project, as discussed previously in the " Planning and Project Implementation Requirements " section. Congress provides discretionary appropriations for wildland fire management to both FS and DOI through the Interior, Environment, and Related Agencies appropriations bill. Funding for DOI is provided to the department, which then allocates the funding to the Office of Wildland Fire and four agencies—BLM, the Bureau of Indian Affairs, the National Park Service, and the U.S. Fish and Wildlife Service. Within FS's and DOI's respective Wildland Fire Management (WFM) account, funding is provided to the Suppression Operations program to fund the control of wildfires that originate on federal land. This includes firefighter salaries, equipment, aviation asset operations, and incident support functions in direct support of wildfire response, plus personnel and resources for post-wildfire response programs. If their suppression funding is exhausted during a fiscal year, FS and DOI are authorized to transfer funds from their other accounts to pay for suppression activities; this is often referred to as fire borrowing . Overall appropriations to FS and DOI for wildland fire management have increased considerably since the 1990s. A significant portion of that increase is related to rising suppression costs, even during years of relatively mild wildfire activity, although the costs vary annually and are difficult to predict. FS and DOI frequently have required more suppression funds than have been appropriated to them. This discrepancy often leads to fire borrowing, prompting concerns that increasing suppression spending may be detrimental to other agency programs. In response, Congress has typically enacted supplemental appropriations to repay the transferred funds and/or to replenish the agency's wildfire accounts. Wildfire spending—like all discretionary spending—is currently subject to procedural and budgetary controls. In the past, Congress has sometimes—but not always—effectively waived some of these controls for certain wildfire spending. This situation prompted the 115 th Congress to explore providing wildfire spending outside of those constraints, as discussed below. Suppression Spending: Wildfire Funding Fix In the FY2018 omnibus, the 115 th Congress established a new mechanism for suppression funding, commonly referred to as the wildfire funding fix (§102(a)). Pursuant to the Budget Control Act of 2011 (BCA), discretionary spending currently is subject to statutory limits for each of the fiscal years between FY2012 and FY2021. Enacted discretionary spending may not exceed these limits. If spending that exceeds a limit is enacted, the limit is to be enforced through sequestration, which involves the automatic cancellation of budget authority largely through across-the-board reductions of nonexempt programs and activities. Certain spending is effectively exempt from the discretionary spending limits pursuant to Section 251(b) of the Balanced Budget and Emergency Deficit Control Act (BBEDCA), because those limits are "adjusted" upward each year to accommodate that spending. Spending for specified emergency requirements and disaster-relief purposes falls into this category. Section 102(a)(3) of the FY2018 omnibus amended BBEDCA to add a new adjustment to the nondefense discretionary spending limit for wildfire suppression operations. This new adjustment starts in FY2020 and continues for each year thereafter through FY2027. For the purposes of the adjustment, wildfire suppression operations includes spending for the purposes of the emergency and unpredictable aspects of wildland firefighting, including support, response, and emergency stabilization activities; other emergency management activities; and funds necessary to repay any transfers needed for these costs. The new adjustment would apply to appropriations provided above an amount equal to the 10-year average spending level for wildfire suppression operations as calculated for FY2015 ("FY2015 baseline"). That is, an amount equal to the FY2015 baseline would be subject to the statutory discretionary limits, and then any additional funding appropriated would be considered outside the limits and would be the amount of the adjustment. The amount of the adjustment is capped each fiscal year, starting at $2.25 billion in FY2020 and increasing by $0.1 billion ($100 million) to $2.95 billion in FY2027. Whatever amount, if any, Congress elects to appropriate for wildfire suppression over the FY2015 baseline ($1.39 billion combined) effectively would not be subject to the discretionary spending limits established in the BCA for FY2020 and FY2021, up to the specified maximum. For example, in FY2020, Congress could appropriate the minimum FY2015 baseline of $1.39 billion for suppression operations, as requested by the agencies. This amount would be subject to the BCA discretionary limits. But then Congress could appropriate up to an additional $2.25 billion in FY2020, effectively outside of the discretionary limits. This means the agencies could be appropriated up to $3.64 billion in total in FY2020, for the same discretionary budget "score" as $1.39 billion. For context, FS and DOI combined received $2.05 billion for suppression purposes in FY2019 ($1.67 billion for FS; $388 million for DOI). Over the past 5 years, FS and DOI combined received $2.16 billion annually on average ($1.74 billion for FS; $428 million for DOI). The enactment of the wildfire funding fix potentially removes some budget process barriers to providing additional wildfire suppression funds, at least for FY2020 and FY2021. This is because the BCA statutory limits for discretionary spending are only in effect until FY2021. If new limits are statutorily established for any year between FY2022 through FY2027, then the wildfire adjustment would still be applicable. If no new limits are enacted, though, the wildfire adjustment would no longer apply. It is also unclear if Congress would continue to provide the fire borrowing authority to the agencies once the wildfire adjustment is in effect starting in FY2020. Section 103 of the FY2018 omnibus requires the applicable Secretary, in consultation with the Director of the Office of Management and Budget (OMB), to "promptly" submit a request to Congress for supplemental appropriations if the amount provided for wildfire suppression operations for a fiscal year is estimated to be exhausted within 30 days. This provision would give Congress notice of the likely need for additional funding but would require additional action from Congress to ensure the agencies have access to funds to enable continued federal services in response to wildfires. The wildfire funding fix raises several potential concerns for Congress. As one example, FS did not report its 10-year suppression obligation for FY2020 since suppression appropriations are now tied to the FY2015 baseline (DOI reported its 10-year obligation average to be $403 million). This may raise concerns related to accountability and oversight of suppression spending. Another concern may be that the FY2015 baseline and the annual adjustment limits are not tied to any inflationary factors. Further, the wildfire funding fix is a temporary procedural change for how Congress funds suppression operations and does not address a variety of other concerns related to suppression costs, such as improving suppression cost forecasting, evaluating the effectiveness of suppression methods, or addressing any of the drivers of increasing suppression costs, among other concerns broadly related to wildland fire management. Wildfire Hazard Potential Maps The Fire Modeling Institute, part of FS's Rocky Mountain Research Station, developed a Wildfire Hazard Potential (WHP) index and map to help inform strategic planning and fuel management decisions at a national scale (see Figure 3 ). Using vegetation, fuels, wildfire likelihood, wildfire intensity, and past wildfire location data, the WHP is an index that reflects the relative potential for a wildfire to occur that would then be difficult to suppress or contain. Based on this data, FS estimates that approximately 226 million acres of land in the continental United States are classified at high or very high WHP. Of those lands identified at high or very high WHP, 120 million acres (53%) are federal land (58 million acres of NFS lands and 62 million acres of DOI lands), and the remaining 106 million acres (47%) are state, tribal, other public, or private lands. According to the index, high or very high WHP reflects fuels that have a higher probability of experiencing extreme fire behavior given certain weather conditions. The WHP data, when paired with appropriate spatial data, can approximate the relative wildfire risk to resources and assets identified from that data. The FY2018 omnibus directs FS to pair the WHP with the appropriate spatial data and scale for community use. Specifically, Section 210 directs FS to consult with federal and state partners, and relevant colleges and universities to develop, within two years, web-based wildfire hazard severity maps for use at the community level to inform risk management decisions for at-risk communities adjacent to NFS lands or affected by wildland fire. Reporting Both the FY2018 omnibus and the 2018 farm bill require FS and BLM to submit reports to Congress on specified topics related to wildland fire management. Specifically, the FY2018 omnibus requires the Secretary of Agriculture (for FS) or the Secretary of the Interior to submit an annual report within 90 days after the end of a fiscal year in which the wildfire funding fix is used. The omnibus also establishes requirements for the report components (§104). The first possible report will be required by December 30, 2021, if the wildfire adjustment is used in the first possible year (FY2020). The Secretaries are to prepare the reports in consultation with the OMB Director. The report is to be available to the public and submitted to the House Committees on Appropriations, the Budget, and Natural Resources and the Senate Committees on Appropriations, the Budget, and Energy and Natural Resources. The report shall document the use of the wildfire funding fix (e.g., specific funding obligations and outlays) and overall wildland fire management spending, analyzed by fire size, costs, regional location, and other factors. The report also shall identify the "risk-based factors" that influenced suppression management decisions and describe any lessons learned. In addition, the law specified that the report shall include an analysis of a "statistically significant sample of large fires" across a variety of measures, including but not limited to: cost drivers and analysis, effectiveness of fuel treatments on fire behavior and suppression costs, and the impact of investments in preparedness activities, among others. The 2018 farm bill also requires the Secretaries of Agriculture and the Interior to jointly compile and submit a report to Congress on wildfire, insect infestation, and disease prevention on federal land (§8706). The report must be submitted to the House Committee on Agriculture, House Committee on Natural Resources, Senate Committee on Agriculture, Nutrition, and Forestry, and Senate Committee on Energy and Natural Resources. The first report is due within 180 days of enactment of the farm bill (it is due on June 20, 2019) and then annually thereafter. The agencies shall report on the number of acres of federal land treated for wildfire, insect and infestation, and disease prevention; number of acres of federal land categorized as high or extreme fire risk; number of acres and average intensity of wildfires affecting federal land both treated and not treated for wildfire, insect infestation, or disease prevention; federal response time for each fire greater than 25,000 acres; total timber production on federal land; number of miles of roads and trails in need of maintenance; maintenance backlog for roads, trails, and recreational facilities on federal land; other measures needed to maintain, improve or restore water quality on federal land; and other measures needed to improve ecosystem function or resiliency on federal land. Forest Management and Restoration Programs85 Forest restoration activities seek to establish or reestablish the composition, structure, pattern, and ecological processes and functioning necessary to facilitate resilience and resistance to disturbance events (e.g., insect or disease infestation, catastrophic wildfire, ice or windstorm). For example, forest restoration may include activities such as removing small-diameter trees (called thinning ) to reduce tree density, potentially mitigating against the spread of some insect or disease infestations. Or, forest restoration may include prescribed fire to reduce the building up of understory vegetation or biomass, to mitigate the potential for a wildfire to increase in intensity and severity, and to facilitate post-fire recovery. BLM's authority to conduct restoration projects is derived primarily from FLPMA. FS's authority is derived primarily from its responsibilities to: protect the NFS from destruction as specified in the Organic Administration Act of 1897; manage the national forests for multiple use and sustained yield as specified in MUSY; and maintain forest conditions designed to secure the maximum benefits and provide for a diversity of plant and animal communities as specified in the Forest and Rangeland Renewable Resources Planning Act of 1974, as amended by NFMA. Congress also has authorized specific forest restoration programs for FS and BLM, or has authorized forest restoration to be one of many activities or land management objectives for other programs. The 115 th Congress established two new programs for FS (watershed condition framework and water source protection), and amended three existing programs: the Collaborative Forest Landscape Restoration Program (CFLRP, available only for FS), stewardship contracting authority, and the good neighbor authority. Among other provisions, aspects of these programs allow FS and BLM to partner with various stakeholders in different ways to identify forest restoration needs and perform specified forest management and restoration activities. These programs are elements of the FS's "Shared Stewardship" approach to address land management concerns at a landscape-scale and across ownership boundaries. These programs are generally perceived as offering opportunities to accelerate forest restoration to mitigate against insect and disease infestations or reduce the risk of catastrophic wildfires to federal lands and surrounding communities. In addition, proponents point to other potential benefits to the surrounding communities, such as providing forest products to support local industries, promoting new markets for restoration by-products (e.g., small diameter trees, woody biomass), and fostering collaboration. These programs are generally supported by many stakeholders, although some have raised concerns about specific aspects of each program. Collaborative Forest Landscape Restoration Program (CFLRP) Title IV of the Omnibus Public Lands Management Act of 2009 ( P.L. 111-11 ) established the CFLRP to select and fund the implementation of collaboratively developed restoration proposals for priority forest landscapes. The collaboration process must include multiple interested persons representing diverse interests and must be transparent and nonexclusive, or meet the requirements for Resource Advisory Committees (RACs, as specified by the Secure Rural Schools and Community Self-Determination Act (SRS)). Priority forest landscapes must be at least 50,000 acres and must consist primarily of NFS lands in need of restoration, but may include other federal, state, tribal, or private land within the project area. In addition, the proposal area should be accessible by wood-processing infrastructure. Proposals must incorporate the best available science, and include projects that would maintain or contribute to the restoration of old-growth stands, and restoration treatments that would reduce hazardous fuels, such as thinning small-diameter trees. The proposals may not include plans to establish any new permanent roads, and any temporary roads must be decommissioned. The law requires the publication of an annual accomplishments report and submission of 5-year status reports to specified congressional committees. The law authorized the Secretary of Agriculture to select and fund up to 10 proposals for any given fiscal year, but also gave the Secretary the discretion to limit the number of proposals selected based on funding availability. FS has selected and funded 23 proposals since the program was established in FY2010. Each selected proposal includes a range of individual projects to implement the proposal's forest restoration goals over the specified time period of the funding commitment . The law established a fund to pay for up to 50% of the costs to implement and monitor proposal projects, and authorizes up to $40 million in annual appropriations to the fund through FY2019. Each selected proposal can receive a funding commitment of up to $4 million per year for up to 10 years to fund project implementation, but appropriations from the fund may not be used to cover any costs related to project planning. The program received $40 million annually in appropriations from FY2014 through FY2019. CFLRP is generally perceived as successful, achieving progress towards the specified land management objectives as well as contributing to local economies and fostering collaboration. Agen cy staff found the dedicated funding commitment to be one of the most valuable aspects of the program, providing long-term stability and predictability for project implementation and coordination. Some may note, however, that this funding commitment may direct resources away from NFS lands in areas not covered by selected projects. While the program provide s some economic benefits, some fe el it f a ll s short in fostering new markets for smaller-scale wood products or reducing treatment costs. In addition, while the program is generally perceived as improving relationship s with community stakeholders and fostering collaboration, some note that much of the collaboration ha d focused on relatively simple and non controversial issues and ha d not made progress towards resolving more complex or controversial issues. Summary of Changes and Discussion Section 8629 of the 2018 farm bill reauthorized the program, and authorized up to $80 million in appropriations annually through FY2023. The law authorized the Secretary of Agriculture to issue a one-time waiver to extend the funding commitment to an existing project for up to an additional 10 years, subject to the project continuing to meet the specified eligibility criteria. The law also added the House and Senate Committees on Agriculture as recipients of the five-year program status reports. The funding commitment for the 23 selected proposals is set to expire at the end of FY2019 , so the reauthorization and extension of eligibility could result in some projects continuing beyond that initial time-frame . In addition, i f Congress chooses to appropriate to the new authorization level, it could also result in more projects being selected and funded. Good Neighbor Authority The 2014 farm bill authorized FS and BLM to enter into good neighbor agreements (GNAs) with state governments. The program was initially authorized as a temporary pilot on NFS land in Colorado in 2001, before the permanent authorization made it available nationwide for all NFS lands as well as BLM lands. Under an approved GNA, states are authorized to do restoration work on NFS and BLM public lands. The authorized restoration services include treating insect- and disease-infested trees, reducing hazardous fuels, and any other activities to restore or improve forest, rangeland, and watershed health. This could include activities such as fish and wildlife improvement projects, commercial timber removal, and tree planting or seeding, among others. The law prohibited treatments in designated wilderness areas, wilderness study areas, or areas where removal of vegetation is prohibited. The 2014 farm bill authorization did not include construction, reconstruction, repair, or restoration of paved or permanent roads, and did not specify any special treatment for any revenue generated through the sale of wood products from the federal lands. While states may perform the work, FS and BLM retain the responsibility to comply with all applicable federal laws regarding federal decisionmaking, including NEPA, as well as approving and marking any silvicultural prescriptions. Generally, a Master Agreement (MA) between the state and FS or BLM outlines the general scope of the GNA, and serves as an umbrella for Supplemental Project Agreements (SPAs). SPAs are tiered to the MA and outline the specific terms and conditions for project implementation. FS reports that they have executed 48 MAs in 33 states and 105 SPAs in 28 states, covering 82 national forests. While many of the GNAs are broad in scope—allowing for the full suite of authorized activities—they typically have a primary emphasis on a specific project type or purpose. This includes timber production (42%), wildlife or fisheries (18%), hazardous fuels management (16%), and other or unspecified activities (19%). The good neighbor authority is generally perceived as successful, particularly in terms of enhancing state-federal relationships and performing cross boundary restoration work. Other benefits include leveraging state resources, although funding and other resource capacity varied across participating states. Some states reported concerns related to the uncertainty of sustained future GNA work, however. Summary of Changes and Discussion Both the FY2018 omnibus and the 2018 farm bill enacted changes to the good neighbor authority. The FY2018 omnibus authorized GNA forest restoration activities to include road construction, reconstruction, repair, restoration, or decommissioning activities on defined NFS roads, and as necessary to implement authorized forest restoration services (§212). The 2018 farm bill expanded the availability of GNAs to include federally recognized Indian tribes and county governments (§8624). The farm bill further specified that, through FY2023, funds received by a state through the sale of timber under a GNA shall be retained and used by the state on additional GNA projects. In addition, the farm bill further specified that any payment made by a county to the relevant Secretary under a project conducted pursuant to a GNA is not subject to any applicable revenue-sharing laws. The expansion of GNA to tribes and county governments has the potential to increase the use of the authority significantly. This may result in increased opportunities for achieving cross-boundary restoration work, as well as leveraging additional nonfederal resources. However, it is also possible that it increases administrative demands on FS or BLM, such as contract administration, project planning, or oversight of project implementation. Other concerns may include the distribution of receipts from the sale of timber or other wood products. Some may prefer to have the revenue from GNA projects subject to revenue-sharing with county governments. Stewardship Contracting Stewardship end-result contracting (stewardship contracting) was established as a temporary pilot program by the Department of the Interior and Related Agencies Appropriations Act of 1999, and was extended multiple times, through 2013. The 2014 farm bill made the authority permanent. This authority allows FS and BLM to enter into multi-year (up to 10 years), dual service and timber sale contracts or agreements to achieve specified land management goals on the lands within their jurisdiction. This means that FS and BLM may combine a timber sale contract (in which the federal government sells the right to harvest federal timber) with a service contract (in which the federal government hires an entity to perform various service activities, such as removing brush and small diameter trees). By combining the two contract types, the agencies can use the value of the harvested timber to offset the cost of service activities (i.e., trade goods for services). The specified land management goals include objectives such as restoring or maintaining water quality through road and trail maintenance or obliteration, improving forest health and reducing fire hazards, increasing soil productivity, restoring and maintaining watersheds, restoring and maintaining fish and wildlife, and reestablishing native plant species. FS and BLM can deposit any timber sale revenue exceeding the cost of contracted services (referred to as excess revenue) in their respective Stewardship Contracting Fund. FS and BLM may use the funds on other stewardship projects without further appropriation. The law authorized contracts to be awarded on a best-value basis, meaning FS and BLM may consider past performance, proposal quality, and other factors in addition to cost, and allows FS and BLM to give procurement preference for contractors making innovative use of wood products. FS and BLM are required to submit annual reports on the development, execution, administration, and accomplishments of stewardship contracts. Stewardship contracting is generally perceived favorably among stakeholders. The agencies report increased opportunities for accomplishing more restoration goals and improving collaborative relationships. Other stakeholders report economic benefits, such as contributions to local economic activity or improved certainty in the development of new markets for woody biomass and other restoration by-products, although some may contend that more certainty or market support is needed. In addition, some might report concern that that there may be a higher than appropriate incentive to remove large or high value—but ecologically important—trees to pay for more service work, or other issues related to program implementation. There may also be concern related to the distribution of receipts from stewardship contracts, as some may prefer to maintain the revenue-sharing requirements with county governments. Other concerns include the amount of up-front financial obligations required and the perceived slow pace of implementation. The initial implementation of the stewardship contracting was difficult to assess due in part to the complexity of integrating the different contract types and a lack of reliable record-keeping. After that initial period, however, the agencies began integrating their respective contracting systems, improving record-keeping, and offering more contracts annually, covering larger areas. However, a 2015 USDA Office of Inspector General (OIG) report found issues with FS' contract administration and record-keeping related to stewardship contracts. Specifically, the OIG report found FS did not consistently comply with applicable procurement requirements by clearly defining the evaluation factors used when awarding contracts. FS published new guidance in 2016, partially in response to the findings of the report. Summary of Changes and Discussion The FY2018 omnibus made several changes to the stewardship contracting authority (§§204-207). In Section 207, the FY2018 omnibus authorized FS and BLM to enter into 20-year stewardship contracts or agreements, if the majority of the federal lands are located in areas classified in Fire Regime Groups I, II, and III. The law also authorized the Secretary to give a procurement preference to a contractor that promotes an innovative use of forest products as part of the contract. In addition, the law authorized FS and BLM to include a cancellation ceiling when entering stewardship contracts. FS and BLM may obligate funds for cancellation ceilings in stages which are economically or programmatically viable. The law further authorized the use of excess revenues to pay for any outstanding liabilities associated with cancelled contracts. Congressional notification is required if FS or BLM intend to enter a stewardship contract or agreement with a cancellation ceiling higher than $25 million without proposed funding for the costs of canceling the contract. The cancellation ceiling provision allows FS and BLM to obligate funds for cancellation ceilings in stages, rather than obligating funds up-front when the contract is entered. This has the potential of resolving concerns related to those up-front financial obligations, and the ability to use excess revenue to offset costs also has potential benefits. Both the use of 20-year stewardship contracts in certain locations and procurement preference may provide for increased market certainty for forest products industries and allow for continued innovation in the use of forest restoration by-products. It is unclear if there are any potential drawbacks to the expanded time-frame. Watershed Condition Framework The protection of watersheds is one of the authorized uses of the NFS, and as such is an authorized activity or goal of many FS programs. As part of a regular program review, OMB cited inadequacies in FS's watershed programs in a 2006 assessment report. The report cited lack of adequate water quality data and performance measures and an inconsistent national approach to prioritize watershed management on NFS lands as areas of concern. As part of the improvement plan developed from the assessment, FS committed to developing long-term, outcome-based performance measures; generating better water quality, habitat, and biological data; and developing and implementing a strategy to make watersheds a priority for management activities as the basis for program allocations. As part of this effort, FS developed a Watershed Condition Framework (WCF) to classify watershed conditions across the NFS, identify priority watersheds, and develop restoration action plans. FS classified and prioritized watersheds by 2011, began to develop watershed restoration action plans in 2013, and began to implement projects to achieve the goals described in those plans soon thereafter. A 2017 USDA OIG report found inadequacies in FS' management and implementation of the WCF program, such as inadequate coordination and oversight at the national level, inadequate methodologies for record-keeping generally and specifically in regard to monitoring project costs and performance towards watershed restoration. Summary of Changes and Discussion Section 8405 of the 2018 farm bill codified the WCF program in statute, assigned specific program responsibilities, and provided guidance on program priorities. More specifically, the law authorized the Secretary of Agriculture, through the Chief of the Forest Service, to establish a WCF for NFS land. Under the framework, FS may evaluate and classify watershed conditions and establish the assessment criteria (e.g., water quality and quantity, aquatic habitat, vegetation, soil condition, among others). FS may identify up to five priority watersheds in each national forest (and two in each national grassland) for protection and restoration. In addition, FS may develop, implement, and monitor restoration action plans, in coordination with interested nonfederal landowners and other governments, to prioritize protection and restoration activities on those priority watersheds and to achieve the desired watershed conditions. The law also authorizes an emergency designation process to prioritize a watershed for rehabilitation if wildfire has had significant impact on a watershed and post-fire stabilization activities have not returned the watershed to "proper function." Water Source Protection Watershed protection generally—and water source protection specifically—is one of the authorized uses of the NFS. Water source protection as such is an authorized activity or goal of many FS programs. As one example, the Secretary of Agriculture is authorized to enter into cooperative agreements for watershed restoration and enhancement purposes with willing federal, tribal, state and local governments, private and nonprofit entities and landowners. If the Secretary determines that the expenditure of federal funds is in the public interest, then the federal government may share the costs of implementing the agreement with the nonfederal partners. The watershed restoration and enhancement purposes include activities such as improving fish, wildlife, and other resources on NFS lands within the watershed. Summary of Changes and Discussion The 2018 farm bill amended HFRA and authorized the Secretary of Agriculture to establish a specific Water Source Protection program on NFS land (§8404). This authorizes FS to enter into multi-year water source investment partnership agreements with nonfederal partners to protect and restore NFS watersheds that serve as sources of municipal water. In cooperation with those nonfederal partners, FS may develop a water source management plan to describe proposed watershed protection and restoration projects. As part of those projects, FS shall carry out forest management activities to protect a municipal water supply and/or restore forest health from insect infestations and disease. The law authorizes FS to conduct a single environmental analysis pursuant to NEPA for the development or finalization of the water source management plan or for each project proposed pursuant to a plan. The law authorizes FS to accept and use cash, in-kind donations, services, and other forms of investment and assistance from partners—directly or through the National Forest Foundation—to implement the water source management plan; the law also specifies that contributions must be in amounts equal to the federal funding, and establishes a Water Source Protection Fund to match the partner donations. Congress authorized $10 million in annual appropriations to the Fund through FY2023. Miscellaneous Provisions Both the FY2018 omnibus and the 2018 farm bill enacted various other provisions related to federal forest land, such as designating NFS lands as part of the National Wilderness Preservation System. Other miscellaneous provisions are related to land acquisition, exchange and disposal; the issuance of special use authorizations for the use or occupancy of federal lands; Secure Rural Schools Act payments, activities, and Resource Advisory Committees; and forest management on tribal lands. Wilderness Designations Section 8626 of the 2018 farm bill designated one new wilderness area and expanded five existing areas in NFS lands Tennessee. Specifically, the Upper Bald River Wilderness was established on the Cherokee National Forest, covering approximately 9,038 acres. Just over 10,500 acres were designated as additions to existing wilderness areas on the Cherokee National Forest: Big Frog (348 acres), Big Laurel Branch (4,446 acres), Joyce Kilmer-Slickrock Wilderness (1,836 acres), Little Frog Mountain (966 acres across two additions), and Sampson Mountain (2,922 acres). The law specified that the areas are to be managed in accordance with the Wilderness Act. This means that most commercial activities, motorized access and use, and other activities are prohibited within the designated areas, subject to valid existing rights. Land Acquisition, Exchange, and Disposal Both the FY2018 omnibus and 2018 farm bill enacted provisions that would change how FS and/or BLM acquire, exchange, or dispose of federal land. These provisions established, reauthorized, or modified specific authorities. For example, Section 8623 of the 2018 farm bill established a new program authorizing the Secretary of Agriculture to lease up to 10 isolated and undeveloped parcels for administrative sites, at market value through cash or in-kind consideration. Section 302 of the FY2018 omnibus reauthorized an expired program to sell or exchange BLM lands identified for disposal and use the proceeds to acquire lands for administrative purposes (Federal Land Transaction Facilitation Act). The 2018 farm bill also reauthorized an expired program: the Forest Service Facility Realignment and Enhancement program, which authorized the conveyance of administrative sites or the conveyance of up to 10 undeveloped parcels of up to 40 acres of NFS land (§8504). The program expired in FY2016, but was reauthorized for FY2019 through FY2023. Section 8621 of the 2018 farm bill modified an existing FS program (Small Tracts Act) by expanding the eligibility requirements, among other provisions. In addition, the 2018 farm bill contained several other provisions authorizing exchanges or sales for specifically identified parcels and sometimes to specifically identified entities (§§8625, 8627, 8628, 8631, and 8707). (See the tables in Appendix for more specific information). Rights-of-Way (ROW) and Special Use Authorization Provisions129 The Secretary of the Interior and the Secretary of Agriculture are authorized to issue rights-of-way (ROW) for the use and occupancy of BLM and NFS lands, respectively (these are sometimes referred to as special use authorizations for FS). The rights-of-way allow for the specific use of those federal lands for numerous purposes. Among other activities, these purposes also generally include issuing linear rights-of-way authorizing access "over, upon, under, or through" the specified lands for facilities and systems for : various types of water infrastructure ; infrastructure for the storage, transportation , or distribution of liquids , gases (with specified exceptions), and solid materials ; electricity generation, transmission, and distribution infrastructure ; communication systems infrastructure ; roads, trails, highways, canals, tunnels and other means of transportation in general; and other "necessary" systems and facilities which are in the public interest. FS and BLM charge cost-recovery fees for processing and monitoring applications as well as an annual land use rental fee. The processing and monitoring fees are generally based on the estimated number of hours it will take the agency to process the application (or renewal) and monitor the activity to ensure compliance with the authorization. There is a general rental fee schedule for linear ROWs, based on land value, and a separate rental fee schedule for communication uses, based on the type of communication use and population served. BLM and FS use the same schedule for the processing and monitoring fees and the same land use rental fee schedules for linear ROWs and communication sites. The 115 th Congress enacted provisions directing FS to update their process and fee schedule for issuing special use authorizations for communication sites, directed FS and BLM to issue new regulations for certain activities within electricity ROWs, and also established a similar pilot process for FS for many of the same activities within utility (defined as electricity, natural gas infrastructure, or related infrastructure) ROWs. In some cases, these provisions are related to concerns about wildfire ignitions within electricity transmission and distribution ROWs. For example, power line ignitions are associated with fires that burn across larger areas. This is in part due to weather conditions (e.g., wind) causing vegetation (e.g., tree limbs) to come into increasing contact with power lines. Some have asserted that confusing or burdensome administrative processes prevent ROW permit-holders from conducting necessary maintenance activities (e.g., vegetation management) to mitigate the risk of ignitions on the federal lands within their ROWs. In contrast, others have placed more of the responsibility on the permit holders. The 115 th Congress provisions are perceived by some as potentially improving the processes for ROW permit holders to obtain approvals and implement vegetation management projects on federal lands. Others may acknowledge that process improvements could facilitate improved land conditions but are concerned about the appropriate balance between expediting project implementation and maintaining accountability and adherence to the laws regarding federal lands. Some of the provisions specify the responsibilities for wildfire suppression costs for wildfires ignited within ROWs, costs associated with other damages, or place a cap on liability costs for ROW permit holders. Some are concerned with the breadth of these provisions and the potential implications for the federal government or others bearing a disproportionate share of the costs to suppress wildfires ignited within a ROW on federal lands. Others contend that the provisions limiting damages and liability will incentivize prompt agency action on maintenance requests from ROW permit holders and also reflect that utilities should not be responsible for the full costs of a wildfire—regardless of ignition point or cause—because past agency actions have contributed to the increased fuel levels surrounding ROWs. Further, others contend that limiting unexpected costs for the utilities would reduce the likelihood of passing on those costs to the ratepayers. Forest Service Communication Uses Fee Schedules and Processes Section 8705 of the 2018 farm bill directed the Secretary of Agriculture to issue regulations revising the process to issue special use authorizations for communications uses on NFS lands within one year of enactment, defined relevant terms, and identified specific requirements for the process. Among other provisions, the law specified that: the new process must be streamlined, uniform, and standardized across the NFS to the extent practicable; FS must consider and grant applications on a competitively neutral, technology neutral, and nondiscriminatory basis; and the lease terms must be for a minimum of 15 years. The law also specified that the regulations must establish a fee structure based on the cost of processing and monitoring applications and approvals, and established a new account in the Treasury for the FS to deposit and use those fees for specified activities related to managing communication sites, subject to appropriations. Such activities include preparing needs assessments or programmatic analyses relating to communications sites or use authorizations, developing management plans and training for management of communication sites, and obtaining or improving access to communication sites. Electricity Transmission and Distribution ROWs Section 211 of the FY2018 omnibus amended FLPMA and established a new Section 512, titled Vegetation Management, Facility Inspection, and Operation and Maintenance on Federal Land Containing Electric Transmission and Distribution Facilities . The law directed FS and BLM to issue guidance for planning and implementing vegetation management, facility inspections, and operation and maintenance activities within electric transmission and distribution ROWs and identified specific requirements for those processes. The guidance must describe the process for FS and BLM to review, approve, and modify plans for vegetation management, facility inspections, and operation and maintenance activities submitted by eligible ROW permit holders (referred to as "owners"). The law specifies the components of the plans, authorizes owners to develop and submit those plans for approval by the appropriate Secretary and conduct activities within their ROW pursuant to an approved plan. The law also specifies circumstances when owners may conduct certain management activities without an approved plan or without the approval of FS or BLM (e.g., when trees are in imminent danger of touching a power line). FS and BLM are also directed to identify any applicable NEPA categorical exclusions for these activities. The law directed the Secretaries to propose regulations implementing the provisions within one year of enactment and to finalize the regulations within two years. Section 211 also encouraged FS and BLM to develop training programs for FS and DOI employees on vegetation management and the electrical transmission and distribution system. The FY2018 omnibus also specified ROW permit holder liabilities related to vegetation management activities in the ROW, including addressing the relationship between permit holder liability and the plan's approval status. For ten years after enactment, the law prohibits the applicable Secretary from imposing strict liability for damages or injury greater than $500,000 resulting from activities conducted by a ROW holder pursuant to a plan under certain conditions. Those conditions include the Secretary concerned unreasonably withholding or delaying plan approval or failing to adhere to an applicable schedule in an approved plan. Within four years of the enactment, FS and BLM must report the impacts of the liability clauses to Congress. Forest Service Utility ROW Pilot Program Section 8630 of the 2018 farm bill established a pilot program, through FY2023, for utility ROW permit holders on NFS land, excluding national grasslands and land utilization projects and established specific requirements for the pilot program. The law defined utility ROWs to include electric transmission lines, natural gas infrastructure, or related infrastructure. Under the pilot program, participating permit holders may develop and implement vegetation management plans, subject to FS approval, for the NFS lands within their ROWs. Pursuant to those plans, pilot participants may also pay for and perform projects on specified NFS lands within and up to 75 feet from the ROW. Participants must adhere to FS and some state regulations regarding various fire prevention and vegetation removal activities when conducting projects on NFS lands. Participants are generally responsible for project costs, although FS may contribute funds at the discretion of the Secretary of Agriculture. Should a participant provide funds to the FS, the Secretary may retain those funds for implementing the pilot, subject to appropriations. The law directed FS to submit a program status report to Congress by December 31, 2020, and every two years afterwards. Section 8630 also specified the financial responsibility of pilot participants related to wildfire: participants must reimburse FS for the costs of wildfire suppression and damage to FS resources if the wildfire is caused by the operations of the pilot participant, under certain conditions. If the participant provides resources to suppress a wildfire caused by their operations in the ROW, the cost of those resources shall be credited toward the reimbursement costs, or if they exceed the maximum reimbursement costs, the FS must reimburse the pilot participant the excess. Section 8630 limits reimbursement costs to up to $500,000 in certain circumstances. Although similar, the electricity ROW provisions prescribed in the FY2018 omnibus for FS and BLM differ from those in the ROW pilot program on NFS lands. The FY2018 omnibus program is specific to electricity ROWs, while the FS pilot program established under the 2018 farm bill is applicable to electricity ROWs as well as natural gas and other related infrastructure. The 2018 farm bill pilot limits participant responsibilities to wildfire and vegetation management, but does not address liability, while the FY2018 omnibus caps liability costs for program participants. Secure Rural Schools (SRS) Payments and Modifications Counties containing NFS, O&C, and CBWR lands receive payments from the federal government based on the revenue generated from those lands in the prior year. SRS authorized an optional payment system to those counties as an alternative to the revenue-sharing payments. SRS payments were based on a formula that accounted for historic revenue payments, acreage of land, and the counties' per capita income. The SRS statute specified the payments to be allocated among three categories based on payment level: Title I FS payments were to be used for funding education and roads (BLM payments were to be used for any governmental purpose); Title II payments were retained by the applicable agency to be used for projects on the lands under jurisdiction and within the county; and Title III payments were to be used for specified county programs, including fire prevention, county planning, and emergency services (e.g., search and rescue operations and firefighting). Title II also established Resource Advisory Committees (RACs) to "improve collaborative relationships and provide advice and recommendations" to the agencies, and established minimum membership requirements. Specifically, the law specified that RACs members must be appointed by the applicable Secretary and must consist of a total of 15 members representing specific interests (this includes outdoor recreation interests, the timber industry, environmental organizations, and local elected officials, among others). The authorized payment level was set in statute at 95% of the previous year's payment level. The original authorization for SRS payments expired at the end of FY2006, but the payments were extended several times through FY2015. Since payments were disbursed after the end of the fiscal year, the last authorized payment was disbursed in FY2016. When SRS payments are not authorized, counties receive a revenue-sharing payment, which is typically much less than they would receive under SRS. After the last authorized SRS payments had been disbursed in FY2016, counties received a revenue-sharing payment in FY2017. Summary of Changes and Discussion The FY2018 omnibus reauthorized SRS payments for FY2017 and FY2018 (§§401, 402). This act authorized payments to be made in FY2018 and FY2019, respectively; however, the revenue-sharing payment for FY2017 had already been distributed at the time of enactment. The reauthorization set the FY2017 payment level at 95% of the level of the last authorized payment and specified that the payment should account for the revenue-sharing payments already disbursed. Thus, counties received a full SRS payment for FY2017 (payments made in FY2018), but the payments were essentially made in two installments. The reauthorization also changed some of the payment allocation requirements and expanded the uses for Title III funds (added law enforcement patrols, training, and equipment costs). The reauthorization expired at the end of FY2018, meaning that no additional payments are authorized after the FY2018 payments are distributed in FY2019. In addition, the 2018 farm bill enacted changes to the SRS statute, despite the law's expiration at the time of enactment. The 2018 farm bill established a process for the applicable Secretary to modify the RAC membership requirements, and established a pilot program, through FY2023, for the Secretary to designate a regional forester to appoint RAC members in Montana and Arizona (§8702). These changes appear to be in response to concerns that the requirements for RACs to consist of 15 members were prohibitive. Tribal Forestry The Tribal Forest Protection Act (TFPA) authorized the Secretary of Agriculture (for NFS lands) and the Secretary of the Interior (for BLM Lands) to enter into an agreement with federally recognized Indian tribes to implement specified forest or rangeland projects on Indian trust or restricted lands or on NFS and BLM lands adjacent to those tribal lands. The applicable NFS or BLM land should be in need of forest restoration activities or pose a fire, disease or other threat to tribal lands or communities, and include a "feature or circumstance unique to that Indian Tribe." Under TFPA, the applicable Secretary is to evaluate a tribe's request on a "best value basis" and in consideration of a set of tribally related factors. The Indian Self-Determination and Education Assistance Act (ISDEAA) authorized federally recognized tribes to enter into self-determination contracts with the federal government to operate specified federal Indian programs, such as a Bureau of Indian Affairs school or an Indian Health Service hospital. In addition to extending the good neighbor authority to tribes (see the " Good Neighbor Authority " section), the 2018 farm bill authorized the Secretary concerned to enter into self-determination contracts, on a demonstration basis, with federally recognized tribes to perform administrative, management, and other functions of the TFPA (§8703). These contracts shall be in accordance with Section 403(b)(2) of the ISDEAA. The law specified that for such contracts on NFS land, the Secretary of Agriculture shall carry out all responsibilities delegated to the Secretary of the Interior. The law also requires the Secretary concerned to retain decisionmaking authority over decisions related to NEPA and TFPA. Issues for Congress Congress may consider several issues related to the forestry provisions enacted by the 115 th Congress, including oversight of the agencies' implementation of the new laws. Congress may also be interested in the implication of these changes or how these provisions address concerns with federal forest management generally, and forest restoration specifically. For example, the Forest Service has identified around 52-58 million acres of NFS lands at high or very high fire risk or insect infestation and in need of restoration treatments. FS reports that they accomplish around 2-6 million acres of treatments annually. At that pace, it would take at least 9 but possibly up to 29 years to eliminate the backlog of treatment needs, and that does not account for maintaining already treated areas to the desired resource conditions. Some estimate that hazardous fuels are accumulating three times faster than the rate of treatment. To address these concerns, FS has proposed to increase the scale, scope, and implementation of forest management projects generally, and forest restoration treatments specifically. FS, and others, identify administrative process barriers as one of many factors impeding progress towards these restoration goals. More specifically, some identify agency decisionmaking processes, particularly related to implementation of the National Environmental Policy Act and opportunities for the public to challenge agency decisions administratively and judicially, as preventing the agencies from implementing projects at the pace and scale necessary to address forest health concerns. Others may point to FS-specific implementation issues related to NEPA as contributing to planning delays more than involvement from the public or administrative or judicial challenges. Other stakeholders identify other administrative barriers—such as inadequate program funding levels and training—as preventing the agency from implementing project planning requirements in a more efficient manner. Many of the provisions enacted by the 115 th Congress aim to improve agency efficiencies by expanding the applicability of procedures intended to expedite the planning and review process for projects, such as hazardous fuel reduction and forest restoration projects. For example, proponents of this approach contend that expanding the use of Healthy Forests Restoration Act authorities and allowing the agencies to plan more projects over larger areas under NEPA Categorical Exclusions would expedite project implementation and allow FS and BLM to achieve progress towards their restoration goals. Some, however, contend that changes made to the agency's decisionmaking processes—such as through the establishment of CEs—are changing the basic legal framework for federal forest management, and making it increasingly difficult for citizens to participate or challenge government decisions. In addition, some stakeholders contend that expanding the use of these authorities could result in environmental impacts that exacerbate forest health concerns. Many of these issues have been ongoing for decades. For example, concerns about deteriorating forest health conditions and high fuel levels were raised after wildfires in Yellowstone National Park in 1988. In 1994, the congressionally chartered National Commission on Wildfire Disasters recommended federal land management agencies invest more in reducing hazardous fuels in high-risk ecosystems, and observed that "the question is no longer if policy-makers will face disastrous wildfires and their enormous costs, but when." A 1995 study recommended FS increase hazardous fuel treatments to up to 3 million acres per year by 2005. As another example, in 1999, GAO recommended FS develop a strategy to identify long-term options for reducing fuels to address forest health issues and mitigate wildfire risk. In 2006 OIG raised concerns with FS' hazardous fuels reduction program and recommended FS develop guidance and controls to identify, prioritize, implement, monitor, and report on hazardous fuels reduction projects and funding. A 2016 OIG report assessed FS' progress towards implementing the recommendations from that 2006 report and found continued issues with FS prioritizing, tracking, and reporting of hazardous fuels reduction projects. Concerns about FS project implementation also have been ongoing. For example, in 2001 Congress asked GAO to evaluate the extent administrative or judicial challenges impeded FS' implementation of fuel management projects. The report found that approximately 24% of the fuel reduction decisions signed in FY2001 and FY2002 were appealed. A similar GAO analysis found that 20% of the fuel management projects identified for implementation in FY2006 through FY2008 were challenged through appeals or objections. In addition, there have been several academic studies examining FS NEPA implementation. Collectively, these studies suggest that projects that are more complex—in terms of scale and scope—are more likely to be challenged, but other project characteristics (e.g., timber harvests) and factors related to staffing, documentation, and implementation of the public involvement requirements also affect the likelihood of project challenges. HFRA, passed in 2003, included provisions intended to expedite implementation of hazardous fuels reduction projects. Despite these provisions, the extent of NFS areas in need of treatment has continued to increase, and FS continues to look for ways to increase the pace of project implementation. To some, this implies that the HFRA approach to streamline agency decisionmaking has not been successful. To others, this implies that the HFRA approach needs to be more broadly applied, as it was in legislation enacted during the 115 th Congress. Appendix. Enacted Forest Management Provisions Comparison to Then-Current Law The following two tables provide side-by-side comparisons that briefly describe the forest-related provisions enacted by each law (the FY2018 omnibus and 2018 farm bill) to prior law, generally in the order in which they were included in the legislation, with a few exceptions for purposes of clarity. Provisions in each law that do not directly affect forest management are not included.

The 115th Congress enacted several provisions affecting management of the National Forest System (NFS), administered by the Forest Service (in the Department of Agriculture), and the lands managed by the Bureau of Land Management (BLM, in the Department of the Interior). The provisions were enacted through two laws: the Stephen Sepp Wildfire Suppression Funding and Forest Management Activities Act, enacted as Division O of the Consolidated Appropriations Act, 2018 (P.L. 115-141, commonly referred to as the FY2018 omnibus), and the Agricultural Improvement Act of 2018 (P.L. 115-334, Title VIII, commonly referred to as the 2018 farm bill). Many of the provisions enacted by the 115th Congress affect Forest Service and BLM implementation of two laws: the National Environmental Policy Act (NEPA), and the Healthy Forests Restoration Act (HFRA). These laws, among others, authorize specific forest management activities and establish decisionmaking procedures for those activities. The enacted provisions are summarized and analyzed in the following categories: project planning and implementation, wildland fire management, forest management and restoration programs, and miscellaneous. Ongoing issues for Congress include oversight of (i) the agencies' implementation of the new laws, and (ii) the extent these provisions achieve their specified purposes, such as improving agency efficiencies, increasing the scale, scope, and implementation of forest restoration projects, and reducing hazardous fuel levels to mitigate against the risk of catastrophic wildfire. Both the FY2018 omnibus and 2018 farm bill included provisions that affect Forest Service and BLM decisionmaking processes by changing certain aspects of the NEPA process and the interagency consultation requirements established in Section 7 of the Endangered Species Act (ESA). For example, each law specified that certain forest management projects would be considered actions categorically excluded from the requirements of NEPA. Also, both laws expanded various authorities originally authorized in HFRA intended to expedite decisionmaking for specific projects. This included reauthorizing the use of procedures intended to expedite priority projects in designated NFS insect and disease treatment areas and amending the definition of an authorized fuel reduction project to include additional activities. The FY2018 omnibus and 2018 farm bill also contained provisions that affect federal wildland fire management. The FY2018 omnibus directed the Secretary of Agriculture to adapt the national-scale wildfire hazard potential map for use at the community level to inform risk management decisions. Both laws directed Forest Service and DOI to provide annual reports on a variety of wildfire-related metrics. The FY2018 omnibus also changed how Congress appropriates funding specifically for wildfire suppression purposes. The so-called wildfire funding fix authorized an adjustment to the discretionary spending limits for wildfire suppression operations for each year from FY2020 through FY2027. However, statutory spending limits are set to expire after FY2021, meaning that the adjustment is effectively in place for two years. Congress has established specific forest restoration programs for Forest Service and BLM, or has authorized forest restoration to be one of many activities or land management objectives for some programs. Forest restoration activities address concerns related to forest health, such as improving forest resistance and resilience to disturbance events (e.g., insect and disease infestation or uncharacteristically catastrophic wildfires). The 115th Congress established two new programs for Forest Service (water source protection and watershed condition framework) and amended three others: the Collaborative Forest Landscape Restoration Program (CFLRP, available only for Forest Service), stewardship contracting authority, and the good neighbor authority. Aspects of several of these programs allow Forest Service and BLM to partner with various stakeholders in different ways to perform specified forest management and restoration activities. Both the FY2018 omnibus and the 2018 farm bill enacted various other provisions related to land acquisition, exchange and disposal; the issuance of special use authorizations for the use or occupancy of federal lands; the payments, activities, and Resource Advisory Committees authorized by the Secure Rural Schools and Community Self-Determination Act; and forest management on tribal lands.

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Introduction The Bush tax cuts, enacted in 2001 and 2003, were scheduled to expire at the end of 2010. Among the expiring tax provisions was a lower 15% rate for long-term capital gains and dividends, with a 0% tax rate on capital gains and dividends for taxpayers subject to ordinary rates of 15% or less. Absent legislative action, capital gains tax rates would have reverted to pre-2003 rates of 20% and 10% (18% and 8% for assets held for five years or more), and dividends would be taxed at ordinary rates. The highest ordinary tax rate is currently 35% but, absent change, will rise to 39.6%. President Obama proposed in both his budget outlines (FY2010 and FY2011) to retain the 15% and 0% rates for lower- and middle-income taxpayers, but to tax both dividends and capital gains at 20% for married couples with income of $250,000 or more and single taxpayers with income of $200,000 or more. The tax rates were temporarily extended through the end of 2012 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). The final resolution at the beginning of 2013 (American Taxpayer Relief Act of 2012, P.L. 112-240 ) was to tax capital gains for higher-income individuals at the higher rate, but at incomes of $480,050 for married couples and $453,350 for singles in 2018, considerably higher than those proposed by President Obama. Compared with most other tax provisions, the potential revenue gain scored for an increase in capital gains taxes is strongly affected by behavioral responses assumed by the Joint Committee on Taxation (JCT) and the Department of the Treasury. As an illustration, the Obama Administration estimated in February 2010 that allowing the Bush tax cuts for capital gains to expire would have raised $16 billion of revenue in FY2019. Yet, based on Congressional Budget Office (CBO) projections in January 2010, the current effective capital gains tax was 13.3% in 2008 and would have increased to 17.9% in 2019; applying the differential in these rates to the realizations in 2019 would have produced a revenue difference of $40 billion. Although some of this differential could arise from different forecasts, assumptions about behavioral responses are the main reason for the reduction in projected revenues. To address these potential behavioral responses, some supporters of increasing taxes on capital gains (given that such gains comprise a significant part of the income of high-income individuals) have proposed applying mark-to-market rules to tax capital gains as accrued, which would eliminate the realization response for affected assets. Assets that are less easily valued could be subject to look-back treatment, which would increase the tax to achieve the same after-tax earnings that would have occurred if the tax were imposed on an accrual basis. Such an approach has a number of complexities, and to the extent that these changes aim to address the behavioral response, it is important to understand the limits this behavioral assumption imposes on options for increasing taxes on realized capital gains and the empirical basis for these estimated effects. Realizations responses in revenue projections by the revenue-estimating agencies (JCT and Treasury) were publicly discussed at the end of the 1980s, in the midst of a contentious debate. This report explains how these responses affect revenues, discusses the debate that occurred in the late 1980s, reviews research since that time, and analyzes the implications for revenue effects. The analysis in this report suggests that the Obama Administration's projections and those of the JCT, absent a change in their realizations response, may likely understate revenue gains from allowing lower capital gains tax rates to expire. Realizations Responses and Revenue Because taxpayers can choose to realize capital gains, economists and policymakers have been concerned about a reduction in the potential revenue from capital gains taxes because those taxes reduce realizations. It is possible for a tax increase to lose revenue if the response is large enough. If realizations are postponed until death, the gains escape tax entirely. Thus, there is an incentive to delay and perhaps ultimately avoid the tax by not selling assets. Capital gains realizations responses are typically expressed in the form of an elasticity, which is the percentage change in realizations divided by the percentage change in taxes. These elasticities are expected to be negative but are often reported without the minus sign (and will be in this report). If realizations increase by 5% when the tax rate falls by 10%, the elasticity is 0.5; if realizations increase by 10% when the tax rate falls by 10%, the elasticity is one; if realizations rise by 20% while the tax rate falls by 10%, the elasticity is two. The higher the value of the elasticity, the smaller the revenue gain or loss from a capital gains tax increase or decrease. If the elasticity is less than one, a tax increase gains revenue; if the elasticity is greater than one, the tax increase loses revenue. For a small increase in tax rates, the ratio of revenue gain projected to the gain realized with no behavioral response (static gain) is one minus the elasticity. Thus, if the elasticity is 0.25, 75% of the static revenue gain will be realized (that is (1-0.25) times the static gain). If the elasticity is 1.25, the tax increase will lose 25% of the static gain (i.e., (1-1.25) equals minus 0.25). Three types of elasticities are relevant to capital gains realizations and revenues and are discussed in the economics literature. The first is the permanent elasticity, which is most relevant for permanent tax law changes: it measures the longer-run (after a year or two) realizations response to a permanent change in tax rate. The second is the short-run elasticity, which measures the short-term response to a permanent change. The third is the transitory elasticity, which measures the response to a temporary tax increase or decrease. This transitory effect might occur because the incomes of wealthy individuals (and the associated taxes due) may vary from year to year, and they time realizations in years when their tax rates are low. It may also occur in the aggregate when a tax change is pre-announced. For example, if taxpayers learn that the tax is increasing next year, they may shift realizations into the current year to take advantage of this year's lower tax rate. Although this discussion will focus on the magnitude and effects of permanent elasticities, these short-term and transitory effects constitute both a challenge in estimation and affect shorter-term responses to changes. Thus a brief discussion is in order. The short-term realizations elasticity has most often been discussed (as it was in the late 1980s) in the context of a capital gains tax cut. The idea behind such as response is that taxpayers have a large stock of accrued gains that they would have already realized if the tax rate were lower and thus there will be a larger increase in realizations in the first year or two. Applying such an effect has two caveats. The first is that the short-term response may be muted if there has been a recent increase in realizations. For example, unbeknownst to revenue estimators in the late 1980s (because the data were not available), there had been a surge in realizations in 1986 because of the pre-announced increase in capital gains taxes for 1987 and later years as part of the Tax Reform Act of 1986. With so many of these accrued gains exhausted, it was unlikely that there would have been a very large short-run response had a tax cut been enacted in 1990. Second, and more important for the current issue, there is no reason to expect that short-run responses apply to a tax increase that is not pre-announced, because, although a cut in taxes may unleash significant short-term realizations from the existing stock of gains, an increase should not cause a similar contraction. The stock of gains that has not been realized because of taxes will simply remain unrealized, with no effect on realizations. The transitory response is sometimes used interchangeably with the short-term response, but transitory responses can be thought of as occurring because of a temporary lower or higher rate. As noted above, a large aggregate transitory response occurred in 1986 because of the passage of legislation that raised future tax rates significantly. A large increase also occurred in 2012 for the same reason. However, because the higher-income taxpayers who realize most capital gains can have significant fluctuations in income and taxes, transitory responses occur among individuals even in years when the law does not change. This possibility of a transitory response was more pronounced in the period (prior to 1987) when capital gains were subject to graduated rates (because the tax benefit was an exclusion rather than a fixed rate). Statistical estimates of realizations responses can be based on a variety of functional forms, but one of the most common functions causes the elasticity (percentage change in gains divided by a percentage change in tax rates) to rise proportionally with the tax rate. Therefore elasticities should be reported with reference to the assumed tax rate. For much of the discussion in the 1990 debate, the relevant tax rate was the one associated with the tax change under consideration, the 22% rate midway between the current and new rate. Many elasticities discussed at that time reflect that rate. Capital gains realizations elasticities are expected to be negative but the elasticities in this report will be stated and referred to in absolute value (without the minus sign). This formulation also leads to a revenue-maximizing tax rate, which is the tax rate at which the most capital gains tax revenue will be realized. The underlying equations are presented in Appendix A . For considering the effects of allowing tax increases, the 22% rate appears appropriate as a starting point (although the effect would roughly reflect the midpoint between the old and new tax rates). Under current law, in addition to the rates of 0%, 15%, and 20%, there is also the 3.8% net investment income tax enacted by the 2010 health care law for taxpayers with incomes above $250,000 for couples and $200,000 for singles. The Congressional Budget Office estimates an overall marginal tax rate of 21.2% for long-term capital gains, and the Department of the Treasury estimates a similar rate of 21.3%. Note that these issues surrounding capital gains taxes and realizations are not applicable to taxes on dividends, which are estimated by CBO to be taxed at a slightly lower marginal rate of 18.4%. The 1990 Debate In 1990, the George H. W. Bush Administration proposed to reduce the capital gains tax rate that had been adopted in 1986. That legislation increased the top rate on capital gains from 20% to 28% by taxing capital gains as ordinary income. During the late 1980s, the revenue-estimating agencies (the Joint Committee on Taxation and the Department of the Treasury's Office of Tax Analysis) had begun to investigate and add behavioral responses in the form of realizations elasticities. The Congressional Budget Office also began to include tax variables in their regressions used to forecast baseline capital gains revenues. Because of the strict budget constraints applying at that time, the issue of revenue cost was a crucial one in 1990. The Administration chose an elasticity (at a 22% rate) of 0.98. The JTC used an elasticity of 0.76. Two types of data were used to estimate the realizations response. The first was aggregate time series, which related total realizations in different years to the tax rate in that year. The second was micro-data studies, which examined individual taxpayers' realizations in comparison to their tax rates. These studies included cross-section studies (which compare taxpayers in a single year), pooled cross-section time-series (which compare taxpayers and include many years but do not follow individual taxpayers over time) and panel studies (which compare taxpayers over time, tracking each taxpayer). As shown in Table B -1 in Appendix B , estimates of the realizations response varied dramatically, from 0.3 to almost 4. To make the revenue implications clear, an elasticity of 0.3 would imply, for a small increase in the tax rate, that the revenue gained would be 70% of the revenue projected if there were no realizations response. An elasticity of 4 implies a loss of three times the projected revenue gained if there were no behavioral response. Estimates based on aggregate time series were generally lower, ranging from 0.3 to 0.9 (70% to 10% of revenue gained). Estimates based on individual taxpayer data ranged from 0.55 to 3.8. The range of estimated responses and their implications for revenue implied serious problems with the estimation methods. The range was particularly broad for estimates based on individual data. The JCT took the position that the time series results were more reliable, and they estimated their own elasticity using this methodology. The Treasury never actually provided a specific methodology for their number, but rather reported it as a conservative choice given the realizations estimates. Researchers trying to estimate the realizations response faced many problems, which are discussed in more detail in Appendix B . In general, individual data are preferred for estimation, because aggregation can produce a bias and loses information. In addition, it is very difficult to control for other factors that change over time. More important, for using individual data, was the problem of distinguishing between permanent and transitory responses. Because income, especially of high-income individuals who realize most gains, can fluctuate over time, tax rates also vary over time. Individuals would be expected to time realizations to coincide with periods of low rates. Individuals might also need to cash in assets when income (and therefore taxes) is unusually low. This concern basically precluded relying on simple cross-section results for permanent responses. Thus, no revenue-estimating entity relied on the larger elasticities (close to 4) produced by some of these micro-data studies. Arguments were made at the time that panel data, which followed individuals over several years, could be used to separate these elasticities, because in these data individual tax rates could be examined over several years. These studies used the average of the current, previous, and future tax rate as a permanent rate. These studies reported smaller elasticities, but ones that still were well above one in some cases. Because of an incorrectly reported elasticity, the three panel studies available at that time appeared to produce a much narrower range of results. These panel results probably influenced the Treasury to choose a larger elasticity than those suggested by the aggregate time series data. However, as noted in the following section, the last panel study also had a very large elasticity. Thus, although attempts were made to address the problem of transitory effects with panel studies, this procedure may not correct for the transitory effect, perhaps because periods of lower income or higher income can continue for several years. Although panel studies offered some possibility of controlling for transitory effects, the panels available were for only a few years. If the higher-income individuals who realize most gains experienced prolonged spells of higher or lower than normal income, panel studies might reduce the transitory element, but estimates could still reflect some transitory response elements. Thus panel estimates could still be too large, whereas the biases in time-series estimates remained uncertain. Neither approach was without flaws. Ultimately the proposed tax cuts were not enacted at that time (although they were eventually reduced in 1997 and again in 2003). Developments Since 1990 The range of realizations elasticities, even if confined to time series estimates, is very broad for revenue-estimating purposes or otherwise evaluating capital gains taxes. Researchers turned their attention to methods to produce more precise and reliable estimates. One important event that influenced thinking about these elasticities was the sharp spike in realizations that occurred in 1986. Between 1985 and 1986, realizations rose from $170.6 billion to $324.4 billion, falling to $144.2 billion in 1987. A study of this phenomenon using taxpayer data showed that these gains occurred in December, and were seven times the gains in December of the previous year. This increase, which took place when a tax increase was passed for the following years, was evidence of the magnitude of transitory realizations responses and contributed further to concerns about the reflection of transitory responses in the econometric studies. Eleven additional academic econometric studies of the realizations response have been identified beginning in 1990, and nine of those studies are reported in Table 1 . The table also includes estimates of practices by CBO, JCT, and Treasury. CBO cautions that its realizations estimate is not for the purpose of estimating revenues. Rather, the tax rate is included as part of an overall statistical study which includes many variables used to project capital gains realizations for the baseline. The second column of Table 1 reports the coefficient which, multiplied by the tax rate, will produce the elasticity. The studies are arrayed by elasticity, from smallest to largest. Table 1 also includes the results of a study by Gravelle, which was not an econometric study. Some analysts had observed that large estimated elasticities from cross-section and panel studies implied large realizations that were far outside the scope of historical experience. Gravelle's study noted that there was a limit to the realizations response in that, for a permanent elasticity, realizations could not exceed accruals (the change in the market value of assets). If every asset were sold every year, realizations would equal accruals, but they could be no larger. The study provided data on the ratio of realizations to accruals, along with tax rates, over a long period of time, and used the average values to estimate the upper limit of the realizations elasticity. The study found that limit to be 0.5, below the estimates of all existing cross-section and panel studies, and below most of the time series studies. Moreover, the 0.5 limit is an upper limit and implies that in the absence of taxes and transactions costs individuals would sell every asset every year. Because some assets are unlikely to be sold even in those circumstances, because investors are satisfied with their investments, the elasticity is likely to be considerably lower. (For example, individuals and families holding controlling shares of corporations are unlikely to sell their assets, as are individuals with investments in family businesses and real estate, or simply those whose portfolios are satisfactory.) Table 1 , therefore, reports both the upper limit and the midpoint of this study. This study was prepared in 1991, and covered the data from 1954 to 1989. In the study, the realizations to accruals level was estimated at 46% and the tax rate was estimated at 18.4%. More recent evidence covering the period 1989-2013 finds a similar ratio, 48%, and a similar tax rate of 17.3%. These findings support the limits to realizations elasticities found in the initial Gravelle study. As an illustration, the Dowd, McClelland, and Muthitacharoen panel study that produced the highest coefficient implies that if all income taxes and transactions taxes and costs were eliminated, realizations would 4.25 times their current value, when the level of accruals suggests they could be no more than twice as large. That same study also corrected the elasticity for the most recent panel study of the 1980s, indicating an elasticity of 3.2, similar to the cross-section results. This correction reinforced the observation that the panel studies could not necessarily address the transitory issues that plagued cross-section studies. Four of the nine studies are panel studies, three are times series, and two are cross-state aggregate panel studies. The Burman and Randolph study was an early innovative econometric study because it used variation in state tax rates to estimate the permanent elasticity. That study found a very small elasticity that was statistically insignificant and a very large (in excess of 6) transitory elasticity. Because state tax rates are exogenous and presumed permanent, their evidence suggested a very small response. Auerbach and Siegel replicated their approach with different years and found similar results. The findings in these studies were consistent with the Gravelle estimate of limits in that they fell below the upper limit of elasticities. Most subsequent studies have incorporated state tax rates. The Auten and Joulfaian study and the Dowd, McClelland, and Muthitacharoen study are individual panel studies and had the highest elasticities of any of the studies. Two aspects were likely to lower their elasticities compared with earlier panel studies: they added state tax rates and they had a longer panel, so that time series effects probably became more important. Both studies, however, continued the approach used by earlier panel studies that used adjacent years to capture permanent tax rates. This period may be too short, and for that reason their estimates probably continue to reflect transitory, timing responses. These timing responses are not appropriate for measuring a permanent response. The Dowd, McClelland, and Muthitacharoen study also provided sensitivity analysis, producing a wide range of estimates reflecting different specifications, inclusion of different variables, and different time periods. For example, considering different time subperiods, the coefficient ranged from 1.8 to 8.0, although the latter estimate would seem questionable because it also produced a large transitory elasticity of the wrong sign. Three of the studies (along with CBO's estimate) used aggregate time series data. The Gillingham and Greenlees study was the earliest and added a few years of data to some earlier studies, whereas the other time series studies (Eichner and Sinai) added many more years. Both studies control for 1986, which was an unusual year. It appears that more years added to time series data lead to lower elasticities; however, all of the time series results fall within the range of the eight time series studies from the 1980s. One time series study falls below the upper limit estimated by Gravelle, one is about at the upper limit, and one is considerably larger. The third time series study was based on Australian data (one of the rare studies undertaken on data outside of the United States). The two state studies, by Bogart and Gentry and by Bakija and Gentry, used aggregate data over time grouped by state. Because they include time controls, they also relied on cross-state variation to identify a permanent response. Their results were slightly above the Gravelle study's upper limit. Bakija and Gentry also show that the control for state fixed effects is important; coefficients rise from 2.91 to 3.88 without state fixed effects. The elasticities in Table 1 are closer together and lower than those in the studies of the 1980s. JCT's current coefficient appears to be similar to the estimate used during the 1990 debate (although the elasticity was slightly higher in 1990, that appears to be due to the exclusion of small portfolio effects; without those, it would probably be around 0.76). The Treasury estimate has been reduced and is now of the same rough magnitude as the JCT assumption. Given the evidence from panel studies that use state variation to identify permanent effects and studies of the reasonableness of elasticities given realizations responses, both JCT and Treasury estimates appear high, so that they likely understate the revenue to be gained from increasing the tax rate. Table 2 uses the elasticities from Table 1 and the CBO projections to compare these revenue estimates for raising the tax rate on capital gains by five percentage points, for 2019, based on those results. (The method for calculating the revenue is in Appendix A .) The estimates are based on CBO's estimates of revenue for 2019 of $199 billion, and their average marginal tax rate of 21.2%. The $199 billion is adjusted down to $180 billion to reflect the share of gains that are short-term gains taxed at ordinary rates, as reported by the Department of the Treasury. As shown in Table 2 , the revenue gain as a percentage of static gain ranges from a reduction of 26% to a reduction of 97%. The revenue gain for the five-percentage-point tax rate increase ranges, from the lowest to the highest elasticity, from $31.4 billion per year to $1 billion, a range of $30.4 billion. These results also illuminate the interest in adopting measures such as an accrual-based taxation that could also include a look-back method. (See Appendix A for an explanation of calculating taxes under the look-back method.) Such a method would not only eliminate the realizations response, increasing capital gains revenues for the five-percentage-point increase from $10.3 billion to $43.2 billion, but by taxing unrealized gains it would collect $222 billion on unrealized gains in a steady state ($180 billion at the old rates and $222 billion at the new rate). Which results are most reliable? The Auten and Joulfaian panel study, judging by problems with short panels in the 1980s, probably retains some transitory elasticity effects because it applied the same methodology. Although it also reflects time series elements, the estimate is probably an overstatement of the permanent elasticity. It also substantially exceeds the upper limit estimated by Gravelle. The Dowd, McClellan, and Muthitacharoen study produced the largest elasticity and also uses adjacent periods to measure the transitory elasticity. It also indicates dramatically differing estimates from different subperiods, implying some fragility in the estimates. Turning to time series, the Eichner and Sinai results include many more years than Gillingham and Greenlees, suggesting that this time series result should be preferred. CBO includes even more years. Given the findings of the remaining studies and of Gravelle's limit calculations, the elasticity is likely below 0.5. These findings suggest that revenue-estimating assumptions retained from the 1990 debate may understate the revenue gain. In all cases, evidence from both post-1980s econometric studies and the limits study indicates that there will be revenue gains from increasing the tax rate by five percentage points, although these gains are negligible relative to the static gain for the highest elasticity. Assuming the lower elasticities (and consistent with the Gravelle constraints), revenue gained would be three times the amount likely to be projected by the JCT. Using the Gravelle upper limit, revenues would be 45% larger. Thus, the JCT's projections, absent a change in their realizations response, may likely understate revenue gains from increasing capital gains tax rates. Appendix A. Technical Appendix This appendix shows in the first section the standard realization of revenues from a coefficient derived from a semi-log function. The second shows the method of calculating taxes under the look-back method. Modeling Realizations and Revenues The elasticity of realizations with respect to taxes can be estimated with a variety of functional forms, but one of the most common, and the one on which the estimates in Table 2 are based is a semi-log function of the form (excluding the constant and other regressors, such as stock market values and GDP): (1) log G = bt where G is gains, t is the tax rate, and b is the tax rate coefficient to be estimated. If equation (1) is differentiated, and b is restated in absolute value, the result is: (2) dG/G = -b dt Multiplying the right hand side top and bottom by t results in an elasticity (dG/G divided by dt/t) of bt. Because the relationship is normally negative, but it is convenient to restate b in absolute value, a minus sign is added to b. If equation (1) is restated in its originally, nonlogged form (again ignoring other explanatory variables and stating b in absolute value), it is: (3) G = A e -bt Since revenues are tG, the revenue equation is written: (4) R = tAe -bt Note that if equation (4) is logged and differentiated, the result is dR/r = dt/t (1-bt). Thus, if the absolute value of the elasticity bt, is 1, there is no revenue gain. To estimate revenues, denoting new values with an *, divide new revenues by old to achieve: (5) R* = R* (t*/t)e -b(t*-t) The revenue maximizing tax rate is where dR/R=0, or where (1-bt) equals zero. This rate is equal to 1/b. Thus, if the coefficient of b is two, the revenue maximizing tax rate is 50% and if b equals 5 the revenue maximizing tax rate is 20%. Calculating Taxes under the Look-Back Method A look-back method decreases basis (i.e., increases taxable gain) in order to achieve the same net on a sale as if the tax had been paid on an accrual basis. In these calculations, g = growth rate, T= holding period, S = sales price, B = basis, t = tax rate, and B* = new basis. To determine the growth rate g: (1) B(1+g) T = S And solving for g: (1) g = (S/B) (1/T) -1 To find a value of B* that will give you the same return as accrual taxation: The gain on realization with the new basis is S-t(S-B*) The gain on accrual is B(1+g(1-t)) T Equating them and substituting in for the value of g: (3) B(1+ ((S/B) 1/T -1)(1-t)) T = S-t(S-B*) Solving for B* (4) B* = [B(1+ ((S/B) 1/T -1)(1-t)) T -S(1-t)]/t Appendix B. Econometric Studies Elasticities in Studies of the 1980s Table B -1 reports the elasticities found in a series of estimates of the realizations elasticity in the 1980s, the information available to influence a choice of realizations response at the time of the 1990 debate. These studies are discussed in general terms earlier, and in more specific terms in the following subsection. Where possible elasticities are reported at a 22% tax rate. The studies are divided into categories based on the fundamental approach used. Citations to all studies in this report are in Appendix C . General Issues Statistical (or econometric) studies relating capital gains realizations to tax rates face many challenges, and some of the debate over the evidence reflects the concerns about these challenges. The debate also concerned which type of data should be used: aggregate time series (which examines total economy-wide realizations over time compared with the economy-wide tax rates) versus individual taxpayer data (which related individual realizations to individual tax rates). As can be seen in Table B -1 , aggregate time series results were generally smaller and more consistent, falling within a range of 0.3 to 0.9. Estimates based on micro data (individual observations) varied from 0.55 to almost 4. The estimate for the pooled time-series, cross-section regression probably reflects a mix of times series and cross-section results. Other things equal, it is more desirable to use individual data, because aggregate data cause a loss of information (i.e., individual variability is lost when individual responses are aggregated) and can bias the results. In addition, it is difficult to control for all of the changes over time that can affect realizations. Two of these, changes in transactions costs and a disconnect between changes in asset prices and changes in accruals, could cause estimates to be overstated. Nor is it clear that the times series estimates are capturing only permanent effects. Other effects, however, could work in the opposite direction. Yet the problems associated with studies based on individual data sets were so severe that many researchers believed that aggregate time series results were more reliable. As an initial problem and point of contention, the effective capital gains tax rate, which would be used as a predetermined (exogenous) variable to explain realizations in a regression, is actually an endogenous variable which is influenced by the amount of realizations itself. Different techniques could, in theory, be used to address this very serious econometric problem, including using the first dollar tax rate (the tax that would appear on the first dollar of capital gains), using maximum statutory rates, using a rate based on predicted gains (where predicted gains are based on other attributes), or using instrumental variables methods. In general, these problems of endogeneity of the explanatory variable are much more severe in the case of individual cross-section data, where much of the variation is due to individual circumstances, and less important in aggregate time series data where the major source of variation is changes in the law. As noted earlier, another important issue, for using individual data, was the problem of distinguishing between permanent and transitory responses. Because income, especially of high-income individuals who realize most gains, can fluctuate over time, tax rates also vary over time. Individuals would be expected to time realizations to coincide with periods of low rates. Individuals might also need to cash in assets when income (and therefore taxes) is unusually low. Although attempts were made to address this problem with panel studies by averaging the previous year, current year, and next year tax rates to create a permanent rate, this procedure may not correct for the transitory effect, perhaps because periods of lower income can continue for several years. Studies Since the 1980s The following discussion reviews the realizations studies published since the 1980s. In some cases, studies used many specifications, and this section explains why specific results were reported in Table 1 , and why results from two studies were not included. References to these studies are in Appendix C . They are discussed in order of publication. Slemrod and Shobe (1990) This study uses a six-year small panel to replicate the Feldstein, Slemrod, and Yitzhaki and the Auten and Clotfelter studies. The authors found varying, but quite large, elasticities (in excess of 1, and in excess of 5 in some cases). Their study appears to confirm potential problems with these studies, and also suggests short panels have significant problems as well (as the elasticity for their full sample was 5.84). These large elasticities are similar to those from cross-section and some panel studies in the 1980s, although some were not statistically significant and results varied significantly over time periods. Slemrod and Shobe also estimated a regression that related the difference between current year realizations and average realizations to the difference between current year and average tax rates. They also obtain large, but statistically insignificant results. They acknowledge that their results may capture transitory effects. Because this study continues a methodology that has largely been rejected, the results are excluded from Table 1 . Gillingham and Greenlees (1992) This study extends a previous times series analysis covering 1954-1985 for a short period (through 1989) and makes some changes in approaches used by CBO to replicate the results. The CBO study referenced used tax rates based on predicted gains in a standard regression. The authors consider three changes. The first is to use an instrumental variables technique that uses taxes on predicted gains as an instrument (that is, first regress actual effective tax rates on predicted tax rates and use the fitted values in the regression on realizations). This provision increased the coefficient from 2.9 to 4.2 and increased the elasticity at a 22% tax rate, from 0.64 to 0.92. Second, they suggested use of the maximum tax rate as an instrument rather than the predicted tax rate, which increased the coefficient to 5.8 and the elasticity to 1.28. They also argued that the data should be differenced (a change in realizations related to a change in rates); differencing produced higher elasticities (1.39 for the instrument with predicted gains and 1.429 for the instrument with the maximum rate) but these elasticities were not statistically significant at conventional levels. Differencing may also capture short-term or transitory effects. Finally they extended the time period through 1989, with and without excluding 1986. Excluding 1986, they found an estimate of 3.4 rather than 4.2 using the predicted gains instrument and 3.5 when the data were differenced (corresponding to elasticities of 0.75 and 0.77 at a 22% rate). For the maximum rate, the values were 5.4 and 5.3 (with and without differencing), corresponding to elasticities of 1.18 and 1.16. Confining the elasticities under consideration to those in the extended sample but excluding 1986, the crucial issue is whether to use the predicted gains rate or the maximum rate as an instrument. It is difficult to know what conclusion to draw from this study, because the principal conclusion of the authors is that micro-data approaches are superior. Problems exist with using the maximum rate as an instrument for this time-series regression, because the law itself changed substantially over the time period in a way that altered the relationship between the maximum rate and the average rate. Over this time period, there were episodes where the maximum rate affected a large fraction of taxpayers and other periods where it affected only a small fraction of taxpayers. Given these reservations about using the maximum rate, the coefficient of 3.4 is reported in Table 1 . Burman and Randolph (1994) The Burman and Randolph study is perhaps the most innovative study done since the 1980s. It separated permanent and transitory effects in a short panel (1979-1983) using variations in state tax rates to identify permanent effects. For the transitory rate, the authors included in their instruments the first dollar current tax rate, which introduced a transitory element. Thus taxpayers with unusually low current income, excluding capital gains (and low current first dollar rates) would have transitory rates below their permanent rates, whereas those with high income would have higher rates. The permanent rates would vary across taxpayers in different states due to state tax rates. The authors estimated an elasticity of 0.18 at an 18% tax rate, which implies a coefficient of one, and an elasticity of 0.22 at a 22% tax rate. This estimated effect was not statistically significant, probably because there was not very much variation in tax rates. They estimated a transitory elasticity of 6.45. Several subsequent studies use across-state variations or incorporate state tax rates into the analysis. Bogart and Gentry (1995) This study also relied on differentials across states to identify permanent responses, but used aggregate state level gains from 1979 to 1990. The study also uses year dummies to control for fixed-year effects, so that the basic identification is due largely to the differential in tax rates across states. The authors report an elasticity of 0.65, which at their reported tax rate reflects a coefficient of 2.5. For a 22% rate, this coefficient leads to an elasticity of 0.55. The techniques used in the study should identify a permanent elasticity. Auerbach and Siegel (2000) Auerbach and Siegel used panel data from 1985 to 1994 to replicate the Burman and Randolph results for a different time period. They report an elasticity of 0.33 at the mean of the tax rate. Unfortunately, they do not report the tax rate. Based on evidence from other sources (Eichner and Sinai), the tax rate is probably around 25%. Using that tax rate, the coefficient is 1.126 and suggests an elasticity at a 22% rate of 0.25, very close to the Burman and Randolph results. They find a transitory elasticity of 4.9 (4.1% at a 22% rate). Auerbach and Siegel also report an alternative specification in which they add several instruments to the permanent tax rate including the first dollar tax rate for the current year and the year ahead maximum statutory rate to a regression on the next year's tax rate. The permanent elasticity is much higher, 1.75 rather than 0.33. This magnitude of elasticity is similar to that found in panel and cross-section studies in the 1980s. The problem with their approach is that this addition of the current first dollar rate likely adds a transitory element to the permanent tax rate, which explains their significantly larger elasticity. Thus, the 1.126 coefficient is reported in Table 1 . Auerbach and Siegel also provide a separate regression for the very wealthy and for "sophisticated" taxpayers (who report sales of more complicated financial products such as derivatives or report short sales). Their findings using the Burman and Randolph methodology indicate that there is essentially no response for these taxpayers. Eichner and Sinai (2000) This study extends time series analysis through 1997, but finds that it is important to exclude 1986 from the estimates. When 1986 is excluded the coefficient is 2.28, for an elasticity of 0.5. There is also a case for excluding 1997, although it is not as important. When both are excluded, the coefficient in a semi-log specification is 2.18, which implies, at a 22% tax rate, an elasticity of 0.48. As in the case of Gillingham and Greenlees, many specifications are tried. One approach used an instrumental variables method relying on the top marginal tax rate. This approach led to an estimate of 3.8, for an elasticity of 0.84. Curiously, the coefficient changes quite substantially when 1997 was also excluded, to 5.13 and an elasticity of 1.13. One of the problems of using the top marginal tax rate is that there are differences between that tax rate and the average tax rate in the years before 1986 when the tax benefit was an exclusion and rates where more steeply graduated. The authors also tried some specifications with changes in tax rates. These tended to lead to elasticities ranging from 0.83 to 1.46. However, in most of these cases some or most of the tax rate coefficients were not statistically significant. Moreover, it is more likely that this approach reflects more transitory elements. Given the problems with using marginal rates and the instability of specifications with tax rate changes, the 2.28 coefficient is reported in Table 1 . Auten and Joulfaian (2004) This analysis uses a longer micro-data panel (over 17 years) to estimate permanent and transitory effects. Although they include state tax rates, they do not use the state tax variation to identify permanent effects. Their approach is similar to the panel studies of the 1980s in that it uses adjacent years to separate permanent and transitory effects. Their estimate is lower than most estimates of short panels from the 1980s, although this lower elasticity may reflect time series elements. It is likely, however, that the permanent estimate contains transitory elements. They find an elasticity of 0.72 at an apparent 20% tax rate, which indicates a coefficient of 3.6 and an elasticity of 0.79 at a 22% tax rate. Evans (2009) The Evans study is a basic cross-section regression, relying on the public use file, with a number of different specifications, leading to elasticities typically between 2 and 5. Although there are some issues associated with the public use file data, because tax returns are blended for high-income taxpayers to protect confidentiality, the main reservation about this study is that it reflects the fundamental, and now widely recognized, shortcomings of cross-section studies, and the findings cannot be interpreted as reflecting permanent realizations elasticities. These results are not reflected in Table 1 . Bakija and Gentry (2014) This study uses a 50-year panel of state data reflecting changes in combined federal and state tax rates. The data are aggregated by state, including state- and time-fixed effects. The identification for the effects comes from changes in effective state marginal tax rates, which are largely exogenous. The state-fixed effects mean that unobserved differences across states are controlled for. The authors provide a number of tests of the effects of changing specification, in particular showing that omitting state-fixed effects and year-fixed effects, separately and together, has significant effects in raising the elasticities. Dowd, McClelland and Muthitacharoen (2015) This study uses standard panel methods using a 10-year panel, although its estimates of transitory elasticities rely, as with other studies, on adjacent years, which may not be sufficient to eliminate transitory effects. However, it does have year-fixed effects, which should help control for transitory effects from law changes (as opposed to income changes). It also provides considerable sensitivity analysis with different specifications and time subperiods. Minas, Lim, and Evans (2018) This study is an aggregate time series study done with Australian data from 1988 to 2015 and spans a period which included an exclusion for part of capital gains as well as changes in marginal tax rates. It includes controls similar to those in U.S. studies for GDP, inflation, and the stock market index. Appendix C. Citations to Studies Citations to Studies of the 1980s (in Table B-1 ) Auerbach, Alan J. "Capital Gains Taxation and Tax Reform." National Tax Journal (September 1989), pp. 391-401. Auten, Gerald E. "Capital Gains Taxes and Realizations: Can a Tax Cut Pay for Itself?" Policy Studies Journal (Autumn 1980), pp. 53-60. Auten, Gerald E., Leonard E. Burman, and William C. Randolph. "Estimation and Interpretation of Capital Gains Realization Behavior: Evidence from Panel Data." National Tax Journal (September 1989), p. 353374. (This study was also released by the U.S. Department of Treasury. OTA Paper 67, May 1989). Auten, Gerald E. and Charles Clotfelter. "Permanent vs. Transitory Effects and the Realization of Capital Gains." Quarterly Journal of Economics (November 1982), pp. 613-632. Congressional Budget Office. Effects of the 1981 Act on the Distribution of Income and Taxes Paid . Staff Working Paper. August 1986. Congressional Budget Office. How Capital Gains Tax Rates Affect Revenues: The Historical Evidence . March 1988. Darby, Michael, Robert Gillingham, and John S. Greenlees. "The Direct Revenue Effects of Capital Gains Taxation: A Reconsideration of the Time Series Evidence." Treasury Bulletin , U.S. Department of Treasury. June 1988. Feldstein, Martin, Joel Slemrod, and Shlomo Yitzhaki. "The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains." Quarterly Journal of Economics (June 1980), pp. 777-791. Gillingham, Robert, John S. Greenlees, and Kimberly D. Zieschang. New Estimates of Capital Gains Realization Behavior: Evidence from Pooled Cross Section Data . U. S. Department of Treasury, OTA Paper 66. May 1989. Jones, Jonathan D. An Analysis of Aggregate Time Series Capital Gains Equations . U. S. Department of Treasury, Office of Tax Analysis Paper 65. May 1989. Lindsey, Larry. Capital Gains: Rates, Realizations, and Revenues . National Bureau of Economic Research, Working Paper 1893. April, 1986. Minarik, Joseph. "The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains: Comment." Quarterly Journal of Economics (February 1984), pp. 93-110. U.S. Department of Treasury. Office of Tax Analysis. Report to the Congress on the Capital Gains Tax Reductions of 1978 . September 1985. Citations to Studies Since the 1980s Auerbach, Alan J. and Jonathan M. Siegel, "Capital-Gains Realizations of the Rich and Sophisticated," American Economic Review , Vol. 90, Papers and Proceedings of the One Hundred Twelfth Annual Meeting of the American Economic Association, May 2000, pp. 276-282. Auten, Gerald and David Joulfaian, "Taxes and Capital Gains Realizations: Evidence from a Long Panel," Prepared for Presentation at the Society of Government Economists session at the Allied Social Science Association Meetings, January 8, 2005, December 2004. Posted at http://www.aeaweb.org/annual_mtg_papers/2005/0109_0800_1204.pdf . Bakija, Jon M. and William M. Gentry, Capital Gains Realizations: Evidence from a Long Panel of State-Level Data , Working Paper, Williams College, June 2014. Posted at https://web.williams.edu/Economics/wp/BakijaGentryCapitalGainsStatePanel.pdf . Bogart, William T. and William M. Gentry, "Capital Gains Taxes and Realizations: Evidence from Interstate Comparisons." Review of Economics and Statistics , vol. 77 (May 1995), pp. 267-282. Burman, Leonard E. and William C. Randolph, "Measuring Permanent Responses to Capital Gains Tax Change in Panel Data," American Economic Review , vol. 83 (September 1994), pp. 794-809. Dowd, Tim, Robert McClelland, and Athiphat Muthitacharoen, "New Evidence on the Elasticity of Capital Gains," National Tax Journal , vol. 68, no. 3, September 2015, pp. 511-544. Evans, Paul, "The Relationship Between Realized Capital Gains and Their Marginal Rate of Taxation, 1976-2004," Institute for Research on the Economics of Taxation, Capital Gains Series no. 2, October 9, 2009. Posted at http://iret.org/pub/CapitalGains-2.pdf . Eichner, Matthew and Todd Sinai, "Capital Gains Tax Realizations and Tax Rates: New Evidence from Time Series." National Tax Journal , vol. 53, no.3, part 2 (September 2000), pp. 663-682. Gillingham, Robert and John S. Greenlees, "The Effect of Marginal Tax Rates on Capital Gains Revenue: Another Look at the Evidence," National Tax Journal , vol. 45 (June 1992), pp. 167-177. Minas, John, Youngdeok Lim, and Chris Evans, "The Impact of Tax Rate Changes on Capital Gains Realisations: Evidence from Australia," Australian Tax Forum , accepted for publication 2018. Slemrod, Joel and William Shobe, The Tax Elasticity of Capital Gains Realizations: Evidence from a Panel of Taxpayers . National Bureau of Economic Research, Working Paper 3237. January 1990. Posted at http://www.nber.org/papers/w3237.pdf .

Compared with most other tax provisions, the potential revenue gain scored for an increase in capital gains taxes is strongly affected by behavioral responses assumed by the Joint Committee on Taxation (JCT) and the Department of the Treasury. As an illustration, the Obama Administration estimated in February 2010 that allowing the Bush tax cuts for capital gains to expire would have raised $16 billion of revenue in FY2019. Yet, based on Congressional Budget Office (CBO) projections in January 2010, the current effective capital gains tax was 13.3% in 2008 and would have increased to 17.9% in 2019; applying the differential in these rates to the realizations in 2019 would have produced a revenue difference of $40 billion. Although some of this differential could arise from different forecasts, assumptions about behavioral responses are the main reason for the reduction in projected revenues. Because these behavioral responses limit the potential revenue scored from a tax increase on capital gains and because of concerns that most income of very high-income individuals is in the form of capital gains (whether accrued or realized), proposals have been advanced to tax capital gains currently (as accrued) by marking to market publicly traded securities and imposing a look-back tax on difficult-to-value assets. Such a change faces a number of difficulties; thus it is important to understand the evidence of the behavioral responses. The analysis in this study suggests that the Administration's projections and those of the JCT, absent a change in their realizations response, may understate revenue gains from increasing capital gains tax rates. Realizations responses in revenue projections by the revenue-estimating agencies (Joint Committee on Taxation and the Treasury) were publicly discussed at the end of the 1980s, in the midst of a contentious debate. The larger the absolute value of the elasticity (the percentage change in realizations divided by the percentage change in taxes), the smaller the revenue gain; with elasticities larger than one in absolute value, a loss would occur. Estimated elasticities in the literature prior to 1990 ranged from 0.3 to almost 3.8, leaving limited guidance for revenue-estimating agencies. JCT used an elasticity of 0.76, whereas Treasury used an elasticity of one. Concerns were raised at that time that there were serious problems with this evidence. Perhaps the most significant concern was that the larger results from studies of individuals reflected a timing or transitory response (high-income taxpayers with variable income chose to realize gains when tax rates were temporarily low). This transitory response is not appropriate for assessing a permanent change. Evidence and studies since that time suggest that the permanent elasticity is considerably lower than what appeared to be the case in 1990. The surge in realizations in 1986 as a capital gains tax rate increase was preannounced provided compelling evidence of the importance of a transitory response. A study of the limits of realizations (which cannot exceed accruals in the long run) suggested the elasticity (percentage change in realizations divided by the percentage change in the tax rate) could be no more than 0.5 in absolute value (evaluated at a 22% tax rate), and a midpoint of 0.25. A number of new econometric studies, using new techniques to isolate the permanent response, suggested elasticities of around 0.5 or less. Other recent studies suggested larger responses. The JCT appears to maintain its original assumption, while the Treasury response has been reduced to be similar to JCT's; both appear to exceed the realizations limit. Simulations indicate that an increase in capital gains tax rates of five percentage points would raise slightly more than $40 billion on a static basis for 2019, about $30 billion using the 0.25 elasticity and $18 billion using the 0.5 elasticity. The JCT estimates would likely be around $10 billion, reflecting a 0.68 elasticity. Taxing gains on an accrual basis would eliminate this response in the long run and gain additional revenues on currently unrealized gains.

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Introduction The annual Department of State, Foreign Operations, and Related Programs appropriations legislation (SFOPS) funds many of the nondefense international affairs activities of the government. It is one of 12 appropriations bills that Congress considers annually to fund the discretionary activities of the government. Congress structures SFOPS into several titles, which consist of broad spending categories. These titles are subdivided into paragraphs that each address one component account, a funding line item that includes one or several activities of the government. A single component account may cover one agency's entire annual budget, grant funds to an independent organization, or fund multiple activities associated with statutory authorities, among other things. In the FY2019 Consolidated Appropriations Act ( P.L. 116-6 ), the Department of State, Foreign Operations, and Related Programs Appropriations Act (Division F) is divided into eight titles, each associated with the following activities: Many of the component accounts within these titles correspond to one or several authorities in statute. Title 22 of the U.S. Code contains many of these authorities. Major acts in Title 22 include the State Department Basic Authorities Act of 1956 (P.L. 84-885; hereinafter the Basic Authorities Act), the Foreign Service Act of 1980 ( P.L. 96-465 ), and the Foreign Assistance Act of 1961 (P.L. 87-195; hereinafter the FAA), among others. This report identifies the statutory authorities that enable each component account to function. A list of these major acts, and cross-references to their location in the U.S. Code , are in Appendix A . For information on SFOPS funding levels, trends, and congressional action, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations , by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill. Account Descriptions Title I—Department of State and Related Agency Title I funds (1) State Department personnel, operations, and programs; (2) U.S. participation in international organizations, such as the United Nations, and international commissions; (3) U.S. government, nonmilitary international broadcasting; and (4) several U.S. nongovernmental agencies and other U.S. commissions and interparliamentary groups, such as the National Endowment for Democracy. Administration of Foreign Affairs The Administration of Foreign Affairs account category provides funding for the State Department's personnel, operations, and programs; including diplomatic security and the construction and maintenance of its facilities in the United States and around the world. It is composed of the following component accounts: Diplomatic Programs (DP) DP, the principal operating account of the State Department, includes four funding categories: Human Resources . Funds the salaries of domestic and overseas State Department employees, training services at the Foreign Service Institute, the operating costs of the Bureau of Human Resources, and diversity recruitment and development programs such as the Pickering and Rangel Fellowships. Overseas Programs . Funds the Department's various regional and functional bureaus, along with bureau-administered foreign policy programs. Historically, the account has, for instance, funded the bureaus of African Affairs, International Organization Affairs, and Conflict and Stabilization Operations as well as the costs of department employees' travel on assignment. Diplomatic Policy and Support . Funds many of the Department's strategic and managerial units, such as the Office of the Secretary and the Bureaus of Administration, Budget and Planning, Legislative Affairs, Information Resource Management, the Comptroller and Global Financial Services, and Intelligence and Research, among others. Security Programs . Funds the Department's security programs and policies, including those implemented by the Bureau of Counterterrorism and Countering Violent Extremism and the Office of Foreign Missions. It is also the primary source of funding for the Worldwide Security Protection subaccount, which provides funds to the Bureau of Diplomatic Security and other bureaus to implement programs to protect the department's staff, property, and information. Until FY2019, this account (named Diplomatic & Consular Programs in prior years) included some consular fees and surcharges that offset expenditures. Beginning with FY2019 appropriations, the State Department is to use that revenue to fund the administration of consular and border security programs directly under a new Consular and Border Security Programs account (the CBSP account). That account does not require annual appropriations and thus does not appear in the FY2019 act. Capital Investment Fund (CIF) CIF funds information technology (IT) and other capital equipment procurement to ensure efficient management, coordination, and utilization of IT resources. Funds allocated to this account, established by Congress in 1994, have supported the ongoing IT modernization initiative at the State Department. Office of Inspector General (OIG) This account funds the State Department's Office of Inspector General, which conducts independent audits, inspections, evaluations, and investigations of the programs and offices of the State Department and the Broadcasting Board of Governors (operationally renamed in 2018 as the U.S. Agency for Global Media). Educational and Cultural Exchange Programs This account funds the State Department's management of U.S. educational, professional, and cultural exchanges, such as the Fulbright Scholar Program, the International Visitor Leadership Program, and the Congress-Bundestag Youth Exchange. Authority for these programs derive from the Mutual Education and Cultural Exchange Act of 1961 (popularly referred to as the Fulbright-Hays Act; P.L. 87-256 ), as amended, though several of these programs predate that act. Representation Expenses The Representation Expenses account reimburses Foreign Service Officers for entertainment of government officials to advance diplomacy. Protection of Foreign Missions and Officials This account funds reimbursable expenses to municipal, state, and federal law enforcement agencies throughout the United States for "extraordinary" services provided to foreign missions and officials, in particular to the New York Police Department to protect representatives to the United Nations. Embassy Security, Construction, and Maintenance (ESCM) ESCM funds provide for the general management and maintenance of U.S. State Department embassies and other facilities in the United States and abroad. This includes ongoing renovations to the State Department headquarters in Washington, DC. This account also funds Worldwide Security Upgrades (WSU), which provides the State Department's share of the costs to plan, design, and build new embassies and facilities to comply with requirements of the Secure Embassy Construction and Counterterrorism Act of 1999 (Title VI of P.L. 106-113 ). Emergencies in the Diplomatic and Consular Service This account addresses unexpected events, such as the evacuation of U.S. diplomats and their families or, in some circumstances, private U.S. citizens or third-country nationals as a result of natural disasters, epidemics, terrorist attacks, or civil unrest. It also funds some nonemergency activities of senior Administration officials, such as G-20 Summits or the Organization for American States (OAS) General Assembly (Basic Authorities Act, §4). This account also funds rewards for informants about international terrorism (the "Rewards for Justice" program), narcotics-related activities, transnational organized crime, and war crimes (Basic Authorities Act, §36). For example, information obtained through Rewards for Justice led to the capture and conviction of one of the planners of the 1993 World Trade Center bombing in New York. Repatriation Loans Program Account The Repatriation Loans Program Account subsidizes small loans to destitute U.S. citizens abroad who are unable to fund their return to the United States (Basic Authorities Act, §4). Payment to the American Institute in Taiwan (AIT) AIT is a nonprofit, private corporation established for "[p]rograms, transactions, and other relations conducted or carried out by the President or any agency of the United States Government with respect to Taiwan," in accordance with the Taiwan Relations Act ( P.L. 96-8 ). It provides consular services for Americans and the people of Taiwan. The account supports a contract providing for salaries, benefits, and other expenses associated with maintaining AIT. International Center, Washington, DC The International Center, or the International Chancery Center (ICC), is a 47-acre diplomatic enclave owned by the U.S. government and is located in Washington, DC. Fees from other executive agencies and proceeds from past leases fund ICC development, maintenance, security, and repairs. Congress established and authorized the ICC in the International Center Act ( P.L. 90-553 ) to provide territory for diplomatic missions of foreign governments to the United States. Payment to the Foreign Service Retirement and Disability Fund The payment covers the U.S. government's contribution to the Foreign Service Retirement and Disability System and the Foreign Service Pension System for USAID and the Department of State. International Organizations Through the following two accounts in the International Organizations category, the United States meets its assessed obligations (dues) to the many international organizations and peacekeeping efforts that the United States supports. Title V of SFOPS appropriates voluntary contributions to multilateral organizations. Contributions to International Organizations (CIO) The Contributions to International Organizations account funds U.S.-assessed contributions to the budget of the United Nations, certain U.N. system organizations, inter-American organizations, war crimes tribunals, and other intergovernmental organizations. Contributions for International Peacekeeping Activities (CIPA) The Contributions for International Peacekeeping Activities account funds U.S.-assessed contributions to U.N. peacekeeping operations worldwide, as well as assessed contributions to certain ad hoc courts, such as the International Criminal Tribunal for the Former Yugoslavia and the International Residual Mechanism for Criminal Tribunals. American Sections, International Commissions Accounts under the International Commissions category provide funding for U.S. obligations under law or treaty to the following bilateral and multilateral commissions: International Joint Commission and the International Boundary Commission (both between the United States and Canada), International Boundary and Water Commission and the Border Environment Cooperation Commission (both between the United States and Mexico); and International fisheries and waters commissions. Broadcasting Board of Governors (BBG)15 The sole listing under the "Related Agency" category, BBG is the U.S. civilian international media agency. BBG was established as the successor to the U.S. Information Agency in the International Broadcasting Act of 1994 (Title III of P.L. 103-236 ). BBG renamed itself the United States Agency for Global Media in 2018, but recent appropriations have maintained the BBG title. It comprises the Voice of America (VOA) and Radio and TV Martí (under the Office of Cuba Broadcasting [OCB]). BBG also funds grantee organizations Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia (RFA), and Alhurra TV and Radio Sawa (under the Middle East Broadcasting Networks [MBN]). The broadcasting category is divided into two accounts, as follows. International Broadcasting Operations This account funds the operations of the BBG and all U.S. government, nonmilitary international broadcasts, including salaries and benefits for new hires and other operating expenses. Programmatic expansion priorities in FY2019 include new Russian and Korean language programs, an increased focus on Venezuela, and a digital media program in the Middle East and North Africa to counter extremist narratives. Broadcasting Capital Improvements The Capital Improvements account supports improvements and maintenance of BBG's global transmission network and digital multimedia infrastructure and capital projects. Related Programs This category includes funding to entities created by the U.S. government that today are nongovernmental but pursue objectives aligned with U.S. foreign policy. Several of these organizations fund themselves with income from trust funds created by Congress, so appropriations authorize use of that income and do not require appropriation of funds. Others receive funding exclusively from the U.S. government, or from both the U.S. government and other donors. The Asia Foundation The Asia Foundation is a nonprofit organization based in San Francisco that seeks to strengthen democratic institutions in Asia, counter violent extremism, promote economic opportunities for Asian and U.S. businesses, and improve U.S.-Asian relations. In addition to annual appropriations, it receives support from foreign governments, nonprofits, corporations, competitive grants, and individual charitable contributions. United States Institute of Peace (USIP) The U.S. Institute of Peace works to increase the United States' capacity to prevent, mitigate, and help resolve international conflict without violence. Congress established USIP in 1984 to offer training, analysis, and additional resources to governments, organizations, and individuals seeking to build peace (United States Institute of Peace Act, Title XVII of P.L. 98-525 ). It is prohibited from receiving non-U.S. government funding. Center for Middle Eastern-Western Dialogue Trust Fund The International Center for Middle Eastern-Western Dialogue (the Hollings Center), based in Istanbul, promotes dialogue between the United States and nations with significant Muslim populations to generate new thinking on key international issues and expand people-to-people contacts. Congress established it in 2004 with a dedicated trust fund ( P.L. 108-199 ). Eisenhower Exchange Fellowship Program The Eisenhower Exchange Program brings professionals who are rising leaders in their countries to the United States and sends their U.S. counterparts abroad. Financed by a dedicated trust fund, it provides programs tailored to each participant and career development opportunities to prepare participants for increasingly senior positions in government, business, and nongovernmental institutions. Israeli-Arab Scholarship Program (IASP) Financed by a dedicated trust fund, the IASP funds scholarships for Israeli Arabs to attend institutions of higher education in the United States. East-West Center The East-West Center, based in Hawaii, promotes better relations and understanding among the people and nations of the Asia-Pacific region and the United States through cooperative study, training, and research. In addition to annual appropriations, it receives support from foreign governments, nonprofits, corporations, competitive federal grants, and individual charitable contributions. National Endowment for Democracy (NED) NED is a private, independent, nonprofit organization that is dedicated to fostering the growth of a wide range of democratic institutions abroad, including political parties, trade unions, free markets, and business organizations. Established in the National Endowment for Democracy Act of 1983 ( Title V of P.L. 98-164 ), NED supports a variety of organizations but maintains four "core institutes," each affiliated with a U.S. domestic organization. The National Democratic Institute (NDI) and the International Republican Institute (IRI) are nonpartisan entities that promote election-related capacity building. The Center for International Private Enterprise, affiliated with the U.S. Chamber of Commerce, supports the private sector by strengthening democratic institutions, and the Solidarity Center, associated with the AFL-CIO, supports labor rights in workplaces abroad. NED also receives funding from the Democracy Fund in Title III of SFOPS. Other Commissions Congress has established a number of organizations to advance selected U.S. objectives in the international arena. Most of these organizations are listed under the Legislative Branch Boards and Commissions in the President's budget request to Congress. Though all except the Commission for the Preservation of America's Heritage Abroad are legislative branch bodies, Congress funds them through SFOPS appropriations given their international affairs focus. Commission for the Preservation of America's Heritage Abroad This 21-member independent executive agency seeks to identify cemeteries, monuments, and historic buildings in Eastern and Central Europe that are associated with the heritage of U.S. citizens, particularly endangered properties and especially American Jews. It works to obtain, in cooperation with the Department of State, assurances from the governments of the region that the properties will be protected and preserved. The commission also encourages, sponsors, assists, and otherwise facilitates private and foreign government site restoration, preservation, and memorialization projects. United States Commission on International Religious Freedom (USCIRF) 16 Established in 1998, the commission seeks to promote international religious freedom in consultation with the State Department. Composed of both presidential and congressional appointees, it advises and makes policy recommendations to the President, the Secretary of State, and Congress through ad hoc publications and an annual report. Commission on Security and Cooperation in Europe (CSCE) The CSCE, established in 1975, seeks to advance U.S. interests by monitoring and promoting human rights, military security, and economic cooperation in the 57-country Organization on Security and Cooperation in Europe (OSCE). Members of Congress lead the commission jointly with executive branch officials. Congressional-Executive Commission on the People's Republic of China (CECC) The CECC monitors human rights and the development of rule of law in China . Members of Congress lead the CECC jointly with executive branch officials. United States-China Economic and Security Review Commission This commission, appointed by congressional leadership, monitors, investigates, and submits to Congress an annual report and recommendations on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China. Western Hemisphere Drug Policy Commission Established in 2017, this commission is required to submit a report evaluating and proposing alternatives for U.S. foreign policy regarding the supply and abuse of illicit drugs in the Western Hemisphere. Unlike the other commissions, it is scheduled to disband after the report's completion. Title II—United States Agency for International Development (USAID) This title provides operational funds for USAID, an independent agency under the foreign policy guidance of the Department of State directly responsible for implementing most bilateral development assistance and disaster relief programs, many of which are funded in Title III of the State, Foreign Operations Appropriations Act. Operating Expenses (OE) The OE account funds USAID's overseas and domestic operational expenses, including salaries and benefits, overseas mission activities, staff training, physical security, and information technology maintenance. Capital Investment Fund (CIF) A program begun in FY2003, the CIF supports the modernization of USAID's information technology systems. Unlike the State Department's Capital Investment Fund, USAID's CIF also funds the construction of facilities overseas in lieu of a separate component account to that end. Office of Inspector General This account supports operational costs of USAID's Office of the Inspector General, which conducts audits and investigations of USAID programs, as well as of the Millennium Challenge Corporation, the Inter-American Foundation, the United States African Development Foundation, and the Overseas Private Investment Corporation. Title III—Bilateral Economic Assistance Under this title, funds are appropriated in support of U.S. government departments and independent agencies conducting humanitarian, development, and other programs meeting U.S. foreign policy objectives throughout the world. Global Health Programs (GHP) GHP is made up of two accounts supporting multiple health activities conducted by USAID and by the State Department (FAA, §104). Global Health-USAID Managed by USAID, appropriations in this account fund programs focused on combating infectious diseases such as HIV/AIDS, malaria, and tuberculosis. Programs also focus on immunization, oral rehydration, maternal and child health, vulnerable children, and family planning and reproductive health. Global Health-State Managed by the Office of the Global AIDS Coordinator (OGAC) in the Department of State, this account is the largest source of funding for the President's Emergency Plan for AIDS Relief (PEPFAR). Funds from this account are transferred to programs implemented by USAID, the Department of Defense, the Centers for Disease Control and Prevention, and the Peace Corps, among others. A specified amount from the Global Health-State account supports the U.S. contribution to the multilateral Global Fund to Fight AIDS, Tuberculosis, and Malaria. Development Assistance (DA) Managed by USAID, the Development Assistance account funds programs aligned with priorities in Part I of the FAA, including sectors referenced in Chapters 1 and 2 targeting agriculture and rural development (§103); education and human capital (§105); energy (§106[b]); urban economic and social development (§106[d]); technical cooperation and development (§106[d][1]); economic development research and evaluation (§106[d][2]); and disaster preparedness and reconstruction (§106[d][3]); U.S. citizen-sponsored schools and hospitals overseas (§214); and micro-, small-, and medium-enterprise development programs (including credit access) (§252). Through the FAA's general authorities, DA also funds environment, democracy and governance, water and sanitation, and human rights programs, among others. In sub-Saharan Africa specifically, DA funds particular priorities for that region described in FAA Chapter 10, including agricultural production and natural resources, health, voluntary family planning services, education, and income-generating activities (§496). International Disaster Assistance (IDA) Managed by the USAID Office of Foreign Disaster Assistance, this account provides relief and rehabilitation to nations struck by natural and manmade disasters and emergencies (FAA, §491[b]). In recent years, the account has been used increasingly to provide emergency food assistance to supplement commodity food aid provided through the P.L. 480 Title II account in the agriculture appropriation (FAA, §491[c]). In 2017, for example, approximately half of obligated IDA funding went to emergency food aid, compared with less than 5% in 2010. Transition Initiatives The Transition Initiatives account supports the activities of USAID's Office of Transition Initiatives (OTI), an entity launched in 1994 to bridge the gap between stabilization and sustainable development. It supports flexible, short-term assistance projects in political transition countries that are moving from war to peace, civil conflict to national reconciliation, or where political instability has not yet erupted into violence and where conflict mitigation might prevent the outbreak of such violence. Although both Transition Initiatives and IDA operate under disaster response authority of the FAA (§491), IDA focuses on humanitarian needs, while Transition Initiatives targets political factors to build peaceful and democratic societies. Complex Crises Fund The fund supports USAID responses to emerging or unforeseen crises with projects aimed at addressing the root causes of conflict or instability. Previously funded through Defense appropriations (as authorized in the National Defense Authorization Act of 2006, Section 1207, P.L. 109-163 ), today USAID administers it under the general authorities of the FAA. Unlike IDA, it may not be used to respond to disasters, and unlike Transition Initiatives, this account is not associated with its own operational component; rather, it is a flexible funding source available to the USAID Administrator. Development Credit Authority (DCA) DCA is a USAID-administered mechanism to subsidize loan guarantees in support of housing projects, water and sanitation systems, and microcredit and small enterprise development, among other programs. In addition to appropriations for the administrative costs of running DCA, Congress authorizes transfers from other component accounts to DCA for loan guarantees. For FY2019, only DA, GHP, and Assistance for Europe, Eurasia, and Central Asia are authorized to transfer funds to DCA. In 2018, Congress passed the Better Utilization of Investments Leading to Development (BUILD) Act (Division F of P.L. 115-254 ), which requires the merger of DCA into a new United States International Development Finance Corporation. FY2019 appropriations for DCA also provide for the costs associated with this transfer. Economic Support Fund (ESF) The Economic Support Fund, authorized under Part II, Chapter 4 of the FAA (§531), uses economic assistance to advance U.S. political and strategic goals in countries of special importance to U.S. foreign policy. Once used primarily in support of the Middle East peace process (in FY1997, for example, 87% of ESF went to Israel, Egypt, the West Bank and Jordan), the use of ESF funds has expanded in recent years to support a broader range of countries of importance to the U.S. counterterrorism strategy. ESF supports development projects that may be indistinguishable from those supported by other accounts, but is also used for occasional direct budget support aid and sovereign loan guarantees. The State Department makes ESF programming decisions; USAID, in large part, implements the programs. Democracy Fund This account supports democracy promotion programs overseen by the State Department's Bureau of Democracy, Human Rights and Labor (DRL). While in past years a portion of this funding was designated for USAID's Office of Democracy, Conflict, and Humanitarian Assistance, appropriations since FY2017 have gone exclusively to DRL, though transfers to USAID may occur. Authorities for this account are found throughout the FAA, but specific reference to the Democracy Fund was added in 2002 (§116, P.L. 107-228 ). Assistance for Europe, Eurasia, and Central Asia (AEECA) This account provides economic assistance to once-Communist states of the former Soviet Union and Eastern Europe, and is the successor to two earlier accounts that channeled aid to the region after the Cold War. AEECA was discontinued at the Obama Administration's request between FY2013 and FY2015, during which time these activities were funded through the ESF, GHP, and INCLE accounts, and reinstated in FY2016. Authorities under this account are found in the FAA (§498-499) and the Support for Eastern European Democracy (SEED) Act of 1989 ( P.L. 101-179 ). Migration and Refugee Assistance (MRA) The Migration and Refugee Assistance account, administered by the State Department's Bureau of Population, Refugees, and Migration (PRM), supports refugee assistance and protection activities worldwide. The MRA account supports U.S. contributions to U.N. entities such as the U.N. High Commissioner for Refugees (UNHCR) and the International Organization for Migration (IOM), as well as organizations such as the International Committee for the Red Cross. It funds resettlement of refugees to other countries as well as processing and initial placement of refugees to the United States. The Migration and Refugee Assistance Act of 1962, as amended, sets out these authorities ( P.L. 87-510 ). United States Emergency Refugee and Migration Assistance (ERMA) Fund ERMA is a humanitarian contingency fund for rapid deployment in unanticipated urgent refugee and migrant emergencies. Appropriations typically replenish this account up to a congressionally authorized level, and the executive branch must notify Congress when funds are used. Independent Agencies Several agencies operate independently and report directly to the Executive Office of the President, unlike USAID, which operates under guidance from the Secretary of State. Peace Corps23 The Peace Corps sends U.S. volunteers to developing countries to provide technical aid and to promote mutual understanding on a people-to-people basis between the United States and citizens of foreign nations (Peace Corps Act of 1961, P.L. 87-293 ). Millennium Challenge Corporation (MCC)24 The MCC provides large-scale, five-year development grants to foreign governments. Known as "compacts" and underpinned by bilateral agreements, these grants are intended to promote economic growth and to eliminate extreme poverty in countries chosen and determined to be eligible, in part, based on their demonstrated commitment to just and democratic governance; investment in health, education, and the environment; and support for economic freedom. Congress established and authorized the MCC in the Millennium Challenge Act of 2003 (Title VI of P.L. 108-199 ). Inter-American Foundation (IAF) The IAF is a nonprofit corporation that finances small-scale enterprise and grassroots community self-help activities aimed at the social and economic development of poor people in Latin America, as originally set out in the Foreign Assistance Act of 1969 ( P.L. 91-179 ) establishing it as an independent entity. United States African Development Foundation (USADF) The USADF is a nonprofit corporation that finances small-scale enterprise and grassroots community self-help activities aimed at the social and economic development of poor people in Africa. Modeled after the IAF, the African Development Foundation Act established it in 1980 (Title V of P.L. 96-533 ). Department of the Treasury: International Affairs Technical Assistance This program deploys financial advisors to provide technical assistance to developing or transitional countries in support of economic reforms, with a focus on banking and financial institutions, financial crimes, government debt, revenue policy, and budget and financial accountability (FAA §129, added in 1998 by P.L. 105-277 ). Title IV—International Security Assistance Department of State International Narcotics Control and Law Enforcement (INCLE) INCLE funds international counternarcotics activities; programs combatting human and wildlife trafficking; and rule of law activities, including support for judicial reform and law enforcement capacity building. Many of the activities under INCLE are overseen and coordinated through the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL). More than half of funding in recent years has gone to programs in the western hemisphere; other major recipients have included Afghanistan, Pakistan, and West Bank/Gaza. INCLE authorities primarily derive from the FAA (§481-490). Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR) This account funds a variety of State Department-managed activities aimed at countering proliferation of weapons of mass destruction (FAA, §581-586), supporting antiterrorism training and related activities (FAA, §571-575), and promoting demining operations in developing nations (FAA, §301). It also funds voluntary contributions to certain nonproliferation-focused international organizations (FAA, §301). Programs also finance certain defense articles related to nonproliferation, demining, and antiterrorism to friendly governments (Arms Export Control Act, §23, P.L. 90-629), and disarmament in the former Soviet Union (FREEDOM Support Act, §504, P.L. 102-511 ). Peacekeeping Operations (PKO) Unlike the Title I Contributions to Peacekeeping Activities (CIPA) account, which provides assessed funds for U.N. peacekeeping operations, the PKO account provides voluntary support for multilateral efforts in conflict resolution, such as the training of African peacekeepers and funding operations of the Multinational Force and Observers mission in the Sinai. The State Department controls the funds and sets PKO program policies (FAA, §551-563). DOD implements the activities. Funding through this account has in recent years been devoted almost entirely on the Middle East and sub-Saharan Africa. Funds Appropriated to the President International Military Education and Training (IMET) Through IMET, the United States provides training and education to selected foreign military and civilian personnel on U.S. military practices and standards, including democratic values like civilian control of the military. Participants take courses at military education facilities in the United States or receive instruction from U.S. training teams abroad. The State Department controls the funds and has policy authority over the program (FAA, §541-549), which the Department of Defense implements. Foreign Military Financing Program (FMF) The Foreign Military Financing Program supports U.S. overseas arms transfers on a loan and grant basis. Funding generally may be used by recipient countries only to purchase U.S. weapons, equipment and training, though a portion of FMF to Israel may be used to support purchases from Israeli defense firms. The State Department controls the funds and has policy authority (Arms Export Control Act, §23). The Department of Defense implements this program. Title V—Multilateral Assistance International Organizations and Programs (IO&P) This account provides voluntary State Department-administered U.S. donations that support the programs of international agencies involved in a range of development, humanitarian, and scientific activities, including the U.N. Development Program (UNDP), U.N. Environment Program (UNEP), U.N. Children's Fund (UNICEF), and U.N. Population Fund (UNFPA). This is distinct from the CIO account under Title I, which funds assessed contributions (dues) to international organizations. Authority is derived from the FAA (§§301-307 on International Organizations and Programs). International Financial Institutions27 Under this category, funds are provided through the Department of the Treasury to a wide range of multilateral financial institutions, which offer loans—both "soft" (i.e., concessional) and "hard" (i.e., near-market rate)—and some grants to developing countries and private sector entities in those countries. Not all international financial institutions require or receive U.S. contributions from year to year; some receive funding under multiyear "replenishments." Authorizations for these contributions have historically been provided in appropriations acts of the relevant year. In the case of concessional lending or grant-making institutions, U.S. appropriations contribute through annual installments toward periodically-agreed donor replenishments as capital is drawn down. Nonconcessional bank institutions typically require new financial commitments only in order to increase the institution's capitalization, as in the ongoing capital increase for the African Development Bank (see below). In FY2019, funds were appropriated for the following entities: Global Environment Facility (GEF) Cosponsored by the UNDP, UNEP, and the World Bank, the GEF, administered by the World Bank, makes grants to help developing countries deal with global environmental problems. World Bank: International Development Association (IDA) As the World Bank's "soft loan" window, IDA provides concessional loans, grants, and debt relief to the lowest-income countries in the world. Asian Development Fund (AsDF) The AsDF is the grants-only window of the Asian Development Bank (AsDB), which finances economic development programs in lower-income countries in Asia and the Pacific. AsDF ceased issuing concessional loans in 2017. AsDB now finances and issues all concessional loans directly through its capital reserves. African Development Bank (AfDB) The AfDB lends at near-market rates to public and private entities, with special emphasis on agriculture, infrastructure, and industrial development. To support a general capital increase, legislative provisions include both paid-in capital and callable capital subscriptions. African Development Fund (AfDF) Part of the African Development Bank, the AfDF provides concessional loans and grants to low-income African countries. International Fund for Agricultural Development (IFAD) IFAD is a UN-system financial institution that issues grants and low-interest loans to developing countries to increase rural incomes, improve nutritional levels, and advance food security. Title VI—Export and Investment Assistance Export-Import Bank of the United States31 Ex-Im Bank issues direct loans, loan guarantees, and export credit insurance to support U.S. exports of goods and services. It aims to support U.S. jobs by providing such financing and insurance when the private sector is unwilling or unable to do so alone and/or to counter financing offered by foreign countries through their export credit agencies. Ex-Im Bank program and administrative expenses are financed by collections such as loan interest, risk premia, and other fees, for which congressional appropriations establish a ceiling. Congress also provides an appropriation for the agency's Office of Inspector General. Ex-Im Bank's enabling legislation is the Export-Import Bank Act of 1945 (P.L. 79-173). Overseas Private Investment Corporation (OPIC)32 OPIC offers political risk insurance, guarantees, and investment financing to encourage U.S. firms to invest in developing countries, under the authority of the FAA (§231-240). Although the agency funds itself in full with loan receipts, appropriations set ceilings on administrative expenses to carry out the insurance programs and denotes a level of support for credit financing. The BUILD Act authorizes a new U.S. International Development Finance Corporation (IDFC), which is to absorb OPIC along with portions of USAID (See DCA section) and assume their responsibilities. It also adds new authorities to this entity. The aforementioned section of the FAA is to be repealed after the IDFC is operational, thereby terminating OPIC. Trade and Development Agency (TDA)34 TDA funds project preparation services such as feasibility studies and other activities to link U.S. businesses to export opportunities in emerging markets for infrastructure and other development projects (FAA, §611). For example, TDA funds reverse trade missions which bring foreign decision-makers to the United States. Title VII—General Provisions General Provisions set out limitations and prohibitions on assistance; administrative, notification, and reporting requirements; and more detailed funding requirements for specific accounts in other titles of the legislation. This title specifies also allocations for various aid sectors, including education, democracy promotion, water and sanitation, and food security, as well as cross-cutting issues such as gender equality. In addition, Title VII provides more detail about aid to certain countries and regions. Title VIII—Overseas Contingency Operations/Global War on Terrorism Since FY2012, executive branch budget requests have distinguished between "core" or "enduring" international affairs funding and funding to support "overseas contingency operations" (OCO). The OCO designation was described initially in budget documents as reflecting "the extraordinary costs of Department [of State] and U.S. Agency for International Development (USAID) operations and programs in Afghanistan, Iraq, and Pakistan," its use quickly expanded to include a broader range of activities and countries. OCO funds are not counted toward spending caps established by the Budget Control Act, 2011, as amended ( P.L. 112-25 ), and as a result have been used as a means of maintaining international affairs funding levels while complying with BCA budget restraints. While the Trump Administration has proposed the elimination of OCO funding under SFOPS for FY2019 and FY2020, Congress has continued to use the designation in SFOPS legislation. OCO funding supports accounts that received core funding in Titles I-V of the legislation, but is identified separately in Title VIII. Appendix A. State, Foreign Operations Authorizing Legislation and U.S. Code References

The annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations legislation funds many of the nondefense international affairs activities of the United States. The State Department portion makes up about one-third of the funding, and the Foreign Operations accounts comprise the remainder. SFOPS is one of 12 annual appropriations acts that fund the federal government each fiscal year. Congress appropriated SFOPS in the Consolidated Appropriations Act, 2019 (P.L. 116-6), under Division F, "Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019." That act is divided into eight titles. Each title funds a variety of government activities, ranging from the operational and administrative costs of government agencies, to direct grant funds for private nonprofit or multilateral organizations. By title, SFOPS provisions set out activities as follows: Title I—Department of State and Related Agency: Funds State Department general operations and diplomatic programs, such as cultural exchange programs, dues to the United Nations, international broadcasting, and grants to U.S. diplomacy-focused nongovernmental organizations such as the National Endowment for Democracy. Title II—United States Agency for International Development (USAID): Funds general operations of USAID, but not USAID foreign assistance programs (see Title III). Title III—Bilateral Economic Assistance: The primary funding source for humanitarian and international development programs of the U.S. government. Includes bilateral assistance for disaster relief, global health, and economic development activities, as well as funding several independent development-oriented agencies, notably the Millennium Challenge Corporation and Peace Corps. Title IV—International Security Assistance: The primary title for U.S. security cooperation programs abroad outside of the National Defense appropriations bill. Includes antinarcotics and rule of law strengthening programs; nonproliferation, anti-terrorism, and demining programs; some assistance to foreign militaries; and some funding for international peacekeeping efforts. Title V—Multilateral Assistance: Contributes funds to several multilateral finance and grant-making institutions. Title VI—Export and Investment Assistance: Funds the three independent export promotion agencies of the U.S. government, the Export-Import Bank; the Overseas Private Investment Corporation; and the Trade and Development Agency. Title VII—General Provisions: Establishes guidance for the allocation of funds appropriated in other titles and lays out restrictions and priorities for programming. Title VIII—Overseas Contingency Operations/Global War on Terrorism: Provides additional funding to accounts in Titles I to V, to address ongoing U.S. military operations priorities overseas, particularly terrorist threats in Afghanistan and Iraq, as well as worldwide.

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Introduction Established in 1953, the Small Business Administration's (SBA's) origins can be traced to the Great Depression of the 1930s and World War II, when concerns about unemployment and war production were paramount. The SBA assumed some of the functions of the Reconstruction Finance Corporation (RFC), which had been created by the federal government in 1932 to provide funding for businesses of all sizes during the Depression and later financed war production. During the early 1950s, the RFC was disbanded following charges of political favoritism in the granting of loans and contracts. In 1953, Congress passed the Small Business Act (P.L. 83-163), which authorized the SBA. The act specifies that the SBA's mission is to promote the interests of small businesses to enhance competition in the private marketplace: It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation. The SBA currently administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in these programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs. This report provides an overview of the SBA's programs and funding. It also references other CRS reports that examine the SBA's programs in greater detail. The SBA's FY2020 congressional budget justification document includes funding and program costs for the following programs and offices: 1. entrepreneurial development programs (including Small Business Development Centers, Women's Business Centers, SCORE, Entrepreneurial Education, Native American Outreach, PRIME, the State Trade Expansion Program, and veterans' programs); 2. disaster assistance; 3. capital access programs (including the 7(a) loan guaranty program, the 504/Certified Development Company [CDC] loan guaranty program, the Microloan program, International Trade and Export Promotion programs, and lender oversight); 4. contracting programs (including the 7(j) Management and Technical Assistance program, the 8(a) Minority Small Business and Capital Ownership Development program, the Historically Underutilized Business Zones [HUBZones] program, the Prime Contract Assistance program, the Women's Business program, the Subcontracting program, and the Surety Bond Guarantee program); 5. regional and district offices (counseling, training, and outreach services); 6. the Office of Inspector General (OIG); 7. capital investment programs (including the Small Business Investment Company [SBIC] program, the New Market Venture Capital program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators); 8. the Office of Advocacy; and 9. executive direction programs (the National Women's Business Council, Office of Ombudsman, and Faith-Based Initiatives). Table 1 shows the SBA's estimated costs in FY2019 for these program areas. Program costs often differ from new budget authority provided in annual appropriations acts because the SBA has specified authority to carry over appropriations from previous fiscal years. The SBA also has limited, specified authority to shift appropriations among various programs. Disaster Loans Overview4 SBA disaster assistance is provided in the form of loans, not grants, which must be repaid to the federal government. The SBA's disaster loans are unique in two respects: they are the only loans made by the SBA that (1) go directly to the ultimate borrower and (2) are not limited to small businesses. SBA disaster loans are available to individuals, businesses, and nonprofit organizations in declared disaster areas. About 80% of the SBA's direct disaster loans are issued to individuals and households (renters and property owners) to repair and replace homes and personal property. In recent years, the SBA Disaster Loan Program has been the subject of regular congressional and media attention because of concerns expressed about the time it takes the SBA to process disaster loan applications. The SBA disbursed $401 million in disaster loans in FY2016, $889 million in FY2017, and $3.59 billion in FY2018. Types of Disaster Loans The SBA Disaster Loan Program includes the following categories of loans for disaster-related losses: home disaster loans, business physical disaster loans, and economic injury disaster loans. Disaster Loans to Homeowners, Renters, and Personal Property Owners Homeowners, renters, and personal property owners located in a declared disaster area (and in contiguous counties) may apply to the SBA for loans to help recover losses from a declared disaster. Only victims located in a declared disaster area (and contiguous counties) are eligible to apply for disaster loans. Disaster declarations are "official notices recognizing that specific geographic areas have been damaged by floods and other acts of nature, riots, civil disorders, or industrial accidents such as oil spills." Five categories of declarations put the SBA Disaster Loan Program into effect. These include two types of presidential major disaster declarations as authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) and three types of SBA declarations. The SBA's Home Disaster Loan Program falls into two categories: personal property loans and real property loans. These loans are limited to uninsured losses. The maximum term for SBA disaster loans is 30 years, but the law restricts businesses with credit available elsewhere to a maximum 7-year term. The SBA sets the installment payment amount and corresponding maturity based upon each borrower's ability to repay. Personal Property Loans A personal property loan provides a creditworthy homeowner or renter with up to $40,000 to repair or replace personal property items, such as furniture, clothing, or automobiles, damaged or lost in a disaster. These loans cover only uninsured or underinsured property and primary residences and cannot be used to replace extraordinarily expensive or irreplaceable items, such as antiques or recreational vehicles. Interest rates vary depending on whether applicants are able to obtain credit elsewhere. For applicants who can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants who cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year. Real Property Loans A creditworthy homeowner may apply for a real property loan of up to $200,000 to repair or restore his or her primary residence to its predisaster condition. The loans may not be used to upgrade homes or build additions, unless upgrades or changes are required by city or county building codes. The interest rate for real property loans is determined in the same way as it is determined for personal property loans. Disaster Loans to Businesses and Nonprofit Organizations Several types of loans, discussed below, are available to businesses and nonprofit organizations located in counties covered by a presidential disaster declaration. In certain circumstances, the SBA will also make these loans available when a governor, the Secretary of Agriculture, or the Secretary of Commerce makes a disaster declaration. Physical disaster loans are available to almost any nonprofit organization or business. Other business disaster loans are limited to small businesses. Physical Disaster Loan Any business or nonprofit organization, regardless of size, can apply for a physical disaster business loan of up to $2 million for repairs and replacements to real property, machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. Physical disaster loans for businesses may use up to 20% of the verified loss amount for mitigation measures in an effort to prevent loss from a similar disaster in the future. Nonprofit organizations that are rejected or approved by the SBA for less than the requested amount for a physical disaster loan are, in some circumstances, eligible for grants from the Federal Emergency Management Agency (FEMA). For applicants that can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants that cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year. Economic Injury Disaster Loans Economic injury disaster loans (EIDLs) are limited to small businesses as defined by the SBA's size regulations, which vary from industry to industry. If the Secretary of Agriculture designates an agriculture production disaster, small farms and small cooperatives are eligible. EIDLs are available in the counties included in a presidential disaster declaration and contiguous counties. The loans are designed to provide small businesses with operating funds until those businesses recover. The maximum loan is $2 million, and the terms are the same as personal and physical disaster business loans. The loan can have a maturity of up to 30 years and has an interest rate of 4% or less. Entrepreneurial Development Programs17 The SBA's entrepreneurial development (ED) noncredit programs provide a variety of management and training services to small businesses. Initially, the SBA provided its own management and technical assistance training programs. Over time, the SBA has come to rely increasingly on third parties to provide that training. The SBA receives appropriations for seven ED programs and two ED initiatives: Small Business Development Centers (SBDCs); the Microloan Technical Assistance Program; Women Business Centers (WBCs); SCORE; the Program for Investment in Microentrepreneurs (PRIME); Veterans Programs (including Veterans Business Outreach Centers, Boots to Business, Veteran Women Igniting the Spirit of Entrepreneurship [VWISE], Entrepreneurship Bootcamp for Veterans with Disabilities, and Boots to Business: Reboot); the Native American Outreach Program (NAO); the Entrepreneurial Development Initiative (Regional Innovation Clusters); and the Entrepreneurship Education Initiative. FY2019 appropriations for these programs are $131 million for SBDCs, $31 million for the Microloan Technical Assistance Program, $18.5 million for WBCs, $11.7 million for SCORE, $5 million for PRIME, $12.7 million for Veterans Programs, $2 million for NAO, $5 million for the Entrepreneurial Development Initiative (Regional Innovation Clusters), and $3.5 million for the Entrepreneurship Education Initiative. Four additional programs are provided recommended funding in appropriations acts under ED programs, but are discussed in other sections of this report because of the nature of their assistance: (1) the SBA's Growth Accelerators Initiative ($2 million in FY2019) is a capital investment program and is discussed in the capital access programs section; (2) the SBA's 7(j) Technical Assistance Program ($2.8 million in FY2019) provides contacting assistance and is discussed in the contracting programs section; (3) the National Women's Business Council ($1.5 million in FY2019) is a bipartisan federal advisory council and is discussed in the executive direction programs section; and (4) the State Trade Expansion Program (STEP, $18 million in FY2019) provides grants to states to support export programs that assist small business concerns. STEP is discussed in the capital access programs' international trade and export promotion programs subsection. The SBA reports that over 1 million aspiring entrepreneurs and small business owners receive training from an SBA-supported resource partner each year. Some of this training is free, and some is offered at low cost. SBDCs provide free or low-cost assistance to small businesses using programs customized to local conditions. SBDCs support small business in marketing and business strategy, finance, technology transfer, government contracting, management, manufacturing, engineering, sales, accounting, exporting, and other topics. SBDCs are funded by grants from the SBA and matching funds. There are 63 lead SBDC service centers, one located in each state (four in Texas and six in California), the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and American Samoa. These lead SBDC service centers manage more than 900 SBDC outreach locations. The SBA's Microloan Technical Assistance program is part of the SBA's Microloan program but receives a separate appropriation. It provides grants to Microloan intermediaries to offer management and technical training assistance to Microloan program borrowers and prospective borrowers. There are currently 147 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico. WBCs are similar to SBDCs, except they concentrate on assisting women entrepreneurs. There are currently 121 WBCs, with at least one WBC in most states and territories. SCORE was established on October 5, 1964, by then-SBA Administrator Eugene P. Foley as a national, volunteer organization, uniting more than 50 independent nonprofit organizations into a single, national nonprofit organization. SCORE's 320 chapters and more than 800 branch offices are located throughout the United States and partner with more than 11,000 volunteer counselors, who are working or retired business owners, executives, and corporate leaders, to provide management and training assistance to small businesses. PRIME provides SBA grants to nonprofit microenterprise development organizations or programs that have "a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; an intermediary; a microenterprise development organization or program that is accountable to a local community, working in conjunction with a state or local government or Indian tribe; or an Indian tribe acting on its own, if the Indian tribe can certify that no private organization or program referred to in this paragraph exists within its jurisdiction." The SBA's Office of Veterans Business Development (OVBD) administers several management and training programs to assist veteran-owned businesses, including 22 Veterans Business Outreach Centers which provide "entrepreneurial development services such as business training, counseling and resource partner referrals to transitioning service members, veterans, National Guard & Reserve members and military spouses interested in starting or growing a small business." The SBA's Office of Native American Affairs provides management and technical educational assistance to Native Americans (American Indians, Alaska natives, native Hawaiians, and the indigenous people of Guam and American Samoa) to start and expand small businesses. The SBA reports that "regional innovation clusters are on-the-ground collaborations between business, research, education, financing and government institutions that work to develop and grow the supply chain of a particular industry or related set of industries in a geographic region." The SBA has supported the Entrepreneurial Development Initiative (Regional Innovation Clusters) since FY2009, and the initiative has received recommended appropriations from Congress since FY2010. The SBA's Entrepreneurship Education initiative provides assistance to high-growth small businesses in underserved communities through the Emerging Leaders initiative and the SBA Learning Center. The Emerging Leaders initiative is a seven‐month executive leader education series consisting of "more than 100 hours of specialized training, technical support, access to a professional network, and other resources to strengthen their businesses and promote economic development." At the conclusion of the training, "participants produce a three‐year strategic growth action plan with benchmarks and performance targets that help them access the necessary support and resources to move forward for the next stage of business growth." The Learning Center is the SBA's primary online training service, which offers free online courses on business planning, marketing, government contracting, accounting, and social media, providing learners an "opportunity to access entrepreneurship education resources through toolkits, fact sheets, infographic tip sheets, instructor guides, and audio content." Capital Access Programs Overview The SBA has authority to make direct loans but, with the exception of disaster loans and loans to Microloan program intermediaries, has not exercised that authority since 1998. The SBA indicated that it stopped issuing direct business loans primarily because the subsidy rate was "10 to 15 times higher" than the subsidy rate for its loan guaranty programs. Instead of making direct loans, the SBA guarantees loans issued by approved lenders to encourage those lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions." With few exceptions, to qualify for SBA assistance, an organization must be both a business and small. What Is a Business? To participate in any of the SBA programs, a business must meet the Small Business Act's definition of small business . This is a business that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; is not dominant in its field on a national basis; and does not exceed size standards established, and updated periodically, by the SBA. The business may be a sole proprietorship, partnership, corporation, or any other legal form. What Is Small?32 The SBA uses two measures to determine if a business is small: SBA-derived industry specific size standards or a combination of the business's net worth and net income. For example, businesses participating in the SBA's 7(a) loan guaranty program are deemed small if they either meet the SBA's industry-specific size standards for firms in 1,047 industrial classifications in 18 subindustry activities described in the North American Industry Classification System (NAICS) or do not have more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carryover losses) for the two full fiscal years before the date of the application. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. The SBA's industry size standards vary by industry, and they are based on one of the following four measures: the firm's (1) average annual receipts in the previous three years, (2) number of employees, (3) asset size, or (4) for refineries, a combination of number of employees and barrel per day refining capacity. Historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small and average annual receipts for most other industries. The SBA's size standards are designed to encourage competition within each industry; they are derived through an assessment of the following four economic factors: "average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms." The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors "as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses." Loan Guarantees Overview The SBA provides loan guarantees for small businesses that cannot obtain credit elsewhere. Its largest loan guaranty programs are the 7(a) loan guaranty program, the 504/CDC loan guaranty program, international trade and export promotion programs, and the Microloan program. The SBA's loan guaranty programs require personal guarantees from borrowers and share the risk of default with lenders by making the guaranty less than 100%. In the event of a default, the borrower owes the amount contracted less the value of any collateral liquidated. The SBA can attempt to recover the unpaid debt through administrative offset, salary offset, or IRS tax refund offset. Most types of businesses are eligible for loan guarantees, but a few are not. A list of ineligible businesses (such as insurance companies, real estate investment firms, firms involved in financial speculation or pyramid sales, and businesses involved in illegal activities) is contained in 13 C.F.R. Section 120.110. With one exception, nonprofit and charitable organizations are also ineligible. As shown in the following tables, most of these programs charge fees to help offset program costs, including costs related to loan defaults. In most instances, the fees are set in statute. For example, for 7(a) loans with a maturity exceeding 12 months, the SBA is authorized to charge lenders an up-front guaranty fee of up to 2% for the SBA guaranteed portion of loans of $150,000 or less, up to 3% for the SBA guaranteed portion of loans exceeding $150,000 but not more than $700,000, and up to 3.5% for the SBA guaranteed portion of loans exceeding $700,000. Lenders with a 7(a) loan that has a SBA guaranteed portion in excess of $1 million can be charged an additional fee not to exceed 0.25% of the guaranteed amount in excess of $1 million. 7(a) loans are also subject to an ongoing servicing fee not to exceed 0.55% of the outstanding balance of the guaranteed portion of the loan. In addition, lenders are authorized to collect fees from borrowers to offset their administrative expenses. In an effort to assist small business owners, in FY2019, the SBA is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reducing the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019; and pursuant to P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program (up to and including $350,000). The SBA's goal is to achieve a zero subsidy rate, meaning that the appropriation of budget authority for new loan guaranties is not required. As shown in Table 2 , the SBA's fees and proceeds from loan liquidations do not always generate sufficient revenue to cover loan losses, resulting in the need for additional appropriations to account for the shortfall. However, "due to the continued improvement in performance in the loan portfolio," the SBA did not request funding for credit subsidies for the 7(a) and 504/CDC loan guaranty programs in FY2016-FY2019. 7(a) Loan Guaranty Program42 The 7(a) loan guaranty program is named after the section of the Small Business Act that authorizes it. These are loans made by SBA lending partners (mostly banks but also some other financial institutions) and partially guaranteed by the SBA. In FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25.4 billion. In FY2018, there were 1,810 active lending partners providing 7(a) loans. The 7(a) program's current guaranty rate is 85% for loans of $150,000 or less and 75% for loans greater than $150,000 (up to a maximum guaranty of $3.75 million—75% of $5 million). Although the SBA's offer to guarantee a loan provides an incentive for lenders to make the loan, lenders are not required to do so. Lenders are permitted to charge borrowers fees to recoup specified expenses and are allowed to charge borrowers "a reasonable fixed interest rate" or, with the SBA's approval, a variable interest rate. The SBA uses a multistep formula to determine the maximum allowable fixed interest rate for all 7(a) loans (with the exception of the Export Working Capital Program and Community Advantage loans) and periodically publishes that rate and the maximum allowable variable interest rate in the Federal Register . Maximum interest rates allowed on variable-rate 7(a) loans are pegged to either the prime rate, the 30-day London Interbank Offered Rate (LIBOR) plus 3%, or the SBA optional peg rate, which is a weighted average of rates that the federal government pays for loans with maturities similar to the guaranteed loan. The allowed spread over the prime rate, LIBOR base rate, or SBA optional peg rate depends on the loan amount and the loan's maturity (under seven years or seven years or more). The adjustment period can be no more than monthly and cannot change over the life of the loan. Table 3 provides information on the 7(a) program's key features, including its eligible uses, maximum loan amount, loan maturity, fixed interest rates, and guarantee fees. Variations on the 7(a) Program The 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress program (for loans of $350,000 or less), the Export Express program (for loans of up to $500,000 for entering or expanding an existing export market), and the Community Advantage pilot program (for loans of $250,000 or less). The SBA also has a Small Loan Advantage program (for loans of $350,000 or less), but it is currently being used as the 7(a) program's model for processing loans of $350,000 or less and exists as a separate, specialized program in name only. The SBAExpress program was established as a pilot program by the SBA on February 27, 1995, and made permanent through legislation, subject to reauthorization, in 2004 ( P.L. 108-447 , the Consolidated Appropriations Act, 2005). The program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guarantee on loans. It provides a 50% loan guarantee on loan amounts of $350,000 or less. The loan proceeds can be used for the same purposes as the 7(a) program, except participant debt restructuring cannot exceed 50% of the project and may be used for revolving credit. The program's fees and loan terms are the same as the 7(a) program, except the term for a revolving line of credit cannot exceed seven years. The Community Advantage pilot program began operations on February 15, 2011, and is limited to mission-focused lenders targeting underserved markets. Originally scheduled to cease operations on March 15, 2014, the program has been extended several times and is currently scheduled to operate through September 30, 2022. As of September 12, 2018, there were 113 approved CA lenders, 99 of which were actively making and servicing CA loans. The SBA placed a moratorium, effective October 1, 2018, on accepting new CA lender applications, primarily as a means to mitigate the risk of future loan defaults. Lenders must receive SBA approval to participate in these 7(a) specialized programs. Special Purpose Loan Guaranty Programs In addition to the 7(a) loan guaranty program, the SBA has special purpose loan guaranty programs for small businesses adjusting to the North American Free Trade Agreement (NAFTA), to support Employee Stock Ownership Program trusts, pollution control facilities, and working capital. Community Adjustment and Investment Program. The Community Adjustment and Investment Program (CAIP) uses federal funds to pay the fees on 7(a) and 504/CDC loans to businesses located in communities that have been adversely affected by NAFTA. Employee Trusts. The SBA will guarantee loans to Employee Stock Ownership Plans (ESOPs) that are used either to lend money to the employer or to purchase control from the owner. ESOPs must meet regulations established by the IRS, Department of the Treasury, and Department of Labor. These are 7(a) loans. Pollution Control. In 1976, the SBA was provided authorization to guarantee the payment of rentals or other amounts due under qualified contracts for pollution control facilities. P.L. 100-590 , the Small Business Reauthorization and Amendment Act of 1988, eliminated the revolving fund for pollution control guaranteed loans and transferred its remaining funds to the SBA's business loan and investment revolving fund. Since 1989, loans for pollution control have been guaranteed under the 7(a) loan guaranty program. CAPLines. CAPLines are five special 7(a) loan guaranty programs designed to meet the requirements of small businesses for short-term or cyclical working capital. The maximum term is five years. The 504/CDC Loan Guaranty Program52 The 504/CDC loan guaranty program uses Certified Development Companies (CDCs), which are private, nonprofit corporations established to contribute to economic development within their communities. Each CDC has its own geographic territory. The program provides long-term, fixed-rate loans for major fixed assets such as land, structures, machinery, and equipment. Program loans cannot be used for working capital, inventory, or repaying debt. A commercial lender provides up to 50% of the financing package, which is secured by a senior lien. The CDC's loan of up to 40% is secured by a junior lien. The SBA backs the CDC with a guaranteed debenture. The small business must contribute at least 10% as equity. To participate in the program, small businesses cannot exceed $15 million in tangible net worth and cannot have average net income of more than $5 million for two full fiscal years before the date of application. Also, CDCs must intend to create or retain one job for every $75,000 of the debenture ($120,000 for small manufacturers) or meet an alternative job creation standard if they meet any one of 15 community or public policy goals. In FY2018, the SBA approved 5,874 504/CDC loans totaling nearly $4.8 billion. Table 4 summarizes the 504/CDC loan guaranty program's key features. International Trade and Export Promotion Programs55 Although any of SBA's loan guaranty programs can be used by firms looking to begin exporting or expanding their current exporting operations, the SBA has three loan programs that specifically focus on trade and export promotion: 1. Export Express loan program provides working capital or fixed asset financing for firms that will begin or expand exporting. It offers a 90% guaranty on loans of $350,000 or less and a 75% guaranty on loans of $350,001 to $500,000. 2. Export Working Capital loan program provides financing to support export orders or the export transaction cycle, from purchase order to final payment. It offers a 90% guaranty of loans up to $5 million. 3. International Trade loan program provides long-term financing to support firms that are expanding because of growing export sales or have been adversely affected by imports and need to modernize to meet foreign competition. It offers a 90% guaranty on loans up to $5 million. In many ways, the SBA's trade and export promotion loan programs share similar characteristics with other SBA loan guaranty programs. For example, the Export Express program resembles the SBAExpress program. The SBAExpress program shares several characteristics with the standard 7(a) loan guarantee program except that the SBAExpress program has an expedited approval process, a lower maximum loan amount, and a smaller percentage of the loan guaranteed. Similarly, the Export Express program shares several of the characteristics of the standard International Trade loan program, such as an expedited approval process in exchange for a lower maximum loan amount ($500,000 compared with $5 million) and a lower percentage of guaranty. In addition, the SBA administers grants through the State Trade Expansion Program (STEP), which are awarded to states to execute export programs that assist small business concerns (such as a trade show exhibition, training workshops, or a foreign trade mission). Initially, the STEP program was authorized for three years and appropriated $30 million annually in FY2011 and FY2012. Congress approved $8 million in appropriations for STEP in FY2014, $17.4 million in FY2015, and $18 million annually since FY2016. The Microloan Program58 The Microloan program provides direct loans to qualified nonprofit intermediary Microloan lenders that, in turn, provide "microloans" of up to $50,000 to small businesses and nonprofit child care centers. Microloan lenders also provide marketing, management, and technical assistance to Microloan borrowers and potential borrowers. The program was authorized in 1991 as a five-year demonstration project and became operational in 1992. It was made permanent, subject to reauthorization, by P.L. 105-135 , the Small Business Reauthorization Act of 1997. Although the program is open to all small businesses, it targets new and early stage businesses in underserved markets, including borrowers with little to no credit history, low-income borrowers, and women and minority entrepreneurs in both rural and urban areas who generally do not qualify for conventional loans or other, larger SBA guaranteed loans. In FY2018, 5,459 small businesses received a Microloan, totaling $76.8 million. The average Microloan was $14,071 and the average interest rate was 7.6%. Table 5 summarizes the Microloan program's key features. Contracting Programs61 Several SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts. These include various prime contracting programs; subcontracting programs; and other assistance (e.g., contracting technical training assistance, the federal goaling program, federal Offices of Small and Disadvantaged Business Utilization, and the Surety Bond Guarantee program). Prime Contracting Programs Several contracting programs allow small businesses to compete only with similar firms for government contracts or receive sole-source awards in circumstances in which such awards could not be made to other firms. These programs, which give small businesses a chance to win government contracts without having to compete against larger and more experienced companies, include the following: 8(a) Program. The 8(a) Minority Small Business and Capital Ownership Development Program (named for the section of the Small Business Act from which it derives its authority) is for businesses owned by persons who are socially and economically disadvantaged. In addition, an individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter. A firm certified by the SBA as an 8(a) firm is eligible for set-aside and sole-source contracts. The SBA also provides technical assistance and training to 8(a) firms. Firms may participate in the 8(a) Program for no more than nine years. In FY2017, the federal government awarded $27.2 billion to 8(a) firms. About $16.4 billion of that amount was awarded with an 8(a) preference ($8 billion through an 8(a) set-aside and $8.4 billion through an 8(a) sole-source award). About $4.8 billion was awarded to an 8(a) firm in open competition with other firms. The remaining $6 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, women-owned small businesses, and service-disabled veteran-owned small businesses). Historically Underutilized Business Zone Program. This program assists small businesses located in Historically Underutilized Business Zones (HUBZones) through set-asides, sole-s ource awards, and price evaluation preferences in full and open competitions. The determination of whether an area is a HUBZone is based upon criteria specified in 13 C.F.R. Section 126.103. To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone. In FY2017, the federal government awarded $7.53 billion to HUBZone-certified small businesses. About $1.90 billion of that amount was awarded with a HUBZone preference ($1.49 billion through a HUBZone set-aside, $65.3 million through a HUBZone sole-source award, and $346.9 million through a HUBZone price-evaluation preference). About $1.53 billion was awarded to HUBZone-certified small businesses in open competition with other firms. The remaining $4.10 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses). Service-Disabled Veteran-Owned Small Business Program. This program assists service-disabled veteran-owned small businesses through set-asides and sole-source awards. For purposes of this program, veterans and service-related disabilities are defined as they are under the statutes governing veterans affairs. In FY2017, the federal government awarded $18.2 billion to service-disabled veteran-owned small businesses. About $6.8 billion of that amount was awarded through a service-disabled veteran-owned small business set aside award. About $4.3 billion of that amount was awarded to a service-disabled veteran-owned small business in open competition with other firms. The remaining $7.1 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, 8(a) firms, and women-owned small businesses). Women-Owned Small Business Program. Under this program, contracts may be set aside for economically disadvantaged women-owned small businesses in industries in which women are underrepresented and women-owned small businesses in industries in which women are substantially underrepresented. Also, federal agencies may award sole-source contracts to women-owned small businesses so long as the award can be made at a fair and reasonable price, and the anticipated value of the contract is below $4 million ($6.5 million for manufacturing contracts). In FY2017, the federal government awarded $21.3 billion to women owned small businesses. About $648.9 million of that amount was awarded with a women owned small business preference ($580.5 million through a women owned small business set-aside and $68.4 million through a women owned small business sole-source award). About $7.0 billion of that amount was awarded to a women owned small business in open competition with other firms. The remaining $13.7 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, 8(a) firms, and service-disabled veteran-owned small businesses). Other small businesses. Agencies may also set aside contracts or make sole-source awards to small businesses not participating in any other program under certain conditions. Subcontracting Programs for Small Disadvantaged Businesses Other federal programs promote subcontracting with small disadvantaged businesses (SDBs). SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups. Individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence). Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do. Federal agencies must negotiate "subcontracting plans" with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs "have an equitable opportunity to compete for subcontracts." Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract or give contractors "monetary incentives" to subcontract with SDBs. As of March 25, 2019, the SBA's Dynamic Small Business Search database included 2,338 SBA-certified SDBs and 122,281 self-certified SDBs. The 7(j) Management and Technical Assistance Program The SBA's 7(j) Management and Technical Assistance program provides "a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities." Eligible individuals and businesses include "8(a) certified firms, small disadvantaged businesses, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals." In FY2018, the 7(j) Management and Technical Assistance program assisted 6,483 small businesses. Surety Bond Guarantee Program75 The SBA's Surety Bond Guarantee program is designed to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. The program guarantees individual contracts of up to $6.5 million and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee ranges from not to exceed 80% to not to exceed 90% of the surety's loss if a default occurs. In FY2018, the SBA guaranteed 10,800 bid and final surety bonds with a total contract value of nearly $6.5 billion. A surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. The surety bond reduces the risk associated with contracting. Surety bonds are viewed as a means to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and are considered to be at greater risk of failing to comply with the contract's terms and conditions. Goaling Program Since 1978, federal agency heads have been required to establish federal procurement contracting goals, in consultation with the SBA, "that realistically reflect the potential of small business concerns" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting these goals to the SBA. In 1988, Congress authorized the President to annually establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. Congress required the government-wide minimum participation goal for small businesses to be "not less than 20% of the total value of all prime contract awards for each fiscal year" and "not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year" for small businesses owned and controlled by socially and economically disadvantaged individuals. Each federal agency was also directed to "have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency." The SBA was required to report to the President annually on the attainment of these goals and to include this information in an annual report to Congress. The SBA negotiates the goals with each federal agency and establishes a "small business eligible" baseline for evaluating the agency's performance. The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., nonappropriated funds), contracts not covered by Federal Acquisition Regulations, acquisitions on behalf of foreign governments, and contracts not reported in the Federal Procurement Data System (such as contracts valued below $10,000 and government procurement card purchases). These exclusions typically account for 18% to 20% of all federal prime contracts each year. The SBA then evaluates the agencies' performance against their negotiated goals annually, using data from the Federal Procurement Data System—Next Generation, managed by the U.S. General Services Administration, to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually. Over the years, federal government-wide procurement contracting goals have been established for small businesses generally ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, and P.L. 105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997), small businesses owned and controlled by socially and economically disadvantaged individuals ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988), women ( P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994), small businesses located within a HUBZone ( P.L. 105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997), and small businesses owned and controlled by a service disabled veteran ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999). The current federal small business contracting goals are at least 23% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses, 3% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses, and 3% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses. Although there are no punitive consequences for not meeting the small business procurement goals, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings. As shown in Table 6 , the FY201 7 Small Business Goaling Report , using data in the Federal Procurement Data System, indicates that federal agencies met the federal contracting goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017. Federal agencies awarded 23.88% of the value of their small business eligible contracts ($442.5 billion) to small businesses ($105.7 billion), 9.10% to small disadvantaged businesses ($40.2 billion), 4.71% to women-owned small businesses ($20.8 billion), 1.65% to HUBZone small businesses ($7.3 billion), and 4.05% to service-disabled veteran-owned small businesses ($17.9 billion). The percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017 is also provided in the table for comparative purposes. Office of Small and Disadvantaged Business Utilization Government agencies with procurement authority have an Office of Small and Disadvantaged Business Utilization (OSDBU) to advocate within the agency for small businesses, as well as assist small businesses in their dealings with federal agencies (e.g., obtaining payment). Regional and District Offices As mentioned previously, the SBA provides funding to third parties, such as SBDCs, to provide management and training services to small business owners and aspiring entrepreneurs. The SBA also provides management, training, and outreach services to small business owners and aspiring entrepreneurs through its 68 district offices. These offices are overseen by the SBA Office of Field Operations and 10 regional offices. SBA district offices conduct more than 20,000 outreach events annually with stakeholders and resource partners that include "lender training, government contracting, marketing events in emerging areas, and events targeted to high-growth entrepreneurial markets, such as exporting." SBA district offices focus "on core SBA programs concerning contracting, capital, technical assistance, and exporting." They also perform annual program eligibility and compliance reviews on 100% of the 8(a) business development firms in the SBA's portfolio and each year conduct on-site examinations of about 10% of all HUBZone certified firms (529 in FY2018) to validate compliance with the HUBZone program's geographic requirement for principal offices. Office of Inspector General91 The Office of Inspector General's (OIG's) mission is "to improve SBA management and effectiveness, and to detect and deter fraud in the Agency's programs." It serves as "an independent and objective oversight office created within the SBA by the Inspector General Act of 1978 [P.L. 95-452], as amended." The Inspector General, who is nominated by the President and confirmed by the Senate, directs the office. The Inspector General Act provides the OIG with the following responsibilities: "promote economy, efficiency, and effectiveness in the management of SBA programs and supporting operations; conduct and supervise audits, investigations, and reviews relating to the SBA's programs and support operations; detect and prevent fraud, waste and abuse; review existing and proposed legislation and regulations and make appropriate recommendations; maintain effective working relationships with other Federal, State and local governmental agencies, and nongovernmental entities, regarding the mandated duties of the Inspector General; keep the SBA Administrator and Congress informed of serious problems and recommend corrective actions and implementation measures; comply with the audit standards of the Comptroller General; avoid duplication of Government Accountability Office (GAO) activities; and report violations of Federal criminal law to the Attorney General." Capital Investment Programs The SBA has several programs to improve small business access to capital markets, including the Small Business Investment Company program, the New Market Venture Capital Program (now inactive), two special high technology contracting programs (the Small Business Innovative Research and Small Business Technology Transfer programs), and the growth accelerators initiative. The Small Business Investment Company Program95 The Small Business Investment Company (SBIC) program enhances small business access to venture capital by stimulating and supplementing "the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply." The SBA works with 305 privately owned and managed SBICs licensed by the SBA to provide financing to small businesses with private capital the SBIC has raised and with funds the SBIC borrows at favorable rates because the SBA guarantees the debenture (loan obligation). SBICs provide equity capital to small businesses in various ways, including by purchasing small business equity securities (e.g., stock, stock options, warrants, limited partnership interests, membership interests in a limited liability company, or joint venture interests); making loans to small businesses, either independently or in cooperation with other private or public lenders, that have a maturity of no more than 20 years; purchasing debt securities from small businesses, which may be convertible into, or have rights to purchase, equity in the small business; and subject to limitations, providing small businesses a guarantee of their monetary obligations to creditors not associated with the SBIC. The SBIC program currently has invested or committed about $30.1 billion in small businesses, with the SBA's share of capital at risk about $14.3 billion. In FY2018, the SBA committed to guarantee $2.52 billion in SBIC small business investments. SBICs invested another $2.98 billion from private capital for a total of $5.50 billion in financing for 1,151 small businesses. New Market Venture Capital Program103 The now inactive New Market Venture Capital (NMVC) program encourages equity investments in small businesses in low-income areas that meet specific statistical criteria established by regulation. The program operates through public-private partnerships between the SBA and newly formed NMVC investment companies and existing Specialized Small Business Investment Companies (SSBICs) that operate under the Small Business Investment Company program. The NMVC program's objective is to serve the unmet equity needs of local entrepreneurs in low-income areas by providing developmental venture capital investments and technical assistance, helping to create quality employment opportunities for low-income area residents, and building wealth within those areas. The SBA's role is essentially the same as with the SBIC program. The SBA selects participants for the NMVC program, provides funding for their investments and operational assistance activities, and regulates their operations to ensure public policy objectives are being met. The SBA requires the companies to provide regular performance reports and have annual financial examinations by the SBA. The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance (which is composed of the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' active unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. Small Business Innovation Research Program104 The Small Business Innovation Research (SBIR) program is designed to increase the participation of small, high technology firms in federal research and development (R&D) endeavors, provide additional opportunities for the involvement of minority and disadvantaged individuals in the R&D process, and result in the expanded commercialization of the results of federally funded R&D. Current law requires that every federal department with an R&D budget of $100 million or more establish and operate a SBIR program. Currently, 11 federal agencies participate in the SBIR program. A set percentage of that agency's applicable extramural R&D budget—originally set at not less than 0.2% in FY1983 and currently not less than 3.2%—is to be used to support mission-related work in small businesses. Agency SBIR efforts involve a three-phase process. During Phase I, awards of up to $163,952 for six months are made to evaluate a concept's scientific or technical merit and feasibility. The project must be of interest to and coincide with the mission of the supporting organization. Projects that demonstrate potential after the initial endeavor may compete for Phase II awards of up to $1.09 million, lasting one to two years. Phase II awards are for the performance of the principal R&D by the small business. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. Federal dollars may be used if the government perceives that the final technology or technique will meet public needs. Eight departments and three other federal agencies currently have SBIR programs, including the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, and Transportation; the Environmental Protection Agency; the National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF). Each agency's SBIR activity reflects that organization's management style. Individual departments select R&D interests, administer program operations, and control financial support. Funding can be disbursed in the form of contracts, grants, or cooperative agreements. Separate agency solicitations are issued at established times. The SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their SBIR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities. Small Business Technology Transfer Program The Small Business Technology Transfer program (STTR) provides funding for research proposals that are developed and executed cooperatively between a small firm and a scientist in a nonprofit research organization and meet the mission requirements of the federal funding agency. Up to $163,952 in Phase I financing is available for approximately one year to fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology. Phase II awards of up to $1.09 million may be made for two years, during which time the developer performs R&D work and begins to consider commercial potential. Agencies may issue an award exceeding these award guidelines by no more than 50%. Only Phase I award winners are considered for Phase II. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. The small business must find funding in the private sector or other non-STTR federal agency. The STTR program is funded by a set-aside, initially set at not less than 0.05% in FY1994 and now at not less than 0.45%, of the extramural R&D budget of departments that spend more than $1 billion per year on this effort. The Departments of Energy, Defense, and Health and Human Services participate in the STTR program, as do NASA and NSF. The SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their STTR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities. Growth Accelerator Initiative The SBA describes growth accelerators as "organizations that help entrepreneurs start and scale their businesses." Growth accelerators are typically run by experienced entrepreneurs and help small businesses access seed capital and mentors. The SBA claims that growth accelerators "help accelerate a startup company's path towards success with targeted advice on revenue growth, job, and sourcing outside funding." The SBA's Growth Accelerator Initiative began in FY2014 when Congress recommended in its appropriations report that the initiative be provided $2.5 million. Congress subsequently recommended that it receive $4 million in FY2015, $1 million in FY2016, FY2017, and FY2018, and $2 million in FY2019. The Growth Accelerator Initiative provides $50,000 matching grants each year to universities and private sector accelerators "to support the development of accelerators and their support of startups in parts of the country where there are fewer conventional sources of access to capital (i.e., venture capital and other investors)." Office of Advocacy115 The SBA's Office of Advocacy is "an independent voice for small business within the federal government." The Chief Counsel for Advocacy, who is nominated by the President and confirmed by the Senate, directs the office. The Office of Advocacy's mission is to "encourage policies that support the development and growth of American small businesses" by intervening early in federal agencies' regulatory development process on proposals that affect small businesses and providing Regulatory Flexibility Act compliance training to federal agency policymakers and regulatory development officials; producing research to inform policymakers and other stakeholders on the impact of federal regulatory burdens on small businesses, to document the vital role of small businesses in the economy, and to explore and explain the wide variety of issues of concern to the small business community; and fostering a two-way communication between federal agencies and the small business community. Executive Direction Programs The SBA's executive direction programs consist of the National Women's Business Council, the Office of Ombudsman, and Faith-Based Initiatives. The National Women's Business Council The National Women's Business Council is a bipartisan federal advisory council created to serve as an independent source of advice and counsel to the President, Congress, and the SBA on economic issues of importance to women business owners. The council's mission "is to promote bold initiatives, policies, and programs designed to support women's business enterprises at all stages of development in the public and private sector marketplaces—from start-up to success to significance." Office of Ombudsman119 The National Ombudsman's mission "is to assist small businesses when they experience excessive or unfair federal regulatory enforcement actions, such as repetitive audits or investigations, excessive fines, penalties, threats, retaliation or other unfair enforcement action by a federal agency." The Office of Ombudsman works with federal agencies that have regulatory authority over small businesses to provide a means for entrepreneurs to comment about enforcement activities and encourage agencies to address those concerns promptly. It also receives comments from small businesses about unfair federal compliance or enforcement activities and refers those comments to the Inspector General of the affected agency in appropriate circumstances. In addition, the National Ombudsman files an annual report with Congress and affected federal agencies that rates federal agencies based on substantiated comments received from small business owners. Affected agencies are provided an opportunity to comment on the draft version of the annual report to Congress before it is submitted. Faith-Based Initiatives The SBA sponsors several faith-based initiatives For example, the SBA, in cooperation with the National Association of Government Guaranteed Lenders (NAGGL), created the Business Smart Toolkit, "a ready-to-use workshop toolkit that equips faith-based and community organizations to help new and aspiring entrepreneurs launch and build businesses that are credit ready." Legislative Activity During the 111 th Congress P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA) provided the SBA an additional $730 million in temporary funding, including $375 million to subsidize fees for the SBA's 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all regular 7(a) loans through September 30, 2010, or when appropriated funding for the subsidies and loan modification was exhausted. P.L. 111-240 , the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks with less than $10 billion in assets to increase their lending to small businesses (about $4.0 billion was issued) and a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs. The act also provided the SBA an additional $697.5 million; including $510 million to continue the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. During the 112 th Congress, the SBA's statutory authorization expired (on July 31, 2011). Since then, the SBA has been operating under authority provided by annual appropriations acts. Prior to July 31, 2011, the SBA's authorization had been temporarily extended 15 times since 2006. P.L. 112-239 , the National Defense Authorization Act for Fiscal Year 2013, increased the SBA's surety bond limit from $2 million to $6.5 million (and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary); required the SBA to oversee and establish standards for most federal mentor-protégé programs and establish a mentor-protégé program for all small business concerns; required the SBA's Chief Counsel for Advocacy to enter into a contract with an appropriate entity to conduct an independent assessment of the small business procurement goals, including an assessment of which contracts should be subject to the goals; and addressed the SBA's recent practice of combining size standards within industrial groups as a means to reduce the complexity of its size standards by requiring the SBA to make available a justification when establishing or approving a size standard that the size standard is appropriate for each individual industry classification. During the 113 th Congress, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased the SBA's SBIC program's annual authorization amount to $4 billion from $3 billion. During the 114 th Congress P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made permanent the SBA's administrative decision to waive the SBAExpress loan program's one time, up-front loan guaranty fee for veterans (and their spouse). The act also increased the 7(a) loan program's FY2015 authorization limit from $18.75 billion to $23.5 billion (later increased to $26.5 billion). P.L. 114-88 , the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE After Disaster Act of 2015), includes several provisions designed to assist individuals and small businesses affected by Hurricane Sandy in 2012, and, among other things, authorizes the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area; authorizes SBDCs to provide assistance to small businesses outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is in a presidentially declared major disaster area; and temporarily increases, for three years, the minimum disaster loan amount for which the SBA may require collateral, from $14,000 to $25,000 (or, as under existing law, any higher amount the SBA determines appropriate in the event of a disaster). P.L. 114-92 , the National Defense Authorization Act for Fiscal Year 2016, includes a provision that expands the definition of a Base Realignment and Closure Act (BRAC) military base closure area under the HUBZone program to include the lands within the external boundaries of the closed base and the census tract or nonmetropolitan county in which the lands of the closed base are wholly contained, intersect it, or are contiguous to it. This change is designed to make it easier for businesses located in those areas to meet the HUBZone program's requirement that at least 35% of its employees reside in a HUBZone area. The act also extends BRAC base closure area HUBZone eligibility from five years to not less than eight years, provides HUBZone eligibility to qualified disaster areas, and adds Native Hawaiian Organizations to the list of HUBZone eligible small business concerns. Starting one year from enactment (effective November 25, 2016), the act also adds requirements concerning the pledge of assets by individual sureties participating in the SBA's Surety Bond Guarantee Program and increases the guaranty rate from not less than 70% to not less than 90% for preferred sureties participating in that program. P.L. 114-113 , the Consolidated Appropriations Act, 2016, expands the projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs, generally limits refinancing under this provision to no more than 50% of the dollars loaned under the 504/CDC program during the previous fiscal year, and increases the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million. The act also provided the 7(a) loan program a FY2016 authorization limit of $26.5 billion. P.L. 114-125 , the Trade Facilitation and Trade Enforcement Act of 2015, renamed the "State Trade and Export Promotion" grant initiative to the "State Trade Expansion Program." P.L. 114-125 also reformed some of the program's procedures and provided $30 million in annual authorization for STEP grants from FY2016 through FY2020. In terms of program administration, P.L. 114-125 allows the SBA's Associate Administrator (AA) for International Trade to give priority to STEP proposals from states that have a relatively small share of small businesses that export or would assist rural, women-owned, and socially and economically disadvantaged small businesses and small business concerns. P.L. 114-328 , the National Defense Authorization Act for Fiscal Year 2017, authorizes the SBA to establish different size standards for various types of agricultural enterprises (previously statutorily set at not more than $750,000 in annual receipts), standardizes definitions used by the SBA and the Department of Veterans Affairs concerning service-disabled veteran owned small businesses, requires the SBA to track companies that outgrow or no longer qualify for SBA assistance due to the receipt of a federal contract or being purchased by another entity after an initial federal contract is awarded, and, among other provisions, clarifies the duties of the Offices of Small and Disadvantaged Utilization within federal agencies. During the 115 th Congress P.L. 115-31 , the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion in FY2017 from $26.5 billion in FY2016. P.L. 115-56 , the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017, provided the SBA an additional $450 million for disaster assistance. P.L. 115-123 , the Bipartisan Budget Act of 2018, provided the SBA an additional $1.652 billion for disaster assistance and $7.0 million to the SBA's OIG for disaster assistance oversight. P.L. 115-141 , the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion in FY2018. The act also relaxed requirements on Microloan intermediaries that prohibited them from spending more than 25% of their technical assistance grant funds on prospective borrowers and more than 25% of those grant funds on contracts with third parties to provide that technical assistance by increasing those percentages to 50%. P.L. 115-189 , the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit. The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year. P.L. 115-232 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019, included provisions originally in H.R. 5236 , the Main Street Employee Ownership Act of 2018, to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives. The act clarifies that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership. The act also directs the SBA to create outreach programs and an interagency working group to promote lending to ESOPs and cooperatives. During the 116 th Congress P.L. 116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30.0 billion in FY2019. Appropriations127 The SBA's received an appropriation of $887.604 million for FY2015, $871.042 million for FY2016, $1.337 billion for FY2017, $2.360 billion for FY2018, and $715.370 million for FY2019. As shown in Table 8 , the SBA's FY2019 appropriation of $715.37 million includes $267.50 million for salaries and expenses, $247.70 million for entrepreneurial development and noncredit programs, $155.15 million for business loan administration, $4.0 million for business loan credit subsidies (for the Microloan program), $21.9 million for Office of Inspector General, $9.12 million for the Office of Advocacy, and $10.0 million for disaster assistance.

The Small Business Administration (SBA) administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in the SBA's loan, venture capital, training, and contracting programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs. This report provides an overview of the SBA's programs, including entrepreneurial development programs (including Small Business Development Centers, Women's Business Centers, SCORE, and Microloan Technical Assistance); disaster assistance; capital access programs (including the 7(a) loan guaranty program, the 504/Certified Development Company loan guaranty program, the Microloan program, International Trade and Export Promotion programs, and lender oversight); contracting programs (including the 8(a) Minority Small Business and Capital Ownership Development Program, the Historically Underutilized Business Zones [HUBZones] program, the Service-Disabled Veteran-Owned Small Business Program, the Women-Owned Small Business [WOSB] Federal Contract Program, and the Surety Bond Guarantee Program); SBA regional and district offices; the Office of Inspector General; the Office of Advocacy; and capital investment programs (including the Small Business Investment Company program, the New Markets Venture Capital program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators). The report also discusses recent programmatic changes resulting from the enactment of legislation (such as P.L. 111-5, the American Recovery and Reinvestment Act of 2009, P.L. 111-240, the Small Business Jobs Act of 2010, P.L. 114-38, the Veterans Entrepreneurship Act of 2015, P.L. 114-88, the Recovery Improvements for Small Entities After Disaster Act of 2015 [RISE After Disaster Act of 2015], P.L. 115-123, the Bipartisan Budget Act of 2018, and P.L. 115-189, the Small Business 7(a) Lending Oversight Reform Act of 2018). In addition, it provides an overview of the SBA's budget and references other CRS reports that examine these programs in greater detail.

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T he Constitution gives no direct role to Congress in conducting federal law enforcement. While Congress enjoys the legislative power under Article I of the Constitution, which includes substantial authority to investigate the executive branch pursuant to its oversight function, criminal investigations and prosecutions are generally considered core executive functions entrusted with the executive branch un der Article II. Because of the potential conflicts of interest that may arise when the executive branch investigates itself, however, there have often been calls for prosecutors with independence from the executive branch. In response, Congress and the U.S. Department of Justice (DOJ) have used both statutory and regulatory mechanisms to establish a process for such inquiries. These responses have attempted, in different ways, to balance the competing goals of independence and accountability with respect to inquiries of executive branch officials. This report first analyzes the use of special prosecutors and independent counsels that were authorized under now-expired provisions of the Ethics in Government Act of 1978, as well as the use of special counsels that are currently authorized by DOJ regulations. A glossary of terms at the beginning of the report briefly defines these italicized terms (see Table 1 ). The report continues with an examination of various legal questions relevant to these efforts. As a threshold matter, some have challenged the appointment of a special counsel under the current regulations as unconstitutional under the Appointments Clause. More broadly, designing a statutory framework for criminal investigations and prosecutions with independence from the executive branch raises questions about how this can be achieved consistent with the requirements of the Constitution. For instance, the Supreme Court upheld the constitutionality of the since-expired independent counsel statute in the 1988 case of Morrison v. Olson , but has not applied the reasoning of Morrison in subsequent cases raising related issues. The constitutional status of a statutory framework analogous to the independent counsel statute is thus subject to debate. Several bills introduced in the 116 th Congress (including S. 71 and H.R. 197 , which merge aspects of two preceding bills introduced in the 115 th Congress, S. 1735 and S. 1741 ) statutorily insulate a special counsel from removal, echoing aspects of the independent counsel statute's provisions. Whether such proposals would withstand constitutional challenge today might ultimately turn on the continued vitality of the analysis applied in Morrison . Historical Background on the Use of Independent Investigations of Alleged Wrongdoing In part to counter perceptions that executive officials suspected of criminal wrongdoing may be subject to different standards than individuals outside the government, independent investigations have sometimes been used to determine whether officials have violated the law. The government has used a range of options to conduct these types of inquiries: special prosecutors, independent counsels, and special counsels. Executive branch officials have noted, however, that "there is no perfect solution" to achieving the goal of avoiding potential conflicts or the appearance thereof that may arise as a result of the executive branch investigating its own officials. While special prosecutors investigated executive officials prior to the 1970s, the events commonly known as Watergate led to perhaps the most famous use of an independent investigation in U.S. history. Specifically, the break-in and burglary of the Democratic National Committee Headquarters at the Watergate Hotel in 1972 led to widespread allegations of wrongdoing by senior officials in the executive branch and calls for the appointment of a prosecutor who could conduct an investigation independent of political interference. In the midst of the Watergate controversy, Elliot Richardson, whose nomination to be Attorney General was being considered by the Senate Committee on the Judiciary, agreed to name an independent special prosecutor to pursue the Watergate allegations. Once confirmed by the Senate, the Attorney General, under his own authority, appointed Archibald Cox as special prosecutor for the Watergate investigation in 1973. The President subsequently ordered DOJ officials to fire the special prosecutor later that year, leading to public outcry, the appointment of another special prosecutor, and, ultimately, the initiation of impeachment proceedings by Congress. Following these events, Congress enacted a new mechanism—discussed in the following section—for the use of special prosecutors who would be appointed by a three-judge panel upon the request of the Attorney General. Special Prosecutors and Independent Counsels, as Authorized Under the Ethics in Government Act Congress enacted the Ethics in Government Act of 1978 out of a broad intent "to preserve and promote the integrity of public officials and institutions." The statute addressed a number of concerns about the ethical behavior of some public officials in the wake of the Watergate scandal. Title VI of the statute (hereinafter "the independent counsel statute") established a mechanism for the appointment of individuals to lead independent investigations and prosecutions in certain circumstances. The statute originally designated these individuals as "special prosecutors" and later renamed them as "independent counsels." Two of the most commonly known examples of appointments of independent counsels under the statute involved incidents known generally as Iran-Contra and Whitewater. In 1986, Lawrence E. Walsh was appointed as independent counsel to investigate potential criminal misconduct of government officials related to the sale of arms to Iran and alleged diversion of profits from the sale to support the "the military activities of the Nicaraguan contra rebels" in violation of federal law. That investigation resulted in criminal charges for 14 individuals, most of whom were convicted, though some convictions were overturned on various grounds. In 1994, Kenneth Starr was appointed as independent counsel to investigate potential violations of federal criminal or civil law related to President Clinton or First Lady Hillary Rodham Clinton's relationship with Madison Guaranty Savings and Loan Association, Whitewater Development Corporation, or Capital Management Services, as well as any allegations arising out of that investigation. That investigation led to a myriad of charges for a number of individuals, but did not include indictments of the President or First Lady. Appointment Process Appointment of independent counsels under the statute occurred in two steps, requiring the involvement of both the Attorney General and a panel of federal judges. Role of the Attorney General The independent counsel statute generally directed the Attorney General to conduct a preliminary investigation upon receiving information about potential wrongdoing by certain officials in the executive branch or from presidential campaign committees. If, within 30 days of receiving such information, the Attorney General determined that the information was specific and from a credible source, the Attorney General was required to conduct a preliminary investigation for a period of up to 90 days. The statute did not require the Attorney General to acknowledge or notify any other parties that such information had come to his attention, but did require that the Attorney General inform the court that he had commenced a preliminary investigation. The conclusions reached in that initial investigation determined whether an independent counsel would be appointed to investigate the underlying allegations further. The statute required that the Attorney General request appointment of a special prosecutor by the special division of a federal court (discussed below) under three sets of circumstances. First, if the 90-day window for the preliminary investigation passed without a determination that further investigation or prosecution was not warranted, the Attorney General was required to request the appointment by the court. Second, if the Attorney General's initial investigation determined that further investigation or prosecution was warranted, the Attorney General was also required to request the appointment by the court. Finally, if the preliminary investigation indicated that further action was not warranted, but additional information was subsequently revealed which led the Attorney General to determine that further investigation or prosecution was indeed warranted, the Attorney General was mandated to conduct a preliminary investigation based on that information. Following that investigation, the statute required the Attorney General to seek appointment of an independent counsel under the same circumstances— i.e. , if no determination had been made within 90 days or if the Attorney General determined further investigation was warranted. The Attorney General's decision to request an appointment under the statute was not subject to judicial review. While the Attorney General was not authorized under the statute to appoint the independent counsel, he was required to provide the court with "sufficient information to assist" the court in the selection of the appointed individual and to define the jurisdiction of the inquiry. Role of the Court While the Attorney General conducted the initial investigation to determine whether an independent investigation was warranted, the independent counsel statute required that a special division of the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit), composed of three federal judges or Justices, appoint the independent counsel. The Chief Justice of the U.S. Supreme Court assigned three federal judges or Justices to that division for two-year assignments. The statute's provisions regarding assignment of the three-judge panel required that the panel include a judge from the D.C. Circuit and that not more than one judge or Justice be from any single court. Any judge or Justice serving in the special division of the court that appointed the independent counsel was barred from participating in any judicial proceeding involving the independent counsel while he or she was still serving in that position or any proceeding involving the exercise of the independent counsel's official duties. Based on recommendations from the Attorney General regarding the selection and jurisdiction of the independent counsel, the three-judge panel had the final authority to make the appointment and define the prosecutorial jurisdiction. The court was expressly barred from appointing "any person who holds or recently held any office of profit or trust under the United States." Scope of Authority "[W]ith respect to all matters in [the] independent counsel's prosecutorial jurisdiction," Congress granted the independent counsel "full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice, the Attorney General, and any other officer or employee of the Department of Justice . . . ." Examples of the independent counsel's enumerated authorities included conducting investigations and grand jury proceedings; engaging in judicial proceedings, including litigation and appeals of court decisions; reviewing documentary evidence; determining whether to challenge the use of testimonial privileges; receiving national security clearances, if appropriate; seeking immunity for witnesses, warrants, subpoenas, and other court orders; obtaining and reviewing any tax return; and carrying out prosecutions in court, including filing indictments. The independent counsel could request DOJ assistance in the course of his or her investigation, including access to materials relevant to the jurisdiction of the inquiry and the necessary resources and personnel to perform his or her assigned duties. Removal Other than impeachment, the independent counsel could be subject to removal "only by the personal action of the Attorney General and only for good cause, physical or mental disability . . ., or any other condition that substantially impairs the performance of such independent counsel's duties." In other words, the independent counsel was generally not subject to the control and oversight of any other official within the executive branch. If the Attorney General exercised his removal authority, he or she was required to notify the special division of the court responsible for the initial appointment and the Committees on the Judiciary of both the House of Representatives and the Senate, identifying the reasons for removal. Termination of Independent Counsel Inquiries The inquiry led by the independent counsel under the statute could be terminated under two methods. First, the statute directed that the office of the independent counsel would terminate upon notification by the independent counsel to the Attorney General that the investigation and any subsequent prosecutions had been completed. Second, the statute permitted the special division of the court—by its own choice or by the recommendation of the Attorney General—to terminate the office at any time if the investigation had been completed or sufficiently completed, allowing DOJ to formally complete the inquiry under its own processes. In either case, the independent counsel was required to submit a report to the special division of the court detailing the work completed. The report was required to include "a description of the work of the independent counsel, including the disposition of all cases brought." Statutory Reauthorizations and Eventual Lapse of the Independent Counsel Statute When the independent counsel statute was originally enacted in 1978, Congress provided that its authority would lapse five years after enactment. Investigations that had already started pursuant to the provisions were permitted to continue, but no new investigations could be initiated at that time. Rather than allow the statute to lapse, Congress reauthorized the law, with some amendments, several times. It was reauthorized in 1983 and 1987, and remained in effect until 1992, when Congress allowed the law to expire. The statute was again reauthorized in 1994, following concerns related to the investigation of the Whitewater controversy during the interim years. However, concerns over whether the independent counsel possessed too much power, which arose after the extensive independent counsel investigations of the Iran-Contra affair and the Whitewater controversy, resulted in the law's ultimate expiration and nonrenewal in 1999. Legal Authority of Special Counsels Under Current Law Following the expiration of the independent counsel statute, DOJ promulgated regulations in 1999, which are currently still in effect, to establish procedures for the appointment of special counsels pursuant to the Attorney General's general administrative hiring authority. DOJ described these regulations as "strik[ing] a balance between independence and accountability in certain sensitive investigations." DOJ acknowledged at the time the regulations were promulgated, however, that "there is no perfect solution" to achieving that goal. Thus far, it appears the special counsel regulations have been invoked infrequently. In 1999, shortly after the regulations were promulgated, the Attorney General appointed former U.S. Senator John Danforth as special counsel to investigate events related to the government actions that occurred six years earlier at the Branch Davidian compound in Waco, Texas. The special counsel's investigation found no wrongdoing on the part of federal law enforcement officials. In May 2017, Deputy Attorney General Rod Rosenstein—acting in place of Attorney General Jeff Sessions, who had recused himself from the investigation—issued a publicly-available order (public order) appointing former Federal Bureau of Investigation Director Robert S. Mueller III as special counsel. Rosenstein indicated in the public order that the appointment had been made pursuant to general statutory authority to manage DOJ investigations, but directed that the investigation would be subject to the agency's regulations governing the scope and administration of special counsel investigations. Specifically, the public order directed the special counsel to investigate efforts of the Russian government "to influence the 2016 election and related matters." DOJ later issued a non-public memorandum that set forth in more detail the scope of the investigation and definition of the special counsel's authority. That memorandum explained that the public order "was worded categorically in order to permit its public release without confirming specific investigations involving specific individuals." It should be noted that the Attorney General also possesses general statutory authority to appoint DOJ staff to conduct or coordinate particular investigations. DOJ has used this authority previously to appoint individuals who were referred to as "special counsels" to investigate particular matters. This authority differs from the special counsel regulations because it involves assignment of an internal agency official rather than an individual from outside the government. For example, in 2003, then-Deputy Attorney General James Comey (acting in place of then-Attorney General John Ashcroft, who had recused himself from the investigation) used this statutory authority to appoint Patrick Fitzgerald to lead an investigation of whether White House or other federal officials unlawfully leaked the identity of a Central Intelligence Agency officer to a reporter. While referred to as a special counsel, Fitzgerald was serving as a U.S. Attorney when named to lead the investigation, precluding an appointment under the special counsel regulations. While an individual referred to as a "special counsel" thus may be appointed under either the general statutory authority or under the specific special counsel regulations, those named under the regulations might be viewed as possessing more independence, as they are appointed from outside the agency and are insulated by the regulations from removal except for cause. DOJ may also task other arms of the Justice Department—such as the Office of the Inspector General—to investigate high-profile, sensitive, and resource-intensive matters regarding "the Department's compliance with certain legal requirements and [internal] policies and procedures." For example, recently, in response to concerns raised by some Members of Congress with respect to "certain prosecutorial and investigative determinations made by the [Department of Justice] in 2016 and 2017," Attorney General Sessions considered, but declined to pursue, a separate special counsel inquiry related to allegations of potential misconduct within the Department, noting that special counsel appointments are "by design, . . . reserved for use in only the most 'extraordinary circumstances.'" Such circumstances, according to Sessions, require the Attorney General to determine that "'the public interest would be served by removing a large degree of responsibility for the matter from the Department of Justice.'" Instead, the Attorney General indicated that DOJ's Inspector General has been tasked with reviewing the actions that the Members had suggested be the subject of the second special counsel inquiry, including allegations about DOJ's compliance with legal requirements and internal policies. Instead, the Attorney General announced that he had tasked John W. Huber, U.S. Attorney for the District of Utah, to lead the investigation into those allegations, emphasizing that Huber would be working "from outside the Washington, D.C. area and in cooperation with the Inspector General." DOJ Special Counsel Regulations Appointment and Selection by the Attorney General or the Acting Attorney General Under the DOJ regulations that supplanted the independent counsel provisions, the authority to appoint and select a special counsel resides solely with the Attorney General (or his surrogate, if the Attorney General has recused himself from the matter), rather than with the judicial branch. The regulations generally state that the Attorney General "will appoint a Special Counsel" to conduct certain investigations or prosecutions. To make such an appointment, the Attorney General must determine that (1) a criminal investigation is warranted; (2) the normal processes of investigation or prosecution would present a conflict of interest for DOJ, or other extraordinary circumstances exist; and (3) public interest requires a special counsel to assume those responsibilities. When DOJ promulgated the special counsel regulations, it explained the type of conflicts that might lead to the appointment of a special counsel: "[t]here are occasions when the facts create a conflict so substantial or the exigencies of the situation are such that any initial investigation might taint the subsequent investigation, so that it is appropriate for the Attorney General to immediately appoint a Special Counsel." After receiving information that could warrant consideration of an independent investigation, the Attorney General generally has discretion under the regulations to determine whether and when the appointment of a special counsel would be appropriate. The Attorney General may appoint a special counsel immediately; may require an initial investigation to inform his decision about whether to appoint a special counsel; or "may direct that appropriate steps be taken to mitigate any conflicts of interest, such as recusal of particular officials," to permit the investigation to be concluded within "the normal processes." In the event that the Attorney General has recused himself from a particular matter upon which a special counsel appointment might be appropriate, the regulations contemplate that the Acting Attorney General will take responsibility for the appointment process. Federal law provides that the Deputy Attorney General would serve as the Acting Attorney General. Individuals appointed as special counsels under these regulations must be chosen from outside the federal government. Such individuals must be "a lawyer with a reputation for integrity and impartial decisionmaking, and with appropriate experience to ensure both that the investigation will be conducted ably, expeditiously and thoroughly, and that investigative and prosecutorial decisions will be supported by an informed understanding of the criminal law and Department of Justice policies." The special counsel may hold other professional roles during his or her service, but is required to agree that the duties of the appointment will take "first precedence." Scope of Jurisdiction and Authority Like the appointment and selection process, the sole authority to determine the scope of the special counsel's inquiry rests with the Attorney General. The jurisdiction of the inquiry is determined by "a specific factual statement" about the matter to be investigated, which is provided by the Attorney General to the special counsel at the outset of the appointment. Beyond that general jurisdiction, the special counsel is also authorized "to investigate and prosecute federal crimes committed in the course of, and with intent to interfere with, the Special Counsel's investigation, such as perjury, obstruction of justice, destruction of evidence, and intimidation of witnesses." While these are the original parameters of a special counsel's jurisdiction, additional matters may be assigned to the special counsel as the inquiry proceeds. To expand the jurisdiction, the special counsel must find such an expansion is necessary to complete the original assignment or necessary "to investigate new matters that come to light in the course of his or her investigation." Upon such finding, the special counsel's jurisdiction may be expanded only after consultation with the Attorney General, who then has the authority to determine whether to assign the additional matters to the special counsel or "elsewhere." Within the jurisdiction identified by the Attorney General, the special counsel has relatively broad authority to carry out his or her inquiry. According to the regulations, "the Special Counsel shall exercise, within the scope of his or her jurisdiction, the full power and independent authority to exercise all investigative and prosecutorial functions of any United States Attorney." The scope of the special counsel's authority under DOJ regulations has been the subject of legal challenge in the course of Special Counsel Robert Mueller III's investigation that began in 2017. That inquiry resulted in several indictments, including against Paul Manafort, the former chairman of President Trump's 2016 campaign, for crimes such as conspiracy to launder money; tax fraud; obstruction of justice and witness tampering; failure to register as an agent of a foreign principal; false statements; and failure to file reports of foreign bank and financial accounts. Manafort filed a motion to dismiss the criminal indictment lodged against him, challenging the indictment as an unlawful exercise of the special counsel's authority. Specifically Manafort argued that the factual matter named as the special counsel's original jurisdiction in the May 2017 public appointment order (i.e., "any links and/or coordination between the Russian government and individuals associated with the campaign of President Donald Trump," as well as "any matters that arose or may arise directly from the investigation, and any other matters within the scope of 28 C.F.R. § 600.4(a)" ) would preclude the charges made against him. According to Manafort, because the charges made against him do not relate to links with the Russian government or actions taken during his time as a campaign manager in 2016 and because the public order's general authority does not grant authority on sufficiently specific matters as required by DOJ regulations, the special counsel cannot pursue the charges filed against him without seeking additional authority under the regulations. The government's response to these claims disclosed and explained additional documents outlining the scope of the investigation. DOJ acknowledged that the applicable regulations require the special counsel to be provided a "'specific factual statement of the matter to be investigated,'" but emphasized that "the regulations do not provide that the factual statement must be in an appointment order or otherwise made public." According to a subsequent memorandum from Acting Attorney General Rosenstein that was partially released with the government's filing, while the initial order "was worded categorically in order to permit its public release without confirming specific investigations involving specific individuals," a subsequent memorandum provided "a more specific description" of allegations deemed to be authorized as part of the special counsel investigation. Such development of the parameters of jurisdiction during the course of an investigation, according to DOJ, are necessary for "an effective investigation [which] must have some latitude to extend beyond the known facts at the time of [the appointment]." Ultimately, the courts that considered Manafort's motion to dismiss his indictments rejected his challenge to the special counsel's authority. For example, a federal district court in Virginia considering Manafort's motion concluded that while many of the charges pursued against Manafort "on their face, appear unrelated to the 2016 Presidential election," the investigation and issues charged in the particular case fell "squarely within the jurisdiction outlined" under the appointment order. The court emphasized that the appointment order's broad grant of authority to investigate "any links" between campaign officials and the Russian government permitted investigation into relationships with individuals supported by, even if not members of, the Russian government, such as members of a pro-Russia Ukrainian political party. Moreover, with respect to charges filed by the special counsel that did not pertain directly to the campaign and Russia, a D.C. federal court held such charges, such as tax evasion with regard to proceeds resulting from Manafort's relationship with pro-Russian entities, fell within the special counsel's jurisdiction as "'matters that arose or may arise directly from the investigation.'" A federal district court in Virginia further relied upon the later DOJ memorandum that clarified the scope of the special counsel's original appointment as a source of the special counsel's authority, explaining that the original appointment order was worded categorically so that it could be publicly released and noting that the clarifying memorandum specifically authorized the special counsel to investigate crimes related to these other charges. Accordingly, the D.C. federal court rejected Manafort's argument that the special counsel's authority amounted to a "'blank check'" for limitless investigation, reading the appointment order's language as "tightly drafted" to give "the Special Counsel flexibility from the start to manage the investigation and pursue matters that arose 'directly' from the issues within his purview." Oversight and Removal The DOJ special counsel regulations limit the special counsel's relatively broad authority to conduct an inquiry by first subjecting his or her conduct to DOJ rules, regulations, procedures, practices, and policies. Special counsels are directed to consult with the appropriate offices within DOJ or the Attorney General directly if necessary. Additionally, special counsels are subject to discipline for misconduct and breach of ethical duties that are generally applicable to DOJ employees. Second, the DOJ regulations contemplate some oversight of the special counsel by the Attorney General. Specifically, they direct the special counsel to "determine whether and to what extent to inform or consult with the Attorney General or others within the Department about the conduct of his or her duties and responsibilities." The regulations expressly require the special counsel to "notify the Attorney General of events in the course of his or her investigation in conformity with the Departmental guidelines with respect to Urgent Reports." Under DOJ internal guidance, attorneys must inform DOJ leadership of certain events, including "major developments in significant investigations and litigation" such as the filing of criminal charges. DOJ has explained that conformance with this notification requirement "guarantees a 'resulting opportunity for consultation' between the Attorney General and the Special Counsel about the anticipated action, which 'is a critical part of the mechanism through which the Attorney General can discharge his or her responsibilities with respect to the investigation.'" While the regulations indicate that special counsels "shall not be subject to the day-to-day supervision of any official," the rules authorize the Attorney General to "request that the Special Counsel provide an explanation for any investigative or prosecutorial step." If, after giving the views of the special counsel "great weight," the Attorney General's review of such actions leads him to "conclude that the action is so inappropriate or unwarranted under established Departmental practices that it should not be pursued," the Attorney General must notify the Chairman and Ranking Members of the Judiciary Committees in Congress of that decision with an explanation. Aside from review of particular actions, the regulations also grant the Attorney General authority to discipline or remove the special counsel. This authority may be exercised "only by the personal action of the Attorney General." In other words, to comply with the regulations, the Attorney General himself must remove the special counsel, not the President or a surrogate (unless, as noted previously in this report, the Attorney General has recused himself in the matter under investigation). A decision to remove the special counsel must be made with "good cause," such as misconduct, a dereliction of duty, incapacity, the existence of conflicts of interest, or violation of departmental policies. The Attorney General must report his decision to remove the special counsel, with an explanation of that decision, to both the Chairman and Ranking Members of the Judiciary Committees of Congress. Review and Conclusion of Special Counsel Inquiries Although the special counsel regulations do not provide an explicit timeline for inquiries or a special counsel's tenure, they do require the special counsel to report to DOJ periodically about the budget of operations for the inquiry as well as with status updates in some circumstances. Specifically, the special counsel must provide a proposed budget within 60 days of the appointment. The special counsel must also provide annual reports regarding the status of the investigation and budget requests 90 days prior to the beginning of the fiscal year. The Attorney General is required to review the special counsel's annual report and determine whether the investigation should continue and with what budget. When the special counsel's inquiry concludes, the special counsel must provide a confidential report to the Attorney General with explanations of the decisions made in the course of the inquiry in favor of or declining to prosecute any charges. The regulations do not expressly provide for disclosure of this report to any other parties, nor do they further identify the parameters of the content of that report. The regulations do, however, require the Attorney General to make certain reports to the Chairs and Ranking Members of the Judiciary Committees of each house of Congress, including upon the conclusion of the investigation. The regulations' only guidance regarding the Attorney General's concluding report's content is that the report must include "an explanation for [the] action," "including, to the extent consistent with applicable law, a description and explanation of instances (if any) in which the Attorney General concluded that a proposed action by a Special Counsel was so inappropriate or unwarranted under established Departmental practices that it should not be pursued." The regulation's use of the word "including," which generally denotes that the terms that follow are illustrative and not definitional, may suggest that the Attorney General's report to Congress is not necessarily limited to explanations of the Special Counsel's prosecutorial decisions. None of the reporting requirements mandate public release of any information shared either between DOJ officials or between DOJ and congressional committees. Instead, the regulations provide the Attorney General with the discretion to "determine that public release of [his reports to Congress] would be in the public interest." Moreover, the report's contents need to be "consistent with applicable law," which may suggest that legal doctrines such as executive privilege and the rules governing the release of grand jury information could restrict what can be included in the report. Appointing and Removing a Special Counsel: Legal Considerations Designing a mechanism to provide for criminal inquiries of executive branch officials by officers independent from the executive branch has raised questions about whether this goal can be accomplished in harmony with the requirements of the Constitution. Under the doctrine of separation of powers, the Constitution assigns each branch of government particular functions that generally may not be delegated to, nor usurped by, another branch. In this vein, Congress is entrusted with the legislative power, and may establish executive branch agencies and conduct oversight of those entities. Congress may not, however, engage in criminal prosecutions on behalf of the United States—a function generally reserved for the executive branch. A crucial bulwark in preserving this separation of powers is the Appointments Clause of Article II. That provision requires "Officers of the United States" to be appointed by the President "with the Advice and Consent of the Senate," although Congress may vest the appointment of "inferior" officers "in the President alone, in the Courts of Law, or in the Heads of Departments." Crucially, Article II also empowers the President to hold executive branch officers accountable, through removal if necessary, which the Supreme Court in Myers v. United States explained was essential in order to "maintain administrative control of those executing the laws." The Court has, however, recognized that Congress may in certain situations restrict the President's power of removal over certain discrete offices. The powers of appointment and removal are key to understanding Congress's authority to create independent investigative offices and define their contours. Appointment of a Special Counsel While introduced legislation aimed to insulate a special counsel from executive control raises questions (addressed below) about the President's ability to oversee the executive branch, some have questioned whether the appointment of a special counsel under the current regulations violates the Constitution. Such challenges have been unsuccessful, however, as exemplified by the D.C. Circuit's recent ruling in In re: Grand Jury Investigation . In that case, the recipient of multiple grand jury subpoenas issued by Special Counsel Robert Mueller moved to quash those subpoenas on the grounds that the appointment of the special counsel was unlawful under the Appointments Clause. The D.C. Circuit's panel decision held that the Appointments Clause did not require Special Counsel to be nominated by the President and confirmed by the Senate because the special counsel is not a principal officer. Applying the Supreme Court's test in Edmond v. United States , the D.C. Circuit ruled that, because he is subject to the control of a superior who was nominated by the President and confirmed by the Senate (i.e., a principal officer), the special counsel is an inferior officer who may be appointed by a department head. While acknowledging that the special counsel regulations bestowed a measure of independence on the special counsel, the court reasoned that because the Attorney General could rescind these regulations at any time, the special counsel is an inferior officer who "effectively serves at the pleasure" of a principal officer. Additionally, the court rejected the argument that Congress had not "by law" granted the Attorney General the authority to appoint a special counsel as required by the Appointments Clause. In so doing, the panel relied on the Supreme Court's opinion in United States v. Nixon , in which the Court concluded that, because Congress had by statute vested general authority in the Attorney General to appoint subordinate officers, the Attorney General's delegation of power to a special prosecutor was valid. Finally, the D.C. Circuit panel concluded that a department head properly appointed Special Counsel Mueller in accordance with the Appointments Clause, notwithstanding his appointment by Rod Rosenstein, the Deputy and Acting Attorney General. The panel observed that the relevant statutory scheme provided that, in the case of a "disability" of the Attorney General, the Deputy Attorney General "may exercise all the duties of that office." The D.C. Circuit reasoned that when Attorney General Sessions recused himself from matters concerning presidential campaigns, he had a "disability" under the statute on that issue. Accordingly, Deputy Attorney General Rosenstein became the acting Attorney General—and was therefore the head of the Department of Justice—on such matters. Acting Attorney General Rosenstein's appointment of Special Counsel Mueller, therefore, was an appointment by the head of a department. Removing a Special Counsel While the legal questions surrounding the appointment of a special counsel under the regulations have largely been resolved, the circumstances in which a special counsel may be removed by a superior have not been settled by the courts. Consideration of the authority to remove a special counsel under current regulations poses several legal questions. As discussed above, Department of Justice regulations provide that a special counsel may be removed only (1) by the Attorney General; (2) "for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies"; and (3) in writing provided to the special counsel specifying the reason(s) for removal. As a preliminary matter, the specific type of behavior that would constitute grounds for removal under the regulations is largely undetermined. For instance, terms such as "misconduct" and "good cause" are not defined in the regulations or by reference to an accompanying statute, and case law addressing the definition of similar statutory removal restrictions is sparse. More broadly, the manner in which a special counsel might be removed without new legislation itself poses difficult legal issues, including the ultimate efficacy of the regulations in constraining the discretion of the executive branch. Removing a Special Counsel Pursuant to the Regulations The Attorney General (or his surrogate if recused) may, consistent with the governing regulations, remove a special counsel "for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies." Conceivably, the Attorney General's decision could be the result of an order from the President, as the Attorney General serves at the pleasure of the President and, as the Court has recognized, the President's power to appoint executive branch officials is tied to the power of removal. A decision to remove a special counsel under current regulations could be difficult to challenge in court. Importantly, the current regulations explicitly disclaim the creation of any legal rights. Even without that disclaimer, internal agency rules and guidelines, including those of the Justice Department, have generally not been recognized as creating judicially enforceable rights. Instead, an individual seeking judicial relief against the United States in federal court must usually rely on a cause of action that asserts violation of a recognized legal right or requirement. Consequently, at least under current DOJ regulations, obtaining judicial review of a special counsel's removal by a federal court may be difficult. Legal Effect of the Regulations More broadly, it is uncertain to what extent the regulations ultimately constrain the executive branch. Because no statute appears to require the Department to promulgate regulations concerning a special counsel, the Department likely enjoys discretion to rescind them. The special counsel regulations also were not promulgated according to the notice and comment procedures that are typically required by the Administrative Procedure Act (APA) when agencies issue legislative rules. Instead, the Department considered the regulations to be exempt from these requirements, as they concerned agency management or personnel. The Department could thus likely rescind the special counsel regulations without going through notice and comment procedures, meaning that the regulations could likely be repealed immediately. Once repealed, a special counsel would no longer be protected by a for-cause removal provision. While DOJ has noted its adherence to the current special counsel regulations, assuming for the sake of argument a situation where the regulations were left in place, a decision by the Attorney General or President to simply ignore the regulations raises unresolved legal questions. Generally, regulations in force typically bind the executive branch with the force of law. In fact, in Nixon v. United States , which concerned a claim of executive privilege by President Nixon against a subpoena issued by a special prosecutor, the Court opined on the regulation in force that insulated the special prosecutor from removal. The Court remarked in dicta that So long as this regulation is extant it has the force of law. . . . [I]t is theoretically possible for the Attorney General to amend or revoke the regulation defining the Special Prosecutor's authority. But he has not done so. So long as this regulation remains in force the Executive Branch is bound by it, and indeed the United States as the sovereign composed of the three branches is bound to respect and to enforce it. In other words, insofar as this reading continues to characterize the Court's approach to the matter, both the President and Attorney General must comply with the special counsel regulations until they are repealed. However, the concrete result of an order removing a special counsel in violation of applicable regulations is difficult to predict. For instance, there might not be a private right of action authorizing judicial review in this situation, leaving the legal remedy available for violation of the regulations in question. On the other hand, the matter raises open legal issues regarding the scope of the President's authority to supervise the executive branch. It is unclear to what extent agency regulations restricting the grounds for removal of a constitutional officer engaged in core executive functions can bind the President. One might argue that the special counsel regulations, while binding on the Department of Justice, do not ultimately restrict the President's powers. Article II vests the executive power of the United States in the President; and criminal investigations and prosecutions lie at the very core of this constitutional authority. An argument in favor of a more robust view of the President's authority might be that regulations issued by an executive branch agency nearly 20 years ago that restrict the President's power to remove a high-level officer of the United States who is charged with enforcing the law intrude on the President's authority under Article II. DOJ has in the past asserted authority to decline to follow statutes it deems unconstitutional intrusions on the executive branch's power, and this argument might be extended to the context of similarly viewed regulations, particularly those issued by a prior Administration. Proposed Legislation to Restrict the Ability to Remove a Special Counsel Given the questions regarding the scope and effect of the current DOJ special counsel regulations, a number of legislative proposals aim to impose statutory restrictions on the executive branch's ability to remove a special counsel. Consideration of these proposals requires examination of the Supreme Court's decisions regarding statutory restriction on the removal of certain officers. However, because Congress has not enacted any such bill, analysis of these efforts is necessarily preliminary. As discussed above, current Department of Justice regulations authorize the Attorney General to appoint a special counsel and determine the ultimate scope of his jurisdiction, but limit the Attorney General's discretion to remove a special counsel to certain specified reasons. A number of bills proposed during the 116 th and 115 th Congresses aim to codify aspects of these regulations. Notably, some would statutorily insulate a special counsel from removal and authorize a federal court to review the removal of a special counsel. For instance, S. 1735 , introduced in the 115 th Congress, would have provided that in order to remove a special counsel, the Attorney General must first file an action with a three-judge court; if that panel issues a finding of "misconduct, dereliction of duty, incapacity, conflict of interest, or other good cause, including violation of policies of the Department of Justice," then a special counsel may be removed. Similarly, S. 1741 , the Special Counsel Integrity Act, would have provided that any special counsel appointed on or after May 17, 2017, may only be removed by the Attorney General, or the highest ranking Justice Department official if the Attorney General is recused, for good cause. S. 1741 further provided that a special counsel who has been removed may challenge this action before a three-judge panel, which is authorized to immediately reinstate the individual if the court finds that the removal violated the legislation's terms. Both bills were introduced in the 115 th Congress. Finally, S. 71 and H.R. 197 , introduced in the 116 th Congress, merge aspects of both of these proposals. They would similarly require good cause in order for the Attorney General to remove a special counsel, but provide a 10-day window in which the special counsel can challenge a removal decision in federal court. If the court determines that the removal violates that good cause standard, then the removal shall not take effect. Understanding these proposals requires an examination of the significant—and oft-debated—constitutional questions concerning Congress's power to establish executive functions outside the direct control of the President. Presidential Authority to Oversee Executive Branch Officers Article II of the Constitution vests the executive power of the United States in the President. As mentioned above, the Supreme Court has made clear that this power includes authority to hold executive branch officers accountable, through removal if necessary. However, the Court has upheld statutory restrictions on the President's removal power for certain offices. In one such case, Morrison v. Olson , the Court upheld restrictions on the removal of an independent counsel, although, as discussed below, the Court has not always followed aspects of that decision in subsequent years. The constitutionality of legislative efforts to statutorily insulate a special counsel from removal will thus likely turn on the continuing vitality of the Court's opinion in Morrison and, more generally, whether a court would apply a more formalist or functionalist methodology in considering such legislation. Definitive conclusions about such efforts are thus difficult absent further guidance from the Court. Morrison v. Olson In the 1988 case of Morrison v. Olson , the Supreme Court addressed the issue of whether a federal prosecutor can be insulated from executive control in the context of the now-expired Independent Counsel Act. Morrison upheld the independent counsel statute, which, as discussed above, vested the appointment of an independent counsel outside of the executive branch and limited the removal authority of the President. Writing for the Court, Chief Justice Rehnquist concluded that the independent counsel was an inferior, rather than a principal, officer, whose appointment was not required to be made by the President subject to Senate confirmation. The appointment of such officers was permissible because they (1) were removable by the Attorney General for cause; (2) had a limited scope of duties; and (3) possessed limited jurisdiction. The Court also held that the Independent Counsel Act's provision limiting the authority of the Attorney General to remove the independent counsel for good cause did not impermissibly intrude on the President's power under Article II. The Court rejected a formalistic rule that would bar statutory for-cause removal protections for an individual tasked with "purely executive" functions; instead, it applied a functional test and asked whether Congress has "interfere[d] with the President's" executive power and his "duty to 'take care that the laws be faithfully executed.'" The Court recognized that the independent counsel operated with a measure of independence from the President, but concluded that the statute gave "the Executive Branch sufficient control over the independent counsel to ensure that the President is able to perform his constitutionally assigned duties." Morrison was decided 7-1, with Justice Scalia dissenting from the Court's opinion and Justice Kennedy not participating in the case. In dissent, Justice Scalia argued that the independent counsel statute violated the separation of powers because the Constitution vested authority for criminal investigations and prosecutions exclusively in the executive branch and the statute deprived the President of exclusive control of that power. Under this rationale, he warned that the Court must be very careful to guard against the "'gradual concentration of the several powers in the same department'" that can be likely to occur as one branch seeks to infringe upon another's distinct constitutional authorities. Justice Scalia emphasized the power and discretion typically vested in prosecutors and noted that the key check on prosecutorial abuse is political—prosecutors are accountable to, and can be removed by, the President, who is likewise accountable to the people. But operation of the independent counsel statute, for Justice Scalia, eliminated that constitutional feature by creating an unaccountable prosecutor outside of presidential control. In the years since Morrison , especially in the wake of the Whitewater investigation into President Clinton by an independent counsel that culminated in the President's impeachment on grounds that were tangential to the impetus for the investigation, a number of legal scholars criticized the independent counsel statute on both policy and constitutional grounds. Additionally, members of both political parties have since noted opposition to the law, resulting in relatively widespread agreement to let the Independent Counsel Act expire in 1999. Post-Morrison Case Law on Appointments and Removal The Supreme Court in the 1997 case of Edmond v. United States applied a different standard than that enunciated in Morrison in the context of a challenge to the appointment of certain "inferior" officers. The opinion, authored by Justice Scalia, adopted the reasoning he applied in dissent in Morrison for determining whether an individual is an inferior officer. In that case, the Court did not apply the functional test used in Morrison for determining whether an individual was an inferior officer. Instead, it adopted a formal rule—an inferior officer is one who is "directed and supervised" by a principal officer (officers appointed by the President and confirmed by the Senate). Applying this rule, the Court concluded that the appointment of members of the Coast Guard Court of Criminal Appeals by the Secretary of Transportation was consistent with Article II. Specifically, the Court reasoned that because Members of the Coast Guard Court of Criminal Appeals are removable at will and lack power to render a final decision of the United States unless permitted to do so by a superior in the executive branch they are directed and supervised by principal officers. The appointment of the members of the Coast Guard Court of Criminal Appeals by the Secretary of Transportation was thus constitutional because the members constituted inferior officers and the Secretary was a principal officer. More recently, in the 2010 case of Free Enterprise Fund v. P ublic Company Accounting Oversight Board , the Court invalidated statutory structural provisions providing that members of the Public Company Accounting Oversight Board could be removed only "for cause" by the Securities and Exchange Commission, whose members, in turn, appeared to also be protected from removal by for-cause removal protections. The Court again applied a rather formalist rule in analyzing Congress's attempt to shield executive branch officers from removal, rather than the functional approach followed in Morrison . The Court concluded that, while the early 20 th century case of Humphrey ' s Executor v. United States had approved such protections for the heads of independent agencies and Morrison did the same for certain inferior officers, the combination of dual "for cause" removal protections flatly contradicted the vestment of executive power in the President under Article II. Further, the Court then applied the test it used in Edmund , rather than the functional analysis of Morrison , in concluding that members of the regulatory board were now—after invalidation of statutory removal protections by the Court—inferior officers because the Securities and Exchange Commission, composed of principal officers, possessed oversight authority over the board and the power to remove its members at will. However, the Court has not gone so far as to overrule or even explicitly question Morrison . As a result, that opinion's holding regarding the constitutionality of for-cause restrictions for an independent counsel binds the lower courts. Moreover, while the Court's decisions in Edmund and Free Enterprise Fund have not applied the reasoning in Morrison concerning the test for who qualifies as an inferior officer, it is not necessarily clear what removal restrictions are appropriate for principal officers or how the determinations about the appointment power concern determinations about the scope of the removal power. Nonetheless, it appears that the Edmond test, rather than the Morrison analysis, for determining whether an individual is an inferior officer is what will guide the Court going forward. Furthermore, Free Enterprise Fund represents a movement toward a more formalist, and possibly more expansive, view of the Presidential power of removal than was expressed in Morrison . More fundamentally, no member of the Morrison Court sits on the Supreme Court today. Because of this apparent shift in the Court's general approach to separation-of-powers matters related to appointment and removal, and the current Court's relative silence on Morrison's import, whether today's Court would necessarily view a reauthorization of the independent counsel statute or a similar statute in the same manner as it did in Morrison is subject to debate . Legislation to Establish For-Cause Removal Protection for a Special Counsel Assuming that the Supreme Court were to follow the functional approach reflected in its Morrison decision, efforts to statutorily require good cause to remove a special counsel would likely pass constitutional muster. As noted above, in Morrison , the Court examined whether Congress had impermissibly interfered with the President's constitutional duties; it approved of the independent counsel statute's provisions that, among other things, (1) required good cause to remove the independent counsel; (2) largely restricted the Attorney General's discretion in deciding to request the appointment of an independent counsel; and (3) placed the actual power of appointment with a panel of Article III judges. Legislation that would statutorily insulate a future special counsel from removal except for good cause appears roughly analogous to the for-cause removal provisions upheld in Morrison . In fact, some proposals appear to be less restrictive of the President's power relative to the independent counsel statute. For instance, S. 1741 (115 th Congress) and S. 71 (116 th Congress) appear to contemplate the appointment of a special counsel at the discretion of the AG, and they provide that only the Attorney General—or the most senior Justice official who has been confirmed by the Senate if the Attorney General is recused—may remove a special counsel. Under both bills, an executive branch official would retain discretion to appoint and remove a special counsel for cause. Under Morrison ' s functional balancing approach, which examines whether Congress has unduly interfered with the President's executive power and duty to take care that the law is executed faithfully, this framework is less intrusive of executive branch power than was the independent counsel statute because the executive branch would retain control over a special counsel's appointment. Likewise, insulating a special counsel from removal by the Attorney General except for those reasons outlined in current Justice regulations—"for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies" —would likely permit removal of a special counsel for a broader range of reasons than did the now-expired independent counsel statute, which limited the basis for removal to "good cause, physical disability, mental incapacity, or any other condition that substantially impairs the performance of such independent counsel's duties." Specifically, several bills would add misconduct, dereliction of duty, and conflict of interest as grounds for removal, and specifically define good cause to include violation of departmental policies. At least considered in isolation, such a provision would be less intrusive into the executive branch's authority under Article II than the statute at issue in Morrison , as the proposal would grant the Attorney General—a principal officer directly accountable to the President—greater control of the special counsel than he had under the independent counsel statute. Accordingly, if the Court were to embrace a functionalist balancing approach in a challenge to such a provision, it would likely affirm its constitutionality as the executive branch could remove a special counsel for a broader range of reasons than was permitted in the independent counsel statute. Nevertheless, bills that aim to insulate a special counsel from removal might be constitutionally suspect if the Court chose to overrule Morrison or limit the reach of that case to its facts. In particular, were the Court to face a challenge to a special counsel entrusted with wide-ranging investigative authority who statutorily could not be removed except for cause, application of the approach in Edm o nd , rather than Morrison , might result in the Court concluding that a special counsel is a principal officer. As noted above, Edmond 's test for inferior officer status is that the individual be directed and supervised by a principal officer. And that test was satisfied because Coast Guard Court of Appeals judges were removable at will and lacked power to render final decisions of the executive branch. A special counsel with statutory removal protection would obviously not be removable at will. As to whether a special counsel renders final decisions, any analysis would likely depend on the scope of authority granted to a special counsel. Were the Court to conclude that a special counsel does constitute a principal officer, his or her appointment must be made by the President with Senate confirmation, rather than by the Attorney General. Further, any removal restrictions might be questioned as well, as the Court has never approved such restrictions for a principal officer charged with core executive functions. Nonetheless, the Court has not reconciled its holding on the appointments question in Morrison with its holding in Edmond, meaning that the limits on Congress's power to insulate executive branch officials from removal are subject to debate. More broadly, a departure from Morrison and an application of the Court's more recent formalist approach to separation of powers disputes, as evidenced in Free Enterprise Fund , might cast for-cause removal protections for a special counsel in an unfavorable light. The Court's emphasis in that case on the importance of presidential control over executive branch officers and the ability to hold them accountable in order to preserve the constitutional structure envisioned by the Framers could be read to conflict with statutory removal restrictions for government officers carrying out core executive functions. That said, a middle road is possible. Were Congress to pass legislation insulating a special counsel from removal except for cause, one option might be for the Court to narrowly construe the scope of for-cause removal protections, interpreting them to permit removal for a broad range of reasons. This would avoid overruling Morrison , but arguably preserve substantial executive branch authority over the special counsel. Nonetheless, such a reading might authorize more significant control of a special counsel's decisions, ultimately restricting the independence of the office, at least compared to that envisioned by the independent counsel statute. Legislation to Establish Judicial Review of a Removal Decision Certain bills authorizing a judicial role in the removal of a special counsel may raise distinct constitutional questions. As an initial matter, proposals to authorize judicial review of a decision by the Attorney General to remove a special counsel, such as S. 1741 (115 th Congress), as well as S. 71 and H.R. 197 (116 th Congress), appear somewhat similar to provisions considered by the Court in Morrison . And the Supreme Court has otherwise adjudicated suits from government officers who have been removed from their position. It bears mention, however, that the traditional remedy in such situations has been for back pay, rather than reinstatement. Bills that limit available remedies to reinstatement, or require this result, depart from the independent counsel statute's provisions, which provided a reviewing court with the option to order reinstatement or issue "other appropriate relief." One might distinguish between, on the one hand, a court's undisputed power to determine compliance with the law and award damages for violations, and, on the other, a potential judicial order directing an executive branch official to reappoint an individual to an office. In this vein, injunctive relief of this type could be viewed as inserting the judiciary into a role assigned by Article II to the executive branch. In addition, at least one proposal, S. 1735 , might authorize the judiciary to play a more substantial role in the removal of a special counsel. That bill would bar the removal of a special counsel unless the Attorney General first files a petition with a three-judge court, and that court itself finds "misconduct, dereliction of duty, incapacity, conflict of interest, or other good cause, including violation of policies of the Department of Justice." Inserting the judiciary into a removal decision, by requiring a court to determine in the first instance the grounds for the dismissal of an executive branch official before he may be removed, appears to go beyond the restrictions on the President's removal power previously approved by the Supreme Court in Humphrey ' s Executor and Morrison . As the Free Enterprise Fund Court explained, even in the prior cases that "upheld limited restrictions on the President's removal power, it was the President—or a subordinate he could remove at will—who decided whether the officer's conduct merited removal under the good-cause standard." The body charged with determining whether good cause exists to remove a special counsel would not be one that is subordinate to or accountable to the President; indeed, that body is not located in the executive branch at all. Moreover, Free Enterprise Fund invalidated two layers of removal protection for executive branch officers as violating Article II. Here, a special counsel could not be removed unless permitted by Article III judges—judicial officers who may not be removed except through the impeachment process. As such, with regards to this proposal, not only would two layers of removal protection shield a special counsel from dismissal, but one layer would be significantly more stringent than the for-cause protection in Free Enterprise Fund . Further, while the Court in Morrison saw no issue with the independent counsel statute's provision authorizing ex post judicial review (i.e., after the fact) of a removal decision, that conclusion rested on the understanding that the executive branch retained discretion over the decision to remove an independent counsel. Judicial review in that situation was limited to ensuring compliance with the law. Indeed, the Morrison Court narrowly construed that statute to preclude any role for the judicial panel that was entrusted with appointing an independent counsel in removing him during an investigation or judicial proceeding. The Court explained that this move avoided an unconstitutional "intrusion into matters that are more properly within the Executive's authority." Proposals that require an initial judicial finding of good cause in order to authorize removal arguably insert the judiciary into an executive branch function in a manner the Morrison Court appeared to consider questionable. On the other hand, application of a functional approach akin to Morrison , which examined a variety of factors in adjudicating the separation of powers dispute, might nevertheless conclude that a requirement of an initial judicial finding of good cause in order to remove a special counsel does not impair the President's core Article II responsibilities. First, under S. 1735 , the Attorney General retains discretion to initiate a removal in the first place by petitioning the three-judge panel; that body would lack authority to remove a special counsel independently. Second, the previously upheld independent counsel statute authorized judicial review of a removal of the independent counsel and authorized reinstatement as a remedy. The bill's provision would shift the sequence of the judicial role from an ex post review to an ex ante (i.e., beforehand) authorization. Viewed in this light, it is unclear why that shift would necessarily make a substantive difference, because even if the executive branch ignored the provision allowing for ex ante review and removed a special counsel unilaterally, the special counsel could sue for reinstatement, which would leave the court in largely the same position. Finally, while requiring judicial authorization to remove a special counsel might intrude somewhat on the executive branch's Article II authority other aspects of the bill are less intrusive. For instance, the bill leaves discretion to appoint the special counsel with the Attorney General, and appears to permit removal for a wider range of conduct than did the independent counsel statute. Because the Morrison Court balanced a variety of factors and concluded that the independent counsel statute did not impermissibly interfere with the President's duty to execute the law, an application of Morrison might mean that these features ameliorate concerns about a judicial body first approving of a removal. Leaving aside issues arising under Article II of the Constitution, legislation requiring the Attorney General to first petition a federal court for a good cause finding before removing a special counsel might raise questions under Article III. The Constitution defines the proper scope of the federal courts' jurisdiction as limited to adjudicating "cases" and "controversies." The Supreme Court has articulated several legal doctrines emanating from Article III that limit the circumstances under which the federal courts will adjudicate disputes. The Court has interpreted Article III to require adversity between the parties, or a live dispute that is "definite and concrete, touching the legal relations of parties having adverse legal interests." Further, the Court has made clear that duties of an administrative or executive nature generally may not be vested in Article III judges. Article III courts are permitted to exercise certain non-adjudicatory functions, but these exceptions are generally limited to duties incident to the judicial function, such as supervising grand juries and participating in the issuance of search warrants. With respect to a suit by the Attorney General seeking ex ante judicial authorization to remove a special counsel, these requirements might not necessarily be met. For instance, given this procedural posture, it is not obvious who the adverse party would be as the legislation does not explicitly authorize the special counsel to participate in the proceedings. Likewise, the supervision of executive branch officers, including discretion to remove them, is traditionally an executive or administrative function, rather than a judicial one. Retroactive Application of Legislation to Insulate a Special Counsel Finally, certain bills that aim to insulate a special counsel from removal might raise unresolved questions concerning their retroactivity. For instance, S. 1741 (115 th Congress) would have provided that a special counsel may not be removed except for cause and that this provision retroactively applies to any special counsel appointed on or after May 17, 2017. Likewise, S. 71 and H.R. 197 (116 th Congress) contain a similar provision, although it applies to any special counsel appointed on or after January 1, 2017. One might argue that statutorily insulating a currently serving special counsel from removal improperly inserts Congress into the appointments process. The Supreme Court has invalidated legislation that explicitly authorized Members of Congress to appoint executive branch officers and has done the same to legislation authorizing Congress to remove an executive branch officer through a joint resolution. Insulating a currently serving executive branch officer from removal via statute might be seen as an attempt by Congress to subvert the purposes of the Appointments Clause, effectively transforming a particular prosecutor's office from one that is subject to executive branch control into one that is statutorily independent without allowing for a new appointment consistent with the Constitution. In particular, if such a bill were passed immediately, it might be seen to apply exclusively to a single individual in the executive branch, effectively appointing a particular executive branch officer for an indefinite time period. To the extent that this provision is viewed as a legislative aggrandizement of the executive's appointment power, it might raise separation-of-powers concerns. That said, it does not appear that a Supreme Court case has directly addressed such a statutory provision. In Myers v. United States , the Court invalidated a statutory restriction on the removal of an executive branch officer. The pertinent statute in that case bestowed removal protection retroactively on executive branch officers, but the Court's opinion did not hinge on this feature of the statute. Further, such a provision would only codify requirements that already exist in regulations, which might be seen as a relatively minor adjustment to a special counsel's office that does not require a new appointment. Given the lack of preexisting case law relevant to such a provision, firm conclusions about its merit are likely premature. Conclusion Both Congress and the executive branch have employed a variety of means to establish independence for certain criminal investigations and prosecutions. The use of special prosecutors, independent counsels, and special counsels all have allowed for the investigation of executive branch misconduct. Nonetheless, efforts to provide independence for prosecutors from executive branch control often raise constitutional questions. In turn, proposals to statutorily protect a special counsel from removal thus raise important, but unresolved, constitutional questions about the separation of powers. As a general matter, simply insulating a future special counsel from removal except for specified reasons appears consistent with the Court's opinion in Morrison . To the extent the current Court might depart from the functional reasoning of that case and apply a more formal approach to the question, however, such proposals might raise constitutional objections. Likewise, constitutional objections might arise against proposals aimed to insulate a special counsel in a manner beyond the framework approved in Morrison .

The Constitution vests Congress with the legislative power, which includes authority to establish federal agencies and conduct oversight of those entities. Criminal investigations and prosecutions, however, are generally regarded as core executive functions assigned to the executive branch. Because of the potential conflicts of interest that may arise when the executive branch investigates itself, there have often been calls for criminal investigations by prosecutors with independence from the executive branch. In response, Congress and the U.S. Department of Justice (DOJ) have used both statutory and regulatory mechanisms to establish a process for such inquiries. These frameworks have aimed to balance the competing goals of independence and accountability with respect to inquiries of executive branch officials. Under the Ethics in Government Act of 1978, for example, Congress authorized the appointment of "special prosecutors," who later were known as "independent counsels." Under this statutory scheme, the Attorney General could request that a specially appointed three-judge panel appoint an outside individual to investigate and prosecute alleged violations of criminal law. These individuals were vested with "full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice" with respect to matters within their jurisdiction. Ultimately, debate over the scope, cost, and effect of the investigations (perhaps most notably the Iran-Contra and the Whitewater investigations) resulted in the law's expiration and nonrenewal in 1999. Following the lapse of these statutory provisions, DOJ promulgated regulations authorizing the Attorney General (or, if the Attorney General is recused from a matter, the Acting Attorney General) to appoint a "special counsel" from outside the federal government to conduct specific investigations or prosecutions that may be deemed to present a conflict of interest if pursued under the normal procedures of the agency. Special counsels are not subject to "day-to-day supervision" by any official and are vested "within the scope of his or her jurisdiction, the full power and independent authority to exercise all investigative and prosecutorial functions of any United States Attorney." The independent nature of these investigations has raised constitutional questions about the propriety of the appointment and removal mechanisms provided for the officials leading the inquiries. These concerns were addressed by the Supreme Court in the 1988 case of Morrison v. Olson, which upheld the constitutionality of the independent counsel statute. The reasoning of that opinion has been challenged, however, and the Court's subsequent analysis of related issues in the 1997 case of Edmond v. United States and the 2010 case Free Enterprise Fund v. Public Accounting Oversight Board did not apply the standard enunciated in Morrison. The constitutional status of a statutory framework similar to the independent counsel statute is thus subject to debate. Several bills introduced in the 116th Congress (including S. 71 and H.R. 197, which merge aspects of two preceding bills introduced in the 115th Congress, S. 1735 and S. 1741) would statutorily insulate a special counsel from removal, echoing aspects of the independent counsel statute's provisions. Whether such proposals would withstand constitutional challenge today might ultimately turn on the continued vitality of the analysis applied in Morrison.

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Introduction The Disaster Relief Fund (DRF) is one of the most-tracked single accounts funded by Congress each year. Managed by the Federal Emergency Management Agency (FEMA), it is the primary source of funding for the federal government's domestic general disaster relief programs. These programs, authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended (42 U.S.C. 5121 et seq.), outline the federal role in supporting state, local, tribal, and territorial governments as they respond to and recover from a variety of incidents. They take effect in the event that nonfederal levels of government find their own capacity to deal with an incident is overwhelmed. The current emergency management policy environment assumes this federal role in domestic disaster relief as the default position and the availability of resources through the DRF a necessary requirement. However, this was not always the case. The concept of general disaster relief from the federal government predates both FEMA and the Stafford Act, but federal involvement in relief after natural and man-made disasters was very rare before the Civil War, and was at times considered unconstitutional. Domestic disaster relief efforts became more common after the Civil War, but were not seen as a necessary obligation of the federal government. Standing federal domestic disaster relief programs and a pool of resources to fund them only emerged after the Second World War. Prior to the development of these programs, domestic disaster relief and recovery was a matter for private nongovernmental organizations and state and local governments. Once established, the federal role in domestic disaster response and recovery grew, proving politically popular and resilient despite periodic concerns about management, execution, and budgetary impacts. As the DRF is the source of funding for most general disaster relief programs, it is an indicator of the scope of those programs and the volume of taxpayer-funded aid they provide. Understanding the trends in the growth of the federal government's role in general disaster relief and recovery, and the associated costs of that role, may be useful as Congress considers changes in both emergency management and budgetary policies. This report introduces the DRF and outlines how its resources are made available through a series of simple questions, presents a brief history of the federal government's involvement in domestic disaster relief, describes how the request for general disaster relief funding has been formulated over time, and examines the congressional response to those requests. It also provides the funding history for the DRF, and discusses several issues before Congress connected to the fund and the general disaster relief programs it supports. What is the Disaster Relief Fund and how is it used? The DRF is the primary source of funding for the federal government's general disaster relief program—response and recovery efforts pursuant to a range of domestic emergencies and disasters in existing law—as opposed to specific relief and recovery initiatives that may be enacted for individual incidents. What determines whether an incident qualifies as an emergency or disaster? Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , as amended; hereinafter "the Stafford Act"), the President can declare that an emergency exists or a major disaster is occurring. These declarations make state, tribal, territorial, and local governments eligible for a variety of assistance programs, many of which are funded from the DRF. Usually declarations are made at the request of a state, tribal, or territorial government. Does all federally funded disaster relief come from the DRF? While the DRF funds Stafford Act disaster relief and recovery programs, several other federal departments and agencies have significant roles in disaster preparedness, relief, recovery, and mitigation. They include the Department of Housing and Urban Development, the Small Business Administration, U.S. Department of Agriculture, U.S. Army Corps of Engineers, and the Department of Health and Human Services. While FEMA may fund some of their activities from the DRF through mission assignments, their larger programs are funded through separate appropriations. What federal government activities are funded under the DRF? The role of the federal government has evolved over the years, but emergency response and disaster relief has historically been a federalized "bottom-up" operation, starting from the local or tribal governments affected, backed up by the state or territorial government, and then turning to the federal government if their capacity is overwhelmed. The broadening of the federal role has been a factor in which activities are funded under the DRF. Currently, the Federal Emergency Management Agency (FEMA) coordinates federal disaster response and recovery efforts, and manages the DRF, which funds activities in five categories: 1. Activity pursuant to a major disaster declaration— This activity represents the vast majority of spending from the DRF. FEMA's primary "Direct Disaster Programs" are the Individual Assistance (IA), Public Assistance (PA), and the Hazard Mitigation Grant Program (HMGP) programs. Federal assistance provided by other federal agencies at FEMA's direction through "mission assignments" is also paid for from the DRF. 2. Pre declaration surge activities —These are activities undertaken prior to an emergency or major disaster declaration to prepare for response and recovery, such as deploying response teams or prepositioning equipment. 3. Activit y pursuant to an emergency declaration —This is federal assistance to supplement state and local efforts in providing emergency services in any part of the United States. 4. Fire Management Assistance Grants (FMAGs) for large wildfires —This is assistance for the mitigation, management, and control of any fires on public or private lands that could, if unchecked, worsen and result in a major disaster declaration. 5. Disaster Readiness and Support (DRS) activities —These are ongoing, non-incident specific activities that allow FEMA to provide timely disaster response, operate its programs responsively and effectively, and provide oversight of its emergency and disaster programs. Under what statute is the Disaster Relief Fund authorized? The DRF is not separately authorized as a distinct entity, but the activities it funds are authorized under the Stafford Act (42 U.S.C. 5121 et seq.). Where are appropriations for the Disaster Relief Fund provided? Since FY1980—FEMA's first annual appropriation—the DRF has been funded through its own appropriation within FEMA's budget, first under the heading "Disaster Relief," and then "Disaster Relief Fund" starting in FY2012. FEMA's annual appropriations were first provided through the VA, HUD, and Independent Agencies Appropriations Act, but have been included in the Department of Homeland Security Appropriations act since FY2004. Since the first "Disaster Relief" appropriation for FY1948, most of the DRF's appropriations have been provided through supplemental appropriations. Are specific Disaster Relief Fund appropriations for specific disasters? DRF appropriations have historically been provided for general disaster relief, rather than specific presidentially declared disasters or emergencies. The most recent iterations of the accompanying language indicate the funds are provided for the "necessary expenses in carrying out the Robert T. Stafford Disaster Relief and Emergency Assistance Act," thus covering all past and future disaster and emergency declarations. Previous versions of the appropriations language going back to 1950 also referenced the legislation authorizing general disaster relief rather than targeting specific disasters. On a number of occasions, specific disasters have been mentioned in the appropriation, but funding was not specifically directed to one disaster over others. While many disaster supplemental appropriations bills are associated with a specific incident or incidents—such as P.L. 113-2 , "the Sandy Supplemental"—the language in that act does not limit the use of the disaster relief appropriation to that specific incident. How is the DRF being spent? Since the enactment of P.L. 112-74 , Congress has received regular reporting on spending from the DRF. Monthly reports on such spending since March 2013 are available on FEMA's website. Currently, the reports include information on DRF balances, actual and projected obligations from the DRF for large-scale disasters broken down by disaster declaration, and obligations and expenditures aggregated by incident. These reports also include estimates of the DRF balance through the end of the current fiscal year. Historical Context for Federal Disaster Relief Funding Disaster relief has not always been a part of the mission of the federal government. For nearly 80 years, federal domestic disaster relief was minimal, extremely narrow in scope, and largely ignored the humanitarian side of the relief equation, leaving that to private organizations and local levels of government. Even as the country emerged from the Civil War with more of a national identity and a sense that the federal government could act to provide relief in some circumstances, disaster aid remained limited, responding only after the fact on a case-by-case basis. Only after World War II did the concept emerge of a federal role in responding to disasters broadly defined, led by the President and funded in advance, as opposed to case-by-case responses to needs in the wake of the most severe events led by ad hoc congressional action. Over the ensuing years, the general disaster relief program and its funding grew, adopting concepts of assistance that had been reserved for catastrophic events. In the 1970s, the Federal Emergency Management Agency (FEMA) was established, institutionalizing the federal role in disaster response, recovery, mitigation, and preparedness—the role we recognize today. At the heart of that role is the set of relief programs that have evolved since the 1940s, known collectively as the Stafford Act, which are funded by the Disaster Relief Fund appropriation. 1789-1947: Case by Case, After the Fact The Constitution provides little specific direction on the question of how the United States should confront disasters. While allusions to the intent of the Constitution speak to promoting domestic tranquility and promoting the general welfare, limitations on the federal role in state affairs combined with practical politics of the day to limit federal involvement in disaster relief and recovery in the early years of the country. The federal government did provide disaster relief on some occasions. Some observers note at least 128 instances from 1803 to 1947 when natural disasters prompted the federal government to provide some type of ad hoc relief on a case-by-case basis for specific incidents after they occurred. Prior to the Civil War, these measures largely consisted of refunds of duties paid on goods destroyed in customs house fires, allowance for delayed payments of bonds, and land grants for resettlement. Proponents of disaster relief argued that the "general welfare" clause of the Constitution warranted the federal role in disaster relief. Opponents did not find this justification convincing, as it was nonspecific, and argued that certain natural disasters (such as flooding of the Mississippi River) were foreseeable, and therefore state and local governments had an obligation to be prepared; that it was improper for the government to provide relief for specific places with money it collected for the common good; and that the federal government could not afford to provide universal relief. As the U.S. economy became more robust, federal revenues grew, weakening the position of those in Congress who opposed a federal role in disaster assistance on the basis of the lack of such resources. Congressional willingness to provide assistance was not always sufficient to ensure its provision, however. In 1887, President Grover Cleveland vetoed a bill that would have provided $10,000 to pay for seeds for farmers in Texas after a drought, arguing as follows: I can find no warrant for such an appropriation in the Constitution; and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that though the people support the Government, the Government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood. Much of the disaster relief provided in this period was nongovernmental in nature. In 1881, Clara Barton founded the American National Red Cross (ANRC), which provided disaster aid from funds it raised from private sources. One year before a catastrophic earthquake struck San Francisco in 1906, revised incorporating legislation for the ANRC tasked the organization with "mitigating the sufferings caused by pestilence, famine, fire, floods, and other great national calamities, and to devise and carry on measures for preventing the same." In the days after the earthquake, President Theodore Roosevelt issued an appeal for assistance from the public to be channeled through the ANRC: In the face of so horrible and appalling a national calamity as that which has befallen San Francisco, the outpouring of the nation's aid should, as far as possible, be entrusted to the American Red Cross, the national organization best fitted to undertake such relief work.... In order that this work may be well systematized and in order that the contributions, which I am sure will flow in with lavish generosity, may be wisely administered, I appeal to the people of the United States, to all cities, chambers of commerce, boards of trade, relief committees and individuals to express their sympathy and render their aid by contributions to the American Red Cross. While the federal government provided assistance in response and recovery in the San Francisco case on an ad hoc basis, the majority of the assistance provided was through private means. Congress appropriated $2.5 million in the days after the quake for the Secretary of War to provide "subsistence and quartermaster's supplies ... to such destitute persons as have been rendered homeless or are in needy circumstances as a result of the earthquake and commissary stores to such injured and destitute persons as may require assistance," but nonfederal cash contributions to the ANRC and the local relief organizations exceeded $9 million in the two years following the disaster. The ANRC served as the major institutional source of relief for disaster victims in the United States, serving communities and individuals in cooperation with state and local governments with relatively little direct contributions from the federal government for many years. The Red Cross continued to play a leading role in nongovernmental disaster relief as the federal government's role in disaster aid evolved and expanded through the 20 th century and into the 21 st . 1947-1950: General Disaster Relief Funding from the Federal Government Begins After the Second World War, the federal government started becoming more involved in disaster relief beyond specific incident-by-incident relief efforts. In 1947, P.L. 80-233 authorized the federal government to provide surplus property to state and local governments for disaster relief under the Disaster Surplus Property Program. Less than eight months later, the Administrator of the Federal Works Agency noted in a letter to President Harry S. Truman that the program would not provide adequate relief to communities over the longer term. The next year, Congress made its first appropriation for general disaster relief. The Second Deficiency Appropriation Act, 1948, which was enacted on June 25, 1948, provided funding directly to the President as follows: DISASTER RELIEF Disaster Relief: To enable the President, through such agency or agencies as he may designate, and in such manner as he shall determine, to supplement the efforts and available resources of State and local governments or other agencies, whenever he finds that any flood, fire, hurricane, earthquake, or other catastrophe in any part of the United States is of sufficient severity and magnitude to warrant emergency assistance by the Federal Government in alleviating hardship, or suffering caused thereby, and if the governor of any State in which such catastrophe shall occur shall certify that such assistance is required, $500,000, to remain available until June 30, 1949, and to be expended without regard to such provisions regulating the expenditure of Government funds or the employment of persons in the Government service as he shall specify: Provided, That no expenditures shall be made with respect to any such catastrophe in any State until the governor of such State shall have entered into an agreement with such agency of the Government as the President may designate giving assurance of expenditure of a reasonable amount of the funds of the government of such State, local governments therein, or other agencies, for the same or similar purposes with respect to such catastrophe: Provided further, That no part of this appropriation shall be expended for departmental personal services: Provided further, That no part of this appropriation shall be expended for permanent construction: Provided further, That within any affected area Federal agencies are authorized to participate in any such emergency assistance. Although this legislation comes with broad latitude for the President in expending these funds, this appropriation contained several hallmarks that continue in today's disaster relief structure: the President makes the determination that a disaster has occurred, and that federal aid is required; the state has a role in certifying the need and committing state resources to be eligible for federal support; aid is to "supplement the efforts and available resources of State and local governments or other agencies," rather than to fund the entire relief effort; and the President may direct federal agencies to participate in emergency assistance. The conditions laid out in this appropriation were echoed in the next two appropriations, provided in 1949, which totaled $1 million. 1950-1966: The Disaster Relief Act of 1950—General Relief and Specific Relief The Disaster Relief Act of 1950 formalized the structure outlined in the initial appropriations legislation, and indicated for the first time that it is the intent of Congress to provide an orderly and continuing means of assistance by the Federal Government to States and local governments in carrying out their responsibilities to alleviate suffering and damage resulting from major disasters, to repair essential public facilities in major disasters, and to foster the development of such State and local organizations and plans to cope with major disasters as may be necessary. Section 8 of the act limited the authorized disaster relief funding to $5 million in total. This restriction did not effectively constrain funding, however. The first supplemental appropriation for general disaster relief authorized under the Disaster Relief Act for 1950 provided $25 million, and a waiver of the Section 8 limitation. The first authorized annual appropriation for general disaster relief was for $800,000, enacted August 31, 1951, less than two months later. Annual appropriations were "to be available until expended," rather than expiring as previous general disaster relief appropriations had, and their use for administrative expenses was statutorily capped at 2% per year. Under the Kennedy and Johnson Administrations, the federal government's role in disaster relief expanded further. Federal general disaster relief programs broadened in 1962, with the inclusion of several American territories, and grants for repair of state facilities. However, Congress still passed specific legislation authorizing relief programs pursuant to other major disasters. In 1964 and 1965, post-disaster legislation provided specific relief for victims of an earthquake in Alaska, flooding in western states, and victims of Hurricane Betsy in Florida, Louisiana, and Mississippi. In a history of disaster relief legislation, one observer described the situation thus: In 1962, 1964, and 1965, Congress had sought to preserve P.L. 81-875 [the Disaster Relief Act of 1950] and yet provide disaster assistance in the case of the very big disasters by special legislation only for the states named. Although no one at the time appeared aware that the new types of assistance would become precedents for general legislation, it was in the nature of the system that ultimately they would be reenacted for general use. This would change the following year. 1966-1974: The Disaster Relief Act of 1966—General Relief Broadens The Disaster Relief Act of 1966 abolished the Disaster Relief Act of 1950, and revised the general disaster assistance program by providing more assistance to public colleges and universities, as well as authorizing assistance to repair local public facilities. According to some observers, the agencies charged with carrying out most of the disaster relief activity felt the 1966 legislation was unnecessary and the work could be carried out under existing authorities. The Disaster Relief Act of 1969 was enacted in response to Hurricane Camille, although the expansion of the federal role in disaster assistance it represented had been included in legislation since 1965. It included broader public and individual assistance, including temporary housing, food assistance, unemployment assistance, and the federal government funding up to half the cost of repair and restoration of public facilities, and providing matching funds to help states develop preparedness plans. Not all of these costs would be borne by the funding provided to the President, and the programs were only authorized through calendar 1970, but they represented a significant broadening of federal government involvement. The Disaster Relief Act of 1970 consolidated the previous disaster relief legislation into a single act, and made many of the Camille-driven programs permanent, including a permanent program to provide temporary housing assistance, and programs for debris removal and permanent repair and replacement of state and local public facilities. 1974-Present: The Era of Federally Coordinated Emergency Management The Disaster Relief Act of 1974 provided for a more robust preparedness program, and introduced the concept of "emergency" declarations to accommodate assistance in cases where an incident did not rise to the "major disaster" threshold. The Disaster Relief and Emergency Assistance Amendments of 1988 ( P.L. 100-707 , hereinafter DREAA) was enacted 14 years later; it renamed the Disaster Relief Act of 1974 as the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the aforementioned Stafford Act). It made the following programmatic changes: Authorized the President to declare an emergency under the Stafford Act in "any occasion or instance" in which federal aid is needed—allowing for assistance without a major disaster declaration; Defined a "major disaster" as "any natural catastrophe ... or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance...." Established a 75% minimum level of assistance for the immediate response, debris removal, and repair of public facilities; and Provided for a 50/50 cost share for hazard mitigation grants. Over the course of the 40 years after the original $500,000 appropriation for general disaster relief with associated programmatic language, the now-renamed Stafford Act and the DREAA are the pieces of legislation that structure the current relationship between the federal and state government in emergency management and disaster relief. These laws, which appear at 42 U.S.C. 5121 et seq., continue to be amended through such vehicles as the Sandy Recovery Improvement Act ( P.L. 113-2 , Division B) and the Disaster Recovery Reform Act of 2018 ( P.L. 115-254 , Division D). Other CRS analyses will address such amendments to the general disaster relief program in detail. Appropriations for General Disaster Relief Types of Appropriations for Disaster Relief General disaster relief activities by the federal government under the Stafford Act are funded through the appropriations process. Three types of appropriations support these activities: Supplemental Appropriations are requested by the Administration on an ad hoc basis, generally to address a need not sufficiently covered in the annual appropriations process. These move on a short timetable and generally do not go through the complete committee process. More than 85% of net appropriations for the DRF have been provided through supplemental appropriations. Annual Appropriations: Requested by the Administration in February as a part of the annual budget process, these are expected to be passed by Congress and enacted into law prior to the start of the fiscal year in October. Annual appropriations measures fund the core activities of the government and are developed through the committee process. Continuing Appropriations: Provided when annual appropriations work remains unresolved at the beginning of the new fiscal year, these appropriations are temporary budget authority provided at a rate for operations based on the prior fiscal year to allow the government to continue functioning. The measure that provides them is termed a "continuing resolution," or "CR." These continuing appropriations may expire (in the case of an interim CR), or extend to the end of the fiscal year (in the case of a "long-term" CR). Supplemental Appropriations for Disaster Relief The current Disaster Relief Fund concept can trace its birth back to an appropriations bill in the 1940s—the Second Deficiency Appropriations Act, 1948. Deficiency appropriations bills, which provided funding to meet unanticipated needs during the fiscal year, were a forerunner of modern supplemental appropriations bills. As the severity, frequency, and resultant costs to the federal government of the array of disasters that will strike the United States in a given year have always been unpredictable in an annual budgetary context, disaster relief funding frequently has been provided through deficiency, and later supplemental, appropriations. When Congress and the Administration began to express concerns about the budget deficit in the 1980s, efforts were made to restrain supplemental spending by limiting it to cases of "dire emergency." With the implementation of budget control in the 1990s, a special designation for emergency spending was created. If both Congress and the Administration agreed certain spending was an emergency requirement, budget limits would be adjusted to accommodate that spending. Congress used the emergency designation on a disaster relief appropriation for the first time in an FY1992 supplemental appropriations act. Congress continues to use emergency designations in supplemental appropriations legislation to provide budgetary flexibility. At one point, Congress was statutorily required to use the designation for disaster relief appropriations. Under the terms of the aforementioned FY1992 supplemental appropriations act, beginning in FY1993, Congress required "all amounts appropriated for disaster assistance payments [under the Stafford Act] that are in excess of either the historical annual average obligation of $320,000,000, or the amount submitted in the President's initial budget request, whichever is lower" to be designated as emergency requirements under a specific provision of the Balanced Budget and Emergency Deficit Control Act of 1985. This practice of emergency designation above a particular threshold was followed until FY2000, when a clause appeared in the appropriation noting that discretionary appropriations were being provided notwithstanding the restrictions of this section of the U.S. Code. With the passage of the Budget Control Act in 2011, which provided additional budgetary flexibility for the costs for major disasters, supplemental disaster relief appropriations declined in frequency, but remained a primary contributor to balances in the DRF. See the " DRF Funding History: FY1964-FY2018 " section below for details. Annual Appropriations As was noted above, the first general disaster relief funding was provided in an appropriations act in 1948, and carried its own authorizing provisions. Stand-alone authorization for general disaster relief first came in 1950. Once the initial separate authorization was put in place for general disaster relief, appropriations were provided for FY1952, FY1956-FY1958, and FY1962. With the broadening of the relief program to cover more types of damages and the authorization of aid on general terms that had only been made on a case-by-case basis before the mid-1960s, appropriations for general disaster relief became more common—and larger. Annual appropriations for general disaster relief have been provided each year since FY1964, with only two exceptions. Each time this occurred, the DRF was deemed to have an adequate unobligated balance to meet anticipated needs. Disaster Relief Designation As will be discussed later in this report, the adoption of a special designation for the costs of major disasters under the Stafford Act as a part of the Budget Control Act of 2011 ( P.L. 112-25 ) made it easier to provide budget authority to the DRF in the annual appropriations process. In the seven appropriations cycles since the implementation of this designation in FY2012, more budget authority was provided for the DRF in annual appropriations measures than in the 63 prior cycles combined, accounting for inflation. Since the FY2013 budget request, FEMA has bifurcated its annual appropriations request between the costs of major disasters—the "Disaster Relief Category"—and everything else funded by the DRF—"Base Disaster Relief," which includes funding for emergency designations, fire management assistance, pre-disaster declaration surge activities, and Disaster Readiness and Support Programs. The former category is eligible for the designation as "disaster relief," a designation that triggers an upward adjustment of statutory discretionary spending limits to accommodate it without triggering sequestration. The latter category is not, and scores as discretionary spending. Continuing Appropriations Even though the DRF is a "no-year" fund, and its appropriations are available until expended, it does get temporary replenishment from continuing resolutions (CRs) at times, until its annual appropriations are finalized. In FY1982, for the first time, interim general disaster relief funding was provided in a CR through an "anomaly," a provision providing funds at an operating rate different from that base rate of operations provided in the resolution. These "anomaly" provisions may also provide flexibility that can help avoid some of the complications that can arise under the constraints of operating under continuing appropriations. For example, CRs generally provide funding at a constant rate of operations, with certain restrictions. This can complicate disaster response and recovery, when calls for funding vary in scale and timing from year to year. When FEMA responds to major disasters of significant size while operating under a CR, either FEMA requests special flexibility from the Office of Management and Budget (OMB)—which apportions funding to agencies—or CRs direct flexibility to be provided to ensure adequate resources are available for disaster response and recovery. An example of this can be found in the initial FY2019 CR. Section 124 of Division C of P.L. 115-245 provides that the funds provided under the CR "may be apportioned up to the rate for operations necessary to carry out response and recovery activities." DRF Funding History: FY1964-FY2018 The following figures show appropriations for the DRF from FY1964 through FY2018. Each fiscal year shows a gross total of annual appropriations and discretionary appropriations (represented by a two-part bar) and a net total (represented by a black mark on each bar), which takes into account rescissions and transfers from the DRF. An inset graphic provides the scale to include funding levels for several outlier years, while showing the detail of appropriations for the more typical years. The first figure shows data in nominal dollars, and the second shows constant FY2018 dollars. The figures show an increase in appropriations for the DRF starting in the 1990s, largely due to increases in supplemental appropriations. Annual appropriations rose significantly in the early 2000s and again starting in FY2013. Even with the surge in appropriations for the 2017 catastrophic series of disasters, which included Hurricane Harvey, Hurricane Maria, and the California wildfires, FY2005 remains the single highest year for appropriations for the DRF, when a series of hurricanes, including Katrina, Rita, and Wilma hit the southeastern United States. A table showing the underlying data for each figure appears in the Appendix . Factors in Changing Appropriations Levels FEMA's budget justifications have noted for years, in one form or another, that "[t]he primary cost driver associated with Major Disasters is disaster activity." Although year-to-year disaster relief appropriations are largely driven by disaster activity and ongoing recovery needs, when analyzing historical data over an extended time frame, other factors such as programmatic changes in general disaster relief and certain changes in the budget process may also warrant consideration. Incident Frequency and Severity The two largest factors affecting year-to-year disaster relief appropriations are disaster activity, which varies in frequency and severity, and the ongoing recovery costs from previous disasters. Federal involvement in disaster response and recovery occurs when lower levels of government find their capabilities are overwhelmed and turn to the federal government for help. Reduced (or increased) numbers of calls for relief mean reduced (or increased) need for disaster relief appropriations. The incidents that lead to expenditures from the DRF vary in scale. Equally powerful storms may strike a community a glancing blow or a direct hit. An earthquake may hit a rural area, or a major city with complex infrastructure. Stricken communities, states, territories, and tribes have varying levels of preparedness for particular types of disaster. Some observers have noted that as the U.S. population grows and develops property in disaster-prone areas, and as patterns of severe weather shift, the costs of disasters are likely to continue to rise. According to the National Centers for Environmental Information of the National Oceanic and Atmospheric Administration, from 1980 through October 2018, the United States has averaged six weather-related disaster events that each cost $1 billion or more each year. 2016 had 15 such events, 2017 had 16, and 2018, as of October 9, had 11. Spending to help large, complex communities rebuild disaster-damaged facilities and infrastructure and mitigate against future disasters is a significant multiyear cost largely paid for from the Disaster Relief Fund. Using Figure 2 , one can contrast this period of high-frequency, high-impact events of the 2010s to the relatively calm period of the 1980s. Without the driver of large disasters, DRF appropriations remained modest. Over the period from FY1981 to FY1991, abnormally low levels of disaster activity led to no supplemental appropriations for 7 of those 11 fiscal years, and no annual appropriations in either FY1984 or FY1991—the only two fiscal years that has occurred since FY1964. By contrast, over the last six years, the DRF has required sustained high levels of appropriations, including three of its five highest total appropriations by fiscal year, even adjusting for inflation. Programmatic Changes in Disaster Relief Over the long term, alterations to the scope of federal disaster relief programs affect the type and level of federal spending when disasters occur. The Disaster Relief Act of 1950 authorized funding to repair local public facilities at the President's discretion. As the brief history above relates, the federal program for general disaster relief has evolved into a much broader program, of which local public facilities is only one facet. This evolution has occurred gradually. Some of this evolution was the result of incorporating assistance offered in response to specific disasters in the 1960s and 1970s into the general relief programs under the Stafford Act. Another facet of this evolution was the broadening of the federal role in helping respond to smaller-scale incidents, including proactive declarations prior to potential disasters to reduce their impact. In addition, disaster relief programs funded through the DRF now include disaster mitigation programs that are not limited to mitigating the disaster that triggered them, but are also intended to reduce the impact (and by extension, the cost) of disasters over the long term. The impacts of programmatic expansions are reflected in Figure 2 , with the trend of increased general disaster relief appropriations on a small scale associated with expansions under the Disaster Relief Act of 1969 and the Disaster Relief Act of 1970, and on a larger scale with the expansion of programs under the Disaster Relief and Emergency Assistance Amendments of 1988. While the decrease in disaster activities in the 1980s reduced the annual demand for disaster relief appropriations, once the number of declared disasters rose again, and emergencies and mitigation also drew on DRF resources, demand for those resources grew rapidly. This evolution continues, with reform legislation frequently following on the heels of exceptionally large disasters, or complexes of disasters. This was the case when the federal response to a series of hurricanes and wildfires in 2017 helped drive interest in the Disaster Recovery Reform Act of 2018. Changes in the Budget Process Changes in congressional budget processes have at times been discussed as a means of limiting the budgetary impact of disaster relief spending. However, the budget controls that have been approved and implemented have more often been provided with provisions to ensure disaster relief budget authority remains available if needed. Prior to 1985, Congress provided appropriations to fund the federal government without specific statutory limitations on overall spending. The 1985 Balanced Budget and Emergency Deficit Control Act put limits on deficit spending in place. The Budget Enforcement Act of 1990 placed express limits on discretionary spending for the first time. The 1990 act also provided an exception to those limits, allowing Congress, together with the President, to declare certain spending to be an emergency requirement, and therefore not subject to those limits. This was used to provide additional appropriations for disaster relief. Although the original set of discretionary limits expired, the emergency spending designation has continued as part of the appropriations process. In 2011, the Budget Control Act ( P.L. 112-25 ) not only reestablished statutory spending limits, but also provided a special designation for the costs of major disasters, in addition to the emergency designation. The amount of funding that can be designated as disaster relief—defined as spending pursuant to a major disaster declaration—is limited by a formula based on past spending on disaster relief. It is not a restriction on how much can be spent on disasters, however—funding in excess of the allowable adjustment for disaster relief is still eligible for an emergency designation. This formula was adjusted by the Bipartisan Budget Act of 2018 to account for emergency-designated spending on disasters. The special designation for disaster spending will expire along with the discretionary spending limits in 2021. The impact of these changes in the budget process on disaster relief appropriations appears to be limited to the structure of the total appropriations, rather than the amount. The Congressional Budget Office (CBO) noted that in the 1970s, "about 5%" of supplemental funding was for disasters. In a report reviewing supplemental appropriations enacted during the 1980s, CBO indicated that number fell to less than 1%. This can be attributed to the drop in disaster activity discussed above. In a similar report on the 1990s, CBO observed an increase in the use of supplemental appropriations to provide disaster relief, noting the following: [I]n the 1990s, Presidents Bush and Clinton tended to request—and the Congress tended to provide in regular appropriations—less than what would eventually be spent in those disaster-related accounts. (Some observers say the underfunding was an effort to keep total appropriations under the [budget enforcement] caps.) When a disaster or emergency arose, the Congress enacted supplemental appropriations during the fiscal year, usually at the request of the President. That supplemental funding was designated emergency spending and was therefore not counted under the discretionary spending caps. Figure 1 and Figure 2 do not show a distinct impact of budget controls on the overall level of disaster spending. However, they do show an increase in the amount of funding provided in annual appropriations versus supplemental appropriations starting in FY2012. The addition of the disaster relief designation under the Budget Control Act enabled higher funding levels for disasters in the annual appropriations bills, as disaster relief-designated appropriations did not compete with other appropriations for limited discretionary resources, within the allocations provided to the subcommittee funding FEMA, or within the overall discretionary spending limit. In the early years of the disaster relief designation, this increased annual funding also reduced the frequency and urgency of supplemental appropriations for the DRF. However, Congress has provided emergency-designated relief for catastrophic disasters in supplemental appropriations, whether statutory budget controls were in place or not. Budgeting Practices for Disaster Relief Management of Disaster Relief Funds The responsibility for managing DRF appropriations has shifted among agencies as the general disaster relief function grew. In March 1951, President Truman initially delegated the authority for directing federal agencies in a disaster to the Housing and Home Finance Administrator at the Department of Housing and Urban Development (HUD); then in January 1953 the responsibility was shifted to the Federal Civil Defense Administration in the Department of Defense (DOD). In 1961, the authority was moved within the department to the Office of Civil Defense Mobilization, which had its name changed in 1961 to the Office of Emergency Planning, and changed again in 1968 to the Office of Emergency Preparedness. It remained with that office until its abolishment in 1973, when disaster relief powers were transferred from DOD back to HUD, where those powers were exercised by the Federal Disaster Assistance Administration (FDAA). Although management responsibilities were vested in various parts of the federal bureaucracy, appropriations for general disaster relief were provided directly to the Executive Office of the President from FY1948 through FY1973. For FY1974, funds were still described as "Funds Appropriated to the President," but they were provided within HUD's appropriations. 1978: The Creation of the Federal Emergency Management Agency In 1978, responding to support for a more cohesive emergency management structure at the federal level, President Jimmy Carter issued Reorganization Plan #3, which created the Federal Emergency Management Agency (FEMA). At the time, disaster relief functions were vested in three agencies: the FDAA (at HUD, managing general federal disaster relief), the Federal Preparedness Agency (FPA—part of the General Services Administration); and the Defense Civil Preparedness Agency (DCPA—part of the Department of Defense). This was the first time that emergency management functions at the national level were expressly centralized into a single federal agency. FEMA had a three-part role: Mobilizing federal resources, Coordinating federal efforts with state and local governments, and Managing the efforts of the public and private sectors in disaster responses. FY1980 was the first year appropriations for "Disaster Relief" were provided to FEMA. Calculation of the Annual Appropriations Request A review of selected FEMA budget justifications shows how the executive branch has discussed its decision on how much to request for disaster relief. "Past Experience" and Various Averages In the early 1980s (1983-1985), FEMA provided justifications for the Disaster Relief appropriation that included management and coordination, individual assistance, and public assistance activities. These activities were also supported under the Emergency Management Planning and Assistance appropriation and the Salaries and Expenses appropriation for FEMA. These justifications noted that actual disaster relief requirements were based on unpredictable external factors. The FY1984 justification noted, "The budget requests mentioned are based on average projection of disaster occurrence. Any significant change from the projected totals, through either more or larger size incidents, could generate an increased request." However, despite that uncertainty, a request for a specific budget number leads to questions about the basis for that particular number. In the FY1986 process, FEMA explicitly noted it was projecting its anticipated need "on the basis of past experience with disasters." Between September 1984, when FEMA submitted its budget request to the Office of Management and Budget for review, and February 1985, when the budget justification was provided to Congress, additional "experience" was apparently accumulated that reduced the projected demand for disaster relief from $350 million to $275 million. By the FY1989 appropriations cycle, the language justifying the request had evolved into "an assessment of historical averages," and included specific data on the average annual disaster relief obligations for a seven-year period, as well as the disaster relief obligations for the most recently concluded fiscal year. The budget justification then included a request, noting the request and the projected obligation data that justified it included $30 million in savings through unspecified "legislative and administrative reforms." By the late 1980s and into the 1990s, concerns about deficit spending led to the discussion of budget controls, and ultimately their implementation. The FY1992 request highlighted the difficulty in simply using averages of past obligations. According to the justification, the average annual obligation from 1981 to 1989 of $270 million was exceeded by the FY1990 obligation of over $2 billion for costs related to Hurricane Hugo and the Lomo Prieta earthquake. The FY1994 request included a great deal of information on prior-year activities, discussing these elements in the context of average levels of obligations, and noting the impact of larger disasters in prior years, but did little to specifically justify the request level of $292 million. Five-Year Averages (With Exceptions) For FY1995, the budget discussion evolved, as FEMA justified the request on the basis of the first five years of activities under the Stafford Act, and the series of major disasters that had struck. The use of the five-year average continued through the 1990s and early 2000s, with disaster support costs—the costs of maintaining disaster response capabilities that are not attributable to a specific disaster—included as well. Certain very large disasters were not included in the average. For example, for FY1999, FEMA explicitly excluded the costs of the Northridge earthquake, plus disaster support costs. For FY2003, not only was Northridge excluded from the average, but so were the impacts of the 9/11 terrorist attacks. By FY2009, the justification had again evolved: "Coupled with funding from recoveries of prior year obligations and unobligated funds carried forward, the appropriation request will fund the five-year average obligation level for direct disaster activity (excluding extraordinary events, such as the terrorist attack of September 11, 2001, the 2004 hurricanes in Florida and other states, and Hurricanes Katrina, Rita, and Wilma in 2005 and 2006 and excluding disaster readiness and support functions)." In FY2011, the Administration simplified the request language by referring to disasters that cost less than $500 million as "non-catastrophic disaster activity." That year, in addition to the request for the DRF based on the five-year average of "non-catastrophic" disaster relief obligations, the Administration made a concurrent request for $3.6 billion for the costs of prior catastrophic storms and wildfires. The Budget Control Act Era: Ten-Year Averages, Reserves, and Flexibility The 2010s saw continued debate on deficit spending, coupled with a continuing desire to fund disaster relief programs. When Congress passed the Budget Control Act of 2011 ( P.L. 112-25 ), it created statutory caps on spending as well as a special mechanism to exempt some of the costs of major disasters from those caps. (See " Changes in the Budget Process " for details.) A $500 million reserve fund was included in the Administration's budget request for FY2012. This was intended to help ensure resources were available on short notice in hurricane season. This rose to $1 billion in FY2015. For FY2019, the reserve request increased to $2 billion "due to the uncertainty around the availability of additional supplemental funding to continue addressing the 2017 hurricanes." In FY2013, FEMA shifted from using a 5-year average to using a 10-year average of non-catastrophic obligations, plus the estimated requirements for past catastrophic disasters, plus the reserve, as the basis for their overall DRF request. Emergency Contingency Funding and Reserve Funds At times, the Administration and Congress have examined methods of speeding up or broadening the availability of funds to address emergencies and disasters by changing how they were appropriated. Examples of this include the use of contingent appropriations and the proposal to establish a reserve fund for disaster relief. Contingent Appropriations In some of its first exercises of the emergency designation, Congress chose to provide a portion of the appropriation for the DRF as emergency-designated budget authority contingent on the Administration specifically requesting the additional funds and designating them as an emergency requirement. An example of this structure can be found in P.L. 103-75 , a supplemental appropriations bill for FY1993: For an additional amount for ''Disaster relief", $1,735,000,000, and in addition, $265,000,000, which shall be available only to the extent an official budget request for a specific dollar amount, that includes designation of the entire amount of the request as an emergency requirement as defined in the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, is transmitted by the President to Congress, to remain available until September 30, 1997, for the Midwest floods and other disasters: Provided , That the entire amount is designated by Congress as an emergency requirement pursuant to section 251(b)(2)(D)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and title I, chapter II, of Public Law 102-229. The FY2002 annual disaster relief appropriation was the last annual appropriation that included this type of contingent appropriation. Reserve Funds While current appropriations requests for the DRF include a special appropriated reserve within the DRF for unanticipated catastrophic disasters, the concept of a budgetary reserve fund outside the DRF has also been proposed in the past, which would enable appropriations for broader non-Stafford disaster relief initiatives. In FY2002, alongside a request for the DRF that included disaster support costs and funding for prior-year disasters, the Administration proposed the creation a of $5.6 billion National Emergency Reserve allowance to support the costs of "significant new disasters." The DRF, the Small Business Administration (SBA) Disaster Loan Program, and wildfire programs at the Department of Agriculture and Department of the Interior would have been the primary recipients of this funding. The annual reserve would have been established in the budget resolution, and based on the average annual spending on "extraordinarily large events." It would have been allocated to the appropriations subcommittees to fund presidential requests for emergency requirements if two criteria were met: "the events were sudden, urgent, unforeseen, and not permanent; and adequate funding for a normal year has been provided for the applicable program by the Appropriations Committees." Unused reserve amounts could be rolled over into the next year. The proposal was not ultimately adopted. Issues for Congress The federal government has defined a role for itself in emergency management and disaster recovery, as a backstop for state, local, territorial, and tribal governments, with roles in providing limited relief for individuals and support for mitigation efforts. FEMA's DRF appropriation funds a great deal of the federal effort. As the DRF appropriation is simply an amount of budget authority provided to support a role in disasters that is defined through separately crafted laws and policies, many of the issues related to the DRF are less about the appropriation than they are about that separately defined federal role. Should the purpose of the DRF be rescoped? Despite the magnitude of funding provided through the DRF for a range of activities and programs, other appropriations support disaster-related activities in other departments and agencies. As noted earlier, HUD, USDA, DOT, DOD, and SBA all fund various disaster relief and recovery programs. At various times in the past, efforts have been made to fund activities through the DRF that are not part of the current portfolio of Stafford Act programs. The Stafford Act already encompasses a wide range of emergency management, disaster relief, and disaster response activities. Making non-Stafford programs eligible for DRF funding is something Congress could choose to do, but it would not provide any obvious policy or budgetary advantage. Existing non-Stafford programs have their own funding streams, management, and oversight. Providing their resources through a new appropriation could complicate their funding stream and congressional oversight. While making the programs eligible for funding from the DRF could make additional budget authority available, it would be more transparent and direct for Congress to simply fund the program through its existing appropriation. There is no special budgetary treatment for appropriations for the DRF—only for appropriations which are designated for the costs of major disasters under the BCA. Shifting discretionary spending out of one appropriations subcommittee's jurisdiction into another provides no overall budgetary benefit—the total amount of spending remains the same. Subcommittee allocations are set and reset every year (sometimes multiple times each year) at the discretion of the House and Senate appropriations committees, so such a move could well result in no net impact on available resources. The concept of a broader funding stream providing discretionary resources for DRF, SBA, and USDA disaster relief programs has also been considered before. Such an idea, floated by a previous Administration but rejected by Congress, might have made more resources available in the immediate aftermath of a disaster, but it is not clear that reorganizing funding would make the programs subject to more thorough oversight or make them more effective. It could limit the ability of Congress to provide specific oversight or direction through appropriations to the separate programs. Congress could also break up the DRF into appropriations for the individual Stafford Act programs or groups of programs. This might allow for additional specific congressional oversight and direction, but it could reduce the flexibility that exists within the DRF to shift its resources to meet unanticipated disaster needs by segmenting the available resources. How much is enough to have on hand? Appropriations are frequently provided on the basis of what can be spent on a project in a given fiscal year. This thinking informs part of the funding request, as it includes a basis of spending on open disasters, where recovery is ongoing. A 10-year average informs the portion of the DRF budget request that pays for response and recovery from disasters that cost less than $500 million. Previous and current Administrations have sought additional reserve funds over and above those projected needs to pay for potential "no notice" events. On the other hand, from FY2014 to FY2017, almost $2.5 billion in funding was rescinded from unobligated balances in the DRF. In the present constrained budget environment, Congress continues to weigh the proper level of reserves for FEMA to keep on hand in the DRF. What accommodations should be made in the federal budget for disaster relief? While disaster relief is a relatively small part of the discretionary budget, and an even smaller part of the overall federal budget, disaster relief spending is anticipated to continue growing in the coming years. In modern history, Congress has been generally willing to provide resources for major disasters on an as-needed basis. However, discussions of deficit and debt continue in Congress, and may increase in frequency and volume as the Budget Control Act nears expiration in FY2021. The central question is this: Does disaster relief represent enough of a priority for the federal government to maintain the status quo notwithstanding potential increasing costs? When budget controls were put in place in the 1980s, 1990s, and 2010s, exceptions were provided to help ensure relief and recovery efforts would continue to be funded. With the expiration of the Budget Control Act statutory caps on discretionary spending, one limitation on disaster relief spending—albeit one with a limited practical effect, as noted above—will go away. The allowable adjustment for disaster relief will expire as well, which may have more of an impact, as Congress has used it to move disaster relief spending more fully into the annual appropriations process. The adjustment has effectively allowed most of the annual DRF appropriation to be provided without competing against other homeland security priorities for the discretionary funding provided under the Homeland Security appropriations subcommittee's allocation. Congress may consider whether they want that process to continue. Congress may also debate whether to try to limit disaster relief spending. The most direct means of doing this would not be to change the DRF appropriation, but by changing the underlying laws that authorize the programs it funds. Implementing relief limits or deductibles for states or smaller jurisdictions, larger nonfederal cost shares, or changes in the declaration process may prove unpopular, and having to vote for them once in more durable authorizing legislation may be more practical than doing so annually in appropriations legislation, which expires. Appendix. General Disaster Relief Appropriations, FY1964-FY2018

The Disaster Relief Fund (DRF) is one of the most-tracked single accounts funded by Congress each year. Managed by the Federal Emergency Management Agency (FEMA), it is the primary source of funding for the federal government's domestic general disaster relief programs. These programs, authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended (42 U.S.C. 5121 et seq.), outline the federal role in supporting state, local, tribal, and territorial governments as they respond to and recover from a variety of incidents. They take effect in the event that nonfederal levels of government find their own capacity to deal with an incident is overwhelmed. The appropriation which feeds the DRF predates current disaster relief programs and FEMA itself. It dates back to a half-million dollar deficiency appropriation to the President in 1948 that was drafted to allow him to use these resources to provide temporary emergency assistance to communities in the wake of unspecified potential natural disasters. Although the appropriation was provided with one particular Upper Midwest flooding incident in mind, the legislative language allowed the funding to be used more broadly, if the President wished to do so. This policy of providing general disaster relief was a shift from previous policy, which largely left emergency management, disaster relief, and disaster recovery in the hands of other levels of government and private relief organizations. Prior to the development of the general relief program, when the federal government got involved in disaster response and recovery, it was on an ad hoc, case-by-case basis. By comparison, the annual appropriation for the DRF in FY2018—70 years after the initial appropriation for general disaster relief—was $7.9 billion. The evolving federal role in disaster relief is partially illuminated in the funding stream provided for it through the DRF. What is a fixture of federal policy today was not a given a century ago. Examining the history of the program and its funding through the DRF may help Congress consider future approaches to disaster relief. This report introduces the DRF and provides a brief history of federal disaster relief programs. It goes on to discuss the appropriations that fund the DRF, and provides a funding history from FY1964 to the present day, discussing factors that contributed to those changing appropriations levels. It concludes with discussion of how the budget request for the DRF has been developed and structured, given the unpredictability of the annual budgetary impact of disasters, and raises some potential issues for congressional consideration. This report is updated on an annual basis.

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Overview The U.S. and Afghan governments, along with partner countries, remain engaged in combat with a robust Taliban-led insurgency. W hile U.S. military officials maintain that Afghan forces are "resilient" against the Taliban, by some measures insurgents are in control of or contesting more territory today than at any point since 2001. The conflict also involves an array of other armed groups, including active affiliates of both Al Qaeda (AQ) and the Islamic State (IS, also known as ISIS, ISIL, or by the Arabic acronym Da'esh ). Since early 2015, the NATO-led mission in Afghanistan, known as "Resolute Support Mission" (RSM), has focused on training, advising, and assisting Afghan government forces; combat operations by U.S. counterterrorism forces, along with some partner forces, also continue. These two "complementary missions" make up Operation Freedom's Sentinel (OFS). Simultaneously, the United States is engaged in an aggressive diplomatic effort to end the war, most notably through direct talks with Taliban representatives (a dramatic reversal of U.S. policy). A draft framework, in which the Taliban would prohibit terrorist groups from operating on Afghan soil in return for the eventual withdrawal of U.S. forces, was reached between U.S. and Taliban negotiators in January 2019, though lead U.S. negotiator Zalmay Khalilzad insists that "nothing is agreed until everything is agreed." Negotiations do not, as of May 2019, directly involve representatives of the Afghan government, leading some to worry that the United States will prioritize a military withdrawal over a complex political settlement that preserves some of the social, political, and humanitarian gains made since 2001. Underlying the negotiations is the unsettled state of Afghan politics, which is a major complicating factor: Afghanistan held inconclusive parliamentary elections in October 2018 and the all-important presidential election, originally scheduled for April 2019, has now been postponed twice until September 2019. The Afghan government has made some progress in reducing corruption and implementing its budgetary commitments, but faces domestic criticism for its failure to guarantee security and prevent insurgent gains. The United States has contributed approximately $133 billion in various forms of aid to Afghanistan over the past decade and a half, from building up and sustaining the Afghan National Defense and Security Forces (ANDSF) to economic development. This assistance has increased Afghan government capacity, but prospects for stability in Afghanistan appear distant. Some U.S. policymakers still hope that the country's largely underdeveloped natural resources and/or geographic position at the crossroads of future global trade routes might improve the economic life of the country, and, by extension, its social and political dynamics as well. Nevertheless, Afghanistan's economic and political outlook remains uncertain, if not negative, in light of ongoing hostilities. U.S.-Taliban Negotiations In August 2017, President Trump announced what he termed a new South Asia strategy in a nationally-televised address. Many Afghan and U.S. observers interpreted the speech and the policies it promised (expanded targeting authorities for U.S. forces, greater pressure on Pakistan, a modest increase in the number of U.S. and international troops) as a sign of renewed U.S. commitment. However, after less than a year of continued military stalemate, the Trump Administration in July 2018 reportedly ordered the start of direct talks with the Taliban that did not include the Afghan government. This represented a dramatic reversal of U.S. policy, which had previously been to support an "Afghan-led, Afghan-owned" peace process. In September 2018, Secretary of State Mike Pompeo appointed former U.S. Ambassador to Afghanistan Zalmay Khalilzad to the newly-created post of Special Representative for Afghanistan Reconciliation; Khalilzad has since met several times with Taliban representatives in Doha, Qatar (where the group maintains a political office). He has also had consultations with the Afghan, Pakistani, and other regional governments. After a six-day series of negotiations in Doha in late January 2019, Khalilzad stated that, "The Taliban have committed, to our satisfaction, to do what is necessary that would prevent Afghanistan from ever becoming a platform for international terrorist groups or individuals," in return for which U.S. forces would eventually fully withdraw from the country. Khalilzad later cautioned that "we made significant progress on two vital issues: counter terrorism and troop withdrawal. That doesn't mean we're done. We're not even finished with these issues yet, and there is still work to be done on other vital issues like intra-Afghan dialogue and a complete ceasefire." After a longer series of talks that ended on March 12, 2019, Khalilzad announced that an agreement "in draft" had been reached on counterterrorism assurances and U.S. troop withdrawal. He noted that after the agreement is finalized, "the Taliban and other Afghans, including the government, will begin intra-Afghan negotiations on a political settlement and comprehensive ceasefire." The Taliban have long refused to negotiate with representatives of the Afghan government, which they characterize as a corrupt and illegitimate puppet of foreign powers, and Kabul is not directly involved in the ongoing U.S.-Taliban negotiations. Some observers have criticized that arrangement; former U.S. Ambassador to Afghanistan Ryan Crocker argued that by not insisting on the inclusion of the Afghan government in these negotiations "we have ourselves delegitimized the government we claim to support," and advocated that the U.S. halt talks until the Taliban agree to include the Afghan government. Afghan President Ashraf Ghani has promised that his government will not accept any settlement that limits Afghans' rights. In a January 2019 televised address, he further warned that any agreement to withdraw U.S. forces that did not include Kabul's participation could lead to "catastrophe," pointing to the 1990s-era civil strife following the fall of the Soviet-backed government that led to the rise of the Taliban. President Ghani's concern about being excluded from the talks surfaced in mid-March when his national security advisor accused Khalilzad of "delegitimizing the Afghan government and weakening it," and harboring political ambitions within Afghanistan, leading to a shark rebuke from the State Department. According to a former State Department official, "The real issue is not the personality of an American diplomat; the real issue is a policy divergence." It remains unclear what kind of political arrangement could satisfy both Kabul and the Taliban to the extent that the latter fully abandons armed struggle in pursuit of its goals. The Taliban have recently given some more conciliatory signs, with one spokesman saying the group is "not seeking a monopoly on power." Still, many Afghans, especially women, who remember Taliban rule and oppose the group's tactics and beliefs, remain wary. Afghan Political Situation The unsettled state of Afghan politics is a major complicating factor for current negotiations. The leadership partnership (referred to as the national unity government) between President Ashraf Ghani and Chief Executive Officer (CEO) Abdullah Abdullah, which was brokered by the United States in the wake of the disputed 2014 election, has encountered challenges but remains intact. However, a trend in Afghan society and governance that worries some observers is increasing political fragmentation along ethnic lines. Such fractures have long existed in Afghanistan but were relatively muted during Hamid Karzai's presidency. These divisions are sometimes seen as a driving force behind some of the political upheavals that have challenged Ghani's government. Afghanistan held parliamentary elections in October 2018 that were marred by logistical, administrative, and security problems; results are still, as of May 2019, incomplete, though the new parliament was inaugurated in April 2019. The all-important presidential election, originally scheduled for April 2019, has now been postponed twice, until September 2019. It is unclear to what extent, if any, those delays are related to ongoing U.S.-Taliban talks. U.S. officials have denied that the establishment of an interim government is part of their negotiations with the Taliban, but some observers speculate that such an arrangement (which Ghani has rejected) might be necessary to accommodate the reentry of Taliban figures into public life and facilitate the establishment of a new political system, which a putative settlement might require. Military and Security Situation Since early 2015, the NATO-led mission in Afghanistan of 17,000 troops, known as "Resolute Support Mission" (RSM), has focused on training, advising, and assisting Afghan government forces. Combat operations by U.S. forces also continue and have increased in number since 2017. These two "complementary missions" comprise Operation Freedom's Sentinel (OFS). There are around 14,000 U.S. troops in Afghanistan, of which approximately 8,500 are part of RSM. The remaining 8,400 troops of RSM come from 38 partner countries. Since at least early 2017, U.S. military officials have publicly stated that the conflict is "largely stalemated." Arguably complicating that assessment, the extent of territory controlled or contested by the Taliban has steadily grown in recent years by most measures (see Figure 1 ). In its January 30, 2019, report, the Special Inspector General for Afghanistan Reconstruction (SIGAR) reported that the share of districts under government control or influence fell to 53.8%, as of October 2018. This figure, which marks a slight decline from previous reports, is the lowest recorded by SIGAR since tracking began in November 2015; 12% of districts are under insurgent control or influence, with the remaining 34% contested. According to SIGAR's April 30, 2019, quarterly report, the U.S. military is "no longer producing its district-level stability assessments of Afghan government and insurgent control and influence." This information, which was in every previous SIGAR quarterly report going back to January 2016, estimated the extent of Taliban control and influence in terms of both territory and population, and was accompanied by charts portraying those trends over time along with a color-coded map of control/influence by district (see Figure 2 ). SIGAR reports that it was told by the U.S. military that the assessment is no longer being produced because it "was of limited decision-making value to the [U.S.] Commander." While the Taliban retain the ability to conduct high-profile urban attacks, they also demonstrate considerable tactical capabilities. Reports indicate that ANDSF fatalities have averaged 30-40 a day in recent months, and President Ghani stated in January 2019 that over 45,000 security personnel had paid "the ultimate sacrifice" since he took office in September 2014. Insider attacks on U.S. and coalition forces by Afghan nationals are a sporadic, but persistent, problem—several U.S. servicemen died in such attacks in 2018, as did 85 Afghan soldiers. In October 2018, General Miller was present at an attack inside the Kandahar governor's compound by a Taliban infiltrator who killed a number of provincial officials, including the powerful police chief Abdul Raziq; Miller was unhurt but another U.S. general was wounded. Beyond the Taliban, a significant share of U.S. operations are aimed at the local Islamic State affiliate, known as Islamic State-Khorasan Province (ISKP, also known as ISIS-K), although there is debate over the degree of threat the group poses. ISKP and Taliban forces have sometimes fought over control of territory or because of political or other differences. U.S. officials are reportedly tracking attempts by IS fighters fleeing Iraq and Syria to enter Afghanistan, which may represent a more permissive operating environment. ISKP also has claimed responsibility for a number of large-scale attacks, many targeting Afghanistan's Shia minority. The UN reports that Al Qaeda, while degraded in Afghanistan and facing competition from ISKP, "remains a longer-term threat." ANDSF Development and Deployment The effectiveness of the ANDSF is key to the security of Afghanistan. As of March 2019, SIGAR reports that Congress has appropriated at least $83.3 billion for Afghan security since 2002. Since 2014, the United States generally has provided around 75% of the estimated $5-6 billion a year to fund the ANDSF, with the balance coming from U.S. partners ($1 billion annually) and the Afghan government ($500 million). Concerns about the ANDSF raised by SIGAR, the Department of Defense, and others include absenteeism, the fact that about 35% of the force does not reenlist each year, and the potential for rapid recruitment to dilute the force's quality; widespread illiteracy within the force; credible allegations of child sexual abuse and other potential human rights abuses; and casualty rates often described as unsustainable. Key metrics related to ANDSF performance, including casualties, attrition rates, and personnel strength, were classified by U.S. Forces-Afghanistan (USFOR-A) starting with the October 2017 SIGAR quarterly report, citing a request from the Afghan government. Although SIGAR had previously published those metrics as part of its quarterly reports, they remain withheld. In both legislation and public statements, some Members have expressed concern over the decline in the types and amount of information provided by the executive branch. U.S. Troop Levels and Authorities At a February 2017 Senate Armed Services Committee hearing, then-mission commander of Resolute Support Mission General Nicholson indicated that the United States had a "shortfall of a few thousand" troops that, if filled, could help break the "stalemate." In June 2017, President Trump delegated to then-Secretary Mattis the authority to set force levels, reportedly limited to around 3,500 additional troops, in June 2017; Secretary Mattis signed orders to deploy them in September 2017. Those additional forces put the total number of U.S. troops in the country at around 14,000. Some reports in late 2018 and early 2019 indicate that President Trump may be contemplating ordering the withdrawal of some U.S. forces from Afghanistan. Still, U.S. officials maintain that no policy decision has been made to reduce U.S. force levels. During a visit to Kabul on February 11, 2019, Acting Secretary of Defense Patrick Shanahan stated "I have not been directed to step down our forces in Afghanistan." Also in February 2019, the Senate passed S. 1 , which includes language (Section 408) warning against a "precipitous withdrawal" of U.S. forces from Afghanistan and Syria. Additionally, U.S. forces now have broader authority to operate independently of Afghan forces and "attack the enemy across the breadth and depth of the battle space," expanding the list of targets to include those related to "revenue streams, support infrastructure, training bases, infiltration lanes." This was demonstrated in a series of operations, beginning in the fall of 2017, against Taliban drug labs. These operations, often highlighted by U.S. officials, sought to degrade what is widely viewed as one of the Taliban's most important sources of revenue, namely the cultivation, production, and trafficking of narcotics. Some have questioned the impact of that campaign, which came to an end in late 2018. In November 2018, the United Nations reported that the total area used for poppy cultivation in 2018 was 263,000 hectares, the second-highest level recorded since monitoring began in 1994. Regional Dynamics: Pakistan and Other Neighbors Regional dynamics, and the involvement of outside powers, are central to the conflict in Afghanistan. The neighboring state widely considered most important in this regard is Pakistan, which has played an active, and by many accounts negative, role in Afghan affairs for decades. President Trump has directly accused Pakistan of "housing the very terrorists that we are fighting." Afghan leaders, along with U.S. military commanders, attribute much of the insurgency's power and longevity either directly or indirectly to Pakistan. Experts debate the extent to which Pakistan is committed to Afghan stability or is attempting to exert control in Afghanistan through ties to insurgent groups, most notably the Haqqani Network, a U.S.-designated Foreign Terrorist Organization (FTO) that has become an official, semiautonomous component of the Taliban. U.S. officials have repeatedly identified militant safe havens in Pakistan as a threat to security in Afghanistan, though some observers question the validity of that charge in light of the Taliban's increased territorial control within Afghanistan itself. Pakistan may view a weak and destabilized Afghanistan as preferable to a strong, unified Afghan state (particularly one led by a Pashtun-dominated government in Kabul; Pakistan has a large and restive Pashtun minority). However, at least some Pakistani leaders have stated that instability in Afghanistan could rebound to Pakistan's detriment; Pakistan has struggled with indigenous Islamist militants of its own. Afghanistan-Pakistan relations are further complicated by the large Afghan refugee population in Pakistan and a long-standing border dispute over which violence has broken out on several occasions. Pakistan sees Afghanistan as potentially providing strategic depth against India, but may also anticipate that improved relations with Afghanistan's leadership could limit India's influence in Afghanistan. Indian interest in Afghanistan stems largely from India's broader regional rivalry with Pakistan, which impedes Indian efforts to establish stronger and more direct commercial and political relations with Central Asia. In his August 2017 speech, President Trump announced what he characterized as a new approach to Pakistan, saying, "We can no longer be silent about Pakistan's safe havens for terrorist organizations, the Taliban, and other groups that pose a threat to the region and beyond." He also, however, praised Pakistan as a "valued partner," citing the close U.S.-Pakistani military relationship. In January 2018, the Trump Administration announced plans to suspend security assistance to Pakistan, a decision that has affected billions of dollars in aid. In February 2019, CENTCOM Commander General Joseph Votel stated, "Pakistan has not taken concrete actions against the safe havens of violent extremist organizations inside its borders," but praised Pakistan for some "positive steps" in assisting Special Representative Khalilzad's reconciliation efforts. Afghanistan largely maintains cordial ties with its other neighbors, including the post-Soviet states of Central Asia, though some warn that rising instability in Afghanistan may complicate those relations. In the past two years, multiple U.S. commanders have warned of increased levels of assistance, and perhaps even material support, for the Taliban from Russia and Iran, both of which cite IS presence in Afghanistan to justify their activities.  Both nations were opposed to the Taliban government of the late 1990s, but reportedly see the Taliban as a useful point of leverage vis-a-vis the United States. Afghanistan may also represent a growing priority for China in the context of broader Chinese aspirations in Asia and globally. President Trump mentioned neither Iran nor Russia in his August 2017 speech, and it is unclear how, if at all, the U.S. approach to them might have changed as part of the new strategy. Afghanistan may also represent a growing priority for China in the context of broader Chinese aspirations in Asia and globally. In his speech, President Trump did encourage India to play a greater role in Afghan economic development; this, along with other Administration messaging, has compounded Pakistani concerns over Indian activity in Afghanistan. India has been the largest regional contributor to Afghan reconstruction, but New Delhi has not shown an inclination to pursue a deeper defense relationship with Kabul. Economy and U.S. Aid Economic development is pivotal to Afghanistan's long-term stability, though indicators of future growth are mixed. Decades of war have stunted the development of most domestic industries, including mining. The economy has also been hurt by a steep decrease in the amount of aid provided by international donors. Afghanistan's Gross Domestic Product (GDP) has grown an average of 7% per year since 2003, but growth slowed to 2% in 2013 due to aid cutbacks and political uncertainty about the post-2014 security situation. Since 2015, Afghanistan has experienced a "slight recovery" with growth of between 2% and 3% in 2016 and 2017, though the increase in the poverty rate (55% living below the national poverty line in 2016-2017 compared to 38% in 2012-2013) complicates that picture. A severe drought affecting northern and western Afghanistan has compounded economic and humanitarian challenges. Social conditions in Afghanistan remain equally mixed. On issues ranging from human trafficking to religious freedom to women's rights, Afghanistan has, by all accounts, made significant progress since 2001, but future prospects in these areas remain uncertain. Congress has appropriated more than $132 billion in aid for Afghanistan since FY2002, with about 63% for security and 28% for development (and the remainder for civilian operations and humanitarian aid). The Administration's FY2020 budget requests $4.8 billion for the ANDSF, $400 million in Economic Support Funds, and smaller amounts to help the Afghan government with tasks like combating narcotics trafficking. This is down slightly from both the FY2019 request as well as the FY2018 enacted level of about $5.5 billion in total funding for Afghanistan (down from nearly $17 billion in FY2010). These figures do not include the cost of U.S. combat operations (including related regional support activities), which was estimated at a total of $745 billion since FY2001 as of December 2018, according to the DOD's quarterly Cost of War report, with approximately $45 billion requested for each of FY2018 and FY2019. In its FY2020 budget request, the Pentagon identified $18.6 billion in direct war costs in Afghanistan and $35.3 billion in "enduring theater requirements and related missions," though it is unclear how much of this latter figure is for Afghanistan versus other theaters. Outlook Insurgent and terrorist groups have demonstrated considerable capabilities in 2018 and 2019, throwing into sharp relief the daunting security challenges that the Afghan government and its U.S. and international partners face. At the same time, hopes for a negotiated settlement have risen, inspired by developments such as the June 2018 nationwide cease-fire and, more importantly, direct U.S.-Taliban talks, though the prospects for such negotiations to deliver a settlement are uncertain. U.S. policy has sought to force the Taliban to negotiate with the Afghan government by compelling the group to conclude that continued military struggle is futile in light of combined U.S., NATO, and ANDSF capabilities. It is still unclear, however, how the Taliban perceives its fortunes; given the group's recent battlefield gains, one observer has said that "the group has little reason to commit to a peace process: it is on a winning streak." Observers differ on whether the Taliban pose an existential threat to the Afghan government, given the current military balance. That dynamic could change if the United States alters the level or nature of its troop deployments in Afghanistan or funding for the ANDSF. President Ghani has said, "[W]e will not be able to support our army for six months without U.S. [financial] support." Notwithstanding direct U.S. support, Afghan political dynamics, particularly the willingness of political actors to directly challenge the legitimacy and authority of the central government, even by extralegal means, may pose a serious threat to Afghan stability in 2019 and beyond, regardless of Taliban military capabilities. A potential collapse of the Afghan military and/or the government that commands it could have significant implications for the United States, particularly given the nature of negotiated security arrangements. Regardless of how likely the Taliban would be to gain full control over all, or even most, of the country, the breakdown of social order and the fracturing of the country into fiefdoms controlled by paramilitary commanders and their respective militias may be plausible, even probable. Afghanistan experienced a similar situation nearly thirty years ago. Though Soviet troops withdrew from Afghanistan by February 1989, Soviet aid continued, sustaining the communist government in Kabul for nearly three years. However, the dissolution of the Soviet Union in December 1991 ended that aid, and a coalition of mujahedin forces overturned the government in April 1992. Almost immediately, mujahedin commanders turned against each other, leading to a complex civil war during which the Taliban was founded, grew, and took control of most of the country, eventually offering sanctuary to Al Qaeda. While the Taliban and Al Qaeda are still "closely allied" according to the UN, Taliban forces have clashed repeatedly with the Afghan Islamic State affiliate. Under a more unstable future scenario, alliances and relationships among extremist groups could evolve or security conditions could change, offering new opportunities to transnational terrorist groups whether directly or by default. After more than 17 years of war, Members of Congress and other U.S. policymakers may reassess notions of what "victory" in Afghanistan looks like, examining the array of potential outcomes, how these outcomes might harm or benefit U.S. interests, and the relative levels of U.S. engagement and investment required to attain them. The present condition, which is essentially a stalemate that has existed for several years, could persist; some argue that the United States "has the capacity to sustain its commitment to Afghanistan for some time to come" at current levels. Others counter that "the threat in Afghanistan doesn't warrant a continued U.S. military presence and the associated costs—which are not inconsequential." The Trump Administration has described U.S. policy in Afghanistan as "grounded in the fundamental objective of preventing any further attacks on the United States by terrorists enjoying safe haven or support in Afghanistan." For years, some analysts have challenged that line of reasoning, describing it as a strategic "myth" and arguing that "the safe haven fallacy is an argument for endless war based on unwarranted worst-case scenario assumptions." Some of these analysts and others dismiss what they see as a disproportionate focus on the military effort, citing evidence that "the terror threat to Americans remains low" to argue that "a strategy that emphasizes military power will continue to fail." As many have observed, increased political instability, fueled by questions about the central government's authority and competence and rising ethnic tensions, may pose as serious a threat to Afghanistan as the Taliban does. In light of these internal political dynamics, Members of Congress may examine how the United States can leverage its assets, influence, and experience in Afghanistan, as well as those of Afghanistan's neighbors and international organizations, to encourage more equal, inclusive, and effective governance. Congress could also seek to help shape the U.S. approach to potential negotiations around amending the constitution or otherwise altering the highly centralized Afghan political system, e.g., through legislation and public statements. Core issues for Congress include its role in authorizing, appropriating funds for, and overseeing U.S. military activities, aid, and regional policy implementation.

Afghanistan has been a central U.S. foreign policy concern since 2001, when the United States, in response to the terrorist attacks of September 11, 2001, led a military campaign against Al Qaeda and the Taliban government that harbored and supported it. In the intervening 17 years, the United States has suffered around 2,400 fatalities in Afghanistan (including seven in 2019 to date) and Congress has appropriated approximately $133 billion for reconstruction there. In that time, an elected Afghan government has replaced the Taliban, and nearly every measure of human development has improved, although future prospects of those measures remain mixed. The fundamental objective of U.S. efforts in Afghanistan is "preventing any further attacks on the United States by terrorists enjoying safe haven or support in Afghanistan." In early 2019, U.S. military engagement in Afghanistan appears closer to ending than perhaps ever before as U.S. officials negotiate directly with Taliban interlocutors on the issues of counterterrorism and the presence of U.S. troops. However, U.S. negotiators caution that talks are still at a preliminary stage, and Afghan government representatives have not been directly involved. Lead U.S. negotiator Zalmay Khalilzad insists that the United States seeks a comprehensive peace agreement but some worry that the United States will prioritize a military withdrawal over a complex political settlement that preserves some of the social, political, and humanitarian gains made since 2001. It remains unclear what kind of political arrangement could satisfy both Kabul and the Taliban to the extent that the latter fully abandons armed struggle. Press reports in December 2018 and early 2019 indicate that the Trump Administration may be considering withdrawing some U.S. forces, though U.S. officials maintain that no policy decision has been made to reduce U.S. force levels. Many observers assess that a full-scale U.S. withdrawal would lead to the collapse of the Afghan government and perhaps even the reestablishment of Taliban control. By many measures, the Taliban are in a stronger military position now than at any point since 2001, though at least some once-public metrics related to the conduct of the war have been classified or are no longer produced (including district-level territorial and population control assessments, as of the April 30, 2019, quarterly report from the Special Inspector General for Afghanistan Reconstruction). Underlying the negotiations is the unsettled state of Afghan politics, which is a major complicating factor: Afghanistan held inconclusive parliamentary elections in October 2018 and the all-important presidential election, originally slated for April 2019, has been postponed twice and is now scheduled for September 2019. For background information and analysis on the history of congressional engagement with Afghanistan and U.S. policy there, as well as a summary of recent Afghanistan-related legislative proposals, see CRS Report R45329, Afghanistan: Legislation in the 115th Congress, by Clayton Thomas.

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Background Education administers federal student aid programs, including the Direct Loan program, through the Office of Federal Student Aid. Under the Direct Loan program, Education issues and oversees the loans while contractors service them. Education currently contracts with nine loan servicers that each handle the billing and other services for a portion of the over $1 trillion in outstanding student loans provided through the Direct Loan program. These servicers track and manage day-to-day servicing activities, and they report key information on the status of each loan to Education’s central student loan database. In 2011, Education contracted with one of its existing loan servicers to become the single servicer for borrowers pursuing PSLF. The PSLF servicer is responsible for processing certification requests and forgiveness applications, as well as servicing the loans of borrowers who have met basic PSLF eligibility requirements. The PSLF program provides eligible borrowers with forgiveness on the remaining balance of their Direct Loans after they have met program requirements. To receive forgiveness for a loan, borrowers are required to be employed by a qualifying employer when making 120 qualifying payments, at the time they apply for forgiveness, and at the time they receive forgiveness for their loans. Specifically, borrowers are required to: Work full-time for a public service organization, such as a government organization, agency, or entity at any level (federal, state, local, or tribal); a nonprofit, tax exempt organization (under section 501(c)(3) of the Internal Revenue Code); or another private nonprofit organization that provides certain public services. Not be in default and be repaying their loans through an income- driven repayment plan (in which borrowers’ monthly payments are based on their income and family size); the 10-year Standard repayment plan; or another plan if the monthly payment amounts equal or exceed the amount the borrower would have paid under the 10-year Standard repayment plan. Although the 10-year Standard repayment plan qualifies for PSLF, borrowers in this plan will pay off their loans before they are eligible for forgiveness unless they change to an income-driven repayment plan that leaves them with a balance remaining to be forgiven after 120 payments. Make 120 on-time monthly loan payments for the full amount due on their bill after October 1, 2007. These monthly payments do not need to be consecutive. In January 2012, Education began offering a voluntary process to certify borrowers’ public service employment and loans as eligible for PSLF. Borrowers can request to have their employment and loans certified at any time to make sure they are meeting basic program requirements and are on track towards qualifying for loan forgiveness (see fig. 1). Once a borrower submits a request, the PSLF servicer reviews the borrower’s employment and loans to determine if they qualify, and if so, counts how many qualifying payments the borrower has made. In September 2017, 10 years after the PSLF program was established, Education began accepting loan forgiveness applications from borrowers. The application is similar to the form borrowers use to request certification of their employment and loans for PSLF, but is intended for borrowers that have already made 120 qualifying payments (see fig. 2). The PSLF servicer reviews a borrower’s application and incorporates information from any previously approved certification forms to determine if the borrower’s employment and loans qualify and if they have made 120 qualifying payments. If the borrower meets all of these requirements, the PSLF servicer forwards the application to Education for final review. If Education determines the borrower has met all eligibility requirements, it directs the PSLF servicer to forgive the remaining balance on the borrower’s loans. Many Borrowers Are Pursuing Public Service Loan Forgiveness, and Recent Legislation Requires Education to Conduct Additional Outreach to Borrowers Over 890,000 Borrowers Took an Initial Step Towards Qualifying for PSLF by Having Their Employment and Loans Certified, and 55 Have Received Loan Forgiveness Over 890,000 borrowers have taken an initial step towards qualifying for the PSLF program by voluntarily having their employment and loans certified as eligible for PSLF, according to data from the PSLF servicer as of April 2018. Of these, over 520,000 borrowers had recorded at least one qualifying payment that counted towards the 120 required to be eligible for loan forgiveness (see fig. 3). In total, almost 1.2 million borrowers requested to have their employment and loans certified but over 280,000 were denied, primarily due to missing information on the form, or because they did not have qualifying federal loans or work for a qualifying employer, according to data from the PSLF servicer. The number of new borrowers whose employment and loans have been certified as eligible for PSLF has increased in each of the past 6 years, according to PSLF servicer data (see fig. 4). Officials with the PSLF servicer said they anticipated that the volume would continue to increase as the program gains visibility. In the first 8 months that borrowers were able to apply for loan forgiveness (September 2017 through April 2018), Education had approved 55 borrowers and forgiven a total of almost $3.2 million in outstanding student loan balances, an average of almost $58,000 per borrower. The amount of loan forgiveness for individual borrowers ranged from almost $800 to almost $290,000. Over 19,300 borrowers had submitted loan forgiveness applications as of April 2018 (see fig. 5). Of the almost 17,000 borrowers with applications that had been processed, over 40 percent had qualifying loans and employment but were denied because they had not yet made 120 qualifying payments. The other most common reasons borrowers were denied included missing information on the application or because the borrower did not have qualifying federal loans. Education officials estimated that about 700 borrowers will be approved for loan forgiveness by September 30, 2018. Borrower Confusion about PSLF Requirements Persists, and Recent Legislation Requires Education to Conduct Additional Outreach Although Education has conducted some outreach to communicate PSLF program requirements to borrowers, the large number of borrowers whose certification requests and forgiveness applications were denied suggests that many borrowers do not understand or are not aware of these requirements. For example, over half of borrowers that requested to have their employment and loans certified as of April 2018 either did not meet basic eligibility requirements or had yet to make any qualifying loan payments. This includes over 150,000 borrowers who requested to have their employment and loans certified despite not having qualifying federal loans, which suggests these borrowers either did not know which types of loans they had or which types qualified for the program. Borrowers who had qualifying loans also may have been confused about requirements related to making qualifying payments. Over 370,000 borrowers that had their employment and loans certified as of April 2018 had not made any qualifying payments at the time of certification because they were not on qualifying repayment plans, had loans in a deferment or forbearance, were still in the grace period before starting repayment, or had recently consolidated their loans, among other reasons, according to PSLF servicer data (see fig. 6). Although some of these borrowers may have understood how prior choices they made regarding repayment of their loans would affect their ability to make qualifying payments, other borrowers may not have. Officials with the PSLF servicer said borrowers were frequently confused by program requirements related to qualifying loans, employment, repayment plans, and payments. For example, PSLF servicer officials said that borrowers were sometimes unaware that they were not on a qualifying repayment plan or that forbearance, deferment, and loan consolidation would affect their qualifying payments. PSLF servicer frontline customer service staff also said they frequently received calls from borrowers who were confused about whether their loans qualified for PSLF and other program requirements. Two other loan servicers we spoke to identified the same general areas of confusion among borrowers who call with questions about PSLF. In addition, borrower complaints reported by the Consumer Financial Protection Bureau indicate confusion with PSLF requirements related to qualifying loans and payments. Education uses several methods to conduct outreach to inform borrowers about PSLF requirements, but denial data suggest and PSLF servicer officials confirmed that borrower confusion persists. Education currently provides information on its website about PSLF requirements and links to an online portal where borrowers can check what types of loans they have and identify their loan servicer. When the PSLF servicer notifies borrowers that their certification requests or forgiveness applications were denied, the notification letter includes information on program requirements and explains why the borrower did not qualify for the program. Education has also adopted other methods to raise awareness of the program among borrowers, such as webinars and outreach to schools, in response to a recommendation in our previous report. Education also instructs borrowers who have additional questions about PSLF to contact the PSLF servicer. However, officials with the PSLF servicer said they can provide more details about the program but cannot answer certain eligibility questions, such as whether a particular borrower has qualifying employment or is on a qualifying repayment plan, until the borrower submits a form to request certification. Officials with three other loan servicers we spoke with also said it is their general policy not to answer specific questions about an individual borrower’s eligibility for PSLF due to the complexity of program requirements, and they instead direct the borrower to contact the PSLF servicer. Although this approach may help avoid the risk of other servicers providing borrowers with incorrect advice, it highlights the need for Education to provide borrowers with clear and sufficient information about how to qualify for the program. It is essential for borrowers to understand eligibility requirements because the retrospective nature of the program requires borrowers to make decisions about their loans and employment months or years before they submit a PSLF certification request or apply for loan forgiveness. For example, the Consumer Financial Protection Bureau reported that borrowers have complained of spending years making payments, believing they were making progress towards PSLF loan forgiveness, and then learning that they were not eligible. Recent legislation requires Education to conduct additional outreach. The consolidated appropriations act enacted in March 2018 appropriated $350 million to forgive the loans of borrowers who otherwise would qualify for PSLF had they not selected a non-qualifying repayment plan. In addition to these funds, the act directed that $2.3 million of Education’s appropriation for administering student aid be used to conduct outreach to borrowers about PSLF, to help ensure borrowers are meeting program requirements. The act specifically requires Education to communicate PSLF program requirements to all Direct Loan borrowers and improve PSLF outreach and information through calls, electronic communications, and other methods. Once implemented, these provisions could reduce confusion about PSLF requirements and help Education provide better service to borrowers. Education Could Provide More Comprehensive Information to Improve Program Administration and Qualifying Employment and Loan Payment Determinations Education’s Piecemeal Guidance and Instructions to the PSLF Loan Servicer Create Challenges for Program Administration Education does not have a comprehensive document or manual to provide the PSLF servicer guidance and instructions, which PSLF servicer officials said makes it difficult to effectively administer the program and provide consistent service to borrowers. Instead, Education’s guidance and instructions to the PSLF servicer are dispersed in a piecemeal manner across multiple documents, including Education’s original contract with the servicer, multiple updates to the contract, and hundreds of emails. According to PSLF servicer officials, administering the program based on this fragmented collection of guidance and instructions creates a risk that relevant information may be overlooked. Education’s use of email to communicate key guidance and instructions to the PSLF servicer is particularly problematic because this important information is not disseminated to relevant individuals at Education and the PSLF servicer in the same standard fashion as official changes to the servicing contract. Various individuals at Education have sent emails with guidance and instructions to different staff at the PSLF servicer. As a result, all the relevant parties may not be aware of important policy changes or clarifications provided in these emails, according to PSLF servicer officials and Education’s monitoring reports. In one instance, for example, Education staff incorrectly identified what they thought was an error in how the servicer was certifying borrowers that were employed part-time because they were not aware of the most recent guidance that other staff at Education had emailed the servicer on the topic. Similarly, PSLF servicer officials said their staff are sometimes unaware of relevant guidance and instructions in emails provided by Education, which creates a risk that some policy updates will be overlooked and not consistently implemented. Education has also used email to communicate certain policy clarifications involving employer eligibility and payment counting that, according to the PSLF servicer, have affected hundreds of borrowers and set precedents for future eligibility decisions. Gaps in Education’s guidance and instructions have also left the PSLF servicer uncertain about how to administer key aspects of the program. For example, PSLF servicer officials said that from 2016 to 2018 they were awaiting additional clarifications from Education about how to account for loan payments when borrowers pay more than the amount due or submit a payment several weeks before the due date. How overpayments and prepayments are accounted for can affect whether the borrower’s subsequent payments qualify for PSLF because borrowers can only receive credit for one payment per month and only when a payment is due. While Education provided a clarification about how to address this issue in May 2018, current guidance from Education on other topics is still unclear or incomplete, according to PSLF servicer officials. The absence of a central, authoritative source of PSLF guidance and instructions creates a risk of differing interpretations and inconsistent implementation. The PSLF servicer has developed its own internal processing handbook based on Education’s guidance and instructions, which PSLF servicer officials said is useful for helping staff process certifications and forgiveness applications. However, Education has reviewed sections of this processing handbook and identified places where the handbook does not accurately reflect PSLF requirements and could result in borrowers’ certification requests being improperly approved or denied. The PSLF servicer has made updates to its processing handbook to address certain issues that Education identified, but Education has not conducted a comprehensive review of this handbook. As a result, there is a risk that the PSLF servicer may still be applying Education’s guidance and instructions differently from how the agency intended. PSLF servicer officials said it would be helpful if Education created a centralized manual of PSLF guidance and instructions. The lack of a central guidance document also makes it difficult to maintain program continuity in the event of staff turnover or if Education decides to contract with a new servicer to administer the PSLF program. Federal internal control standards state that agencies should communicate information to those who need it, in a form that enables them to carry out their responsibilities. Education has recently taken some steps to provide clearer guidance and instructions, such as holding meetings with PSLF servicer officials every 2 weeks to discuss any administrative issues. Education officials also told us they plan to develop a comprehensive PSLF servicing manual, but they do not have a timeline for completing it. They are currently drafting an initial section of the manual focusing on payment counting. The current lack of a definitive and comprehensive source of guidance and instructions for the PSLF servicer creates the risk of inconsistent interpretations that could potentially result in borrowers being improperly denied loan forgiveness since Education does not currently review loan forgiveness applications that are denied by the PSLF servicer. Additional Information from Education Could Improve the PSLF Servicer’s and Borrowers’ Ability to Determine Whether Borrowers’ Employment Qualifies for Loan Forgiveness Education has provided the PSLF servicer and borrowers with limited information that could help them determine which employers qualify for PSLF, creating uncertainty for borrowers and increasing the risk that the PSLF servicer may improperly certify or deny certification to some borrowers. Education has not provided the PSLF servicer with a definitive source of information for determining which employers qualify a borrower for loan forgiveness. Instead, Education has identified some data sources the PSLF servicer can use to determine whether borrowers are working for qualifying employers. However, these sources are not comprehensive, and PSLF servicer officials said they sometimes have to consult other sources that have significant limitations. For example, Education directs the PSLF servicer to review the Internal Revenue Service’s public list of 501(c)(3) organizations to identify qualifying nonprofit employers. Since this list does not capture all potentially qualifying nonprofits, the PSLF servicer supplements this with other sources that have not been fully reviewed or assessed for accuracy by Education. For example, PSLF servicer officials told us they use an online directory of nursing home facilities to help determine if certain nursing homes are nonprofit employers. However, this website explicitly states that it does not guarantee that the information it provides is accurate or current. PSLF servicer officials also said they sometimes use state government websites to research organizations’ nonprofit status, but they only have access to the relevant information from states that provide it for free. For assessing government employers, Education directs the servicer to www.usa.gov, an official federal government website that describes government agencies and services, but this source provides limited information on state and local government employers. In addition, PSLF servicer officials said it is particularly difficult to assess certain types of employers, such as quasi-governmental entities and charter schools. PSLF servicer officials said that when they are uncertain whether an employer qualifies, they elevate the assessment to Education, but they generally try to resolve as many employer determinations as possible by using supplemental sources to research employers. However, the reliability of some of these supplemental sources is unclear. PSLF servicer officials said that having additional information would help them assess employers more quickly and minimize the risk of inaccurate decisions. One way to provide this information would be for Education to develop an official, comprehensive list of qualifying employers, which would help the PSLF servicer assess employers and help borrowers determine whether they are eligible for PSLF, according to PSLF servicer officials. Education officials said they are considering creating their own list of qualifying employers and are investigating how to leverage information from other federal government agencies that could be useful for categorizing employers. In particular, Education officials said they have reached out to the Internal Revenue Service to explore the feasibility of obtaining relevant data on employers. Education could also expand and improve on a database that the PSLF servicer created based on its prior assessments of employers. Education staff that conducted a spot check on the PSLF servicer’s database expressed concerns about using it as a sole source for assessing employers, according to an Education monitoring report, but Education officials said it could provide a foundation for Education to build on. Borrowers would also benefit from additional information about qualifying employers, according to PSLF servicer officials. Education currently provides borrowers with basic information on the types of employers that qualify for PSLF, but not sufficient details to reliably determine whether specific employers qualify. When borrowers contact their loan servicer with questions about their employer’s eligibility, officials with the PSLF servicer and other loan servicers we spoke with said they generally do not provide borrowers with information about whether a specific employer qualifies, due to the complexities involved in assessing qualifying employers. Instead, borrowers are encouraged to submit an employment certification form once they are working for an employer in order to find out if the employer qualifies. PSLF servicer officials said that providing borrowers with access to additional information about qualifying employers, such as an official list, would reduce uncertainty for borrowers and reduce the number of borrowers who submit certification requests and forgiveness applications despite working for non-qualifying employers. In addition, making this information readily available to borrowers could help them to make better informed employment decisions rather than having to wait to submit a certification request after they have started a job to find out if their employer qualifies. Federal internal control standards state that agencies should communicate the necessary quality information to those who need it in order to achieve the agencies’ objectives. Unless Education provides additional information to help the PSLF servicer make employer assessments, it will remain difficult to determine whether employers qualify for the program, raising the risk that borrowers’ certification requests will be improperly approved or denied. Moreover, without access to sufficient information about qualifying employers, borrowers will not be able to reliably determine whether certain employers qualify for PSLF. This creates uncertainty for borrowers as to which jobs and careers to pursue and leaves them to make important employment decisions without knowing until after the fact how these decisions affect their future eligibility for PSLF. Education Could Improve the Information Provided to the PSLF Servicer and Borrowers about Whether Borrowers’ Payments Qualify for Loan Forgiveness Collecting Consistent Payment Information Education does not ensure the PSLF servicer receives consistent information on borrowers’ prior loan payments from other loan servicers, which could raise the risk of qualifying payments being miscounted. In order to process certification requests and loan forgiveness applications, the PSLF servicer has to examine the borrower’s prior loan payment information to determine which prior payments count towards the 120 needed to qualify for loan forgiveness. This is relatively easy in cases where the PSLF servicer was servicing the borrower’s loans during the entire period he or she was pursuing PSLF because the servicer already has the necessary information on their prior payments, according to PSLF servicer officials. However, the PSLF servicer does not have the same information readily available for loans that are serviced by one of Education’s eight other loan servicers. For these loans, Education established a process for servicers to use in transferring loan and prior payment information to the PSLF servicer. The servicers transfer most information through standardized templates that Education developed. However, despite the use of standardized templates, the PSLF servicer does not receive consistent and reliable information from other servicers, according to PSLF servicer officials. For example, PSLF servicer officials said the lack of standard definitions and terminology among loan servicers leads servicers to interpret some data fields differently, resulting in inconsistencies in the data other loan servicers report to the PSLF servicer. Comparable data and standardized terminology is particularly important given the need for loan servicers with different systems and practices to communicate key payment information with one another. PSLF servicer officials said inconsistencies in the information provided by other loan servicers make it challenging to determine whether borrowers are on qualifying repayment plans or making qualifying payments. For example, when a borrower has multiple loans, PSLF servicer officials said they assess PSLF eligibility and payments separately for each individual loan. Officials added that some servicers only report total monthly payments for the borrower’s combined loans, and not how these payments were allocated among each loan. This makes it difficult for the PSLF servicer to determine whether the borrower paid the full monthly payment amount due on each loan, which it needs to know in order to determine whether the payment qualifies for PSLF. Officials with Education and the PSLF servicer said that inconsistencies in the information obtained from other loan servicers increase the risk of miscounting qualifying payments. Education officials said they have started to track these data consistency problems and coordinate discussions among the PSLF servicer and the three other loan servicers that together provide the data systems used by all nine servicers. However, these efforts are in the early stages. Federal internal control standards state that agencies should use quality information to achieve their objectives. Standardizing the prior payment information transferred among servicers could improve the PSLF servicer’s ability to determine qualifying payment counts for borrowers transferring from other servicers. Communicating Information to Borrowers Although Education and PSLF servicer officials acknowledge the risk of miscounting qualifying payments, the PSLF servicer does not provide borrowers with sufficient information to easily catch errors. In addition to the risks caused by inconsistent prior payment information from other loan servicers, the payment counting process is also vulnerable to errors in instances when the PSLF servicer has to manually review payment information from other servicers, according to PSLF servicer officials and an Education monitoring report. Borrowers whose loans were transferred to the PSLF servicer from other loan servicers have complained about inaccurate qualifying payment counts, according to a Consumer Financial Protection Bureau report. Officials with the PSLF servicer said they rely on borrowers to catch any payment counting errors resulting from issues with information provided by other loan servicers. However, the PSLF servicer provides borrowers with aggregate counts of qualifying payments, which are useful for helping borrowers track their progress, but do not provide borrowers with enough detail to check the servicer’s counts and identify prior payments that the servicer may have missed (see fig. 7). Borrowers have several options for disputing payment counts or other aspects of the eligibility determination process, including contacting the PSLF servicer or filing an official complaint with Education’s Federal Student Aid Ombudsman Group or through the Federal Student Aid Feedback System. However, the lack of detailed information on qualifying payment counts makes it difficult for borrowers to determine whether the count is correct or not. Education officials said they have not considered requiring the PSLF servicer to provide more detailed information to borrowers on which prior payments were approved or denied. Officials noted that there would be a cost associated with providing this information to borrowers, although they have not produced a cost estimate. Also, officials said that providing too much information may confuse borrowers, and they must consider how to meet borrowers’ need for detailed information without overwhelming borrowers with payment counting complexities. Officials with the PSLF servicer said providing this information to borrowers could be helpful but would require time to confirm the information was correct and would only be done at the direction of Education. Federal internal control standards state that agencies should communicate necessary quality information to external parties. While providing too much information could prove counterproductive, borrowers could benefit from receiving greater detail about their qualifying payments beyond the aggregate counts of qualifying payments that they currently receive. Without clearer and more detailed information on qualifying payments, borrowers may not detect any errors in payment counts, which could ultimately affect borrowers’ eligibility for loan forgiveness. Conclusions Education is responsible for establishing the administrative structure necessary to fulfill the PSLF program’s goal of encouraging individuals to enter and continue in public service employment by providing loan forgiveness to eligible borrowers who meet program requirements. However, Education has not provided the PSLF servicer with a comprehensive source of guidance and instructions on how to operate the program, raising the risk that the PSLF servicer may improperly approve or deny borrowers’ certification requests and forgiveness applications. Education officials told us they have plans for creating a comprehensive PSLF servicing manual, but no timeline for doing so. Working for a qualifying employer is one of the key requirements of the PSLF program; however, Education has not provided the PSLF servicer and borrowers with sufficient information for determining whether employers qualify. This makes the PSLF servicer’s employer assessments vulnerable to inconsistencies and fosters uncertainty for borrowers as to whether or not their employment will eventually qualify them for loan forgiveness. Similarly, inconsistencies in the information used for counting borrowers’ qualifying loan payments raise the risk of errors. Borrowers should be confident that their loan payments will be accurately counted regardless of who their servicer is. However, Education has not ensured the PSLF servicer is receiving consistent loan payment history information from other loan servicers, increasing the risk of inaccurate qualifying payment counts. The chance that these and any other payment counting errors will go undetected is compounded by the fact that Education does not require the PSLF servicer to provide borrowers with details on which payments qualified and which did not. This makes it difficult for borrowers to detect erroneous counts that could ultimately affect their eligibility for loan forgiveness. Consequently, some borrowers may be required to make more payments than necessary before receiving loan forgiveness, while others may be improperly approved for forgiveness. Recommendations for Executive Action We are making the following four recommendations to Education’s Office of Federal Student Aid: The Chief Operating Officer of the Office of Federal Student Aid should develop a timeline for issuing a comprehensive guidance and instructions document for PSLF servicing. This could involve developing a new servicing manual or expanding upon the PSLF servicer’s existing processing handbook. (Recommendation 1) The Chief Operating Officer of the Office of Federal Student Aid should provide additional information to the PSLF servicer and borrowers to enhance their ability to determine which employers qualify for PSLF. This could involve Education developing an authoritative list of qualifying employers or improving the PSLF servicer’s existing database, and making this information available to borrowers. (Recommendation 2) The Chief Operating Officer of the Office of Federal Student Aid should standardize the information the PSLF servicer receives from other loan servicers to ensure the PSLF servicer obtains more consistent and accurate payment information for borrowers pursuing PSLF. (Recommendation 3) The Chief Operating Officer of the Office of Federal Student Aid should ensure that borrowers receive sufficiently detailed information from the PSLF servicer to be able to identify any errors in the servicer’s counts of qualifying payments, including information on whether or not each payment qualified toward forgiveness. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this report to Education for its review and comment. In its comments, reproduced in appendix I, Education concurred with each of our recommendations and identified steps it plans to take to implement them. To improve guidance and instructions for PSLF servicing, Education stated it is documenting PSLF requirements and guidelines and plans to incorporate them into a comprehensive guide. Regarding our recommendation to provide additional information on qualifying employers to the PSLF servicer and borrowers, Education stated that it is reviewing options for developing an online help tool that would be expanded to incorporate qualifying employer information. To standardize the information other loan servicers provide to the PSLF servicer, Education stated it will continue its efforts to address data definition issues related to the data exchanged between servicers. To ensure borrowers receive sufficiently detailed information on counts of qualifying payments, Education stated it will review the letters the PSLF servicer sends to borrowers to determine how to better communicate regarding qualifying payment counts, program requirements, and employer eligibility. We also provided relevant report sections to the PSLF servicer and the three other loan servicers included in our review for technical comments. The PSLF servicer provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Education, and other interested parties. In addition, the report will be 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 (617) 788-0534 or emreyarrasm@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 II. Appendix I: Comments from the U.S. Department of Education Appendix II: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Debra Prescott (Assistant Director), William Colvin (Analyst-in-Charge), and Linda Collins made key contributions to this report. Additional assistance was provided by James Bennett, Deborah Bland, Alicia Cackley, Sarah Cornetto, Hedieh Fusfield, Kirsten Lauber, Sheila R. McCoy, Jeffrey G. Miller, Jessica Orr, Ellen Phelps Ranen, and Paul Wright.

Why GAO Did This Study Starting in September 2017, the first borrowers became eligible and began applying to have their loans forgiven through the PSLF program. GAO was asked to review the PSLF program. This report examines the (1) number of borrowers pursuing PSLF and the extent to which Education has conducted outreach to increase borrower awareness of program eligibility requirements, and (2) extent to which Education has provided key information to the PSLF servicer and borrowers. GAO analyzed data from the PSLF servicer on employment and loan certifications and loan forgiveness applications as of April 2018; reviewed Education's guidance and instructions for the PSLF servicer; assessed the information used by Education and the PSLF servicer and communicated to borrowers against federal internal control standards; and interviewed officials from Education and the four largest loan servicers, including the PSLF servicer. What GAO Found As of April 2018, over a million borrowers had taken steps to pursue Public Loan Service Forgiveness (PSLF) from the Department of Education (Education), but few borrowers have been granted loan forgiveness to date. The PSLF program, established by statute in 2007, forgives borrowers' federal student loans after they make at least 10 years of qualifying payments while working for certain public service employers and meeting other requirements. Over 890,000 borrowers have passed a first step towards potentially qualifying for PSLF by voluntarily having their employment and loans certified as eligible for PSLF as of April 2018, according to data from Education's PSLF loan servicer. While borrowers first became eligible to apply for loan forgiveness in September 2017, few applicants had met all requirements as of April 2018, with 55 borrowers having received loan forgiveness (see figure). Education has used various outreach methods to inform borrowers about PSLF, but the large number of denied borrowers suggests that many are still confused by the program requirements. A recently enacted law requires Education to conduct additional outreach to help borrowers understand how to meet program requirements. Education does not provide key information to the PSLF servicer and borrowers. Guidance and instructions: Education provides piecemeal guidance and instructions to the PSLF servicer it contracts with to process certification requests and loan forgiveness applications. This information is fragmented across the servicing contract, contract updates, and hundreds of emails. As a result, PSLF servicer officials said their staff are sometimes unaware of important policy clarifications. Education officials said they plan to create a comprehensive PSLF servicing manual but have no timeline for doing so. Qualifying employers: Education has not provided the PSLF servicer and borrowers with a definitive source of information for determining which employers qualify a borrower for loan forgiveness, making it difficult for the servicer to determine whether certain employers qualify and for borrowers to make informed employment decisions. Qualifying loan payments: Education does not ensure the PSLF servicer receives consistent information on borrowers' prior loan payments from the eight other federal loan servicers, which could increase the risk of miscounting qualifying payments. Borrowers also lack sufficiently detailed information to easily identify potential payment counting errors that could affect their eligibility for loan forgiveness. These weaknesses are contrary to federal internal control standards for using and communicating quality information, creating uncertainty for borrowers and raising the risk some may be improperly granted or denied loan forgiveness. What GAO Recommends GAO recommends that Education (1) develop a timeline for issuing a comprehensive guidance and instructions document for the PSLF servicer, (2) provide the PSLF servicer and borrowers with additional information about qualifying employers, (3) standardize payment information other loan servicers provide to the PSLF servicer, and (4) ensure borrowers receive sufficiently detailed information to help identify potential payment counting errors. Education agreed with GAO's recommendations.

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Background IRS Collection Process IRS’s process for collecting unpaid tax debts includes: Notice Phase: IRS sends the taxpayer an automatically-generated series of letters about unpaid debts or delinquent returns to prompt payment or response if the taxpayer disagrees with the balance due or is unable to pay the amount owed. Automated Collection System: IRS attempts to have telephone contact with the taxpayer to discuss the debt and prompt full payment or set up a payment installment agreement. According to IRS officials, telephone contact generally happens when taxpayers call IRS in response to IRS enforcement notices or actions, such as filing a lien against the taxpayer’s property or levying financial assets. Field Collection: IRS revenue officers attempt in-person contact with taxpayers to prompt a payment or take enforcement action such as those described above with the Automated Collection System. According to IRS, its collection efforts focus on the potentially collectible inventory. IRS attempts to prioritize the debts it believes it will most likely be able to collect, based on an analysis of factors such as the debt amount and the taxpayer’s ability to pay it. History of Previous PDC Programs In 1995, Congress authorized IRS to contract with private debt collectors to collect unpaid tax debts. In 1997 we reported IRS data showing that the program cost about $21.1 million and collected about $3.1 million. The program was canceled, in part, because of the net loss. In October 2004, Congress granted discretionary authority to IRS for creating a PDC program to collect some portion of unpaid taxes. The program enabled IRS to contract with private collection agencies to collect tax debts and pay them from a revolving fund of the revenue collected. IRS said it would study the comparative performance of private collection agencies versus the agency in collecting unpaid taxes because of concerns that the program might cost more than using IRS resources to collect the debts. IRS began assigning cases to private collection agencies in September 2006. It began the study at that time too. In March 2009, IRS released its study, which concluded that IRS was more cost effective than collection agencies in collecting tax debts when working similar cases. As a result, IRS announced that it would not renew expiring contracts with the private collection agencies. Laws Covering the Current PDC Program and Related Funding The Fixing America’s Surface Transportation (FAST) Act in 2015 mandated that IRS assign inactive tax debt cases to private collection agencies. Inactive cases are those that IRS includes in its potentially collectible inventory but is not actively pursuing. Congress defined three types of inactive tax debt cases that must be assigned to the collection agencies, which are those: removed from active inventory due to a lack of IRS resources or inability to contact a taxpayer; not assigned for collection to an IRS employee and more than one- third of the period of applicable statute of limitation has lapsed; and assigned for collection and more than 365 days have passed without any interaction with the taxpayer or a third party for purposes of furthering collection. The act also excluded certain taxpayer accounts from being assigned to a collection agency. Specifically, accounts are to be excluded if the taxpayer is deceased; under the age of 18; in designated combat zones; a victim of tax-related identity theft; under examination, litigation, criminal investigation or levy; subject to pending or active offers in compromise, an installment agreement, or a right of appeal; or involved in an innocent spouse case. The American Jobs Creation Act and the FAST Act together created two funds which allow IRS to retain up to 50 percent of the amounts collected by private collection agencies. Specifically, IRS can retain up to 25 percent of the amounts that collection agencies collect in each of these funds: Cost of Services fund to pay collection agencies’ commissions. Special Compliance Personnel Program fund to pay costs of administering the collection agency contracts and costs of adding collection staff. IRS’s Approach for Assigning Cases to Collection Agencies under the PDC Program According to IRS officials, IRS’s approach for implementing the PDC program is to roll out cases over time in three major phases, moving from simpler to more complex cases. The first phase (April 2017) included the simplest types of cases in which individual taxpayers had agreed to the debt owed. The second phase (March 2018) added individual tax debts from IRS compliance activities—such as auditing the accuracy of filed tax returns—where taxpayers have not agreed with the debt owed and unfiled tax returns (i.e., from individuals who did not file tax returns as required). The third phase (planned for March 2019) is to add business tax debt cases and unfiled business tax returns. As shown in figure 1, since first assigning cases to collection agencies in April 2017, IRS has increased the number and types of tax debt cases. By the end of fiscal year 2019, IRS plans to have assigned about 2.4 million cases that it expects to be eligible for the PDC program. IRS Has Not Clearly Defined PDC Program Objectives, Measures, and Targets IRS has not clearly defined program objectives, measures, and targets for the PDC program. According to federal internal control standards, management should define objectives clearly to enable the identification of risks and define risk tolerances. Objectives should be defined in specific and measurable terms to enable design of internal control for related risks. Establishing measures and related targets also allows assessment of program performance and helps ensure that objectives are achieved. Although IRS started sending cases to collection agencies under the PDC program in April 2017, IRS did not document the program’s objectives and their links to related proposed measures until October 2018. IRS officials explained that they wanted to get some experience with the program before establishing its objectives and measures, so in June 2018 and August 2018, officials held working sessions to draft the program’s mission, vision, and values statements, and link performance metrics to them. The resulting proposed mission statement was to “provide taxpayers an opportunity to understand and resolve their tax obligations and apply tax laws in a manner that is consistent with IRS collection practices.” The sessions also yielded the following statements under related categories that according to IRS officials are the PDC program’s three program objectives. Taxpayer Protection—Apply tax laws in a manner that is consistent Taxpayer Experience/Satisfaction—Provide taxpayers an opportunity to understand and resolve their tax obligations Private Collection Agency Operational Success—Resolve tax obligations by utilizing private collection agencies According to the working sessions’ documents, officials also proposed PDC measures. However, our review found that these measures did not clearly link to two of the three PDC objectives—applying tax laws consistently with IRS collection practices and providing taxpayers an opportunity to understand and resolve their tax obligations. Table 1 shows our analysis of the clarity of the links between the objectives and proposed measures, and the lack of targets for each of the objectives and measures. In addition, based on our discussions with IRS officials and review of PDC program documents, IRS’s three program objectives do not acknowledge all key program-related risks. For example, because high costs put previous PDC programs at risk, IRS officials said they designed program procedures to control costs and compare these costs to revenue collections. However, none of the objectives or measures addresses costs compared to revenue collections. Similarly, IRS has acknowledged the risks of scams and created risk responses but none of the three objectives focuses on protecting taxpayers from the risks of scams. Our review of IRS documentation also shows that IRS has used inconsistent terms to communicate the program’s objectives. Specifically, IRS’s fiscal year 2019 communication plan for the PDC program states different program objectives than those in the working session documents. This document states the program’s objectives as: help America’s taxpayers settle their debt and come into compliance; ensure the safety and security of taxpayers and their data; and ensure that all taxpayers contacted by private collectors are treated with fairness and respect by monitoring the program. These objectives do not include terms used in the objectives stated in table 1, such as applying tax laws consistently with collection practices while they introduce new terms such as compliance, safety and security, and fairness and respect. Although the two sets of objectives do not necessarily conflict, their differing, inconsistent terms contribute to the stated program objectives being unclear. According to IRS officials, the objectives defined by the working sessions are the objectives for the PDC program. They said that IRS needs more time to finalize the program objectives and measures and develop related targets. The officials said their efforts and resources until recently had been directed toward implementing the PDC program. However, they do not expect to finish refining the objectives, measures, and targets until fiscal year 2020 or later, when they will use program data that may be available then. Until program objectives are clearly defined and consistently stated, IRS cannot ensure that appropriate controls will be in place to address risks and achieve the desired results of the PDC program. Also, without measures and targets that are clearly linked to the objectives, IRS will be limited in its ability to assess and assure that the program is making progress in achieving its objectives. IRS Reporting on PDC Program Results Is Incomplete and IRS Has Not Analyzed Ways to Improve These Results IRS Reporting of PDC Program Revenue Collection and Costs Results is Not Complete According to federal internal control standards, management should externally communicate complete, quality information necessary to achieve objectives. Ways to carry this out include using and reporting complete financial information. However, we found that IRS’s reporting on the PDC program to Congress did not provide complete, quality financial information on some of the program’s results for revenue collected and costs. Specifically, IRS’s reporting did not clarify how much of the collected revenue went to the general fund of the Treasury (the Treasury) rather than to IRS for two special funds. For example, from fiscal year 2016 when IRS started to develop the program through September 2018, IRS’s report to Congress in October 2018 showed program revenue collections of $88.8 million and costs of $66.5 million—a program balance of $22.3 million. While suggesting this positive program balance to the Treasury, the report did not clarify that about $50.9 million of the $88.8 million went to the Treasury and about $37.8 million went to the two IRS special funds—about $18.9 million for each—to pay current and future related IRS costs (see table 2 in appendix II). The report included the required information on the collected revenue retained in the two special funds. We analyzed the status of the two funds as of September 2018 (see table 3 in appendix II). The $18.9 million that IRS retained to pay the costs for commissions to the contracted collection agencies had a balance of $2.9 million; the $18.9 million that IRS retained to pay costs to administer the PDC contracts and hire and train additional staff for IRS collection activities had a balance of $14.6 million. IRS officials said IRS used this fund to hire 100 additional collection staff in October 2018. The officials said that information system improvements will allow IRS to track the revenue collections and costs related to those additional staff pursuing tax debts. IRS officials said in September 2018 that they plan for future reports to include a program balance table and retained fund balance tables. However, they said IRS does not plan to include a table on the amount of collected revenue that went to the Treasury because IRS is not required to include this in the report. Full reporting of revenue and costs can help stakeholders better understand and assess program results. Without clearly reported data, stakeholders are challenged to know how much of the collected revenue went to the Treasury rather than to IRS’s two funds. Nor did IRS’s reporting to Congress include all PDC program costs. As discussed above, ways for management to meet internal control standards include using and communicating quality information on achieving program objectives. IRS has not included the costs incurred by the Treasury Inspector General for Tax Administration’s (TIGTA) Office of Investigation to operate the system for taxpayer complaints about collection agencies, which is part of the PDC program (see table 4 in appendix II for IRS’s reported costs). IRS officials said that IRS did not include TIGTA’s program costs because IRS does not typically include costs incurred by TIGTA or other agencies in its program costs. However, by not including TIGTA’s operational costs, as opposed to its audit costs, Congress is not informed of full PDC program costs. IRS Does Not Plan to Conduct Analyses to Improve PDC Program Results Our work has shown that using performance data helps agencies achieve better results. Federal internal control standards also require that management use quality information to achieve objectives. The standards also point out that management is responsible for an effective internal control system that minimizes the waste of resources. In addition, an IRS strategic goal includes analyzing data to improve decision-making and program results. However, IRS does not have plans to analyze data to identify ways to improve the results of the PDC program by using this information to guide the types of cases sent to collection agencies. We found that IRS has not conducted any analysis of PDC results to determine which types of cases are not potentially collectible and should not be assigned to collection agencies because they result in little or no collected revenue. Our analysis of IRS data showed that certain cases assigned to collection agencies generally have had limited results. Specifically, from April 2017 to September 2018, collection agencies had only collected $88.8 million of the $5.7 billion assigned—1.6 percent—in about 730,000 cases. closed about 111,000 cases, of which about 38,000 were closed as either fully paid or with an installment agreement, while about 56,000 were recalled by IRS and 17,000 were returned by collection agencies with little or no revenue collected. IRS officials said that these recalled and returned cases may have generated some revenue but did not know how much. Although revenue amounts were not known, IRS fiscal year 2018 data showed that collection agencies returned 288 cases (1.7 percent of about 17,000 cases returned in 2018) with a partial debt payment. In addition, our review of IRS’s data indicated that most returned cases would not have had collected revenue. According to these fiscal year 2018 data, more than 95 percent of the 17,000 cases—involving $183 million in tax debt— were returned because the collection agencies indicated that: they were unable to collect on the debt or contact the taxpayer, or the taxpayer received Social Security supplemental or disability income payments (which are to be returned because these taxpayers have limited resources or ability to pay, according to IRS officials), asked the collection agency to cease contact, or had died. When we shared our analysis with IRS officials, they said they were not surprised by these limited PDC collection results because IRS considers them to have low collection potential. Furthermore, many taxpayers may not be able to pay because they have low income. In September 2018, TIGTA reported that 54 percent of taxpayer accounts assigned to collection agencies had a low income indicator. By pursuing such cases that produce little or no revenue, IRS increases PDC program costs to manage the cases being sent and returned as well as the burdens for taxpayers who have to respond to collection agencies’ contacts. However, IRS officials said that they have not analyzed these results and do not have data on either the costs or the burdens associated with these cases. We also found that IRS does not have plans to analyze PDC program results and inactive debt cases to identify cases that IRS will not pursue that could be added to the PDC inventory. These cases could have higher collection potential than many of the current PDC cases that are collecting little or no revenue even though this potential has not been high enough to be actively pursued by IRS. For example, IRS could use its discretion to assign cases before they meet the FAST Act’s case age requirements criteria for collection agency assignment. Assigning such cases earlier could improve PDC program results because of the debt collection principle that collection success generally worsens as cases age. Similarly, IRS does not have plans to analyze PDC results to identify characteristics of cases with the highest collection results and use that analysis to find other types of inactive cases with similar characteristics that could be included in the PDC inventory. IRS officials said they are not conducting or planning such analyses because their priority is to fully implement the program and assign the types of cases to collection agencies that the FAST Act mandates. They said that they may consider expanding the types of cases sent to collection agencies after March 2019 and that they do not know whether they will do related analyses or when any decision will occur. However, for both the debt cases that could be excluded or added, IRS has existing discretionary authority to revise the PDC inventory. For example, IRS has authority to exclude cases from the PDC program if IRS determines they are not potentially collectible. Furthermore, prior law grants IRS the discretion to assign collection agencies cases beyond the three types of cases specified by the FAST Act. Even so, IRS officials said that they have no plans to analyze data on whether to revise the PDC inventory to reduce costs or maximize revenue collection. By not analyzing the results of the PDC cases, IRS risks continuing to send cases to collection agencies that collect little or no revenue and incur costs that waste federal resources as well as burden taxpayers. If most of the more than 2 million cases slated for collection agency assignment into 2019 collect little or no revenue, the accumulated IRS costs as well as burdens imposed on taxpayers could be significant. Similarly, by not analyzing new types of cases that could be assigned to private collection agencies, IRS could miss opportunities to assign cases that collect more revenue than cases that these agencies currently return with little or no revenue. IRS Has Established a Risk Management Process to Address PDC Risks to Taxpayers but the Process Is Not Complete IRS Has Addressed Some Taxpayer Risks but Has Not Fully Implemented All Elements of Its Risk Management Process for Its PDC Program As shown in figure 2 and as described in greater detail below, IRS has made progress in implementing elements of a risk management process for its PDC program but has not completed full implementation of the process. IRS has involved leadership in supporting the risk management process but has not aligned the process with objectives for protecting taxpayers in the PDC program. We previously reported that agency officials should engage leadership and regularly consider risks and how they could affect achievement of objectives. IRS’s initial discussions of risk—including taxpayer risks—involved PDC leadership and internal stakeholders, and followed guidance from the Office of Chief Risk Officer, according to IRS officials. IRS created a risk register to track the status of PDC risks. PDC leadership and IRS stakeholders continue to update these risks biweekly, according to IRS officials. In addition, IRS has developed a program mission statement and draft objectives. However, IRS has not aligned its risk management process for the PDC program with an objective for protecting taxpayers because, as discussed earlier in this report, IRS has not yet finalized its objectives for the PDC program. Identify Risks IRS has taken some steps to identify risks; however, we found various weaknesses in its implementation of this risk management element. According to our 2016 report on risk management, agencies should assemble a comprehensive list of risks that could affect achievement of goals and objectives. IRS’s risk register includes taxpayer risks that IRS internal stakeholders initially identified and continue to update biweekly, according to IRS officials. IRS assigned each of these a risk category— such as taxpayer rights and protection—and most risks have an IRS official assigned to manage them. Our prior work found that clearly documenting actions taken in a risk management process—such as in a risk register—facilitates systematic risk review to help accomplish an agency’s mission. However, we found that IRS has not documented a comprehensive list of specific risks to taxpayers in the risk register. IRS’s risk register identified 6 taxpayer risks but we identified another 10 risks by reviewing other PDC documentation, such as the Policy and Procedures Guide, and by interviewing external stakeholders, as shown in figure 3. For example, IRS did not identify in the risk register the risk that taxpayers may agree to debt payments they cannot afford. Also, IRS has not aligned the taxpayer risks with one or more PDC objectives because IRS has not yet finalized the objectives, as previously discussed. IRS officials said they did not list all taxpayer risks in the risk register because they covered many of these risks in other PDC program documents. Even so, not documenting risks and aligning them with the objectives in the risk register will make it more difficult to properly manage all taxpayer risks. Furthermore, based on our review, the register identified many risks that are broad and unclear. For example, IRS’s description of a taxpayer rights risk is broad and unclear on which rights are at risk given the 10 taxpayer rights in the Taxpayer Bill of Rights. For other risks, we found that IRS did not clearly state the risk to taxpayers. For example, IRS identified certain taxpayer risks with a focus on: giving taxpayers an opportunity to agree to pay their tax debts through a series of payments rather than the effects on taxpayers if they are unable to make all payments; and harming IRS’s reputation if collection agencies do not follow IRS standards rather than clarifying any specific risks to taxpayer rights. While IRS identified some taxpayer risks, the lack of completeness and clarity in IRS’s risk register limits its effectiveness as a tool for tracking taxpayer risks. As a result, IRS does not have reasonable assurance that it has fully identified and addressed all taxpayer risks from the PDC program. Assess Risks IRS has not consistently documented its assessment of taxpayer risks from the PDC program, making it unclear how risks will be prioritized. Our 2016 report on risk management describes the importance of assessing the impact and likelihood of risks so risks can be prioritized. This step is necessary to guide decisions on how to respond to risks. Before implementing the PDC program in April 2017, IRS assessed potential risks and developed sections in the risk register on risk impacts, likelihood, and responses that IRS would use to address each risk. However, IRS has not clearly documented the impacts for each risk in the risk register. We found that the column in the risk register designated for capturing risk impact was generally blank or contained just a date. We also found that IRS did not fully capture information on the severity of a risk’s impact. For example, in a column for recording severity in the risk register, we found information on the implementation status of a risk response instead. Further, although IRS officials said they continue to monitor “closed” risks, we found that the register recorded no information about the severity of the risk impact after IRS implemented a response. Instead, the register recorded the risk as “closed.” We also found that IRS had not clearly documented the likelihood of each risk in the risk register, making it difficult to understand how likely each risk is to occur after IRS responds to and closes a risk. For example, the PDC program and taxpayers could be harmed if scammers find a way to impersonate collection agencies. IRS set up a Taxpayer Authentication Number to allow taxpayers to verify that a phone call is from a collection agency and not a scammer, and closed the risk involving scams. However, the risk register is unclear on how IRS estimates the likelihood this risk could occur or on how this response would reduce the likelihood of scams. IRS officials said quantifying the impacts and likelihood of some risks is difficult. Even so, without clear documentation on the risk impacts and likelihood, it will be difficult for IRS to prioritize the risks. Without a reasonable measure of the impact’s severity, IRS may be unable to properly select responses to mitigate the potential impacts from the risks. Select Risk Response IRS has developed many responses to broadly address taxpayer risks in the PDC program, but has not clearly documented and aligned the responses to address specific risks. Our 2016 report on risk management suggests as a good practice selecting risk responses based on a prioritized list of risks. IRS established risk categories and risk responses that broadly respond to taxpayer risks in the PDC program, such as the quality review process to measure how well collection agency employees properly follow IRS procedures. However, IRS has not addressed all of the elements we described in our 2016 report for selecting responses to risks—in part because identified risks and responses are broad—as IRS has not completed all the steps for risk identification and assessment, as previously discussed. In addition, we found that the risk register did not clearly document the responses chosen to mitigate some stated risks. First, IRS did not always clearly document in the register column for responding to risks how its many responses aligned with a specific risk. For example, the register aligned a response on tracking taxpayer complaints with the risk on protecting taxpayer rights but not with the risk of scams, even though IRS officials said that they rely on TIGTA to monitor taxpayer complaints for PDC-related scams. Second, the register did not include some taxpayer protection responses. Specifically, we identified taxpayer protection responses in the collection agency contracts that were not included in the risk register, such as 1) ensuring that collection agency employees are not paid based on how much they collect, or 2) relying on taxpayers to inform collection agencies if debt payments would cause a hardship. IRS officials acknowledged that their risk register does not align all of its responses with specific risks, but said they created many responses to generally protect taxpayers, although we did not find many of these responses documented in the risk register. Without thorough risk identification and assessment or clear documentation in the risk register of how all risk responses align with specific risks, IRS does not have reasonable assurance that it has properly selected risk responses for each taxpayer risk. Monitor Risks and Risk Responses IRS has developed monitoring efforts for major taxpayer risk responses for the PDC program, but lacks assurance that specific responses are working effectively to mitigate specific risks. Our prior work encourages agencies to monitor how risks change and how well risk responses work. IRS monitoring includes: reviewing the quality of a statistically reliable sample of calls between collection agencies and taxpayers, reviewing monthly reports from collection agencies on their compliance and behaviors involving taxpayers, periodically visiting collection agencies to review program compliance, acting on referrals from Treasury Inspector General for Tax Administration’s (TIGTA) investigation of complaints, and tracking taxpayer satisfaction through a customer satisfaction survey. However, we found that IRS’s broad monitoring efforts provide limited information on whether or how effectively the responses are addressing taxpayer risks in the PDC program. For example: IRS monitors calls and scores collection agencies’ accuracy in following various collection procedures, but this measure provides little information on how well specific risks in the PDC program are addressed to protect taxpayers. For fiscal year 2017, the quality scores indicated that collection agencies scored at least 98 percent accuracy. However, IRS focuses on this overall score rather than monitoring individual components that make up the overall score, which could serve as possible indicators of taxpayer risks, such as unauthorized disclosures of taxpayer information. IRS documentation showed that IRS is still identifying which components of the quality score apply to collection agency performance on taxpayer rights protection, but IRS officials said they do not plan to finalize the program’s performance measures until fiscal year 2020. IRS has not documented how it uses its customer satisfaction survey measure to monitor specific risks to taxpayer rights. IRS reports that taxpayers’ satisfaction scores for interacting with collection agencies exceed 93 percent overall. However, this overall score does not provide specific information about risks to taxpayers or related risk responses. Some survey questions—such as on collection agency professionalism—could provide information about specific taxpayer risks. IRS has plans to consider using other survey questions as measures and, in October 2018, officials said they are planning analysis in fiscal year 2019 to inform and implement survey changes by fiscal year 2020. IRS expects taxpayers to tell the collection agency if they cannot afford a debt payment, but does not track whether this risk response is effective. If a taxpayer reports to a collection agency that debt payments would cause economic hardship, that they have a medical hardship, or that they receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), the collection agency is required to return the case to IRS. To start such tracking, IRS officials said they were open to possibly analyzing which types of taxpayers pay or do not pay, as well as the voluntary payment rate on installment agreements for PDC taxpayers. As of October 2018, IRS documentation showed ongoing development of measures for monitoring taxpayer complaints that TIGTA receives and investigates. It showed that IRS proposes to establish thresholds for the number of actionable complaints and unauthorized disclosures a collection agency needs to report before IRS takes corrective action. In addition to TIGTA complaints, we found that IRS has other sources of taxpayer complaints available that it was not using to monitor changes in taxpayer risk. The Federal Trade Commission’s (FTC) Consumer Sentinel Database received a number of taxpayer complaints about collection agencies and possible scams, but we found that IRS did not ask FTC for these data. FTC gathers data on complaints from the public, the Better Business Bureau, and IRS and other federal and state agencies. We analyzed FTC data from about the first 15 months of the PDC program and identified 20 PDC-related taxpayer complaints. More than half of the complaints indicated taxpayer confusion after being contacted by a collection agency; of these, seven taxpayers mistook the collection agencies for scammers. In addition, six cases were possible scams, and in three cases taxpayers reported harassment by the collection agency. When we shared our analysis with IRS officials, they agreed that the FTC data would be valuable to them and said they plan to work with TIGTA’s Office of Investigations to incorporate these data into their monitoring of taxpayer complaints by the end of March 2019. Although IRS has developed methods to monitor its risk responses involving taxpayer risks and taxpayer rights violations, IRS’s monitoring provides broad indicators rather than specific measures on how well responses address each risk in the PDC program. Although officials are considering changes to IRS’s monitoring and have plans to conduct data analysis in fiscal year 2019 to inform decisions about possible customer satisfaction survey changes, until these changes are implemented, IRS will have limited assurance that it has effective responses to address each risk in the PDC program. Inform Stakeholders IRS informs internal stakeholders and Congress about taxpayer risks in the PDC program, but has not fully engaged external stakeholder groups that represent taxpayers’ interests to learn about risks. Our 2016 report on risk management discussed the need to inform internal and external stakeholders about program risks and risk response performance, and to seek feedback on risks from stakeholders. We found that IRS followed some of these practices and conducted outreach to some internal and external stakeholders. For example, PDC management engages regularly with IRS stakeholders, and produces annual reports to Congress on PDC performance including taxpayer protection. IRS officials said that IRS staff regularly meet with the Taxpayer Advocate Service (TAS) staff on PDC. However, TAS has recommended that it be involved in overseeing taxpayer protection procedures by reviewing collection agency calls with taxpayers. IRS officials said they also reached out to external stakeholders such as practitioner groups and Low-Income Taxpayer Clinics through conferences and the Office of National Public Liaison, and participated in Nationwide Tax Forums to provide “limited talking points” about the PDC program. IRS provided documents showing prior outreach to these groups as well as AARP about the PDC program. In addition, IRS provided documents showing planned outreach to external stakeholders for fiscal year 2019, including TAS, Congress, tax preparers, and tax professional groups. IRS officials said they welcome feedback about taxpayer risks, but documents they provided showed limited efforts to solicit feedback from external stakeholders about the PDC program. For example, between May 2016 and October 2018, IRS anonymously recorded 26 questions from external stakeholders through its Stakeholder Liaison office, which is designated to communicate with stakeholders. Ten of these questions were recorded after April 21, 2017, when collection agencies started contacting taxpayers directly about their tax debts. Because the identities of stakeholders submitting questions are kept anonymous, we could not follow up with stakeholders about IRS’s responses. IRS officials said they had not received any direct feedback from Low Income Taxpayer Clinics, but that any such feedback would be shared through TAS. Our interviews with external stakeholders from practitioner groups and groups that represent taxpayer interests indicated that IRS had not offered them clear opportunities to provide feedback. For example, several Low Income Taxpayer Clinic officials informed us that they did not perceive that IRS was soliciting their feedback when the PDC topic was discussed at conferences and meetings they attended. We received similar comments that feedback opportunities were lacking or unclear from representatives at AARP, the American Bar Association, and other groups, raising questions about how fully IRS solicited feedback while conducting its outreach on the PDC program. As previously mentioned, we learned about taxpayer risks IRS did not include in its risk register and the experiences of vulnerable groups by reaching out to stakeholders and listening to their stories (see figure 3). For example, some stakeholders expressed concerns that using collection agencies could increase scam risk and make it more difficult to advise taxpayers on how to avoid scams. They also identified a range of risks to various types of vulnerable taxpayers. For example, stakeholders told us that low-income taxpayers can be risk averse and will try to pay, and may be unaware they do not have to pay the debt if it will cause a hardship. According to some of the groups we interviewed, some elderly taxpayers are particularly vulnerable to scams and could be easier for collection agencies to pressure into payment arrangements; other types of taxpayers might be confused and believe that a legitimate collection agency call is actually a scam. While we did not encounter clear examples of taxpayer mistreatment by collection agencies or scammers impersonating collection agencies, the concerns stakeholders raised suggest they can provide IRS with feedback and insights about taxpayer risks—particularly to vulnerable groups—that IRS may not identify on its own. Without ensuring that it has fully solicited feedback and conducted outreach to stakeholders, IRS does not have assurance that it has identified specific risks to taxpayers and appropriately responded to them. IRS Has Identified Scams as a Risk, but Has Not Identified and Assessed Other Program Fraud Risks IRS identified scams as a risk to the PDC program and taxpayers. In response to the scam risk, IRS established a Taxpayer Authentication Number to help taxpayers and collection agencies verify each other’s identities, provided authentication guidance to taxpayers with cases assigned to collection agencies, and posted scam alerts and press releases on its website. In addition, TIGTA monitors taxpayer complaints to identify instances of scams, according to IRS officials. Beyond this step, IRS has not identified other fraud risks, such as those internal to the operation of PDC. To help agencies better address fraud, we issued A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework), which includes a comprehensive set of leading practices to combat fraud in a strategic, risk-based manner. These practices include: identifying and assessing inherent fraud risks—including fraud risks within the program, examining the suitability of existing fraud controls, and documenting the program’s fraud risk profile. IRS did not have information to demonstrate a formal fraud risk assessment for the PDC program. IRS officials said they did not conduct and document a formal fraud risk assessment because they considered fraud risk as part of their risk management process for the PDC program. However, IRS’s risk register did not identify fraud types beyond scams, and our review of other IRS risk management documents found that they had no clear information about consideration of other external or internal fraud risks, such as from collection agency employees. In addition, IRS did not document responses to address fraud risks beyond the Taxpayer Authentication Number and scam-related complaints monitoring. Without information on IRS’s assessment and responses to fraud risks it is not clear that IRS fully considered internal and external fraud risks, or developed appropriate responses to those risks, meaning IRS cannot provide assurance it is effectively managing fraud risks to taxpayers and the program. IRS Provided Inconsistent Guidance on Taxpayer Protections, Possibly Creating Confusion and Raising Risks for Some Vulnerable Taxpayers IRS assures taxpayers that they can expect the same level of service and protections from collection agencies as they do from IRS collections. However, we identified two inconsistencies in IRS guidance on taxpayer protections for the PDC program, which could increase confusion among taxpayers or risks to taxpayers. In response to our findings, IRS is revising its guidance to address one of these issues but the other has not been addressed. Responding to suicidal taxpayers: IRS guidance for its collection employees requires them to take all taxpayer suicide threats seriously, keep the taxpayer on the phone, and act quickly to report the incident to authorities to locate and help the taxpayer. However, IRS guidance for collection agency staff allowed debt collectors to first use judgment to try and determine if the suicide threat was sincere before taking steps to help the taxpayer. When we pointed out this discrepancy to IRS officials, they acknowledged it and, in October 2018, issued revised guidance to collection agencies that removed collector discretion to judge whether suicide threats are valid before taking actions to help the taxpayer. Reporting scams to TIGTA: IRS instructs taxpayers to call TIGTA if they suspect a scam. IRS information mailed to taxpayers and on the main PDC program website includes contact information for TIGTA, but does not say to call TIGTA to report a scam. This information is found separately on IRS’s website for scams—which can be accessed through the main PDC program website—but this may not be clear to all taxpayers in the PDC program. IRS officials acknowledged that their mailed publications do not instruct taxpayers to contact TIGTA to report scams, but said they encourage taxpayers to visit IRS.gov to keep informed about scams. External stakeholders including AARP and the National Center on Elder Abuse said that older Americans generally trust and rely more upon the mail than the internet. In addition, because older Americans are more likely to watch televised news, they may not necessarily see IRS website scam alerts and therefore may be less aware of these scams. They also said that not all taxpayers—in particular elderly taxpayers—use the internet, and thus rely on printed guidance or the telephone for information about reporting scams. Without clear guidance, taxpayers will not know how to report scams. Thus, TIGTA and IRS may be unaware of and unable to appropriately respond to them. IRS officials said it would be possible to update the printed guidance provided to taxpayers with information about contacting TIGTA to report scams, but that such revisions could take up to a year to implement. Conclusions The PDC program can contribute to IRS’s enforcement efforts to assure taxpayer compliance and help address the tax gap. However, without program objectives that are clearly defined and consistently stated, IRS cannot assure that appropriate controls will be in place to address risks. Also, without measures and targets that are clearly linked to program objectives, IRS will be limited in assessing progress and assuring that the program achieves its objectives. Without complete reporting on the PDC program revenue collection results, Congress is not fully informed on the amounts of collected revenue sent to the general fund of the Treasury and amounts retained by IRS to pay costs. In addition, IRS’s not reporting TIGTA’s costs to administer the PDC taxpayer complaint system means Congress is not informed of full PDC program costs. Furthermore, because IRS does not have plans to analyze data to identify ways to improve the results of the PDC program by using its discretion to revise the types of tax debt cases it sends to collection agencies, IRS risks continuing to send cases to collection agencies that incur costs but collect little or no revenue. IRS may also miss opportunities to assign cases that collect more revenue to more efficiently and effectively address the gap between what taxpayers owe and pay. IRS’s incomplete documentation of how taxpayer risks align with program objectives, identification of risks, and risk assessment make it difficult for IRS to prioritize risks, and does not provide reasonable assurance that IRS properly selected risk responses to address each risk. Similarly, not fully documenting how IRS is monitoring taxpayer risks and related responses means that IRS has limited assurance that each response is effective in addressing the risk. Taxpayers may face increased risk if IRS guidance to taxpayers is unclear, such as how to report scams. Lastly, more fully soliciting feedback from external stakeholders to learn about taxpayer risks—particularly to vulnerable groups—would provide assurance that IRS has identified and appropriately responded to taxpayer risks. Recommendations for Executive Action We are making the following 12 recommendations to the Commissioner of Internal Revenue: The Commissioner of Internal Revenue should finalize the PDC program objectives so that they are clearly defined in consistent terms, and assure that the key program risks, measures, and targets are linked with the objectives. (Recommendation 1) The Commissioner of Internal Revenue should include TIGTA costs in IRS’s reporting of PDC program costs. (Recommendation 2) The Commissioner of Internal Revenue should report the amount of collected revenue sent to the general fund of the Treasury and amounts retained by IRS to pay its costs. (Recommendation 3) The Commissioner of Internal Revenue should analyze PDC program results to identify the types of cases that are not potentially collectible and should not be assigned to collection agencies. (Recommendation 4) The Commissioner of Internal Revenue should analyze PDC program results and the cases not assigned to the PDC program to identify the types of inactive cases IRS will not pursue that could be assigned to collection agencies to improve PDC program results. (Recommendation 5) The Commissioner of Internal Revenue should clearly document and distinguish the complete list of identified risks to taxpayers in the PDC program risk register, and align the risks with PDC program objectives. (Recommendation 6) The Commissioner of Internal Revenue should clearly document the severity of impacts of the taxpayer risks, as well as the likelihood of each taxpayer risk after responding to it, in the PDC program risk register, and use this information to prioritize risks to address and guide selection of risk responses. (Recommendation 7) The Commissioner of Internal Revenue should clearly document how each risk response aligns with specific taxpayer risks in the PDC program risk register. (Recommendation 8) The Commissioner of Internal Revenue should document how IRS’s monitoring of the PDC program provides information on specific taxpayer risks and how well specific responses are working to address each risk, and should supplement IRS’s monitoring of taxpayer complaints with FTC complaint data. (Recommendation 9) The Commissioner of Internal Revenue should more fully seek and document feedback from external stakeholders representing vulnerable taxpayers to identify and appropriately respond to possible PDC taxpayer risks. (Recommendation 10) The Commissioner of Internal Revenue should clearly document an assessment of fraud risks related to the PDC program. (Recommendation 11) The Commissioner of Internal Revenue should ensure that its printed guidance to PDC taxpayers includes information about reporting scams to TIGTA. (Recommendation 12) Agency Comments and Our Evaluation We provided a draft of this report to the Commissioner of Internal Revenue for comment. IRS provided written comments, which are reproduced in appendix III. Of our twelve recommendations, IRS partially agreed with one and disagreed with two. IRS agreed with the remaining nine recommendations and outlined actions to implement them. Of these nine recommendations, IRS said it already implemented one and planned to implement another, even though IRS disagreed with part of the related finding. IRS partially agreed with our recommendation on defining PDC program objectives related to key risks and developing related measures and targets (Recommendation 1). IRS said it would use consistent terms in developing measures that link to its PDC program objectives, but did not agree that program objectives are necessarily framed in terms of program risks. IRS said its approach to risk management is consistent with GAO’s Standards for Internal Control in the Federal Government, which is to identify objectives before identifying risks to achieving those objectives. However, IRS did not document the program’s objectives until October 2018, about two years after it validated identified PDC program risks, and did not expect to finalize the objectives and related measures and targets until fiscal year 2020 or later. Further, as discussed in the report, IRS’s stated objectives did not acknowledge all key PDC program risks, such as scams and high costs compared to revenue collected. We revised the recommendation to more clearly address our intent that whenever IRS finishes defining the PDC program objectives, IRS should ensure that they include objectives that are linked with key program risks. IRS disagreed with our recommendation that IRS include TIGTA costs in reporting program costs (Recommendation 2). IRS said that doing so would be inconsistent with legislative requirements that define program costs as IRS’s costs and with IRS cost-accounting practices. However, the FAST Act set minimum reporting requirements to which IRS can add more information. Also, the existing cost accounting standards and practices to which IRS refers govern IRS’s accounting for and reporting of costs incurred by IRS. However, our intent is to ensure fuller reporting of the PDC program’s cost to the federal government. Therefore we stand by our recommendation because without such reporting Congress is not informed of full PDC program costs. IRS also disagreed that it should analyze PDC program results to identify the types of cases that are not potentially collectible and therefore should not be assigned to collection agencies (Recommendation 4). IRS said the PDC statute requires the assignment of all inactive tax receivables to collection agencies and therefore no collectability analysis is required or necessary. However, as we discuss in our report, the statute defines “inactive tax receivables” as being in “potentially collectible inventory” but does not define “potentially collectible inventory.” We also noted that IRS has the discretion to define “potentially collectible inventory” under its general rulemaking authority in 26 U.S.C. § 7805 and can use this authority to determine which cases are potentially collectible and which are not. IRS also said it questioned whether the analysis we recommend would improve efficiency and said there is very little cost associated with assigning additional cases to collection agencies. During our review, we asked IRS for such cost information and IRS officials said they did not know the costs to send or to handle returned PDC cases. As we noted in our report, IRS has incurred tens of millions of dollars in costs with little or no revenue collected for most of the PDC cases that IRS has closed. IRS analysis to improve PDC case assignment could improve efficiency. Under its general rulemaking authority, IRS is authorized to make rules it deems necessary for the efficient administration of the tax code. We added language in the report to emphasize IRS’ management responsibility to assure efficient program operations. Without the analysis we recommend, IRS could continue assigning uncollectible debts to PCAs that generate IRS costs and waste federal resources. IRS agreed that it should analyze PDC program results and the cases not assigned to the PDC program to identify the types of inactive cases that could be assigned to collection agencies to improve PDC program results (Recommendation 5). IRS said it had already built this analysis into its current shelving process, as the statue addresses inactive cases that are shelved due to lack of resources. However, it is not clear that the analysis embedded into IRS’s shelving process identifies cases that IRS will not pursue and assigns them to collection agencies before the 52-week shelving threshold, or before the FAST Act’s case age requirements, as we discuss in the report. Similarly, it is not clear that IRS’s shelving process includes analysis of PDC results to identify characteristics of cases with the highest collection results and uses that analysis to find inactive cases with similar characteristics that could be assigned to collection agencies, as we discuss in the report. We look forward to IRS taking actions that will address our findings. Without such analyses, IRS could miss opportunities to assign cases that collect more revenue than cases that collection agencies return with little or no revenue collected. Finally, although IRS agreed with our recommendation that it report the amount of collected revenue sent to the general fund of the Treasury and amounts retained by IRS to pay its costs (Recommendation 3), IRS said it disagreed that its reports to Congress on the PDC program have not provided complete financial information and said such reporting followed statutory requirements. As we state in our report, IRS has documented PDC revenue collections and costs in its annual report to Congress as required by the FAST Act. However, although not required by the Act, IRS has reported the program balance measure—program revenue less cost—without clarifying how much revenue goes to the general fund of the Treasury (the Treasury) rather than to IRS’s two funds. We appreciate IRS’s agreement with this recommendation as well as its plans to report PDC revenue amounts going to the Treasury and to IRS’s retained funds. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. In addition, the report will be 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) 512-9110 or at lucasjudyj@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 IV. Appendix I: Objectives, Scope, and Methodology The objectives of this report were to assess the extent to which the Internal Revenue Service (IRS) has (1) documented Private Debt Collection (PDC) program objectives and measures; (2) documented data on PDC revenue collection and cost results, and used these data to improve the program and meet its objectives; and (3) addressed PDC program risks to prevent or address scams or other harmful effects on taxpayers. We limited the scope of our analysis to PDC program planning and implementation, PDC program data on costs and revenues, and risks to taxpayers in the PDC program. To assess the extent to which IRS documented PDC program objectives and measures, we reviewed PDC program management documents and interviewed IRS officials—including the Director of Headquarters Collection and the PDC Program Manager—to identify the stated objectives and proposed measures to support identification of program risks and assess program performance. We compared the program objectives and measures to criteria in federal internal control standards for defining objectives, including standards that objectives be clearly defined to enable risk identification in specific and measurable terms with measures and related targets to allow assessment of program performance. We assessed the clarity of links between the IRS’s stated PDC program objectives and proposed program performance measures. We also interviewed IRS officials and reviewed program documents to assess the extent to which PDC program objectives were linked to acknowledged key program risks. Finally, we compared IRS’s documented objectives statements to assess consistency in their terms. To assess the extent to which IRS has documented data on PDC revenue collections and costs, we compared IRS’s reporting of PDC costs and revenue collections data to criteria in federal internal control standards, including standards that management should externally communicate complete, quality information necessary to achieve objectives, including objectives for reporting financial information. We assessed the extent to which IRS’s reporting of its program balance measure was complete in reporting program’s results for revenue collected and costs to include how much of the collected revenue goes to the general fund of the Treasury, and how much IRS is retains to pay for related costs. We also assessed the completeness of IRS cost reporting to include the Treasury Inspector General for Tax Administration costs for administering the system for taxpayer complaints about collection agencies. To assess the extent to which IRS is using costs and revenue collect data to improve the PDC program and meet objectives, we compared IRS’s program administration plans to criteria in federal internal control standards that management use quality data to achieve objectives, our work showing that using performance data helps agencies achieve better results, and IRS strategic goals. We also assessed the extent to which IRS had legal authority to revise the types of cases it assigns to collection agencies, and to what extent it had plans to analyze data to revise case assignments to minimize costs and maximize collection revenue results. To assess the extent to which the PDC program addressed risks to taxpayers, we reviewed risk management criteria from one of our previous publications on enterprise risk management (ERM), guidance from the Office of Management and Budget Circular A-123, the Fraud Reduction and Data Analytics Act, and our Fraud Risk Framework. We then applied these criteria to the PDC program risk register for the taxpayer risks. We believe this was appropriate because IRS follows an ERM process to manage taxpayer risks as well as other program risks that were not part of our work. We did not assess IRS’s overall approach to applying its ERM process. To identify taxpayer risks and understand the program’s risk responses, we reviewed the risk register, the collection agency Policy and Procedures Guide, collection agency contracts, and other program documentation and analyzed data on cases collection agencies returned to IRS. We also interviewed IRS officials involved in PDC, including the Director of Headquarters Collection and PDC Program Manager in IRS’s Small Business/Self-Employed operating division, and solicited feedback from external stakeholders—such as Low-Income Taxpayer Clinics and groups dealing with elder fraud and abuse issues—that represent vulnerable taxpayers to learn about risks, and analyzed FTC data on taxpayer complaints. We also reviewed PDC program performance data on quality reviews, taxpayer satisfaction, and taxpayer complaints to understand how IRS monitors taxpayer risks and responses. Lastly, while reviewing program documents, we noted inconsistencies between PDC program guidance for collection agencies and IRS collection procedures that arose during our review, and verified these inconsistencies with IRS officials. We conducted this performance audit from January 2018 to March 2019 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: Data on the IRS Private Debt Collection Program’s Revenue Collections to Various Funds and Costs Table 2 shows the overall private debt collection (PDC) program’s revenue collections and cost data the Internal Revenue Service (IRS) used to calculate and report the PDC program balance measure through September 30, 2018, along with additional detailed information (in bold) that IRS did not include in the program balance table it reported to Congress. The added information shows the amounts that went to the general fund of the Treasury and the amounts of commissionable collections that went to IRS to pay costs to contract for PDC and hire additional collection staff in the future. Table 3 shows the status of the two IRS retained funds for fiscal years 2017 and 2018; these funds had no activity during fiscal year 2016 because IRS had not yet sent any cases to the private collection agencies to be worked. Table 4 shows IRS’s reporting of its PDC program costs for fiscal years 2016 through 2018, including the costs that IRS incurred before IRS started sending tax debt cases to private collection agencies in April 2017. Appendix III: Comments from the Internal Revenue Service Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Jessica Lucas-Judy, (202) 512-9110 or lucasjudyj@gao.gov. Staff Acknowledgements In addition to the contact named above, Tom Short (Assistant Director), Ronald W. Jones (Analyst-in-Charge), Carole J. Cimitile, Charles Fox, Robert Gebhart, James Andrew Howard, Edward Nannenhorn, William M. Reinsberg, Robert Robinson, Cynthia Saunders, Rebecca Shea, Margie K. Shields, and Adam Windram made key contributions to this report.

Why GAO Did This Study IRS attempts to collect tax debts to promote tax compliance but does not have resources to pursue all debts. A 2015 law required IRS to contract with private collection agencies for certain tax debts. However, stakeholders such as the National Taxpayer Advocate have noted that safeguards are needed to protect taxpayers from risks, such as scammers impersonating collection agencies. GAO was asked to review IRS's PDC program. This report assesses the extent to which IRS (1) documented program objectives and measures, (2) documented revenue collection and cost results data, (3) used data to improve the program and meet its objectives, and (4) addressed risks to prevent or address scams and other harmful effects on taxpayers. GAO analyzed IRS's documents on PDC program administration and planning; collections and costs reporting; and managing risks. GAO interviewed officials from IRS and external groups that represent taxpayer interests. What GAO Found The Internal Revenue Service (IRS) documented objectives and proposed measures for its private debt collection (PDC) program for sending tax debt cases to private collection agencies, but the objectives are not clearly defined and their linkages with program measures are unclear. For example, one objective is to provide taxpayers an opportunity to understand and resolve their tax debts, but the proposed measure focuses on taxpayer satisfaction with collection agencies rather than taxpayers' understanding. The objectives also do not include some key program risks, such as scams. Without clearly defined objectives and measures, IRS will have limited ability to assess program results. IRS's reports to Congress on the PDC program have not provided complete financial information. For example, as of September 2018, IRS reported program revenue collections of about $89 million and costs of $67 million, suggesting a positive balance of $22 million for the general fund of the Treasury (the Treasury). However, the report did not clarify that about $51 million collected went to the Treasury and the remaining $38 million were retained by IRS in two special funds to pay current and future program costs. Without this information, Congress has an incomplete picture of the program's true costs and revenues. IRS has not analyzed PDC program results to identify the types of cases that should not be assigned to collection agencies because they do not result in collections. GAO's analysis of IRS data shows that between April 2017 and September 2018 about 73,000 of 111,000 cases closed by collection agencies had little or no revenue collected because the collection agencies were unable to contact the taxpayer or collect the debt, among other reasons. Given the costs associated with managing these cases, without such analyses, IRS may continue to use resources inefficiently and assign cases with little or no potential for revenue collection, or miss opportunities to assign other cases that could produce more revenue. IRS has identified and taken steps to mitigate some PDC program risks that could harm taxpayers. However, IRS has not completed the process of identifying and documenting all risks nor has it fully assessed risks to taxpayers from the program or its response to these risks. Specifically, GAO found that IRS identified and documented 6 taxpayer risks related to the PDC program, such as scammers impersonating collection agencies, but had not identified an additional 10 risks that GAO did, such as taxpayers agreeing to debt payments they cannot afford. IRS had not consistently assessed the impact or likelihood of the identified risks. As a result, IRS's responses to mitigate risks were broad in nature, and were not prioritized or aligned to address specific risks. IRS monitors a sample of collection agencies' telephone calls with taxpayers and reviews taxpayer complaints, but these methods do not provide information on whether IRS's responses to risks are effective. Without addressing these risk management issues, IRS cannot ensure it has fully identified PDC program risks and effectively responded to protect taxpayers from them. What GAO Recommends GAO makes 12 recommendations, including that IRS improve PDC program objectives and measures, revenue and cost reporting, analysis to assign cases, and management of taxpayer risks. IRS agreed with nine recommendations, partially agreed with GAO's recommendation on improving objectives—which GAO clarified in response—and disagreed with two recommendations to include certain costs in reporting and analyze data to identify cases not collectible. GAO maintains the recommendations would more fully report PDC program federal costs and prevent waste.

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Background The federal government owns and leases hundreds of thousands of buildings across the country that cost billions of dollars annually to operate and maintain. In recent years, the federal government has taken steps to improve the management of federal real property and address long-standing issues by undertaking several government-wide initiatives and issuing memorandums to the CFO Act agencies. Within the executive branch, OMB and GSA provide leadership in managing federal real property. As the chief management office for the executive branch, OMB oversees how federal agencies devise, implement, manage, and evaluate programs and policies. OMB provides direction to federal agencies by, among other things, issuing policies and memorandums on real property management. In 2012, OMB issued a memorandum that required agencies to move aggressively to dispose of excess properties held by the federal government and more efficiently use real estate assets. This memorandum initially laid out the requirement to “freeze the footprint.” In 2013, OMB issued a memorandum clarifying the Freeze the Footprint policy. This memorandum required agencies going forward to maintain no more than their fiscal year 2012 total square footage of domestic office and warehouse space. The policy required agencies to specifically identify existing properties to be disposed of to offset any new property acquisitions. In March 2015, OMB transitioned from freezing the federal government’s real property footprint to reducing it. Specifically, OMB issued the National Strategy for the Efficient Use of Real Property (National Strategy) to provide a framework to guide agencies’ real property management, increase efficient real property use, control costs, and reduce federal real property. The National Strategy outlined three key steps to improve real property management: (1) freeze growth in the inventory; (2) measure performance and use data to identify opportunities to improve the efficiency of the real property portfolio; and (3) reduce the size of the inventory by consolidating, co-locating, and disposing of properties. OMB also issued the RTF policy which clarified existing policy to dispose of excess properties and promote more efficient use of real property assets. The RTF policy requires agencies to: (1) submit annual Real Property Efficiency Plans (Plan) to GSA and OMB; (2) issue a policy that specifies a design standard for maximum useable square feet by workstation for use in domestic office space; (3) set and specify in their Plans annual reduction targets for their domestic office and warehouse space for a 5-year period; (4) set and specify in their Plans annual reduction targets for domestic owned building properties reported in the Federal Real Property Profile; and (5) continue to not increase the square footage of their domestic inventory of office and warehouse space. Additionally, agencies must identify in their Plans potential projects related to office and warehouse consolidation, co-location, disposal, as well as construction and acquisition efforts. OMB is responsible for reporting the progress of agencies’ efforts in reducing the amount of federal real property space under the RTF policy. GSA has two key leadership responsibilities related to real property management. First, GSA’s Public Buildings Service functions as the federal government’s principal landlord. In this role, GSA acquires, manages, and disposes of federally owned real property for which it has custody and control on behalf of federal agencies that occupy the space. Additionally, GSA leases commercial buildings on behalf of agencies and manages the lease agreements. In these situations, GSA executes an occupancy agreement with a customer agency for each space assignment that is similar to a sublease between GSA and the agency. The occupancy agreement outlines both the financial specifics of the agreement and the responsibilities of GSA and the customer agency. There are certain unique advantages for customer agencies when GSA leases on their behalf. For example, GSA is able to enter into longer-term leases, and agencies can release space back to GSA with 4 months’ written notice if certain conditions are met, relieving the agencies of the cost for the returned space. Second, GSA’s Office of Government-wide Policy is responsible for, among other things, identifying, evaluating, and promoting best practices to improve the efficiency of management processes. In this policy role, GSA provides guidance for federal agencies and publishes performance measures. It also maintains the Federal Real Property Profile, a real property inventory database that contains information on federal real property government-wide. Agency Plans Identified Similar Strategies to More Efficiently Use Space and Common Challenges Agencies Identified Space Consolidation, Co- location, or Property Disposal as Ways to Achieve Space Reductions Based on our review of agencies’ 2016 and 2017 Plans, we found that all 24 CFO Act agencies described strategies for reducing office and warehouse space. As previously mentioned, these annual Plans must include all potential projects related to office and warehouse consolidation, co-location, disposal, as well as construction and acquisition efforts. The agencies’ Plans cited consolidation, co-location, and disposal as the primary means to reduce their office and warehouse space, activities mentioned in the National Strategy. Agencies also cited other methods, such as utilizing telework and decreasing the space they allocate per person to achieve space reductions. The space reduction strategies included most often in the Plans we reviewed include the following. Consolidation: All 24 agencies reported planned or ongoing efforts to reduce their space by consolidating their offices or operations. For example, we spoke with officials at HUD, which is in the process of consolidating staff from four offices in the National Capital Region into its 1.12-million square foot headquarters building in Washington, D.C. HUD started by remodeling one floor to create a more open floor plan and intends to apply this design throughout the building. As part of the consolidation project, HUD has reduced the size of some office cubicles from 64 square feet to 56 square feet. (See fig. 1.) HUD leases its space through GSA and estimates that it will be able to return about 175,000 square feet of unneeded space back to GSA once all four offices are closed. At that point, GSA would then bear the cost of the space and work to lease it to another agency or otherwise dispose of it. Once the project is completed, HUD estimated that its headquarters building will accommodate about 500 more personnel (for a total of 3,200) and reduce its annual lease payments by about $11 million. Fifteen of the 24 agencies identified consolidation opportunities outside of their headquarters buildings. For example, the Department of Agriculture (USDA) discussed a consolidation project involving five component agencies in Albuquerque, New Mexico, in its fiscal year 2017 Plan. According to USDA officials, four component agencies occupying nearly 44,500 square feet in one building were to be consolidated into about 34,000 square feet of space in another building already occupied by a different USDA agency. In the prior location, the multiple components spaces’ square footage per person averaged 327, but the proposed consolidation would bring the utilization rate down to 255 square feet per person. USDA estimated that the consolidation project would result in about $238,000 in annual rent cost savings for the four components. Additionally, to enable this consolidation project, the component agency already occupying the building consolidated and vacated about 20,000 square feet, a move that resulted in an annual rental savings of about $500,000. In its fiscal year 2017 Plan, Interior’s Bureau of Reclamation anticipated eliminating 87,000 square feet of office space by consolidating operations from two buildings in Denver, Colorado. Interior estimated that the consolidation will result in a 40 percent reduction in its overall utilization rate to 165 square feet per person and an annual cost savings of about $2.1 million. Co-location: Thirteen of the 24 agencies’ Plans stated that they are exploring or implementing co-location projects to reduce space by merging staff from different components or agencies into another agency’s space. For example, the Social Security Administration (SSA) recently initiated a co-location pilot program with the Internal Revenue Service (IRS) within Treasury to combine SSA field offices with IRS Taxpayer Assistance Centers. Co-location of operations can reduce the overall space required by allowing agencies to share common space such as waiting rooms, an action that can reduce rent and operating costs for the co-located agencies. Since the inception of the 1-year program in January 2017, four IRS offices are participating and have moved into SSA field offices. According to SSA, IRS and SSA staff have adjusted to sharing space and the IRS presence in SSA space has not affected SSA wait times or created security or parking issues. According to an IRS official, IRS employees continue all normal operations from their co-located offices with SSA, including meeting with taxpayers in-person. The official also noted that IRS has extended the terms of its agreement with SSA for an additional year. However, SSA noted that the agencies are still working through customer access issues that could determine whether it would be possible to expand the pilot program and pursue additional co-location opportunities. In another example, according to Interior officials, the U.S. Geological Survey is co-locating staff from Menlo Park, California, to a National Aeronautics and Space Administration facility in the nearby city of Mountain View, California. About 40 percent of the staff will move early in fiscal year 2019, and the U.S. Geological Survey expects the remaining staff to be co- located by the end of 2021. Interior officials estimate that the co- location will result in an overall reduction of 165,000 square feet (about 50 percent of its space) and expects to save about $12 to $14 million in annual rent costs. To help agencies identify potential co-location opportunities and work with other agencies to meet their space requirements, GSA developed and provided agencies access to its Asset Consolidation Tool in fiscal year 2015. This database tool provides agencies with information about federal spaces in their area, including the buildings’ vacancy and utilization rates. Disposal of unneeded space: Thirteen of the 24 agencies reported that they plan to reduce their real property footprint by disposing of unneeded space, including selling or demolishing federal buildings or terminating leases, among other actions. For example, IRS has five tax submission-processing centers that receive all mailed income-tax returns and have warehouses that store the physical tax records. Each of these five processing centers, which include both office and warehouse spaces in multiple buildings, is approximately 500,000 square feet. According to IRS officials, 87 percent of all 2016 individual income-tax returns were filed electronically. As a result, the IRS plans to dispose of three of the five centers by 2024 to align with its reduced need for income-tax return processing and storage space. GSA has the statutory authority to dispose of property for all federal agencies and generally does so on their behalf. In addition, some federal agencies, such as Energy, or departmental components have statutory authority to dispose of buildings and other types of property and are not required to notify or use the services of GSA to complete the disposal. Better utilization of existing space: In their Plans, agencies also reported using tactical tools, such as incorporating space utilization rates into their capital-planning process, to identify opportunities to reduce space. For example, 22 of the 24 agencies reported incorporating office space design standards and agency utilization rates into their processes to identify space reduction opportunities. Agencies set their own space design standards and space utilization rates, which may vary based on agency mission requirements across their components. The RTF policy requires agencies to establish a design standard for the maximum workstation size, which should, at a minimum, be applied to all space renovations and new acquisitions. In addition, GSA has a recommended office space-utilization rate range of 150 to 200 square feet per person. Officials from our case study agencies noted several practices they said were helpful to identify opportunities to better utilize and ultimately reduce their space. For example, Commerce officials described developing a process for identifying and prioritizing space reduction opportunities using a two-factor matrix. Through this process, Commerce plans to target office space with a large number of employees and poor utilization rates (compared to its 170 square foot utilization rate). According to Commerce officials, these situations may offer the most opportunity for space reductions and achieving significant rent and operating cost savings, particularly in high-cost real estate markets. Using this process, Commerce identified the potential for reducing as much as 1.6-million square feet (16 percent) of its total office space within 52 high priority facilities. According to IRS, retirements, hiring freezes, budget reductions, and increased telework have resulted in excess space throughout its portfolio. In fiscal year 2016, IRS started using a Strategic Facility Plan model to help identify space reduction projects. IRS’s objectives include consolidating multiple offices within a metropolitan area, closing outlying buildings, and leveraging telework, mobility, and its attrition rates. This model utilizes a template form to provide a consistent decision-making framework for assessing various options, articulating the rationale for selecting the preferred option, and documenting decisions and concurrence. According to IRS officials, this model has helped IRS to reduce a lot of its space. In 2014, GSA developed and provided agencies with access to the Real Property Management Tool, which can aid agencies that want to more effectively utilize their space. The database tool provides agencies with the capability to comprehensively view their real property portfolio by consolidating data from the assets that agencies directly manage with the assets that GSA manages on their behalf. As such, regardless of whether an agency initiated the action or GSA did so on its behalf, the tool gives an agency the ability to see all of its data, such as on expiring leases, in one place. The tool enables agencies to create individualized analytic reports allowing them to analyze the data in various ways. Teleworking and hoteling: Fifteen of the 24 agencies also described alternate workplace arrangements enabled by information technology, such as telework and hoteling, to help reduce office space. Telework is a work flexibility arrangement under which an employee performs their work responsibilities at an approved alternative worksite (e.g., home). Executive agencies are required to establish policies that authorize eligible employees to telework, determine the eligibility of all employees to participate in telework, and notify all employees of their eligibility. Federal law also requires that agencies consider whether space needs can be met using alternative workspace arrangements when deciding whether to acquire new space. As such, some agencies are eliminating designated offices for staff who primarily telework, a step that can improve space utilization. In a hoteling arrangement, employees use non-dedicated, non-permanent workspaces assigned for use by reservation and on an as needed basis. For example, the Office of Personnel Management implemented a workspace sharing initiative at one of its program offices. Staff who are not physically present in the office 4 or more days per week are required to share cubicles and offices. The Office of Personnel Management estimated that the initiative resulted in a 47 percent office space reduction for the program office. Cost and Mission Considerations Were Cited as Leading Challenges to Reducing Space As part of their fiscal year 2016 and 2017 Plans, the 24 CFO Act agencies also described the major challenges they anticipated facing in their efforts to meet their space reduction targets. The agencies most frequently cited the following challenges: Space reduction costs: Twenty of 24 agencies stated that the costs of space reduction projects pose a challenge. Agencies are generally responsible for the up-front costs associated with relocations and tenant improvements, such as acquiring new furniture and renovating existing areas to reduce space or to accommodate more personnel in a smaller area. For example, the Department of Labor (Labor) reported in its fiscal year 2017 Plan that it did not have sufficient funding to implement a space reduction project that would have reduced commercially leased office space by 4,000 square feet. Similarly, the Department of Veterans Affairs’ fiscal year 2017 Plan noted that assuming a limited budget, large scale consolidations would be difficult to achieve. Some agencies have used or report that they intend to use funding from GSA’s Consolidation Activities program to help fund their space reduction projects. According to GSA, from fiscal years 2014 to 2017, GSA’s Consolidation Activities program funded projects that will eliminate 1.4-million rentable square feet from the GSA inventory and reduce agencies’ annual rent payments by $54 million. According to the IRS, GSA’s Consolidation funds have helped the agency reduce about 500,000 square feet of space. IRS officials noted that these funds helped the agency implement larger and more expensive space reduction projects than it would have been able to do otherwise. However, according to officials from several agencies, to use this program, agencies must also contribute funds to the projects. HUD officials stated that they considered applying for project funding through GSA but did not do so because HUD did not have sufficient funds for the agency’s share of project costs. Three of the 24 agencies specifically noted that the cost to clean up environmentally contaminated buildings is a challenge to disposing of excess office and warehouse space. Agencies are required to consider the environmental impact of property disposals. We have previously found that assessments and remediation of contaminated properties can be expensive and complicate the disposal process. Also, agencies are responsible for supervising decontamination of excess and surplus real property that has been contaminated with hazardous materials of any sort. In its fiscal year 2017 Plan, Energy estimated that over 60 percent of its excess buildings require extensive decontamination prior to disposal. Overall, Energy projected that its total liability for environmental clean-up could cost more than $280 billion. Mission delivery: Thirteen of the 24 agencies reported that mission delivery requirements can also affect their ability to reduce space. Agency missions may require office locations in certain areas or require additional space to accommodate activities such as customer interactions. These requirements may preclude disposals or limit opportunities to reduce space. For example, in its fiscal year 2017 Plan, SSA stated that its efforts to reduce space are affected by its mission, which requires offices widely dispersed throughout the country to administer and support its benefit programs, among other things. SSA has about 1,500 office spaces nationwide, most of which require space to accommodate the public. SSA had an overall office space utilization rate of 301 square feet per person, which exceeded GSA’s recommended office space utilization rate range of 150 to 200 square feet per person. USDA’s fiscal year 2017 Plan stated that its missions require office space in rural areas to, among other things, provide program assistance and leadership on food, agriculture, natural resources, rural development, nutrition, and related issues. In its fiscal year 2017 Plan, USDA also observed that the real estate market in rural areas is less competitive than in urban areas because there are fewer rental options, a situation that can also drive up rent costs. As such, USDA noted that these factors may contribute to difficulties identifying disposal opportunities and finding alternate spaces that could allow for more effective space utilization. Employee organization concerns: Ten of the 24 agencies reported that considering employee organizations’ concerns and addressing collective bargaining requirements when reconfiguring space can add time and affect the extent of their space reductions. For example, in its fiscal year 2017 Plan, SSA noted that the agency must meet with three employee unions when revising office space policies or design standards and collaborating with these organizations adds to the project’s implementation timeline. In July 2017, we reported that SSA officials met with employee union groups about the impact of potential changes to its space configuration or usage. Officials said that while the interactions with the union groups were positive—including gaining input on issues such as ergonomics, the security of field offices, and overall implementation—at times, these negotiations caused delays to individual projects and complicated reduction efforts by requiring union buy-in. In addition, Labor reported in its fiscal year 2017 Plan that its collective bargaining agreement and agency mission requirements for offices and work stations do not always enable it to take advantage of the previously discussed GSA Consolidation Funding program as well as GSA’s Total Workplace Furniture & Information Technology program. For example, the Total Workplace Furniture & Information Technology program requires that cubicles and offices must not exceed a specified square footage. However, according to Labor officials, Labor’s Departmental Space Management Regulation requires a certain utilization rate per person which may make it challenging to also stay within the program’s square footage requirements. Workload growth: Eight of the 24 agencies noted that increases in their workload limited their ability to achieve overall agency space reductions. For example, according to the Department of Justice’s fiscal year 2017 Plan, the agency anticipated having to provide additional court rooms to support an increased volume of immigration cases and accommodate the additional immigration judges needed to handle that volume. The Department of Justice estimated that the space needed to accommodate the new judges and additional public areas could add about 155,000 square feet to its portfolio. Also, according to the Department of Health and Human Services’ fiscal years 2016 and 2017 Plans, the Office of Medicare Hearings and Appeals experienced a 30 percent growth in cases and expected 1.2- million new cases annually after 2017. The Department of Health and Human Services projected that the growth in cases and additional staff needed to process the cases required additional field offices, which would increase its total office space square footage. The Majority of Agencies Reported Space Reductions in Fiscal Year 2016 but Achieved Varied Success in Meeting Their Targets As previously mentioned, agencies are required to set annual square foot reduction targets for domestic office and warehouse space in their annual Plans. According to an OMB official, to help ensure the targets are realistic, agencies are also required to identify the specific projects that will help them to achieve their space reduction targets. According to GSA and OMB officials, agencies submit their Plans, including their reduction targets, and their Plans are reviewed by both GSA and OMB. But each individual agency ultimately establishes its targets based on what it determines to be cost-effective and feasible. Through its Real Property Efficiency Plan template, GSA provides guidance to agencies on what is expected in their annual submissions. Each agency is required to document its internal controls, such as the process for identifying and prioritizing reductions to office and warehouse space and disposal of properties based on return on investment and mission requirements. The identified internal controls should help ensure that an agency’s proposed space reduction projects reflect an efficient use of space and are cost effective. A review of our five case study agencies illustrated some of the different approaches agencies used to determine their reduction targets. For example, several agencies’ targets were based on the total estimated feasible reductions identified by each agency component. In contrast, one agency centrally established a reduction target percentage and then asked its components to develop projects to meet that target. According to case-study agency officials, the agencies considered many factors, including their missions, priorities, component needs, and available budgets, when determining their targets. We found that the number and magnitude of the space reduction projects agencies identified in their fiscal year 2017 Plans varied greatly and were generally proportional to the size of the agency’s real property portfolio. The number of projects identified in agency Plans ranged from as few as 3 projects (the minimum required in the Plans) to nearly 400 projects. The estimated space reductions per project across agencies ranged from about 1,400 to over 94,000 square feet. For example, the Department of Veterans Affairs has a relatively large office and warehouse portfolio of over 28-million square feet. As part of its fiscal year 2017 Plan, the agency reported 320 planned or ongoing projects with an average space reduction of about 1,800 square feet per project. Conversely, the Office of Personnel Management has a relatively small office space portfolio of about 1-million square feet; its fiscal year 2017 Plan identified 4 ongoing or potential projects with an average space reduction of about 6,000 square feet. In fiscal year 2016—the first and only year RTF data were available at the time of our review—the majority (71 percent or 17 of the 24 agencies) reported they achieved reductions in their office and warehouse space even though the agencies had varying success in achieving the individual targets they set for themselves. For example, as shown in figure 2, of the 17 agencies that reduced space, 9 exceeded their targets (i.e., reduced more space than planned); 7 reduced space but missed their target (by anywhere between 2.8 and 96.7 percent); and 1 agency expected to increase in square footage, but reduced space. Whether an agency met its target is not the only indicator of an agency’s success in reducing space. For example, although some agencies missed their targets, they reduced their office and warehouse space by a larger percentage than some agencies that exceeded their targets. Also, the fact that some agencies missed their targets can in part be attributed to setting more aggressive targets than other agencies. Agencies’ fiscal year 2016 targets ranged from a 0.8 percent increase to an 8.4 percent decrease in office and warehouse space. Of the 9 agencies that exceeded their reduction targets, 4 more than tripled their target. As mentioned, agency targets are set by the agency and are a reflection of their unique situation including mission needs and priorities and therefore cannot be generalized across agencies. For example, Energy exceeded its fiscal year 2016 reduction target and reduced 292,140 square feet of space (0.8 percent of its total square footage). However, the Environmental Protection Agency missed its target, which was the second most aggressive target across all the agencies at 7.2 percent of its total square footage; but the agency reduced 174,003 square feet (3.24 percent of its total square footage). Of the three agencies with the most aggressive target reductions—those that ranged between 6.7 and 8.4 percent of their total square footage—only one met its target. Figure 3 shows the extent to which each of the CFO Act agencies met its fiscal year 2016 targets. See appendix II for more detailed information on each agencies’ square footage of space, reduction targets and fiscal year 2016 reductions. Officials from our case study agencies cited a number of factors that influenced whether or not they met their fiscal year 2016 targets, and may also affect their target achievement in subsequent years. Of our five case study agencies, three exceeded their fiscal year 2016 reduction target and two missed their target. Timing and funding: Officials from two case study agencies cited timing as a factor, noting that there is fluidity to the project’s planning, implementation, and disposal process that may not always be within an agency’s control. As a result, space reductions anticipated in one fiscal year may not be realized until a subsequent fiscal year; conversely, some space reduction opportunities may present themselves unexpectedly. For example, according to officials at HUD, which missed its fiscal year 2016 reduction target, some projects take longer than anticipated to start or complete. HUD officials said that their fiscal year 2016 target may have been too ambitious and planned projects were delayed because they were unable to secure sufficient funding. As such, the officials said the agency must carefully select which projects to move forward with in a given fiscal year, but expected to move forward with their delayed, planned projects in the next fiscal year. Energy on the other hand, exceeded its fiscal year 2016 reduction target. Energy officials said that they tend to be conservative in listing potential RTF projects in their Plans. They noted that it takes a long time to dispose of a building and the timing was dependent on the building’s level of contamination, location, size, agency budget, and other factors. As a result, even though the agency may have planned to dispose of a building in a given fiscal year, there were numerous reasons why the project may get delayed. Further, RTF is a long-term effort and should not be judged based on agencies’ progress in their first year. According to an OMB official, it is understood that there may be circumstances in a given year that may hinder agencies from reaching their RTF targets, such as budget constraints or the timing of leases; however, the expectation is that agencies will continue to work toward accomplishing their target in the next year. Accordingly, under RTF, agencies set annual space reduction targets for a 5-year period. Officials from our case study agencies emphasized that the 5-year targets are not static, but rather are subject to annual updates. The RTF policy also acknowledged that changes to mission requirements and the availability of budgetary resources may require modifications to an agency’s targets, particularly in each of the subsequent years. Lastly, given that the RTF policy is still relatively recent, an OMB official noted that agencies are still in the process of learning how to set appropriate targets. Previous space reductions: Officials from three of our case study agencies noted that prior space reductions made during the Freeze the Footprint policy limited their ability to reduce space more aggressively. Though the thrust of Freeze the Footprint was to maintain the fiscal year 2012 size of an agency’s portfolio, agencies started to look more strategically for opportunities to dispose of excess space in their portfolios. The majority of agencies (18 of 24) have been decreasing the square footage of their domestic office and warehouse space since the Freeze the Footprint policy was implemented in 2013. OMB reported that under Freeze the Footprint, agencies achieved a 24.7-million square foot reduction between fiscal years 2012 and 2015. Officials from the IRS, which accounts for 70 percent of Treasury’s real property inventory, noted it has released 2.7-million square feet (approximately 10 percent) in the past 5 years, bringing its total square footage down to 25.3 million. According to officials from three of our case study agencies, a certain amount of space is required to effectively fulfill their missions. As such, the closer agencies get to attaining their optimum footprint, their ability to achieve further space reductions may be limited. GSA Has Processes to Track Space Release Requests and Manage Vacant Space In November 2016, GSA put into effect a new standard operating procedure to, among other things, standardize and streamline the process of receiving, reviewing, and documenting agencies’ space release actions. As previously mentioned, GSA’s occupancy agreements for space it leases on behalf of its customer agencies generally allow the agencies to release space back to GSA with as little as 4 months’ notice, if certain conditions are met. This can enable agencies to reduce their space and related rent costs relatively quickly without penalty. As a result of this new process, GSA established a centralized e-mail for agencies to submit their space release requests. The e-mail is maintained at GSA headquarters before it is forwarded to the respective GSA region. GSA also developed a centralized space release tracking spreadsheet to help ensure that all GSA regions were (1) notifying the customer agency of GSA’s determination on whether the space release request was within GSA’s policy, and (2) processing the space release and ceasing rent billings in a timely manner. According to GSA headquarters officials, this new process was implemented to rectify past concerns that space release requests were not centrally tracked, GSA regions may not have been making consistent determinations, and some requests either were missed or were not processed within the appropriate time frames. GSA officials noted that GSA similarly manages all vacant space in federally owned property under its custody and control and in commercial space it leases, and the agency seeks to utilize the space as quickly as possible. GSA has 11 regional offices throughout the country that generally conduct the day-to-day real property management activities for its customer agencies. These responsibilities include acquiring, managing, and disposing of real property, as well as executing, renewing, and terminating leases on behalf of its customer agencies in exchange for a monthly fee for GSA’s services. GSA headquarters officials told us that GSA regional offices track all the occupancy agreements and proactively work with customer agencies to help manage their space needs well before the agreements expire to understand ongoing space requirements. For example, according to GSA headquarters officials, this process includes working with agencies at a strategic level and helping them think about how they can accomplish their space needs and meet their targets 4 to 5 years in advance. GSA headquarters and regional officials noted that the advance planning helps the GSA regional officials integrate agencies’ potential space needs into the work they are already doing in the region as GSA manages the regional inventory as a whole, including managing the amount of vacant space. GSA regional officials told us that they work closely with the agencies in their space consolidation and reduction efforts to minimize the likelihood that GSA would be caught off guard by a release of space. This work enables GSA to develop options for either filling vacant space based on the known needs in the region or developing an alternative plan to effectively utilize the unneeded space. One of GSA’s strategic objectives is to improve the federal utilization of space in order to lower the government’s operational costs. To assess progress, GSA has an agency-wide vacant space performance goal of 3.2 percent for its federally-owned and leased inventory (with a 5 percent goal for federally owned and 1.5 percent goal for leased space). Based on GSA data, the agency has steadily lowered its percentage of vacant space under its custody and control from 3.8 percent in fiscal year 2013 to 3 percent in fiscal year 2016, exceeding its performance goal of 3.2 percent for the first time in 4 years. The vacant space performance goal’s data help GSA evaluate its real property assets and plan for and make investment decisions while meeting its customer’s needs. According to GSA officials, the lower vacant space percentage is a reflection of the agency’s continued focus on working with its customer agencies to: (1) move into federally owned space, when possible; (2) decrease the size of commercially leased space to reduce agency rental costs and overall government reliance on leased space; and (3) dispose of unneeded federally owned assets. However, GSA officials noted that a certain level of vacant space is necessary to meet the space needs of new customers and customers with changing space requirements. According to GSA officials, GSA also tracks and reports annual cost avoidance data for all office and warehouse space reductions. These data include space covered under RTF in federally owned buildings under GSA’s custody and control and commercial space that GSA leases. Cost avoidance is defined as the results of an action taken in the immediate timeframe that will decrease future costs. The government-wide cost avoidance for fiscal year 2016 was $104 million based upon a net 10.7 million square foot reduction to all office and warehouse space. Of the government-wide figure, according to GSA, the total cost avoidance associated with office and warehouse space reductions in federally- owned space under GSA’s custody and control and commercial space GSA leased in fiscal year 2016 was over $75.8 million and 3.1 million square feet. In its cost avoidance calculation, GSA accounts for space returned to it by customer agencies only if there is a net square footage reduction in GSA’s total square footage across all the space that it manages. Similarly, the space returned to GSA does not reduce the federal government’s overall office and warehouse square footage unless GSA disposes of it. However, space that is returned to GSA is reflected as a square footage reduction for the customer agency and contributes toward that agency’s RTF target reduction. According to GSA regional officials, agencies’ requests to return space prior to the end of their occupancy agreements appear to have increased since the implementation of the RTF policy. Thus far, GSA has processes to manage agencies’ space release requests and keep its vacant space to a minimum. However, it is too early to determine how the recent increase in space release requests, in combination with agencies’ continued focus on occupying a smaller footprint and reducing their square footage, will affect: (1) the size of GSA’s inventory of vacant space in the long term, (2) GSA’s regional office workload to manage the requests, and (3) the cost savings for the federal government. Agency Comments We provided a draft of this report to GSA, OMB, Commerce, Energy, HUD, Interior, and Treasury for review and comment. We received technical comments from Energy, which we incorporated, where appropriate. GSA, OMB, Commerce, HUD, Interior, and Treasury did not have comments on our draft report. We are sending copies of this report to the appropriate congressional committees; the Administrator of GSA; the Director of the OMB; the Secretaries of the Departments of Commerce, Energy, HUD, the Interior, and the Treasury; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-2834 or rectanusl@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 III. Appendix I: Objectives, Scope, and Methodology Our objectives were to determine: (1) the approaches and any challenges the 24 Chief Financial Officers (CFO) Act agencies identified to achieving their Reduce the Footprint (RTF) reduction targets for all their domestic office and warehouse space; (2) the extent to which these agencies reduced space and met their fiscal year 2016 RTF targets; and (3) how the General Services Administration (GSA) manages vacated space that it had leased to these agencies. To obtain background information for all three objectives, we reviewed relevant literature, including laws governing federal real-property management and agencies’ efforts to reduce their real property portfolios and Office of Management and Budget’s (OMB) and GSA’s memorandums and guidance governing the RTF policy. We also reviewed prior GAO and GSA inspector general reports describing agencies’ real-property management and efforts to more efficiently manage their real property portfolios. To determine the approaches used and any challenges faced by the CFO Act agencies in achieving their RTF reduction targets for all their domestic office and warehouse space, we conducted a content analysis of the agencies’ 5-year Real Property Efficiency Plans (Plans) for fiscal years 2016 and 2017. These Plans were obtained directly from each of the agencies. Each Plan describes an agency’s overall strategic and tactical approach in managing its real property, provides a rationale for and justifies its optimum portfolio, and directs the identification and execution of real property disposals, efficiency improvements, general usage, and cost-savings measures. The content analysis of the Plans helped us to understand the approaches agencies used to reduce space, how space- reduction targets were set, and any challenges they experienced in reducing their space. To identify agencies’ approaches to achieving their RTF targets, we reviewed all agencies’ Plans to determine the most frequently mentioned approaches agencies reported using or planned to use to reduce their real-property footprints. As part of their plans, each agency is required to include a section detailing approaches it plans to use to reduce space. While these sections were the primary focus of the analysis, we analyzed the Plans as a whole for any additional mention of agencies’ approaches to reduce space. Based on the frequently identified approaches, codes were developed. An analyst reviewed all the agencies’ Plans and coded the approaches and another analyst reviewed the coding. If there was a disagreement, the two analysts reviewed and discussed until they reached an agreement. As a result of the analysis, five approaches were identified that agencies most frequently reported using or were planning to use to achieve their RTF targets. These five approaches are described in more detail in the report: (1) consolidation; (2) co-location; (3) disposition of unneeded space; (4) better utilization of existing space; and (5) teleworking and hoteling. For the purposes of our report, telework and hoteling were combined because these approaches are often used in combination. For example, agencies can use telework strategically to reduce space needs and increase efficiency by making hoteling (i.e., desk sharing) possible. To identify any challenges agencies faced in achieving their RTF targets, we similarly conducted a content analysis of agencies’ fiscal year 2016 and 2017 Plans. As part of their Plans, each agency included a section describing challenges it faced to reducing space. While these sections were the primary focus of the analysis, we analyzed the Plans as a whole for any additional mention of agencies’ challenges. Based on the frequently identified challenges, codes were developed. An analyst went through all the agencies’ Plans to code the challenges and another analyst reviewed the coding. If there was a disagreement, the two analysts reviewed and discussed until they reached an agreement. As a result of the analysis, we identified the four challenges that agencies most frequently described in their Plans: (1) space reduction costs; (2) mission delivery; (3) employee organization concerns; and (4) workload growth. In our report, we relied specifically on agencies’ fiscal year 2016 and 2017 Plans to provide examples and context for our description of the approaches agencies use and challenges they experience in achieving their RTF targets. However, after these Plans were submitted, agencies reported that the specific details as described in their Plans may in some instances, have changed due to a variety of factors. For our case study agencies, to the extent possible, we have provided updated information from agency officials as of December 2017. We selected five agencies as case studies to inform our first two objectives. We selected the agencies using a variety of considerations such as the diversity in the size of the agency’s domestic office and warehouse portfolio, the extent to which the agency met its fiscal year 2016 RTF targets, the types of real property authorities the agency has, as well as suggestions from GSA and OMB related to agencies’ experiences. Based on these factors, we selected the: (1) Department of Commerce (Commerce); (2) Department of Energy (Energy); (3) Department of Housing and Urban Development (HUD); (4) Department of the Interior (Interior); and (5) Department of the Treasury (Treasury). While our case-study agencies and their experiences reducing their space are not generalizable to all CFO Act agencies, they provide a range of examples of how agencies are implementing the RTF policy. We interviewed officials at the selected agencies as well as GSA and OMB, and reviewed relevant agency real-property management and RTF guidance, to obtain more detailed information about agencies’ RTF approaches, challenges, specific RTF projects, RTF project funding and prioritization, and experiences in meeting their RTF targets. In addition, we visited three office buildings of our case study agencies in Washington, D.C., with ongoing or recently completed RTF projects that illustrated approaches the agencies used to reduce space and met with officials to discuss the projects in more detail. The spaces we visited were the headquarters buildings for Commerce, HUD, and Interior. We selected the buildings based on recommendations from officials at our case study agencies. To determine to what extent agencies reduced their space and met their fiscal year 2016 RTF targets, we analyzed the 24 CFO Act agencies’ data as submitted to GSA on their RTF targets and reported reductions for fiscal year 2016. The office and warehouse square footage reductions are calculated annually using GSA occupancy agreement data and agencies’ self-reported data in GSA’s Federal Real Property Profile. For example, for fiscal year 2016, the space reduction calculations based on these data sources at the end of the fiscal year was compared to the square footage reported in fiscal year 2015. At the time of our review, this was the first and only year of RTF data available as the policy was implemented in March 2015. We conducted a data reliability assessment of the RTF data GSA provided by interviewing GSA officials and reviewing documentation, and concluded the data were reliable for our purposes. We also interviewed officials at GSA and OMB and reviewed relevant documentation to learn more about each agency’s role and the requirements of the RTF policy. We interviewed officials from our selected case-study agencies to obtain supporting documentation and to improve our understanding of how agencies set their RTF targets, agencies’ progress toward those targets, and the approaches used and challenges faced in meeting those targets. We also asked the agency officials for examples of successful practices used to reduce their office and warehouse space. To determine how GSA manages vacated federally owned and commercially leased space that it leases to agencies, we reviewed federal requirements and GSA policies and vacancy data. We conducted a data reliability assessment of GSA’s vacancy and cost avoidance data by interviewing GSA officials and reviewing documentation, and concluded the data were reliable for our purposes. We also interviewed GSA headquarters and regional officials and obtained documentation on how GSA manages space returned by agencies. We conducted this performance audit from April 2017 to March 2018 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: Agencies’ Reported Baselines, Targets, and Fiscal Year 2016 Reductions FY 2016- FY 2020 target reduction (118,127) Social Security Administration Missed target and increased in space Department of Health and Human Services (170,147) (520,987) (15,466) (47,946) (56,062) CFO Act Agencies Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the individual named above, Maria Edelstein (Assistant Director); Lacey Coppage; Edgar Garcia; Delwen Jones; Catherine Kim (Analyst-in-Charge); Michael Mgebroff; Malika Rice; Kelly Rubin; and David Wise made key contributions to this report.

Why GAO Did This Study The federal government continues to work to reduce its real property inventory and associated costs. GSA provides space for agencies in government-owned and commercially leased buildings. In 2015, the OMB issued a memorandum requiring the 24 agencies with chief financial officers to reduce their domestic office and warehouse space. These agencies are required to set annual reduction targets for a 5-year time period and update their real property plans annually. GAO was asked to review the implementation of this space reduction initiative. This report discusses: (1) the approaches and any challenges the 24 agencies identified to achieving their reduction targets for all their domestic office and warehouse space; (2) the extent these agencies reduced their space and met their fiscal year 2016 targets; and (3) how GSA manages vacated space it had leased to these agencies. GAO conducted a content analysis of the 24 agencies' real property plans for fiscal years 2016 and 2017 and analyzed agencies' data as submitted to GSA on their targets and reductions for fiscal year 2016, the only year for which data were available. GAO selected five agencies as case studies based on several factors, including size of the agencies' office and warehouse portfolio, agency reduction targets, and fiscal year 2016 reported reductions. GAO reviewed relevant documentation and interviewed officials from GSA, OMB, and GAO's case study agencies. GAO provided a draft of this product to GSA, OMB, and our case study agencies for comment. GAO incorporated technical comments, as appropriate. What GAO Found Most of the 24 agencies with chief financial officers reported to the Office of Management and Budget (OMB) and the General Services Administration (GSA) that they planned to consolidate their office and warehouse space and allocate fewer square feet per employee as the key ways to achieve their space reduction targets. For example, the Department of Agriculture reported it will consolidate staff from five component agencies in two office buildings. When complete, the space allocated per employee will average about 250 square feet down from a high of 420 square feet per employee. In taking these actions, the agencies most often identified the cost of space reduction projects as a challenge to achieving their targets. Agencies cited costs such as for space renovations to accommodate more staff and required environmental clean-up before disposing of property as challenges to completing projects. Some agencies required to maintain offices across the country reported that their mission requirements limit their ability to reduce their space. In fiscal year 2016, 17 of the 24 agencies reported they reduced their space, but had varying success achieving their first-year targets. Of the 17 agencies, 9 exceeded their target and reduced more space than planned, 7 missed their target (by anywhere between 2.8 and 96.7 percent), and 1 reduced space, despite a targeted increase. Agency officials said that it is not unusual for projects to shift to different years and that such shifts could lead to missing targets one year and exceeding them the next. GSA has processes to manage the space vacated by agencies that is leased through GSA. For example, starting in November 2016, GSA started tracking agencies' space release requests centrally to help standardize the process and established an e-mail address to which agencies can submit requests. GSA relies on regional offices to manage real property in their regions and to identify tenants for vacant space or to remove unused space from the inventory. GSA's regional officials said regular monitoring and coordinating with agencies minimizes the likelihood GSA is caught off guard by a return of space. These processes also help them to plan ahead. GSA met its 2016 performance goal to have an annual vacant space rate of no more than 3.2 percent in its federally owned and leased buildings. However, given the recent implementation of the space reduction initiative, it is too early to determine the extent to which agencies will return space to GSA prior to the end of their leases and the effect on GSA's inventory.

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Background DNA Analysis of Crime Scene Evidence Analysis of DNA evidence from crime scenes can help law enforcement link offenders or victims to crime scenes. After crimes occur, law enforcement submits physical evidence from crime scenes, victims, and suspects (hereafter referred to as “crime scene evidence”) to labs for analysis. Labs then perform “DNA analysis,” which, as used in this statement, refers to (1) biology screening (locating, screening, identifying, and characterizing blood and other biological stains and substances); and/or (2) DNA testing (identifying and comparing DNA profiles in biological samples). In order to compare the victim’s or offender’s DNA profile to the recovered crime scene DNA, the lab will need to have known biological samples available. Thus, samples are generally collected from victims and may also be collected from others—such as suspects, crime scene personnel, first responders, and consensual sexual partners (in cases of sexual assault). Matching DNA Profiles in the FBI’s Combined DNA Index System Matching DNA profiles from unknown potential offenders to existing DNA profiles can help law enforcement develop investigative leads. If a case has no suspects to compare the DNA evidence to, the DNA profile of the unknown potential offender can be entered in the Federal Bureau of Investigation’s (FBI) Combined DNA Index System (CODIS), where it can be compared to existing DNA profiles at the local, state, or national level. Labs can then compare unknown potential offender profiles to other profiles already in CODIS, including: 1. Profiles generated from evidence taken from other crime scenes and connected to other unknown potential offenders. 2. Profiles generated from samples taken from known convicted offenders, arrestees, and others as required by law (hereafter “offender samples”). According to DOJ, the federal government, all 50 states, the District of Columbia, and Puerto Rico have laws requiring the collection of DNA samples from individuals convicted of certain crimes; in addition, the federal government, over half of the states, and the District of Columbia have laws authorizing the collection of DNA from individuals arrested for certain crimes. When an unknown potential offender’s profile matches another profile within CODIS, a “hit” or investigative lead may be developed and shared with law enforcement, as shown in figure 1 below. Only federal, state, or local government labs that meet the FBI’s Quality Assurance Standards can participate in CODIS. As of January 1, 2018 there were 201 labs that participated in CODIS in the U.S. Of these, 143 performed just forensic casework DNA analysis, 4 performed just offender sample DNA analysis, and 54 performed both. According to the FBI, as of May 2018, the national level of CODIS contained over 16 million profiles generated from offender samples and over 850,000 profiles generated from crime scene evidence. Also, the FBI reported that as of May 2018, CODIS had produced over 422,000 hits that aided more than 406,000 investigations. DOJ’s Capacity Enhancement and Backlog Reduction Grant Program The CEBR grant program is administered by the National Institute of Justice (NIJ), a component within OJP. NIJ, the research arm of DOJ, is responsible for evaluating programs and policies that respond to crime, and providing and administering awards for DNA analysis and forensic activities, among other criminal justice activities. The CEBR grant program is funded by an appropriation “for a DNA analysis and capacity enhancement program and for other local, State, and Federal forensic activities.” The broad appropriations language enables NIJ to allocate funding for a variety of forensic programs at funding levels established by the agency; however, congressional reports accompanying the appropriation have directed that OJP make funding for DNA analysis and capacity enhancement a priority. CEBR awards can be used to enhance capacity and reduce backlogs at government labs that analyze crime scene DNA evidence and/or process offender DNA samples. NIJ defines a “backlogged” request for analysis of crime scene evidence as a request that has not been completed within 30 days of receipt in the laboratory. CEBR is a formula grant program that dates back to 2004. Grant awards are made non-competitively to states and units of local government based on a formula set by DOJ that allocates certain amounts to each state. This formula takes into account each state’s population and associated crime, and guarantees a minimum amount for eligible applicants from each state. CEBR has broad participation from states and local jurisdictions. For instance, in 2017 OJP awarded $61 million in CEBR grants to 131 grantees in 49 states, the District of Columbia, and Puerto Rico. Preliminary Analysis of CEBR Data Show that the Backlog of Requests for Crime Scene DNA Analysis Is Increasing and Stakeholders Attribute This to Various Factors Our preliminary analysis of CEBR grant program data show that the backlog of requests for crime scene DNA analysis has increased by 77 percent from 2011 through 2016, and that demand for such DNA analysis has outpaced laboratory capacity. In our review, we identified numerous factors that have contributed to an increased demand for DNA analysis beyond laboratories’ capacities, including scientific advancements in DNA analysis technology and state laws requiring testing of certain DNA evidence. Preliminary Analysis of CEBR Data Show an Increasing Backlog for Crime Scene DNA Analysis at Laboratories among CEBR Grantees, though Backlogs Vary Among Individual Labs We found that, among CEBR grantees, the reported aggregated backlog of requests for crime scene DNA analysis has increased by 77 percent from 2011 through 2016. As part of the grant application process, NIJ requires applicants for CEBR grants to provide data from all labs in their jurisdiction, even if certain labs will not be using CEBR funds. NIJ does this to assist in understanding nationwide trends in DNA analysis backlogs. The reported growth in the aggregate backlog among CEBR grantees is the result of labs receiving more requests than they were able to complete over time, as shown in the figure below. Although reported aggregate trends show an increase in the backlog among CEBR grantees, the data also reveal that this increase is not uniform across all labs. For example, among the 118 grantees for which we had data from 2011 through 2016, 30 grantees (25 percent) reported an overall decrease in the backlog. In addition, data from CEBR grantees show differences in the average time it takes to process requests (turnaround time) among grantees. Stakeholders also stated, and NIJ has reported, that labs generally have shorter average turnaround times for requests associated with violent crimes than for requests associated with non-violent crimes—because labs generally prioritize requests associated with violent crimes. For our ongoing review, we continue to analyze CEBR data and data from other sources pertaining to this issue. Various Factors, Such as Scientific Advancements, Have Increased Demand for DNA Analysis Beyond Laboratories’ Capacities Based on a review of a selection of studies and discussions with DNA evidence stakeholders, we identified the following factors that are reported to have contributed to an increased demand for crime scene DNA analysis beyond laboratories’ capacities. As a result, these factors are believed to have helped contribute to increased backlogs: Recent scientific advancements have increased the quality of DNA analysis by allowing lab analysts to obtain DNA profiles from smaller amounts of biological evidence. This has increased the amount of evidence that is eligible to be analyzed and, as a result, has increased the demand for DNA testing. One DNA evidence stakeholder was able to produce preliminary data demonstrating that, as a general trend, labs that decreased their turnaround time saw corresponding increases in requests from law enforcement. Other DNA stakeholders, including NIJ, made similar observations. Increased awareness among law enforcement and the public Increased awareness among law enforcement officers of the value of DNA analysis in solving current and older cases has led to law enforcement agencies submitting more DNA evidence to labs for analysis. Further, NIJ and other stakeholder officials we interviewed stated that the volume of DNA profiles in CODIS has increased significantly over recent years. This, in turn, increased the usefulness of DNA evidence in testing suspect DNA profiles against a well-populated database of existing offenders. This usefulness has increased awareness among law enforcement personnel of CODIS, which contributes to increased demand for DNA analysis, thereby contributing to the backlog. Additionally, when deciding whether to submit DNA evidence for analysis, law enforcement and prosecutors may consider jurors’ expectations that DNA analysis is presented. Recent legislation requiring Sexual Assault Kit (SAK) analysis State legislation requiring SAK analysis has caused an increase in demand for DNA analysis. As of July 2018, we identified at least 25 states that have enacted laws requiring law enforcement to submit for testing SAKs that come into law enforcement possession. Eleven of these states also required the submission for testing of previously untested SAKs. Twenty-one of these laws were passed in 2014 or later. In addition to the factors that have contributed to increased demand, resource challenges and constraints on lab capacity are reported to have helped contribute to crime scene evidence backlogs. State and local labs generally receive appropriations from state or local governments and are subject to local funding priorities. Federal grants can help, but even combined federal and jurisdictional funding may not increase lab capacity enough to keep up with increases in demand. Additionally, these labs report facing lengthy hiring and training processes for forensic analysts, and often lose staff to private or federal labs which may offer higher pay, further limiting lab capacity for completing analysis. Preliminary Results Show that DOJ Has Not Clearly Defined and Documented CEBR Grant Program Goals DOJ’s NIJ has not defined CEBR program-wide goals in clear, specific, and measurable terms. We identified statements in NIJ and CEBR program documentation that communicated program-wide goals, but the documentation did not consistently identify the same goals or cite the same number of goals. For example, a stated goal of improving the quality of DNA testing was included in only 2 of 4 NIJ documents we reviewed. In addition, NIJ officials verbally clarified that the CEBR program has two goals, (1) to increase laboratory capacity for DNA analysis, and (2) to reduce backlogs of DNA evidence awaiting analysis. These differences can be seen across goal statements outlined in various NIJ sources as shown in table 1 below. NIJ officials acknowledged that they do not have documentation that further defines the goals of the program in clear, specific, and measurable terms. These goals are specified as increasing laboratory capacity for DNA analysis and reducing backlogs of DNA evidence awaiting analysis. Officials provided an explanation as to what the goals mean. Specifically, officials stated that: Increasing lab capacity refers to increasing samples analyzed, reducing processing times, and increasing the number of DNA profiles uploaded into CODIS—all while either maintaining or increasing the quality of DNA analysis at labs. Reducing backlogs refers to reducing the number of backlogged requests awaiting analysis by more than the number of requests that become backlogged during the same timeframe. Officials stated that although they believe the goal of reducing the crime scene evidence backlog is unachievable in the foreseeable future, they have kept it as a program goal because each year it is included in the appropriation language that supports the program. However, these clarifications and definitions are not available in CEBR documentation, which is an indication that NIJ may not be using clear, specific, and measurable goals to guide program development or assess progress. We continue to evaluate CEBR program goals and we are in the process of evaluating related CEBR performance measures as part of our ongoing work. Preliminary Analysis Shows that OJP Has Established Controls for Conflicts of Interest Related to CEBR Grants, but Has Not Fully Established Controls Related to Lobbying Our preliminary results show that OJP has controls to implement federal requirements associated with conflicts of interest and some controls related to lobbying that apply to both OJP CEBR grant administrators as well as recipients of grant funding; however, OJP has not fully established all appropriate controls related to lobbying. OJP Has Established Controls for Conflicts of Interest Related to CEBR Grants We found that OJP has established controls to implement federal conflicts of interest requirements that apply to OJP employees administering CEBR grants and CEBR grantees. For example, federal law prohibits government employees from participating personally and substantially in particular government matters, such as the administration of federal grants, which could affect their financial interests. We found that OJP has established an agency-wide ethics program and uses tools such as the DOJ Ethics Handbook and annual financial disclosure reports, among others, to help employees and their supervisors to determine whether they have potential conflicts of interest. See table 2 below for a list of the federal conflicts of interest requirements we identified, as well as our preliminary assessment of related OJP controls to ensure that the requirements are met. OJP Has Some Controls for Lobbying as They Apply to Recipients of CEBR Grant Funds, but Has Not Fully Established All Appropriate Controls We found that OJP has established some controls related to lobbying but has not fully established controls needed to meet applicable requirements. Specifically, federal law sets forth several requirements related to lobbying “certification” and “disclosure.” Lobbying certification refers to agreeing not to use appropriated funds to lobby, and lobbying disclosure refers to disclosing lobbying activities with respect to the covered federal action paid for with nonappropriated funds. Federal regulation requires recipients of all federal awards over $100,000 to file certification documents and disclosure forms (if applicable) with the next tier above, and to forward those same forms from the tier below if they issue subawards for $100,000 or more. In the case of CEBR grants, tiers include OJP, grantees, subgrantees, contractors under grantees and subgrantees, and subcontractors. Subawards include subgrants, contracts under grants or subgrants, and subcontracts. We found that OJP had established controls to obtain lobbying certification documents and disclosure forms from grantees, but had not fully established controls to ensure grantees obtain these documents from tiers below them, see table 3 below. OJP has established mechanisms to ensure it obtains lobbying certification documents and disclosure forms from grantees. Specifically, according to OJP, it requires that grant applicants electronically agree to the certification document during the application process; if applicants do not agree to it, they cannot move on in the process. OJP also requires that applicants submit the lobbying disclosure form as part of the grant application process. Upon submission, a grant manager reviews the form for completeness and content and checks a box in an application review checklist. However, OJP has only partially established a mechanism to ensure that, for subawards over $100,000 (1) CEBR grantees obtain certification documents and disclosure forms, as applicable, from tiers below them, and (2) disclosure forms are forwarded from tier to tier until received by OJP. Specifically, OJP requires grant applicants to agree to the certification document set forth in regulation. This certification document, in turn, lists certification and disclosure requirements, and states that, “The undersigned shall require that the language of this certification be included in the award documents for all subawards at all tiers (including subgrants, contracts under grants and cooperative agreements, and subcontracts) and that all subrecipients shall certify and disclose accordingly.” However, the certification document does not state in clear terms what the specific requirements of the regulation are or how they are to be carried out. OJP attorneys responsible for overseeing their implementation were not aware of specific requirements in the regulation. For example, they were not aware that disclosure forms were required to be forwarded from tier to tier until received by OJP. Additionally, 3 of 4 CEBR grantees we spoke with were not aware of one or more of these requirements. Lastly, we found that OJP does not provide guidance to grantees to ensure they understand the requirements nor does OJP follow-up with grantees to ensure they are implementing them. The statute requires that federal agencies “take such actions as are necessary to ensure that the are vigorously implemented and enforced in agency.” As part of our ongoing work, we will continue to monitor and assess OJP’s compliance with statute and regulations related to grantee, subgrantee, and contractor lobbying disclosure requirements and make recommendations, as appropriate. Chairman Grassley, Ranking Member Feinstein, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contacts and Staff Acknowledgements If you or your staff members have any questions about this testimony, please contact Gretta L. Goodwin, Director, Homeland Security and Justice at (202) 512-8777 or GoodwinG@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this testimony included Dawn Locke (Assistant Director), Adrian Pavia (Analyst-in-Charge), Stephanie Heiken, Jeff Jensen, Chuck Bausell, Daniel Bibeault, Pamela Davidson, Eric Hauswirth, Benjamin Licht, Samuel Portnow, Christine San, Rebecca Shea, Janet Temko-Blinder, and Khristi Wilkins. 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.

Why GAO Did This Study Many state and local crime labs have backlogs of requests for DNA analysis of crime scene evidence, as reported by grantees participating in DOJ's CEBR grant program. These backlogs can include sexual assault kits. Since 2011, DOJ's Office of Justice Programs—the primary grant-making arm of DOJ—has awarded nearly $500 million to states and local jurisdictions through the CEBR grant program to help reduce DNA evidence awaiting analysis at crime labs. There have been concerns that these backlogs of unanalyzed evidence have enabled serial offenders to reoffend or have delayed justice. This statement is based on preliminary observations and analyses from GAO's ongoing review of (1) the level of crime scene DNA evidence backlogs among CEBR grantees and the factors that contribute to such backlogs; (2) the extent to which DOJ has clearly defined goals for CEBR; and (3) the extent to which OJP has controls for CEBR related to federal conflicts of interest and lobbying requirements. To develop these preliminary findings, GAO reviewed CEBR grantee data from 2011-2016 (the latest data available) and studies relevant to the DNA backlog, visited selected labs, and interviewed DOJ officials, among others. What GAO Found GAO's preliminary analysis found that, among the Department of Justice's (DOJ) DNA Capacity Enhancement and Backlog Reduction Program (CEBR) grantees (state and local entities with forensic crime labs), the reported aggregated backlog of crime scene DNA analysis requests has increased by 77 percent from 2011-2016. The growth in this reported aggregate backlog is the result of labs receiving more requests than they were able to complete, although they were receiving and completing more requests, as shown in the figure below. GAO's preliminary analysis also found that the National Institute of Justice (NIJ)—the component within DOJ's Office of Justice Programs (OJP) that is responsible for administering CEBR grants—has not defined CEBR program-wide goals in clear, specific, and measurable terms. Additionally, GAO's ongoing work identified statements in NIJ and CEBR program documentation that communicated program-wide goals, but the documentation did not consistently identify the same goals or cite the same number of goals. GAO continues to evaluate CEBR program goals and is in the process of evaluating related CEBR performance measures as part of its ongoing work. GAO's preliminary analysis found that OJP has some controls to implement federal requirements associated with conflicts of interest and lobbying that apply to both OJP CEBR grant administrators as well as recipients of CEBR grant funding, but OJP has not fully established all appropriate controls related to lobbying. What GAO Recommends GAO is not making recommendations in this testimony but will consider them, as appropriate, as it finalizes its work.

gao_GAO-18-87

gao_GAO-18-87_0

Background State is the lead agency responsible for implementing American foreign policy and representing the United States abroad. It operates over 275 embassies, consulates, and other posts worldwide, staffed by over 13,000 Foreign Service officers. State has the authority to grant allowances to employees serving overseas to offset the cost of living and working overseas as well as to recruit and retain employees who serve in difficult and dangerous locations. Two key offices within State are involved in administering and processing allowances for overseas employees. State’s Office of Allowances in the Bureau of Administration develops and coordinates policies, regulations, standards, and procedures to administer allowances under the Department of State Standardized Regulations. The office compiles statistics on overseas living costs and conditions and computes the established allowances to compensate U.S. government civilian employees for costs and hardships related to assignments abroad. State’s Bureau of the Comptroller and Global Financial Services (CGFS) processes allowances for State employees through the Consolidated American Payroll Processing System, State’s payroll system, and captures information on payments for all allowances through the Global Financial Management System, State’s accounting system. State uses the Consolidated American Payroll Processing System to process American employees’ pay, including allowances paid directly to employees. This system generally captures information on the location where an employee is assigned. According to State officials, the Global Financial Management System captures information on all State payments, including those paid through vouchers, such as for rent paid directly to the landlord. State Offers 14 Allowances to Compensate Its Employees for Costs and Hardships Related to Foreign Assignments State provides 14 allowances to employees serving overseas to compensate them for the costs and hardships related to foreign assignments across four broad categories—cost-of-living, recruitment and retention incentives, quarters, and other allowances. Table 1 includes a brief summary of these allowances. Cost-of-Living Allowances Cost-of-living allowances reimburse employees for certain excess costs, exclusive of any quarters costs, incurred from employment overseas. The following six allowances fall into this category: The post allowance is granted to employees officially stationed at posts or foreign areas where the cost of living, exclusive of the cost of quarters, is substantially higher than in Washington, D.C. It is designed to permit employees to spend the same portion of their salaries for standard living expenses as they would if they were living in Washington, D.C. The Office of Allowances updates the post allowance at least every other year based, in part, on a survey filled out by posts. As part of this process, posts must collect and compile prices for a sample basket of goods from stores that U.S. government employees serving at that post frequent (see fig. 1). For example, as of September 3, 2017, Embassy Port-au-Prince had a post allowance rate of 20 percent and was expected to submit its next required survey in June 2018. The foreign transfer allowance defrays an employee’s extraordinary, necessary, and reasonable costs when he transfers to a post in a foreign area. This allowance includes four expense types— predeparture subsistence, wardrobe, lease penalty, and miscellaneous. The predeparture subsistence expense portion assists employees with the cost of temporary lodging, meals, laundry, and dry cleaning for up to 10 days when they vacate their permanent residence in the United States before traveling to their overseas post. This allowance may be granted before the employees’ final departure from the United States, beginning not more than 30 days after they vacate their residence. The reimbursement rate is based on the per diem rate of their U.S. post. Employees are eligible for the wardrobe expense portion when they transfer across two climate zones for a new foreign assignment. For example, if an employee were to transfer from Saint Petersburg, Russia (zone 1), to Doha, Qatar (zone 3), then the employee would receive a wardrobe allowance. This allowance is a flat rate of $600 for individuals, $1,000 for employee and one family member, or $1,300 for employees and multiple family members. The lease penalty expense portion offsets a residential lease penalty unavoidably incurred by employees when they transfer. The miscellaneous expense portion covers employees’ expenses incurred from moving, such as pet transportation, vehicle registration, and driver’s license fees. These expenses are capped at the lesser of either 1 week’s salary or $650 for an individual, or 2 weeks’ salary or $1,300 for a family. The home service transfer allowance defrays an employee’s extraordinary, necessary, and reasonable costs when she transfers from an overseas post to a post in the United States. To qualify for this allowance, the employee must agree to work for the U.S. government for at least 12 months after her transfer. Similar to the foreign transfer allowance, the home service transfer allowance includes four expense types—subsistence, wardrobe, lease penalty, and miscellaneous. The subsistence expense portion covers the same types of expenses as the predeparture subsistence expense portion. However, employees are also eligible to receive reimbursements upon return to the United States based on the per diem rate for the first 30 days and then a prorated rate thereafter. The wardrobe, lease penalty, and miscellaneous expense types are the same for the home service transfer as for the foreign service transfer. The separate maintenance allowance (SMA) defrays the additional expense of maintaining family members at another location (1) because of dangerous, notably unhealthful, or excessively adverse living conditions at the overseas post of assignment, (2) for the convenience of the U.S. government, or (3) because of special needs or hardships involving the employee or a family member. There are three types—involuntary, voluntary, and transitional. Involuntary SMA is provided when State determines that there is an adverse, dangerous, or notably unhealthful condition that should exclude family members from accompanying employees at a post. The annual rate is based on family size ranging from $6,800 for one child only to $23,000 for an adult and four or more family members. Voluntary SMA can be authorized based on an employee’s request for special needs or hardship at posts for reasons including, but not limited to, career, health, educational, or family considerations. The annual rate is based on family size, ranging from $5,300 for one child only to $18,000 for an adult and four or more family members. Transitional SMA is granted for a limited time after a post’s evacuation status changes or in connection with the beginning or end of an unaccompanied posting. It is paid at a daily rate based on the number of eligible family members, the standard continental U.S. per diem rate, and the amount of time the employee receives the allowance. The education allowance defrays extraordinary and necessary costs, not otherwise compensated for, to obtain adequate elementary and secondary education for dependent children at overseas posts that would normally be free of charge in the United States. State’s Office of Overseas Schools determines the adequacy of schools at posts. State determines the approved rate based on allowable education expenses for (1) a school at the post, (2) a school away from the post, (3) home schooling / private instruction, or (4) special-needs education. For example, employees assigned to New Delhi can send their school-aged children to the American Embassy School, which State has determined is the least-expensive adequate school at post (see fig. 2). Tuition for this school costs State between about $18,000 and $30,000 per child per year, depending on the child’s grade level. The educational travel allowance annually covers the travel expenses of one round trip for each dependent between a school attended and the overseas post of assignment. This benefit is primarily intended to reunite a full-time, postsecondary student attending college (including the postbaccalaureate level), or technical or vocational school with the employee / parent serving the U.S. government in the foreign area. Educational travel cannot be paid at the same time as the education allowance. Recruitment and Retention Incentive Allowances Recruitment and retention incentive allowances compensate employees for service at posts where conditions may be difficult or dangerous. State uses the following three allowances to recruit and retain staff at posts: Hardship pay compensates employees for service in foreign areas where conditions of environment differ substantially from conditions of environment in the continental United States in that the living conditions are extraordinarily difficult, involve excessive physical hardship, or are notably unhealthy. Employees assigned to designated posts can earn hardship pay at rates ranging from 5 to 35 percent above basic compensation in 5 percent increments, based on the severity of the hardship as determined by State. Danger pay compensates employees for service in foreign areas where conditions of civil insurrection, civil war, terrorism, or wartime conditions threaten physical harm or imminent danger to the health or well-being of the employee. Employees in designated danger pay locations are granted between 15 and 35 percent above basic compensation, in 10 percent increments, based on whether family members are allowed at overseas posts. The difficult-to-staff incentive differential is paid to employees assigned to a 15 percent or higher hardship pay post after State has determined that especially adverse conditions of environment warrant additional pay as an incentive to fill the employee’s position at that post. State must establish a history of difficulty in filling positions at a post prior to posts being eligible for this incentive. For example, employees posted in Lagos, Nigeria, were eligible for this allowance following the 2016 bidding cycle. Employees filling these positions can earn 15 percent above their basic compensation. However, the difficult-to-staff incentive and danger pay allowance combined cannot exceed 35 percent of basic pay. Employees must agree to a 3-year assignment to receive the difficult-to-staff incentive. Quarters Allowances Quarters allowances reimburse employees for substantially all costs for either temporary or residence quarters at posts where government housing is not provided. According to State officials, while most overseas posts provide government-leased or owned housing for employees and their families at no cost to the employee, employees can receive the following three allowances to assist with housing costs: The living quarters allowance defrays the annual cost of suitable, adequate living quarters for the employee and his or her family at an overseas post where government-leased or government-owned housing is not provided. Rates vary by post and are designed to substantially cover the average employee’s costs for rent, utilities, required taxes levied by the local government, and other allowable expenses. According to State officials, while most posts provide government housing, employees assigned to posts in Canada and Bern, Switzerland, for example, primarily rely on the rental market. The temporary quarters subsistence allowance assists with the reasonable cost of temporary lodging, meals, and laundry in a foreign area when an employee first arrives at a new post and permanent quarters are not yet available, or when an employee is getting ready to depart the overseas post permanently and must vacate residential quarters. The rate is based on the per diem at post, the size of an employee’s family, and the amount of time the employee receives the allowance. Employees cannot receive this allowance while receiving the post allowance. The extraordinary quarters allowance is typically granted for up to 90 days to employees and eligible family members at an overseas post when they are required to partially or completely vacate their permanent quarters because of renovations, repairs, or unhealthy or dangerous conditions in their permanent quarters. The rate is based on the per diem at post, post allowance, and family size. In contrast to the temporary quarters subsistence allowance, employees can continue to receive the post allowance when they receive the extraordinary quarters allowance. Other Allowances State offers two additional allowances designed to reimburse employees who must maintain an official residence or employees who incur expenses representing the U.S. government in an official capacity to a foreign government. The official residence expense reimburses a principal representative, such as an ambassador, at an overseas post for expenses related to operating and maintaining a suitable official residence in-country when those expenses exceed the usual expenses incurred if he were serving at the post in any other official capacity. The allowance is intended to offset the cost of representing the United States abroad when a principal representative extends official hospitality to foreign dignitaries and important visitors and by hosting appropriate ceremonies (for an example, see fig. 3). Generally, principal representatives are expected to direct at least 3.5 percent of their salary toward maintaining their residences, and State may reimburse expenses above that. The representation allowance reimburses employees, including foreign national employees, and adult family members acting with or on behalf of employees, for expenses incurred in establishing and maintaining relationships of value to the United States in foreign countries. Reimbursement may include costs for entertainment and customary gifts or gratuities; for entertainment expenses, it must be clearly demonstrated that the purpose is to directly promote U.S. foreign policy interests, that the expenditure is not for personal recreation, and that it is not otherwise prohibited by regulation. State Spent Almost $480 Million Annually on Allowances for Its Employees Serving Overseas, Totaling Almost $2.9 Billion in Fiscal Years 2011– 2016 State Spent about 70 Percent of Its Total Spending on Allowances from Fiscal Years 2011 through 2016 on the Education Allowance, Hardship Pay, and Post Allowance State spent $2.9 billion on 14 allowances from fiscal years 2011 through 2016, 70 percent of which went to the three most expensive allowances— the education allowance, hardship pay, and post allowance. The education allowance accounted for 30 percent of the total ($853.0 million), hardship pay accounted for 25 percent ($732.3 million), and the post allowance accounted for 15 percent ($417.3 million). The other 11 allowances accounted for the remaining 30 percent of the total ($870.0 million) in fiscal years 2011 through 2016 (see fig. 4). Each of these 11 allowances accounted for less than 10 percent of total spending, ranging from danger pay ($266.5 million) to the educational travel allowance ($11.4 million). For additional information on State spending across all 14 allowances by fiscal year, see appendix II. State Spent Almost $480 Million Annually in Fiscal Years 2011–2016, with Individual Allowances Varying State spent almost $480 million annually on the 14 allowances from fiscal years 2011 through 2016, with varying amounts for individual allowances. The lowest annual spending on such allowances during this period was $462.3 million in fiscal year 2011 and the highest was $496.1 million, in fiscal year 2014 (see fig. 5). Trends in spending for individual allowances varied from fiscal years 2011 through 2016, with the largest variation in spending from the cost-of-living allowances. The largest increase in absolute spending across all allowances during this period, as well as the largest single allowance expenditure, was for the education allowance ($39.7 million). While the overall spending for dependent education increased each year, State officials noted that the spending on this allowance varied by post and year based on the number of dependent children of overseas employees and increasing education costs at some posts. The largest decrease in absolute spending across all allowances during this period was for the post allowance ($21.1 million). According to State officials, this variation was caused, at least in part, by fluctuation in the strength of the dollar against major global currencies. The other cost-of-living allowances— SMA, home service transfer, foreign transfer, and educational travel—had relatively smaller fluctuations in dollar spending across fiscal years. For example, State explained that the region’s increased volatility from the “Arab Spring” may have contributed to the change in SMA spending from fiscal years 2011 to 2012 (see fig. 6). According to State officials, this unrest likely caused more volatile security situations at many State posts, resulting in fewer family members of overseas employees living at the assigned post of their parent or spouse, and, therefore, an increase in SMA support. Recruitment and retention incentive allowances had the largest net decrease in allowance spending from fiscal years 2011 through 2016, about $10.6 million. Hardship pay increased by $5.3 million, with its largest single year change between fiscal years 2015 and 2016 following State’s 2015 revisions to its process for determining hardship pay rates. In conjunction with an increase in hardship pay, danger pay decreased by $15.6 million during this period. The difficult-to-staff incentive differential remained relatively constant, decreasing by about $264,000 (see fig. 7). State’s spending on quarters allowances decreased from fiscal years 2011 through 2016 by almost $1 million. According to State officials, over this period State shifted employees from the living quarters allowance into U.S. government owned and leased facilities. They explained that, as of August 22, 2017, a limited number of posts in Canada and Switzerland relied primarily on the living quarters allowance, as opposed to U.S. government-provided housing. For the extraordinary quarters allowance, State officials explained that short-term, unexpected facilities issues that render a house uninhabitable—such as water damage, mold remediation, or fire—cause variations in spending. These costs can vary significantly by year and by post. Spending on the temporary quarters subsistence allowance increased by $1.6 million from fiscal years 2011 through 2016 (see fig. 8). The other allowances category consists of the official residence expense and representation allowances. The official residence expense spending at posts decreased by $2.6 million from fiscal years 2011 through 2016. The representation allowance increased by $6.6 million during the same period (see fig. 9). State’s Spending on the Post Allowance, Separate Maintenance Allowance, Hardship Pay, and Danger Pay Varied Substantially by Country in Fiscal Years 2011–2016 State’s spending on the post allowance, SMA, hardship pay, and danger pay varies substantially by country because these expenditures are determined by factors specific to each post and allowance. For the post allowance, spending by country reflects allowance rates, the number of State employees, and the size of State employees’ families at each of the country’s posts. Spending for SMA, by country, depends upon the number of State employees maintaining their families away from post. Spending for hardship pay and danger pay, by country, reflects the allowance rate and number of State employees permanently assigned to posts in each country. For example, in fiscal year 2016 State spent about the same amount on hardship pay in Dhaka, Bangladesh (a post eligible for 35 percent hardship pay), as it did in Bangkok, Thailand (a post eligible for 10 percent hardship pay) because State had more than twice as many personnel assigned to Thailand as to Bangladesh. Figure 10 shows a map of State’s post allowance spending by country for fiscal years 2011 through 2016. State provided this allowance in about 170 countries worldwide in that period. Figure 11 shows State’s spending on SMA. Employees received an SMA across about 170 countries from fiscal year 2011 through 2016. Figure 12 shows State’s spending on hardship pay. About 140 countries had posts eligible for hardship pay from fiscal years 2011 through 2016. As illustrated in figure 13, countries with danger pay spending in fiscal years 2011 through 2016 are largely concentrated in the Middle East and Africa. Employees from posts in about 30 countries received danger pay from fiscal years 2011 through 2016. Several countries with danger pay spending during this period—including Mexico, Colombia, and Saudi Arabia—were no longer eligible for danger pay as of February 5, 2017. Agency Comments We provided a draft of this report to State for comment. State provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of State. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-8980 or courtsm@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 contributions to this report are listed in appendix II. Appendix I: Objectives, Scope, and Methodology The objectives of this report were to (1) describe the allowances the Department of State (State) offers its employees serving overseas and (2) examine the amount State spent annually on these allowances from fiscal years 2011 through 2016. To describe the different allowances offered by State to employees serving overseas, we reviewed the Foreign Affairs Manual (FAM), Foreign Affairs Handbooks, the Department of State Standardized Regulations, and other State information. We selected 14 allowances to include in our scope based on 3 FAM Exhibit 3210. From this list we excluded the advance-of-pay allowance because it is not an additional outlay from State’s budget. To examine State’s spending at overseas posts for these allowances, we analyzed data in fiscal years 2011 through 2016 from State’s Consolidated American Payroll Processing System and State’s Global Financial Management System, which are administered by State’s Bureau of the Comptroller and Global Financial Services (CGFS). We used the Global Financial Management System, State’s accounting system, to analyze the foreign transfer, home service transfer, education allowance, educational travel, difficult-to-staff incentive, living quarters, temporary quarters subsistence, extraordinary living quarters, official residence expense, and representation allowances. We used the Consolidated American Payroll Processing System, State’s payroll system, to analyze post allowance, separate maintenance allowance (SMA), hardship pay, and danger pay expenditures, including information on the outlays by country. Because CGFS processes these four allowances through payroll, it provided us with spending data for the 26 pay periods that best approximated each fiscal year from 2011 through 2016, and we used these data to summarize spending by fiscal year. All spending in this report is presented in nominal dollars. We also used the gross domestic product price index to analyze trends in hardship and danger pay, expressed in terms of constant (inflation-adjusted) dollars. To assess the reliability of the data that State provided, we performed testing to identify missing data, outliers, and errors; and interviewed Office of Allowances officials in Washington, D.C., and CGFS officials in Charleston, South Carolina. We determined that the data we used were sufficiently reliable for the purposes of summarizing spending by country for the post allowance, SMA, hardship pay, and danger pay and by fiscal years 2011–2016 for all allowances. We also communicated with State officials from the Office of Allowances, CGFS, and the Bureau of Overseas Building Operations about changes in allowance expenditures over time. We conducted this performance audit from May 2017 through November 2017 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 description and analysis based on our audit objectives. Appendix II: Department of State Spending for Allowances for Employees Serving at Overseas Posts, Fiscal Years 2011–2016 Appendix II: Department of State Spending for Allowances for Employees Serving at Overseas Posts, Fiscal Years 2011–2016 417,283 37,900 46,441 55,019 852,972 11,367 (21,055) (347) Education travel Recruiting and retention incentive allowances Hardship differential Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Hynek Kalkus (Assistant Director), Alana Miller (Analyst-in-Charge), Ashley Alley, Timothy Carr, Debbie Chung, Gita Devaney, Neil Doherty, Jill Lacey, Drew Lindsey, and Eli Stiefel made key contributions to this report.

Why GAO Did This Study State spends millions of dollars annually on allowances to compensate its employees for costs and hardships related to foreign assignments. Many of these assignments are critical to U.S. foreign policy objectives. In accordance with U.S. law, State employees working abroad may be reimbursed for costs related to working overseas, including the cost of living in expensive locations, dependent education costs, and the costs of maintaining family members away from post. They also may be eligible for such allowances in locations where they encounter harsh or dangerous living conditions. These allowances cover over 13,000 employees across more than 275 posts. GAO was asked to review State's administration of allowances for its employees. GAO's September 2017 report focused on State hardship and danger pay allowances ( GAO-17-715 ), while this report (1) describes all of the allowances that State offers its employees serving overseas and (2) examines the amount State spent annually on these allowances in fiscal years 2011 through 2016. GAO analyzed State data and documents and communicated with State officials in Washington, D.C., and Charleston, South Carolina, the location of State's Bureau of the Comptroller and Global Financial Services. What GAO Found The Department of State (State) offers 14 different allowances to compensate State employees serving at overseas posts for costs and hardships related to foreign assignments across four categories. Cost-of-living allowances consist of six types of allowances that reimburse employees for certain costs incurred from employment overseas, such as the cost for dependent education that would normally be free in the United States. Recruitment and retention incentive allowances consist of three types of allowances that compensate employees for service at posts where conditions may be difficult or dangerous. For example, hardship pay compensates employees for service where conditions differ substantially from those in the United States. Quarters allowances consist of three types of allowances that reimburse employees for substantially all housing costs at posts where government housing is not provided. For example, the temporary quarters subsistence allowance pays for temporary housing when government-provided housing is not available. Other allowances consist of two types of allowances that reimburse employees, such as ambassadors, who must maintain an official residence in-country or employees who incur expenses representing the U.S. government in an official capacity to a foreign government. State spent almost $480 million per year on its 14 allowances for employees serving overseas, totaling almost $2.9 billion in fiscal years 2011 through 2016. Most of this amount went toward cost-of-living and recruitment and retention allowances. During this period, the three largest individual allowances accounted for about 70 percent of the total spending on all allowances. These were the education allowance, about $853.0 million; hardship pay, about $732.3 million; and post allowance, used to offset the higher cost of living at certain posts, about $417.3 million.

gao_GAO-18-92

gao_GAO-18-92_0

Background FHA’s Role and Insured Portfolio FHA’s single-family mortgage insurance programs insure private lenders against losses from borrower defaults on mortgages that meet FHA criteria for properties with one to four housing units. FHA insures a variety of mortgage types, including loans for initial home purchases, construction and rehabilitation, and refinancing. In fiscal year 2016, FHA insured roughly 1.3 million single-family mortgages with total initial balances of approximately $260 billion. Partly because of its low 3.5 percent minimum down-payment requirement, FHA has played a particularly large role among groups with lower average levels of accumulated wealth, including minority, lower-income, and first-time home buyers. For example, in fiscal year 2016, roughly 82 percent of FHA-insured home purchase loans went to first-time home buyers and more than 33 percent went to minority home buyers. FHA also generally is thought to promote stability in the housing market by helping to ensure the availability of mortgage credit in areas that may be underserved by the private sector or that are experiencing economic downturns. Consistent with this view, the volume of FHA-insured forward mortgages peaked in fiscal year 2009, toward the end of the 2007–2009 recession and in the midst of the 2007–2011 housing crisis. In terms of loan originations, the share of the single-family home purchase mortgage market insured by FHA reached nearly 30 percent in fiscal year 2009, while in more recent years it has been about 20 percent. FHA’s Mutual Mortgage Insurance Fund The MMI Fund includes almost all of FHA’s single-family mortgage insurance programs, the largest of which is the 203(b) program. The Housing and Economic Recovery Act of 2008 (HERA) moved a number of other programs that were previously under the General and Special Risk Insurance Fund to the MMI Fund. These included programs for insuring mortgages on condominium units, mortgages that simultaneously finance home purchase and rehabilitation costs, and reverse mortgages. A reverse mortgage is a type of loan against the borrower’s home equity. With a reverse mortgage, borrowers do not need to repay the loan as long as they meet certain conditions. These conditions, among others, require the borrower to live in the home, pay property taxes and homeowners’ insurance, maintain the property, and retain the title in his or her name. Unlike forward mortgages, where the borrower makes monthly payments to the lender, increasing equity and decreasing the loan balance over time, reverse mortgages typically are “rising debt, falling equity” loans. For reverse mortgages, the loan balance increases and the home equity decreases over time. As the borrower receives payments from the lender, the lender adds the principal and interest to the loan balance, reducing the homeowner’s equity. FHA insures reverse mortgages under its Home Equity Conversion Mortgage (HECM) program, which serves eligible borrowers aged 62 or older. Congress established the HECM program in 1988 as a way to alleviate economic hardship caused by the increasing costs of health care, housing, and subsistence needs at a time in life when income is reduced, while protecting reverse mortgage lenders and borrowers from financial losses. The MMI Fund is supported by insurance premiums paid by borrowers. For forward mortgages, FHA has the authority to establish and collect a single up-front premium (in an amount not to exceed 3.0 percent of the amount of the original insured principal of the mortgage) and annual premiums of up to 1.5 percent of the remaining insured principal balance, or 1.55 percent for borrowers with down payments of less than 5.0 percent. As of September 2017, FHA charged a 1.75 percent up-front premium and either a 0.80 percent or 0.85 percent annual premium, depending on the size of the down payment. As of the same date, FHA charged HECM borrowers an initial premium of either 0.50 percent or 2.5 percent, depending on how they draw down available funds, and an annual premium equal to 1.25 percent of the outstanding HECM balance. Reviews of the MMI Fund Each year, the MMI Fund is subject to three different financial assessments: Independent actuarial review. The National Housing Act requires an annual independent actuarial review of the MMI Fund’s financial position. FHA uses the results of the actuarial review to determine whether the MMI Fund is meeting the act’s requirement that it maintain a capital ratio of at least 2 percent. Each year, an independent actuarial contractor conducts two separate actuarial reviews—one for forward mortgages and one for HECMs—to estimate the economic value of the two portfolios. In a separate annual report to Congress, FHA combines the findings of the forward mortgage and HECM actuarial reviews to determine the capital ratio for the MMI Fund as a whole. As previously noted, the capital ratio is the fund’s economic value divided by the insurance-in-force. Budgetary review. FHA estimates and reestimates the net lifetime costs—known as credit subsidy costs—of the mortgages it insures as part of the MMI Fund’s annual budgetary review. Under the Federal Credit Reform Act of 1990 (FCRA), FHA and other federal agencies must estimate the credit subsidy costs of their direct loan or loan guarantee programs in their annual budgets. Credit subsidy costs represent the present value of estimated cash flows to the government minus the present value of estimated cash flows from the government over the life of the loan, excluding administrative costs. For a mortgage insurance program, cash inflows consist primarily of insurance premiums charged to borrowers and proceeds from sales of foreclosed properties, and cash outflows consist mostly of insurance claim payments to lenders. Annually, agencies estimate credit subsidy costs for new loan cohorts—the loans agencies commit to guarantee in a given fiscal year. When estimated cash inflows exceed expected cash outflows, a cohort is said to have a negative credit subsidy cost, meaning that the cohort is estimated to generate income. When the opposite is true, the cohort is said to have a positive credit subsidy cost. Generally, agencies also are required to produce annual updates of their subsidy estimates—known as reestimates—for each loan cohort on the basis of information on actual performance and estimated changes in future loan performance. Each additional year provides more historical data on loan performance that may influence estimates of the amount and timing of future claims. Additionally, economic assumptions (such as house prices and interest rates) also can change from year to year, which would affect estimates of future loan performance. In recognition of the difficulty in making credit subsidy estimates that mirror actual loan performance, FCRA provides permanent and indefinite budget authority for reestimates that reflect increased credit subsidy costs (upward reestimates). While FHA has had a number of upward reestimates, the only year in which the MMI Fund has needed to draw on permanent and indefinite budget authority was fiscal year 2013, when it received $1.69 billion. All other upward reestimates were covered by funds held in the MMI Fund’s capital reserve account. Financial accounting review. The preparation of FHA’s financial statements also provides a review of the MMI Fund. FHA is required to prepare financial statements in accordance with generally accepted accounting principles for the federal government (federal GAAP). The financial statements provide information on the overall financial position of the MMI Fund, including its assets, liabilities, and actual cash flows during the year. In addition, federal GAAP requires FHA to calculate a liability for loan guarantees, which represents the estimated net present value of expected future cash flows for outstanding insurance. Capital Requirements and Stress Testing In general, capital exists to absorb unexpected losses and allow a financial institution to continue operations during economic downturns. The MMI Fund plays a key role during such periods by helping to maintain the flow of mortgage credit to areas that may be underserved by the private sector. As previously noted, the MMI Fund is statutorily required to maintain at least a 2 percent capital ratio. It also is the only federal credit program with a capital requirement. Because the MMI Fund can draw on permanent and indefinite budget authority, if necessary, it has greater ability to weather adverse economic conditions than a private entity. However, the capital requirement is intended to help ensure that the fund remains self-sufficient by creating a reserve for unexpected losses. The size of the MMI Fund’s capital reserve can be expected to fluctuate depending on economic conditions and other factors. For example, the reserve may tend to grow when the economy is strong (limiting borrower defaults and FHA insurance losses), and may tend to shrink when the economy is weak (increasing borrower defaults and FHA insurance losses). Stress tests are a risk management tool used by banks and other financial institutions. The International Actuarial Association defines stress testing as a projection of the financial condition of an institution under a specific set of adverse conditions. While there is no requirement that FHA stress test the MMI Fund, actuarial reviews of the MMI Fund have included analyses of the MMI Fund’s economic value and insurance-in-force under alternative scenarios, including adverse scenarios. As discussed later in this report, the alternative scenarios include selected economic paths used in estimating the economic value of the MMI Fund’s forward mortgage and HECM portfolios, as well as baseline and economic slump paths produced by Moody’s Analytics. FHA considers these analyses to be a form of stress testing. Budgetary and Actuarial Assessments of the Fund Serve Different but Complementary Functions Supplemental Funding Is Determined by Budgetary Assessments, and Actuarial Reviews Provide Complementary Information FHA assessments performed as part of the MMI Fund’s annual budgetary review—specifically, the credit subsidy estimates and reestimates discussed previously—determine the fund’s financing account and capital reserve account balances. The financing account is designed to hold sufficient funds to cover anticipated net future costs on outstanding insurance. The capital reserve account holds additional funds that could be used to cover unexpected losses (for example, due to higher-than- anticipated mortgage defaults). If the capital reserve account had insufficient funds to cover an upward credit subsidy reestimate (that is, an increase in expected lifetime costs), FHA would draw on permanent and indefinite budget authority. As previously noted, this has occurred one time (fiscal year 2013) since the implementation of FCRA. Drawing on permanent and indefinite budget authority means that the MMI Fund is not self-sufficient under FCRA requirements. However, it does not indicate that the fund is unable to pay insurance claims in the near-term without supplemental funding, because the fund’s financing account holds balances to cover the anticipated net future costs on claims expected in the near-term and over the long-term for the existing insurance portfolio. In contrast, the actuarial reviews do not directly determine the need for additional budget authority; rather, they are used to assess whether the MMI Fund is in compliance with the requirement to maintain at least a 2 percent capital ratio. Additionally, the reviews are statutorily required to be conducted by an independent actuary rather than by FHA. As previously noted, the actuarial reviews estimate the economic value of the forward mortgage and HECM portfolios separately, and FHA combines these estimates to calculate the capital ratio (that is, the economic value divided by the insurance-in-force) for the MMI Fund as a whole. The economic value of each portfolio consists of existing net capital resources (assets less liabilities) plus the net present value of anticipated future cash inflows and outflows on outstanding insurance. To determine existing net capital resources, FHA’s actuarial contractor uses information on the assets and liabilities of the financing and capital reserve accounts previously discussed. Beginning with the fiscal year 2012 actuarial review and continuing through the fiscal year 2016 review (the most recently completed one), FHA’s actuarial contractor has estimated the net present value of cash flows using Monte Carlo simulation—a methodology that involves running simulations of multiple economic paths. Specifically, for the forward mortgage and HECM portfolios separately, the contractor generated 100 economic paths, centered around Moody’s Analytics’ baseline economic scenario, and computed a net present value of future cash flows for each of these paths. The contractor added the average of these 100 numbers to the existing net capital resources to produce the economic value used to assess compliance with the MMI Fund’s 2 percent capital requirement. Table 1 shows the fiscal year 2016 economic value, insurance-in-force, and capital ratio for the forward mortgage and HECM portfolios, as well as for the MMI Fund as a whole. Under the independent actuarial reviews, an economic value of zero— and therefore a capital ratio of zero—for the MMI Fund as a whole indicates that estimated resources are enough to cover anticipated net future costs and no more. Specifically, if the capital ratio is zero, the MMI Fund’s existing net capital resources (for example, cash and Treasury investments) and the net present value of future cash inflows (for example, premium revenue and proceeds from sales of foreclosed homes) are estimated to be equal to the net present value of future cash outflows (for example, insurance claim payments and costs to maintain foreclosed properties). Therefore, in concept, a positive economic value is similar to a positive balance in the capital reserve account under the budget process—that is, it projects the availability of funds above what is needed to cover expected net future costs on outstanding insurance. However, the independent actuarial reviews have used different estimation models and economic assumptions from those used in FHA’s budgetary assessment to estimate the present value of future cash flows; therefore, the actuarial and budgetary reviews have not produced identical capital estimates. (See app. II for more information on the related components of the budgetary and actuarial reviews.) A capital ratio below 2 percent, or even below zero, does not directly determine the need for permanent and indefinite budget authority. However, it indicates that according to the models and assumptions of the actuarial reviews, the MMI Fund’s ability to absorb unexpected losses may be limited and that premium and policy changes designed to bolster the fund’s capital position may be needed. Actuarial Reviews Also Include Stress Tests of the MMI Fund and Other Insights In addition to the capital assessment, the actuarial reviews also have projected the MMI Fund’s performance under alternative economic scenarios, including stress scenarios. For example, the fiscal year 2016 actuarial reviews estimated the economic value and insurance-in-force of the MMI Fund under eight alternative scenarios, including both strong economic conditions and economic downturns. Specifically, the fiscal year 2016 reviews estimated the 10th best and worst, 25th best and worst, and worst economic values produced by the Monte Carlo simulation, along with the economic values resulting from Moody’s Analytics’ baseline and protracted slump scenarios. In addition, the fiscal year 2016 reviews included a low-interest-rate scenario, which assumes that low interest rates persist for 2 years, before resuming on the path of the Moody’s Analytics’ baseline scenario. The reviews also include information on the house price index values, interest rates, and unemployment rates from the economic paths that produced these alternative economic values. The actuarial reviews have analyzed the economic value under alternative scenarios separately for the forward mortgage and HECM portfolios. The estimated economic values for the forward mortgage and HECM portfolios can be combined to arrive at fund-wide capital ratios for the average of the 100 economic values produced by the simulation— Monte Carlo average—and all of the Moody’s Analytics’ scenarios (see table 2). However, the 10th best and worst, 25th best and worst, and worst economic values produced by the Monte Carlo simulations cannot be combined. This limitation is due to the fact that the economic scenario that led to the 10th best forward mortgage economic value, for example, may be different from the scenario that led to the 10th best HECM economic value. In contrast, the budgetary reviews do not include analysis of future loan performance under alternative economic scenarios. The budgetary reviews are required to use the President’s economic assumptions, which the Office of Management and Budget provides to agencies for budget formulation. In addition to the actuarial reviews prepared by FHA’s contractor, FHA compiles statutorily required annual reports for Congress based on the results of the actuarial analysis. These reports include the calculation of the MMI Fund’s overall capital ratio and some additional analyses of the MMI Fund’s financial condition. Statutory requirements for the content of the reports to Congress are broad, and each year, FHA determines the types of information it believes will be most useful to Congress. FHA officials said they consider what they reported in the previous year, events from the past year, and feedback from readers to determine what would be most useful to include. For example, in its fiscal year 2015 report to Congress, FHA discussed the amount of additional capital that would have been needed for the forward mortgage portfolio to achieve a 2 percent capital ratio and withstand losses in the event of an economic downturn similar to the last economic crisis. Financial Statements and Quarterly Reports Provide Additional Perspectives on the MMI Fund’s Financial Condition FHA’s financial statements present the MMI Fund from a financial accounting perspective and are prepared according to federal GAAP. The financial statements are composed of year-end balance sheets, the related statements of net cost and changes in net position, and the combined statements of budgetary resources. As with the budgetary and actuarial reviews, FHA’s annual management reports, which include the financial statements, also include information on the MMI Fund’s capital resources and a net present value calculation of cash flows from outstanding insurance. Information used in preparing the financial statements—specifically, the MMI Fund’s assets and liabilities (excluding the liability for loan guarantees)—is used in the budgetary review to inform the amount needed in the financing account and is used by the actuarial review to determine the existing capital resources component of the economic value calculation. Like the budgetary reviews, the financial statement reviews do not include analysis of future loan performance under alternative economic scenarios. Another source of information on the MMI Fund’s financial status is quarterly reports FHA issues to Congress, as required by HERA. The quarterly reports can help provide early insight into whether there are potential deviations from the prior year’s projections before the next annual budgetary and actuarial reviews are completed. Among other topics, the reports must include information on any significant changes between actual and projected claim and prepayment activity, and projected versus actual loss rates. However, while the quarterly reports update certain measures of the MMI Fund’s performance and financial condition, they are not intended to provide a full actuarial or budgetary analysis. The MMI Fund’s Capital Requirement Lacks Accountability Mechanisms, and Stress Tests Are Not Fund-Wide The MMI Fund’s capital requirement and stress tests are consistent with some principles and practices promulgated or used by financial institutions and regulators, but are not consistent with others. To assess the MMI Fund’s consistency with these principles and practices, we developed a framework of important considerations in designing capital requirements and another for designing stress tests. Our frameworks include underlying principles or key features of the requirements and practices of institutions we reviewed—such as transparency and accountability—that could also be applied to the MMI Fund. See appendix I for further details on our methodology. The Capital Requirement Is Not Based on a Specified Risk Threshold and Lacks Accountability Mechanisms The MMI Fund’s capital requirement is consistent with our framework element on transparency and partially consistent with two other elements—that the requirement include both risk-based and fixed components and that the requirement be designed to cover unexpected losses and be based on specified risk thresholds. However, the MMI Fund’s capital requirement is not consistent with the element on including accountability mechanisms. We were unable to determine whether the requirement is consistent with the element on balancing financial soundness with the entity’s role and mission because such an assessment would require more information about the severity of the economic conditions the capital requirement was designed to withstand without supplemental funding. Table 3 summarizes our assessments. The MMI Fund’s capital requirement is consistent with the framework element of being transparent so that external parties can understand the financial risks facing the entity. FHA’s actuarial reports and accompanying report to Congress provide specific information about the MMI Fund’s capital requirement and capital assessment results. For example, the actuarial reports describe how the capital ratio is calculated, the models and data sources used to calculate the net present value of future cash flows, key economic assumptions used in calculating the MMI Fund’s economic value, and estimated economic values of the forward mortgage and HECM portfolios. Additionally, FHA’s reports to Congress include calculations of the Fund-wide capital ratio based on these values, as well as analyses of factors affecting the past performance of the forward mortgage and HECM portfolios and factors that could affect their future performance. The actuarial reviews and reports to Congress are publicly available on HUD’s website. Risk-Based and Fixed Components The MMI Fund’s capital requirement is partially consistent with the framework element of having both a risk-based and a fixed component. For capital requirements with this feature, whichever component requires the greater level of capital is the binding minimum requirement. Among other things, a risk-based component helps to ensure that the entity holds more capital as the asset quality of its portfolio (credit quality, specifically, in the case of a mortgage portfolio) decreases. A fixed component is insensitive to asset quality; it therefore is not subject to the potential for estimation errors of risk-based assessments and serves as a backstop to the risk-based component. While the MMI Fund’s capital requirement is statutorily set at 2 percent, it is risk-based because the calculation of the capital ratio’s numerator (economic value) accounts for loan and borrower quality. As loan and borrower characteristics, such as loan-to-value ratios and borrower credit scores, get riskier, the models used to estimate the MMI Fund’s economic value predict higher insurance claims and higher net losses on claims (due to increased foreclosures and decreased returns on sales of foreclosed properties). This, in turn, reduces the MMI Fund’s estimated economic value and makes it more difficult for the fund to meet the 2 percent capital requirement. The MMI Fund’s capital requirement also has attributes similar to a fixed component in that the fund’s economic value must be at least 2 percent of the insurance-in-force, regardless of the credit quality of the insurance portfolio. However, the requirement does not have a separate fixed component that backstops the risk-based component (that is, becomes binding when it is the more stringent of the two). Developing and implementing a separate fixed component to the MMI Fund’s capital requirement would pose challenges. For example, a requirement that was insensitive to portfolio credit quality would not align with the FCRA requirements and accounting principles that FHA must follow. These requirements and principles emphasize the consideration of risk factors in estimating potential financial losses. Additionally, substantial additional analysis would be required to determine the structure of a separate fixed component, the level at which it should be set, under what conditions it might become binding, and how it might affect FHA’s ability to fulfill its mission. As a result, it is unclear whether developing a separate fixed component to the MMI Fund’s capital requirement would be beneficial. Unexpected Losses and Specified Risk Thresholds The MMI Fund’s capital requirement is partially consistent with the framework element of being able to cover unexpected losses and being based on a specified risk threshold, such as an adverse economic scenario that the entity would be expected to withstand. The MMI Fund’s capital requirement is designed to cover some unexpected losses. As previously noted, the MMI Fund’s capital ratio is calculated by dividing the economic value of the fund by the amortized insurance-in-force. The economic value is determined by adding existing capital resources to the net present value of future cash flows on outstanding insurance. An economic value of zero (and therefore a capital ratio of zero) indicates that based on the actuarial calculations, the sum of the MMI Fund’s existing capital resources and the present value of expected cash inflows (for example, premium income) is exactly the amount needed to cover the present value of expected cash outflows (for example, claim payments). Therefore, a 2 percent capital requirement serves the purpose of covering some losses above expected amounts. However, the requirement was not designed to absorb losses associated with a specified economic scenario, so the extent of loss protection it provides is unclear. In a February 2001 report, we concluded that neither the statute that created the 2 percent capital requirement nor FHA had established criteria to determine how severe of a stress the MMI Fund should be able to withstand. Accordingly, we recommended that Congress or FHA specify the economic conditions that the MMI Fund would be expected to withstand. In March 2002, a legislative proposal was introduced in the House of Representatives that would have required a capital ratio sufficient to withstand a broad range of adverse economic circumstances, but it was not enacted. Neither Congress nor FHA has subsequently specified the economic conditions the MMI Fund should be able to withstand or corresponding minimum capital ratios. FHA officials said they did not consider it their role to define those economic conditions and would comply with any requirement Congress established. Because the MMI Fund’s capital requirement is not based on a specified risk threshold, it may not provide an adequate financial cushion under economic scenarios in which Congress may anticipate that the fund would be self- sufficient. Accountability Mechanisms The MMI Fund’s capital requirement is not consistent with the framework element of having accountability mechanisms such as additional reporting requirements, remediation plans, and operational restrictions that are triggered if capital requirements are not met. Failure to comply with the MMI Fund’s capital requirement does not trigger a defined process or set of steps to be taken by FHA. In a September 2010 report, we stated that Congress should consider establishing a minimum time frame for restoring the capital ratio to 2 percent should the ratio fall below that level. A legislative proposal was introduced in Congress in December 2011 that, among other things, would have required FHA to return the MMI Fund’s capital ratio to the statutorily required level within 2 years, but it was not enacted. In addition, in a September 2013 report, we stated that Congress should consider requiring FHA to submit a capital restoration plan and regular updates on plan implementation whenever the capital ratio falls below 2 percent. Congress has not yet acted on this suggestion, but doing so could help ensure prompt action by FHA and focus Congress’s monitoring efforts should this situation arise in the future. Balancing Financial Soundness and Mission We could not assess the consistency of the MMI Fund’s capital requirement with the framework element of balancing financial soundness with the entity’s role and mission. Such an assessment would require more information about the severity of the economic conditions the capital requirement was designed to withstand without supplemental funding. As previously discussed, the statute that created the requirement did not specify those conditions. As a result, it is unclear whether FHA’s difficulties in maintaining the financial soundness of the MMI Fund while carrying out its public mission during and after the 2007–2011 housing crisis indicate that the 2 percent capital requirement is insufficient. Any reconsideration of the capital requirement would involve policy decisions that would need to be made through congressional deliberations. These decisions center on the relative weight FHA should place on its financial and mission goals and requirements. On the one hand, FHA has a statutory operational goal to minimize mortgage default risk to the MMI Fund and a statutory requirement to maintain a capital ratio of at least 2 percent. A minimum capital requirement that is too low may result in FHA taking on too much risk and having an insufficient capital buffer to withstand an economic downturn without requiring supplemental funding. On the other hand, FHA also has a statutory operational goal to provide mortgage insurance to traditionally underserved borrowers—such as low-income, minority, and first-time home buyers—and historically has played a role in stabilizing housing markets during economic downturns. Setting a minimum capital requirement that is too high may limit FHA’s ability to serve the borrowers for which it was intended or play its market-stabilizing role, because it might require FHA to charge insurance premiums that many borrowers cannot afford or impose underwriting standards they cannot meet. The tension between the financial and mission aspects of FHA’s goals and requirements poses trade-offs that must be weighed by policymakers in setting the MMI Fund’s capital requirement. FHA Has Not Conducted Fund-Wide Stress Tests or Specified the Objectives of Its Tests Stress testing practices for the MMI Fund are consistent with two of the five elements in our stress testing framework—that stress testing methods and results be transparent and stress testing scenarios capture relevant risks. The stress testing practices are inconsistent with two other elements—that the scope of testing includes entity-wide assessments and that the specific objectives of the tests be defined. We were unable to determine the consistency of MMI Fund stress testing practices with the framework element that methods and scenarios be consistent with the objectives of the tests because FHA has not defined specific objectives. Table 4 summarizes our assessments. Stress tests of the MMI Fund are consistent with the framework element of transparency. Specifically, stress testing methods, scenarios, and results should be specific and available for review. Actuarial reports on the MMI Fund provide detailed information on the methodology and results of fund stress tests. For example, the actuarial reports describe the stress testing method of estimating economic values for the forward mortgage and HECM portfolios using hypothetical scenarios based on projected unemployment, house price appreciation, and interest rates. The reports also describe sources for these projections, including scenarios developed by Moody’s Analytics and generated by the actuarial contractor through Monte Carlo simulation. In addition, for each variable, the reports present graphics showing their projected paths under each scenario over the stress period. Furthermore, for each scenario, the reports provide quantitative results and an accompanying narrative discussion highlighting key drivers of the results. The reports are publicly available on HUD’s website. Risks Relevant to Entity Stress tests of the MMI Fund are consistent with the framework element of capturing risks that are relevant to the entity. The stress scenarios used in the actuarial reviews have incorporated risks the MMI Fund faces by considering changes in economic conditions that would negatively affect the fund’s cash flows and, by extension, the fund’s economic value. More specifically, they include declines in house prices and rises in unemployment, which can be expected to increase borrower defaults on FHA-insured mortgages and increase the number and severity of insurance claims FHA pays to lenders. In addition, the scenarios include declines in interest rates, which can be expected to increase the number of FHA-insured mortgages that are paid off before maturity—for example, as borrowers refinance out of their FHA-insured mortgages into conventional mortgages (those without government insurance or guarantees)—thus reducing the amount of insurance premiums FHA collects. To examine these risks, the stress scenarios in recent FHA actuarial reviews have included substantial declines in a Federal Housing Finance Agency national house price index, increases in unemployment rates, and decreases in interest rates for 30-year home mortgages. To provide additional perspective on the severity, duration, and timing of scenarios used to stress test the MMI Fund, appendix III compares selected MMI Fund stress scenarios to the severely adverse scenario used by the Federal Reserve in conducting annual supervisory stress tests of large banking organizations. Entity-Wide Scope Stress tests of the MMI Fund are not consistent with the framework element of including entity-wide assessments to provide a complete picture of risk. Since fiscal year 2009, when the HECM portfolio was first included in the MMI Fund, stress tests of the MMI Fund have analyzed the forward mortgage and HECM portfolios separately, but not on a fund- wide basis. This practice partly reflects the way in which capital assessments of the MMI Fund are performed—through separate assessments of the forward mortgage and HECM portfolios. Additionally, an FHA official said the agency has been reluctant to report combined ratios for stress scenarios because the results could be misinterpreted (for example, result in too much or too little confidence in the fund’s ability to withstand stress) if the scenarios are not viewed in the proper historical context. However, without the combined analysis, it is unclear what the capital position of the MMI Fund as a whole would be under stressful conditions. As a result, FHA and Congress may lack information that could be useful in assessing risks to the MMI Fund, including circumstances that could cause the fund’s capital ratio to fall below the statutory minimum. Defined Objectives Stress testing of the MMI Fund is not consistent with the framework element of defining the specific objectives of the tests. According to guidance from federal banking regulators, large banking organizations should indicate the specific purpose and focus of stress tests within a framework that allows for consistent, repeatable exercises. Additionally, this guidance and stress testing principles and practices from two international financial organizations provide examples of stress testing objectives such as informing assessment of vulnerabilities, contingency planning, identifying and monitoring risk concentrations, and determining the level of risk the entity is willing to accept (risk appetite). The MMI Fund actuarial reviews have included the broad statement that the stress tests performed as part of the reviews provide insights into the sensitivity of the MMI Fund’s economic value under different economic conditions. In addition, FHA has included some information from the stress tests in recent annual reports to Congress to highlight different points. However, FHA has not articulated specific objectives for the stress tests, in part because a key use of the actuarial reviews is to help determine the MMI Fund’s compliance with the capital requirement under a baseline economic scenario (which, in recent actuarial reviews, has been the Monte Carlo average). Accordingly, the types of information FHA has reported to Congress have varied from year to year. For example, in recent years, FHA’s reporting on stress test results has ranged from no information (fiscal year 2016), to how much additional capital the forward mortgage portfolio would need to withstand losses comparable to the last economic crisis (fiscal year 2015), to the probability that the economic value of the HECM portfolio would fall below zero under deteriorating economic conditions (fiscal year 2013). Without specific objectives for its stress testing, FHA has limited assurance that its stress tests are targeted to risk-management needs and that its reporting to Congress provides consistent information on the MMI Fund’s ability to withstand adverse conditions. Methods and Scenarios Consistent with Objectives Because FHA has not defined specific objectives for MMI Fund stress tests, we could not assess whether existing tests were consistent with the framework element of using stress testing methods and scenarios that are consistent with stated objectives. Entities should use stress testing methods—such as conventional stress testing (which looks at the effect of specified hypothetical or historical stress scenarios) or reverse stress testing (which assumes a negative outcome and identifies scenarios that would lead to that outcome)—that yield information responsive to the objectives of the stress tests. Actuarial reviews of the MMI Fund have used conventional stress testing and a range of stress scenarios developed by Moody’s Analytics and generated by Monte Carlo simulation. But, depending on how FHA defines the specific objectives of the MMI Fund’s stress tests, other stress testing methods or scenarios might provide useful information for risk management. For example, if the objective of the stress testing was to identify the conditions that might cause the MMI Fund’s capital ratio to fall below 2 percent or require supplemental funding, reverse stress testing would be an appropriate method. If the objective was to assess the MMI Fund’s ability to withstand conditions similar to those of the Great Depression or the 2007–2011 housing crisis, developing historical stress scenarios would be appropriate. Additionally, if the objective was to assess the effect of changes to a particular variable or input (as opposed to a broader economic scenario), sensitivity stress tests would be appropriate. Joint Capital Assessment Has Advantages and Disadvantages Advantages of Including Reverse Mortgages in the Fund’s Capital Requirement Include Greater Transparency Beginning with the 2009 loan cohort, HERA placed new HECMs (FHA- insured reverse mortgages) in the MMI Fund, while previous HECMs remained in the General and Special Risk Insurance Fund. When the post-2008 HECM portfolio became part of the MMI Fund, it also was included in the MMI Fund’s capital ratio assessment and became subject to annual actuarial review requirements. These changes have had some advantages. First, subjecting HECMs to the annual actuarial review requirements has improved the transparency of the program’s financial condition. For example, the actuarial reviews have included estimates of the HECM portfolio’s economic value and performance under alternative economic conditions, which were not available prior to 2009. Second, jointly considering the forward mortgage and HECM portfolios in the MMI Fund’s capital assessment mitigates the potential difficulty of independently holding the HECM portfolio to a specified capital ratio. The economic value of the HECM portfolio is more sensitive to changes in economic conditions and inputs to the models than the forward mortgage portfolio. As a result, the capital ratio for the HECM portfolio is more volatile, and requiring HECMs to independently meet a capital ratio would be difficult. Specifically, it could be difficult to manage HECM insurance premiums, loan limits, and other program requirements to ensure that a capital requirement is consistently met. Estimates of HECM capital ratios under alternative economic scenarios from the fiscal year 2016 actuarial review illustrate the sensitivity of this portfolio’s economic value—and therefore its capital ratio—to changes in economic conditions (see fig.1). While the capital ratio for forward mortgages ranged from negative 3.3 percent to positive 4.17 percent under all of the economic scenarios, the corresponding range for HECMs was negative 38.74 percent to positive 3.07 percent. Under the current approach of jointly considering the HECM and forward mortgage portfolios in the capital assessment, both portfolios in combination are subject to the capital requirement, but the volatility of the HECM portfolio’s economic value is mitigated by the relative stability of the forward mortgage portfolio. More specifically, because the forward mortgage portfolio is substantially larger than the HECM portfolio (with the HECM portfolio accounting for roughly 10 percent of the MMI Fund’s insurance-in-force in fiscal year 2016), the combined capital ratio more closely follows the generally less volatile capital ratio for forward mortgages (see fig. 2). As a result, the combined capital ratio is less uncertain than the HECM capital ratio, and managing the HECM portfolio within that combined framework is more feasible than managing it to a separate capital requirement. Finally, another possible advantage of the joint assessment is some degree of risk diversification. The cash inflows and outflows of the forward mortgage and HECM portfolios do not necessarily rise and fall in tandem in response to changes in macroeconomic conditions. For example, all other things being equal, rising mortgage interest rates tend to increase the economic value of the forward mortgage portfolio but tend to decrease the economic value of the HECM portfolio. Because the cash flows of the two portfolios are not fully correlated, the amount of capital needed for the two portfolios in combination may be less than the sum of the amount of capital needed for each portfolio separately. Disadvantages of Including HECMs in the MMI Fund Include More Uncertainty about the MMI Fund’s Financial Condition Joint assessment of the forward mortgage and HECM portfolios in determining compliance with the capital requirement also has some disadvantages. First, including HECMs in the MMI Fund can result in more uncertainty about the Fund’s expected performance. As previously discussed, the economic value of HECMs is more volatile and sensitive to economic conditions than the economic value of forward mortgages. As a result, estimates of the MMI Fund’s economic value and capital ratio and its potential performance under alternative economic scenarios are less predictable and more difficult to interpret with the inclusion of HECMs. Although the combined capital ratio generally tracks with the forward mortgage capital ratio, the inclusion of HECMs in the assessment can affect the combined capital ratio. For example, in fiscal year 2015, a high HECM capital ratio (6.44 percent) pulled the combined capital ratio above 2 percent (2.07 percent), even though the forward mortgage capital ratio was below 2 percent (1.63 percent). In this case, the inclusion of the HECM portfolio in the capital ratio resulted in the MMI Fund meeting the 2 percent capital requirement for the first time in 6 years. In its fiscal year 2014 report to Congress, FHA concluded that the HECM portfolio was over 10 times more volatile than the forward mortgage portfolio, noting that small changes to the HECM program can affect the overall value of the MMI Fund. Further, in its fiscal year 2015 report to Congress, FHA noted that because the HECM portfolio is projected to continue growing at a faster rate than the forward portfolio, year-to-year HECM volatility is likely to contribute more uncertainty to future actuarial valuations of the MMI Fund. In recent years, HECMs have accounted for an increasing percentage of the MMI Fund’s insurance-in-force, rising from 4.01 percent in fiscal year 2009 to 9.42 percent in fiscal year 2016. Second, relying on a combined capital ratio to assess the MMI Fund’s compliance with the capital requirement could mask the financial condition of the individual portfolios. Information on the performance of each portfolio is available in separate actuarial reports, but differences between the financial health of the two portfolios may be overlooked because compliance with the 2 percent capital requirement is determined by the combined capital ratio. For example, in fiscal year 2013, the combined capital ratio was below 2 percent (negative 0.11 percent), while the HECM capital ratio was 7.50 percent. In contrast, in fiscal year 2016, the combined ratio was above 2 percent (2.32 percent), while the HECM capital ratio was below 2 percent (negative 6.90 percent). In those years, the substantial difference between the financial condition of the HECM portfolio and the overall MMI Fund would not have been evident from the combined capital ratio. Even in years when the capital ratios of both the forward mortgage and HECM portfolios are above or below the 2 percent level, the combined capital ratio may still hide important differences between the two. For example, in fiscal year 2014, the capital ratios for both the forward mortgage and HECM portfolios were below 2 percent. However, the forward mortgage capital ratio was positive (0.56 percent), while the HECM capital ratio was negative (-1.20 percent). This difference may be important to policymakers because a positive capital ratio indicates that the portfolio has some capital cushion to absorb unexpected losses, even if it is small. In contrast, a negative ratio suggests the portfolio may not have sufficient capital to independently cover all expected net losses on outstanding insurance, and may essentially be financially supported by the other portfolio in the MMI Fund. Finally, in certain circumstances, the joint capital assessment could create pressure to raise insurance premiums or tighten underwriting standards in one program to compensate for the weaker financial performance of another program. For example, if the forward mortgage capital ratio were above 2 percent, but the HECM capital ratio pulled the combined ratio below 2 percent, raising insurance premium rates for forward mortgages could be the quickest way to regain a 2 percent capital ratio. In this example, a portion of the premiums paid by the forward mortgage borrower would essentially support the HECM program. While this situation would benefit HECM borrowers (because their insurance premiums would not increase), it would potentially create a burden for forward mortgage borrowers and could reduce the number of prospective borrowers who are able to afford FHA mortgage insurance. However, as of September 2017, FHA officials said that the agency had not increased forward mortgage premiums to support the HECM program or vice versa. Alternative Approaches to Managing the HECM Program and Assessing the Capital Requirement Pose Trade-offs Alternatives to the MMI Fund’s joint capital assessment could address some of the disadvantages of this approach but would also involve potential trade-offs between mission, financial soundness, and transparency goals. Policy decisions about these trade-offs could have significant implications for the management of FHA’s programs and for potential FHA borrowers. If Congress wishes to place additional emphasis on the financial self- sufficiency of the HECM program, it may be appropriate to hold the HECM portfolio to a capital requirement separate from that of forward mortgages. Under this option, future HECMs could either remain in the MMI Fund or be placed under a different insurance fund. The capital requirement could be set at the same congressionally defined level as the one for forward mortgages, or it could be tailored to the risks and volatility of the HECM portfolio. A separate HECM capital requirement would help ensure that the forward mortgage portfolio is not supporting the HECM portfolio, or vice versa. Decisions about premiums and other program requirements could be based solely on each portfolio’s financial condition and would not be influenced by a need to keep a combined capital ratio sufficiently high. In addition, a separate HECM capital requirement would help ensure that for future loan cohorts, the financial conditions of the individual portfolios are not masked by a combined capital ratio. However, if the HECM portfolio was required to independently meet a minimum capital ratio, the volatility of the portfolio’s economic value could make it difficult for FHA to consistently meet the requirement without targeting a capital level substantially above the minimum requirement. Doing so may require FHA to raise insurance premiums or place greater restrictions on the amount seniors can borrow, which would limit the program’s ability to serve its goal of alleviating economic hardship. In comparison, if Congress wishes to place greater emphasis on maximizing the benefits of the HECM program for seniors, another option may be to exempt the HECM portfolio from a capital requirement. Under this option, future HECMs would not be part of the MMI Fund and would not be subject to the MMI Fund’s capital requirement. As with a separate HECM capital requirement, this option would help ensure that the financial condition of future loan cohorts in the forward mortgage portfolio is not masked by a combined capital ratio. But, the financial condition of the HECM portfolio would not be as transparent, unless FHA continued to conduct HECM actuarial assessments. In addition, FHA could set premiums and program limits without consideration for building a capital buffer, which might decrease the likelihood that the HECM program would operate on at least a break-even basis over the long run. Some industry participants we spoke with did not think that HECMs should be exempted from a capital requirement, noting that the increased transparency and accountability of HECMs were important. However, even without a capital requirement, FHA could choose to continue conducting actuarial assessments of the HECM program for continued transparency. Conclusions The programs FHA administers under its MMI Fund play an important role in the mortgage market by expanding homeownership opportunities and helping stabilize housing markets during economic downturns. However, the MMI Fund’s financial challenges in the wake of the 2007–2011 housing crisis illustrate the fund’s vulnerability to severely adverse economic conditions and underscore the importance of capital requirements and stress testing practices for this $1.2 trillion mortgage insurance portfolio. Opportunities exist to strengthen these requirements and practices by making them more consistent with those used by financial institutions and regulators, as reflected in our two evaluative frameworks. As we concluded in our September 2013 report, and consistent with the capital requirements framework in this report, including accountability mechanisms in FHA’s capital requirement could enhance management and oversight of the MMI Fund. Therefore, as we suggested in our 2013 report, we maintain that Congress should consider requiring FHA to submit a capital restoration plan and regular updates on plan implementation whenever the fund’s capital ratio falls below the required level. In our current review, we identified three additional areas where the capital requirement and stress testing practices for the MMI Fund could be strengthened in accordance with our frameworks. Specifically, the statutory 2 percent capital requirement does not specify the economic conditions the fund would be expected to withstand. As a result, it may not provide an adequate financial cushion under scenarios in which Congress may anticipate that the fund would be self-sufficient. In addition, FHA has not analyzed or reported stress test results on a fund-wide basis, making it unclear what the capital position of the fund as a whole would be under stressful conditions. Finally, FHA has not defined the specific objectives of the fund’s stress tests and therefore has limited assurance that its stress testing methods and scenarios are targeted to risk-management needs. Matter for Congressional Consideration Congress should consider amending the National Housing Act to specify the economic conditions the MMI Fund would be expected to withstand without substantial risk of drawing on permanent and indefinite budget authority, and require FHA to specify and comply with a capital ratio consistent with these conditions. In specifying the economic conditions, Congress should take into account FHA’s statutory operational goals and role in supporting the mortgage market during periods of economic stress. (Matter for Consideration 1) Recommendations for Executive Action We are making the following two recommendations to FHA: The Commissioner of FHA should combine stress test results for the forward mortgage and HECM portfolios, where possible, and report estimated MMI Fund-wide capital ratios for the stress scenarios examined. (Recommendation 1) The Commissioner of FHA should develop specific objectives for stress tests of the MMI Fund and apply stress testing methods and scenarios consistent with those objectives. (Recommendation 2) Agency Comments We provided a draft of this report to HUD, the Federal Reserve, and FHFA for their review and comment. The Federal Reserve and FHFA had no comments. In its comments, reproduced in appendix IV, HUD agreed with our recommendations. HUD said that FHA’s forthcoming annual actuarial reports and report to Congress on the MMI Fund would include stress test results for forward mortgages and HECMs, but HUD did not state whether the reports would address our recommendations. By analyzing and reporting stress test results on a fund-wide basis and defining the specific objectives of its stress tests, FHA would better understand the capital position of the MMI Fund as a whole under stressful conditions and have greater assurance that its stress testing methods and scenarios are targeted to risk-management needs. HUD also said it was important to recognize the trade-offs between FHA’s mission and insurance policy holders when considering financial soundness. HUD said it appreciated our report’s statement that minimum capital requirements that are too high may limit FHA’s ability to serve its mission and market role and recommended that we make this statement more prominent. While our report does contain that statement, it also states that a minimum capital requirement that is too low may result in FHA taking on too much risk and having an insufficient capital buffer to withstand an economic downturn without requiring supplemental funding. Accordingly, we added language to the introduction of the report noting the challenge FHA and Congress face in balancing the fund’s financial self-sufficiency with FHA’s role in facilitating mortgage credit to underserved borrowers and stabilizing the housing market during economic downturns. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Housing and Urban Development, the Chair of the Board of Governors of the Federal Reserve System, the Director of the Federal Housing Finance Agency, and other interested parties. In addition, the report will be 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) 512-8678 or garciadiazd@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: Objectives, Scope, and Methodology Our objectives were to examine (1) the types of information actuarial reviews and other assessments provide about the Mutual Mortgage Insurance Fund’s (MMI Fund) financial condition, including its ability to remain self-sufficient; (2) the extent to which the capital requirement and stress testing practices for the MMI Fund are consistent with principles and practices underlying those of other financial institutions; and (3) key advantages and disadvantages of including both forward and Home Equity Conversion Mortgages (HECM) in the MMI Fund’s capital assessment. Information Provided by Reviews of the MMI Fund To examine the types of information actuarial reviews and other assessments provide about the MMI Fund’s financial condition, including its ability to remain self-sufficient, we reviewed actuarial reports of the fund prepared by a Federal Housing Administration (FHA) contractor and related FHA reports to Congress. We focused on reports for fiscal year 2009 (the first year HECMs were part of the MMI Fund) through fiscal year 2016 (the most recently completed report). Additionally, we reviewed FHA budget and financial documents containing assessments of the fund. Specifically, we reviewed the Department of Housing and Urban Development (HUD) appendix from the President’s budgets for fiscal year 2011 through fiscal year 2018 (the most recent available) and FHA’s audited financial statements for fiscal year 2011 through fiscal year 2016 (the most recent available). We also reviewed FHA documents and prior GAO reports describing the mechanisms used to provide supplemental resources to the fund, if necessary. We determined the extent to which the actuarial, budgetary, and financial accounting reviews contained information pertinent to assessing the MMI Fund’s financial condition, such as the amount of funds needed and available to cover expected net future costs on outstanding insurance, the amount of funds available to cover unexpected losses, and the projected performance of the MMI Fund under alternative economic scenarios. We compared the types of information available in the actuarial reviews with the types of information in the budgetary and financial accounting reviews of the fund, as well as in FHA’s quarterly reports to Congress, focusing on information that could help inform whether the MMI Fund is likely to remain self-sufficient. Additionally, we interviewed FHA headquarters officials about the content and interpretation of the various reviews of the fund. To illustrate the similarities and differences between the MMI Fund’s actuarial and budgetary reviews, we summarized information about the two reviews, including their purposes and the sources of their requirements (see app. II). In addition, we reviewed recent actuarial reports and HUD budget appendixes and spoke with FHA officials to understand their similarities and differences. We developed a hypothetical illustration of how certain components of the budgetary review are used in the actuarial review. Capital Requirements and Stress Tests To assess the extent to which the MMI Fund’s capital requirement and FHA’s stress testing approach are consistent with principles underlying such requirements for other financial institutions, we developed two evaluative frameworks and assessed requirements and practices for the MMI Fund against them. For the capital requirements framework, we reviewed publicly available documents on requirements and capital assessment practices from financial regulators and institutions, including the Bank for International Settlements, Fannie Mae and Freddie Mac (specifically, their capital requirements for private mortgage insurers), the Federal Deposit Insurance Corporation, and the Federal Housing Finance Agency (FHFA). For the stress testing framework, we reviewed articles on principles and practices from financial regulators and institutions, including the Bank for International Settlements, the Board of Governors of the Federal Reserve System (Federal Reserve), and the International Monetary Fund. We included in our frameworks key common elements in designing capital requirements and stress tests that could apply to the MMI Fund, assuming the fund would continue to operate under federal accounting standards and budgeting requirements. In addition to FHA, we shared the draft frameworks with FHFA, the National Association of Insurance Commissioners, and the American Academy of Actuaries and interviewed officials from these organizations to obtain their input on the frameworks. We chose these organizations based on their expertise in financial assessments of housing finance and mortgage insurance institutions. We then reviewed publicly available reports and documents, including relevant statutory provisions and FHA’s annual actuarial reviews and reports to Congress, to assess whether the requirements and practices of the MMI Fund were consistent with our framework elements. To provide additional perspective on stress tests of the MMI Fund, we compared variables in selected economic scenarios from the fiscal year 2016 actuarial review of FHA’s forward mortgage portfolio with corresponding variables in one of the scenarios used by the Federal Reserve in its 2016 supervisory stress tests of large banking organizations (see app. III). Specifically, we graphed the projected paths of the house price index, 30-year fixed mortgage rate, and unemployment rate for the two most stressful MMI Fund scenarios—the Monte Carlo simulation path producing the lowest economic value for forward mortgages and the Moody’s Analytics’ protracted slump scenario—and the Federal Reserve’s severely adverse scenario. We chose to highlight the worst simulation path and the Moody’s Analytics protracted slump scenarios because they are generally the two most severe scenarios used in stress tests of the MMI Fund. The Federal Reserve’s severely adverse scenario was the most analogous to the two MMI Fund scenarios and has been referenced in Fannie Mae’s and Freddie Mac’s financial requirements for private mortgage insurers. We analyzed the similarities and differences in the severity, duration, and timing of the three variables discussed above. To assess the reliability of FHA’s data on its stress scenarios, we compared the data we received from the agency with published information in FHA’s actuarial reviews. We determined the data were sufficiently reliable for the purposes of illustrating similarities and differences with the Federal Reserve’s severely adverse scenario. Consideration of Forward Mortgages and HECMs in Capital Assessment To identify key advantages and disadvantages of including both forward mortgages and HECMs in the MMI Fund’s capital assessment, we reviewed actuarial results for both portfolios from fiscal year 2009 through fiscal year 2016. Using information from the actuarial reviews, we calculated and compared the separate and combined capital ratios for forward mortgages and HECMs to determine the effect of including the reverse mortgage portfolio in the MMI Fund capital calculation, as well as the potential effects of holding the HECM portfolio to a separate capital requirement. We also reviewed discussions in FHA’s annual reports to Congress describing the effect of including the forward mortgage and HECM portfolios in the same fund. In addition, we interviewed FHA officials and other industry participants and stakeholders, including the National Reverse Mortgage Lenders Association, Mortgage Bankers Association, U.S. Mortgage Insurers, American Bankers Association, and the American Association of Retired Persons, about the advantages and disadvantages of jointly considering both portfolios in assessing the MMI Fund’s capital ratio as well as of alternative approaches. We conducted this performance audit from August 2016 to November 2017 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: Mutual Mortgage Insurance Fund Budgetary and Actuarial Reviews The budgetary and actuarial reviews of the Mutual Mortgage Insurance Fund (MMI Fund) serve different purposes, stem from different requirements, and are conducted by different entities. See table 5 for a summary of these two reviews of the fund. However, the two reviews share some concepts and numbers. For example, the actuarial analysis of the MMI Fund’s economic value includes an existing capital resources component, which can be calculated from information on assets and liabilities presented in the budgetary review. In addition, both reviews include a calculation of the present value of future cash flows on outstanding insurance, though the two reviews use different models and economic assumptions to perform these calculations. Both reviews also provide estimates of the amount of resources the MMI Fund has, in excess of what is needed to cover estimated credit subsidy costs (that is, the net present value of expected future cash flows on outstanding insurance). Figure 3 provides a simplified, hypothetical illustration of the relationship between the MMI Fund’s budgetary and actuarial reviews. Appendix III: Comparison of Economic Scenarios Used in Mutual Mortgage Insurance Fund and Federal Reserve Supervisory Stress Tests We compared selected economic scenarios used in stress tests of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund) with the severely adverse scenario developed by the Board of Governors of the Federal Reserve System (Federal Reserve) for its supervisory stress tests of large banking institutions. (Under the direction of the Federal Housing Finance Agency, the housing enterprises Fannie Mae and Freddie Mac incorporated the Federal Reserve scenario into financial criteria that private mortgage insurance companies must meet to be an approved insurer of mortgages acquired by the housing enterprises.) Our analysis focused on scenarios used in the fiscal year 2016 actuarial review of the MMI Fund’s forward mortgage portfolio (the most recently completed review) and the Federal Reserve’s 2016 supervisory stress tests, because these scenarios all used projections of economic variables beginning in calendar year 2016. We examined similarities and differences in the severity, duration, and timing of these scenarios’ projections of three variables most pertinent to the MMI Fund’s economic value: single-family home prices, 30-year fixed mortgage interest rates, and unemployment rates. These comparisons should be treated as illustrative because the MMI Fund and Federal Reserve stress tests have different intended uses and time horizons. For example, the Federal Reserve stress scenarios last 3 years and one quarter, whereas the MMI Fund scenarios last nearly 12 years. In addition, because both the MMI Fund and Federal Reserve stress scenarios change from year to year, the similarities and differences we discuss are not representative of those that might be observed for other time periods. The following analysis compares the projected quarterly paths of the three variables under two economic scenarios used in stress tests of FHA’s forward mortgage portfolio—the Monte Carlo simulation path producing the lowest economic value for forward mortgages (MMI Fund worst simulation path) and the modified Moody’s Analytics protracted slump scenario (MMI Fund protracted slump)—with the projected paths of the variables under the Federal Reserve’s severely adverse scenario. We chose to highlight these MMI Fund stress scenarios because they generally have been the two most adverse scenarios considered in the actuarial reviews and are therefore the most analogous to the Federal Reserve’s severely adverse scenario. The projections for the MMI Fund scenarios and the Federal Reserve scenario start 6 months apart (third quarter and first quarter of calendar year 2016, respectively). We treated the starting quarter of each scenario as the first quarter of the comparative analysis. House Price Index As shown in figure 4, the MMI Fund and Federal Reserve scenarios differ in terms of the severity, duration, and timing of projected changes in house prices (as measured by house price indexes). All other things being equal, falling house prices negatively affect the MMI Fund because they increase the number of mortgage foreclosures and the severity of insurance losses on those foreclosures. The MMI Fund protracted slump and Federal Reserve severely adverse scenarios assume similar sharp declines in house prices during the first 2 years—about negative 20 percent and negative 23 percent, respectively. However, under the MMI Fund protracted slump scenario, house prices begin to recover in the third year and rise steadily thereafter, ending 15 percent higher than they were at the start of the scenario. In contrast, under the Federal Reserve scenario, house prices decline about an additional 2 percentage points, then recover slightly before the scenario ends in the fourth year. The MMI Fund worst simulation path features a substantially different house price path than the other two scenarios. It shows a small initial increase in house prices over the first 2 years, before projecting an extended 6-year decline, resulting in a peak-to-trough drop of about 18 percent. Thereafter, house prices recover somewhat, but end up about 10 percent below their level at the start of the scenario. Thirty-Year Mortgage Interest Rate The projected path of 30-year fixed mortgage interest rates also differs among the three stress scenarios. Changes in mortgage interest rates can have varying effects on the MMI Fund. On the one hand, lower interest rates can negatively affect the fund by incentivizing borrowers to prepay their mortgages (for example, through refinancing), which reduces the fund’s income from insurance premiums. On the other hand, if coupled with conditions that increase foreclosure risk (such as low house price growth), higher interest rates can negatively affect the fund by reducing prepayments, resulting in more mortgages remaining in the fund that could lead to foreclosures and insurance claims. As shown in figure 5, the three scenarios exhibit differences in the severity and timing of interest rate changes and the overall volatility of the interest rate path. The mortgage interest rate under the Federal Reserve’s severely adverse scenario increases by about 1 percentage point over the first year, then essentially levels off through the end of the scenario in the fourth year. In contrast, the MMI Fund protracted slump scenario projects an initial 1.5 percentage point decline in the interest rate over about the first 2 years, followed by an extended increase that leaves the interest rate almost 2 percentage points higher at the end of the 12- year scenario than it was at the start. The MMI Fund worst simulation path features the most dramatic interest rate changes of the three scenarios. It begins with a sharp increase of more than 3.5 percentage points over about the first 2 years, then assumes several up and down spikes over about the next 10 years, before ending with an interest rate about 3 percentage points higher than it was at the start of the scenario. Unemployment Rate As shown in figure 6, all three scenarios feature a steep increase and subsequent decline in the unemployment rate, but the timing and duration of the changes differ. All other things being equal, increases in the unemployment rate adversely affect the MMI Fund because of the negative effect that job loss has on a borrower’s ability to make monthly mortgage payments and avoid foreclosure. The unemployment rate under the Federal Reserve severely adverse scenario and the MMI Fund protracted slump scenario follows similar paths. Both start with nearly identical increases of about 4 percentage points within the first 2 years, followed by declines of roughly 1 percentage point over the subsequent six quarters, at which juncture the Federal Reserve scenario ends. In the longer MMI Fund protracted slump scenario, the unemployment rate continues to fall gradually through the 12th year, ending about 1 percentage point lower than it was at the beginning of the scenario. In contrast, the MMI Fund worst simulation path features a more gradual and less even increase in the unemployment rate—about a 3.25 percentage point rise over about the first 5 years. The unemployment rate then slides below the starting level by year 10, before rebounding past the starting level by the end of the scenario. Appendix IV: Comments from the Department of Housing and Urban Development Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Steven Westley (Assistant Director), Winnie Tsen (Analyst in Charge), Stephen Brown, Marcia Carlsen, William Chatlos, Robert Dacey, Emei Li, John McGrail, Angela Pun, Jennifer Schwartz, Jena Sinkfield, and Frank Todisco made key contributions to this report.

Why GAO Did This Study FHA insures private lenders against losses from defaults on single-family mortgages. According to independent actuarial reviews, in fiscal years 2009–2014, FHA's MMI Fund (which insures $1.2 trillion in single-family traditional and reverse mortgages) did not meet its statutory 2 percent capital requirement. Also, a budgetary review determined that the fund required $1.69 billion in supplemental funds in fiscal year 2013. GAO was asked to examine issues concerning the MMI Fund's capital requirement and actuarial reviews. This report examines the types of information provided by assessments of the fund's financial condition, FHA's capital requirement and stress testing practices, and trade-offs associated with including reverse mortgages in the fund's capital assessment. GAO analyzed actuarial and budgetary assessments of the MMI Fund. GAO reviewed financial institution and regulatory capital and stress testing principles to develop an evaluative framework and applied it to FHA. GAO also interviewed federal and mortgage industry officials. What GAO Found The Federal Housing Administration's (FHA) budgetary reviews of the Mutual Mortgage Insurance Fund (MMI Fund) assess whether it needs more budget authority to cover expected future costs, and independent actuarial reviews provide complementary information on the fund's finances. FHA uses the actuarial reviews to assess whether the MMI Fund's capital ratio (economic value divided by insurance obligations) meets the 2 percent requirement and how fund components would perform under alternative economic scenarios. While the actuarial assessment does not directly determine the need for additional budget authority, it evaluates the fund's ability to absorb unexpected losses and may prompt changes in FHA policies and insurance premiums. Capital requirements and stress testing practices—tools for managing financial risks—for the MMI Fund are not consistent with all elements of a framework GAO developed to help assess these tools in the context of FHA's single-family mortgage insurance programs. In accordance with the framework, FHA's capital assessments and stress tests are transparent and incorporate a number of relevant risk factors. However, areas of inconsistency include the following: Scenario-based requirement . The statutory capital requirement is intended to help ensure the fund can absorb unexpected losses but is not based on a specified risk threshold, such as an adverse economic scenario the fund would be expected to withstand without requiring supplemental funds. Accountability mechanisms . The capital requirement also does not include accountability mechanisms, such as a set of steps FHA would have to take if the capital ratio again fell below the 2 percent minimum. Fund-wide stress tests . FHA has conducted separate stress tests—projections of financial condition under adverse scenarios—of its forward (traditional) and reverse mortgage (loans against home equity available to seniors) portfolios, but has not performed tests on a fund-wide basis. Stress test objectives . FHA has not defined specific objectives for its stress tests such as determining the amount of additional capital, if any, that would be needed to withstand conditions similar to the last housing crisis. Strengthening FHA's capital requirement and stress testing practices could help ensure that the MMI Fund is able to withstand economic downturns and that stress test results are as relevant and useful as possible for risk management. Including reverse mortgages in the fund's capital assessment has advantages and disadvantages. Unlike for stress tests, FHA jointly assesses forward and reverse mortgages to calculate a combined capital ratio. Subjecting the reverse mortgage portfolio to capital assessment has made its financial condition more transparent. But, the portfolio's sensitivity to changes in economic assumptions makes the combined ratio more unpredictable. Alternative approaches also pose trade-offs. For example, a separate reverse mortgage capital requirement may help ensure the financial transparency of both portfolios, but requiring FHA to hold more capital to account for the volatility of the reverse mortgage portfolio could compel FHA to raise insurance premiums or lower borrowing limits. What GAO Recommends Congress should consider specifying the economic conditions the MMI Fund would be expected to withstand without supplemental funds, and FHA should conduct stress tests on a fund-wide basis and specify the objectives of its stress tests. GAO also continues to maintain that Congress should incorporate accountability mechanisms into FHA's capital requirement (as stated in GAO-13-722 ). FHA agreed with GAO's recommendations.

gao_GAO-18-76

gao_GAO-18-76_0

Background NAICS Codes and SBA’s Size Standards The Economic Classification Policy Committee of the Office of Management and Budget (OMB), Statistics Canada, and Mexico’s Instituto Nacional de Estadistica y Geografia developed NAICS codes as a standard for collecting and analyzing data describing the economies of North American countries. The U.S Census Bureau assigns a 6-digit NAICS code to each industry based on its primary activity that generates the most revenue. The Economic Classification Policy Committee reviews NAICS codes every 5 years for potential revisions to ensure the relevance, accuracy, and timeliness of the classifications. Additionally, SBA uses NAICS codes as the basis for its small business size standards. The Small Business Act authorizes SBA to establish size standards for determining eligibility for federal small business assistance, including contracting preferences. Size standards vary by industry and are generally expressed either as the average number of employees over a 12-month period or the average annual receipts in the previous 3 years. For certain codes, there are more than one size standard. SBA refers to these additional size standards as exceptions. For example, NAICS code 541712 (Research and Development in the Physical, Engineering, and Life Sciences, Except Biotechnology) with a general size standard of 1,000 employees has three exceptions related to aircraft and aircraft engines (1,500 employees), other aircraft parts (1,250 employees), and guided missiles and space vehicles (1,250 employees). The Small Business Jobs Act of 2010 requires SBA to review at least one-third of all size standards during every 18-month period from the date of its enactment and to review all size standards at least every 5 years. SBA has completed the first 5-year review of all size standards. To help ensure that small businesses receive a share of federal procurement contract dollars, Congress has set an annual government- wide goal of awarding not less than 23 percent of prime contract dollars to small businesses. For firms to compete for government contracts set aside for small businesses, these firms have to meet the small business size standard for the procurement and have the capacity to provide the goods and services. Indefinite Delivery/Indefinite Quantity (ID/IQ) Contracts ID/IQ contracts provide flexibility in cases where the government cannot determine the exact quantities and required timing for a product or service. We found in 2017 that from fiscal years 2011 through 2015, the proportion of spending by federal agencies on ID/IQ contracts remained stable and accounted for about a third (more than $130 billion annually) of total government contract obligations. Contracting officers may award either a single-award or multiple-award ID/IQ contract to meet procurement needs. Single-award ID/IQ contracts refer to situations when only one contract is awarded under a solicitation and are used in certain circumstances such as when only one contractor is capable of providing the product or service. Multiple-award ID/IQ contracts refer to situations when contracts are awarded to two or more contractors under a single solicitation. The FAR contains policies for using multiple-award ID/IQ contracts and states a preference for multiple-award (rather than single- award) ID/IQ contracts. NAICS Code Assignment and Acquisition Process Contracting officers have the authority to enter into, administer, or terminate contracts and are responsible for assigning the appropriate NAICS code and corresponding size standard to an acquisition. The FAR requires that contracting officers assign the NAICS code that best describes the principal purpose of the acquisition and states that the contracting officer’s assignment of the NAICS code is final unless a person adversely affected by the decision or SBA files an appeal. The FAR states that when selecting the NAICS code, contracting officers are to give primary consideration to the industry descriptions in the NAICS Manual, the product or service description in the solicitation, the relative value and importance of the components of the procurement making up the end item being procured, and the function of the goods or services being purchased. It also notes that a procurement is usually classified according to the component that accounts for the greatest percentage of contract value. In addition to the contracting officer, a number of agency officials and offices provide input on the assignment of NAICS codes to federal contracts during different phases of the acquisition process (presolicitation, pre-award, and award) (see fig. 1). Presolicitation phase. The program office identifies a need and contacts the contracting officer for guidance on developing and preparing key acquisition documents, such as the market research report and acquisition plan. The contracting officer and program office may also seek advice from the small business specialist and assigned PCR. After the approval of the procurement request, the contracting officer and program office work together to revise planning documents as necessary. Also during the presolicitation phase, the contracting officer coordinates with agency small business specialists and SBA’s assigned PCR using a small business coordination form. The contracting officer then publishes the presolicitation notice to summarize proposed contract actions. Pre-award phase. After the approval of the NAICS code, the contracting officer publishes the solicitation, which specifies the assigned NAICS code and corresponding size standard. Award phase. The agency awards the contract and publishes the award notice. Agencies use their contracting writing systems to execute the acquisition life-cycle from planning to contract award and use FPDS-NG to report contract awards. Firms interested in challenging a NAICS code assigned to a solicitation may file an appeal with SBA OHA. OHA was established in 1983 and is responsible for reviewing appeals of NAICS code assignments. OHA also reviews appeals of certain SBA program decisions such as size determinations; eligibility determinations for service-disabled veteran- owned (SDVO) small businesses, women-owned small businesses (WOSB), and economically disadvantaged women-owned small businesses (EDWOSB); and 8(a) business development program eligibility determinations, suspensions, and terminations. Contracting Officers Consider Various Factors When Assigning NAICS Codes, and SBA’s 2013 Rule Provides Additional Guidance for Multiple-Award Contracts Contracting Officers Consider Several Factors When Assigning NAICS Codes Officials at the Army, the Navy, DHS, and HHS stated that contracting officers refer to the FAR when assigning NAICS codes and consider a variety of factors. Additionally, in 2010 the Department of Defense (DOD) disseminated a memorandum to its components, which include the Army and the Navy, reiterating the process for determining the size status of contractors, including the requirement that contracting officers determine the appropriate NAICS code and related small business size standard and include them in solicitations. Although these agencies did not have training that specifically focused on NAICS codes, the training for contracting officers included discussion of NAICS code assignment. Contracting officers at these four agencies cited several factors, including a contract’s scope of work, that are involved in determining the NAICS code for a contract solicitation or an order: Statements of work and market research reports. The contracting officers we interviewed at all four agencies stated that they review the statements of work and assign the code that represents the majority of the work. One contracting officer stated that she also reviews the market research report when assigning the NAICS code. All of the contracting officers we interviewed at the four agencies stated that the market research reports usually include the relevant NAICS code. We found evidence of market research for two of the four contracts that we reviewed and found that the market research reports included the NAICS codes assigned to the contracts. Navy and HHS contracting officers were unable to provide evidence of market research for the contracts included in our review. Navy officials stated that the contracting team conducted market research but was unable to find copies of the documents. The HHS contracting officer stated that he conducted market research for the contract, but did not document it in a market research report. Instead, he noted in the small business coordination form that he reviewed prior or similar acquisitions as part of efforts to locate small business sources. Input from small business specialists. These four agencies’ contracting officers consult with their agencies’ small business specialists when deciding the NAICS code for a contract. Each of the four agencies we reviewed required their contracting officers to complete small business coordination forms prior to issuing solicitations for their agencies. When completing the forms, contracting officers must include the NAICS code designation and the corresponding size standard. Small business specialists must review the form before the contracting officer can issue the solicitation. All four agencies provided small business coordination forms related to the selected contract we reviewed. Additionally, each form included the signature of the small business specialist and listed the NAICS code and size standard, as required. All four of the agencies’ small business specialists we interviewed stated that they rarely disagreed with contracting officers on NAICS code assignments. They also noted that they coordinate with contracting officers on the NAICS code early in the acquisition process, for example, during market research. If they are unable to reach agreement on the code assignment, the specialists can elevate their concerns to the SBA PCR assigned to the office. According to SBA officials, the PCR will examine the research and either concur with the decision or file an appeal to the contracting officer. None of the specialists we interviewed had elevated any concerns to their PCR. Contract writing system requirements. The contracting officers we interviewed at all four agencies stated that they assign a single NAICS code for each solicitation, including for multiple-award contracts, because their contract writing systems and FPDS-NG do not allow them to enter more than one code per contract. While acquisition officials at each agency confirmed that contracting officers can assign only one code per multiple-award contract in their contract writing systems, they noted that contracting officers may list multiple codes for a multiple-award contract in the solicitation. Codes assigned to other contracts. Contracting officers we interviewed at all four agencies stated that if the solicitation is for a recurring contract, they refer to the previously assigned code. Two of the four contracting officers also consider the codes assigned to other contracts within their agencies that consisted of similar work. The purpose of the order. To issue an order under a contract, the purpose of the order must be within the scope of the underlying base contract. The four contracts we reviewed all had one NAICS code. The contracting officers we interviewed at all four agencies stated that if an order did not relate to the base award’s statement of work or NAICS code, they would award the order through another existing contract or award a new contract. We reviewed 10 orders from each of the four selected contracts and found that all 40 of the orders appeared to reflect the purpose of the base award and appeared to relate to the assigned NAICS code. However, the contracting officers we interviewed at two of the four agencies noted some challenges in assigning NAICS codes. They stated that because NAICS code definitions are broad, sometimes more than one code could be assigned to a solicitation. In reviewing the 40 orders associated with the four contracts we selected, we noted that in some instances more than one code could appear to apply to a contract. For example, the purpose of one order was to provide recommendations on design, testing, and evaluation in support of engineering activities. We found that this order could relate to the Research and Development in the Physical, Engineering, and Life Sciences (Except Biotechnology) code that was assigned as well as to the Engineering Services code because both include studies and development using engineering sciences. One contracting officer also noted that assigning the NAICS code is subjective and two different contracting officers could review the same contract and find different codes to be appropriate. We also noted this in reviewing our sample of orders. We found that some orders had similar purposes but were assigned different NAICS codes with different corresponding size standards. For example, as shown in table 1, we found two orders related to the installation of closed-circuit TV systems that had different NAICS codes. Three of the four contracting officers we interviewed stated that there are no unique challenges associated with assigning NAICS codes to ID/IQ contracts compared to other contracts. However, one small business specialist noted that assigning NAICS codes to ID/IQ contracts may be challenging for contracting officers because the statements of work may cover more than one code. One contracting officer we interviewed also stated that it can be challenging to assign NAICS codes to ID/IQ contracts because it is difficult to predict the nature of future orders associated with the base award, especially for research and development contracts. SBA’s 2013 Rule May Clarify NAICS Code Assignments on Multiple- Award Contracts In 2013, SBA issued a rule on assigning NAICS codes to multiple-award contracts that may further clarify code assignment for contracting officers. The purpose of the rule was to implement the Small Business Jobs Act of 2010, which amended the Small Business Act to allow small business set-asides for parts of multiple-award contracts, for orders placed against multiple-award contracts, and for reserving one or more contract awards for small business concerns. The final rule clarifies that if a multiple- award contract consists of discrete categories, contracting officers may assign a different NAICS code and corresponding size standard to each category. Additionally, under the final rule, contracting officers may issue orders under each category as long as the category’s NAICS code matches the order’s NAICS code. SBA officials stated that they developed the rule because contracting officers were unclear on how to assign NAICS codes to orders from multiple-award contracts. Updates to the FAR and FPDS-NG are required to fully implement the portion of SBA’s final rule related to NAICS codes. In a 2016 proposed rule to update the FAR, DOD, GSA, and the National Aeronautics and Space Administration (NASA) proposed changes to implement SBA’s 2013 rule and stated that enhancements to federal data systems were in process. In June 2017, GSA officials told us that updates to FPDS-NG would be required because the system does not currently allow agencies to assign a NAICS code to an order that differs from the code assigned to the base contract. They also told us that GSA was working on a new version of FPDS-NG that would allow contracting officers to assign NAICS codes to orders that differ from the code assigned to the base contract. SBA officials told us that this planned change would be responsive to their rule. As of mid-November 2017, the final FAR rule had not been issued, and updates to FPDS-NG will depend on the final rule. The four agencies we interviewed were aware of SBA’s 2013 final rule and the 2016 proposed update to the FAR, and stated they would apply the guidance in the rule and update their contract writing systems once the FAR update was finalized. Some Stakeholders Expressed Concerns about NAICS Code Assignments, but Few Appeals Have Been Filed Some Industry Groups and Firms Expressed Concern That Contracting Officers Assign NAICS Codes Based on Size Standards Some of the stakeholders we interviewed—three industry groups and five small businesses that had filed NAICS code appeals (appellants)— expressed concern that some contracting officers assign NAICS codes because they want specific size standards, not because they are the most appropriate codes, but several also stated it was difficult to determine how often this occurs. Specifically, the three industry groups and four of the five appellants we interviewed contended that contracting officers in some instances assign NAICS codes that allow them to make an award to a firm that would not be considered a small business under the “appropriate” code. Conversely, an official of one firm we interviewed told us that contracting officers in some instances assign NAICS codes with smaller size standards to limit competition for a contract. Because agencies have a federal mandate to meet small business contracting goals, contracting officers are required to provide maximum practicable opportunity to award contracts to small businesses in support of those goals. The following are specific concerns that industry groups and firms expressed: Ambiguous and overlapping language. An official from one firm told us that the language in the NAICS Manual can be ambiguous and noted overlap in the descriptions of certain codes with different size standards. For example, NAICS codes 541330 (Engineering Services) and 541712 (Research and Development in the Physical, Engineering and Life Sciences except Biotechnology) both include engineering, but have different size standards ($15 million and 1,000 employees, respectively). An official from another firm stated that the broad NAICS code descriptions result in solicitations that describe identical work having different NAICS codes and size standards. One industry group official stated that the practice of assigning a code based on the size standard and not the principal purpose is particularly a concern for research and development, professional services, and construction contracts. The definitions of the NAICS codes for these industries are broad and there is some overlap. For example, the Professional, Scientific, and Technical Services sector (Sector 54) includes research and development, engineering, legal and accounting, and computer systems design services, among other services. The Construction sector (Sector 23) also includes engineering services in addition to housing construction, water and sewer line construction, and plumbing and heating contractors. Preference for incumbent. Officials from two firms we interviewed told us that when recompeting an existing contract, the contracting officer may choose the NAICS code that best positions the incumbent company to compete rather than the code that best represents the work. Officials of one of these firms also stated that they are concerned when the NAICS code assigned to an existing contract that is being recompeted has changed and, in their opinion, the body of work to be performed under the new contract remains the same as the existing contract. Need to select multiple NAICS codes. In addition, one firm we interviewed stated that it is difficult to predict the code that a contracting officer will use for a procurement. Therefore, the firm selects multiple NAICS codes in its SAM entity registration so contracting officers will consider it for a variety of contracts. The other four firms we interviewed also told us that they selected multiple NAICS codes in SAM. As shown in table 2, a hypothetical firm that has 450 employees and revenue of $200 million would be a small business under some NAICS codes and large under other codes. Certain NAICS codes such as 541330 (Engineering Services) have exceptions to accommodate military procurement needs. However, one industry group and some firms stated that it is difficult to determine how often the practice of assigning a code based on the size standard and not the principal purpose occurs. Industry groups and firms also acknowledged that other factors could lead to the assignment of inappropriate NAICS codes. For example, one industry group official stated that human error, not ill intentions, may lead to the assignment of inappropriate codes. In addition, two firms we interviewed cited the inexperience of some contracting officers as a cause. One of these firms also noted that there could be legitimate disagreements about the appropriate NAICS code because individuals can perceive the nature of the work differently, including what is the preponderance of work to be performed. Another industry group official noted that the intended use of NAICS codes is for statistical purposes, not procurement, and as a result, the codes do not always align with procurement needs and the contracting marketplace. OHA officials acknowledged that assigning codes based on size standards may occur, but noted that it is OHA’s role to review the appropriateness of appealed NAICS code assignments, not the contracting officer’s intention behind assigning the code. As discussed in more detail later in this report, the standard for OHA’s review is whether the NAICS code designation was based on clear error of fact or law. When we shared stakeholders’ concerns about the assignment of NAICS codes with officials at the four agencies we reviewed and SBA, officials at three of the five agencies told us that they did not agree with some of the concerns. For example, DHS officials said that some of the observations—particularly the statement that contracting officers may assign the NAICS code that best positions the incumbent company to compete for the contract—were unfair and could be taken out of context. HHS officials told us they did not believe that contracting officers at HHS assign NAICS codes because they want specific size standards. SBA officials also questioned the stakeholders’ statements and pointed to the results of NAICS code appeals as an indication that the practice of assigning NAICS codes based on the size standard was not widespread. In addition, we analyzed the use of NAICS codes from fiscal years 2009– 2016 to determine whether contracting officers used NAICS codes whose size standard increased in 2012 more often than codes whose size standard did not increase. We selected three sectors with size standard increases in 2012 (Sectors 48–49 and 54) for this analysis because these sectors were among the first that SBA reviewed and adjusted. We found that the proportion of obligations and new contracts, respectively, related to NAICS codes with size standards that increased in 2012 remained relatively consistent for Sector 54 and increased for Sectors 48–49 after the size increase. See appendix II for more details. SBA’s Process for NAICS Code Appeals Includes Expediting Them According to OHA officials, OHA expedites NAICS code appeals over other appeals it receives, issuing the decision as soon as practicable because the decision is effectively moot if it is not made before offers are due. They stated that the NAICS code appeal process takes an average of 18 to 30 days to complete, depending on the complexity of the appeal. SBA’s process for NAICS code appeals includes (1) determining if appeals are timely and within OHA’s jurisdiction, (2) determining if the appellant is adversely affected by the assignment, and (3) expediting NAICS code appeals that are accepted. Interested parties filing a NAICS code appeal do not have to follow a particular format, but the appeal must include the following information: the solicitation or contract number; the name, address, and telephone number of the contracting officer; a full and specific statement as to why the NAICS code designation is alleged to be in error, and argument in support of such allegations; and the name, address, and telephone number of the appellant or its attorney. Once an appeal is filed, an administrative judge is assigned to adjudicate it. The judge issues a Notice and Order informing the parties of the filing of the appeal petition, establishing the close of record as 15 days after service of the Notice and Order, and informing the parties that OHA must receive any responses to the appeal petition no later than the close of record. Upon receiving notice of the appeal, the contracting officer must place a hold on the solicitation; inform the public about the appeal and the procedures and deadline for interested parties to submit arguments concerning the appeal; and send OHA copies of the solicitation and inform them of any amendments, actions, and developments concerning the procurement in question. When reviewing NAICS code appeals, the judge first considers whether the appeal is timely and within OHA’s jurisdiction. SBA regulations define timely appeals as those that are filed within 10 calendar days after issuance of the solicitation or amendment to the solicitation affecting the NAICS code. According to OHA officials, because the office has jurisdiction over small businesses only, large businesses cannot file appeals. If the appeal is untimely or outside OHA’s jurisdiction, the appeal is dismissed. If the appeal is not dismissed, OHA officials told us the judge then reviews the NAICS Manual, SBA regulations on size standards, OHA precedent, and the written records to make a final and independent decision. The standard of review is whether the NAICS code designation was based on clear error of fact or law. If there was no clear error of fact or law, OHA will deny the appeal. If it finds a clear error of fact or law, OHA will grant the appeal (see fig. 2). We found that OHA’s process for reviewing NAICS code appeals is generally similar to other types of OHA appeals (see table 3). For example, NAICS code appeals and other SBA appeals generally must be filed by an interested party that has been adversely affected. In addition, NAICS code appeals and some other SBA appeals must be filed within 10 calendar or business days. NAICS code appeals are different from other SBA appeals in that OHA is adjudicating an action taken by a contracting agency as opposed to a determination made by an SBA official. Four of the five firms (appellants) that we interviewed to discuss their experience with NAICS code appeals were generally satisfied with the appeals process. Of the five appellants, four used a legal counsel and expressed general satisfaction with the time frames for filing a NAICS code appeal. Four of the five appellants noted that filing within the 10 calendar days was not a challenge, two of them indicating that they had known about the code for some time because it was included in the agency’s request for information or proposals. Three of the four firms that used a legal counsel also told us the NAICS code filing process was straightforward. However, the remaining appellant said that 10 calendar days was not enough time. In addition, two appellants noted that firms may not file appeals because they are concerned that filing an appeal will affect their ability to receive future awards from the contracting officer. Few NAICS Code Appeals Were Filed, and Most Were Dismissed or Denied Of the 62 NAICS code appeals filed during calendar years 2014–2016, the majority were dismissed or denied. During this same time period, approximately 1.4 million new federal contracts were awarded, and 284 other types of appeals were filed with OHA. The majority of NAICS code appeals were dismissed, and less than half of the remaining appeals were granted (see fig. 3). Thirty-five appeals were dismissed for procedural reasons. For example, OHA dismissed NAICS code appeals that were not filed before the 10 calendar day deadline. Fifteen appeals were denied, meaning that OHA determined that the NAICS code designation was not based on a clear error of fact or law. Twelve appeals were granted, meaning that OHA determined that the NAICS code designation was based on a clear error of fact or law. Agency Comments We requested comments from DOD, DHS, GSA, HHS, and SBA on a draft of this report. DOD, DHS, and SBA had no comments on the draft report. GSA and HHS provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to DOD, DHS, GSA, HHS, and SBA and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology This report examines (1) what contracting officers consider when assigning North American Industry Classification System (NAICS) codes to federal contracts and the status of efforts to clarify code assignment and (2) stakeholder views on NAICS code assignment and the number and outcomes of appeals filed with the Small Business Administration’s (SBA) Office of Hearings and Appeals (OHA). For our first objective, we reviewed federal laws and regulations related to NAICS code assignment and relevant policies and procedures from the four agencies with the highest indefinite delivery/indefinite quantity (ID/IQ) contract obligations from fiscal years 2011–2015 (the 5 most recent years of Federal Procurement Data System-Next Generation (FPDS-NG) data available when we began our review): Army, Navy, Department of Homeland Security (DHS), and Department of Health and Human Services (HHS). These agencies accounted for approximately $347 billion in obligations and 47 percent of all ID/IQ obligations in fiscal years 2011–2015. To understand how these selected agencies assign NAICS codes to contracts, we reviewed contract documentation, such as acquisition plans and market research documents, for one ID/IQ contract from each of the agencies (see table 4). We selected the four contracts we reviewed based on (1) whether they had small business set-asides, (2) the NAICS code, and (3) the number of orders. We selected contracts to obtain a mix of assigned NAICS codes and corresponding size standards. We selected contracts awarded in fiscal years 2014 and 2015 with codes from NAICS industry Sector 54 (Professional, Scientific, and Technical Services) because this sector accounted for half of the 10 NAICS codes with the highest ID/IQ obligations from fiscal years 2011–2015 (see table 5). We focused on ID/IQ contracts for our contract review because orders for these contracts are ordered after the base contract is awarded, potentially leading to challenges when assigning the NAICS code. We interviewed contracting officers, small business specialists, and SBA procurement center representatives (PCR) associated with each contract. Of the contracting officers who assigned the NAICS codes to the selected contracts, three no longer worked at the agencies. As such, we interviewed the contracting officer currently assigned to the contract. We also interviewed either the small business specialist who reviewed the NAICS code assignment or the specialist currently responsible for the contract or program office. To understand how orders relate to the base awards and their NAICS codes, we reviewed 10 orders from each contract and compared each order’s purposes to the base award purposes and to the NAICS code definition. We selected a mix of (1) orders that had product and service codes different from the codes assigned to the majority of the contract’s orders or did not contain key words contained in the contract’s statement of work and (2) orders that were the top orders in terms of obligations. To determine the status of ongoing efforts to clarify code assignment, we reviewed proposed and final regulatory changes to NAICS code assignment and interviewed officials at SBA and the General Services Administration (the agency responsible for managing the operation, maintenance, and updating of FPDS-NG). For our second objective, to understand stakeholders’ views on NAICS code assignment, we interviewed officials from three industry groups and five firms that filed NAICS code appeals during calendar years 2014– 2016 (the 3 most recent years of data available). We selected three industry groups to interview that were small business trade associations or contracting interest groups with information on their websites about NAICS codes. We interviewed 5 of the 14 firms that filed appeals in calendar years 2014–2016 of NAICS codes in Sector 54 (the sector with the most appeal decisions). We selected these firms to get a variety of results (granted, denied, or dismissed) and focused on firms that had filed multiple appeals or recent appeals. To identify commonly used NAICS codes and commonly used size standards, we analyzed data from FPDS-NG to identify the top NAICS codes by obligations and by number of contracts awarded in fiscal year 2016. To assess whether contracting officers were more likely to use a NAICS code when the corresponding size standard increased, we analyzed fiscal year 2009–2016 obligations and number of contracts awarded for NAICS codes in three sectors with size standards that SBA increased in 2012. We assessed the reliability of the FPDS-NG data we used by electronically testing for missing data, outliers, and inconsistent coding, and by comparing the data on selected contracts to contract documentation we obtained, including the NAICS code and whether or not the contract was an ID/IQ contract. We determined that the data were sufficiently reliable for the purposes of identifying trends in NAICS codes assigned. To understand SBA OHA’s process for reviewing NAICS code appeals, we reviewed federal regulations and interviewed OHA officials. For context, we compared OHA’s process for NAICS code appeals to its processes for other types of appeals. To identify the number and outcomes of NAICS code appeals, we obtained and analyzed SBA’s OHA decisions on NAICS code appeals filed during calendar years 2014–2016. We summarized the year, agency, outcome, and challenged code for each of the decisions in this time period. We conducted this performance audit from October 2016 to December 2017 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 in 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: Analysis of Federal Procurement Data System-Next Generation Data on North American Industry Classification System Code Assignments In this appendix, we present analyses of FPDS-NG data on NAICS codes by obligations and number of contracts awarded. Specifically, we analyzed (1) FPDS-NG data for fiscal year 2016 to determine commonly used NAICS codes and size standards and (2) FPDS-NG data for fiscal years 2009 through 2016 to determine whether selected NAICS codes were used more often when the corresponding size standards increased. Commonly Used NAICS Codes Tables 6 and 7 contain data on the top 50 NAICS codes by obligations and number of new contracts awarded, respectively, in fiscal year 2016. Tables 8 and 9 contain data on commonly used revenue-based size standards and employee-based size standards by obligations. Tables 10 and 11 contain data on commonly used revenue-based size standards and employee-based size standards by new contracts awarded. Use of NAICS Codes with Size Standard Increases in 2012 Industry stakeholders we interviewed stated that contracting officers may assign NAICS codes because they want specific and usually higher size standards, not because they are the most appropriate codes. We analyzed the use of NAICS codes from fiscal years 2009–2016 to determine whether contracting officers used NAICS codes whose size standard increased in 2012 more often than codes whose size standard did not increase. We selected three sectors with size standard increases in 2012 (Sectors 48–49 and 54) for this analysis because these sectors were among the first that the Small Business Administration reviewed and adjusted. As shown in figures 4 and 5, the proportion of obligations and new contracts, respectively, with NAICS codes where size standards increased in 2012 remained relatively consistent for Sector 54 and increased for Sectors 48–49 after the size increase. Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Paige Smith (Assistant Director), Juliann Vadera (Analyst in Charge), Pamela Davidson, Timothy DiNapoli, Suellen Foth, Julia Kennon, John McGrail, Marc Molino, Ifunanya Nwokedi, and Tovah Rom made key contributions to this report.

Why GAO Did This Study Federal regulations require that contracting officers assign the NAICS code that best describes the principal purpose of the acquisition. SBA's OHA is responsible for reviewing appeals of NAICS code assignments. Questions have been raised about whether agencies assign the appropriate NAICS codes to ID/IQ contracts with multiple task orders. GAO was asked to review several issues related to NAICS codes. In this report, GAO examines (1) what contracting officers consider when assigning NAICS codes to federal contracts and the status of efforts to clarify code assignment and (2) industry views on NAICS code assignment and the number and outcomes of appeals. GAO reviewed policies and procedures of the four agencies with the highest ID/IQ obligations from fiscal years 2011–2015: Army, Navy, Department of Homeland Security (DHS), and Department of Health and Human Services (HHS); reviewed one contract and 10 related task orders at each of the selected agencies and interviewed the related contracting officers; analyzed 2016 federal contracting data to identify commonly used NAICS codes and size standards; interviewed three industry groups and five firms that filed appeals for industry views on NAICS code assignment; and analyzed SBA decisions on NAICS code appeals in 2014–2016. The Department of Defense, DHS, and SBA had no comments on the report. The General Services Administration and HHS had technical comments, which we incorporated as appropriate. What GAO Found Agencies' contracting officers consider various factors in assigning North American Industry Classification System (NAICS) codes to federal contracts, and the Small Business Administration (SBA) issued a rule in 2013 intended to clarify NAICS code assignment. NAICS codes are the basis for SBA's size standards; therefore, the code that the contracting officer assigns determines whether a firm is eligible for federal contracting preferences, such as small business set-asides. The contracting officers GAO interviewed cited several factors that affect their assignment of NAICS codes, including information on the work to be performed and input from agency small business specialists. However, they stated that assigning a NAICS code can be challenging when one or more codes could apply to a contract. In the 2013 rule, SBA clarified that under certain circumstances, contracting officers may assign more than one code to multiple-award contracts. Such contracts are awarded to two or more contractors under a single solicitation and include indefinite delivery/indefinite quantity (ID/IQ) contracts used when quantities and timing are not known at the time of the award. However, updates to the Federal Acquisition Regulation (FAR)—the rules governing the federal government's purchasing process—are required to fully implement SBA's final rule. The agencies GAO interviewed plan to implement this rule after it is adopted into the FAR and they can make necessary updates to their information technology for contracting. This FAR rule-making process is ongoing. Some industry groups and firms GAO interviewed expressed concerns about how contracting officers assign NAICS codes, but SBA's Office of Hearings and Appeals (OHA) dismissed most appeals and denied more than half of the remaining appeals. Some industry groups and firms GAO interviewed expressed concerns that contracting officers may assign NAICS codes based on the size standard (thereby affecting the number of firms that can compete as a small business) and not the work to be performed. However, some also stated it was difficult to determine how often this practice occurs, and OHA officials noted it is the office's role to review the appropriateness of appealed NAICS codes, not the contracting officer's intention when assigning the code. Of the 62 NAICS code appeals that were filed in calendar years 2014–2016, OHA dismissed 35, denied 15, and granted 12 (see fig.). Appeals were dismissed because, among other things, they were untimely or the contracting officer cancelled the acquisition.

gao_GAO-18-513

gao_GAO-18-513_0

DOD Has Established 10 Cross-Functional Teams That Are in Various Stages of Implementation DOD has established 10 cross-functional teams that OCMO officials consider responsive to section 911, and these teams are in various stages of implementation. The Secretary of Defense established a cross- functional team to manage the transfer of background investigations for DOD personnel security clearances from the Office of Personnel Management to DOD. This team is required to report directly to the Secretary. In addition, the Deputy Secretary of Defense established 9 additional cross-functional teams to implement reform initiatives for improving DOD’s business operations. These teams report to the CMO. DOD Is in the Early Stages of Establishing a Cross-Functional Team to Manage the Transfer of Background Investigations to DOD In August 2017, the Secretary of Defense issued a memorandum authorizing its first cross-functional team in response to section 911 to address challenges with personnel vetting and background investigation programs. The memorandum notes that a backlog of background investigations affects DOD’s mission readiness, critical programs, and operations. According to the memorandum, this cross-functional team will conduct a full review of current personnel vetting processes to identify a redesigned process for DOD’s security, suitability and fitness, and credential vetting. The cross-functional team’s objectives are to develop options and recommendations to mitigate shortcomings, ensure necessary resourcing, and transform the personnel vetting enterprise. The Office of the Under Secretary of Defense for Intelligence and the Defense Security Service are leading the efforts to establish the team. Since we last reported on DOD’s efforts to establish the team, DOD has taken some steps, such as assigning some team members, but has not completed other key steps to staff and establish a direction for the team. In February 2018, we reported that DOD had selected an interim leader for the team. As of May 2018, this person, a non-Senior Executive Service individual from the Defense Security Service, was still serving as the interim leader. Section 911 requires DOD to assign a senior qualified and experienced individual as the leader of the team. According to Office of the Under Secretary of Defense for Intelligence officials, the department plans to seek nominations from DOD components for a permanent leader from the Senior Executive Service, but does not have a specific timeframe for doing so. DOD also assigned seven full-time personnel to the team, who are now co-located, in accordance with requirements under section 911. These personnel are from the Army, Defense Civilian Personnel Advisory Service, DOD Consolidated Adjudications Facility, OCMO, Office of the Under Secretary of Defense for Intelligence, and MITRE Corporation. Office of the Under Secretary of Defense for Intelligence officials estimated that the team may have 20 members when it is fully staffed, but they did not have an estimate of when DOD will assign the remaining team members. In addition, the Office of the Under Secretary of Defense for Intelligence has established priorities for the cross-functional team. For example, the team is required to prepare a project plan incorporating all key components for a DOD enterprise vetting mission—including key milestones, specific objectives, performance metrics, a resourcing plan, and an action plan for tracking key initiatives—which are key steps for establishing the team’s direction. According to Office of the Under Secretary of Defense for Intelligence officials, as of May 2018, the interim leader was outlining a project plan. Filling key leadership and staff positions will be important for ensuring that the team has the knowledge and expertise from components across the department to effectively develop and implement the plan. DOD Has Established 9 Cross-Functional Teams to Improve DOD’s Business Operations The Deputy Secretary of Defense has established 9 additional cross- functional teams since October 2017 to implement reform initiatives intended to improve the quality and productivity of the department’s business operations, including moving toward more use of enterprise services. According to the memoranda appointing the team leaders, these teams support the Secretary of Defense’s focus on creating a more lethal and effective force by allowing the department to reallocate resources from business operations to readiness and to recapitalization of the combat force. OCMO officials stated that they consider these teams to be responsive to section 911 of the NDAA for Fiscal Year 2017. Section 911 requires DOD to assign senior qualified and experienced individuals to lead the teams, and the Deputy Secretary of Defense generally appointed senior DOD officials as leaders. Seven leaders were appointed in October 2017, one in November 2017, and one in January 2018. According to OCMO officials, these leaders report to the CMO. As of May 2018, the size of the teams ranged from 5 to 12 members; OCMO officials stated that the size of the teams can vary based on the knowledge and expertise the team needs to implement its initiatives. The teams include representatives from the military departments, functional organizations relevant to the reform topic, and external experts. According to OCMO officials, the team leaders chose their team members from candidates proposed by the military departments and functional organizations. In addition, the members may be assigned on a full-time or part-time basis, and all of the teams have co-located space. Figure 1 provides additional details on the structure of these 9 teams. OCMO officials stated that these 9 teams are in various stages of implementing their initiatives. For example, the Human Resources team was the most recent team to be established, and OCMO officials stated the team is in the process of finalizing the identification and beginning the implementation of its reform initiatives. Other teams, such as the Financial Management and Information Technology and Business Systems teams, have identified and are in the process of implementing initiatives related to their reform areas. DOD established the Reform Management Group to identify opportunities for reform and provide support to these 9 cross-functional teams. Chaired by the Deputy Secretary of Defense and facilitated by the CMO and Director of Cost Assessment and Program Evaluation, the Reform Management Group provides oversight and guidance, makes decisions on team recommendations, and monitors the teams’ progress, according to OCMO officials. These officials also told us that the Reform Management Group holds weekly meetings to discuss the status of the reform teams’ efforts and provides monthly comprehensive reports on these efforts to the Secretary of Defense. DOD Has Not Issued Its Organizational Strategy That Outlines Steps for Advancing a Collaborative Culture OCMO has drafted an organizational strategy, but DOD has not issued the strategy, which section 911 required to be completed by September 1, 2017. OCMO officials told us that they have not completed the strategy because they want to align it with the National Defense Strategy, which was issued in January 2018, and the National Defense Business Operations Plan, which was issued in May 2018. OCMO officials told us that, once the organizational strategy is reviewed internally to align with the National Defense Strategy and the National Defense Business Operations Plan, the CMO plans to coordinate the review and approval of the strategy across components within the department. We previously recommended, and DOD concurred, that the CMO should obtain input on the development of the strategy from key stakeholders, such as the military departments and defense agencies. The officials estimated that DOD components would have about 2 to 3 weeks to provide input on the strategy and that the strategy could be issued as early as July 2018. We found that, consistent with our recent recommendations, a revised version of the draft organizational strategy addresses the requirements in section 911, including outlining steps for advancing a collaborative culture within the department. In February 2018, we found that the August 2017 version of the draft organizational strategy that we reviewed addressed the two required elements under section 911, but did not outline how it would achieve several future outcomes that advance a collaborative culture within the department, as required by the NDAA. We recommended, and DOD concurred, that the CMO should revise the organizational strategy to outline how it would achieve these outcomes and, in doing so, should consider our nine leading practices on mergers and organizational transformations. Based on our review of a February 2018 version of the draft organizational strategy, we found that OCMO officials have taken steps to address our recommendation, including identifying potential action steps for the department that align with each of the nine leading practices. For example, consistent with the leading practice for establishing a coherent mission and integrated strategic goals to guide the transformation, OCMO officials revised the draft strategy to propose that the CMO, in coordination with stakeholders, could develop an implementation plan with detailed initiatives for increasing collaboration and information sharing across the department. According to the draft strategy, this plan could include goals and milestones for these initiatives, and the CMO could report periodically on the achievement of the goals. Further, consistent with the leading practice to involve employees to obtain their ideas and gain their ownership for the transformation, OCMO officials proposed that a representative from OCMO could chair an action officer- level governance body to plan and share performance information related to this effort. According to the draft strategy, this governance body would solicit feedback about the related changes, propose changes to new policies and procedures based on the feedback, and manage the implementation and tracking of the established goals. Issuing the organizational strategy—in accordance with section 911 and our prior recommendation—will better position DOD to advance a collaborative culture. DOD Has Not Implemented Training or Issued Guidance for Its Cross- Functional Teams or Provided Training to Presidential Appointees DOD has not fulfilled three related requirements of section 911 to guide the implementation of its cross-functional teams, namely to (1) provide training to cross-functional team members and their supervisors, (2) issue guidance on cross-functional teams, and (3) provide training to presidential appointees. OCMO officials stated that they plan to send the guidance and training curricula to the Secretary of Defense for review and approval after the organizational strategy is issued. Table 1 shows the three requirements of section 911, the due dates, and the status of DOD actions, if any, as of May 2018. DOD Has Not Implemented Training or Issued Guidance for Its Cross-Functional Teams As of May 2018, OCMO had developed a draft training curriculum for cross-functional team members and their supervisors, but had not provided the required training. In February 2018, we reported that the draft training curriculum addressed all requirements in section 911. OCMO officials stated that after the Secretary of Defense reviews and approves the training curriculum, which will occur after the organizational strategy is issued, they will provide training to the members of the cross- functional team on personnel vetting for background investigations and to the 9 teams implementing reform initiatives. OCMO has also drafted guidance on cross-functional teams, but DOD has not issued the guidance and did not meet the statutorily-required date of September 30, 2017. Section 911 requires the guidance to address areas such as the decision-making authority of the teams and key practices that senior leaders should follow with regard to leadership, organizational practice, collaboration, and the functioning of cross- functional teams. In February 2018, we reported that OCMO had developed draft guidance for cross-functional teams that addressed six of seven statutorily-required elements and incorporated five of eight leading practices for effective cross-functional teams that we identified in prior work. We recommended, and DOD concurred, that the CMO should fully address all requirements in section 911 and incorporate these leading practices into the guidance. DOD has taken steps to address our recommendation. For example, consistent with the practice for open and regular communication, OCMO revised the guidance to state that the cross-functional team leaders and OCMO will encourage and facilitate continuous communication and information sharing. According to the revised guidance, the team leaders and OCMO will accomplish this through co-location of team members, management practices by cross- functional team leaders that promote a unified team culture and trust, and use of collaborative information technology tools maintained by OCMO. However, as of May 2018, DOD had not issued the guidance. As we reported in February 2018, without initial guidance that fully addresses the required statutory elements in section 911 and incorporates our leading practices, DOD’s cross-functional teams may not be able to consistently and effectively pursue the Secretary of Defense’s strategic objectives or further promote a collaborative culture within the department. Over Two-Thirds of Presidential Appointees in the Office of the Secretary of Defense Have Been Appointed, but None Have Received Required Training or Waivers OCMO has developed a draft training curriculum for individuals filling presidentially-appointed, Senate-confirmed positions in the Office of the Secretary of Defense. However, as of May 2018, DOD had filled 26 of 36 such positions, and none had received the training or been granted a training waiver. Further, section 911 requires these individuals to complete the training within 3 months of their appointment, but 22 have been in their positions longer than 3 months, as shown in figure 2. In February 2018, we reported that the draft curriculum addressed only one of the four required elements in section 911. Specifically, we found that the draft curriculum addressed the required statutory element for training on the operation of cross-functional teams, but did not incorporate the required statutory elements for leadership, modern organizational practice, or collaboration. We recommended, and DOD concurred, that the CMO should either (1) provide training that includes all of the required elements in section 911 or (2) develop criteria for obtaining a waiver and have the Secretary of Defense request such a waiver from the President for these required elements if the individual possesses—through training and experience—the skill and knowledge otherwise to be provided through a course of instruction. Once the training curriculum is reviewed and approved by the Secretary of Defense, which will occur after the organizational strategy is issued, OCMO officials plan to provide the training on the operation of cross-functional teams to the presidential appointees. These officials stated that DOD plans to develop criteria for presidential appointees who are eligible for a waiver from the training on leadership, modern organizational practice, and collaboration, and to recommend that the Secretary of Defense approve these waivers. Until DOD finalizes actions on this recommendation, the department may have difficulty advancing a collaborative culture, as top leadership commitment is a key practice for a successful organizational transformation. Agency Comments We are not making recommendations in this report. We provided a draft of this report to DOD for review and comment. DOD concurred with our report. In addition, DOD provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and DOD’s Chief Management Officer. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or FieldE1@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 III. Appendix I: Prior GAO Reports on the Department of Defense’s Implementation of Section 911 of the National Defense Authorization Act for Fiscal Year 2017 Section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017 included a provision for us—every 6 months after the date of enactment on December 23, 2016, through December 31, 2019—to submit to the defense committees a report setting forth a comprehensive assessment of the actions that DOD has taken pursuant to section 911 during each 6-month period and cumulatively since the NDAA’s enactment. We issued our first report in June 2017, and did not make recommendations. We issued our second report in February 2018, and made four recommendations to improve DOD’s implementation of section 911. Table 2 identifies the two prior GAO reports on DOD’s implementation of section 911 and the status of the four recommendations from our February 2018 report. Appendix II: Summary of Requirements in Section 911 of the National Defense Authorization Act for Fiscal Year 2017 Section 911 of the National Defense Authorization Act for Fiscal Year 2017 requires the Secretary of Defense to take several actions. Table 3 summarizes some of these requirements, the due date, and the date completed, if applicable, as of May 2018. Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Margaret Best (Assistant Director), Tracy Barnes, Arkelga Braxton, William Carpluk, Adelle Dantzler, Michael Holland, William Lamping, Amie Lesser, Ned Malone, Judy McCloskey, Sheila Miller, Richard Powelson, Terry Richardson, Ron Schwenn, Jared Sippel, Sarah Veale, and Tina Won Sherman made key contributions to this report.

Why GAO Did This Study DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for FY 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives that span multiple functional boundaries and would benefit from the use of cross-functional teams. Additionally, DOD is to establish cross-functional teams to support this strategy, issue guidance on these teams, and provide training to team members and civilian leaders in the Office of the Secretary of Defense. The NDAA also included a provision for GAO to periodically assess DOD's actions in response to section 911. This is GAO's third report on the implementation of section 911. It assesses the status of DOD's efforts to (1) establish cross-functional teams, (2) issue an organizational strategy, and (3) issue guidance on cross-functional teams and provide training to team members and Office of the Secretary of Defense leaders. GAO reviewed documentation on DOD's implementation of its cross-functional teams and DOD's draft organizational strategy, draft guidance on establishing cross-functional teams, and draft training curricula. GAO also interviewed DOD officials on efforts to implement section 911. GAO is not making new recommendations in this report. DOD concurred and is taking actions to address GAO's previous recommendations on DOD's implementation of section 911. DOD also concurred with the findings in a draft of this report. What GAO Found The Department of Defense (DOD) has implemented some statutory requirements in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, enacted in December 2016, to address organizational challenges. However, senior leadership has not implemented several requirements intended to support cross-functional teams and promote department-wide collaboration (see table). DOD has established 10 cross-functional teams, which are in various stages of implementation. Specifically, DOD is in the early stages of establishing one cross-functional team to address the backlog of the department's personnel security clearance background investigations and has assigned an interim leader and seven members to this team. In addition, DOD established 9 cross-functional teams to implement reform initiatives intended to improve the efficiency of the department's business operations. DOD generally appointed senior department officials to lead these teams, and the size of the teams, as of May 2018, ranged from 5 to 12 members. DOD has drafted, but not issued, an organizational strategy. DOD officials stated that they have not completed the strategy because they want to align it with two department-wide strategy documents—the National Defense Strategy, which was issued in January 2018, and the National Defense Business Operations Plan, which was issued in May 2018. DOD also has not fulfilled three statutory requirements related to guidance and training for cross-functional teams and civilian leaders in the Office of the Secretary of Defense. Specifically, DOD has not (1) provided training to cross-functional team members, (2) issued guidance on cross-functional teams, or (3) provided training to presidential appointees in the Office of the Secretary of Defense. DOD officials stated that they plan to send the guidance and training curricula to the Secretary of Defense for review and approval after DOD issues the organizational strategy. Fully implementing these requirements and GAO's prior recommendations related to the organizational strategy, guidance, and training, will better position DOD to effectively implement its cross-functional teams and advance a collaborative culture as required by the NDAA.

gao_GAO-18-381

gao_GAO-18-381_0

Background According to OMB’s regulation implementing the PRA, “information” is broadly defined as any statement or estimate of fact or opinion, regardless of form or format, whether in numerical, graphic, or narrative form, and whether oral or maintained on paper, electronic, or other media. Federal agencies collect this information in various formats, such as forms and applications, recordkeeping information maintained by entities, and third-party disclosures (see figure 1). Agencies collect this information to ensure that the public is kept safe from harm, that qualified recipients receive benefits to which they are entitled, and that agencies otherwise fulfill their respective missions. For example, DOT requires commercial motor vehicle drivers to record information about the hours drivers spend operating their vehicles with the goal of improving operational safety and reducing crashes, injuries, and fatalities involving trucks or buses. USDA oversees SNAP, which provides food assistance to low-income individuals and families, and state agencies that administer the program must collect information from applicants in order to determine eligibility. HHS collects compliance information from entities and businesses to ensure that they are appropriately safeguarding individuals’ health information. While such information collection activities are important for the fulfillment of agency missions, they have the potential to impose significant burdens on individuals, businesses, and other entities. The PRA created the Office of Information and Regulatory Affairs (OIRA) within OMB to review and approve individual ICRs and oversee how agencies implement the PRA. OIRA provides agencies with instructions for preparing the supporting statements required for each ICR submitted for review. OIRA also provides agencies with guidance documents on specific information collection requirements, including how to conduct pre- testing on new or complex information collections, and how PRA applies to the use of social media. Estimating Information Collection Burden An integral part of an agency’s ICR submission is the estimated burden on the public associated with the collection—in terms of both time (i.e., burden hours) and costs (i.e., dollars spent). Under the PRA and OMB regulations, agencies are required to develop a specific, objectively supported estimate of the burden associated with each collection. OMB directs agencies to estimate burden hours and costs to respondents for each information collection as part of the ICR justification in the supporting statement. According to OMB staff, estimated costs to respondent should include the wage rate and any applicable employee fringe benefits, such as paid leave, insurance, and retirement contributions. The formulas shown in figure 2 illustrate the calculations generally used by agencies to determine burden hours and costs associated with the collections. ICRs are subject to multiple levels of review to ensure that they comply with the requirements of the PRA. Programs or components within an agency (e.g., bureaus) often perform an initial review. In addition, PRA requires that agencies have an independent review process, whereby agency staff who are independent of program responsibilities review the ICRs. During this review, staff evaluate the need for the information collection and the burden estimate, including whether the information collection minimizes burden on the public, among other things. Before an information collection is submitted by an agency to OMB for final review and approval, the independent reviewer must certify that the collection meets the standards that are set forth in the PRA. These standards include ensuring that the collection contains sufficient information to allow respondents to evaluate the estimated burden. Once an ICR has been submitted to OMB, OMB will then review it for compliance with procedural requirements of the PRA and OMB’s PRA regulations. OMB can approve an ICR without changes or request changes or additional information from the agency. OMB can approve a collection for up to 3 years at one time. If the agency wants to continue to collect the information after the approval period, it must submit another ICR to OMB for approval and provide the public with an opportunity to comment on the continuation of the collection. Public Comment and Consultation The PRA requires agencies to solicit public input on their ICRs as a means of validating their burden estimates. Agencies can engage the public in a variety of ways such as through a notice of proposed rulemaking (NPRM), a PRA 60-day notice published in the Federal Register, or other agency-specific mechanisms. Figure 3 shows the process that agencies generally use to engage the public, which involves a PRA 60-day notice published in the Federal Register. In some circumstances, an NPRM in the Federal Register can be used to solicit input on an information collection in lieu of the 60-day notice where an information collection is part of larger rulemaking. Selected Agencies Used Data and Professional Judgment to Estimate Burden, but Limitations Include Inconsistent Cost Estimates and Insufficient Review IRS Used Original Data to Estimate Burden, While Other Agencies Used Existing Data and Professional Judgment When estimating burden hours, USDA, HHS, DOT, and IRS used data and professional judgment to develop their estimates. The PRA requires that agencies develop an objectively supported burden hour estimate, but neither the act, nor OMB regulations, prescribe how agencies should develop these estimates. Among our four agencies, IRS was the only one to report gathering original data on public burden through surveys of individual taxpayers and businesses to help inform the estimates for its two largest ICRs. Each year, IRS surveys a representative sample of taxpayers who submitted completed tax returns, according to IRS officials. The surveys collect information on the actual time and cost that taxpayers invest in paperwork-related activities. For the U.S. Individual and Business Tax Return ICRs—the federal government’s two largest information collections—IRS used its Taxpayer Burden Model to combine original survey results with existing taxpayer data to estimate taxpayer burden in terms of both time and out-of-pocket costs. The survey results also help IRS forecast its burden hour estimates each year, taking into account changes in law, regulations, and technology. For the remaining six case study ICRs that we reviewed, USDA, HHS, and DOT used already existing data and information to estimate at least one burden hour element (i.e., number of respondents, frequency of responses, or average burden time per response), such as in the following examples: Historical data. To estimate the number of respondents for the SNAP ICR, USDA’s Food and Nutrition Service used historical program data on the number of applicants in previous years. Other internal agency data. To estimate the number of respondents, such as drivers and motor carriers, for the Hours of Service of Drivers Regulations ICR, DOT’s Federal Motor Carrier Safety Administration (FMCSA) used data from the 2014 Pocket Guide to Large Truck and Bus Statistics, according to agency officials. This publication compiles data from the Federal Highway Administration, the National Highway Traffic Safety Administration, and FMCSA’s Motor Carrier Management Information System, including data on the number of commercial motor vehicle drivers operating in the United States. Third-party data. To estimate the frequency of response for some of the third-party disclosures included in its Prescription Drug Labeling ICR, HHS’s Food and Drug Administration used data from a survey conducted by the National Association of Boards of Pharmacy, according to agency officials. The data included the number of drugs on the market and the percentage of drugs requiring medication guides. These data helped Food and Drug Administration staff estimate how often the pharmaceutical industry might need to comply with the information collection. Research studies. To help estimate the burden of applying for SNAP benefits, USDA’s Food and Nutrition Service relied, in part, on a program research study. Specifically, a 2004 Food Stamp Program Access Study estimated that applicants spend, on average, 2.2 hours travelling for face-to-face interviews during the application process. Food and Nutrition Service staff incorporated this information in its burden hour estimates to determine the average burden time per response for the SNAP ICR. In cases where data did not exist to inform burden hour estimates, such as for average burden time per response, the selected agencies relied on their professional judgment to develop estimates, informed in some instances by internal consultation or public input. For example, HHS’s Office for Civil Rights (OCR) did not have data for the average burden time per response for some Health Insurance Portability and Accountability Act (HIPAA) Privacy, Security, and Breach Notification Rules information collection activities. The information collection addresses HIPAA requirements related to the use, disclosure, and safeguarding of individually identifiable health information. According to HHS officials, some of the reporting or recordkeeping activities required by HIPAA may be conducted by security experts. To help estimate the average burden time for these particular activities, OCR officials stated that they consulted with internal HHS security experts to determine the time it might take a security expert to complete the applicable information collection activities. When available, public input helped some agencies refine their burden hour estimates. For example, as part of its Prescription Drug Labeling information collection, HHS’s Food and Drug Administration had originally estimated that it would take approximately 5 seconds for a pharmacist to provide a patient with a medication guide. During the 2001 renewal of the ICR, however, the agency received a comment from a distributor stating that such disclosure could take additional time, especially if the pharmacist did not already receive the medication guides and had to print them on-site, according to agency officials. After receiving this comment, agency officials considered that some distributions of medication guides to patients may take longer than others, and revised its previous estimate from 5 seconds to 3 minutes. Agencies Did Not Always Estimate Time Costs nor Estimate Time Costs Consistently In some cases, the four agencies did not estimate respondent time costs as a monetized dollar amount in their supporting statement, as required by OMB. Of the 200 ICRs reviewed (including the 8 largest ICRs), 76 ICRs did not include respondent time cost estimates. Specifically, of the 50 ICRs with the largest burden hours at each agency, we found agencies did not include total annual respondent time costs for IRS—all 50, including its 2 largest ICRs; DOT—19, including its 2 largest ICRs; HHS—5, including its second-largest ICR; and USDA—2 ICRs. OMB requires agencies to include estimated respondent time costs in the ICR supporting statements. Supporting statements provide the public with detail information about the burden estimates and underlying methodology used to calculate them, among other things. However, OMB reviewed and approved all 76 ICRs we identified that did not include these estimates. Agencies provided a variety of reasons for not including these estimates in the supporting documents. For example: According to IRS officials the model they used to generate burden estimates for all but their two largest information collection requests is unable to calculate respondent time costs. They told us that the model they used to generate burden estimates for their two largest collections—called the Taxpayer Burden Model— does calculate respondent time cost, but the IRS did not include this information in the supporting statement. According to IRS officials, OMB is aware of the old model’s limitation and told IRS its resources should be devoted to transitioning these collections to its Taxpayer Burden Model. IRS officials said that the agency plans, but has not developed a timeline, to use the Taxpayer Burden Model on future ICRs and to phase in use of the new model over a number of years, giving higher priority to tax forms that affect the most taxpayers. DOT officials stated that some respondent time costs were not included in ICR supporting statements because, based on their professional judgment, the information collection activities are incidental to routine business operations and therefore should not be included in respondent time cost estimates. While OMB’s guidance states that agencies should not include burden hour estimates for customary and usual business practices, the guidance also instructs agencies to estimate respondent time costs for any estimated burden hours included in the supporting statement. That is, any estimated burden hours should have a corresponding time cost for carrying out the information collection activities. DOT’s inclusion of burden hours in the supporting statement in these cases indicates that the information collection activities are not incidental to routine business operations, and that respondent time costs should have been provided based on OMB’s guidance. An HHS official told us that, in general, while costs are not ignored, they are also not considered high-impact information. USDA officials said that it did not include respondent time costs in the supporting statement in part because an ICR had been merged with another information collection, but stated the agency would include these costs in the ICR renewal’s supporting statement. Unless OMB takes action to ensure that agencies consistently follow its guidelines to include respondent time costs, agencies will likely continue to not meet the requirement and omit this information. The PRA requires that OMB establish and oversee standards and guidelines by which agencies are to estimate the burden to comply with a proposed collection of information. As part of its guidelines, OMB directs agencies to provide certain standard information in its supporting statements, including estimated respondent time costs. According to OMB staff, OMB reviews these supporting statements as part of its ICR review process and has the option of requesting changes from the agency prior to approving the ICR. However, OMB staff said that the process is decentralized with individual OMB desk officers responsible for managing their own review of ICRs. OMB reviewed and approved all 76 ICRs we identified that did not include these estimates. OMB officials told us that they will review the findings in this report to determine what response is needed. Monetized respondent time cost estimates will be particularly important if agencies can use reductions in paperwork to offset new regulations under Executive Order 13771. For ICRs with monetized respondent time costs, agencies were inconsistent in whether they included fringe benefits, such as paid leave, insurance, and retirement contributions. OMB’s instructions for submitting ICRs direct agencies to provide respondent time costs, but the instructions do not specify how to calculate such costs. Of the 119 ICRs we identified where employees might complete an information collection activity on behalf an employer, 35 applied fringe benefits to their respondent time cost estimates and 84 did not, as shown in table 2. Table 3 shows that including fringe benefits in respondent time cost estimates can have a significant effect on the total estimated respondent time costs for an information collection. Of the two ICRs with the largest burden hour estimates at USDA, the Mandatory Country of Origin Labeling of Covered Commodities ICR includes fringe benefits, while the SNAP ICR does not. The SNAP ICR’s respondent time cost for state employees would have been $118 million higher if it had applied the same fringe benefit estimate (33 percent of the wage rate) as the Mandatory Country of Origin Labeling ICR. While different types of respondents (e.g., state employees, farmers, or doctors) may not receive the same percentage of wages as fringe benefits, the exclusion of such benefits leads to an underestimate of respondent time costs. OMB has not provided agencies with any formal, final guidance for calculating respondent time costs or applying fringe benefits. The PRA requires the Director of OMB to develop standards and guidelines for information collections. Additionally, Standards for Internal Control in the Federal Government states that management should externally communicate the necessary quality information to external parties to achieve the entity’s objectives. OMB provided non-binding draft guidance on reviewing agency information collections in 1999 that states that any wage rates used to estimate respondent time costs should be “fully-loaded” to reflect the full cost of labor, including employee fringe benefits, such as paid leave, insurance, and retirement contributions. OMB staff told us that OMB continues to believe that using “fully-loaded” wage rates is important. Without formal, final guidance clearly communicating how agencies should apply fringe benefits to respondent time cost estimates, agencies may continue to calculate costs inconsistently. Agencies’ inconsistent application of fringe benefits could contribute to agencies underestimating the burden costs. Such underestimation could contribute to inconsistent implementation of Executive Order 13771. As previously stated, OMB guidance implementing the Executive Order states that agencies may offset the incremental costs of new regulations through the repeal or streamlining of mandatory information collection burdens. HHS officials said that they have considered potential information collection burden reductions as part of their efforts to comply with the order. While USDA and IRS officials said that the agencies were aware of the order, they did not yet have specific plans to reduce information collection burden for the purposes of the order. Without clear guidance about how to consistently estimate respondent time costs, Congress and the administration cannot effectively compare information collection cost savings for the public. Agencies’ Independent Review Processes Did Not Detect Errors in Burden and Cost Estimates or Other Discrepancies While our selected agencies reported having multiple levels of independent review processes in place as part of the overall process for preparing ICR burden estimates, we found instances where USDA, HHS, and DOT did not detect math errors or inconsistencies. We found multiple calculation errors in the supporting statements at three of the four selected agencies—USDA, HHS, and DOT—that over- or underestimated burden hours and costs to varying degrees, sometimes by millions of hours or hundreds of millions of dollars. We also found inconsistencies among estimates in Reginfo.gov and supporting statements. Reginfo.gov provides summary information to the public on information collections, including information on the estimated time and cost burdens. Supporting statements provide the public with more detailed information on the underlying methodology used to estimate burden, among other things. The PRA requires that agencies establish a process independent of program responsibility to review each ICR before submission to OMB for approval, including a specific, objectively supported estimate of the burden. Agency officials reported that reviewers assessed the reasonableness of burden estimates by reviewing calculations, comparing current estimates to previously approved estimates, or reading the accompanying narrative in the supporting statement, which contains the assumptions used in calculating burden hours and costs. However, the agencies we reviewed did not adequately follow their own review processes, resulting in estimates that misrepresented the burden hours and costs of information collection activities, as described in the following examples. Department of Agriculture: We found math errors in the supporting statement of USDA’s second largest ICR based on estimated burden hours. Specifically, we found that USDA’s Agricultural Marketing Service did not follow its stated assumptions in calculating burden hours and respondent time costs for the Mandatory Country of Origin Labeling ICR, resulting in an overestimation of hours and an underestimation of costs. By using the incorrect number of respondents when calculating burden hours, the Agricultural Marketing Service overestimated the Mandatory Country of Origin Labeling ICR’s total burden by 171,444 hours. In addition, the agency did not consistently apply its stated assumptions (e.g., about the average burden time per response) in the development of respondent time cost estimates, resulting in underestimated costs presented to the public, as shown in table 4. For instance, the ICR contained two different maintenance recordkeeping costs: one described in the narrative and another in the summary tables in the supporting statement. Both underestimated recordkeeping costs. Our review found that, had the agency’s stated assumptions been consistently applied, the actual cost estimate would have been approximately $463.2 million, or $104.5 million higher than the largest maintenance recordkeeping cost estimate in the supporting statement. According to Agricultural Marketing Service officials, external pressure and accelerated timelines resulted in a less effective review of the ICR. Agency officials acknowledged that they did not follow review processes or adequately review the supporting statement. An official said that the agency will ensure that estimates for this ICR are corrected in the future. Department of Health and Human Services: We found both math errors in the supporting statements and inconsistencies between the supporting statements and Reginfo.gov for some of HHS’s 50 largest IRCs based on estimated burden hours. Specifically, HHS did not detect calculation errors in the supporting statements in 6 of 50 ICRs (none of which were the top two case study ICRs for HHS) that we reviewed, resulting in incorrect burden hour or cost estimates. For example, in a Centers for Medicare & Medicaid Services (CMS) ICR, we found that the agency correctly stated its assumptions in the supporting statement but, due to a math error that was not detected during the review process, incorrectly calculated the respondent time cost in the second year of the collection based on these assumptions. Because it did not detect this error, HHS underestimated respondent time costs by approximately $14.4 million or about 40 percent of the published total respondent time costs in the second year for that ICR, as shown in table 5. In another ICR, published in July 2013, CMS overestimated the public’s burden by approximately 12.8 million hours. Agency officials attributed the discrepancy to two significant math errors. Officials said that these math errors were resolved and the burden hours recalculated in a subsequent renewal of the information collection in 2017. According to HHS officials, ICRs go through multiple levels of review before HHS approves the ICR. Program offices conduct an initial review of ICRs before passing them on to the Office of the Chief Information Officer (OCIO), which then conducts a final review of ICRs before final submission to OMB, including a basic check of the math used in calculating burden hours. Additionally, in 19 of the 50 HHS ICRs we reviewed, including HHS’s largest ICR and the two CMS examples above, we identified discrepancies in reported burden hours between the supporting statements and Reginfo.gov (see table 6). For the public to evaluate the methodology used to develop the final burden estimate posted on Reginfo.gov, the two sources need to be consistent. Reasons for such discrepancies, according to HHS officials, included data entry errors, estimate changes made in supporting statements that were not reflected on Reginfo.gov, and calculation errors. We also found 14 instances where HHS did not include an ICR supporting statement on Reginfo.gov. Based on our findings, HHS examined the discrepancies in table 6, and in June 2018 reported that all of the issues that we identified had been corrected. CMS said that in general most of the issues identified can be attributed to human error due in part to staff shortages and tight ICR submission timelines. CMS said that it takes the errors very seriously and will continue to work to refine its internal review processes to improve the quality of its ICR submissions. HHS officials attributed some the discrepancies between the burden estimates found in the supporting statements and the estimates found on Reginfo.gov to instances when OMB works directly with program offices within the department on revisions to a burden estimate without involving OCIO. For example, according to HHS officials, in one instance shown in table 6, the supporting statement reported an initial estimate of 30,708 burden hours. Later, the estimate was revised based on input that OMB provided directly to the program office and was reported on Reginfo.gov as 12,845,827 burden hours. OCIO was not aware that the change had been made. Officials from HHS OCIO said the office is working to improve coordination and serve more as an intermediary between OMB and HHS components. Department of Transportation: We found, and DOT officials acknowledged, a calculation error in the supporting statement for the Inspection, Repair, and Maintenance ICR, DOT’s second largest ICR based on estimated burden hours. In the ICR’s supporting statement, DOT calculated its total annual burden hours by using an average burden time per response of 170 seconds for one information collection activity. However, DOT did not include 30 seconds for one of the inspection tasks that was stated in the calculation’s assumptions found in the supporting statement. Officials said that this error may have been an inadvertent miscalculation and identified 200 seconds as the accurate average burden time per response. As a result, DOT underestimated the ICR’s total annual burden by approximately 450,000 hours, nearly 4 percent of the reported total annual burden hours for the ICR (see table 7). As part of its review process, DOT uses a checklist for reviewing ICRs, which includes checking the math for burden hours and costs in supporting statements. An official acknowledged that, while DOT follows its review process, the agency missed this calculation error at multiple steps. The official said that the information collection had been active for a long period of time and that not detecting the error was not material in terms of PRA compliance. However, this example illustrates that a small error of 30 seconds per response can have a large impact on the overall burden hour and cost estimate. The DOT official said that it will correct the error in a revised ICR. In the examples above, both OMB and agencies reviewed and approved the ICRs—including some of the largest ICRs at each of the agencies— but did not detect or address the math errors in the supporting statements, inconsistencies between published estimates in supporting statements and Reginfo.gov, or missing supporting statements during the review process, allowing incorrect burden hour and cost estimates to be publicly released. The PRA requires OMB to provide directions and oversee the review and approval of collections of information and the reduction of the information collection burden. OMB reviews the ICRs to ensure they are consistent with applicable laws and policies related to information quality. According to OMB officials, OMB desk officers check the burden calculations for consistency and reasonableness. The desk officers also check that the estimates are properly and consistently calculated. This includes reviewing the burden calculations to ensure that they are mathematically accurate. When we asked OMB officials about the ICRs cited in this report where we detected mathematical errors, they told us that they will review these ICRs to determine what response is needed. Until agencies ensure that their review processes adequately detect errors and inconsistencies, the agencies cannot ensure that their burden estimates are reliable, may result in less confidence in agencies’ ability to accurately compute and report burden and as such, less confidence in agencies’ ability to effectively manage and minimize the burden they impose on the public. According to the Standards for Internal Control in the Federal Government, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives. Therefore, if agencies’ review processes do not detect errors or inconsistencies in supporting documents, then the public may have inaccurate or incomplete information on the burden imposed by an information collection. Additionally, without reliable burden estimates and complete information, Congress and the administration cannot ensure that agencies’ efforts to reduce burden to comply with Executive Order 13771 are effective. Agencies We Reviewed Conducted Varying Levels of Public Consultation and Received Little Input on Burden Estimates Agencies Conducted Public Outreach, but Public Notices Received Few Comments and Did Not Always Contain Needed Information to Evaluate Burden Estimates Agencies met the PRA requirement to post Federal Register notices and solicit public comments for all 200 information collections that we reviewed. They generally received few, if any, comments from the public in response. We found that 161 ICRs solicited comments through 60- day notices. Table 8 shows that while 35 of the 161 ICRs received comments (including 3 of the top 8 case study ICRs), only 10 received comments that were related to the burden estimates (including only one case study ICR), according to the ICR supporting statement and related documents. Based on our review of these 10 comments, 2 comments resulted in increases to agencies’ burden estimates while another 5 resulted in no burden estimate change, but allowed the agency to further explain the basis for its estimates, and provided increased transparency for the public. For example, as a result of feedback from a trade association, USDA revised its burden hour estimate for a particular component of the National Organic Program ICR from 1 hour to 10 hours. The trade association said it would take 10 to 60 hours to develop a label and get it approved. Because this estimate was not based on a formal survey, USDA did not use the upper range provided by the commenter but did acknowledge that it may have underestimated the burden, according to the ICR supporting statement. In the other example, DOT officials revised the overall burden for an ICR on drivers’ medical certificates from 9.8 million hours to 10.2 million hours based on a comment that called to their attention an incorrect assumption about the collection’s frequency. The agencies also made more transparent the specific sources used to determine the burden estimates for five of the ICRs in response to public comments. For example, one comment prompted HHS to provide additional details on the components of the burden hour estimate for the ICR and identify the relevant source data. Officials at DOT and HHS said that, in some cases, they rely on public input in response to the 60-day Federal Register notices to validate their burden estimates, and if they do not receive any comments, they do not make any changes to the ICRs. For example, according to DOT officials, FMCSA relies on public comments to suggest revisions to ICRs that are up for renewal. In cases where no one has submitted any comments on the burden estimate, DOT officials reported that they assume the burden hour estimate per respondent is accurate and do not change the estimate. Despite the value of public input, agencies’ Federal Register notices did not always contain a complete description of the elements that make up the burden estimates. As a result, the public may not have had enough information to comment on the reasonableness of the estimates. PRA and OMB regulations require that agencies solicit comments from the public both in the Federal Register and through other means, in part to evaluate the accuracy of the agency’s burden estimate, including the validity of the methodology and assumptions used to calculate the burden. Generally, three basic elements of the burden estimate formula in the Federal Register notices provide the public with sufficient information to review the burden estimates. As previously stated, these elements are: (1) the number of respondents, (2) the frequency of response, and (3) the average burden time per response. However, agencies do not consistently include all of these elements in the Federal Register notices. Figures 4 and 5 show two examples of 60-day Federal Register notices in which agencies provided varying levels of detail on the burden hour estimates. In figure 5, USDA has provided burden information in its SNAP information collection by using tables and a summary that provides the estimated number of respondents, the frequency of response (i.e., number of responses per respondent), and the average burden time per response. In addition to providing data on these three elements, USDA grouped burden estimates by activity and type of respondent. This made it possible for the public to be able to review and comment on the specific assumptions used to develop the estimated hours per response. In particular, the notice shows burden data for time spent on the application, recertification application, reports, and notices for both state agencies and households. Conversely, figure 5 shows an example where IRS has only provided the estimated total annual burden hours for the ICR without providing any of the elements used to calculate the estimated burden hours—the frequency of the information collection, the number of respondents, and the average burden time per response. A member of the public is more likely to be able to meaningfully comment on the average burden time per response (e.g., 19 minutes for a household to complete the initial SNAP application, as shown in figure 4) than an aggregate estimate (e.g., 284,599 total burden hours to complete a form used to report and summarize income from rents, royalties, partnerships, and other sources, as shown in figure 5). In 9 of the 10 instances in which USDA, HHS, and DOT received comments related to the burden estimates, the 60-day notices contained either all of these required elements or sufficient information to be able to calculate all of these elements. Agencies that do not consistently include these basic elements of the burden estimate reduce the likelihood that the public will be able to provide meaningful input to improve the accuracy of their burden estimates. For the two ICRs that resulted in a change in the burden estimate, USDA and DOT included detailed information for the burden time per response in their respective 60-day notices, which allowed the public to comment on these estimates. As shown in table 9, of the 200 ICRs that we reviewed, 25 did not contain enough information to allow the public to reasonably determine the frequency of response, number of respondents, or average burden time per response: 13 at IRS, 11 at DOT, and 1 at HHS. In general, if agencies do not provide sufficient data for the elements needed to evaluate burden estimates, they may not benefit from receiving well- informed comments to ensure more reliable estimates, or to provide an opportunity for greater transparency concerning their rationale for existing burden estimates. Our analysis found that 13 IRS ICRs (none of which were case study ICRs) did not have enough information on the frequency of the collection to allow the public to reasonably review the burden estimate and thereby provide meaningful input. IRS officials said that they did not always include data on the frequency of the collection because it might cause confusion for those instances where only a portion of the respondent population will respond to the collection more than once in a given year. Instead, IRS officials noted that their current policy is to include the estimated number of respondents, the estimated time per response, and the estimated total burden hours in each Federal Register notice for ICRs. In early 2017, IRS established a new position to review ICRs and ensure that the agency’s PRA policies are properly implemented. According to IRS, this has helped to ensure that IRS includes estimated number of respondents, the estimated time per response, and the estimated total burden hours in each Federal Register notice. However, if IRS does not also report on the frequency of the collection and the frequency cannot be calculated using the other elements, the public may not be able to fully evaluate the burden estimate. According to a DOT official, in some instances, program officials did not follow DOT’s prescribed templates for Federal Register notices, which direct officials to include the number of respondents, the frequency of response, and burden time per respondent to be able to calculate the total annual burden hours in each notice. According to the DOT official, in response to our findings, DOT’s Office of General Counsel is conducting an education campaign to reinforce the necessity of providing fully transparent information regarding ICR burden during all stages of the notice process. In addition, DOT did not always include the average burden time per response in its Federal Register notices, in part because DOT’s templates do not direct officials to provide this information. A DOT official said that the templates presume that the individual reading the notice will have sufficient information to calculate this element. However, we found that average burden time per response could not reasonably be calculated using the other information provided in 10 of the notices that we reviewed in part because one or more other elements of the burden estimate were missing. Average burden time per response is a key element for the public to be able to reasonably evaluate the burden. A DOT official said that DOT plans to update the template based on our findings. Agencies Did Not Always Consult with the Public beyond Public Notices and Did Not Solicit Input about Burden Estimates The agencies we reviewed did not always consult with the public on information collections beyond Federal Register notices, as required by the PRA and regulations. While the PRA requires consultation on every ICR, OMB guidance only recommends public consultation in general but does not direct agencies to consult beyond the publication of the notices. When they did consult with the public, agencies did not always use these consultations as an opportunity to explicitly ask about burden hour estimates. Of the 200 information collections we reviewed, 113 contained information in their supporting statements indicating that the agencies performed public consultations beyond the Federal Register notices (see table 10). Only 3 of the 8 case study ICRs that we reviewed indicated that the agencies performed public consultations beyond the Federal Register notices. In the 50 ICRs we reviewed, DOT provided information about public consultation in about one-quarter of its ICR supporting statements. A DOT official stated that DOT generally conducts outreach through the rulemaking process through discussions with stakeholders about the activities and fundamentals of the rule. Through this outreach process, rather than speaking explicitly about estimated burden hours, DOT and stakeholders discuss what the regulations require and whether those requirements are burdensome. According to the official, stakeholders will tell OMB if the burden estimate is incorrect. But DOT generally does not conduct additional outreach about burden estimates during ICR renewals, which occur at least every 3 years. HHS also provided information about public consultation in about one-third of its ICRs. Agencies’ public consultation beyond the publication of Federal Register notices include federal advisory committee meetings, board meetings, webinars, and periodic stakeholder meetings. In addition, the outreach targeted a wide range of stakeholders, including associations, individuals subject to the information collection, and industry representatives. OMB’s guidance directs agencies to include descriptions in ICR supporting statements of efforts to consult with the public about information collection burden. However, only 6 of these 113 ICR supporting statements—4 at USDA and 2 at DOT—indicated that public outreach was related to the burden hour estimates, despite OMB’s guidance. Agencies generally did not use public consultation beyond the publication of Federal Register notices to seek input on burden estimates. For example, USDA officials said that the Agricultural Marketing Service engages industry on a regular basis through meetings and seminars, but that it does not explicitly ask for feedback on the ICR burden hour or cost estimates and assume that industry representatives will raise any existing issues with the ICRs at these meetings. At HHS, Office for Civil Rights (OCR) officials stated that there are instances where they receive feedback during conferences or through communications initiated by the public or members of Congress. However, OCR officials let people bring up the subject of the accuracy of OCR’s burden hour estimates on their own. At DOT, for five of the six Federal Railroad Administration ICRs we reviewed that involved consultation with the Railroad Safety Advisory Committee, the supporting statements do not show evidence of discussions of the ICRs’ burden estimates during committee meetings, and the agency did not reference any comments on these estimates or summarize them in the supporting statements. At IRS, 40 of the 43 IRS ICR supporting statements that identified public consultation specifically highlighted periodic meetings to discuss tax laws and tax forms with representatives of professional associations in the fields of law and accounting. IRS officials said that they do not specifically raise the issue of burden hour estimates during these meetings, but only ask stakeholders for general comments. The lack of public consultation beyond Federal Register notices is due, in part, to a lack of guidance from OMB. In 2005, we recommended that OMB alter its current guidance to all federal agencies to direct agencies to consult with potential respondents beyond the publication of Federal Register notices. OMB disagreed with this recommendation, stating that it interprets publication in the Federal Register as the principal means of agency consultation with the public, with PRA notices on forms providing an opportunity for further public input. OMB staff told us in January 2018 that they still hold this view. Specifically, OMB staff said that additional consulting should occur for those ICRs where important information may be missed by the notice and comment period. In a June 2018 conversation, OMB staff acknowledged that public consultation could be particularly beneficial the first time that an ICR is renewed after the initial approval. At that point, the public will have had its first experiences responding to the information collection, which can inform its feedback to agencies. However, given the different types of changes that can occur over time that could affect burden estimates—such as changes in technology, the economy, and the original source data used to generate burden estimates—we continue to believe that it is important to actively consult with the public on each renewal, particularly given the low level of response that agencies receive in response to Federal Register notices for ICR renewals. In our 2005 report, agencies also expressed concerns that consultation for every ICR would not be a good use of agency resources. Officials stated that the greatest opportunity is at the rulemaking stage. However, as previously discussed, agencies have existing public outreach efforts whose broader use would not require significant additional time and resources. Without leveraging opportunities to engage in direct public consultation with the public for every ICR, agencies may miss opportunities to obtain additional comments on ICRs, which some agencies stated they rely on to check the accuracy of their estimates and in two cases have resulted in significant revisions. Further, emphasizing those elements of the burden estimate where quality data are limited and stakeholder experiences are most relevant (e.g., the time per response) could help agencies focus outreach on the most pertinent information. We maintain that the PRA requirement regarding public consultation in addition to the 60-day Federal Register notice is clear: both requirements are introduced together, with no distinction between them: agencies shall “provide 60-day notice in the Federal Register, and otherwise consult with members of the public and affected agencies concerning each proposed collection.” Based on our review of the four agencies, we believe that such consultation can be completed in an efficient and effective consultation manner using many of the outreach mechanisms currently in place. However, given OMB’s continued disagreement with our 2005 recommendation, congressional action may be needed to clarify the language in the PRA to more explicitly require federal agencies to consult with potential respondents on each information collection beyond the publication of Federal Register notices. Conclusions One of the PRA’s key requirements is for agencies to produce estimates of the burden that information collections will impose on the public. This information is essential for agencies to appropriately balance the burden of these information collections with their public benefit and for properly measuring progress toward applicable burden reduction goals. The PRA provides two mechanisms to help ensure the quality of these estimates: a multi-layered independent review process and mandatory public consultation requirements. However, the errors, omissions, and other discrepancies that we found in agencies’ ICRs indicate these mechanisms are not operating as effectively as they could be. Independent review processes are only able to ensure an accurate and reliable estimate when agencies and OMB use them consistently to detect errors and correct them. However, we found that USDA, HHS, and DOT failed to adequately apply their own review processes, resulting errors and discrepancies between the supporting statement and Reginfo.gov. Similarly, OMB approved ICRs containing mathematical errors in the supporting statements and inconsistencies between the supporting statements and Reginfo.gov. If the agencies’ and OMB’s review processes do not detect mathematical errors and inconsistencies, then Congress and the public may have inaccurate or incomplete information on the estimated burden imposed by an information collection may result in less confidence in agencies’ abilities to accurately compute and report the burden and as such, less confidence in agencies’ ability to effectively manage and minimize the burden they impose on the public. As part of its review process, OMB also reviews ICRs for compliance with PRA and applicable regulations, and policies. However, OMB approved numerous ICRs without the required respondent time cost information. If OMB does not take action to ensure that agencies consistently follow its guidance to include respondent time costs, agencies will likely continue to and omit this information. In addition, OMB’s current formal guidance does not offer specific instructions on when and how to include fringe benefits like paid leave and retirement contributions in respondent time costs. Without clear guidance, agencies may continue to inconsistently estimate respondent time costs, which could potentially result in underestimated time costs at some agencies as well as inconsistent implementation of efforts to reduce regulatory burden. Public input, when available, often resulted in improvements in the quality of agencies’ burden estimates. However, the four agencies are missing opportunities to improve the quality of their estimates by not better leveraging existing public outreach efforts. While Federal Register notices provide the public with an opportunity to comment on the burden estimates, we found that DOT and IRS did not always provide sufficient information in their notices on the methodologies used to calculate the burden to allow the public to meaningfully comment on agencies’ burden estimates. At the same time, given the few comments that agencies receive in response to these notices, it is clear that Federal Register notices alone are not sufficient. We found that agencies are already actively engaging with stakeholders through a number of means, including federal advisory committee meetings, periodic stakeholder meetings, and webinars, but are not fully using these opportunities to explicitly seek input on their burden estimates. Emphasizing those elements of the burden estimate (e.g., average time per response) during these events could help the agencies target their outreach on the most pertinent information. IRS uses a methodically rigorous process to develop the initial burden estimates for the federal government’s two largest information collections—U.S. Individual and Business Tax Return ICRs. This process includes gathering detailed information from the public on the time and money spent on tax preparation through its taxpayer surveys. IRS plans to transition additional information collections to this more rigorous approach in the coming years. This could improve the quality of burden hour estimates and provide the cost estimates that IRS is currently lacking for other collections. IRS could also do more do consult with the public after the initial burden estimate has been developed. IRS reported that it already periodically meets with representatives from professional associations to discuss tax laws and tax forms. If IRS used these opportunities to explicitly seek input on the initial burden estimate, the agency could both obtain valuable feedback on burden estimates and comply with the consultation requirements in PRA. OMB could help ensure that agencies more consistently obtain valuable public input on each of their ICRs by providing guidance directing agencies to consult with the public beyond the Federal Register notices on every ICR, as required in the PRA and as we previously recommended. However, while we consider the PRA requirement regarding public consultation in addition to the 60-day Federal Register notice for each ICR to be clear, OMB continues to believe that additional consulting should occur for those ICRs where important information may be missed by the public notice and comment period. We maintain that agencies should comply with the additional consultation requirement in the PRA. We acknowledge OMB’s concerns that public consultation not overly be burdensome to agencies. However, we found that the agencies we reviewed have already identified efficient and effective mechanisms for gathering input from the public, such as through periodic stakeholder meetings and webinars. Given that OMB continues to disagree with our 2005 recommendation, congressional action to clarify the legal requirement may be required. Matter for Congressional Consideration We are making the following matter for congressional consideration: Congress should consider amending the Paperwork Reduction Act to more explicitly require federal agencies to consult with potential respondents on each information collection beyond the publication of Federal Register notices using efficient and effective consultation methods. (Matter for Consideration 1) Recommendations for Executive Action We are making a total of 11 recommendations, including 2 to OMB; 2 each to the Departments of Agriculture and Health and Human Services; 3 to the Department of Transportation; and 2 to the Internal Revenue Service. The Director of OMB should ensure the consistent application of the requirement for respondent time costs, including clarifying instructions for when and how to include fringe benefits. (Recommendation 1) The Director of OMB should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 2) The Secretary of Agriculture should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 3) The Secretary of Agriculture should leverage existing consultation with stakeholders and the public to explicitly seek input on the burden imposed by information collections. (Recommendation 4) The Secretary of Health and Human Services should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 5) The Secretary of Health and Human Services should leverage existing consultation with stakeholders and the public to explicitly seek input on the estimated burden imposed by information collections. (Recommendation 6) The Secretary of Transportation should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 7) The Secretary of Transportation should leverage existing consultation with stakeholders and the public to explicitly seek input on the estimated burden imposed by information collections. (Recommendation 8) The Secretary of Transportation should include enough information in Federal Register notices to allow the public to reasonably calculate or determine the number of respondents, the frequency of response, and the average burden time per response for each information collection activity. (Recommendation 9) The Commissioner of Internal Revenue should leverage existing consultation with stakeholders and the public to explicitly seek input on the estimated burden imposed by information collections. (Recommendation 10) The Commissioner of Internal Revenue should include enough information in Federal Register notices to allow the public to reasonably calculate or determine the number of respondents, the frequency of response, and the average burden time per response for each information collection activity. (Recommendation 11) Agency Comments and Our Evaluation We provided a draft of this report to the Director of OMB; the Secretaries of USDA, HHS, DOT; and the Commissioner of the IRS for comment, respectively. OMB did not provide written comments, and OMB staff informed us that OMB neither agreed nor disagreed with our recommendations to the agency. The Audit Liaison from the USDA’s Office of the Chief Information Officer informed us in an email that USDA concurs with our recommendations to the agency. HHS, DOT, and IRS provided written comments, which we have reprinted in appendixes II, III and IV. In its written comments, HHS and DOT concurred with our recommendations to the agencies. HHS said it intends to continually review PRA processes and procedures as well as closely monitor their implementation to further reduce human error. DOT stated that the agency has taken action to improve its PRA program, and reported that it issued a new Federal Register notice for its Inspection, Repair, and Maintenance ICR to address mathematical errors identified in this report. In its written comments, IRS also concurred with our recommendations to the agency. However, IRS stated that its existing PRA policies and procedures sufficiently address the PRA requirements. In response to our recommendation on leveraging existing consultation mechanisms to obtain public comments on ICR burdens, IRS noted its public participation process includes consultation with stakeholders. Specifically, IRS said that, as resources allow, it partners with industry and stakeholder groups to consult with taxpayers on tax product development and assess the burden experience in understanding the tax forms and complying with requirements to complete them. However, we believe that IRS could better leverage this stakeholder consultation. Our analysis of supporting statements and interviews with IRS officials indicates that IRS did not explicitly seek input on burden estimates for its largest collections during these consultations. Soliciting input through the published forms themselves provides additional opportunities to obtain valuable stakeholder input, but it is not a substitute for actively reaching out to stakeholders for input on its burden estimates prior to approval, which could be readily accomplished through the mechanisms IRS already has in place for stakeholder consultation. In response to our recommendation on providing the public with sufficient information in its public notices to allow the public to evaluate an ICR’s burden, IRS acknowledged that public notices issued before February 2017 may not have included all the elements needed by the public to be able to evaluate the burden estimates (number of respondents, frequency of response, and average burden time per response). However, according to IRS, the agency has since implemented a procedure to ensure that these elements are in the ICRs and that recent ICR public notices contain all three elements. If effectively implemented, these new procedures could help ensure that the public has the information it needs to review and provide input to on the specific assumptions used to develop the burden estimates. The public notices we reviewed for this report were all published prior to February 2017. When we spoke with IRS officials in February 2018, they said that their current policy is to include the estimated number of respondents, the estimated time per response, and the estimated total burden hours in each Federal Register notice for ICRs. IRS officials added that they did not always include data on the frequency of the collection because it might cause confusion for those instances where only a portion of the respondent population will respond to the collection more than once in a given year. Although IRS stated in its written comments that it had implemented new procedures to include all the necessary elements, we found some ICRs issued after February 2017 that do not contain the necessary elements, including frequency, to allow the public to evaluate the specific assumptions used to develop the burden estimates. We will follow-up with IRS to ensure that new ICR procedures fully address the issues we identified. OMB, USDA, HHS, and DOT also provided technical comments, which we incorporated as appropriate throughout our report. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Director of the Office of Management and Budget; the Secretaries of the Departments of Agriculture, Health and Human Services, and Transportation; and the Commissioner of the Internal Revenue Service, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact Tranchau (Kris) T. Nguyen at (202) 512-2660 or Nguyentt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix V. Appendix I: Objectives, Scope, and Methodology This report examines (1) how agencies estimate both the burden hours and costs of their information collections, and any limitations of their approaches, and (2) the extent to which agencies consult with and receive comments from the public on the collections’ estimated burden. To address both of these objectives, we reviewed Office of Management and Budget (OMB) data on federal information collection requests (ICR) available on Reginfo.gov as of April 7, 2017. To obtain more information about the ICR process at the agency level, we selected four agencies to serve as case studies. We identified the four agencies with the largest number of total annual estimated burden hours across the federal government based on the Reginfo.gov data. The selected agencies are the Internal Revenue Service (IRS)—which alone accounts for approximately 70 percent of the federal government’s total information collection burden hours—and the Departments of Health and Human Services (HHS), Agriculture (USDA), and Transportation (DOT). HHS represents 12 percent of the total burden hours in the federal government, while USDA and DOT each represent 2 percent of the federal information collections burden. The four selected agencies represent more than 85 percent of the total estimated burden hours across the federal government. For each of the four agencies, we selected the 50 largest ICRs based on total annual burden hours, for a total of 200 ICRs, to provide us with information about the agencies’ efforts to consult with the public and their approach for estimating burden hours, respondent time costs, and resource costs related to each ICR. As part of this analysis, we reviewed information about (1) burden hour and (2) cost estimates and public consultation from Reginfo.gov and the ICR supporting statement. To obtain a more detailed understanding of the methodologies, policies, and public outreach efforts related to estimating and reviewing the burden associated with each ICR, we selected the two ICRs with the largest burden hour estimates from each selected agency as case studies. The eight case study ICRs, shown in table 11, represent the majority of information collection burden at each agency and roughly 59 percent of the federal government’s total burden hours. We reviewed the supporting statements for each case study ICR to determine how the agencies calculated burden hours, respondent time costs, and respondent resource costs. We reviewed the Federal Register notices issued by the agencies to solicit comments from the general public on these ICRs, as well as the comments received in response to the 60-day notices. We reviewed the Paperwork Reduction Act and OMB guidance issued to assist agencies in developing and reviewing their information collections. We interviewed knowledgeable officials at the four selected agencies to obtain information on the methodologies used to estimate burden time and costs, the processes and policies for ICR review and submission, and public participation in providing comments about the burden estimates. In addition, we interviewed OMB staff to obtain information about its role in reviewing ICRs submitted by agencies, as well as its relationship with the selected agencies. To assess the reliability of Reginfo.gov data on burden hours and annualized costs for each ICR, we interviewed OMB staff and reviewed documentation of the Reginfo.gov website and the Regulatory Information Service Center/Office of Information and Regulatory Affairs Consolidated Information System (ROCIS), which is the system that agencies use to track information collection requests and that underlies information provided on Reginfo.gov. We compared the data from Reginfo.gov with the data found in the supporting statements. We interviewed agency officials and OMB staff about the discrepancies between these two information sources. We found that the Reginfo.gov data were sufficiently reliable for the purpose of selecting the case study agencies and ICRs subject to our review. We conducted this performance audit from January 2017 to July 2018 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: Comments from the Department of Health and Human Services Appendix III: Comments from the Department of Transportation Appendix IV: Comments from the Department of the Treasury Appendix V: GAO Contacts and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the above contact, Thomas J. McCabe (Assistant Director) and Joseph L. Santiago (Analyst-in-Charge) supervised the development of this report. Michael Bechetti, Tim Bober, Alyssia Borsella, Jaqueline Chapin, Steven Flint, Tim Guinane, Heather Krause, Ying Long, Sharon Miller, Ed Nannenhorn, Kayla Robinson, Robert Robinson, Cindy Saunders, Wesley Sholtes, and Chris Zakroff made major contributions to this report. Dawn Bidne, Jeffrey DeMarco, Jessica Nierenberg, and Laurel Plume verified the contents of this report.

Why GAO Did This Study Federal agencies collect a wide variety of information to ensure the public is kept safe from harm, receives benefits to which they are entitled, and fulfill their missions. Such collections can also impose significant burdens on the public. The goal of the PRA is to minimize the burden of these collections and maximize their utility. To help accomplish this, the PRA requires agencies to estimate the burden, and consult with the public on these estimates. This report examines (1) how agencies estimate burden hours and costs of their collections, and any limitations of agencies' approaches; and (2) the extent to which agencies consult with the public on estimated burden. To address these objectives, GAO selected four agencies with the largest burden hour estimates, reviewed the 50 ICRs with the largest burden hour estimates at each agency, with a focus on the 2 largest ICRs at each as case studies, and interviewed agency officials and OMB staff. What GAO Found Agencies GAO reviewed—the Departments of Agriculture (USDA), Health and Human Services (HHS), and Transportation (DOT), and the Internal Revenue Service (IRS)—generally used existing data, such as historical data, to estimate the time, or “burden hours,” it takes for the public to complete an information collection request (ICR). IRS reported gathering original data on public burden through surveys of taxpayers to help estimate the burden for its two largest ICRs. When data were unavailable for one or more elements of the burden calculation (e.g., average time per response), agencies relied on professional judgment, informed in some instances by internal consultation with issue area experts. GAO found two limitations with the agencies' current approaches for estimating burden. First, 76 of 200 ICRs that GAO reviewed, including the 2 largest ICRs at IRS and DOT, did not translate burden hours into dollars, or estimated “respondent time costs.” Although the Office of Management and Budget (OMB) requires agencies to include these costs, it reviewed and approved all 76 ICRs. ICRs that included respondent time costs did not consistently include fringe benefits, such as insurance contributions, in part because of a lack of clear guidance from OMB. Inconsistencies in estimating respondent time costs could lead to inconsistent implementation of new requirements under Executive Order 13771 that agencies offset the incremental costs of new regulations with reductions in regulatory burden, including paperwork burden, elsewhere. Second, while all agencies and OMB reported having independent review processes in place, as required by the Paperwork Reduction Act (PRA), GAO found instances where 3 of the 4 selected agencies—USDA, HHS, and DOT—did not detect math errors through these review processes or inconsistencies among estimates provided on Reginfo.gov, and in the more detailed ICR supporting statements. For example, GAO found that one ICR underestimated burden by as much as $270 million, and another overestimated burden time by more than 12 million hours. Agencies acknowledged they followed their review processes but not detect the errors and inconsistencies. OMB also did not detect the errors and inconsistencies in its review of the ICRs. Until agencies ensure that their review processes detect errors or inconsistencies, the public may have less confidence in agencies' ability to effectively manage and minimize burden. While the agencies solicited public comments through the Federal Register , as required by the PRA, IRS and DOT did not always provide the level of information in the notices (e.g., the frequency of the collection) needed to allow the public to evaluate the burden estimates. Also, agencies did not always consult with the public beyond these notices, as required under the PRA. Of the 200 ICRs GAO reviewed, 113 contained information in their supporting statements indicating public consultation beyond the Federal Register notices. Only 6 of these 113 indicated that public outreach was related to the burden hour estimates. OMB could help ensure that agencies consistently obtain public input by directing agencies to consult with the public beyond the Federal Register notices on each ICR, as required in the PRA. However, OMB continues to believe that additional consulting should occur only for ICRs where important information may be missed by the public notice and comment period. Congressional action to clarify the PRA requirement may be needed. What GAO Recommends Congress should consider more explicitly requiring agencies to consult with the public beyond the Federal Register notices. GAO is also making 11 recommendations: 1 to OMB on ensuring consistent application of the requirement for estimating respondent time costs; 4 on reexamining processes for reviewing ICRs to OMB, USDA, HHS, and DOT; 2 on improving public notices to IRS and DOT; and 4 on better leveraging existing public consultation to USDA, HHS, DOT, and IRS. USDA, HHS, DOT, and IRS agreed with the recommendations. OMB staff did not agree or disagree.

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Background Border Patrol’s Organizational Structure Border Patrol divides responsibility for southwest border security operations geographically among nine sectors, each with its own sector headquarters. Each sector is further divided into varying numbers of stations. For example, the Tucson sector has divided geographic responsibility across eight stations, seven of which have responsibility for miles of land directly on the U.S.-Mexico border. Stations’ areas of responsibility are divided into zones. Border Patrol refers to “border zones”—those having international border miles—and “interior zones”— those without international border miles. For example, as shown in figure 1, within the Tucson sector, the Sonoita station has only border zones, the Willcox station has only interior zones, and the other stations have a mix of both border and interior zones. According to Border Patrol officials, dividing stations into zones allows sectors to more effectively analyze border conditions, including terrain, when planning how to deploy agents. Zone dimensions are largely determined by geography and topographical features, and zone size can vary significantly. Staffing Levels and Agent Deployment In fiscal years 2011 through 2016, Border Patrol was statutorily required to maintain a minimum of 21,370 full-time equivalent agent positions, but Border Patrol has faced challenges in staffing to that minimum level. As of May 2017, Border Patrol had about 19,500 agents on board. Additionally, in January 2017, an executive order called for the hiring of 5,000 additional Border Patrol agents, subject to available appropriations, and Border Patrol is aiming to have 26,370 agents by the end of fiscal year 2021. The Acting Commissioner of CBP reported in a February 2017 memo to the Deputy Secretary for Homeland Security that from fiscal year 2013 to fiscal year 2016, Border Patrol hired an average of 523 agents per year while experiencing a loss of an average of 904 agents per year. The memo cited challenges such as competing with other federal, state, and local law enforcement organizations for applicants. In particular, the memo noted that CBP faces hiring and retention challenges compared to DHS’s U.S. Immigration and Customs Enforcement (which is also planning to hire additional law enforcement personnel) because CBP’s hiring process requires applicants to take a polygraph examination, Border Patrol agents are deployed to less desirable duty locations, and Border Patrol agents generally receive lower compensation. Border Patrol headquarters, with input from the sectors, determines how many authorized agent positions will be allocated to each of the sectors. According to Border Patrol officials, these decisions take into account the relative needs of the sectors, based on threats, intelligence, and the flow of illegal activity. Each sector’s leadership determines how many of the authorized agent positions will be allocated to each station within their sector. Sector leadership also distributes newly assigned agents—those agents recently hired whom headquarters has assigned to the sector, or existing agents who are being transferred—to specific stations within the sector. Table 1 shows the number of authorized agent positions for each southwest border sector as well as the number of agents who were assigned to each of those sectors, as of May 2017. Once a sector assigns agents to a station, station officials assign agents to a shift. Most agents work 10-hour shifts, which allows for some overlap in time for the outgoing shift to relay key information to the incoming shift. Most agents work 5 days per week with 2 off duty days. FOBs and Checkpoints Border Patrol has 17 FOBs that are established in forward or remote locations in five of the nine southwest border sectors to sustain Border Patrol operations. According to Border Patrol officials, the primary function of these facilities is to give the Border Patrol a tactical advantage by reducing response time to threats or actionable intelligence. Typically, agents are assigned for 7 days, during which they reside at the FOB and deploy to their assigned duties. FOBs allow agents to be pre-positioned at these locations, which reduces the portion of an agent’s shift that is spent in transit between the station and the patrol location. In addition, these facilities are intended to increase security awareness and presence in the border areas where they are located. FOBs are staffed by Border Patrol agents on temporary duty assignments from their permanent duty station. After their shift, they are normally required to remain at the FOB to rest, prepare for their next shift, and be available, if needed, to respond to operational issues. Figure 2 includes a photo of a FOB in the Rio Grande Valley sector. Five of the nine southwest border sectors—Yuma, Tucson, El Paso, Big Bend, and the Rio Grande Valley—have FOBs, whereas the other four sectors—San Diego, El Centro, Del Rio, and Laredo—do not. Border Patrol operates two types of checkpoints—permanent and tactical—that differ in terms of size, infrastructure, and location. While both types of checkpoints are generally operated at fixed locations, permanent checkpoints—as their name suggests—are characterized by their brick and mortar structures, that may include off-highway covered lanes for vehicle inspection and several buildings including those for administration, detention of persons suspected of smuggling or other illegal activity, and kennels for canines used in the inspection process. Figure 2 shows examples of permanent and tactical checkpoints we observed in the Rio Grande Valley and Tucson sectors, and figure 3 is a map depicting the locations of permanent checkpoints near the southwest border. Border Patrol agents at checkpoints have legal authority that agents do not have when conducting roving patrols away from the border. The United States Supreme Court ruled that Border Patrol agents may stop a vehicle at fixed checkpoints for brief questioning of its occupants even if there is no reason to believe that the particular vehicle contains illegal entrants, and also held that the operation of a fixed checkpoint does not require a judicial warrant. The Court further held that, provided the intrusion is sufficiently minimal so as not to require particularized justification, Border Patrol agents “have wide discretion” to refer motorists selectively to a secondary inspection area for additional brief questioning. In contrast, the Supreme Court held that Border Patrol agents on roving patrol may stop a vehicle only if they have reasonable suspicion that the vehicle contains aliens who may be illegally in the United States—a higher threshold for stopping and questioning motorists than at checkpoints. The constitutional threshold for searching a vehicle is the same, however, and must be supported by either consent or probable cause, whether in the context of a roving patrol or a checkpoint search. Probable cause can include a canine detecting something it is trained to detect (e.g., concealed people, narcotics). Figure 4 shows a Border Patrol canine team inspecting a vehicle at a checkpoint. Previous GAO Work We have previously reported on topics related to the defense in depth strategy, and specifically on checkpoints. In August 2009, we reported on the measurement of checkpoint performance and the impact of checkpoint operations on nearby communities, among other things related to checkpoints. In that report, we made recommendations to, among other things, strengthen checkpoint design and staffing and improve the measurement and reporting of checkpoint effectiveness, including measuring community impacts. CBP has implemented two of our recommendations from that report—specifically, Border Patrol explored and considered the feasibility of a checkpoint performance model and required that traffic volumes be studied and considered when designing new permanent checkpoints. Appendix I provides details on the status of all six recommendations from that report. We also reported in December 2012 on how Border Patrol manages personnel resources at the southwest border, including aspects of the defense in depth strategy, such as where apprehensions and seizures were occurring relative to the southwest border. That report focused on the Tucson sector—which at the time had the most Border Patrol apprehensions of the nine southwest border sectors—and compared data on agent deployment, apprehensions, and seizures from the Tucson sectors with data for other sectors. Border Patrol Deploys Agents Based on Availability and Geography, Among Other Factors, and Agent Activity Schedules Vary By Sector Border Patrol Assigns Agents Based on Factors Such As Availability, Geography, and Illegal Traffic Patterns According to sector officials, decisions about agent deployment in terms of location and activity are based on multiple factors, including the availability of agents for a given shift, the geography in a station’s area of responsibility, and illegal traffic patterns. For example, when considering the various assignments that need to be filled for a given day, supervisors must take into account agents that are unavailable because they are off duty, on scheduled leave, or are scheduled to attend training. The geography in a station’s area of responsibility can also affect decisions about where to deploy available agents. For example, Border Patrol may have limited access to certain areas because of challenging terrain, limited or poor quality roads, or private ownership. Supervisors also review information about illegal traffic patterns in their areas of responsibility to determine where enforcement operations may be needed. Number and Availability of Agents One key factor in how Border Patrol makes deployment decisions at the station level is the overall number of agents available. Officials from all nine southwest border sectors cited current staffing levels and the availability of agents as a challenge for optimal deployment. Nationwide, as of May 2017, Border Patrol had nearly 1,900 fewer agents than authorized and has faced hiring and retention challenges in recent years. As shown in table 1 earlier, eight of the nine southwest border sectors were below their authorized agent staffing levels as of May 2017. As such, resources are constrained and station officials must make decisions about how to prioritize activities for deployment given the number of agents available. Within sectors, some stations may be comparatively more understaffed than others because of recruitment and retention challenges, according to officials. Generally, sector officials said that the recruitment and retention challenges associated with particular stations were related to quality of life factors in the area near the station—for example, agents may not want to live with their families in an area without a hospital, with low- performing schools, or with relatively long commutes from their homes to their duty station. This can affect retention of existing agents, but it may also affect whether a new agent accepts a position in that location. For example, officials in one sector said that new agent assignments are not based solely on agency need, but rather also take into consideration agent preferences. These officials added that there is the potential that new agents may decline offers for stations that are perceived as undesirable, or they may resign their position earlier than they otherwise would to pursue employment in a more desirable location. Supervisors make decisions about how to deploy agents based on the number of agents assigned to a shift who are available to work the shift on a particular day. On any given day, some agents will be off duty, in training, or have annual or sick leave scheduled, thereby reducing the number of agents available for deployment during a shift. To assess how Border Patrol has scheduled and deployed agents across the southwest border sectors, we analyzed the scheduled deployment data that supervisors entered into BPETS for fiscal years 2013 through 2016. Supervisors enter data into BPETS in advance of a shift to track expected time and attendance. Supervisors record work status by indicating whether an agent will be working, off duty, or otherwise not working (for example, on annual leave or scheduled sick leave), and for agents who are working, the supervisors also record an assignment to which the agent is expected to be deployed that day. We analyzed these assignments to determine how agents’ work time was distributed among activities in the following categories: Operations and Patrol refers to frontline activities that involve identifying and apprehending illegal entrants and identifying and seizing contraband. Some specific examples include linewatch, sign cutting, and checkpoint duties. Operational Support refers to activities, such as intelligence gathering or surveillance, that support frontline agents conducting operations and patrol activities. Processing refers to activities that occur after apprehending an individual, including transport, processing, detention, and removal. Legal Support and Litigation refers to activities, such as attending court proceedings, that involve prosecution of apprehended individuals. Training refers to activities that involve providing instruction, attending training, or completing qualification/certification tests. Administrative and Other Non-Enforcement Activities refers to activities other than those above, including public relations, hiring and recruitment, and policy and compliance. Our analysis included time that agents were scheduled to be off duty or on scheduled leave because scheduled time off can affect supervisors’ deployment decisions by reducing the number of agents available on a particular day. As shown in figure 5, agents were unavailable for deployment for a total of 42 percent of time (off duty time, scheduled non-work time, and training), and about 43 percent of agents’ time was scheduled for operations and patrol activities in the field. As an example, this means that a station with 300 total agents—with 100 agents assigned to each of three shifts—would have had on average about 42 of the 100 agents per shift unavailable because of planned time not working (off duty or other scheduled non-work time) or in training. Of the remaining 58 agents, on average, about 43 would have been scheduled to field-based operations and patrol activities, and 15 would have been assigned to other activities. Furthermore, it is important to note that BPETS deployment schedules reflect the scheduled availability and deployment of agents, rather than actual deployment. Actual availability or deployment may have differed because of changes in circumstances or other factors, and supervisors are not required to update BPETS to reflect these deployment changes. For example, an agent who was assigned to patrol the border might do so for part of a shift, but upon apprehending an illegal entrant the agent may spend some or all of the remainder of the shift processing the apprehended individual. According to Border Patrol officials, additional agents in the field may also be pulled from their patrol activities to conduct processing when large groups are apprehended. Geography Border Patrol station officials also make deployment decisions based on the unique geographical factors in their area of responsibility, such as proximity to population centers and access to certain areas (including remote areas where FOBs are located). In addition, whether the station is responsible for the operation of checkpoints is another factor that station officials consider in making decisions about how to most effectively use available agents for operations and patrol activities in the field. In relatively populated areas close to the border, the window of time Border Patrol has to respond to illegal crossings may be shorter than in more remote areas where agents may have more time to apprehend illegal crossers. Thus, proximity to population centers is a factor that officials consider when deciding how many agents to deploy to particular locations within a station’s area of responsibility. In February 2017, we reported that Border Patrol officials said that populated urban environments offer an advantageous setting for illegal entrants because within seconds to minutes these entrants can blend in with the local U.S. community after crossing the border. Therefore Border Patrol has intended to divert illicit cross-border activities into more remote or rural environments, where illegal entrants may require hours or days to reach the nearest U.S. community. For example, El Centro sector officials told us that an outlet mall located at the immediate border posed a threat in terms of the limited time it would take illegal crossers to assimilate into the population. Similarly, officials in one station in the Rio Grande Valley sector identified a town that is very close to the Rio Grande River, and Border Patrol agents must aim to apprehend crossers within a two to three block distance to prevent crossers from blending in with residents of the town. Sector officials generally stated that stations prioritize deployment to areas along the immediate border. Border Patrol may have limited access to certain areas because of land ownership or limited road infrastructure, and this may affect decisions about how to deploy agents (if at all) to these areas. Some sectors consist primarily of privately owned land, and Border Patrol officials must obtain permission from the landowner, or a judicial warrant, to access any private lands further than 25 miles from the border. Border Patrol officials in one sector noted that some landowners do not want Border Patrol on their property. Additionally, the availability and condition of road infrastructure can make it challenging for agents to get to some locations. For example, officials in sectors with mountainous terrain cited challenges related to accessing and patrolling mountainous areas. In particular, officials in the Tucson sector noted that the sector includes seven mountain ranges and estimated that about 20 percent of the 262 miles of land border in the sector are inaccessible by vehicle. As a result, these officials said that agents deployed to those areas patrol by foot, horseback, and air. In some areas where there are terrain and road access challenges, Border Patrol may establish FOBs to facilitate access to areas near the immediate border and enable agents to spend a greater proportion of their shifts on patrol. Border Patrol sector officials in the five sectors that currently operate at least one FOB, as well as officials in one other sector that previously operated a FOB, said that FOBs are beneficial for maximizing patrol time in difficult to reach locations. Assigning agents to these locations on temporary duty assignments reduces the portion of an agent’s shift that is spent in transit between the station and the patrol location. For example, officials in one sector said that the transit time between the station and the FOB is a 5 to 6 hour round trip. Thus, transit to that location could comprise 50 to 60 percent of a shift for agents deployed to that patrol area if they were to report to the station each day prior to beginning their patrol duties. Instead, agents travel between the station and the FOB only as part of the first and last day of their multi-day assignment to the FOB, and on the days in between they are pre- positioned at the FOB to begin patrols at the start of their shift. Although FOBs can help facilitate access to some remote locations, there can also be associated challenges, and therefore, they may not be an effective solution in all cases to improving access to remote areas. For example, officials in one sector noted that Border Patrol had considered establishing a FOB to improve accessibility to that location, but there were challenges to securing the rights to access private property and providing for adequate facilities given that the area of interest did not have infrastructure to supply water to the FOB if it were to be built. In February 2016, the DHS Office of the Inspector General reported that although the challenge of supplying water to FOBs rarely causes Border Patrol to shut down a FOB, it is a frequent problem that often requires additional resources to resolve. Additionally, some remote or difficult to access locations may be located on private or tribal lands, which require Border Patrol to negotiate access and other aspects of FOB operations, or on wildlife refuges, which may have limitations regarding the types of infrastructure or operations in order to preserve the local habitat. Stations that have responsibility for checkpoints in their areas of responsibility consider checkpoint operations in their deployment decisions. Border Patrol’s checkpoints policy includes a recommended minimum number of agents to operate the checkpoint. The nature of a checkpoint—whether it is permanent or tactical—can also affect deployment. Permanent checkpoints are generally intended to be operational most of the time, meaning that stations with responsibility for permanent checkpoints generally assign at least the minimum number of agents to those checkpoints to ensure continuous operation. In contrast, tactical checkpoints are intended to be set up for short-term or intermittent use. Accordingly, a station can make a decision about whether to operate a tactical checkpoint based on a determination of whether it is more effective to staff the checkpoint or whether it is more effective to deploy those agents elsewhere. Stations with responsibility for both the immediate border and interior checkpoints must balance agent deployment across both responsibilities. In contrast, border stations that do not contain checkpoints in their areas of responsibility do not have to distribute agents between checkpoint and patrol activities. Similarly, interior stations that do not have responsibility for the border can prioritize checkpoints. Additionally, for stations with checkpoints, supervisors must determine how many agents, if any, to deploy to the areas around a checkpoint through which illegal entrants or smugglers may travel to circumvent the checkpoint (known as circumvention routes). We reported in August 2009 that Border Patrol policy highlights the need to detect and respond to circumvention activity, but at the time, officials stated that other priorities sometimes precluded positioning more than a minimum number of agents and resources in checkpoint circumvention routes. Similarly, as part of this review, sector officials said checkpoint circumvention routes may not be patrolled at all times because of the need to deploy agents elsewhere, including to the checkpoint itself to meet the minimum number of agents needed to keep the checkpoint operational. According to officials, in some locations, sensors and cameras assist with monitoring traffic in circumvention routes, and when technology detects traffic, agents can be deployed to respond. In our August 2009 report, we reported that checkpoint performance can be hindered by limited staffing at checkpoints. Border Patrol policy recommended the minimum number of agents for checkpoint operation, but sector managers may have had other priorities for staff placement, and thus stations may have only staffed checkpoints—and circumvention routes—with the minimum number of agents. Additionally, as part of that review, we found that design and planning documents for the planned Interstate 19 checkpoint in the Tucson sector did not include an estimate of the number of agents who would be deployed to address circumvention activity at the new checkpoint. We recommended that, in connection with planning for new or upgraded checkpoints, CBP should conduct a workforce planning needs assessment for checkpoint staffing allocations to determine the resources needed to address anticipated levels of illegal activity around the checkpoint. In January 2017, Border Patrol began construction of a new checkpoint facility on U.S. Highway 281 south of Falfurrias, Texas, that will replace the existing checkpoint. The current checkpoint has a maximum of five lanes of traffic, whereas the new checkpoint will have a maximum of eight lanes. Border Patrol provided us an estimate for the number of agents, supervisors, and canine units that are expected to be needed to operate the new checkpoint; however, the information provided lacked supporting details, such as a discussion of what data were collected and how the data were analyzed to determine how many agents would be needed to staff the checkpoint and the surrounding circumvention routes. Given existing staffing constraints, having an accurate workforce planning needs assessment is important to inform future considerations for how to deploy agents to address anticipated levels of illegal activity at and around the checkpoint. Therefore, we continue to believe this recommendation is warranted. Intelligence Information about Illegal Traffic Patterns Sector officials said they consider intelligence information—such as information about illegal traffic patterns and data on apprehensions and seizures; the types of threats in the area (e.g., illegal border crossing, drug smuggling); and transnational criminal organizations’ tactics, techniques, and procedures—when determining where to deploy available agents. Officials said they also receive information on suspected illegal traffic from community members, and stations may deploy agents to respond. Sectors Vary in How Much Time Agents Are Scheduled for Operations and Patrol Activities and Where Such Activities Are Scheduled to Occur From fiscal years 2013 through 2016, the nine southwest border sectors varied in how they distributed work time scheduled to activities in the six categories previously discussed—(1) operations and patrol, (2) operational support, (3) processing, (4) legal support and litigation, (5) training, and (6) administrative and other non-enforcement—although all the sectors scheduled the majority of agents’ time (between 61 and 77 percent) to operations and patrol activities. As shown in figure 6, the Rio Grande Valley sector scheduled the smallest percentage of agents’ work time to operations and patrol activities (61 percent) and the highest percentage of time to processing (13 percent). As discussed later in this report, the Rio Grande Valley had the highest number of apprehensions out of the nine southwest border sectors from fiscal year 2012 through 2016, thereby affecting the time needed for processing or otherwise attending to apprehended individuals. The scheduling data also show variations in the locations where sectors plan to deploy agents to operations and patrol activities in proximity to the border. Specifically, as shown in figure 7, the sectors ranged from scheduling 34 to 61 percent of operations and patrol time in border zones (for the Big Bend and Rio Grande Valley sectors, respectively) and from 17 to 52 percent of operations and patrol time in non-border zones (for the Del Rio and Big Bend sectors, respectively). In some cases, the data do not include a zone assignment, and sectors varied in what percentage of operations and patrol scheduling assignments did not have a zone assignment. Including a zone assignment is not required by Border Patrol policy, and headquarters and sector officials identified some possible reasons why an assignment may not include a zone. For example, officials said that an agent could be deployed to an activity that has responsibility for multiple zones or no specific zone, such as roving patrol, specialty units (such as an intelligence unit or special operations), or assisting CBP’s Air and Marine Operations. Officials from one sector noted that a zone may not be assigned in the data because supervisors assign them orally when agents arrive at the start of a shift, and this provides supervisors flexibility to make the assignments based on the most up-to-date information about traffic patterns. Border Patrol headquarters officials said that the reasons for variations in border zone deployment are the same as we previously reported in December 2012— specifically, differences in geographical factors among the southwest border sectors (such as varying topography, ingress and egress routes, and land access issues, and structural factors such as technology and infrastructure deployments) that can affect how sectors operate and may preclude closer deployment to the border. Sectors also varied in terms of the proportion of operations and patrol time scheduled for checkpoint-related activities. Across the nine southwest border sectors from fiscal year 2013 through fiscal year 2016, approximately 9.4 percent of agents’ time scheduled for operations and patrol was scheduled for checkpoint activities. However, the number of agent hours scheduled for checkpoint activities—and what percentage of operations and patrol time these hours represent—vary by sector because of differences in factors, such as the number of checkpoints in a sector, the relative size of checkpoints, and the overall number of agents in a sector. For example, as shown in table 2, the El Centro and Big Bend sectors scheduled a similar number of hours to checkpoint-related activities, but these hours represented different percentages of total scheduled operations and patrol activities time—13.9 percent and 21.0 percent, respectively—which partly reflects that the El Centro sector has almost double the number of agents and fewer checkpoints than the Big Bend sector. Apprehensions Occurred Closer to the Border in Fiscal Year 2016 Compared to Fiscal Year 2012, While Seizure Locations Remained Relatively Unchanged Apprehensions From fiscal years 2012 through 2016, 33 percent of southwest border apprehensions were made one-half mile or less from the border, and over this time period apprehensions increasingly occurred closer to the border, as shown in figure 8. Specifically, from fiscal years 2012 through 2016, apprehensions one-half mile or less from the border increased from 24 percent to 42 percent. During the same time period, the percentage of apprehensions occurring more than 20 miles from the border steadily dropped, from 27 percent in fiscal year 2012 to 15 percent of all apprehensions in fiscal year 2016. While all nine southwest border sectors exhibited this trend of an increase in apprehensions one-half mile or less from the border and a decrease in apprehensions farther than 20 miles from the border, the Rio Grande Valley sector had the greatest influence on the overall southwest border trend because that sector accounted for almost half (42 percent) of all southwest border apprehensions during this time period. Consistent with the overall trend for southwest border apprehensions in figure 8 above, the percentage of Rio Grande Valley sector apprehensions one-half mile or less from the border increased (from 27 percent in fiscal year 2012 to 48 percent in fiscal year 2016) and the sector’s percentage of apprehensions more than 20 miles from the border decreased (from 30 percent in fiscal year 2012 to 12 percent in fiscal year 2016). Appendix II provides more detailed information about trends in apprehensions by sector for fiscal years 2012 through 2016. According to Border Patrol officials and apprehension data, one key driver for apprehensions occurring closer to the border is the increasing number of apprehensions of children (either unaccompanied or as part of family units) from countries other than Mexico. We have previously reported that CBP officials have attributed high apprehension rates in the Rio Grande Valley sector to the high number of unaccompanied children and adults with children, many of whom turn themselves in to Border Patrol without attempting to evade detection. Officials said children are often told by smugglers to wait in specific locations where agents frequently patrol so that they will be found. According to Border Patrol officials, persons apprehended from Central America are often fleeing violence, and once apprehended they may assert claims for asylum in the United States. As shown in table 3, apprehensions of individuals, particularly children, from Central American countries (specifically, El Salvador, Guatemala, and Honduras) increased, while apprehensions of Mexicans, including children, decreased. In particular, in the Rio Grande Valley sector, the number of children apprehended from El Salvador, Guatemala, and Honduras increased almost tenfold, from 6,869 in fiscal year 2012 to 60,084 in fiscal year 2016. Such apprehensions also increasingly occurred closer to the border. In fiscal year 2016, Border Patrol apprehended 36,882 children from these countries (about 61 percent) one-half mile or less from the border, compared to 1,830 (about 27 percent) in fiscal year 2012. Although other sectors accounted for smaller percentages of overall southwest border apprehensions, all sectors saw notable increases in the percent of apprehensions who were children from Central America and who were apprehended closer to the border. Border Patrol officials said other factors may also have contributed to the change in apprehension patterns, such as changes in where patrols occurred during the time period we analyzed. Seizures From fiscal year 2012 through fiscal year 2016, seizure locations remained roughly the same, with between 64 and 70 percent of seizures occurring 10 or more miles from the border each year and between 9 percent and 11 percent of seizures occurring one-half mile or less from the border each year, as shown in figure 9. Trends within individual sectors varied, but unlike with apprehensions, no single sector dominated the proportion of seizures to strongly influence the overall pattern for the southwest border. The greatest number of seizures during the 5 fiscal years occurred in the Tucson, Big Bend, and Rio Grande Valley sectors (34, 19, and 16 percent of all seizures respectively). These sectors each had different distributions of where seizures occurred, as shown in figure 10. In particular, about 1 percent of seizures in the Big Bend sector occurred within 1 mile of the border, compared to 13 percent of seizures in the Tucson sector and 37 percent of seizures in the Rio Grande Valley sector. Appendix III provides more detailed information about trends in seizures by sector for fiscal year 2012 through fiscal year 2016. Long-Standing Data Quality Issues Make It Difficult to Precisely Measure Checkpoints’ Contributions to Apprehensions and Seizures Checkpoints’ Role in Apprehensions and Seizures Is Difficult to Measure with Precision Because Of Long- Standing Data Quality Issues According to our analysis of Border Patrol data, checkpoints accounted for about 2 percent of apprehensions and almost half of seizures in southwest border sectors. However, determining the extent to which apprehensions and seizures farther from the border are attributable to checkpoints is difficult because of data quality issues that have persisted since we previously reported on checkpoints in August 2009. In that report, we found that Border Patrol had established a number of measures for checkpoint performance to inform the public on program results and provide management oversight, including measures related to apprehensions and seizures at checkpoints and on circumvention routes. However, we reported that information gaps and reporting issues hindered public accountability and that inconsistent data collection and entry hindered Border Patrol’s ability to monitor the need for program improvement. Specifically, we found that a lack of management oversight and unclear checkpoint data collection guidance resulted in the overstatement of checkpoint performance results in agency performance reports, as well as inconsistent data collection practices at checkpoints. For example, officials at some checkpoints were including apprehensions that occurred within a 2.5-mile radius of the checkpoints in their reporting of apprehensions at checkpoints, which led to inconsistent reporting across checkpoints. We reported that the lack of oversight and unclear data collection guidance hindered management’s ability to monitor the need for program improvement. We therefore recommended, among other things, that Border Patrol establish internal controls for management oversight of the accuracy, consistency, and completeness of checkpoint performance data. In response to our recommendations, Border Patrol issued several memoranda in 2009 and 2010 related to the collection of checkpoint data, including guidance intended to distinguish between apprehensions and seizures occurring at checkpoints compared to those occurring in circumvention routes. In particular, these memoranda stated that: “At the checkpoint” is defined as the area including the checkpoint itself and the roadway prior to the checkpoint marked with cones and/or warning signs related to checkpoint operations (which, according to Border Patrol’s checkpoint policy, are to begin on the roadway one-half mile from the checkpoint itself). Apprehensions and seizures occurring at a checkpoint are to be recorded by selecting the appropriate checkpoint location from a dropdown list of landmarks (landmark data field). “Circumvention” is defined as “any deviation from a normally used route of egress in order to avoid detection by a checkpoint,” and if an individual was apprehended while attempting to circumvent a checkpoint, the apprehension is to be recorded by marking a checkbox labeled “Circumvention App?” (There is no data field for seizures that indicates that Border Patrol seized contraband from someone attempting to circumvent a checkpoint, but the seizure can be associated with an apprehension or arrest record for the person carrying the contraband, and the apprehension or arrest record may have the “Circumvention App?” box checked.) However, as discussed below, these memoranda have not fully addressed our recommendation because our analysis indicates that issues persist regarding the accuracy and consistency of data on checkpoint apprehensions and seizures. These issues continue to affect how Border Patrol monitors and reports on checkpoint performance results. According to Border Patrol officials, since the implementation of these memoranda, Border Patrol has reported on apprehensions and seizures at checkpoints based solely on the landmark data field. Specifically, an apprehension or seizure event is reported as having occurred at a checkpoint if the landmark associated with the event corresponds to the landmark for a checkpoint (checkpoint landmark). In September 2016, the Border Patrol Chief testified before a congressional committee that Border Patrol apprehended 8,503 individuals and seized over 75,000 pounds of drugs at checkpoints nationwide in fiscal year 2015, and the officials responsible for overseeing and analyzing the data said that these numbers were generated by determining the number of apprehensions and seizures associated with a checkpoint landmark. Furthermore, CBP’s fiscal year 2018 congressional budget justification noted that measurement of checkpoint activities—such as apprehensions at checkpoints—can gauge checkpoint operational effectiveness and provide insight into the effectiveness of the Border Patrol’s overall national border enforcement strategy. CBP reported in the budget justification that apprehensions at checkpoints ranged from 1.34 to 2.52 percent of nationwide apprehensions across fiscal years 2013 through 2016. To assess Border Patrol’s efforts to implement our August 2009 recommendation and determine the extent to which Border Patrol’s reporting of checkpoint statistics provides accurate information about enforcement actions at and around checkpoints, we analyzed apprehension and seizure data from fiscal years 2013 through 2016. For example, as shown in table 4, an apprehension or seizure event that occurred one-half mile or less from a checkpoint (according to the GPS coordinates of the event) and that was also associated with the nearest checkpoint landmark was considered category 1. Our analysis of Border Patrol data, as shown in table 5, indicates that at least 31,639 apprehensions and 30,449 seizures—those that are in category 1—occurred at checkpoints from fiscal years 2013 through 2016 based on both the GPS coordinates and the landmarks associated with those apprehensions and seizures. These apprehension and seizure events would be considered as occurring “at checkpoint” for Border Patrol reporting purposes because a checkpoint landmark was associated with the event. However, for the 19,759 apprehensions and 1,182 seizures in category 2—which are not included in Border Patrol’s reporting—it is unknown what proportion should be considered “at a checkpoint.” This is because for each of these apprehensions and seizures, the associated landmark does not correspond to the nearest checkpoint landmark, even though the GPS coordinates indicate that these apprehensions and seizures occurred one-half mile or less from a checkpoint location. Border Patrol officials said that one reason why the checkpoint landmark might not be indicated for apprehensions and seizures that occur one-half mile or less from a checkpoint is if the checkpoint is nonoperational at the time. However, our analysis suggests that not all apprehensions and seizures recorded in category 2 would reflect instances of checkpoints being non- operational. For example, about 30 percent of apprehensions that were one-half mile or less from the Falfurrias, TX, checkpoint (4,278 of 14,345 apprehensions) did not use the landmark for that checkpoint. Border Patrol officials in the Rio Grande Valley sector said the Falfurrias checkpoint is rarely closed, so the checkpoint being closed does not fully explain why the relevant checkpoint landmark was not used. Because Border Patrol’s policies do not provide guidance about recording data differently when a checkpoint is operational or nonoperational, it is unclear what proportion of apprehensions or seizures in category 2 reflect inconsistent application of Border Patrol’s guidance versus instances of a checkpoint being nonoperational. There are also inconsistencies in how Border Patrol is recording and reporting on apprehensions and seizures on potential circumvention routes. Events in category 3 appear to have occurred in circumvention routes rather than at checkpoints—they occurred farther than one-half mile from a checkpoint, and thus do not fit Border Patrol’s definition of an apprehension that occurs “at a checkpoint”—but because they are associated with a checkpoint landmark, Border Patrol’s reporting of events at checkpoints includes these apprehensions and seizures. Additionally, officials responsible for compiling checkpoint data said that they have not analyzed the use of the “Circumvention App?” checkbox to separately determine apprehensions that occur around checkpoints. Although the GPS coordinates and associated landmarks suggest that apprehensions in category 4 are not related to checkpoints, there were over 27,000 apprehensions in this category that had the “Circumvention App?” box checked. However, these apprehensions have not been included in statistics related to checkpoints because Border Patrol’s reporting to date has focused on events associated with checkpoint landmarks and has not separately analyzed or reported the number of apprehensions for which the “Circumvention App?” box was checked. In doing so, Border Patrol’s reporting does not differentiate between apprehensions that occurred at versus around a checkpoint. Border Patrol officials agreed that the agency’s policies could better differentiate between these areas and how to record data for events that occur in each location. Examining apprehensions specific to an individual checkpoint further illustrates the inconsistencies in data recorded for checkpoints. Figure 11 shows how apprehensions at and around one checkpoint have been recorded using GPS coordinates and landmarks, in relation to the one- half mile radius around the checkpoint. Border Patrol’s methodology for determining the number of apprehensions and seizures at checkpoints—which counts only apprehensions and seizures associated with checkpoint landmarks—may result in overstating or understating apprehensions and seizures that occurred at checkpoints; however, the precise number of apprehensions and seizures that occurred at checkpoints cannot be determined because of the data inconsistencies noted above. For example, Border Patrol’s reporting—such as in the Border Patrol Chief’s testimony or CBP’s fiscal year 2018 budget justification—may overstate apprehensions at checkpoints by including apprehensions in category 3, while it may understate apprehensions by not including some portion, or all, of the apprehensions in category 2. For the 4 fiscal years of data we analyzed, this means that Border Patrol’s methodology for attributing apprehensions to checkpoints would potentially overstate by 1,746 apprehensions (about 0.1 percent of total southwest border apprehensions) and potentially understate by as many as 19,759 apprehensions (about 1.2 percent of total southwest border apprehensions). Although these numbers represent relatively small percentages of total southwest border apprehensions, they are important for the measurement of checkpoint apprehensions given that Border Patrol has generally reported that about 2 percent of apprehensions occur at checkpoints, and in particular, adding 1.2 percentage points to the reported 2 percent would increase the reported contributions of checkpoints by about 50 percent. Although Border Patrol issued guidance in 2009 and 2010 in response to our recommendation, our analysis demonstrates that this guidance does not provide sufficient clarity on how data are to be recorded, and as a result data quality issues have persisted. For example, Border Patrol’s guidance does not indicate what landmark should be used when an agent apprehends an individual who was attempting to circumvent a checkpoint. Additionally, Border Patrol has not provided sufficient oversight of the accuracy, consistency and completeness of checkpoint data since the guidance was issued. In July 2013, Border Patrol issued a memorandum to establish the Checkpoint Program Management Office (CPMO), and the memorandum tasked CPMO with overseeing checkpoint data quality and accuracy, among other things. However, CPMO was not officially formed until the summer of 2016 when we began this review. Officials noted that while Border Patrol staff had been consistently assigned to oversee checkpoint data as a collateral duty, these assignments were not within an officially formed CPMO and there was no centralized oversight of checkpoint data or performance. The Associate Chief responsible for overseeing CPMO told us he had not been aware of the memorandum establishing CPMO until we requested checkpoint policies as part of this review, and he explained that CPMO had not been formally established under his predecessor at the time of the July 2013 memorandum. In late summer 2016, the Associate Chief formally established CPMO with the two Border Patrol agents who were, at the time, assigned part- time to oversee checkpoints. However, the CPMO establishing memo called for two full-time staff members, and one of the staff assigned to CPMO part-time moved to another position within Border Patrol several months later. The first full-time staff person was assigned to CPMO in January 2017. In March 2017, CPMO officials said they agreed with our findings regarding inconsistent recording of checkpoint data, and they said they have drafted a policy to provide additional guidance, including how to distinguish how data are recorded for apprehensions and seizures that occur at the checkpoint versus around the checkpoint. The Assistant Chief for CPMO, in consultation with sector and data analysis officials, has drafted additional guidance for recording apprehensions and seizures data in a manner that differentiates between events that occurred at versus around checkpoints. According to this official, this guidance will be included in a larger update to Border Patrol’s checkpoint policy because the checkpoint policy was last updated in 2003. Border Patrol officials said they expect the updated checkpoint policy with additional data entry guidance and procedures will be in place by March 2018, following Border Patrol and CBP management review and approval and programming changes to Border Patrol’s data systems. Having quality control procedures in place to accurately document apprehensions and seizures that occur at and around checkpoints is important to enable Border Patrol to measure checkpoint effectiveness and to make better deployment decisions about the extent to which circumvention routes should be staffed. Distinguishing between the locations of apprehensions and seizures, relative to checkpoints, would provide more visibility into illegal traffic patterns at and around checkpoints that can be used for staffing and other resource decisions. Until revised internal control practices are in place, including data collection guidance and sufficient oversight of the recording of the data, our 2009 recommendation that Border Patrol establish internal controls for management oversight of the accuracy, consistency, and completeness of checkpoint performance data remains warranted. As part of our regular follow up on implementation of our recommendations, we will monitor Border Patrol’s progress in issuing and implementing the planned update to its checkpoint policy. Almost Half of Seizures that Occurred at Checkpoints Were One Ounce or Less of Marijuana from U.S. Citizens In addition to analyzing where apprehensions and seizures occurred, we analyzed marijuana seizure data to determine how seizures that occurred at checkpoints compared to those that occurred at other locations. As shown in figure 12, out of the 30,449 seizures that occurred at checkpoints, at least 12,214 (40 percent) were 1 ounce or less of marijuana seized from U.S. citizens. In contrast, seizures occurring at non-checkpoint locations were more often higher-quantities seized from aliens. For example, more than three-quarters of marijuana seizures at non-checkpoint locations were of over 50 pounds (25,792 out of 33,477 seizures). (Appendix III includes additional detail on the distribution of marijuana seizures by quantity seized.) Border Patrol officials said that the primary purpose of checkpoints is to enforce immigration laws, but agents at checkpoints are also expected to take action when they incidentally encounter violations of other federal laws. In particular, they noted that when a trained canine alerts agents to the presence of a concealed human or substance the canine was trained to detect, agents are required to respond to the alert. Based on the canine alert, agents do not know until they conduct a search of the vehicle what the canine detected (concealed human or illicit substance) or what quantity of a substance might be present—and therefore, agents cannot determine prior to an inspection whether the occupants of the vehicle are travelling with what would generally be considered a personal use quantity of a substance or whether they are carrying larger quantities potentially with the intent to distribute, dispense, or manufacture. Collecting Additional Data Could Improve Border Patrol’s Existing Efforts to Identify and Respond to Community Concerns Regarding the Defense in Depth Strategy Defense in Depth Strategy’s Effects on Surrounding Communities are Difficult to Quantify, but Collecting Additional Data Could Inform Actions to Address Such Effects Members of state and local law enforcement and business and community groups that we spoke to generally support Border Patrol’s efforts, but some raised concerns about checkpoint operations and the broader defense in depth strategy. Members of all three community groups we met with during our visits to the Rio Grande Valley and Tucson sectors generally supported Border Patrol. Additionally, officials from law enforcement agencies we interviewed generally said they had a positive working relationship with Border Patrol and that Border Patrol has played a role in limiting cross-border illicit activity in their communities. For example, one law enforcement official from the Tucson sector said that the community would be overwhelmed without Border Patrol’s efforts in the area, and another said that without the defense in depth approach, illegal activity would likely be worse, although this latter official noted there can be communication and coordination challenges in working with Border Patrol. Some residents and law enforcement officials we met with in the two sectors we visited said that they support Border Patrol’s use of checkpoints. For example, the leader of one community group said the group’s members viewed checkpoints positively, and members from another group said that some residents in their community believe that their local checkpoint is making the community safer through law enforcement presence. However, Border Patrol’s defense in depth deployment strategy may also result in communities ranging up to 100 miles from the border experiencing effects associated with Border Patrol enforcement actions to interdict illicit cross-border activity. In April 2015, we reported that illicit cross-border activity can negatively affect business and the safety of farms and ranches on or near the border. Although data are limited to support the extent of criminal activity tied to cross-border illegal traffic, available data indicate that cross-border traffic affects areas beyond the immediate border. For example, in fiscal year 2016, 20 percent of all Border Patrol apprehensions and 77 percent of all seizures occurred more than five miles from the border. Therefore, illegal crossers and drug smugglers may sometimes travel near or through communities and private property in areas that are not along the immediate the border, prior to being apprehended by Border Patrol. For example, members of one community group we interviewed said that there are hundreds of illegal crossers and smugglers who attempt to circumvent the local checkpoint by walking through the surrounding ranches. Echoing views from ranchers we interviewed for a December 2012 report, members of one community group we spoke with as part of this review said that they would like to see Border Patrol direct more enforcement efforts at the immediate border to prevent illegal crossers from entering their communities or properties. Officials we interviewed from two sheriffs’ departments in nearby counties said they have heard similar views from residents. Community groups and law enforcement officials we met with as part of this review identified concerns regarding private property damage and public safety resulting from illegal cross border traffic, similar to concerns we have reported in the past. Private Property Damage: Community members have reported damage to private property suspected to have occurred as a result of individuals trying to illegally cross the border or Border Patrol enforcement actions. Border Patrol officials we spoke with in six of nine sectors cited concerns from community residents about illegal crossers and Border Patrol agents traveling on their private property. Additionally, officials from two sheriffs’ departments told us that ranchers in their communities have voiced complaints about damage on their properties resulting from illegal crossers or Border Patrol activity. These concerns are similar to concerns we identified in an April 2015 report, in which we reported that landowners had reported damage to private property—including broken gates, destroyed crops, and injured or lost livestock—as a result of individuals trying to illegally cross the border (see fig. 13). In addition to identifying damage suspected to be caused by illegal crossers, landowners we spoke with as part of that review also reported damage that may have resulted from Border Patrol’s enforcement efforts. We previously reported in April 2015 that some landowners had filed tort claims alleging damage to their property as a result of the conduct of an employee of Border Patrol or any CBP component that was acting within the scope of his or her official duties. Examples of such claims include CBP vehicles crashing through properties and damaging fences, gates, irrigation pipes, and crops. Public Safety: Additionally, according to Border Patrol and local law enforcement officials, illegal entrants and smugglers could pose a public safety risk to communities along the border or further inland. We previously reported in December 2012 that ranchers in the Tucson sector said they were most concerned about safety. Officials from law enforcement agencies that we interviewed as part of this current review said that crime resulting from illicit cross-border activity has affected border communities. In particular, law enforcement officials we spoke with cited drug smuggling (including recruiting juveniles to engage in drug smuggling), home invasions, burglaries, and vandalism. The effects related to public safety and private property associated with Border Patrol’s defense in depth strategy may be felt more acutely in communities near checkpoints; in particular, one of Border Patrol’s stated goals for checkpoints is to deter and disrupt smuggling efforts, and as a result, smuggling traffic may be pushed onto checkpoint circumvention routes, which may pass through these communities. We previously reported in August 2009 that Border Patrol officials acknowledge that this approach can adversely impact communities near checkpoints, and said that sometimes there were not enough agents in place to deter illegal activity or apprehend trespassers in surrounding areas. As noted earlier in this report, this remains true—checkpoint circumvention routes are not always patrolled. We are unable to measure the extent Border Patrol’s defense in depth strategy has affected communities through measures such as crime rates or effects on property values. As part of previous reviews, we have reviewed information related to the impacts of illegal cross-border activity on local communities, including reports of property damage (such as tort claims) and available crime data. As a result, we have previously reported that methodological challenges existed and data were unavailable to substantiate the extent to which illegal border crossings and drug smuggling have affected local communities in terms of public safety and private property damage. In August 2009 we reported that a comparison of community impacts for the time before and after a checkpoint was established would require a complete set of historical data to develop a baseline understanding, before interpreting factors that can change the baseline. However, there are limited data sets for specific geographic areas around checkpoints, with county level data being the smallest possible geographic area, in many cases. For instance, in terms of crime data, officials from one police department in the Tucson sector told us that they did not track criminal activity committed by illegal entrants. In 2011, as part of Border Patrol’s efforts to implement our August 2009 recommendations, Border Patrol requested a study to identify the effects of checkpoints on nearby communities and develop an approach to measure these effects, and this study also noted data limitations that affect conclusions regarding the effects of checkpoints on surrounding communities. Implementing two of our August 2009 recommendations could help Border Patrol collect relevant data to examine the community effects of checkpoint operations specifically and take corresponding actions to respond to ongoing community concerns. In August 2009 we reported that Border Patrol had previously identified performance measures to examine the effect checkpoint operations have on quality of life in the surrounding communities, but the agency was not using these measures. As a result, Border Patrol was hindered in its ability to assess the impact of checkpoints on local communities. We recommended that Border Patrol (1) implement quality of life measures identified by Border Patrol to evaluate the impact that checkpoints have on local communities; and (2) use the information generated from the quality of life measures in conjunction with other relevant factors to inform resource allocations and address identified impacts. Border Patrol agreed with the recommendations but has not yet fully implemented them. In 2010, Border Patrol asked a DHS Center of Excellence, co-led by the University of Arizona and the University of Texas at El Paso, to conduct a study to help address our recommendations. The resulting December 2012 report made several recommendations to Border Patrol on evaluating the impact of checkpoints on local communities using quantitative measures and with maintaining regular contact with the public to elicit opinions on experiences with the checkpoint, both positive and negative. Border Patrol has since reported plans for implementing our recommendations but has revised the estimated completion dates several times. (See appendix I for more information about Border Patrol’s planned actions to address these recommendations.) As discussed later in this report, Border Patrol provides opportunities for members of the community to express concerns related to the defense in depth strategy since our previous review of checkpoint operations in 2009, however, some residents and local law enforcement officials near checkpoints we spoke to for this review remain concerned about the effects checkpoints may have on their communities. Measuring performance, such as quality of life measures related to checkpoints, would give Border Patrol critical information on which to base decisions for improving checkpoint operations. Therefore, we continue to believe that our recommendations remain warranted. Border Patrol Is Taking Steps to Identify and Respond to Community Concerns Border Patrol uses a variety of methods to collect feedback from community members related to the defense in depth strategy. It receives feedback through direct communication and informal relationships, which are facilitated in part by communication and outreach events organized by sector Border Community Liaison (BCL) programs. Border Patrol initiated the BCL program in April 2011 in an effort to enhance Border Patrol’s relationships with landowners and the community as a whole. According to the July 2012 CBP implementation memo, the BCL program’s function and associated positions are intended to enhance CBP’s interaction with communities and provide a fact-based understanding of community views, concerns, and issues as they relate to CBP. According to Border Patrol officials, sector BCL agents interact with members of the local community to address complaints and also introduce the community to how Border Patrol operates so that there is a better understanding and relationship between Border Patrol agents and the surrounding community. Each sector has its own BCL program designed to address complaints and improve the relationship between Border Patrol agents and the surrounding community, and the efforts within each program range from official events to informal communications. Sector and station BCL programs organize official events such as cook-offs, stakeholder events, and open houses where community members learn about Border Patrol’s activities and have the opportunity to share their concerns. As an example of informal communications, Border Patrol officials from one station in the Rio Grande Valley sector told us that agents and officials make an effort to be very approachable to community members, as demonstrated through actions such as the station’s patrol agent in charge providing a personal cell phone number to local residents to facilitate direct communication. In addition, every southwest border sector uses the Compliments and Complaints Management System (CCMS). The CCMS is a computerized system that allows users to log and track complaints or compliments. The CCMS is meant to identify trends and patterns in community comments to better address complaints and compliments, but Border Patrol officials have questioned its usefulness. Following a pilot program, in January 2017, CCMS became a permanent program to all CBP offices that have interaction with the public. Comments can be entered directly by residents or by Border Patrol officials who have received feedback from the community. According to the memo, CBP also standardized the response time for compliments and complaints entered into the system throughout the agency. Agency officials are to send an acknowledgment of receipt within 5 business days and complete responses within 45 days. Officials from six of nine sectors said they generally preferred the less formal methods of interacting with the community, as discussed above, compared to the CCMS. Some of the reasons they identified included that community members often prefer to speak with an agent instead of inputting their concern into a system, very few complaints or compliments are logged into the CCMS by residents, the system is not user friendly, and it is rarely used for data recall. According to a report generated by Border Patrol headquarters, there were 599 comments entered into the CCMS nationwide in calendar year 2016. Of those, 81 were compliments. Border Patrol takes various actions to respond to community concerns it has identified, including considering the input of local stakeholders when making deployment decisions. For example, officials from the Tucson sector told us that agents engage with ranchers who have game cameras on their properties so station officials can consider the flow of illegal entrants or drug smugglers on their properties when making deployment decisions. Moreover, officials from the Rio Grande Valley sector said that sector and station officials take into account population centers when making deployment decisions to attempt to deploy agents in positions to apprehend entrants prior to reaching population centers because once they enter the general population they are more difficult to detect and apprehend. Additionally, community members and Border Patrol officials told us that agents respond to calls of suspected illegal cross-border activity on private lands. Border Patrol has various mechanisms in place for community members to notify agents of suspected activity. For example, one station in the Rio Grande Valley sector created a mobile phone application and released a limited number of licenses for ranchers and landowners to take a picture if they see suspicious activity and send it directly to Border Patrol. Moreover, landowners in the Rio Grande Valley sector told us that Border Patrol has been responsive to calls when something out of the ordinary has been spotted on private land. Agency Comments We provided a draft of this report to the Department of Homeland Security for their review and comment. In its comments, reproduced in appendix IV, DHS provided an update on planned actions to implement the four open recommendations from our August 2009 report. DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. 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) 512-8777 or gamblerr@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: Status of GAO Recommendations Related to Checkpoints In August 2009, we reported on and made recommendations regarding the measurement of checkpoint performance and the impact of checkpoint operations on nearby communities, among other things related to checkpoints. In comments provided on our August 2009 report, the Department of Homeland Security (DHS) concurred with those recommendations. This appendix provides additional detail regarding the status of the recommendations from that report, including two recommendations that U.S. Customs and Border Protection (CBP) has implemented. Recommendation 1: Establish milestones for determining the feasibility of a checkpoint performance model that would allow the Border Patrol to compare apprehensions and seizures to the level of illegal activity passing through the checkpoint undetected. Status: Closed – Implemented In August 2009, we reported that the Border Patrol had developed some useful measures of checkpoint performance, but the agency lacked a model or method that would allow the agency to compare the number of apprehensions and seizures made at the checkpoint to the level of illegal activity passing through the checkpoint undetected. The lack of this information challenged the Border Patrol’s ability to measure checkpoint effectiveness and provide public accountability. In 2010, Border Patrol asked a DHS Center of Excellence to study checkpoint performance, including developing a checkpoint performance model, and the DHS Center of Excellence issued its report in December 2012. In June 2013, Border Patrol reported that the agency had considered the checkpoint performance models proposed by the National Center for Border Security and Immigration—the DHS Center of Excellence—but determined it was not feasible to use the proposed models due to cost prohibitions and other factors. This action was responsive to the intent of our recommendation to study the feasibility of a checkpoint performance model, and this recommendation has been closed as implemented. Recommendation 2: Establish internal controls for management oversight of the accuracy, consistency, and completeness of checkpoint performance data. In August 2009, we reported on inconsistencies in the way agents collected and entered performance data into the checkpoint information system. As a result, data reported in the system were unreliable. In October 2009, Border Patrol issued a memorandum specifying which data fields agents should use to indicate that an enforcement activity occurred at a checkpoint (or on a circumvention route, for apprehensions), and in January 2010 Border Patrol issued an additional memorandum on checkpoint data integrity that further specified definitions for “at the checkpoint” and “circumvention.” In subsequent years, Border Patrol officials reported to us that they were taking steps to develop a redesigned checkpoint information system, implement a data oversight procedure, and provide training, and estimated completion dates were revised several times. In its comments on this report (see app. IV), DHS stated that it expects to issue an updated checkpoint policy, including updates on data entry guidance and oversight to address data integrity, by February 28, 2018. As discussed earlier in this report, data quality issues have persisted, and without established internal controls, the integrity of Border Patrol’s performance and accountability system with regard to checkpoint operations remains uncertain. Recommendation 3: Implement the quality of life measures that have already been identified by the Border Patrol to evaluate the impact that checkpoints have on local communities. Implementing these measures would include identifying appropriate data sources available at the local, state, or federal level, and developing guidance for how data should be collected and used in support of these measures. In August 2009, we reported that Border Patrol had identified some measures to evaluate the impact that checkpoints have on local communities in terms of quality of life, but Border Patrol had not implemented the measures. As a result, the Border Patrol lacked information on how checkpoint operations could affect nearby communities. In October 2009, the Border Patrol reported that it was reevaluating its checkpoint performance measures, including quality of life measures. In December 2012, the DHS Center of Excellence completed a study for CBP on checkpoints. This study made several recommendations to Border Patrol on evaluating the impact of checkpoints on local communities using quantitative measures and with maintaining regular contact with the public to elicit opinions on experiences with the checkpoint, both positive and negative. At the time, the Border Patrol noted it intended to develop quantitative measures on community impact, such as on public safety and quality of life, using information collected in the new checkpoint information system it was planning. Border Patrol also noted that it was considering the budgetary feasibility of (1) conducting a survey of checkpoint travelers to gather detailed information about the community and impact metrics that are of highest importance to the public and (2) implementing an expedited lane for regular and pre-approved travelers. In July 2014, the Border Patrol revised the expected completion date for its actions to address this recommendation to March 2015, noting that it planned to request ideas from the field commanders on what the agency could measure that would accurately depict the impact of checkpoints on the community. In June 2015, Border Patrol revised the expected completion date to September 2015. In September 2016, officials from Border Patrol’s Checkpoint Program Management Office said quality of life measures had not been implemented and they were not aware of any plans to develop and implement such measures. In its comments on this report (see app. IV), DHS stated that it expects to establish performance measures related to community impacts by February 28, 2018. As noted earlier in this report, residents and local law enforcement officials near checkpoints we spoke to for this review remain concerned about the effects checkpoints may have on their communities. Measuring performance, such as quality of life measures related to checkpoints, would give Border Patrol critical information on which to base decisions for improving checkpoint operations. Recommendation 4: Use the information generated from the quality of life measures in conjunction with other relevant factors to inform resource allocations and address identified impacts. In August 2009, we reported that while the Border Patrol’s national strategy cites the importance of assessing the community impact of Border Patrol operations, the implementation of such measures was lacking in terms of checkpoint operations. In October 2009, the Border Patrol reported that once it had completed an upgrade of its existing checkpoint data systems and had reevaluated its checkpoint performance measures, the agency would begin using information garnered by these performance measures to inform future resource allocation decisions. This was originally expected to be completed by September 30, 2010, but due to budgetary and other issues, the checkpoint system upgrades were not yet completed as of June 2013. Border Patrol then reported to us in June 2013 that the redesigned and upgraded checkpoint information system was expected to be implemented in September 2014, but this system has not been developed or implemented, and in September 2016, officials from Border Patrol’s Checkpoint Program Management Office stated that they were not aware of any planned or completed actions to address this recommendation. In its comments on this report (see app. IV), DHS stated that it expects to establish performance measures related to community impacts by February 28, 2018, and that these measures will be used to inform resource allocation decisions. As noted earlier in this report, residents and local law enforcement officials near checkpoints we spoke to for this review remain concerned about the effects checkpoints may have on their communities. Measuring performance, such as quality of life measures related to checkpoints, would give Border Patrol critical information on which to base decisions for improving checkpoint operations. Recommendation 5: Require that current and expected traffic volumes be considered by the Border Patrol when determining the number of inspection lanes at new permanent checkpoints, that traffic studies be conducted and documented, and that these requirements be explicitly documented in Border Patrol checkpoint design guidelines and standards. Status: Closed – Implemented In August 2009, we reported that Border Patrol did not conduct traffic studies when designing three recently constructed checkpoints. As a result, we could not determine if the Border Patrol complied with its checkpoint design guidelines to consider current and future traffic volumes when determining the number of inspection lanes at the three checkpoints. In the absence of documented traffic studies, the Border Patrol could not determine if the number of inspection lanes at each of these checkpoints was consistent with current and projected traffic volumes, or if a different number of lanes would have been more appropriate. On October 28, 2009, the Border Patrol finalized an addendum to the Border Patrol Facilities Design Standard, which requires the Border Patrol to acquire, document, and utilize traffic study data collected by the state Departments of Transportation regarding current and projected traffic volumes on roadways where permanent checkpoints are to be constructed. The traffic studies are to be documented by the Border Patrol and utilized as the baseline requirement to determine the number of inspection lanes at new permanent checkpoints, and therefore this recommendation has been closed as implemented. Recommendation 6: In connection with planning for new or upgraded checkpoints, conduct a workforce planning needs assessment for checkpoint staffing allocations to determine the resources needed to address anticipated levels of illegal activity around the checkpoint. In August 2009, we reported that Border Patrol’s checkpoint strategy to push illegal crossers and smugglers to areas around checkpoints—which could include nearby communities—underscores the need for the Border Patrol to ensure that it deploys sufficient resources and staff to these areas. In October 2009, Border Patrol reported that the agency was evaluating its checkpoint policy regarding the establishment of a new checkpoint or the upgrade of an old checkpoint, and checkpoint policy changes would be finalized by September 30, 2010. Border Patrol also reported that checkpoint system upgrades that capture data on checkpoint performance would help management determine future resource needs at checkpoints. In June 2013, Border Patrol reported that due to budget and other issues, the checkpoint system upgrade had not been completed, and the rewritten checkpoint data protocol had not been approved. In June 2013, Border Patrol reported that as part of the checkpoint study conducted by the DHS Center of Excellence, the Center created checkpoint simulation tools that would help inform resource allocations when determining the number of inspection lanes on current or new checkpoints. The Border Patrol agreed with the utility of such a model, but noted that the Border Patrol would need to purchase modeling software—a cost-prohibitive measure in the current budget environment. In the interim, Border Patrol is developing a formal workforce staffing model to identify staffing strategies for all Border Patrol duties. Border Patrol expected to implement this model for checkpoint staffing assignments in fiscal year 2014. However, in July 2014, Border Patrol reported that the Border Patrol’s Personnel Requirements Determination project was still being developed and that process would inform staffing at checkpoints, although the project is not specific to checkpoint staffing needs. As a result, Border Patrol revised its expected implementation date to September 2015. However, according to the Border Patrol official overseeing the project, subsequent changes in leadership and factors unrelated to checkpoints have affected the overall time frames for the Personnel Requirements Determination project. In September 2016, Border Patrol officials reported that the agency’s Personnel Requirements Determination process would not provide information on staffing needs until fiscal year 2017 or 2018. In its comments on this report (see app. IV), DHS stated that it expects to use information from the Personnel Requirements Determination process to determine staffing requirements and address our recommendation by September 30, 2019. Given that local residents continue to express concerns about the impacts of checkpoints on communities, conducting a needs assessment when planning for a new or upgraded checkpoint could help better ensure that officials consider the potential impact of the checkpoint on the community and plan for a sufficient number of agents and resources. Appendix II: Trends in Southwest Border Apprehensions, Fiscal Years 2012 through 2016 This appendix contains additional detail about trends in southwest border apprehensions from fiscal years 2012 through 2016, including trends in the: number of apprehensions by sector, distribution of apprehensions by sector and by distance from the border, distribution of apprehensions by sector and by proximity to checkpoints. Apprehensions by Sector From fiscal years 2012 through 2016, Border Patrol apprehended a total of almost 2 million individuals in southwest border sectors. The number of apprehensions over this period rose to a peak in fiscal year 2014, declined in fiscal year 2015, and rose again in fiscal year 2016. Over this 5-year period, about two-thirds of the apprehensions occurred in the Rio Grande Valley and Tucson sectors (42 percent and 23 percent, respectively), and the Rio Grande Valley sector accounted for an increasing percentage of total southwest border apprehensions over this time period (from 27 percent of all southwest border apprehensions in fiscal year 2012 to 46 percent of apprehensions in fiscal year 2016). As shown in figure 14, apprehensions also increased in five other sectors, but the other sectors represented consistently smaller percentages of all apprehensions over the 5-year period. The Secretary of the Department of Homeland Security stated during testimony before the Senate Committee on Homeland Security and Governmental Affairs that apprehensions have dropped sharply since the beginning of 2017. He stated, for example, that Border Patrol apprehended approximately 1,000 unaccompanied alien children in March 2017 (a time of year he noted when apprehensions generally are higher) compared to over 7,000 unaccompanied alien children in December 2016. Distribution of Apprehensions by Sector and by Distance from the Border As noted in this report, apprehensions overall for the southwest border increasingly occurred closer to the border. Table 6 shows the distribution for each sector of apprehensions by distance from the border during fiscal years 2012 through 2016. Apprehensions at Checkpoints by Sector For fiscal years 2013 through 2016, the percent of apprehensions occurring at checkpoints varied by sector. We assigned each apprehension into one of four location categories based on whether the GPS coordinates for the event occurred close enough to the GPS coordinates for a checkpoint to be considered “at a checkpoint” and whether the event’s landmark corresponds to the nearest checkpoint landmark. Table 7 shows the distribution of apprehensions for each sector by location category during fiscal years 2013 through 2016, and the extent to which apprehensions were identified as checkpoint circumventions based on use of the “Circumvention App?” checkbox. Differences in sector apprehensions at checkpoints could depend in part on the number of checkpoints within a sector, the amount of time checkpoints are operational, and the extent to which sectors consistently apply guidance on how to enter data for apprehensions that are related to checkpoint operations. Appendix III: Trends in Southwest Border Seizures, Fiscal Years 2012 through 2016 This appendix contains additional detail about trends in southwest border seizures from fiscal years 2012 through 2016, including trends in the: number of seizures by type of contraband seized, number of seizures by sector, distribution of seizures by sector and by distance from the border, seizures related to Border Patrol checkpoints each available year by sector, and marijuana seizures at checkpoints by quantity seized. Seizures by Type of Contraband Seized Border Patrol seized almost 90,000 prohibited items in southwest border sectors from fiscal year 2012 through fiscal year 2016. Most of these seizures (92 percent) were narcotics, and 87 percent of narcotics seizures were marijuana. The remaining seizures were of firearms, ammunition, currency, or other property. As shown in table 8, the number of seizures on the southwest border generally decreased from fiscal year 2012 to fiscal year 2016, with the exceptions of slight rises in the amount of methamphetamines and heroin seized during this period. Seizures by Sector The greatest number of seizures during the 5 fiscal years occurred in the Tucson, Big Bend, and Rio Grande Valley sectors (34, 19, and 16 percent respectively). Collectively, these three sectors accounted for 69 percent of southwest border seizures from fiscal years 2012 through 2016. For all southwest border sectors except the Big Bend sector, the numbers of seizures decreased during this 5-year period. For example, the number of seizures in the Tucson sector decreased 12 percent, and the number of seizures in the Rio Grande Valley sector decreased 36 percent during this period. The number of seizures in the Big Bend sector increased 39 percent from fiscal years 2012 through 2016. Figure 15 shows the number of seizures from fiscal years 2012 through 2016 by sector. Distribution of Seizures by Sector and by Distance from the Border As noted in this report, the location where seizures occurred remained relatively stable from fiscal year 2012 through fiscal year 2016, with the majority of seizures occurring 10 miles or more from the southwest border. Table 9 shows the distribution of seizures for each sector by distance from the border during fiscal years 2012 through 2016. Seizures at Checkpoints by Sector For fiscal years 2013 through 2016, the percent of seizures occurring at checkpoints varied by sector. We assigned each seizure into one of four location categories based on whether the GPS coordinates for the event occurred close enough to the GPS coordinates for a checkpoint to be considered “at a checkpoint” and whether the event’s landmark corresponds to the nearest checkpoint landmark. Table 10 shows the distribution of seizures for each sector by checkpoint location category during fiscal years 2013 through 2016. Differences in sector seizures at checkpoints could depend in part on the number of checkpoints within a sector, the percent of time checkpoints are operational, and the extent to which sectors consistently apply guidance on how to enter data for seizures that are related to checkpoint operations. Marijuana Seizures by Quantity Seized Most southwest border seizures were narcotics, and most narcotics seizures were marijuana. As noted in this report, marijuana seizures at checkpoints were often for smaller quantities compared to marijuana seizures at non-checkpoint locations. Table 11 shows that about 67 percent of marijuana seizures at checkpoints were for quantities less than or equal to 1 ounce, whereas the quantities seized at non-checkpoint locations were often larger. For example, more than three-quarters of marijuana seizures at non-checkpoint locations were of over 50 pounds (25,792 out of 33,477 seizures). Appendix IV: Comments from the Department of Homeland Security Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Adam Hoffman (Assistant Director), David Alexander, Alana Finley, Eric Hauswirth, Monica Kelly, John Mingus, Sasan J. “Jon” Najmi, Christine San, Adam Vogt, and Tomas Wind made significant contributions to this report.

Why GAO Did This Study The Border Patrol has primary responsibility for securing the border between U.S. ports of entry. On the southwest border, Border Patrol deploys agents along the immediate border and in areas up to 100 miles from the border as part of a layered approach known as the defense in depth strategy. Immigration checkpoints, generally located between 25 and 100 miles from the border, are one element of this strategy. GAO was asked to review the defense in depth strategy. This report addresses: (1) the factors Border Patrol considers in deploying agents, (2) where apprehensions of illegal crossers and seizures of contraband are occurring, and (3) what data show about how checkpoints contribute to apprehensions and seizures, among other objectives. To answer these questions, GAO analyzed Border Patrol documents and data on apprehensions and seizures from fiscal year 2012 through 2016, visited two southwest border sectors, interviewed officials from the other seven southwest border sectors and Border Patrol headquarters, and reviewed prior GAO work on border security. What GAO Found According to U.S. Border Patrol (Border Patrol), agent deployment decisions are based on factors such as staffing levels and the availability of agents, among other things. As of May 2017, nationwide, Border Patrol had about 1,900 fewer agents than authorized, which officials cited as a key challenge for optimal agent deployment. In recent years, attrition has exceeded hiring (an average of 904 agents compared to 523 agents) according to officials. GAO analyzed scheduling data, including time that agents were scheduled to be not working (for example, off duty or on leave) because these activities can affect deployment decisions by reducing the number of agents available on a particular day. GAO found that agents were available for deployment about 43 percent of the time. From fiscal years 2012 through 2016, Border Patrol apprehended a total of almost 2 million individuals along the southwest border, and these apprehensions increasingly occurred closer to the border, with 42 percent of apprehensions occurring one-half mile or less from the border in fiscal year 2016 compared to 24 percent in fiscal year 2012. One driver for this change is the increasing number of apprehensions of children, whom officials report may turn themselves in to Border Patrol without attempting to evade detection. Meanwhile, over this period, the locations where seizures of contraband occurred remained roughly the same, with the majority occurring 10 or more miles from the border. For fiscal years 2013 through 2016, GAO found that 2 percent of apprehensions and 43 percent of seizures occurred at checkpoints; however, determining the extent to which apprehensions and seizures are attributable to checkpoints is difficult because of long-standing data issues. More apprehensions and seizures may be attributable to checkpoints, but Border Patrol's reporting does not distinguish apprehensions that occurred “at” versus “around” a checkpoint. Border Patrol is drafting guidance to clarify how checkpoint apprehension and seizure data are to be recorded that would respond to a 2009 GAO recommendation to improve the internal controls for management oversight of checkpoint data. GAO also determined that seizures at checkpoints differed from those at other locations. Specifically, 40 percent of seizures at checkpoints were 1 ounce or less of marijuana from U.S. citizens. In contrast, seizures at other locations were more often higher quantities of marijuana seized from aliens. What GAO Recommends GAO is not making any new recommendations at this time but has previously recommended that Border Patrol establish internal controls for checkpoint data, among other things. DHS concurred with this recommendation and has taken some steps to improve the quality of checkpoint data, but additional actions are needed to fully implement the recommendation.

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Background According to State and USAID, the Northern Triangle countries of El Salvador, Guatemala, and Honduras (see fig. 1) have a history of police corruption and gross violations of human rights. For example, State’s Guatemala 2016 Human Rights Report describes human rights abuses by the police, including arbitrary and unlawful killings, abuse, and mistreatment. Agencies also described a number of factors that challenge police forces in the Northern Triangle, including a culture of impunity and limited partner nation capacity to address these challenges. Many U.S. agencies implement assistance to civilian police in El Salvador, Guatemala, and Honduras, with State’s INL being the primary source of funding. Federal law generally prohibits the use of foreign assistance funds for police training, but Congress provided several exceptions including for training in internationally recognized standards of human rights, the rule of law, anti-corruption, and the promotion of civilian police roles that support democracy. Accordingly, as part of USAID’s broader security sector reform assistance efforts, the agency provides some police training, which often includes training on community policing practices. DOD generally is not authorized to train civilian police and focuses on building the capacity of its military and other national security counterparts. However, under its authority to build the capacity of foreign security forces for various purposes, DOD has provided a limited amount of training for civilian police and military units that provide civilian security in El Salvador, Guatemala, and Honduras. For example, several U.S. agencies, including DOD, have delivered training to the Joint Group Cuscatlán in El Salvador, an interagency task force that includes police; and to the Special Response Intelligence and Security Group in Honduras (commonly called TIGRES, its acronym in Spanish), which, according to State, is an elite, vetted unit within the Honduran National Police, specializing in high-risk tactics. State, USAID, and DOD deliver training in a variety of ways, including through the agencies’ own subject matter experts, interagency agreements with other U.S. agencies, and contracts with nongovernment implementing partners. For example, USAID has contracts and cooperative agreements with corporations, universities, and nongovernmental organizations to implement assistance projects that include training of police in El Salvador, Guatemala, and Honduras. State’s INL uses contracts to procure the services of nongovernment implementing partners and interagency agreements to partner with several other U.S. government agencies and components, including DHS and DOJ, to implement police assistance and training. State’s ILEA program also funds a network of police training academies, including one located in San Salvador, El Salvador (see fig. 2). Agencies Have Established Objectives and Delivered Training to Professionalize Police but Have Not Consistently Done So Related to Respect for Human Rights Agencies Have Established Training Objectives to Professionalize Police and Have Delivered Such Training Global, regional, and country-specific strategies outlining U.S. policy in El Salvador, Guatemala, and Honduras all include objectives to professionalize police. For example, the 2017 National Security Strategy of the United States of America includes an objective to support local efforts to professionalize police in the Western Hemisphere. The U.S. Strategy for Central America—a primary document outlining U.S. policy in El Salvador, Guatemala, and Honduras—also includes an objective specifically to “professionalize civilian police.” In addition, government- wide Integrated Country Strategies outlining U.S. goals for fiscal year 2014 through 2017 efforts in El Salvador, Guatemala, and Honduras include police professionalization objectives. For example, the Integrated Country Strategy for Guatemala for fiscal years 2016 and 2017 includes an objective to strengthen professionalism through training for law enforcement. Consistent with these objectives, DOD, State, and USAID have planned and delivered training aimed at professionalizing police in El Salvador, Guatemala, and Honduras. First, while DOD’s primary responsibility is to train its military counterparts, DOD country campaign plans for each of the three Northern Triangle countries include tasks related to professionalizing security forces, which would pertain to police they may train. For example, the plan for Guatemala for fiscal years 2016 and 2017 includes conducting professional development courses to improve skills to enhance partner nation security forces. During fiscal years 2014 through 2017, DOD delivered training to security forces, including a limited number of police participants, and officials told us that all DOD training delivered to security forces was intended to professionalize those forces. Second, our analysis of project documents associated with 22 State and USAID police assistance efforts in El Salvador, Guatemala, and Honduras implemented during fiscal years 2014 through 2017 found that 21 of the projects included objectives to professionalize police. For example, agreements between the DHS’s U.S. Customs and Border Protection and State’s INL for each of the three Northern Triangle countries have an objective to assist in the development of professional border security through police training. Similarly, USAID officials noted the police training incorporated in their broader assistance efforts consistently includes elements to professionalize those forces, and we found examples of such training incorporated in documents for each of the 8 USAID projects we reviewed. In line with these objectives, State and USAID implementing partners delivered training to professionalize police from all three Northern Triangle countries. For example, DOJ’s Drug Enforcement Administration delivered tactical training on the use of firearms to police in El Salvador (see fig. 3). Agencies Have Established Few Police Training Objectives to Promote Respect for Human Rights and Vary in the Extent to Which They Have Delivered Such Training Agencies have established few objectives to provide human rights training to police in El Salvador, Guatemala, and Honduras either in government-wide strategies for the countries or in police assistance project work plans. Federal standards for internal control state that management should set objectives or other internal control mechanisms to meet an entity’s mission, strategic plan, and goals. In the case of police training, global, regional, and country-specific strategies note the importance of a professional police force that respects human rights, and some cite risks associated with police forces lacking these attributes. For example, U.S. national security strategies associated with fiscal years 2014 through 2017 state that respect for human rights is an important aspect of U.S. national security strategy. At the regional level, the U.S. Strategy for Central America states that all security cooperation will emphasize respect for human rights. Further, the government-wide Integrated Country Strategies for El Salvador, Guatemala, and Honduras for fiscal years 2014 through 2017 emphasize the importance of promoting respect for human rights. Despite the consistent, government- wide emphasis on the importance of promoting respect for human rights, government-wide strategies and police assistance project documents include few objectives specifically to provide human rights training to police in El Salvador, Guatemala, and Honduras. First, government-wide country strategies contain few objectives to provide human rights training to police. Of the three current government- wide Integrated Country Strategies for El Salvador, Guatemala, and Honduras, only the document for El Salvador contains an objective to provide human rights training to police (see table 1). Officials from INL, the State bureau responsible for achieving the human rights police training objective for El Salvador, noted that efforts related to this objective have focused on institutionalizing human rights training through the country’s police academy. State officials did not know why the strategy for Honduras for fiscal years 2016 and 2017 lacked such an objective while the strategy for fiscal years 2014 through 2016 included one. Similarly, officials did not know if the officials who drafted the Integrated Country Strategy for Guatemala for fiscal years 2016 and 2017 had considered including an objective to train police in human rights. Second, police assistance project documents also vary in the extent to which they include objectives or other internal control mechanisms to ensure human rights content is incorporated in police training. Further, agencies also vary in the extent to which they included respect for human rights in police training delivered during fiscal years 2014 through 2017. Department of Defense (DOD) DOD has not established specific objectives to train police on human rights, but internal control mechanisms, such as written policies, have helped ensure that training DOD delivers to police consistently incorporates content on respect for human rights, according to agency officials. As mentioned previously, DOD primarily provides training for partner nation militaries and national security forces and does not have strategic objectives specific to training civilian police. Nonetheless, the U.S. Southern Command (SOUTHCOM)—whose area of responsibility includes El Salvador, Guatemala, and Honduras—uses a written policy to require that all SOUTHCOM-sponsored operational and intelligence training provided to security forces contain a human rights component. Further, in fiscal year 2017, DOD’s Global Train and Equip Program consolidated some types of assistance DOD had previously used to provide training for foreign security forces in El Salvador, Guatemala, and Honduras. The legal authority for this program requires that projects executed under the authority include elements that promote observance of and respect for the law of armed conflict, human rights and fundamental freedoms, the rule of law, and civilian control of the military. DOD officials explained that based on these requirements, human rights training was either imbedded in or provided as a component of all DOD training delivered to security forces, which they stated generally focused on operational or tactical topics. We reviewed agendas for training that DOD officials identified as having included police participants, and found such content. For example, the agenda for a 4.5-day training on the legal aspects of combatting terrorism delivered by DOD’s Defense Institute of International Legal Studies to Salvadoran security force participants, among whom were 12 civilian police, included at least 5 hours of training on human rights topics such as international law and the proper use of force. U.S. Agency for International Development (USAID) While USAID has established few specific objectives or other internal control mechanisms to include human rights content in police training, according to USAID officials, training delivered to police in El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017 included content on respect for human rights. Our analysis of project documents related to the eight USAID projects that officials identified as including police assistance in fiscal years 2014 through 2017 found that two projects included objectives to provide police training specifically on human rights. For example, the USAID-funded Rights and Dignity Project for El Salvador included an objective to provide human rights training to several security sector entities, including the country’s national police. For a third project, USAID used an internal control mechanism to ensure human rights related content was included in police training. In this instance, the terms and conditions of USAID’s cooperative agreement included technical direction to the implementer that substantive instruction should address issues of gender-based violence, a human rights concern pertinent in the recipient countries. The remaining five USAID projects included no objectives or other internal control mechanisms to ensure that human rights content was incorporated. USAID officials explained that project documents did not include specific objectives to provide police training on respect for human rights because USAID projects generally have broader goals that are not specific to training police. Despite having few specific objectives or other internal control mechanisms intended to ensure that police training includes human rights content, USAID officials told us that USAID-funded police training delivered in fiscal years 2014 through 2017 consistently included such content. For example, according to these officials, training on community policing constituted a significant portion of police-related assistance in El Salvador, Guatemala, and Honduras, and USAID’s civilian policing policy guidance identifies respect for human rights as a core component of its community policing curriculum. Further, USAID officials posted in El Salvador, Guatemala, and Honduras, noted that police training delivered in each country incorporated human rights precepts. For example, in Honduras, USAID officials said the agency’s efforts included training police on human rights issues specifically to improve police engagement with vulnerable populations such as women and members of the lesbian, gay, bisexual, and transgender community. In addition to the information provided by USAID officials we spoke with, we reviewed reports from USAID’s implementing partners that contained information about police training delivered in fiscal years 2014 through 2017, some of which noted content related to human rights. For example, one implementing partner reported on providing training that included content on human rights, ethics, and the proper use of force. USAID officials told us that the decision to include training on respect for human rights is based on a series of factors, including USAID staff discretion, and noted that an internal control mechanism would help ensure that officials consistently consider the extent to which content related to respect for human rights would be appropriate to include in police training. Department of State (State) State has not established specific objectives or other internal control mechanisms to ensure police training incorporates content promoting respect for human rights. We reviewed documents related to 14 INL- funded projects for El Salvador, Guatemala, and Honduras that officials identified as including assistance for police and that were implemented in fiscal years 2014 through 2017. None of the project documents we reviewed for the 14 INL-funded projects included police training objectives or other internal control mechanisms related to human rights. Officials explained that they do not have specific objectives to provide training on respect for human rights because they have designed objectives with a broader focus, such as to reduce insecurity and corruption. However, they agreed that establishing internal control mechanisms specific to human rights could help ensure training includes such content as appropriate. Although State has not established objectives or other internal control mechanisms to ensure that human rights content is included in police training, State officials told us that some INL-funded police training includes such content. For example, the ILEA program offers training that includes human rights content, such as its Human Rights course. However, ILEA and other INL-funded training implementers also offer training of a technical nature, such as first responder training and crime scene management, which may not warrant inclusion of human rights content. Officials also explained that because training content is developed and maintained by INL’s implementing partners, INL could not readily provide detailed information on the content of the training delivered to police. These officials said that the implementing partners, such as ILEA and other U.S. agencies, could provide more specific information on the content of INL-funded training. Our analysis of ILEA training delivered to police from El Salvador, Guatemala, and Honduras during fiscal years 2015 through 2017 found that 84 of 189 courses (or 44 percent) focused on or included content related to human rights. For example, the ILEA Human Rights course included content on fundamental human rights and relevant issues and challenges in participants’ countries. The ILEA Human Trafficking and Child Exploitation course included human rights content related to minority rights and vulnerable populations. Officials explained that some training, such as courses on crime scene management and other courses on topics of a technical nature, may not warrant the inclusion of content related to human rights. Absent objectives from State to deliver training to promote respect for human rights, officials from 10 key DHS and DOJ offices that implement INL-funded police training noted various extents to which respect for human rights is included in police training they deliver. For example, officials from DOJ’s Bureau of Alcohol, Tobacco, Firearms, and Explosives noted that they have delivered training on topics such as post- blast investigations and the eTrace firearms tracing system that does not warrant the inclusion of content related to respect for human rights. Officials from DHS’s U.S. Customs and Border Protection noted that police training they deliver, such as on conducting highway checkpoints, does not specifically address respect for human rights but contains best practices grounded in respect for human rights. Officials from 1 of the 10 offices we contacted—DOJ’s International Criminal Investigative Training Assistance Program—noted that all INL-funded police training that it delivered included a human rights component. While there is no requirement that all State- and USAID-funded police training include human rights content, these agencies consistently emphasize the importance of building police and other security forces that respect human rights. By establishing specific objectives in government- wide strategies or project-specific work plans or other internal control mechanisms, such as written policies, State and USAID could help ensure that police training incorporates human rights content, or continues to do so, as appropriate. Further, without such objectives or internal control mechanisms, it may be difficult for these agencies to account for the extent to which implementing partners include human rights content or to assess progress being made with respect to partner nation police forces’ respect for human rights—a key goal of U.S. strategy in Central America. Agencies Collect Some Information on the Number of Police Trained, but State Lacks Readily Available, Reliable Data on This Indicator DOD and USAID Have Collected Some Information on the Number of Police Trained While DOD and USAID training for recipients in the Northern Triangle may include police participants, police training is not a primary element of DOD and USAID assistance in El Salvador, Guatemala, and Honduras. Neither agency collects data in relation to a specific indicator on police training. Nonetheless, both agencies gather some information regarding civilian police they have trained. DOD’s primary security assistance objectives in El Salvador, Guatemala, and Honduras pertain to partner nation militaries; thus the agency does not collect data in relation to specific police training indicators. Nevertheless, information on training participants from civilian institutions such as police forces is available, according to DOD officials. For example, DOD officials identified civilian police participants from El Salvador and Guatemala who participated in DOD’s Defense Institute of International Legal Studies training events during fiscal year 2013. Further, the Foreign Military Training report tracks DOD training and includes participants’ units, which can be used to identify police and other civilian trainees. For instance, the report for fiscal years 2014 and 2015 identifies a 3-month counterdrug course delivered in fiscal year 2014 to 200 members of the elite Honduran police unit, the TIGRES. DOD also included police participants in courses primarily attended by military officials. For example, the report for fiscal years 2016 and 2017 indicated 3 members of the Salvadoran National Police attended a fiscal year 2016 course titled “Countering Transnational Threats in the Americas,” along with at least 20 military officials. USAID’s assistance in El Salvador, Guatemala, and Honduras consists of broader security sector reform efforts that include, but do not focus on, police training. Hence, USAID does not have indicators to specifically track police training. Consequently, officials explained that the level of detail that implementing partners reported on police training would vary project by project and would most likely be found in project-level reporting submitted by implementing partners. We reviewed quarterly and annual reports for USAID projects we included in our analysis and found examples of various levels of detail regarding the number of police trained. For example: In reporting on efforts to improve security in Honduras by increasing the capacity of community members and police, the implementing partner of USAID’s Convive! project noted that they had delivered training on community policing to 447 officers from April 2016 to June 2017. The implementing partner of USAID’s Security and Justice Sector Reform project in Guatemala reported holding workshops to build investigators’ capacity to gather information, write reports, and plan operations in a way that respects human rights, but the implementing partners’ reports did not specify the number of participants in those workshops. USAID’s implementing partner for its Justice Sector Strengthening project in El Salvador submitted a report on activities during October through December 2017 noting that they had (1) trained 150 officers in the fundamentals of community policing and (2) supported workshops on human rights, ethics, and the proper use of force for 113 officers. State Lacks Readily Available, Reliable Data on the Total Number of Police Trained State is responsible for tracking progress toward a key indicator related to training police in El Salvador, Guatemala, and Honduras. Objective 3.1 of the U.S. Strategy for Central America is to “Professionalize Civilian Police,” and a related indicator is the “number and percentage of civilian police trained by INL.” However, INL officials in Washington, D.C., told us that while they collect data for certain types of police training, such as training provided through the ILEA program, they do not have reliable information readily available on the total number of police trained through INL-funded projects. INL collects some information on the number of police trained through efforts that it funds. For instance, officials from INL’s ILEA program were readily able to provide us with data showing that the program had provided 252 training courses to more than 1,600 police participants from El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017 (see table 2). In response to our request for information about INL’s fiscal year 2014 through 2017 police training efforts delivered through implementing partners other than ILEA, INL officials told us that they did not have readily available data on the number of police trained in El Salvador, Guatemala, and Honduras. They noted that they could ask INL staff at the U.S. embassies in those countries to manually compile data related to fiscal year 2017 training events, but that it would take officials months to produce similar data for prior fiscal years. After we narrowed our data request to fiscal year 2017 training events only, data we received in April 2018 from the embassies indicated that about 8,400 police—about 3,000 from El Salvador, 4,600 from Guatemala, and 800 from Honduras—received training from ILEA, the Colombian National Police Training program, U.S. agency trainers, and other INL-funded implementing partners. However, our analysis found that the data State provided were unreliable in that they did not include training delivered by some implementing partners or align with other training data provided to us by implementing partners. For example: First, fiscal year 2017 data from INL in El Salvador included INL- funded training delivered by Colombian police and two nongovernment implementing partners but no training delivered by U.S. government implementing partners. However, State and DOJ officials in Washington, D.C., told us that DOJ’s Drug Enforcement Administration and Federal Bureau of Investigation had delivered INL-funded courses to Salvadoran police during fiscal year 2017. Second, INL officials at the U.S. embassy in Guatemala told us that the training data they provided excluded training delivered by DOJ’s Federal Bureau of Investigation and the Miami-Dade Police Department. These officials assured us that more complete data associated with additional police training activities did exist, but they stated that they did not include these data because doing so would have required them to collect and compile data from several different sources—a difficult and time-consuming effort. Third, data from INL officials at the U.S. embassy in Honduras were similarly unreliable in that they did not align with training data we collected from implementing partners. For example, embassy data indicated there were 6 police participants of a training provided by DOJ’s Drug Enforcement Administration in Honduras, but DOJ reported that 34 Honduran police participated in the same training. Fourth, data from all three embassies included information about ILEA training that did not align with the data we received directly from the ILEA program. Officials from the U.S. embassy in Guatemala acknowledged that the ILEA data they had provided to us were likely unreliable. Officials from the ILEA program noted that they provide data on the number of police trained directly to headquarters INL officials who may have a need for such information. INL officials at the U.S. embassies in the Northern Triangle agreed the fiscal year 2017 data they provided to us may be unreliable in that the data are incomplete and may be inconsistent with data available from implementing partners. Despite acknowledging the information they provided had problems with reliability, INL officials told us that they would use a similar process to compile data for reporting progress related to the U.S. Strategy for Central America indicator on the number and percentage of civilian police trained by INL. In May 2018, State and USAID issued the first report to Congress on results of that strategy, which included data on the number of civilian police from El Salvador, Guatemala, and Honduras that INL trained during fiscal year 2017. Although INL officials told us that they used the same process to provide data to us in April 2018 and to compile data for the May 2018 report, we found the two sets of data differed. INL officials explained that these discrepancies were because State included training delivered to additional types of police and by more training implementers in its May 2018 report than they included in the data provided to us in April 2018. Despite identifying reasons for these discrepancies, INL officials acknowledged their data collection process is decentralized and agreed that improvements could be made in the availability and reliability of the data on the number of police trained. Moreover, INL noted challenges collecting these data. Specifically: INL officials from U.S. embassies in the Northern Triangle responsible for collecting police training data noted that a large number of implementing partners deliver training, which makes collecting data more difficult. These officials told us they are beginning to use a smaller number of institutions, such as local police academies, where implementing partners deliver INL- funded training. Officials believe this change has helped improve the reliability of their data on police training because a greater portion of the training is delivered through a small number of institutions, making it easier for implementing partners to track participation. However, the officials also noted that processes such as reviewing travel orders to find U.S. trainers who had visited the country and requesting data from individual implementing partners are still routinely employed to compile training data when such data are requested. INL officials in Washington, D.C., where police training data are aggregated for reporting purposes, told us that it is difficult to compile reliable information in a timely manner. This is because embassies use unique processes and systems to collect information on police training events and the data collected are not systematically consolidated within the individual embassies or centrally at INL headquarters. Further, they explained that following the establishment of the U.S. Strategy for Central America State received increased funding for police training efforts, particularly in fiscal year 2016. Although they used some of these funds to provide more training, they told us that INL was not fully prepared to implement proper internal control mechanisms to help ensure the collection of reliable data. According to these officials, this shortcoming was exacerbated by a worldwide hiring freeze for State that precluded INL from employing additional staff at the affected embassies to assist with data collection and analysis. INL officials stated that they recognize that effective data collection is a necessary element of high quality monitoring and evaluation. For that reason, in September 2017, the INL office for Western Hemisphere Programs contracted a private firm to conduct data collection and develop a data management system for INL efforts throughout the hemisphere, including those related to police training. INL officials told us they intend to extend the contract for the optional second year and are considering the potential need to procure additional contractor services to continue the effort after that. INL officials said that the contractors have made some progress toward the goals set forth in the contract but acknowledged that it is early in the process and that data reliability challenges remain. For example, according to agency officials, in June 2018, contractors were still developing a broad set of indicators related to INL efforts in the Western Hemisphere and had begun the process of collecting data related to some of them in June 2018. Further, the contractors reported that as of March 2018 they had yet to build a data management system or produce training materials and reporting templates for data collection. Readily available and reliable data allow managers to make informed decisions and evaluate an entity’s performance. Without such information, INL cannot accurately assess the number of police trained in the Northern Triangle—a key indicator in the U.S. Strategy for Central America. Further, it may be difficult to fully assess the extent to which training is having the desired effect. Agencies Have Planned and Undertaken Various Actions to Support the Ability of Partner Nations to Sustain Police Training, Including for Human Rights State, USAID, and DOD have established plans and taken action to support the ability of partner nations to sustain police training, including training on promoting respect for human rights. INL’s Sustainability Guide defines sustainability as the ability of host-country partners and beneficiaries to take complete responsibility for the foreign assistance programming, and maintain or improve program outcomes and impacts beyond the life of the program and U.S. government funding. Government-wide and funding agency guidance discusses the importance of sustainability for police assistance. According to Presidential Policy Directive 23 on Security Sector Assistance, a principal goal is to help partner nations build sustainable capacity to address common security challenges. Guidance from agencies that fund police training—including State, USAID, and DOD—also stresses the importance of sustainability in assistance for police. For example, State’s INL Guide to Police Assistance notes that police assistance projects should emphasize sustainable, institutional capacity building to achieve maximum effect. In line with such guidance, country-level and agency strategic and project documents have established objectives related to sustaining police training. For example, the Integrated Country Strategy for Guatemala for fiscal years 2014 through 2016 has an objective to assist the government in establishing, training, and maintaining anti-gang investigative units. Agency police training project documents also address sustainability. For example, the interagency agreement between INL and DHS’s U.S. Customs and Border Protection to enhance border security and build capacity in Honduras aims to create a trained law enforcement unit that is sustained by local resources. To enhance the sustainability of police training programs, agency officials identified various activities they undertake, including the following: Training-the-trainer. State’s INL Guide to Police Assistance states that train-the-trainer models can create a sustainable training program, and officials from multiple agencies told us that they use train-the-trainer programs to sustain police training. For example, the INL-funded Gang Resistance Education and Training program is a regional training program that trains police officers to teach children and young adults to resist the pressures to join gangs or engage in other risky behaviors. According to INL, this police training program has certified over 1,171 regional police officers as teachers and taught more than 211,000 at-risk youth in Central America. Developing policy or guidance. Officials from USAID stated that helping partner nations develop policy or guidance for law enforcement can help strengthen institutions and make police training more sustainable. For example, a USAID project in El Salvador supported the development of a new use-of-force policy that was adopted by the national police. Further, USAID supported the dissemination of the new policy by distributing 10,000 copies, training police instructors who subsequently taught the policy to other officers, and holding workshops on human rights, ethics, and the proper use of force. Supporting police academies. The ability of partner nations to incorporate and institutionalize training in their own police academies is among the most significant determinants of sustainability, according to U.S. officials from several agencies. For example, State officials said they try to incorporate curriculum from U.S. training into the law enforcement academies’ training curriculum in partner nations. They said doing so has a more lasting effect than individual training events and leads to the host government paying for the training going forward. In El Salvador, USAID developed community policing training in conjunction with the civilian national police that, according to officials, is now administered to every new police officer in the country at the country’s National Academy of Public Security (see fig. 4). At the same institution, INL supported the development of online training that includes a human rights component. According to INL officials, the Salvadoran police were planning to make the online training a yearly continuing education requirement for the entire police force. Continuing engagement. Officials from various agencies told us that continuing engagement with participants helps sustain police training, whether through additional training, on-the-job mentorship, or service requirements for receiving training. For example, the ILEA academy in San Salvador provides a list of alumni to the U.S. Embassy San Salvador and encourages implementing partners to follow up with these alumni, according to officials. The San Salvador academy also plans to develop an online alumni portal for engaging with past participants in order to sustain training. Building relationships. Building relationships—both within and across countries—between partners’ law enforcement agencies and rule of law institutions can help sustain police training, according to officials from multiple agencies. For example, in 2013, DOD’s Defense Institute of International Legal Studies conducted border security training in El Salvador that included military, police, and civilian officials. The training focused on improving El Salvador’s interagency cooperation and enhancing respect for human rights. To build and sustain relationships across countries, DOJ’s Federal Bureau of Investigation holds an annual training conference that brings together vetted police units from various partner nations, according to officials. Developing civil society. Officials from both State and USAID told us that police reform efforts are more sustainable if there are parallel civil society organizations that can advocate for accountability from police and other law enforcement institutions. USAID works with civil society and community organizations to track police abuses, including human rights violations. Officials said that external monitoring can promote the transparency, accountability, and effectiveness of the police. For example, USAID’s Justice, Human Rights, and Security Strengthening project in Honduras seeks to build the capacity of civil society organizations to advocate for vulnerable groups and victims of human rights abuses. Conclusions Civilian police forces that protect human rights are essential to functioning democracies, and U.S. agencies recognize that it is important to include respect for human rights in training provided to partner nation security forces, including police. The need to bolster respect for human rights among security forces is specifically emphasized in assistance strategies for El Salvador, Guatemala, and Honduras—three countries with notable histories of human rights violations by security forces, according to State and USAID. However, unlike DOD, which has written policies requiring the inclusion of human rights content in its training, State and USAID have few such formal mechanisms to ensure human rights content is appropriately included. Creating internal control mechanisms, such as objectives or directives to training implementing partners, would help ensure that State- and USAID-funded police training is consistent with U.S. government and agency priorities in including content related to respect for human rights as appropriate. Such control mechanisms would also enable the agencies to better account for implementing partners’ related activities. In addition, State lacks a standardized process to readily compile reliable data on the total number of police trained through INL-funded programs in the Northern Triangle countries. Without such data, State cannot reliably report on progress toward the U.S. Strategy for Central America and thus cannot accurately assess the efficacy of such training. Addressing these two gaps—establishing internal control mechanisms related to human rights training content and improving police training data—would better position State to assess the outcomes of such training, the results of which could inform future funding and sustainment decisions. Recommendations for Executive Action We are making a total of three recommendations, including two to State and one to USAID: The Secretary of State should ensure that the Bureau of International Narcotics and Law Enforcement Affairs (INL) designs internal control mechanisms to ensure human rights content is included in INL-funded police training for El Salvador, Guatemala, and Honduras as appropriate. (Recommendation 1) The Secretary of State should ensure that the Bureau of International Narcotics and Law Enforcement Affairs (INL) develops and implements a process to collect more reliable data on the number of police trained through INL-funded efforts in El Salvador, Guatemala, and Honduras. (Recommendation 2) The Administrator of USAID should design internal control mechanisms to ensure human rights content continues to be included in USAID-funded police training for El Salvador, Guatemala, and Honduras as appropriate. (Recommendation 3) Agency Comments and Our Evaluation We provided a draft of this product, which included three recommendations, to DHS, DOD, DOJ, State, and USAID for comment. State provided written comments, which we have reprinted in appendix II, concurring with our two recommendations to the agency. In response to the first recommendation, State noted that INL intends to amend templates for relevant implementing documents to address human rights as appropriate. In response to the second recommendation, State commented that, partly in response to our report, INL is developing specific indicators related to INL-funded police training. USAID also provided written comments, which we have reprinted in appendix III, concurring with our recommendation, and detailed two related policy revisions it intends to implement in response. State, DHS, and DOD provided technical comments, which we incorporated as appropriate. DOJ reviewed the report but did not provide comments. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Defense, Homeland Security, Justice, and State; and the USAID Administrator. 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) 512-7141 or GroverJ@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 IV. Appendix I: Scope and Methodology Senate Report 115-125 accompanying the National Defense Authorization Act for Fiscal Year 2018 includes a provision for us to report on various aspects of U.S. police training efforts in El Salvador, Honduras, and Guatemala. In this report, we examine, for the Northern Triangle, (1) the extent to which U.S. agencies have established objectives for and delivered training to professionalize police, including promoting respect for human rights; (2) the extent to which agencies have collected data related to police training indicators; and (3) the actions U.S. agencies have planned and undertaken to support the ability of partner nations to sustain police training. To address these objectives, we reviewed government-wide and agency strategies, guidance documents, project documents such as work plans, and reports from the U.S. Departments of State (State) and Defense (DOD), and the U.S. Agency for International Development (USAID). We focused on State and USAID because officials identified them as the primary funders of police training in El Salvador, Guatemala, and Honduras. While DOD primarily provides assistance to military and other national security entities, we included DOD in our analysis because some of the training funded by the agency includes police participants. We included police training implemented by the Departments of Justice (DOJ) and Homeland Security (DHS) when their training efforts were funded by State, DOD, and USAID, but not separate efforts funded by DOJ and DHS. In addition to reviewing documents, we conducted fieldwork in El Salvador and interviewed agency officials in Honduras; Guatemala; and Washington, D.C., who oversee and conduct police training. To determine the extent to which U.S. agencies have established objectives for and delivered training to professionalize police, including promoting respect for human rights, we reviewed agency documents and assessed them against federal standards for internal control, which state that management should set objectives or other control mechanisms to meet an entity’s mission, strategic plan, and goals. Our analysis included U.S. global, regional, and country-specific strategies such as government- wide Integrated Country Strategies and DOD country security assistance plans for El Salvador, Guatemala, and Honduras. Officials from DOD, State, and USAID told us that all agency-funded classroom training delivered to police in El Salvador, Guatemala, and Honduras is done to professionalize those forces, of which training to promote respect for human rights may be one element. We also reviewed documents from DOD, USAID, and State about police assistance efforts implemented during fiscal years 2014 through 2017 that agencies identified as projects that included assistance for police in El Salvador, Guatemala, and Honduras. Specifically, we reviewed 22 projects—14 funded by State and 8 funded by USAID—that the agencies identified as including assistance for police. The projects and documents we identified for each agency are as follows: We reviewed DOD strategic plans covering assistance for El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017 and found that they did not contain objectives to specifically train police. DOD officials confirmed that security assistance they provide is focused on military recipients and that they had no projects to specifically provide assistance to civilian police. Thus, we determined that no DOD projects would be included in our review of project documents to identify objectives related to training to professionalize police. USAID provided a list of USAID-funded efforts in El Salvador, Guatemala, and Honduras implemented during fiscal years 2014 through 2017. Among the projects were eight with funds used for police training, which we included in our review. USAID provided work plans for six of the eight projects. For the remaining two projects, USAID did not identify similar project work plans, so we identified alternative documents to use for our analysis. For one of them, we used a progress report submitted to USAID by the contractor that included a project work plan specifically for fiscal year 2016. For the other, we used a final evaluation report that included the objectives of the project. State identified efforts funded by its Bureau of International Narcotics and Law Enforcement Affairs (INL) in El Salvador, Guatemala, and Honduras implemented during fiscal years 2014 through 2017. Because INL assistance generally includes police among target recipients of assistance, we requested project documents for all of the efforts State identified. We worked with State officials to identify project documents that included work plans or other summaries that identified objectives for these State- funded efforts. Ultimately, State provided documents for 19 projects. Based on our review of those documents, we determined 5 of the projects should not be included in our review for one or more of the following reasons: They (a) were not implemented during fiscal years 2014 through 2017, (b) did not provide assistance to police, or (c) did not have sufficient documentation provided by State to conduct our analysis. Among State efforts excluded from our scope due to insufficient documentation is State-funded training provided through the Colombian National Police. For the 14 projects that we included in our scope, we used documents such as work plans for our analysis of objectives. For each of the 22 USAID and State police assistance projects we reviewed, we analyzed related project documents, such as work plans or reports, to identify objectives or other internal control mechanisms related to police professionalization, including promoting respect for human rights. To do so, we assessed these documents using definitions we developed based on our analysis and discussions with agency officials, as follows: We defined “police” as civilian—not military—police, as well as other civilian law, customs, and maritime forces. We defined “training” as classroom-style training and workshops, not including mentoring or technical assistance. We defined “objective” as any statement containing the words goal, objective, aim, intent, we will, or other statements with actionable items aimed at reaching an end state. We defined “professionalize” in line with agency officials’ descriptions of the term, using related words such as professionalism, professional competence, or capacity building. We defined “promotion of respect for human rights” to specifically include the phrase human rights or elements of human rights as defined in agency documents, such as the proper use of force and minority rights, and the United Nations Universal Declaration of Human Rights. The project documents for the 22 projects in our scope were independently reviewed by two analysts. The analysts discussed and resolved any disagreements in their initial determinations about the extent to which project documents included relevant objectives or other internal control mechanisms. With respect to our reporting on the extent to which training incorporated content to professionalize police, agencies lack a formal definition of what types of training constitute police professionalism. To better understand what types of training we should consider to be training to professionalize police, we interviewed officials at U.S. agencies that fund and execute police training in El Salvador, Guatemala, and Honduras. Officials at agencies that fund and implement such training consistently described all training delivered to police to be training intended to professionalize recipients. Thus, for the purpose of this report, we defined training to professionalize police as all training provided to police and determined that all three agencies had delivered such training. With respect to reporting on the extent to which training incorporated content related to human rights, we spoke with implementing partner officials and analyzed documents on police training, such as training agendas and course catalogs. To determine the extent to which training delivered by State’s International Law Enforcement Academies program (hereafter referred to as ILEA) incorporated content related to human rights, we requested data from the program on the courses it provided to participants from El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017. We then analyzed the descriptions in fiscal years 2015, 2016, and 2017 course catalogs and embassy cables related to 189 training courses the ILEA program reported to have delivered to participants from El Salvador, Guatemala, and Honduras during fiscal years 2015 through 2017. For our analysis, we defined training to promote respect for human rights as training specifically addressing human rights or elements of human rights as defined in agency documents, such as the proper use of force and minority rights, and the United Nations Universal Declaration of Human Rights. If such human rights content was specified in the title or description of the course, we determined that the course included content related to human rights. To determine the extent to which agencies have collected data on police training indicators, we analyzed agency documents to identify indicators related to police training and assessed related data against federal internal control standards, which call for agencies to have readily available, reliable data to track progress toward goals. Specifically, we analyzed regional and country-specific strategies and the project documents described above to identify indicators directly related to objectives to provide police training. We identified, and agency officials confirmed, one key indicator in the U.S. Strategy for Central America for which State is responsible for collecting police training data. Specifically, objective 3.1 of the strategy is to “Professionalize Civilian Police,” and a related indicator is the “number and percentage of civilian police trained by INL.” That national strategy assigns State responsibility for tracking that indicator. We asked State to provide us with fiscal year 2014 through 2017 information related to the indicator. To assess the reliability of the data on participants of ILEA training events, we reviewed documents and interviewed cognizant officials about the ILEA Global Network, the program’s online system used to record all courses and participants receiving training provided by ILEA. For example, we determined that the ILEA program has (1) established and documented a process—described with clear steps in a user guide—to input accurate data and (2) periodically reviews the quality of that data. We determined that the data on ILEA training participation are sufficiently reliable for reporting on the number of police trained. Beyond the ILEA data, INL initially responded to our data request by explaining the difficulties in providing the requested information and suggesting they could provide a more limited set of data. We modified our request to include only fiscal year 2017 data, which were compiled separately for El Salvador, Guatemala, and Honduras by the responsible INL staff at the U.S. embassy in each country. We then interviewed cognizant officials and compared the data State provided in April 2018 with information that (a) we received from implementing partners, including U.S. agencies, and (b) was reported in State’s May 2018 progress report on results of the U.S. Strategy for Central America. We determined that State does not have readily available, reliable data on the total number of police trained, which we report as a finding. To determine actions U.S. agencies have planned and undertaken to support the ability of partner nations to sustain police training, including training to promote respect for human rights, we spoke with agency officials about related activities and analyzed project planning documents and reporting related to police assistance. Using this information, we determined the types of actions U.S. agencies had planned or undertaken and discussed these categories with agency officials to confirm that the categories accurately reflected agency actions. We conducted this performance audit from October 2017 to September 2018 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: Comments from the U.S. Department of State Appendix III: Comments from the U.S. Agency for International Development Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Jennifer Grover, (202) 512-7141 or GroverJ@gao.gov. Staff Acknowledgments In addition to the contact named above, Biza Repko (Assistant Director), Drew Lindsey (Assistant Director), Kathryn Bolduc (Analyst-in-Charge), Ashley Alley, David Dayton, Martin de Alteriis, Gretta Goodwin, Dawn Locke, Stevenson Ramsey, James Reynolds, Cary Russell, and Brian Wanlass made key contributions to this report. Neil Doherty also provided technical assistance.

Why GAO Did This Study Several U.S. agencies train police in the Northern Triangle countries of El Salvador, Guatemala, and Honduras, where corruption and human rights abuses have traditionally plagued civilian police forces. State, the primary agency responsible for foreign police assistance, allocated about $37 million to train police in these countries from appropriations for fiscal years 2014 through 2017. Although it is not a focus of their efforts, DOD and USAID also train police in the Northern Triangle. Senate Report 115-125 includes a provision for GAO to report on various aspects of U.S. police training efforts in the Northern Triangle. In this report, GAO examines, among other objectives, the extent to which U.S. agencies have (1) established objectives for and delivered training to professionalize police, including promoting respect for human rights, and (2) collected data related to police training indicators. GAO analyzed agency data and project documents, including for 22 State and USAID-funded projects implemented during fiscal years 2014 through 2017 that agencies identified as including assistance for police. GAO also conducted fieldwork in El Salvador and interviewed agency officials in Honduras; Guatemala; and Washington, D.C., who oversee and conduct police training. What GAO Found Agencies have established objectives and delivered training to professionalize police in Central America's Northern Triangle but have not consistently done so to promote police respect for human rights. U.S. strategies include objectives to professionalize police, and the Departments of State (State) and Defense (DOD) and U.S. Agency for International Development (USAID) have delivered related training (see figure). These strategies also highlight the importance of police respect for human rights, but agencies have few objectives or other control mechanisms to ensure police receive related training. For instance, none of the 14 State projects and 2 of the 8 USAID projects that GAO reviewed had such objectives. Officials said this is because objectives were designed to be broader in focus. DOD also does not have objectives but has other control mechanisms to ensure its training includes human rights content. Federal standards for internal control call for managers to establish control mechanisms consistent with priorities. Without them, it may be difficult for State and USAID to ensure that training supports agencies' goals to promote police respect for human rights. DOD, State, and USAID collect information on police training, but State lacks readily available, reliable data on the number of police trained—a key indicator in the U.S. Strategy for Central America . State's data are not readily available because, according to officials, the process to track training is decentralized and data are not consolidated. Further, GAO found State's fiscal year 2017 police training data to be unreliable because, among other reasons, the data did not include training delivered by some implementers. Officials noted that State did not have sufficient internal control mechanisms and staff in place to collect data as it expanded police training in the Northern Triangle. Without such data, State cannot accurately assess its efforts in Central America. What GAO Recommends To improve oversight of police training in the Northern Triangle, State and USAID should design control mechanisms to ensure human rights content is included as appropriate, and State should improve police training data. State and USAID concurred.

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Background Contact with infected animals or consumption of contaminated water and food—including produce, meat, poultry, and processed products—can cause foodborne illness. Many different pathogens can contaminate food, including harmful bacteria such as Salmonella and Campylobacter. CDC reported that in 2015 there were 902 foodborne disease outbreaks reported in the United States that resulted in 15,202 illnesses, 950 hospitalizations, 15 deaths, and 20 food product recalls. According to CDC, fish, chicken, and pork were the most common single food categories implicated in these outbreaks. More recently, in 2016, there were 233 foodborne illnesses from 10 outbreaks linked to beef, 426 foodborne illnesses from 17 outbreaks linked to pork, and 417 foodborne illnesses from 20 outbreaks linked to poultry, according to CDC’s National Outbreak Reporting System (see fig. 1). Common symptoms of foodborne diseases include nausea, vomiting, stomach cramps, and diarrhea. Symptoms can sometimes be severe, and some foodborne illnesses can be life-threatening. Although anyone can get a foodborne illness, some people are more likely to have one. Those groups include young children, older adults, pregnant women, and people with immune systems weakened from medical conditions, such as diabetes, liver, and kidney disease. Patients receiving chemotherapy or radiation treatment are also more susceptible. We have previously reported that to improve its food safety approach, FSIS moved to an increasingly science-based, data-driven, risk-based approach by adopting the Pathogen Reduction; HACCP regulations in 1996. Under the HACCP approach, each plant is responsible for (1) identifying food safety hazards, such as fecal material, that are reasonably likely to occur and (2) establishing controls that prevent or reduce these hazards in its processes. As part of this approach, plants must develop plans that identify the point (known as the critical control point) where they will take steps to prevent, eliminate, or reduce each hazard identified. FSIS inspectors at slaughter and processing plants routinely check records to verify a plant’s compliance with those plans. FSIS inspectors also observe operations at plants as part of their inspection activities. Under the 1996 HACCP regulations, the agency also established Salmonella pathogen standards used to assess the effectiveness of plants’ controls in reducing levels of pathogens in meat and poultry products. According to the regulations, FSIS selected Salmonella for pathogen standards because, among other things, it was the most common bacterial cause of foodborne illness, and they believed that intervention strategies aimed at reducing fecal contamination and other sources of Salmonella on raw product should be effective against other pathogens. FSIS has a verification-testing program in which FSIS inspectors at plants collect samples of certain products and test them to determine whether plants meet the pathogen standards. Test results from this program help FSIS inspectors verify that plant HACCP plans are working and identify and assist plants whose process controls may be underperforming. FSIS also requires products to be labeled with instructions for safe handling. In contrast to Salmonella and Campylobacter, which are subject to pathogen standards, FSIS considers certain serotypes of Escherichia coli (E. coli), another type of disease-causing pathogen, adulterants under the definition of “adulterated” in the Meat Inspection Act and the Poultry Inspection Act. The acts define an adulterant in meat and poultry products to include, among other things, “any poisonous or deleterious substance which may render it injurious to health.” Meat and poultry products contaminated with any level of adulterants are not permitted to enter commerce—a stricter standard than the pathogen standards, which allow certain levels of contamination. FSIS initially declared E. coli O157:H7 as an adulterant in ground beef following an outbreak from 1992 to 1993 that involved Jack-in-the-Box hamburgers and, in 2011, declared an additional six non-O157 Shiga-toxin-forming E. coli in certain raw beef products as adulterants. In the early 1990s, a strain of Escherichia coli (E. coli) bacteria linked to hamburger resulted in a deadly foodborne outbreak and led to changes in food regulations. E. coli are bacteria found in the environment, food, and intestines of people and animals. E. coli are a large and diverse group of bacteria. Most strains of E. coli are generally harmless, but others can cause diarrhea, urinary tract infections, respiratory illness and pneumonia, other illnesses, and death. From November 1992 through February 1993, more than 500 laboratory-confirmed infections with E. coli O157:H7 and four associated deaths occurred in four states—Washington, Idaho, California, and Nevada. During the outbreak, contaminated hamburger patties were traced to a fast food restaurant chain and then ultimately to five slaughter plants in the United States and one in Canada as likely sources of carcasses used to produce the contaminated ground beef. No one slaughter plant or farm was identified as the source. In 1994, USDA’s Food Safety and Inspection Service declared that any raw ground beef found contaminated with E. coli O157:H7 would be adulterated under the Federal Meat Inspection Act—rendering the meat unlawful to sell in commerce. Meat and Poultry in the United States Beef: According to the U.S. Department of Agriculture (USDA), beef is a highly consumed meat in the United States, averaging 56 pounds per person per year. Beef comes from full-grown cattle that are about 2 years old and weigh about 1,000 pounds. There are at least 50 breeds of beef cattle, but fewer than 10 make up most cattle produced. Veal is meat from a calf (young cattle) that weighs about 150 pounds. Calves that are mainly milk-fed usually are less than 3 months old. Pork: According to the USDA, the United States is the world’s third-largest producer and consumer of pork and pork products. Pork is meat from hogs, or domestic swine, and is from young animals (6 to 7 months old) that weigh from 175 to 240 pounds. FSIS coordinates with numerous federal agencies, state agencies, and local entities to help ensure the safety of meat and poultry products from the farm to the consumer (known as the farm-to-table continuum). FSIS coordinates with USDA’s Animal and Plant Health Inspection Service (APHIS) to share information when investigating foodborne illnesses. FSIS also coordinates with the Department of Health and Human Services’ Food and Drug Administration (FDA) and with CDC on a number of activities. For example, FSIS works collaboratively with FDA and CDC through the Interagency Food Safety Analytics Collaboration to, among other things, estimate foodborne illness source attribution. Attribution entails identifying which foods are the most important sources of selected major foodborne illnesses. According to FSIS officials, determining the sources of illness is an important part of identifying opportunities to improve food safety. FSIS also coordinates with CDC and state health departments to respond to foodborne illness outbreaks, including identifying the pathogen, the product, and where the product became contaminated along the farm-to-table continuum (see fig. 2). Poultry: According to USDA, consumption of poultry (chicken and turkey) in the United States is higher than beef or pork. Chicken includes broiler-fryer chickens and roaster chickens. Broiler-fryer chickens are young, tender chickens about 7 weeks old that weigh from 2 ½ to 4 ½ pounds. Roaster chickens are young chickens from 8 to 12 weeks old with a ready-to-cook carcass weight of 5 pounds or more. Turkey is a large, widely domesticated North American bird. They grow to full maturity in about 4 to 5 months, depending on the desired market weight. USDA’s FSIS has developed or revised pathogen standards for assessing the effectiveness of plants’ controls in reducing the level of pathogens in certain meat and poultry products. More specifically, the agency has developed pathogen standards for some beef, pork, chicken, and turkey products but not for other products that are widely available, and its basis for deciding which products to consider for new pathogen standards is unclear. In addition, as of 2011, the agency has revised pathogen standards for chicken and turkey products, but standards for other products are outdated, with no time frames for revision. FSIS has developed pathogen standards for beef, pork, chicken, and turkey carcasses; specific chicken parts (i.e., breasts, thighs, and legs); and ground beef, chicken, and turkey (see Figure 3). The initial pathogen standards FSIS developed in 1996 were all for Salmonella because, among other things, it was the most common bacterial cause of foodborne illness and intervention strategies aimed at reducing Salmonella in raw products might be effective against other pathogens, according to agency documents. Subsequently, in 2011, FSIS developed Campylobacter standards for chicken and turkey carcasses and in 2016 developed Salmonella and Campylobacter standards for chicken parts. FSIS has not developed pathogen standards for other widely available products, such as pork cuts (e.g., pork chops), turkey parts (e.g., turkey breasts), and ground pork. The agency is taking steps that may lead to the development of new pathogen standards for additional products. For example, according to FSIS documents, the agency is collecting information on the presence of Salmonella and other pathogens in pork cuts and ground pork, among other pork products. According to FSIS officials, this could lead to the development of new standards. However, the agency’s process for deciding which products to consider for new pathogen standards is unclear because it is not fully documented. In December 2016, the agency documented a part of its process: who will make the decisions about which products to consider. According to the December 2016 document, certain agency officials are to meet as needed to discuss emerging food safety risks and propose related data collection efforts to senior management, who will decide which products to consider for new standards. However, the document does not explain the basis for management’s decisions. FSIS has informed stakeholders that it will take into account factors including consumption and foodborne- illness data, as it did when setting standards for chicken parts, but the agency has not documented this process going forward. Several researchers and consumer advocacy representatives we interviewed questioned whether the agency’s process proactively addresses food safety risks. Previously, FSIS developed new pathogen standards after the agency was directed to do so or after widespread outbreaks indicated the need. For example, in 2011, FSIS revised Salmonella standards for chicken and turkey carcasses and developed new standards for Campylobacter in these same products after being charged with doing so by the Presidential Food Safety Working Group. Additionally, in a 2016 Federal Register notice, FSIS, after reviewing outbreaks from these products in 2011, 2013, and 2015—outbreaks in which 794 people were sickened and 1 died—concluded that new pathogen standards were needed for comminuted (including ground and other mechanically separated) poultry and chicken parts. Under federal standards for internal control, federal entities are to design control activities to achieve objectives and respond to risks, including appropriate documentation of transactions and internal control. With appropriate documentation of internal control, management clearly documents internal control and allows the documentation to be readily available for examination; the documentation may appear in management directives, administrative policies, or operating manuals. Until FSIS clearly documents its process for deciding which products to consider for new pathogen standards, including the basis on which such decisions should be made, FSIS will not have assurance that its decisions are risk- based and that agency personnel will know the process when making such decisions. USDA Has Revised Some Existing Pathogen Standards but Has Not Revised Others in Decades and Has No Time Frames for Revision USDA’s FSIS has revised Salmonella standards for chicken and turkey carcasses and for comminuted chicken and turkey but has not revised other Salmonella standards since 1996, and the agency has not set time frames for determining whether revisions are needed. Specifically, as noted above, FSIS revised Salmonella standards for chicken and turkey carcasses in 2011 in response to a charge from the President’s Food Safety Working Group that the agency develop new or revised standards to reduce the prevalence of Salmonella in poultry products. The agency revised the pathogen standards for comminuted chicken and turkey in 2016 to help achieve public health goals for reducing human illness from Salmonella, among other things. The revisions have generally involved reductions in the maximum allowable percentage of products that test positive for this pathogen. For example, in 2016, when the agency revised the Salmonella standards for comminuted chicken, the allowable percentage changed from 44.6 to 25.0. (See table 1.) However, FSIS has not revised the Salmonella standards for beef and pork carcasses and ground beef since they were first developed in 1996. Although USDA announced in a 2014 Federal Register notice that it intended to propose new pathogen standards for ground beef, FSIS has not done so. Furthermore, FSIS set the pathogen standards for beef and pork carcasses and ground beef at industry-wide prevalence levels found at that time, not at levels intended to be protective of human health. In 2017, FSIS reviewed data on Salmonella in beef carcasses and ground beef and determined that the agency will not reach public health goals for reducing foodborne illness from Salmonella without further reduction in Salmonella contamination in beef. FSIS officials said that the agency is developing options for how it might move forward and could determine that revised or new standards are not needed and that other policies could suffice in addressing pathogens in beef. In the meantime, however, the agency in 2014 suspended monitoring against the existing Salmonella standards for ground beef until the agency develops a revised standard. The agency also suspended monitoring whether plants were meeting the pathogen standard for Salmonella on pork carcasses because, according to agency officials, the percentage of pork carcass samples that tested positive for Salmonella was consistently low. FSIS officials said that the agency is collecting data on pathogens in pork that could lead to new standards for pork products. In the absence of testing against the standards, the agency has other tools to ensure plants are controlling pathogens. For example, the agency continues to test beef for levels of E. coli, and FSIS inspectors at plants are to routinely check records to verify a plant’s compliance with its HACCP plans. FSIS officials told us that they would begin monitoring against the Salmonella standards for these products if the standards are revised or determined to be sufficient (in the case of beef and pork carcasses and ground beef) or if the agency develops new standards (in the case of pork cuts and ground pork). Generally, FSIS begins monitoring against a standard once the agency announces a standard and after a phase-in period has ended. For example, when FSIS developed new Campylobacter and Salmonella standards for chicken parts in 2016, the agency began monitoring whether plants met the standard 5 months after the standards were announced in the Federal Register. Monitoring for compliance with pathogen standards is a key tool as envisioned by the 1996 Pathogen Reduction; HACCP Systems final rule for verifying the effectiveness of a plant’s processing controls to prevent, eliminate, or reduce food safety hazards. It is unclear when FSIS plans to resume the use of this tool and complete the revisions of the Salmonella standards for beef carcasses or ground beef or develop new standards for additional pork products because the agency has not set time frames for doing so. According to FSIS officials, developing or revising pathogen standards takes time and resources, in part because the agency must first collect and analyze data to estimate the prevalence of pathogens in FSIS-regulated products, notify the public of proposed standards, and open a comment period, all of which can take years. However, according to FSIS officials, the agency has no time frames for determining what actions to take. Program schedule planning is recognized as a leading practice to ensure organizational activities are completed as planned, according to the Project Management Institute’s Standard for Program Management. Such planning includes setting time frames for completing a project. By setting time frames for determining what pathogen standards or additional policies are needed to address pathogen levels in beef carcasses, ground beef, and pork products, FSIS could better ensure it completes these activities in a timely manner to protect human health. USDA Is Taking Additional Steps to Address Pathogen Reduction Challenges That We Identified in 2014, but These Challenges Are Ongoing In addition to taking steps to develop or revise pathogen standards, USDA’s FSIS is addressing other challenges we identified in September 2014 with respect to poultry pathogens, but these challenges are ongoing and also apply to meat products. These challenges include FSIS’s limited control over factors that affect the level of pathogens outside of plants, pathogens not designated as hazards, the complex nature of Salmonella, limited Campylobacter research and testing, limited enforcement authority, absence of mandatory recall authority, and insufficient prevalence estimates. Limited Control Outside of Plants In September 2014, we found that the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) faced a challenge in reducing levels of Salmonella and Campylobacter in poultry products in part because the agency did not have regulatory jurisdiction over farm practices to reduce contamination in poultry before they reach a plant for slaughter and processing. At the time, we noted that FSIS had worked to address the on-farm limitation by issuing guidelines that detailed, among other things, several on-farm practices to reduce Salmonella and Campylobacter in live poultry. We recommended that in future revisions of the guidelines, FSIS include information on the effectiveness of on-farm practices to explain the potential benefits of adopting such practices on poultry farms. USDA concurred with our recommendation. In addition, we found that once poultry products leave a plant, factors beyond FSIS’s control may affect contamination of poultry products, such as cross-contamination from poultry products (i.e., when bacteria spread from a food to a surface, from a surface to another food, or from one food to another) that can occur at retail establishments, in restaurants, and in consumers’ homes, according to a food safety researcher we interviewed. Pathogen Contamination after Products Leave the Plant According to the Centers for Disease Control and Prevention (CDC), even if meat and poultry products leave the processing or slaughter plant with no detectable pathogen, it does not ensure that the products are safe, as opportunities exist for them to become contaminated at any point along the farm-to- table continuum. To illustrate, frozen hamburger patties might be trucked from a plant to a supplier, stored in the supplier’s warehouse for a few days, trucked again to a local distribution facility, and then delivered to a restaurant. According to CDC, if refrigerated food is left on a loading dock during transportation for an extended time in warm weather, the food could reach temperatures that allow pathogens to grow. among other things, on-farm practices to reduce levels of Salmonella contamination in hogs. The draft Salmonella guidelines are available on the agency’s website. Even though the guidelines are not yet finalized, FSIS encourages producers to use them, according to agency officials we interviewed. However, unlike the poultry and beef cattle guidelines, the draft Salmonella guidelines do not contain information on the effectiveness of on-farm practices, as recommended in 2011 by USDA’s National Advisory Committee on Meat and Poultry Inspection. According to the draft guidelines, when a plant makes changes at the appropriate processing location, process control should result in raw pork products that have less contamination with pathogens, including Salmonella. FSIS officials we interviewed told us that there is not as much research available for such practices for hogs as there is for beef cattle and poultry. However, the officials agreed that including available information would be beneficial. By including available information on the effectiveness of these practices to reduce the level of pathogens as it finalizes its guidelines for controlling Salmonella in hogs, FSIS would have better assurance that it is keeping industry informed of the potential benefits of adopting on-farm practices and encourage their implementation. Contamination can also occur during preparation in consumers’ homes if food is not properly stored, prepared, heated, or served. For example, according to CDC, once contamination occurs, if meat and poultry are stored or cooked at unsafe temperatures, pathogens will grow quickly, which may lead to foodborne illness. With respect to reducing pathogens after slaughter, FSIS continues to update its guidance to consumers and work with federal partners to ensure the safety of meat and poultry products after they leave the plant. For example: In 2015, the agency developed the FoodKeeper mobile application to educate consumers on how to use food while at peak quality and store food properly. It updated the application in 2017 so users could receive automatic notifications when FDA or FSIS announces food safety recalls. In 2016, FSIS and FDA announced that they would work together to revise the FDA Food Code—a model that local, state, tribal, and federal regulators use to ensure food safety at retail stores, restaurants, and institutions such as nursing homes, among others— to ensure consistency with FSIS regulations and guidance. In 2017, FSIS expanded the operating hours for its Meat and Poultry Hotline, through which consumers could speak with an agency representative or listen to recorded messages regarding food safety, such as the proper storage, handling, and preparation of meat and poultry products. Pathogens Not Designated as Hazards In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter contamination in poultry products when plants do not designate these pathogens as hazards. Under the Hazard Analysis and Critical Control Point (HACCP) approach, plants have discretion about whether to include Salmonella or Campylobacter as a hazard “reasonably likely to occur” in their HACCP plans and develop mitigation strategies to reduce these pathogens. FSIS’s 2014 final rule for modernizing poultry slaughter inspection requires plants to develop, implement, and maintain written procedures to prevent contamination of carcasses and parts by enteric pathogens—bacteria that normally reside in the intestines of many animals, including humans, such as Salmonella and Campylobacter—as well as fecal material. Plants must incorporate these procedures into their HACCP plans, sanitation procedures, and other programs. Since our September 2014 report, FSIS has not required hog and beef plants to designate Salmonella or Campylobacter as hazards likely to occur, but it has taken other steps to reduce Salmonella and Campylobacter contamination when plants do not designate these pathogens as hazards. More specifically, in February 2018, FSIS proposed a rule to modernize hog slaughter inspections. The proposed rule would require plants to develop, implement, and maintain written procedures to prevent contamination by enteric pathogens in pork. Stakeholders we interviewed representing industry and consumer advocacy groups disagreed on whether plants should be required to designate specific pathogens as a hazard reasonably likely to occur. However, in response to instances in which inadequate validation of HACCP plans led to the production of adulterated food, and in some cases illnesses, FSIS released compliance guidance outlining best practices for designing and implementing adequate HACCP plans for all plants in 2015. According to FSIS, plants can use the guidance to properly design and execute HACCP plans and reduce the likelihood of contamination of the products they produce. Specifically, the guidance outlines, among other things, best practices for gathering scientific and technical support, as part of the HACCP plan validation process, to demonstrate that the plants’ processes prevent, reduce, or eliminate the hazards identified. Complex Nature of Salmonella In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella contamination in poultry products because of the complex nature of this pathogen. The majority of the representatives from industry and consumer groups we interviewed at the time, as well as FSIS officials, agreed that Salmonella is difficult to control in poultry products because it is widespread in the natural environment. According to Centers for Disease Control and Prevention officials we interviewed for our past work, there are more than 2,500 serotypes of Salmonella (with different strains), some of which pose greater risk to human health than others. Therefore, it is important to understand the genetic makeup of each to determine which ones are more or less likely to cause human illness. FSIS officials said that, in the future, there may be opportunities to improve how the agency protects human health by focusing inspections on plants and products that have tested positive for the more dangerous strains of Salmonella in meat and poultry products. To this end, FSIS collaborates with USDA’s Agricultural Research Service and APHIS, CDC, FDA, and local and state public health partners to develop new technologies that can more precisely determine if a strain of Salmonella detected is particularly dangerous to people. One such technology is whole genome sequencing, which allows the agency to determine the complete set of genes, or strain, within a Salmonella serotype. According to FSIS officials, it is more challenging to link the strain associated with an illness to a specific meat or poultry product that has sickened consumers; whole genome sequencing technology can more definitively identify the strain involved in an outbreak and help reduce incidents of illness or death due to foodborne pathogens. FSIS is currently planning how to integrate this technology into its food safety program. For example, current pathogen standards are based on the presence or absence of generic Salmonella, not on specific strains. FSIS held a public meeting in October 2017 to get input from state, federal, and international public health partners and other stakeholders on the use of this technology in a regulatory setting to improve food safety and public health. Limited Campylobacter Research and Testing In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service faced a challenge in reducing levels of Campylobacter in poultry products in part because less was known about Campylobacter than about Salmonella. Specifically, technologies, such as clinical diagnostics, used to detect Campylobacter may have underdiagnosed cases of illness from this pathogen, and the methods used by many diagnostic laboratories to isolate Campylobacter from samples were not standardized, according to a 2012 World Health Organization report on illnesses from the pathogen. Additionally, the agency’s ability to measure a reduction in Campylobacter illnesses depended on its ability to attribute Campylobacter illnesses to poultry and other food types, according to agency officials, and attribution analyses needed improvement. Since our report in September 2014, FSIS has had efforts under way with other agencies to improve foodborne illness source attribution to meat and poultry products and has independent data collection efforts under way to determine the presence of Campylobacter on these products. More specifically, in collaboration with CDC and FDA through the Interagency Food Safety Analytics Collaboration, FSIS has taken steps to improve and standardize methods to estimate the source attribution for Campylobacter foodborne illness. In 2015, this interagency collaboration improved the method for estimating the number of Campylobacter illnesses from meat and poultry products by standardizing the approach used by all three food safety agencies. The interagency collaboration’s new estimates for the proportion of Campylobacter illnesses included all food products—including beef, pork, and poultry. The interagency collaboration also released updated foodborne illness source attribution estimates in December 2017. According to FSIS officials, the three agencies are collaborating on multiple analytic projects, in line with the interagency collaboration’s 2017–2021 strategic plan, to improve models to estimate foodborne illnesses from Campylobacter and other pathogens. These projects involve using new methods and whole genome sequencing and other data sources. In addition to this interagency effort, in 2015, FSIS tested about 200 samples of pork products for Campylobacter as part of an exploratory sampling effort, according to agency documents summarizing the efforts. FSIS found that about 1 percent of products tested were positive for Campylobacter and, therefore, chose not to continue testing pork products for this pathogen. For poultry, in 2016, FSIS revised a laboratory guidebook describing standard protocols for isolating and analyzing Campylobacter in raw products. In 2017, the agency concluded a literature review of Campylobacter contamination in beef and, as of October 2017, is discussing the development of an exploratory sampling project to test for Campylobacter in beef products, according to agency officials. Limited Enforcement Authority In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a potential challenge in reducing Salmonella contamination in poultry products, according to agency officials and representatives of some stakeholder groups we interviewed, because (1) a 2000 federal court ruling stated that FSIS could not withdraw inspectors, effectively shutting down the plant, solely because a plant did not meet Salmonella pathogen standards, and (2) FSIS has not classified Salmonella as an adulterant in raw poultry products, so products contaminated with this pathogen generally may be permitted to enter commerce. FSIS adopted the position that the court ruling did not affect its ability to use the Salmonella pathogen standards as part of verifying a plant’s sanitation and Hazard Analysis and Critical Control Point plans and that it had tools, such as food safety assessments (an evaluation of a plant’s food safety system), to prevent contaminated products from entering the market. Representatives from consumer groups we interviewed at the time said that even with these tools, the agency does not have sufficient authority to ensure plants comply with the standards because FSIS cannot shut down plants when they fail the Salmonella standards alone. Representatives from industry groups we interviewed at the time disagreed and stated that FSIS has sufficient authority to ensure plants comply with standards because the agency has broad statutory authority and oversight. Regarding FSIS not classifying Salmonella as an adulterant, representatives from consumer groups we interviewed for our previous work said that the agency should declare some serotypes of Salmonella as adulterants, such as those with specific antibiotic-resistant patterns. FSIS officials we interviewed for our previous work said they found no conclusive evidence that antibiotic-resistant strains of Salmonella or Campylobacter have a greater resistance to the interventions used in plants but that the agency would continue to review relevant scientific evidence to identify any potential challenges these serotypes may present to public health. Since our report in September 2014, FSIS continues to stand by the position that the 2000 court ruling does not affect its ability to use pathogen standards as a tool to prevent contaminated products from entering the market. FSIS reaffirmed its position in a 2016 Federal Register notice. Our review of FSIS data from 2016 through 2017 for poultry plants shows that some plants are still not meeting pathogen standards—in some cases repeatedly not meeting the standards—and are allowed to operate. We were unable to review similar data for beef or hog plants since, as noted above, FSIS suspended monitoring these plants against pathogen standards. FSIS stands by its assessment that its enforcement tools are sufficient. Moreover, in 2015, FSIS announced an additional tool to help FSIS identify and assess problems or trends that may be of concern. Specifically, FSIS investigators must now conduct a public health risk evaluation at every plant that does not meet a pathogen standard. This is a positive step for those products that have pathogen standards, such as chicken parts. However, as previously stated, FSIS does not test for whether plants producing beef carcasses, ground beef, and pork carcasses meet the pathogen standards for those products, and other products such as ground pork do not have pathogen standards. Representatives from consumer groups and industry we interviewed continue to disagree on whether FSIS’ existing enforcement tools are sufficient to ensure that meat and poultry plants meet pathogen standards. Regarding antibiotic-resistant strains of Salmonella, FSIS officials continue to state that the pathogen does not meet the criteria for classifying it as an adulterant and that the agency will continue to examine options for regulating the presence of antibiotic-resistant strains of Salmonella in raw meat and poultry products. Agency officials told us that to classify a pathogen as an adulterant in raw meat and poultry products, FSIS must determine that the pathogen meets certain criteria established both in its authorizing statutes and by case law. Specifically, in American Public Health Association v. Butz, a federal appeals court in 1974 held that Salmonella did not adulterate raw poultry because ordinary consumer methods of preparing and cooking the product would eliminate the pathogen. In contrast, FSIS declared certain types of E. coli as adulterants in beef, as discussed above, because ordinary consumer cooking does not eliminate the pathogen. According to FSIS officials, the available data do not appear to indicate that Salmonella presents the same issues as E. coli or meets the necessary criteria, regardless of whether it is resistant or susceptible to antibiotics. This issue continues to be contentious among the stakeholders we interviewed. Six of the seven industry stakeholders we interviewed stated that FSIS’s current enforcement authority is sufficient. Two of four food safety researchers we interviewed stated that the agency does not need additional authority to label Salmonella as an adulterant because FSIS has labeled other pathogens as adulterants when it made sense to do so, such as E. coli¸ and there is no need to label naturally occurring bacteria as adulterants on raw product. In contrast, all four of the consumer advocacy groups and two of the four food safety researchers we interviewed stated that FSIS needs more authority to label Salmonella as an adulterant. No Mandatory Recall Authority In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter contamination in poultry products because it did not have mandatory food recall authority similar to that of the Food and Drug Administration (FDA) for the food products FDA regulates, such as milk, seafood, fruits, and vegetables. In 2011, Congress passed the FDA Food Safety Modernization Act, giving FDA mandatory recall authority. We recommended in October 2004 that Congress consider legislation to increase FSIS’s authority to include mandatory recalls, but the agency continues to not have such authority. Instead, to protect human health from potentially contaminated meat and poultry products, FSIS can issue public health alerts, which notify the public on specific actions to take to avoid illness, or request voluntary recalls, which are voluntary actions taken by plants, among other actions. Before requesting a voluntary recall, FSIS must gather sufficient evidence through its investigation and determine that a product is adulterated and mislabeled, among other things. In September 2014, we reported that this can be challenging to do. FSIS officials told us at the time that rather than focusing on the lack of mandatory recall authority, it was more productive to work aggressively with the tools they had, such as withdrawing inspectors, thus preventing products from entering commerce. According to FSIS officials, this can be as effective for keeping unsafe food from the marketplace as FDA’s recall authority. To encourage poultry slaughter and processing plants to control for Salmonella and Campylobacter—disease-causing pathogens that can sicken consumers—USDA publicly releases information on individual plant performance for reducing these pathogens. According to the agency’s 2017 annual plan, publishing plant-specific data allows consumers to make more informed choices, motivates individual plants to improve performance, and leads to industry-wide improvements in food safety. USDA’s Economic Research Service found that publicly releasing the identities of plants with poor or mediocre performance on tests for Salmonella is strongly correlated with about a 60 percent decline of chicken carcass samples testing positive for Salmonella from 2006 to 2010. In 2016, USDA temporarily replaced posting information on individual plants’ performance for chicken and turkey carcasses, chicken parts, and comminuted poultry (e.g., ground), with information on aggregate results to allow time for plants to update their food safety systems. In January 2018, FSIS began reposting individual plants’ category status for poultry carcasses on a monthly basis. According to the agency’s annual plan for fiscal year 2017, USDA intends to resume publicly releasing individual plant performance information for turkey carcasses and to add data for plants producing chicken parts and comminuted chicken and turkey. The agency also intends to release data for plants producing some beef products, according to its 2016 strategic plan on publicly releasing data. Since our September 2014 report, FSIS officials said that they continue to believe that mandatory recall authority is not necessary for the reasons previously mentioned. According to FSIS officials, the agency continues to refine and improve its procedures for requesting voluntary recalls of adulterated and misbranded meat and poultry products, confirming the effectiveness of these recalls, and alerting the public about adulterated and misbranded products that may remain in commerce. Therefore, FSIS officials stated that the agency does not see the lack of mandatory recall authority as an obstacle or hindrance to its efforts to protect public health and ensure that meat and poultry products are safe, wholesome, and properly labeled. In contrast, FDA officials told us that having mandatory recall authority protects human health from foodborne illness because the agency does not have to rely upon manufacturers’ voluntary recall efforts or obtain a court order to remove contaminated or misbranded food, other than infant formula, from the food supply. In our review of FDA’s annual reports to Congress on the use of mandatory recall authority from 2013 to 2016, the most recent available, the agency has used its mandatory recall authority twice. The majority (12 of 17) of the stakeholders we interviewed stated that the absence of mandatory recall authority is not a challenge for FSIS in reducing pathogen contamination of meat and poultry products. However, according to 3 of 4 stakeholders from consumer groups and 1 of 4 food safety researchers we interviewed, acquiring mandatory recall authority would enable FSIS to better protect human health because the agency would then have an additional tool to stop an outbreak of foodborne illness and address the level of pathogens in products once they leave the plant. Insufficient Prevalence Estimates In September 2014, we found that the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter contamination in poultry products as a result of not having sufficient prevalence estimates. Prevalence is the proportion of a product that would test positive for a pathogen if the entire population of that product was sampled and analyzed during a specific period of time. FSIS collects and analyzes data to estimate the prevalence of pathogens when the agency develops or revises pathogen standards for products it regulates. However, we reported that there were numerous problems with the data FSIS used to estimate prevalence. For example, assessing levels of poultry pathogens across the entire industry was difficult using data from FSIS’s verification-testing program because the program was not designed to assess prevalence of pathogens industry-wide and the agency does not randomly select plants for inspection. According to USDA’s National Advisory Committee on Microbiological Criteria for Food, estimating the prevalence of pathogens in food is critical to understanding and addressing the public health risk of foodborne illness, and these estimates provide a mechanism for measuring performance against public health goals, among other things. FSIS officials told us at that time that the agency had plans to propose a new testing approach for all of its poultry products, which would allow for more frequent data collection and improve prevalence estimates, among other things. In 2016, FSIS implemented this new testing approach for all poultry products for which there are pathogen standards and for some meat products, but according to officials, the agency did not do so for all products that it regulates because of resource constraints. Specifically, according to a 2016 Federal Register notice, FSIS now routinely samples chicken and turkey carcasses, chicken parts (legs, wings, and breasts), and comminuted chicken and turkey for Salmonella and Campylobacter pathogens over an entire year—rather than a set period of time—based on the volume of poultry products produced in plants. It also uses this approach to test for Salmonella in ground beef, beef manufacturing trimmings, and other ground beef components, according to a 2014 Federal Register notice. This new approach allows for better prevalence estimates and for monitoring changes in prevalence over time, according to agency officials. As discussed earlier, FSIS began exploratory sampling of pork products, including pork cuts and comminuted (including ground) pork, in 2015. According to a 2017 agency notice describing the sampling, FSIS collects and analyzes samples of pork products in a way that allows for prevalence estimates. FSIS does not use the same approach to sample other products, such as raw components used in ground beef (e.g., esophagus, head meat, cheek meat, and hearts), chicken half carcasses, and chicken necks, because of limited resources, according to agency officials. These officials stated that the agency first conducts exploratory sampling—such as its current program for pork products—to determine if FSIS should allocate resources for routine sampling of these products that would allow for prevalence estimates. Conclusions To help ensure the safety of meat and poultry products and protect against foodborne illness, USDA’s FSIS has transitioned to an increasingly science-based, data-driven, risk-based approach. As part of this approach, FSIS has taken several actions to reduce levels of Salmonella and Campylobacter in poultry products, including strengthening existing pathogen standards for Salmonella in poultry carcasses and developing new Salmonella and Campylobacter standards for certain chicken parts. However, the agency has not set pathogen standards for many widely available products, such as pork cuts and ground pork, and the agency’s process for deciding which products to consider for new pathogen standards is not fully documented. Previously, FSIS has developed new pathogen standards after the agency has been directed to do so or after widespread outbreaks indicated the need. Until FSIS clearly documents its process for deciding which products to consider for new pathogen standards, including the basis on which such decisions should be made, FSIS will not have assurance that its decisions will be risk-based and that agency personnel will know the process when making such decisions. As part of its new approach, FSIS is collecting data that could enable it to set new pathogen standards for pork cuts and ground pork, and the agency is analyzing data that could lead to revising the Salmonella standards for beef carcasses and ground beef—which are decades old and not set at levels that are health protective. However, the agency has not set time frames for completing these efforts. In the absence of pathogen standards against which the agency tests, the agency is not using a valuable tool that could be used to help verify that plants’ processing controls to prevent, eliminate, or reduce food safety hazards are working. By setting time frames for determining what pathogen standards or additional policies are needed to address pathogens in these products, FSIS could better ensure it completes these activities in a timely manner to better protect human health. In addition, FSIS continues to face several challenges that hinder its ability to reduce the level of pathogens in meat and poultry products. For example, practices outside the slaughter plant, such as conditions on cattle, hog, and poultry farms, can affect levels of pathogens on meat and poultry products. To help overcome this challenge, the agency has developed draft guidance on practices for controlling levels of Salmonella and Campylobacter on beef cattle, hog, and poultry farms, but the draft guidance for hogs does not include available information on the effectiveness for each practice, as an internal agency committee recommended. As FSIS finalizes this guidance, FSIS could better inform industry of the potential benefits of adopting on-farm practices and encourage implementation of these practices by including available information on their effectiveness. Recommendations for Executive Action We are making three recommendations to FSIS. Specifically: The Administrator of FSIS should document the agency’s process for deciding which products to consider for new pathogen standards, including the basis on which such decisions should be made. (Recommendation 1). The Administrator of FSIS should set time frames for determining what pathogen standards or additional policies are needed to address pathogens in beef carcasses, ground beef, pork cuts, and ground pork. (Recommendation 2). The Administrator of FSIS should include available information on the effectiveness of on-farm practices to reduce the level of pathogens as it finalizes its guidelines for controlling Salmonella in hogs. (Recommendation 3). Agency Comments and Our Evaluation We provided a draft of this report to USDA and the Department of Health and Human Services. In written comments, reproduced in appendix II, USDA agreed with our three recommendations and described actions it will take to implement them. In particular, with respect to our first recommendation, USDA stated that FSIS will complete an internal document that delineates the agency’s process for creating or updating pathogen standards. However, USDA stated that although it agrees it can take additional steps to document its process, it does not agree that FSIS does not have assurance its decisions are risk based. In particular, it cited a Federal Register notice indicating that it designed its pathogen standards for chicken parts and comminuted chicken and turkey to achieve certain reductions in illnesses from Salmonella and Campylobacter. USDA also stated that FSIS has consistently documented and published its process in the Federal Register, and it noted that agency personnel use these Federal Register notices as guidance and historical reference. While these notices can be a useful historical record and document the steps FSIS took to ensure that agency decisions were risk-based, we continue to believe that, until FSIS clearly documents its process for deciding which products to consider for new pathogen standards going forward—including the basis on which such decisions should be made—FSIS will not have assurance that its decisions will be risk-based and that agency personnel know the process when making such decisions in the future. Completing documentation of the agency’s process would address our recommendation. Concerning our second recommendation, USDA stated that in 2018 FSIS will continue to assess data from sampling projects, along with baseline data and outbreak/illness data, to determine whether new or revised standards or additional policies are needed to address Salmonella in beef products. USDA further stated that in 2019, it will use data collected during its raw pork exploratory study to determine whether standards or additional policies (e.g., training, guidance to industry, or instructions to field personnel) are needed to address Salmonella in pork products. Finalizing analysis of these data and determining if additional standards or policies are needed to address Salmonella in beef in 2018 or pork in 2019 would address our recommendation. In response to our third recommendation, USDA stated that FSIS will include available scientific information on the effectiveness of each recommended farm practice in the guidelines for reducing Salmonella in market hogs. Doing so would address our recommendation. USDA also provided technical comments. We incorporated these comments as appropriate. The Department of Health and Human Services did not have any comments. As agreed with your offices, unless you publicly announce the contents earlier, we plan no further distribution of this report until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Administrator of the Food Safety and Inspection Service, and other interested parties. In addition, the report will be 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) 512-3841 or morriss@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 III. Appendix I: Salmonella Testing for Beef Purchased for the National School Lunch Program In addition to regulating meat and poultry sold in commerce, the U.S. Department of Agriculture (USDA) also purchases food and, in some cases, has additional food safety requirements for food it purchases. USDA’s Agricultural Marketing Service (AMS) purchases beef and other food for various federal nutrition assistance programs, including the National School Lunch Program. USDA provides this food to states in support of about 100,000 public and private nonprofit schools that provide lunches to about 30 million children. Ground beef is a staple of school menus. For example, according to AMS officials, during fiscal year 2016, the agency purchased more than 110 million pounds of raw beef, over 90 percent of which was delivered to the National School Lunch Program. Further, according to AMS officials, about 41 million pounds (37 percent) were delivered raw while the rest was delivered to a federally inspected processing facility for cooking prior to delivery to school lunch program agencies. Beef to be delivered raw to the National School Lunch program is tested for pathogens (Salmonella and Shiga-toxin-producing E. coli, two pathogens that can cause foodborne illness in humans) and certain microorganisms such as aerobic plate count bacteria, coliform bacteria, and generic E. coli that serve as indicators of the effectiveness of slaughter and processing plants’ process controls to limit pathogens. National School Lunch Program According to USDA, the National School Lunch Program is a federally assisted meal program operating in public and nonprofit private schools and residential childcare institutions. It provides nutritionally balanced, low-cost or free lunches to children each school day. The program was established under the National School Lunch Act, signed by President Harry Truman in 1946. USDA’s Food and Nutrition Service administers the program at the federal level. At the state level, the program is administered by state agencies, operating through agreements with school food authorities. Participating school districts and independent schools receive cash subsidies and food. In exchange, participating institutions must serve lunches that meet federal nutrition requirements and offer the lunches at a free or reduced price to eligible children. USDA’s Agricultural Marketing Service purchases beef and other food for various federal nutrition assistance programs, including the National School Lunch Program. According to AMS officials, these indicator microorganisms indicate the quality of the food safety controls at the plant. For raw beef products that AMS considers for purchase for its programs, the agency rejects any beef that tests positive for Salmonella, a pathogen that can cause foodborne illness in humans. According to AMS officials, this requirement that beef purchased for these programs not test positive for Salmonella differs from the regulatory standard for beef inspected by USDA’s Food Safety and Inspection Service (FSIS). Further, according to AMS officials, AMS set this requirement because raw beef was considered the product with the most risk for recipients and enough plants were able to meet the requirement. AMS officials said that as a purchaser for various federal nutrition assistance programs, the agency has discretion to set requirements for qualified suppliers, and plants can choose whether to become qualified suppliers. Appendix II: Comments from the U.S. Department of Agriculture Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Mary Denigan-Macauley (Assistant Director); Thomas Cook (Assistant Director); James R. Jones, Jr. (Assistant Director); David Bennett (Analyst in Charge); Kevin Bray; Cindy Gilbert; Cynthia Norris; Gloria Ross; and Kiki Theodoropoulos made key contributions to this report. Related GAO Products Foot-and-Mouth Disease: USDA’s Evaluations of Foreign Animal Health Systems Could Benefit from Better Guidance and Greater Transparency. GAO-17-373. Washington, D.C.: April 28, 2017. Antibiotic Resistance: More Information Needed to Oversee Use of Medically Important Drugs in Food Animals. GAO-17-192. Washington, D.C.: March 2, 2017. Food Safety: A National Strategy Is Needed to Address Fragmentation in Federal Oversight. GAO-17-74. Washington, D.C.: January 13, 2017. Seafood Safety: Status of Issues Related to Catfish Inspection. GAO-17-289T. Washington, D.C.: December 7, 2016. Imported Food Safety: FDA’s Targeting Tool Has Enhanced Screening, but Further Improvements Are Possible. GAO-16-399. Washington, D.C.: May 26, 2016. Food Safety: FDA Coordinating with Stakeholders on New Rules but Challenges Remain and Greater Tribal Consultation Needed. GAO 16- 425. Washington, D.C.: May 19, 2016. Federal Food Safety Oversight: Additional Actions Needed to Improve Planning and Collaboration. GAO-15-180. Washington, D.C.: December 18, 2014. Food Safety: USDA Needs to Strengthen Its Approach to Protecting Human Health from Pathogens in Poultry Products. GAO-14-744. Washington, D.C.: September 30, 2014. Food Safety: More Disclosure and Data Needed to Clarify Impact of Changes to Poultry and Hog Inspections. GAO-13-775. Washington, D.C.: August 22, 2013.

Why GAO Did This Study The U.S. food supply is generally considered safe, but the Centers for Disease Control and Prevention (CDC) estimate that Salmonella and Campylobacter in food cause about 2 million human illnesses per year in the United States. In 2014, GAO identified challenges USDA faced in reducing pathogens in poultry products, including standards that were outdated or nonexistent and limited control over factors that affect pathogen contamination outside of meat and poultry slaughter and processing plants, such as practices on the farm. GAO was asked to review USDA's approach to reducing pathogens in meat and poultry products. This report examines (1) the extent to which USDA has developed standards for meat and poultry products and (2) any additional steps USDA has taken to address challenges GAO identified in 2014. GAO reviewed relevant regulations, documents, and data and interviewed officials from USDA and CDC, as well as 17 stakeholders representing industry, consumer groups, and researchers selected based on their knowledge of USDA's meat and poultry slaughter inspections and food safety. What GAO Found To help ensure the safety of our nation's food supply, the U.S. Department of Agriculture (USDA) has developed standards limiting the amount of Salmonella and Campylobacter —pathogens that can cause foodborne illness in humans—permitted in certain meat (beef and pork) and poultry (chicken and turkey) products, such as ground beef, pork carcasses, and chicken breasts. However, the agency has not developed standards for other products that are widely available, such as turkey breasts and pork chops. Further, its process for deciding which products to consider for new standards is unclear because it is not fully documented, which is not consistent with federal standards for internal control. For example, USDA has informed stakeholders that it will take into account factors including consumption and illness data, but the agency has not documented this process going forward. Previously, USDA had developed new standards after widespread outbreaks indicated the need. For example, in 2016, USDA concluded that new standards were needed for certain poultry products to reduce Salmonella after reviewing outbreaks from these products in 2011, 2013, and 2015—outbreaks in which 794 people were sickened and 1 died. By documenting the agency's process for deciding which products to consider for new standards, USDA could better ensure that such decisions will be risk-based. USDA is taking steps to address challenges GAO identified in 2014 for reducing pathogens in poultry products, but these challenges are ongoing and could affect USDA's ability to reduce pathogens in meat as well. For example, one challenge GAO identified is that the level of pathogens in poultry products can be affected by practices on farms where poultry are raised. GAO recommended in 2014 that to help overcome this challenge, USDA guidelines on practices for controlling Salmonella and Campylobacter on farms include information on the effectiveness of each of the practices, consistent with a recommendation from a USDA advisory committee. Since GAO's 2014 report, USDA drafted revised guidelines to include information on the effectiveness of on-farm practices for controlling pathogens in poultry and beef cattle, in 2015 and 2017, respectively. However, USDA's draft guidelines for controlling Salmonella in hogs do not contain such information. By including such information as it finalizes its draft guidelines, USDA could better inform industry of the potential benefits of adopting on-farm practices included in the guidelines and encourage implementation of such practices. What GAO Recommends GAO is making three recommendations, including that USDA document its process for deciding which products to consider for new standards and that it include information on the effectiveness of on-farm practices in its guidelines for Salmonella control in hogs. USDA agreed with GAO's recommendations and described actions it will take to implement them.

gao_GAO-18-45

gao_GAO-18-45_0

Background Solid Rocket Motors (SRM) SRMs are the propulsion systems that propel various types of missiles and are also used in space launch activities, including the National Aeronautics and Space Administration’s (NASA) Space Shuttle program. Across the military departments, DOD has approximately 40 missile programs that currently use SRMs, including tactical programs such as the Army’s Guided Missile Launch Rocket System and the Navy and Air Force AIM-9X Sidewinder. As shown in figure 1, an SRM consists of a casing filled with solid propellant that, when ignited, expels hot gases through a nozzle to produce thrust. DOD describes the overall SRM components as being consistent among the missile types, although size and scale of propellant requirements vary. For example, tactical missiles use the smallest SRMs—ranging from about 3 inches up to 24 inches in diameter—and require between 3 and almost 1,600 pounds of propellant. Strategic missiles use large SRMs that exceed 40 inches, while missile defense systems utilize both small and large SRMs. Space launch SRMs can exceed 150 inches and can require more than a million pounds of propellant. In order to be used in a missile, the SRM and its components, such as the propellant ingredients or casing materials, are subject to testing to demonstrate that they meet DOD’s technical specifications and requirements. For instance, this testing can confirm that the construction of the SRM allows it to function at certain altitudes or in certain temperatures or environments required by the missile. The SRM is tested as a stand-alone item and as part of the overall missile system before production begins. By successfully completing testing, the missile becomes qualified, and the SRM and its components are deemed suitable to meet the missile’s specific requirements going forward. Any changes in the SRM or its components may require additional testing and, if the changes are significant or if there are multiple changes, may require the missile to be retested and thus, requalified—which DOD has noted is an expensive and time-consuming process that can take years and cost millions of dollars. SRM Supply Chain DOD relies on a multi-tiered supply chain to provide the SRMs that are used for missile propulsion. Industry representatives we spoke to estimate the supply chain extends to more than 1,000 suppliers that provide the raw materials, components, and sub-systems needed to manufacture the SRM. The missile’s prime contractors are ultimately responsible for delivering the missiles and for selecting and managing the subcontractors that manufacture the SRM. The SRM manufacturers then subcontract with suppliers that provide the components and materials used to manufacture the SRM. Those suppliers might, in turn, work with another tier of suppliers to meet their needs. For example, an SRM manufacturer may obtain the materials needed for the casing from a first- tier supplier. The first-tier supplier may obtain the materials and components it needs from multiple second-tier suppliers, and so on. According to DOD reports, the SRM supplier base, including the sub-tier suppliers, is nearly identical across missile defense, tactical, and strategic missile systems that use SRMs. Figure 2 is an illustrative version of the SRM supply chain. Historically, the demand for SRMs was mostly driven by their use in solid rocket boosters for NASA space programs, such as the Space Shuttle program. DOD has reported that NASA’s retirement of the Space Shuttle program in 2011 had a negative impact on the SRM supply chain as it led to decreased demand for SRMs and the related raw materials and components. Similarly, we reported in August 2017 that the demand for solid rocket motor propellant had dropped by more than 75 percent, from 20 million pounds to 5 million pounds, since the end of the Space Shuttle program. DOD has reported that these changing market conditions have resulted in excess capacity, where production demand is less than what is optimal to sustain the suppliers. Thus, excess capacity keeps SRM manufacturers from being cost competitive, which can jeopardize the viability of the manufacturers as well as their sub-tier suppliers. MIBP’s Role in Identifying Industrial Base Risks MIBP, which is part of the Under Secretary of Defense for Acquisition, Technology, and Logistics, is DOD’s primary representative for issues affecting the defense industrial base. MIBP officials told us they conduct analyses of risks affecting defense supply chains and provide information to decision makers, including required annual reports to Congress. These reports cover a wide range of industrial capabilities for various types of systems, including missiles. For example, in fiscal year 2014, MIBP assessed the fragility and criticality risks facing missile production, by analyzing factors that would cause potential disruptions and would be difficult to replace if disrupted. This assessment identified solid rocket motors as one of the key risks. While individual program offices and military departments are generally responsible for identifying risks within their own areas, MIBP officials stated that they coordinate and share information with relevant stakeholders for issues that affect multiple programs within or across the military departments. MIBP’s coordination role, according to these officials, includes participating in or leading various coordinating bodies within DOD or other federal departments. For example, MIBP leads the Joint Industrial Base Working Group, which shares industrial base information across DOD agencies and military departments. In addition, MIBP co-leads the Critical Energetic Materials Working Group, a DOD- sponsored entity that focuses on ensuring the near- and long-term availability of energetic materials such as those used in SRMs, and suggesting risk mitigation strategies. MIBP officials told us that they also conduct an annual data collection effort among the military departments and other DOD agencies to identify defense industrial base areas of risk and to learn about ongoing issues across the industrial base. In addition, they noted that MIBP works closely with the Industrial Analysis Group within the Defense Contract Management Agency (DCMA), which conducts assessments to identify industrial base risks facing individual acquisition programs at various points in the program’s life cycle and makes recommendations to program offices to help sustain a resilient and innovative defense industrial base. Additionally, DOD officials we spoke to said weapon program-specific risks are communicated through the military departments and to MIBP, which tracks them and determines their implications for the industrial base. Industry Trends Create Uncertainty for U.S. Solid Rocket Motor Suppliers Over the last 20 years, the SRM industrial base has consolidated from six to two U.S. manufacturers—Aerojet Rocketdyne and Orbital ATK. Both manufacturers produce the small and large SRMs used in tactical and missile defense systems, and Orbital ATK also produces SRMs for strategic missiles. A senior MIBP official told us that current DOD needs require two SRM manufacturers, but there is not enough demand to keep three companies economically viable. In DOD’s industrial base reports to Congress, MIBP has reported that, while other industrial sectors are supported by commercial markets in addition to government needs, SRM manufacturers cater largely to the defense and space missions of the government and generally do not have a commercial base that can sustain production when the federal government’s demand fluctuates. As a result, similar to the impact of NASA’s Space Shuttle retirement on the SRM supplier base, trends or decisions made in a particular program area can have broader effects and potentially result in cost increases for other programs. For example, we found that a company that is supporting space launch has decided to source its SRMs from Orbital ATK instead of Aerojet Rocketdyne, which had previously produced the motors. This arrangement will take effect in 2019, and Aerojet Rocketdyne officials said that it is consolidating its facilities to reduce costs due to excess production capacity for these types of large SRMs. According to DOD, the resulting impact may affect costs in Aerojet Rocketdyne’s remaining business units, including those that provide the smaller SRMs used for tactical missiles. DOD says that these costs would likely be passed on to the missile systems programs. Additionally, if Aerojet Rocketdyne decides to exit the large SRM market altogether, the lack of competition is likely to result in increased costs for other DOD programs that use large SRMs. When there is limited demand, then a small supplier base can also be impacted by competition from foreign suppliers. Specifically, in the past several years, the two U.S. manufacturers have faced competition from a foreign supplier, Nammo Raufoss, and, more recently in 2017, a newly established U.S. corporation, Nammo Energetics Indian Head, Inc. (NEIH). These two new entrants are both ultimately wholly owned by the same Norwegian parent company and, according to an MIBP official, have the potential to take away market share from the two longstanding domestic SRM manufacturers. Figure 3 shows the industry trends among SRM manufacturers. Nammo Raufoss, the foreign SRM manufacturer, began providing SRMs for the AMRAAM program in 2012, after the U.S. SRM manufacturer had encountered production challenges. According to an MIBP official, no U.S. SRM manufacturer, including the supplier at the time, was offered the opportunity to design a new SRM, which would have solved the production issues. Further, according to the MIBP official, the Norwegian government contributed funding to this effort. Additional funding was provided by the prime contractor—Raytheon—and the program offices, to develop, test, and produce the new SRM for AMRAAM. Currently, Nammo Raufoss provides SRMs for two tactical missile programs used by DOD—Evolved Sea Sparrow Missile and AMRAAM. The programs for which Nammo Raufoss provides SRMs accounted for approximately 4 percent of the tactical missiles procured by DOD in fiscal year 2017, a slight increase over the 3 percent share since it first provided SRMs for the AMRAAM missiles in fiscal year 2012. The remaining missile programs use SRMs produced by Aerojet Rocketdyne and Orbital ATK. While the missile prime contractor found it viable to turn to a foreign source for the AMRAAM program, Congress and DOD have been concerned about the potential negative impacts the addition of a foreign supplier could have on a fragile domestic SRM industrial base. For example, the Senate Appropriations Committee recently noted concerns about reduced spending and the use of foreign suppliers. Similarly, even though DOD recognizes that access to global markets provides the necessary competitive pressures to incentivize U.S. suppliers to remain competitive and control costs, it has also noted that there needs to be a commitment to investing in the U.S. SRM industrial base to develop and produce critical technologies for the next generation of weapon systems. Further, by law, DOD must limit specific conventional ammunition procurements to sources within the industrial base if it determines such limitation is necessary to maintain a facility, producer, manufacturer, or other supplier available for furnishing an essential item of ammunition or ammunition component in cases of national emergency or to achieve industrial mobilization. According to MIBP officials, the current threat to the existing U.S. SRM manufacturer from a foreign supplier is not great enough to force it from the market. Therefore, it is difficult to restrict SRM procurements to the U.S. industrial base. Instead, an MIBP official told us they have raised concerns to DOD program offices and missile prime contractors about expanding the use of the Norwegian SRM supplier, Nammo Raufoss, as this potentially could have a negative impact on the near- or long-term survivability of U.S. manufacturers. Moreover, our review found that the newly established NEIH as a U.S. SRM manufacturer also creates competition within the existing domestic supplier base and also raises uncertainty for Aerojet Rocketdyne and Orbital ATK. Specifically, NEIH is in the early stages of establishing its production capabilities, which includes remodeling the manufacturing facility at Indian Head, over the next three years. Further, an MIBP official told us that MIBP plans to monitor the competitive landscape among the three companies, but as NEIH is a U.S. company, it is considered a part of the domestic industrial base and would not be subject to DOD restrictions on foreign suppliers. At this stage, it is too early to tell how, if at all, the newest competitor, whose product line is focused on small SRMs, will disrupt the business of the two long-standing U.S. SRM manufacturers that produce large and small SRMs. Single Source Suppliers Drive Material Availability Risks but Mitigation Actions Underway During our review, we found that the decreased demand for SRMs has resulted in a loss of suppliers in the supply chain, increasing the risk that key components and materials are only available from single sources. Should such components and materials become unavailable, production delays could result. MIBP’s industrial base reports to Congress and our discussions with industry representatives showed increased awareness of supply chain risks and steps taken to identify and mitigate risks before they affect SRM production, including coordination of efforts to address key chemicals needed for SRM propulsion. Single Source SRM Suppliers Increase Risk As decreased demand for SRMs has contributed to the consolidation of manufacturers, a main concern for DOD and industry is the impact of similar reductions among the manufacturers’ sub-tier suppliers. According to MIBP’s reports to Congress, relying on a decreased number of sub-tier suppliers exacerbates the risk that needed SRM materials become unexpectedly unavailable and disrupt missile production. MIBP emphasizes that in the current lower-production environment, sub-tier suppliers who are primarily supporting defense and space missions rather than commercial businesses, must determine how to remain viable or decide to exit the SRM market. SRMs contain few commercial off-the- shelf components and a great number of defense-unique components, which leads to an extensive reliance on sole-source suppliers. Further, DOD reported that the missiles that are powered by SRMs experience rapid production during times of conflict. While surge production can create additional business opportunities, it is greatly impacted by the availability of materials and components that comprise the SRM for the missile. Industry representatives told us that managing complex supply chains is a part of their business, but noted that there has been a great deal of consolidation among SRM suppliers in recent years. One SRM manufacturer estimated that the supply chain has dropped from approximately 5,000 sub-tier suppliers to about 1,000 suppliers over the last 20 years. As a result, manufacturers are heavily dependent on only one supplier for some of the raw materials and key components of the SRM. For example, manufacturers provided us with information showing that they rely on a single company for ignition components for most of the tactical missiles they produce. Single Source Supplier Issues for the Advanced Medium-Range Air-to-Air Missile (AMRAAM) A U.S. manufacturer experienced problems with the propellant mixture used in the AMRAAM solid rocket motor (SRM). The root cause was not discovered, but experts believe that variation in the raw material for a particular propellant ingredient resulted in the SRM functioning differently than intended. As a result, Raytheon, the prime missile contractor, stopped accepting the manufacturer’s SRMs in 2010 and AMRAAM production was disrupted for about 2 years. At the time, Raytheon had been working to qualify a second SRM supplier. According to DOD, the qualification process was accelerated to speed up production of the missiles that were needed to support military operations. AMRAAM production resumed approximately 2 years after the SRM issues occurred. These dependencies increase as they move into the lower tiers of the supply chain. Components can be available from one source for either of the following two instances: (1) only one sole source is available for the material, component, or chemical and no other alternative exists; or (2) other suppliers exist, but only one single source supplier has been qualified or chosen to produce the item. Either situation poses a risk of disrupting the supply of SRMs and ultimately, the production of the missile. DOD officials noted that, even if other suppliers exist, it can be costly and time-consuming for them to be qualified as alternative sources. For example, in its assessments, DCMA has stated that energetic materials—which are used in SRM propellants—are among the most expensive components to requalify. As there are approximately 25 to 30 ingredients in the typical SRM’s propellant, changes in any of the ingredients require that the propellant be retested for effectiveness. Further, disruptions among single source suppliers can take place for other reasons besides leaving the market. Production changes, such as altering manufacturing processes or even relocating production facilities, can affect the material or component produced in unexpected ways. In addition, there has been a long-standing concern that SRM manufacturers are dependent on a single source supplier for an SRM propellant ingredient—ammonium perchlorate—as only one U.S. company is certified to provide this ingredient. The House version of the Fiscal Year 2018 National Defense Authorization Act calls for DOD to study the future costs and availability of ammonium perchlorate. MIBP officials told us they have conducted extensive analysis of the issues for this critical component, including two studies conducted in 2016. Industry’s Efforts to Manage Its Supply Chain Industry representatives from missile prime contractors and SRM manufacturers we spoke with said that managing their supply chain to ensure the availability of needed materials is a primary concern. Prime contractor representatives said that SRM subcontractors are generally expected to manage their suppliers and ensure that they suppliers can meet their contract requirements. However, the prime contractors said they are particularly involved when the risks relate to material availability. While losing a supplier is always a risk, they try to mitigate this through increased awareness of their supply chains and taking quick actions when risks are identified. To increase awareness, prime contractor representatives said they consider potential availability issues before contracts are awarded and include requirements that they be notified of these issues in their subcontracts, which the SRM manufacturers apply to their subcontract suppliers, in order to minimize surprises. One SRM manufacturer confirmed that it includes subcontract requirements for its own sub-tier suppliers to report any changes in the product, materials, or production location as soon as the change is known. In addition, both of the U.S. SRM manufacturers noted that they have staff dedicated to monitoring potential issues with supply chain availability. In one case, a manufacturer conducted a business continuity study that analyzed suppliers’ business plans for the next 5 years to identify potential problems. After issues—such as a financially fragile supplier—are identified, representatives said the key factor is the amount of time they have to mitigate the issue. In this respect, the U.S. SRM manufacturers we spoke with said their processes have improved in recent years and they receive more advanced notice when suppliers plan to exit the market, allowing them to take steps such as stockpiling supplies or making last buys while additional suppliers are identified. Taking such steps also allows time to more fully assess and take necessary steps—including qualifying a new supplier, if needed. DOD Efforts to Respond to Supply Chain Risks MIBP officials told us that they coordinate regularly with industry and the affected DOD program offices to be informed of potential issues in the supply chains, but noted that it can be challenging to be aware of SRM suppliers beyond the initial tiers. However, the officials said that through their coordination efforts—which include participating in multiple working groups with the military departments and DOD components, as well as NASA and industry—they are aware of the SRM sub-tier suppliers that are at the greatest risk. For example, MIBP co-leads the Critical Energetic Materials Working Group to track availability issues with the chemicals that DOD relies on, including SRM propellant ingredients. Officials said that MIBP also works closely with DCMA, which conducts industrial base assessments that provide additional insights into contractors’ supply chains. Further, officials said that MIBP is in the early stages of developing a business analytics tool to help them better understand the interdependencies in the sub-tier supplier base. Their hope is to be able to proactively identify risks, rather than wait for program offices or DCMA to elevate concerns to MIBP. DOD officials and industry representatives identified cases in which actions were taken when essential materials—typically chemicals—were at risk of becoming unavailable. For example, MIBP coordinated with other DOD stakeholders and industry to mitigate risks in the cases summarized in table 1. Additionally, an official said that MIBP is conducting a munitions industrial base resiliency study in 2017 that addresses, among other issues, how DOD plans for risks in the missile sector, particularly those related to the loss of qualified suppliers, including for SRMs. In September 2017, we reported that DOD program offices have limited information from contractors that would help them to identify and proactively manage risks stemming from a single source of supply for missile systems, among other items. We recommended that DOD develop a mechanism to ensure that program offices, such as those for missile programs, obtain information from contractors on single sources of supply risks. DOD concurred with this recommendation and indicated that modifications to current contractual regulations and policy would be beneficial. In light of DOD’s planned actions in response to our previous recommendation, we are not making any additional recommendations at this time. Manufacturing Engineers’ Solid Rocket Motor Design Skills Declining but Workforce Project Initiated MIBP’s annual industrial capabilities reports to Congress have consistently stated that the limited number of new missile development programs inhibits DOD’s ability to provide opportunities that maintain the workforce capabilities SRM manufacturers need to meet current and future national security objectives. These capabilities include engineering skills related to SRM concept designs, system development, and production, which are critical to meeting potential requirements for new SRM designs. With few new-start missile programs being initiated and decades-old programs having reached a steady state of design, SRM engineers are not typically engaged at the early stages of development and newer engineers have not fielded new SRM designs, thus creating a skills gap. According to reports from DOD, the lack of new programs for missiles has also limited opportunities to recruit and train the next generation of SRM scientists and engineers. The SRM manufacturers we spoke with also acknowledged experiencing attrition among workers with the requisite experience, as design experts are at or near eligibility for retirement. Industry representatives noted that engineers and chemists do not typically go to school to become SRM engineers, but must be trained by the SRM manufacturers. In a report to Congress, MIBP stated that one SRM manufacturer estimated that it can take up to 5 years to fully train SRM engineers or production workers. Key to this issue is the limited number of new missile programs or updates requiring new SRM designs, which would provide the workforce with development opportunities that DOD and industry find to be critical. Current research and development efforts are generally limited to updates or modifications for legacy missile programs, rather than for new missile programs. For example, the Joint Air-to-Ground Missile, a tactical missile program that officials said has started and stopped development several times since the late 1990s, had planned to incorporate a new SRM design. However, due to budget limitations and affordability concerns related to the SRM, the program opted to use a legacy SRM from the Hellfire missile, which has been in production since 1982. While the legacy SRM requires some modifications to change the casing material from steel to composite materials that are stable enough to withstand fire, mechanical shocks, and shrapnel, yet still burn correctly to propel the warhead and destroy the intended target, it does not involve the same level of skill as is needed to design new SRMs. Similarly, a DOD official said the AIM-9X program proposed designing a new SRM, but this plan was later abandoned due to concerns about the overall program costs. There are currently only two missile programs—Army’s Long Range Precision Fire missile and the Navy’s Advanced Anti-Radiation Guided Missile Extended Range—planning to use new solid rocket motor designs. Although these programs present opportunities for industry to develop SRM design skills, MIBP does not believe it will close the current skills gap. Further, MIBP officials said they have raised concerns that the use of foreign SRM suppliers results in fewer opportunities for domestic SRM manufacturers such as exercising their design skills. For example, MIBP noted that domestic engineers did not have the chance to design the new SRM used by AMRAAM. In its reports to Congress, MIBP has stated that the loss of design capabilities could result in costly delays and unanticipated expenses and impair DOD’s readiness to support existing systems and field new capabilities. One of the elements that heighten SRM criticality for missile systems is the long lead time for restarting production in the event of stoppage. Specifically, one MIBP report stated that SRM manufacturers estimated that it can take from 3 to 5 years to fully restart if there is some ongoing production, and up to 8 years if production has completely ceased. In addition, according to MIBP, restarting production processes would incur costs, including those associated with retraining engineers. MIBP also indicated that the loss of SRM capabilities could delay future development of missile programs by 5 to 10 years. MIBP has an effort underway intended to address these diminishing design skills. According to MIBP officials, in 2016 they awarded a 4-year risk mitigation project that will provide approximately $14 million to Orbital ATK and Aerojet Rocketdyne during the course of the project. The purposes of the project are to provide opportunities for the SRM manufacturers to develop new SRM design skills for less experienced engineers and mature advanced technologies. The engineers will incorporate technology into a new SRM as designed by each company. According to an official, MIBP provided general guidelines for the resulting SRM, but purposely did not provide strict specifications in an effort to allow engineers to identify their own solutions for a new motor design. Agency Comments We are not making recommendations in this report. We provided a draft of this report to DOD for comment. DOD reviewed the draft and offered technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, 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) 512-4841 or makm@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 the appendix. Appendix: GAO Contact and Staff Acknowledgments GAO Contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. Staff Acknowledgments In addition to the contact named above, Candice Wright (Assistant Director), Alyssia Borsella, Jennifer Dougherty, Leigh Ann Haydon, Emily Bond, Lorraine Ettaro, Kurt Gurka, and Roxanna Sun made key contributions to this report.

Why GAO Did This Study DOD relies on a multi-tiered supply chain to provide SRMs, the propulsion systems behind the various missile systems that provide defense capabilities to meet U.S. national security objectives. The SRM industrial base includes manufacturers that turn to an extensive network of suppliers that provide the raw materials, components, and subsystems needed to build SRMs. DOD is responsible for developing a strategy for the national industrial base that ensures that defense contractors and their suppliers are capable of providing the goods and services needed to achieve national security objectives. GAO was asked to review the state of the U.S. industrial base for SRMs. This report addresses (1) SRM industry trends, (2) single source supplier risks, and (3) opportunities for SRM manufacturers' engineering workforce development. GAO analyzed DOD's annual industrial capabilities reports to Congress for fiscal years 2009 through 2016, which reflect DOD's most current information on SRM risks, and reviewed DOD budget data and information from missile prime contractors and SRM manufacturers. GAO also interviewed missile prime contractors, SRM manufacturer representatives, and officials from DOD and the military departments. What GAO Found Over the past two decades, the solid rocket motor (SRM) industrial base has undergone various changes including consolidation and recent expansion. Specifically, since 1995, the industry has consolidated from six U.S. manufacturers to two U.S. manufacturers. With regard to expansion, a foreign supplier entered the market in 2012, and in 2017, a U.S. firm, which is ultimately foreign-owned, was also established. According to the Department of Defense (DOD) while it supports competition, its current demand for SRMs can only sustain two manufacturers. Although at this stage it is too early to know how, or if, these new entrants will impact the economic viability of the more long-standing U.S. manufacturers. The consolidation in the SRM industrial base has also been accompanied by a decrease of suppliers throughout the supply chain. For example, one SRM manufacturer estimated a decrease in suppliers, from approximately 5,000 to 1,000, over the last 20 years. This increases the risk of production delays and disruptions in the event that key components and materials available from a single source become unavailable from that source. GAO found that DOD and industry are taking steps to identify and mitigate these risks, such as by establishing alternative sources and requiring advance notice when suppliers are considering exiting the market. In its annual industrial capabilities reports to Congress, DOD has consistently stated that the limited number of new missile development programs inhibits its ability to provide opportunities to help SRM manufacturers maintain their workforce capabilities. Specifically, with few new missile programs being initiated, engineers have had fewer opportunities to develop their engineering skills related to SRM concept designs, system development, and production, which are critical if SRM performance issues arise. However, in 2016, DOD funded a 4-year project to enhance engineering design skills for less experienced engineers working for the two U.S. manufacturers and help them develop advanced SRM technologies. What GAO Recommends GAO is not making recommendations at this time.

gao_GAO-18-453

gao_GAO-18-453_0

Background The Puget Sound basin—the southern half of the transboundary Salish Sea—consists of about 19 major watersheds, according to EPA, and spans much of western Washington State and portions of British Columbia, Canada, as shown in figure 1. The basin covers more than 10,000 square miles, including about 2,800 square miles of inland marine waters and thousands of rivers and streams. The Puget Sound basin features a wide variety of land uses, including highly urbanized areas, agricultural lands, large swaths of commercial forests, and areas that are largely protected from development, such as national parks and wildlife refuges. The Puget Sound Partnership has identified numerous environmental stressors that threaten Puget Sound and that have impaired water quality. In particular, the Partnership has reported that nonpoint sources of pollution, such as polluted stormwater runoff from roads and agricultural fields, are the biggest threats to Puget Sound water quality. Polluted stormwater runoff can also threaten sources of drinking water and carries toxic chemicals, nutrients, sediment, and bacteria into Puget Sound, where these pollutants can harm aquatic life. For instance, a 2017 study found that toxic stormwater runoff is linked to the high rates of adult coho salmon mortality that have been observed in some urban streams in central Puget Sound. Moreover, fish, shellfish, and other species that are contaminated by toxic chemicals and other pollutants in Puget Sound may subsequently pose a threat to other marine wildlife and to humans that consume them. For example, in 2017 the Partnership reported that approximately 16 percent of the roughly 225,000 acres managed for commercial shellfish harvesting in Puget Sound were closed because of water pollution caused by fecal bacteria from sources such as failing septic systems and agricultural runoff. Such closures have economic impacts, as Washington State is the country’s leading producer of farmed oysters, clams, and mussels, and much of this production comes from the Puget Sound region. In addition, contaminated shellfish may pose potential health threats to people who consume it, including tribes that rely on shellfish for subsistence and ceremonial uses. Human activities have also degraded habitats that salmon and other marine species depend on for survival. The Partnership has reported that some of the primary threats to Puget Sound habitats include hardened shorelines (such as shorelines that have been armored with seawalls), filled estuaries, channelized rivers, and altered floodplains. These threats affect habitats in various ways. For example, according to a 2018 Washington State report, seawalls interfere with natural coastal processes and cause beaches to erode, which in turn can decrease and degrade habitat for fish, birds, and wildlife. The report states that about 27 percent of the shoreline in Puget Sound has been armored by structures such as seawalls. Figure 2 illustrates the sources of water quality impairment and habitat degradation in the Puget Sound basin. Federal laws, including the Clean Water Act and the Endangered Species Act, play a role in addressing water quality issues and habitat degradation in Puget Sound. The Clean Water Act’s objective is to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. A 1987 amendment to the act created the National Estuary Program to, among other things, identify nationally significant estuaries that are threatened by pollution, development, or overuse, and promote comprehensive planning for, and conservation and management of, such estuaries. The National Estuary Program calls for management conferences to be convened for designated estuaries of national significance to, among other things, develop a comprehensive conservation and management plan (CCMP). The current CCMP for Puget Sound is The 2016 Action Agenda for Puget Sound, a document developed to meet both federal and state requirements. By federal statute, when selecting estuaries and convening management conferences, EPA is to give priority consideration to certain named estuaries, including Puget Sound. Under the act, EPA also works with Washington State to regulate water quality. The Endangered Species Act was enacted to, among other things, provide a means to conserve the ecosystems upon which endangered and threatened species depend and to provide a program for the conservation of such species. Several species in the Puget Sound basin are listed as endangered or threatened, including bull trout, Chinook salmon, Southern Resident Killer Whales (a population that spends spring, summer, and fall months in the Salish Sea, including Puget Sound), northern spotted owl, and steelhead trout. In addition to environmental laws that relate to Puget Sound waters and species, tribal treaty rights play an important role in restoration efforts within the basin’s watersheds. In particular, 19 federally recognized tribes are within the Puget Sound basin, and many of them have explicit treaty rights to the fish in Puget Sound waters. In 1974, a federal court held that the treaty tribes had the right to take up to 50 percent of the harvestable fish in areas where fishing rights had been reserved, an allocation upheld by the Supreme Court in 1979. In 1994, a federal court stated that tribes were also entitled to take half of the harvestable shellfish on most Washington beaches. According to several federal officials we interviewed, considerations relating to tribal treaty fishing rights have served as an important catalyst for some federal agencies’ restoration activities, particularly with regard to restoring and protecting habitat. Federal and State Entities Carried Out Numerous Efforts that Supported Puget Sound Restoration Using a Variety of Funding Sources, but Total Expenditures Are Unknown Federal and state entities we surveyed identified numerous federal and state efforts that, in whole or in part, supported Puget Sound restoration from fiscal years 2012 through 2016. Some of these efforts focused exclusively on restoration activities in the Puget Sound basin, while others had a broader national, regional, or statewide focus or had a broader scope of work that did not center directly on restoration activities. These efforts were supported by a variety of federal and nonfederal funding sources, such as EPA’s National Estuary Program and Puget Sound Geographic Program, which together expended about $142 million for activities in Puget Sound during this time frame according to EPA data. However, total expenditures across all restoration efforts are unknown, in part because of data limitations such as difficulties isolating expenditures specific to the Puget Sound basin for some efforts. Federal and State Entities Carried Out Numerous Restoration Efforts that Varied in Geographic and Programmatic Scope Through their responses to the first phase of our survey, officials from federal and state entities identified numerous efforts that supported Puget Sound restoration from fiscal years 2012 through 2016. Specifically, respondents from federal entities identified 73 federal efforts, and respondents from state entities identified 80 state efforts that, in whole or in part, supported Puget Sound restoration during this period. Appendix II lists the restoration efforts identified by federal entities, and appendix III lists the restoration efforts identified by state entities. According to the survey responses, the federal and state entities often worked with local governments, tribal entities, and nongovernmental organizations to carry out these efforts. These efforts primarily involved six types of restoration activities (see table 1). The federal and state restoration efforts carried out during this time period varied in geographic scope. Some of the efforts survey respondents reported focused exclusively on the Puget Sound basin, such as Washington State’s Puget Sound Acquisition and Restoration Fund. According to agency fact sheets, this fund has helped state agencies, local governments, and others carry out projects that address high-priority salmon habitat protection and restoration needs in Puget Sound. Other efforts that supported restoration activities in Puget Sound during the time frame we reviewed have a broader national, regional, or statewide focus. For example, EPA’s section 319 nonpoint source management program is a nationwide program that supports state and tribal efforts to address nonpoint sources of pollution. Within Puget Sound, EPA’s data show that the section 319 program has supported activities such as carrying out projects that target nonpoint source pollution from urban areas, agricultural lands, and marinas. The federal and state restoration efforts survey respondents identified also varied in programmatic scope, with some efforts focusing exclusively on restoration-related activities and other efforts supporting such activities within a broader scope of work. Through the U.S. Fish and Wildlife Service’s National Coastal Wetland Conservation Grant Program, Washington State carried out activities specifically aimed at restoring wetlands, estuaries, and marshes in Puget Sound. In contrast, some efforts survey respondents cited had a broader scope of work that did not center directly on restoration but included some activities that also benefited Puget Sound restoration. One such effort was the Natural Resources Conservation Service’s Environmental Quality Incentives Program, which helps farmers carry out conservation practices on agricultural land. According to agency documentation, such as the program’s website, some of these practices, such as those that reduce the amount of sediment and nutrients entering waterways, can also help improve water quality in the Puget Sound basin. A Variety of Federal and Nonfederal Funding Sources Support Restoration Efforts, but Total Expenditures Are Unknown Funding for Puget Sound restoration efforts has come from a wide variety of federal and nonfederal entities. At the federal level, some agencies, such as EPA and the National Oceanic and Atmospheric Administration (NOAA), supported restoration efforts by providing funds to other federal or nonfederal entities to carry out restoration projects. In contrast, other agencies, such as the U.S. Army Corps of Engineers, directly carried out restoration activities in Puget Sound, sometimes working in conjunction with nonfederal entities. Based on our analysis of survey responses and interviews with agency officials, we selected the following examples of federal programs to show the diversity in federal funding approaches in support of Puget Sound restoration and to illustrate how federal funds have been leveraged to obtain nonfederal contributions in support of restoration efforts. EPA’s National Estuary Program. According to EPA’s website, this program aims to protect and restore the water quality and ecological integrity of designated estuaries of national significance, such as Puget Sound. EPA Region 10 officials stated that the agency uses funds from this program in conjunction with funds from EPA’s Puget Sound Geographic Program to support restoration efforts. According to data provided by EPA, these programs together expended about $142 million for activities in Puget Sound from fiscal years 2012 through 2016. EPA provided most of these funds through grants to state and tribal entities. According to EPA Region 10 officials we interviewed, EPA requires an overall dollar-for-dollar nonfederal match for these grants, and the officials stated that the National Estuary Program funds have been leveraged to obtain significant nonfederal funding support for Puget Sound restoration efforts. For example, the Floodplains by Design program, a joint effort led by The Nature Conservancy and state agencies to restore natural floodplain functions, has used National Estuary Program funds to help leverage nonfederal funding support, according to the EPA officials. NOAA’s Pacific Coastal Salmon Recovery Fund. Under this program, NOAA awards funds through grants to state and tribal entities to carry out salmon recovery activities in five western states. In Washington State, NOAA provided funds to the Washington State Recreation and Conservation Office and the Northwest Indian Fisheries Commission for use in Puget Sound and other areas. According to data and estimates provided by NOAA, as of November 2017 these entities had expended or allocated about $59 million from this program for activities in the Puget Sound basin from fiscal years 2012 through 2016. This program requires a 33 percent match from state agencies, such as the Washington State Recreation and Conservation Office, that receive funds, and NOAA officials we interviewed said that Washington State usually exceeds this matching requirement. For example, a 2015 NOAA report cites a habitat restoration project in Puget Sound that received about $117,000 from the Pacific Coastal Salmon Recovery Fund and secured an additional $1.75 million in matching and other funds. Corps’ Puget Sound and Adjacent Waters Restoration Program. Under this program, the Corps carries out habitat restoration projects in Puget Sound in conjunction with nonfederal entities, such as cities. In 2000, Congress created this program and authorized $40 million to be appropriated to carry out the program. As of November 2017, the Corps had expended approximately $12 million over the life of the program on five restoration projects, according to data provided by the Corps. This program includes a cost-sharing requirement for the participating nonfederal entity to contribute at least 35 percent of the total project costs. Survey respondents cited nonfederal funds as the exclusive source of funding for about one-third of the state efforts presented in appendix III. For example, Washington State’s Puget Sound Acquisition and Restoration Fund, which the Partnership and the Washington State Recreation and Conservation Office jointly manage, has been a significant source of nonfederal funding for habitat restoration projects. According to expenditure data provided by the Partnership, the Puget Sound Acquisition and Restoration Fund expended approximately $100 million on restoration projects throughout Puget Sound from state fiscal years 2012 through 2016. In its response to our survey, the Recreation and Conservation Office stated that these projects included culvert replacements, levee setbacks, and acquisition of important habitat, among other things. When carrying out specific restoration projects in Puget Sound, federal and nonfederal officials we interviewed said that project managers may need to secure funds from multiple federal and nonfederal sources, such as the federal and state programs discussed above. According to tribal and local participants in our discussion groups, their experiences carrying out restoration projects has similarly shown a need to piece together multiple sources of funding for some projects. The discussion group participants said that this need commonly arises with expensive and complex projects that take a long time to complete, as reflected in the project examples below that involved tribal and local entities. Qwuloolt Estuary Restoration Project. According to a project fact sheet and officials, this project restored more than 350 acres of estuary habitat in the Snohomish River Delta that had previously been converted into farmland. By breaching existing levees and taking other actions to reestablish natural stream channels and allow for tidal inundation of the historic floodplain, this project aimed to restore salmon habitat and improve water quality in the estuary (see fig. 3). In 2016, NOAA reported that this project had led to improvements in salmon abundance, productivity, and diversity. The Tulalip Tribes of Washington served as the overall project manager and worked with numerous federal, state, and local partners to complete this project, which took more than 20 years and ended in 2015. According to tribal data, this project cost about $21 million and received funding from more than 20 federal, state, tribal, and local sources. Federal funds accounted for a little more than half of this amount; the Corps contributed the largest amount, around $5 million, using funds from the Puget Sound and Adjacent Waters Restoration Program. Seahurst Park Shoreline Restoration Project, Phase II. This phase of the project lasted from 2007 to 2014 and included removing about 1,800 feet of seawall, creating a small wetland, and restoring shoreline habitat at a coastal park in Burien, Washington (see fig. 4). Through these actions, this project aimed to improve nearshore marine habitat for salmon and other species, restore natural sedimentation processes, and improve recreational access to Puget Sound. The city of Burien led this effort in conjunction with the Corps. According to documentation provided by the city and the Corps, this phase of the project cost about $10 million and received funding from at least seven federal, state, and local sources, including EPA’s National Estuary Program, the Corps’ Puget Sound and Adjacent Waters Restoration Program, and Washington State’s Puget Sound Acquisition and Restoration Fund. As shown in the program and project examples above, we obtained expenditure information for a selection of programs and projects to help illustrate how federal and nonfederal funds have been used to support Puget Sound restoration. However, we found that the total amount of expenditures incurred for Puget Sound restoration across all federal and nonfederal efforts for fiscal years 2012 through 2016 is unknown. We identified two primary barriers to determining the total amount of expenditures. First, data limitations present challenges to obtaining accurate and consistent expenditure data across entities. For example, federal and state agency officials said that for some national and statewide programs, it is difficult to isolate expenditures specific to the Puget Sound basin or to quantify expenditures related to staff time that supported restoration-related activities. Second, no comprehensive database of Puget Sound restoration activities and expenditures exists. This issue was identified by the Washington State Joint Legislative Audit and Review Committee in its 2017 audit of the Puget Sound Partnership, which recommended that the Partnership and the Washington State Office of Financial Management develop a plan to create a more complete inventory of restoration efforts and related funding. Both agencies concurred with the recommendation, and the Partnership reported in December 2017 that a more complete inventory of efforts and funding would significantly enhance the agency’s ability to prioritize actions and recommend strategic investments. The Partnership reported that it plans to develop such an inventory by August 2019. Federal and Nonfederal Entities Have Taken Steps to Coordinate Restoration Efforts and Identified Both Benefits and Challenges to Interagency Coordination Federal and nonfederal entities have established two primary interagency groups, the Puget Sound Management Conference and the Puget Sound Federal Task Force, to coordinate Puget Sound restoration efforts at the strategic level. Coordination also occurs at the project level and, according to our discussion group participants, has been most effective under certain circumstances, such as when written plans and agreements are in place to help entities work together across their normal jurisdictions. Federal and nonfederal entities provided their views on the benefits produced by the management conference and the federal task force as well as challenges that could limit the effectiveness of these groups, such as not having had continuous national-level leadership for the federal task force. Federal and Nonfederal Entities Coordinate Restoration Efforts at the Strategic Level through Two Primary Interagency Groups Federal and nonfederal entities coordinate at the strategic level to, among other things, identify goals, develop strategies to achieve the goals, and set priorities for action. This coordination primarily occurs through two main interagency groups: the state-led Puget Sound Management Conference, which started in its current form in 2007, and the Puget Sound Federal Task Force, which started in 2016. Each group has developed a planning document to guide its efforts. Figure 5 provides an overview of each group’s structure and planning document. The management conference serves as the governance structure for Puget Sound restoration under the National Estuary Program and helps set the general direction for the restoration effort. To do so, the management conference brings together federal and nonfederal entities under a common planning process led by the Partnership to develop and periodically update the CCMP. EPA’s Region 10 office then works with EPA’s National Estuary Program national office to review and approve any new or updated CCMPs developed by the management conference. The CCMP serves as the primary planning document for Puget Sound restoration and identifies proposed near-term actions to help restore the Sound, nearly all of which are to be carried out by nonfederal entities. For example, one of the proposed near-term actions calls for a local university to sample contaminants of emerging concern in regional waters to help characterize risks and prioritize follow-up actions. The Puget Sound Federal Task Force complements the work of the management conference by coordinating the efforts of federal agencies in support of the CCMP and by helping these agencies work together to fulfill federal trust responsibilities to the tribes as they relate to The Puget Sound Federal Task Force Action Plan (Fiscal Years 2017-2021) (Federal Action Plan). The task force was created through a memorandum of understanding signed by nine federal agencies as of October 2016, and in January 2017 the task force released its Federal Action Plan, which is currently in draft form. The federal task force consists of a national-level leadership group—which focuses on higher-level policy, oversight, and coordination issues—and regional leadership and implementation teams that perform much of the on-the-ground implementation and coordination work of the task force. The national-level group is co-chaired by the Council on Environmental Quality (CEQ) and a co-chair that rotates among the other agencies. The task force’s regional teams are led by EPA’s Region 10 and a co-chair that rotates among the other agencies. According to EPA Region 10 officials, the draft Federal Action Plan developed by the task force is not intended to be a strategic plan with its own overarching restoration objectives. Instead, the federal task force used the priorities established in the CCMP and tribal documents, as well as salmon recovery priorities, as the basis for developing its draft Federal Action Plan, which identifies priority federal actions to help protect and restore Puget Sound. For example, to support the habitat-related priorities established in the 2016 CCMP and elsewhere, the draft Federal Action Plan identifies more than 40 priority federal actions that focus on protecting and restoring habitats, such as by removing fish passage barriers and implementing projects to restore estuaries. Federal and Nonfederal Entities Coordinate at the Project Level in Various Ways Based on our interviews with federal and nonfederal officials and the local and tribal discussion groups, federal and nonfederal entities coordinate at the project level to plan, secure funding for, and carry out specific restoration actions, such as projects to improve water quality or restore habitat in a particular location. According to federal officials, federal involvement at the project level varies and may range from providing funding to being more directly involved in project planning and implementation. Participants in our discussion groups said that local and tribal entities often lead the on-the-ground planning and implementation of restoration projects, including coordinating with other participating entities throughout a project’s lifecycle. For example, the Qwuloolt Estuary Restoration Project we previously discussed was largely led by a local tribe that coordinated the involvement of numerous federal, state, local, and nongovernmental entities throughout project planning, permitting, and implementation. The management conference recognizes nine local integrating organizations—local groups made up of various local, tribal, and other nonfederal participants—to, among other things, guide the implementation of the CCMP’s priorities at a local scale in specific geographic areas of Puget Sound. In addition, 15 salmon recovery lead entities, which are local watershed-based organizations that develop local salmon habitat recovery strategies and manage projects to implement the strategies, are active in the Puget Sound region. Representatives from these local integrating organizations, salmon recovery lead entities, and tribal entities participated in our moderated discussion groups and identified several factors that have helped to facilitate effective collaboration among entities on restoration projects. Some of the factors discussion group participants commonly cited were consistent with key features that we have previously identified as benefiting interagency collaboration, including: Involving all relevant participants. Discussion group participants highlighted the importance of ensuring that the appropriate entities are involved to bring together a broad range of knowledge, skills, and expertise in support of restoration projects. For example, one discussion group participant commented that his local organization’s ability to partner with both government and nongovernmental entities and harness their talents has enhanced its efficiency in carrying out restoration projects. Other participants stated that an important part of successfully involving all relevant participants has been early engagement with members of the local community to identify priorities and vet projects. In addition, several participants described projects that could not have been carried out without the financial, technical, and political support of diverse partners. Ensuring that the appropriate entities are involved is consistent with our previous work on interagency collaboration, which found that it is important to ensure that all relevant participants have been included in collaborative efforts, including federal agencies, state and local entities, and organizations from the private and nonprofit sectors. Bridging organizational cultures to build trust. Discussion group participants cited the long-standing relationships that have been built over time among different restoration partners as critical to developing the level of trust needed for project-level collaboration to succeed across organizational boundaries. For example, one participant said that having long-standing collaborative relationships with other partners has helped her local organization identify, secure funding for, and carry out good restoration projects. Another participant described a separate example of a local watershed council that has met monthly for 30 years, explaining that these meetings have developed a level of trust among the key partners that helps them work toward common goals and deal with difficult issues. We have previously reported that different agencies participating in any collaborative mechanism bring diverse organizational cultures to it. Accordingly, it is important to address these differences to enable a cohesive working relationship and to create the mutual trust required to enhance and sustain the collaborative effort. We have also reported that positive working relationships among participants from different agencies help to bridge organizational cultures, build trust, and foster communication, which then facilitates collaboration. Having written plans and agreements. Discussion group participants also described the benefits that have resulted from having local plans and agreements in place to help entities work together across their normal jurisdictions on restoration projects. For example, according to one local discussion group participant, the decades-old formal agreement among the local governments within his watershed was a fundamental reason for the restoration successes they achieved. The participant explained that this agreement has helped the local governments look beyond their immediate jurisdictions and think more broadly about priorities for the entire watershed. We have previously reported that agencies that articulate their agreements in formal documents can strengthen their commitment to working collaboratively. According to Federal and Nonfederal Entities, the Steps Taken to Coordinate Restoration Efforts Have Yielded Benefits, but Challenges Remain that May Limit Effectiveness Federal and nonfederal entities we surveyed and interviewed identified benefits produced by the steps taken to coordinate restoration efforts, including the development of the management conference, the federal task force, and their respective planning documents. Federal and nonfederal officials generally described the management conference as having provided an effective forum for different entities to share their diverse views and work collaboratively to address priority restoration issues in Puget Sound. Moreover, officials said that the management conference has helped Puget Sound restoration by enabling federal and nonfederal entities to identify common goals and develop strategies to achieve the goals, among other things. These benefits are consistent with our previous work on interagency collaboration, which found that defining and articulating common outcomes and establishing strategies to achieve them are practices that can enhance and sustain collaboration. Federal officials credited the federal task force, and in particular the task force regional teams, with having helped to improve communication and coordination of efforts among federal agencies by bringing together a broad group of agencies to focus on issues surrounding Puget Sound restoration and tribal treaty rights. Other benefits of the task force that survey respondents identified include providing national-level awareness of restoration activities and providing a forum for nonfederal entities to engage with federal agencies on restoration or species-related issues. Federal and nonfederal entities also identified strengths of the key planning documents that the management conference and federal task force developed to help coordinate Puget Sound restoration efforts, based on our interviews and our analysis of survey responses. For example, 8 of the 27 federal and state entities that responded to our survey said the 2016 CCMP provides a clear blueprint or road map for the restoration of Puget Sound that helps guide restoration efforts in a common direction. In the case of the draft Federal Action Plan, survey respondents from 7 of the 27 federal and state entities said that one of the plan’s primary strengths is that it clearly defines a list of priority federal actions and identifies roles and responsibilities for implementing them. This is consistent with our previous work on interagency collaboration, which found that agreeing on roles and responsibilities is a leading practice that can help enhance and sustain collaborative efforts. In addition, one federal survey respondent credited the development of the draft Federal Action Plan with helping to raise awareness among federal agencies of each other’s efforts, which the respondent said has led to improved coordination. Federal and nonfederal entities also identified challenges the management conference faces that could limit its effectiveness as an interagency coordinating group. For example, according to Partnership officials we interviewed, within the management conference there are differing views and disagreements about how to balance local versus regional perspectives and decision-making authorities. In addition, some federal and nonfederal entities described the planning process to produce the CCMP as overly burdensome and frustrating. The Joint Legislative Audit and Review Committee’s 2017 audit of the Partnership similarly reported on frustration and planning fatigue among the entities they interviewed that stemmed from the frequency of plan updates, which state law had required take place every 2 years. In 2017, Washington State amended the law to extend the required planning cycle to every 4 years, which the Partnership said should result in a more effective use of time for the agency and its partners. We also found, through our analysis of agency documents and interviews with federal officials, that the federal task force faced an additional challenge that it has since addressed. Specifically, the federal task force did not have continuous leadership at the national level because the task force’s national leadership group was inactive for more than a year beginning in January 2017. During this time, CEQ, the permanent co- chair of the national-level task force leadership group, did not convene the group for meetings, and there was uncertainty about who would represent some agencies after the change in administration and subsequent changes in agency personnel, according to officials from the task force agencies. EPA Region 10 officials said that the federal task force’s regional implementation team remained active during this period and facilitated continued engagement among federal agencies and nonfederal partners at the regional level. Nevertheless, without an active national-level leadership group in place, the federal agencies did not have a fully functioning task force and were not in a position to fulfill some of the task force’s responsibilities under the memorandum of understanding, such as approving a federal action plan. In April 2018, a senior CEQ official informed us that CEQ had taken action in response to our discussions with CEQ staff about this challenge and convened a meeting of the national-level task force group on April 4, 2018. In addition, according to the CEQ official, the task force agencies have committed to working together going forward and plan to continue meeting. By working with the other federal agencies to hold this meeting and secure this commitment, CEQ has taken an important step toward addressing the challenge we identified and ensuring that national-level leadership is in place for the federal task force. The CCMP Lays Out a Framework for Assessing Progress toward Puget Sound Restoration, but Assessment of Progress Has Been Limited in Some Instances The CCMP lays out the primary framework for assessing progress toward Puget Sound restoration, including six high-level goals created by state law and a variety of associated indicators and targets. The Partnership leads the management conference’s efforts to assess restoration progress under this framework, but its assessments have been limited because of insufficient data and because targets have not been established for all indicators. In addition, we found that the federal task force has limited ability to assess how the implementation of the Federal Action Plan, which is currently in draft form, contributes to overall restoration progress under the CCMP’s framework, because the task force has not clearly linked the plan’s priority federal actions to the framework’s goals, indicators, and targets. The CCMP’s Framework for Assessing Progress Includes Goals, Indicators, and Targets The CCMP lays out the primary framework for assessing progress toward Puget Sound restoration, including goals, indicators, and targets. In 2007, the Washington State legislature established six high-level goals for Puget Sound restoration that continue to guide the CCMP, with an overarching directive to strive to achieve the goals by 2020. The six high-level goals are: Healthy human population. A healthy human population supported by a healthy Puget Sound that is not threatened by changes in the ecosystem. Vibrant human quality of life. A quality of human life that is sustained by a functioning Puget Sound ecosystem. Thriving species and food web. Healthy and sustaining populations of native species in Puget Sound, including a robust food web. Protected and restored habitat. A healthy Puget Sound where freshwater, estuary, nearshore, marine, and upland habitats are protected, restored, and sustained. Abundant water. An ecosystem that is supported by groundwater levels as well as river and streamflow levels sufficient to sustain people, fish, and wildlife, and the natural functions of the environment. Healthy water quality. Fresh and marine waters and sediments of a sufficient quality so that the waters in the region are safe for drinking, swimming, shellfish harvest and consumption, and other human uses and enjoyment, and are not harmful to the native marine mammals, fish, birds, and shellfish of the region. The CCMP identifies 25 categories of measures, called vital signs, used to gauge the health of Puget Sound. Each vital sign is designed to support one of the six high-level goals. For example, the CCMP has assigned four vital signs—marine water quality, freshwater quality, marine sediment quality, and toxics in fish—to collectively assess progress toward the goal of healthy water quality. According to the CCMP, most vital signs are represented by one or more specific measures, called indicators, for a total of 47 indicators. Based on our analysis of Partnership data, more than half of these indicators have measurable recovery targets set for the year 2020, and some of the indicators also have measurable interim targets to assess incremental progress. Figure 6 provides an example of the relationship among goals, vital signs, indicators, and targets for 1 of the 47 indicators. To achieve the CCMP’s recovery targets, the Partnership, supported by other members of the management conference, has initiated an effort to develop implementation strategies that will outline, among other things, specific approaches, actions, and program and policy changes that are needed. According to the Partnership’s implementation strategy guidelines, each implementation strategy will focus on the recovery targets for indicators under a particular vital sign or a set of related vital signs. The guidelines state that the implementation strategies are to also estimate the costs of achieving recovery targets, including the cost- effectiveness of specific activities to inform decisions about priority investments and expectations for progress. Officials from EPA and the Partnership said no official estimates have yet been developed for the total costs to restore the Sound, but EPA Region 10 officials stated that investments on the order of tens of billions of dollars, if not more, will likely be necessary. According to EPA Region 10 officials, the implementation strategies will help more directly link investments to restoration progress, a step consistent with our previous reporting on enhancing the use of performance information. Specifically, in September 2005 we reported that linking cost with performance information brings performance concerns into planning and budgetary deliberations, prompting agencies to reassess their performance goals and strategies and to more clearly understand the cost of performance. The Partnership Has Taken Steps to Assess Restoration Progress under the CCMP’s Framework, but Its Assessment of Progress Has Been Limited in Some Instances The Partnership leads the management conference’s efforts to assess Puget Sound restoration progress and has taken steps to do so under the CCMP’s framework. In particular, the Partnership created the Puget Sound Ecosystem Monitoring Program to help monitor the effectiveness of restoration actions and assess restoration progress. The Puget Sound Ecosystem Monitoring Program includes representatives from federal entities, such as EPA, and nonfederal entities, such as state and local agencies. The Partnership uses information from the Puget Sound Ecosystem Monitoring Program and other sources to assess and report on restoration progress in a biennial State of the Sound report, which was most recently published in November 2017. The Partnership has assessed two primary aspects of restoration progress for the CCMP’s 47 indicators: (1) progress relative to baseline conditions and (2) progress toward the 2020 recovery targets. Assessments of Progress Relative to Baseline Conditions The 2017 State of the Sound reported the general results of assessments of progress relative to baseline conditions for 29 of the 47 indicators, with additional details available on the Partnership’s website. According to the State of the Sound, progress was made in some areas but many key indicators did not show improvement, as reflected below: Ten indicators improved compared to baseline data. For example, one of the indicators reported as improved was acres of harvestable shellfish beds, which is associated with the goal of a healthy human population. According to the Partnership’s website, from 2007 to 2016 the number of acres of harvestable shellfish beds increased by approximately 4,800 acres. Fifteen indicators showed mixed results or no improvement relative to baseline data. For example, one indicator reported as showing no improvement was the abundance of Puget Sound Chinook salmon populations, which is associated with the thriving species and food web goal. According to the Partnership’s website, these populations remain below desired levels. Four indicators worsened compared to baseline data. For example, another indicator for the thriving species and food web goal tracks the number of Southern Resident Killer Whales. According to the Partnership’s website, from 2010 to September 2017, the number of Southern Resident Killer Whales declined. However, the State of the Sound was unable to report on assessments of progress relative to baseline conditions for 18 of the 47 indicators because of data limitations. Specifically, the State of the Sound reported that there were insufficient data or no data available to assess progress relative to baseline conditions for these indicators. Based on our analysis of information on the Partnership’s website, the most common reason for these data insufficiencies is that the data for many indicators are in the early stages of collection and more time is needed to obtain enough data to assess progress. For example, the Partnership plans to assess nine indicators under the healthy human population and vibrant quality of life goals using new data collected through a survey, which the website states should allow the Partnership to assess progress within several years. According to a senior Partnership official, in addition to needing more time to collect data and assess progress for some indicators, resource limitations have posed a challenge to addressing some of the data gaps. Assessments of Progress toward Recovery Targets The 2017 State of the Sound reported general information on the progress made toward recovery targets, with additional details available on the Partnership’s website. Based on our analysis of Partnership data, we found that the management conference has adopted measurable 2020 recovery targets for 31 of the 47 indicators. According to the State of the Sound, most indicators have not met their interim targets, and most of the 2020 targets are not likely to be attained, as reflected in the examples below. The Partnership reported that the indicator for restoration of floodplains showed some progress toward its 2020 target to restore 15 percent of degraded floodplain acreage in Puget Sound, but the 2020 target was still far from being met. According to the Partnership’s website on the Southern Resident Killer Whales indicator, the 2016 interim target of an end-of-year census of 91 whales was not met, and as of September 2017 the number of Southern Resident Killer Whales was well below the 2020 target of 95 whales. However, the overall ability to assess progress toward recovery targets has been limited because the management conference, led by the Partnership, has not established recovery targets for all indicators. Specifically, according to our analysis of Partnership data, recovery targets have not been established for 16 of the 47 indicators. We have previously reported on the importance of using performance measures to track progress in achieving goals and have identified key attributes of successful performance measures, such as having measurable targets. More specifically, a measurable target should have a numerical goal, without which it is difficult to tell whether performance is meeting expectations. Partnership officials we interviewed said that recovery targets have not been established for all indicators because they first focused on developing targets for indicators about which more information was known. The officials said they have not had sufficient resources to fully develop all of the indicators and associated recovery targets to assess progress, and that additional information and expertise are needed to develop targets for some indicators. According to EPA Region 10 officials we interviewed, developing targets for the remaining indicators would be useful, but given limited resources, it may be necessary to prioritize indicators for which to develop targets. We recognize that developing measurable recovery targets can take time and resources and that prioritizing among the remaining 16 indicators for the development of targets is important. The management conference plans to issue an updated CCMP in December 2018, with another update scheduled for 2022, according to Partnership officials. EPA officials said that EPA’s Region 10 office will be responsible for reviewing and approving these updated CCMPs in conjunction with EPA’s National Estuary Program national office. Partnership officials we interviewed said that the management conference intends to reexamine and, as appropriate, revise the indicators and targets during the development of the 2022 CCMP. EPA’s National Estuary Program guidance directs EPA regions to work with management conferences to ensure that revisions of the CCMP contain all the appropriate content, including quantitative performance measures where possible. By working with the management conference on future updates to the CCMP to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible, EPA would better position the Partnership to assess progress toward restoration goals. The Federal Task Force Has Limited Ability to Assess How the Implementation of the Federal Action Plan Contributes to Overall Restoration Progress under the CCMP’s Framework The federal task force has limited ability to assess how the implementation of its Federal Action Plan, currently in draft form, contributes to overall restoration progress under the CCMP’s framework, according to our analysis of agency documents and interviews. We found that except in a small number of cases, the federal task force has not clearly linked the priority federal actions identified in the draft Federal Action Plan to the CCMP’s goals, vital signs, indicators, or recovery targets. For example, one of the plan’s priority federal actions is to replace or remove culverts that pose a barrier to fish passage on Forest Service roads. However, the plan does not specify how the expected outcome of this action will contribute to the CCMP’s goals, vital signs, indicators, or recovery targets. The federal task force’s memorandum of understanding calls for the integration of federal efforts with those of nonfederal entities in the implementation of the CCMP. According to EPA Region 10 officials we interviewed, one of the primary purposes of the federal task force is to support the CCMP as the strategic plan for Puget Sound restoration, which includes the overarching goals and targets for the restoration effort. The federal task force’s regional implementation team is responsible for annually evaluating the Federal Action Plan and making any necessary modifications. As the permanent co-chair of the regional implementation team, EPA’s Region 10 office leads the effort to track and report information on the progress made in implementing the action plan, according to Region 10 officials. EPA has developed a tool to track the implementation of each priority federal action in the plan and has started to collect initial information from the other task force members, according to the Region 10 officials. The tracking tool documents the implementation status of each of the priority federal actions, but similar to the action plan, the tracking tool does not show how the actions are linked to the CCMP’s goals, vital signs, indicators, or recovery targets. We have previously reported on the importance of interagency collaborative efforts, such as federal task forces, to track and monitor progress toward their desired outcomes. In addition, we have reported that agencies can increase the value of their performance reporting by linking annual performance information with their goals, a leading practice for performance reporting. According to an EPA official involved in leading the regional implementation team, the draft Federal Action Plan did not link the priority federal actions to the CCMP’s framework for assessing restoration progress because the task force had focused on higher-level alignment between the organization of the action plan and the CCMP’s strategic initiatives, which focused on habitat, stormwater, and shellfish. In addition, the EPA official said that the tracking tool does not include such linkages because the tool has focused more narrowly on tracking the progress made in carrying out the priority federal actions. According to the EPA official, better documenting the linkage between the priority federal actions and the CCMP’s goals, vital signs, indicators, and targets would be helpful for assessing progress. The official said that he sees value in making these linkages more explicit, and that one opportunity to do so would be to add more detail in the tracking tool on how some of the key federal actions connect to the various elements of the CCMP’s framework for assessing progress. Similarly, some federal and state survey respondents reported that more explicitly linking the information in the Federal Action Plan to the CCMP would be helpful, based on our analysis of narrative responses about shortcomings to the draft Federal Action Plan and the plan’s alignment with the CCMP. By working with the appropriate members of the regional implementation team to clearly link, such as through the tracking tool, the plan’s priority federal actions to the CCMP’s framework for assessing progress toward Puget Sound restoration, EPA would better position the federal task force to assess the impact of its efforts and the implementation of the draft— and, if applicable, final—action plan. Federal and Nonfederal Entities Identified Several Factors, Including Population Growth and Climate Change, that May Limit the Success of Puget Sound Restoration Federal and state respondents to our survey and tribal and local participants in our discussion groups identified a number of factors that may limit the long-term overall success of Puget Sound restoration efforts. Federal and nonfederal entities have control over some of these factors, such as coordination, but entities in the region may have less ability to influence other factors, such as climate change. To obtain views from federal and state agency officials, we asked survey respondents to rate the level of risk that 10 factors could pose to the long-term overall success of Puget Sound restoration efforts. We identified these factors based on our review of key restoration documents, such as the CCMP, and our interviews with federal and nonfederal entities. Figure 7 illustrates the number of survey respondents that identified each of the factors as posing a great risk. Through our analysis of the survey results, discussion group transcripts, federal and nonfederal documentation, and agency interviews, we found that federal and nonfederal entities consistently identified certain key factors as posing significant risks that may limit the success of Puget Sound restoration, including: Effects of population growth and increased development. According to estimates in the CCMP, the population of the Puget Sound region is projected to increase from roughly 4.5 million in 2016 to 7 million people by 2040. Survey respondents and discussion group participants explained that population growth and the associated increase in development threaten restoration efforts in a variety of ways. For example, population growth and development contribute to new habitat loss and water quality degradation and may contribute to increases in property values that can raise the costs of restoration projects that involve land acquisitions. Nearly all of the survey respondents rated this factor as posing a great risk, and the majority of survey respondents identified this factor as the single greatest risk to the long-term overall success of Puget Sound restoration efforts. Effects of climate change and ocean acidification. According to the CCMP, climate change and ocean acidification could affect many aspects of Puget Sound’s ecosystem and natural resources. In addition, a 2015 University of Washington report stated that projected increases in sea surface temperatures associated with climate change could harm salmon populations and increase the magnitude and frequency of harmful algal blooms in Puget Sound. Moreover, according to a report from the Washington State Blue Ribbon Panel on Ocean Acidification, more than 30 percent of Puget Sound’s marine species—including oysters, clams, mussels, and crabs—are believed to be vulnerable to ocean acidification because of its corrosive effects on some shelled organisms. According to a December 2017 report by the Washington Marine Resources Advisory Council, Washington’s waters are considered to be among the most highly affected by ocean acidification in the world. A variety of actions are under way in Washington State to respond to this threat, including the implementation of stormwater and nutrient reduction programs to reduce the severity of acidifying conditions and research on kelp cultivation to absorb carbon dioxide to improve seawater conditions. Funding constraints. Funding constraints cited by federal and nonfederal entities included concerns about securing funds for future restoration efforts and the administrative challenges associated with combining multiple sources of funding to carry out projects. According to Partnership officials we interviewed, many of the near-term actions called for in the CCMP are at risk of not being carried out because funding has not been secured for these actions. Discussion group participants also cited difficulties securing funds as a barrier for project implementation and stated that the challenges associated with having to cobble together funds from multiple sources can delay or threaten the success of restoration projects. The participants explained that managing the requirements of multiple funding sources can increase administrative burden and project complexity. Moreover, discussion group participants explained that the single-year funding cycles for some programs and the restrictions that are sometimes placed on how funds can be used present additional challenges, as they are not always compatible with the needs of more complex multi- year restoration projects. Participants in the discussion groups noted a critical need for predictable, consistent, multi-year funding to adequately and efficiently plan and carry out restoration activities. The factors identified by federal and nonfederal entities as posing a risk to the success of Puget Sound restoration efforts are consistent with some of our prior work on large-scale ecosystem restoration efforts in other parts of the country. Specifically, we previously reported that similar factors—including population growth, the effects of climate change, and funding constraints—may limit restoration efforts in the Great Lakes and Chesapeake Bay. Conclusions Restoring Puget Sound is a large, complex, and potentially costly endeavor that involves many federal, state, local, tribal, and nongovernmental partners, and it faces a number of factors that may limit long-term success. Federal and nonfederal entities have made progress in coordinating the numerous restoration efforts underway by establishing the Puget Sound Management Conference and the Puget Sound Federal Task Force and by developing the CCMP and the draft Federal Action Plan. The Partnership, through its plans to develop a more complete inventory of restoration efforts and related funding, can make important information available for coordinating the management of the efforts moving forward. In addition, the Partnership has led the management conference’s efforts to assess restoration progress under the framework laid out in the CCMP, reporting in 2017 that while progress had been made in some areas, many key indicators had not shown improvement. However, these assessments have been limited by insufficient data, resources, and the lack of measurable targets, which have not been established for 16 of the 47 indicators. By working with the management conference on future updates to the CCMP to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible, EPA would better position the Partnership to assess progress toward restoration goals. In addition, the federal task force has made progress by coordinating its actions through the Federal Action Plan and can continue to make progress as it takes steps to implement the draft plan—and, if applicable, any final version of the plan that is approved. However, the task force has limited ability to assess how the implementation of its plan contributes to overall restoration progress because neither the plan nor the tracking tool developed by EPA’s Region 10 clearly link the plan’s priority federal actions to the goals, vital signs, indicators, or recovery targets that make up the CCMP’s framework. By working with the appropriate members of the regional implementation team to clearly link, such as through the tracking tool, the plan’s priority federal actions to the CCMP’s framework for assessing progress toward Puget Sound restoration, EPA would better position the federal task force to assess the impact of its efforts and the implementation of the draft—and, if applicable, final—action plan. Recommendations for Executive Action We are making the following two recommendations to EPA: The EPA Region 10 Administrator should work with the management conference on future updates to the CCMP to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible. (Recommendation 1) The EPA Region 10 Administrator should work with the appropriate members of the federal task force regional implementation team to clearly link, such as through the tracking tool, the Federal Action Plan’s priority federal actions to the CCMP’s framework for assessing progress toward Puget Sound restoration. (Recommendation 2) Agency Comments and Third-Party Views We provided a draft of this report for review and comment to CEQ; the Departments of Agriculture, Commerce, Defense, Homeland Security, the Interior, and Transportation; EPA; and the Puget Sound Partnership. EPA provided written comments, which are reproduced in appendix IV, and stated that it generally agrees with the conclusions and recommendations in our report. The Departments of Commerce, Defense, Homeland Security, and the Interior responded by email that they did not have comments on the draft report. CEQ, the Department of Agriculture, and the Department of Transportation provided technical comments, which we incorporated as appropriate. The Partnership also provided written comments, which are reproduced in appendix V, and stated that our report does a good job describing a complex landscape. The Partnership’s comments included one technical comment, which we incorporated as appropriate, and highlighted several points that we made in the report, including the lack of targets for some indicators and other barriers to success, the importance of obtaining more comprehensive information on restoration expenditures, and the importance of linking the work of the federal task force to the CCMP. In its written comments, EPA stated that it appreciated the work we performed to understand the scope and intricacies of restoration efforts in Puget Sound and our coordination with multiple federal and nonfederal entities in developing our report. EPA agreed with our recommendation to work with the management conference to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible. The agency stated that it has begun working with the Partnership and other management conference partners to identify this as a priority for the next review of the CCMP, as well as to develop a clear plan for advancing this priority. EPA also stated that progress has been made to evaluate the current set of indicators and vital signs as a result of a 2017 project led by the Partnership and that recommendations from that project will inform both adjustments to the current set of indicators and future target setting. In addition, EPA agreed with our recommendation to work with the appropriate members of the federal task force regional implementation team to clearly link the Federal Action Plan’s priority federal actions to the CCMP’s framework for assessing progress, and the agency highlighted steps it will take to do so. EPA stated that it has already met with the federal task force’s regional leadership and implementation teams and reached agreement to review the Federal Action Plan and specify how each action connects to the vital signs and other elements of the CCMP. EPA stated this this crosswalk process will begin in January 2019 after the updated CCMP is approved. We are sending copies of this report to the appropriate congressional committees; the Chair of CEQ; the Secretaries of Agriculture, Commerce, Defense, Homeland Security, the Interior, and Transportation; the Administrator of EPA; the Executive Director of the Puget Sound Partnership; 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) 512-3841 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 VI. Appendix I: Objectives, Scope, and Methodology This report examines (1) Puget Sound restoration efforts and related expenditures for fiscal years 2012 through 2016; (2) how federal and nonfederal entities coordinate their restoration efforts and their views on this coordination; (3) the framework for assessing progress toward Puget Sound restoration; and (4) key factors, if any, federal and nonfederal entities identified that may limit the success of Puget Sound restoration. To help us understand the legal framework supporting restoration efforts across these four objectives, we reviewed selected relevant federal and state laws, including the Clean Water Act, the Endangered Species Act, and Washington State law governing Puget Sound water quality protection and establishing the Puget Sound Partnership. To examine Puget Sound restoration efforts and related expenditures for fiscal years 2012 through 2016, we used the first phase of a two-phase survey to identify federal and state efforts that supported Puget Sound restoration during this time frame. We selected this period to allow us to obtain information on a range of restoration efforts carried out in recent years. In addition, we used the first phase of the survey to obtain information on the availability of expenditure data for the federal and state efforts and to help determine whether any limitations existed that would affect the reliability of such data. As part of developing the first phase of the survey, we conducted a pretest with the Partnership to check that the questions were clear and used terminology correctly and to ensure that we could obtain the requested information without placing an undue burden on agency officials. We sent the first phase of the survey to 15 federal and 11 state entities in June 2017, and all of them responded. We identified the 15 federal entities based on their participation in the Puget Sound Federal Caucus, a group formed of regional federal entities in 2007 to help coordinate federal restoration efforts in Puget Sound. The federal entities were the Bureau of Indian Affairs, Federal Emergency Management Agency, Federal Highway Administration, Federal Transit Administration, National Oceanic and Atmospheric Administration, National Park Service, Natural Resources Conservation Service, U.S. Army Corps of Engineers, U.S. Army Joint Base Lewis-McChord, U.S. Coast Guard, U.S. Environmental Protection Agency (EPA), U.S. Fish and Wildlife Service, U.S. Forest Service, U.S. Geological Survey, and the U.S. Navy. We identified the 11 Washington State entities based on our review of the comprehensive conservation and management plan (CCMP)—called The 2016 Action Agenda for Puget Sound—and our discussions with federal and state officials. The state entities were the Office of Financial Management, Puget Sound Partnership, Recreation and Conservation Office, Washington State Conservation Commission, and the Washington Departments of Agriculture, Commerce, Ecology, Fish and Wildlife, Health, Natural Resources, and Transportation. In the first phase of our survey, we requested specific information on federal and state efforts to support Puget Sound restoration. Table 2 summarizes the questions we are reporting on from the first phase of the survey. We also asked other questions that we do not specifically report on to provide additional context for the survey responses. For example, we asked the respondents whether their agency managed each effort on its own or jointly with other entities, and we asked whether their agency had provided funding from each effort to other entities. We used the first-phase survey results in part to develop catalogs of federal and state efforts that supported Puget Sound restoration from fiscal years 2012 through 2016. To obtain additional information about the federal and state efforts identified in the survey responses, we reviewed documentation, such as agency websites and reports, and interviewed agency officials. We incorporated this additional information as appropriate in the catalogs, and we then asked each entity to verify the accuracy of the information presented in the catalogs. Appendix II presents the catalog of federal efforts, and appendix III presents the catalog of state efforts. Based on the results of the first phase of the survey and additional follow- up interviews with agency officials, we determined that we would be unable to collect sufficiently reliable data to report on the total amount of expenditures that have supported Puget Sound restoration. In particular, we identified data limitations that would make it difficult for us to collect consistent, reliable, and comparable expenditure data across all of the federal and state entities’ efforts. These limitations included difficulties isolating expenditures within the geographic boundaries of Puget Sound for some efforts, difficulties isolating expenditures that supported restoration activities as opposed to other purposes, and difficulties quantifying administrative expenses, such as staff salaries and travel expenses, associated with specific efforts. As a result of these limitations, we limited our collection of expenditure data to a nongeneralizable sample of three federal programs and one state program to provide examples of the diversity in funding approaches used to support Puget Sound restoration. We considered the following factors in selecting these efforts: 1) their prominence in Puget Sound restoration, 2) variations in the federal and state entities involved in carrying them out, 3) variations in their size, and 4) evidence of reliable expenditure data. In addition, to help illustrate how federal and nonfederal funds are used together at the project level, we interviewed agency officials and obtained expenditure data for two recently completed restoration projects. We selected these projects because they had received funding from a variety of federal and nonfederal sources and illustrated how federal and nonfederal entities work together to carry out restoration projects. We also conducted two site visits to observe the outcomes of these projects. We assessed the reliability of the expenditure data for these program and project examples by comparing the data we obtained with data from other sources where possible, reviewing agency documentation, and interviewing knowledgeable agency officials. We found the data to be sufficiently reliable for our purposes. To examine how federal and nonfederal entities coordinate their restoration efforts in Puget Sound and their views on this coordination, we identified two key groups that coordinate among federal, state, local, tribal, and nongovernmental entities: the state-led Puget Sound Management Conference and the Puget Sound Federal Task Force, which replaced the Puget Sound Federal Caucus in 2016. We analyzed key restoration-related documentation, including the CCMP developed by the management conference and the federal task force’s draft The Puget Sound Federal Task Force Action Plan (Fiscal Years 2017-2021) (Federal Action Plan). We also interviewed officials from EPA and the Council on Environmental Quality about the implementation of the federal task force. In August 2017, we sent the second phase of our survey to the 15 federal and 11 state entities that had received the first phase, as well as to the Washington State Governor’s Office, to obtain their views on the coordination of restoration efforts and we received responses from all of the entities. The second phase of the survey featured, among other things, a series of open-ended and closed-ended questions about the role of the management conference and the federal task force in helping to coordinate restoration efforts and about the strengths and shortcomings of the CCMP and the draft Federal Action Plan. We refined the second phase of the survey based on pretests we conducted with two federal agencies and two state agencies to ensure that the questions were clear and used terminology correctly and that we could obtain the requested information without placing an undue burden on agency officials. Table 3 summarizes the questions we are reporting on from the second phase of the survey. We also asked other questions that we do not specifically report on to provide additional context for the survey responses. For example, we asked the respondents to identify what steps, if any, could be taken to improve the management conference and the federal task force, and we asked whether any entities were missing from these groups that should be included. We also held six moderated discussion groups, three with tribal representatives and three with local representatives, to obtain their views on factors that have helped and hindered their ability to implement restoration projects, including factors related to coordination. We selected the tribal and local entities to participate in the discussion groups because of their involvement in implementing restoration projects. We invited all 19 federally recognized tribes in the Puget Sound basin to participate in our discussion groups, as well as two tribal consortia that support restoration efforts. Representatives from 15 of these tribal entities participated in the tribal discussion groups. For the three local discussion groups, we invited all 9 local integrating organizations and all 15 salmon recovery lead entities within the Puget Sound basin to participate. Representatives from 7 of the local integrating organizations and 13 of the salmon recovery lead entities participated in the three local discussion groups. We conducted the six moderated discussion groups over the telephone in May and June 2017. During each discussion group, the GAO moderator asked participants to list factors that, in their experience, had helped their tribal or local entity implement restoration projects in Puget Sound, as well as factors that hindered their ability to do so. The moderator then asked participants to elaborate on how the factors had helped or hindered the implementation of restoration projects. When necessary, the moderator asked probing questions to further clarify participants’ comments. Two or three analysts transcribed each session and combined and reconciled notes to develop transcripts for each of the discussion groups. We analyzed the transcripts from the six discussion groups using qualitative analysis software to categorize the factors that helped and hindered the implementation of restoration projects. Prominent factors identified in the discussion groups that we discuss in the body of the report include factors related to administration and management, coordination, and resources. Other factors, such as laws and regulations, public awareness, and science were also raised to a lesser extent, and we do not discuss these in the body of the report. To obtain additional views on the coordination of Puget Sound restoration efforts, we interviewed federal and state agency officials as well as representatives from conservation, agricultural, and fishing industry organizations. We also obtained written responses from two Canadian agencies about their coordination of restoration activities with entities in the United States. We compared the information we obtained on the coordination of Puget Sound restoration efforts with selected leading collaboration practices that we previously identified and that were most relevant based on our initial audit work, such as leadership, bridging organizational cultures, and the inclusion of relevant participants. We also assessed federal entities’ implementation of the memorandum of understanding that established the federal task force. To examine the framework for assessing progress toward Puget Sound restoration, we reviewed laws, regulations, and key documents, such as the CCMP and the draft Federal Action Plan. We also reviewed the Partnership’s documentation on the results of its assessments of restoration progress. We identified some limitations associated with these results and noted those in our report where appropriate. We obtained additional views on efforts to assess progress from federal and nonfederal entities through the second phase of our survey and interviews described previously. For example, in the second phase of the survey, we asked the federal and state entities about their views on efforts to assess progress under the CCMP and the draft Federal Action Plan and about their views on the sufficiency of monitoring efforts in Puget Sound. We compared the information obtained through these steps with EPA’s National Estuary Program guidance and with leading practices for performance measurement and reporting to determine whether efforts to assess Puget Sound restoration progress have followed leading practices. To determine key factors, if any, federal and nonfederal entities identified that may limit the success of Puget Sound restoration, we used the second phase of our survey, which we described above, and our discussion groups to obtain views on factors that may pose a risk to the success of restoration efforts. We also reviewed the CCMP and other documentation and used our interviews with the federal and nonfederal entities described above to obtain views on limiting factors. In addition, we reviewed our prior work on large-scale ecosystem restoration efforts in other parts of the country, such as in the Great Lakes and Chesapeake Bay, to compare the key factors we identified in Puget Sound with factors that may limit restoration efforts that we identified in our past reports. We conducted this performance audit from October 2016 to July 2018 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: Catalog of Efforts Identified by Federal Entities that Supported Restoration Activities in Puget Sound As part of our first objective to examine Puget Sound restoration efforts, we surveyed 15 federal entities and asked them to provide information about their efforts that have supported Puget Sound restoration activities. Based on our research and discussions with federal and state officials, we identified six general categories of restoration activities: Habitat restoration – projects or other activities intended to restore degraded habitats. Habitat protection – projects or other activities intended to protect high-quality habitats from future degradation. Water quality improvement – projects or other activities intended to improve the physical, chemical, or biological characteristics of waters within the Puget Sound basin by, for example, reducing stormwater runoff and other sources of water pollution. Monitoring – projects or other activities intended to monitor the physical, chemical, or biological characteristics of waters within the Puget Sound basin, including monitoring for the purposes of establishing baselines, identifying trends, and assessing the effectiveness or results of restoration activities. Research – research projects, studies, or other related activities intended to support Puget Sound restoration activities. Education and outreach – projects or other activities intended to educate the public about the state of Puget Sound and the pressures facing the basin or to elicit community support for restoration activities (e.g., by recruiting volunteers). Table 4 presents a catalog of applicable federal efforts from federal fiscal years 2012 through 2016 based on the survey responses from each federal entity. The table includes a wide range of efforts, including some efforts that focused exclusively on restoration-related activities and other efforts that had a broader scope of work that in some cases did not center directly on restoration. We further developed some information presented in the table based on information obtained from other sources, such as agency websites and documentation, and follow-up communications with the federal entities. We did not evaluate whether each entity had included all relevant efforts in their responses. Appendix III: Catalog of Efforts Identified by State Entities that Supported Restoration Activities in Puget Sound As part of our first objective to examine Puget Sound restoration efforts, we surveyed 11 state entities and asked them to provide information about their efforts that have supported Puget Sound restoration activities. We used the same six general categories of restoration activities as in the catalog of federal efforts in appendix II: Table 5 presents a catalog of applicable state efforts from state fiscal years 2012 through 2016 based on the survey responses from each state entity. The table includes a wide range of efforts, including some efforts that focused exclusively on restoration-related activities and other efforts that had a broader scope of work that in some cases did not center directly on restoration. We further developed some information presented in the table based on information obtained from other sources, such as agency websites and documentation, and follow-up communications with the state entities. We did not evaluate whether each entity had included all relevant efforts in their responses. Appendix IV: Comments from the Environmental Protection Agency Appendix V: Comments from the Puget Sound Partnership Appendix VI: GAO Contact and Staff Acknowledgments GAO Contact J. Alfredo Gómez, (202) 512-3841 or gomezj@gao.gov. Staff Acknowledgments In addition to the individual named above, Janet Frisch (Assistant Director), Susan Iott (Assistant Director), Joshua Wiener (Analyst in Charge), Chuck Bausell, Stephen Betsock, Mark Braza, Ellen Fried, Jack Granberg, Carol Henn, Gina Hoover, Karen Howard, Vondalee Hunt, Benjamin T. Licht, Jeffery Malcolm, John Mingus, Patricia Moye, Dan C. Royer, Sara Sullivan, Sarah Veale, and Arvin Wu made key contributions to this report. Related GAO Products Great Lakes Restoration Initiative: Improved Data Collection and Reporting Would Enhance Oversight. GAO-15-526. Washington, D.C.: July 21, 2015. Great Lakes Restoration Initiative: Further Actions Would Result in More Useful Assessments and Help Address Factors That Limit Progress. GAO-13-797. Washington, D.C.: September 27, 2013. Chesapeake Bay: Restoration Effort Needs Common Federal and State Goals and Assessment Approach. GAO-11-802. Washington, D.C.: September 15, 2011. Recent Actions by the Chesapeake Bay Program Are Positive Steps Toward More Effectively Guiding the Restoration Effort, but Additional Steps Are Needed. GAO-08-1131R. Washington, D.C.: August 28, 2008. Coastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could Help Guide Future Restoration and Protection. GAO-08-130. Washington, D.C.: December 14, 2007. South Florida Ecosystem: Restoration Is Moving Forward but Is Facing Significant Delays, Implementation Challenges, and Rising Costs. GAO-07-520. Washington, D.C.: May 31, 2007. Chesapeake Bay Program: Improved Strategies Are Needed to Better Assess, Report, and Manage Restoration Progress. GAO-06-96. Washington, D.C.: October 28, 2005. Great Lakes: Organizational Leadership and Restoration Goals Need to Be Better Defined for Monitoring Restoration Progress. GAO-04-1024. Washington, D.C.: September 28, 2004. Great Lakes: An Overall Strategy and Indicators for Measuring Progress Are Needed to Better Achieve Restoration Goals. GAO-03-515. Washington, D.C.: April 30, 2003.

Why GAO Did This Study Puget Sound is the nation's second-largest estuary and serves as an important economic engine in Washington State, supporting millions of people, major industries, and a wide variety of species. However, according to the CCMP, human use and development have degraded water quality and habitats and harmed critical species such as salmon. GAO was asked to review efforts to restore Puget Sound. This report examines, among other objectives, (1) Puget Sound restoration efforts and related expenditures for fiscal years 2012 through 2016, (2) how federal and nonfederal entities coordinate their restoration efforts, and (3) the framework for assessing progress toward Puget Sound restoration. GAO reviewed restoration plans and other documentation, conducted a two-phase survey of the more than 25 federal and state entities that GAO determined had participated in restoration efforts, conducted discussion groups with tribal and local representatives, and interviewed representatives from these federal and nonfederal entities. What GAO Found Through its survey of federal and Washington State entities, GAO identified numerous federal and state efforts that, in whole or in part, supported Puget Sound restoration from fiscal years 2012 through 2016. The efforts involved a variety of activities, including habitat protection, water quality improvement, and monitoring. Some of these efforts focused exclusively on Puget Sound restoration, while others had a broader geographic or programmatic scope. Funding for these efforts came from a variety of sources, such as the Environmental Protection Agency (EPA), which reported expending about $142 million for activities in Puget Sound through the National Estuary Program and the Puget Sound Geographic Program during this time frame. However, total expenditures for all efforts are unknown, in part because of difficulties isolating expenditures specific to Puget Sound. A 2017 state audit recommended that two state agencies develop a plan to create a more complete inventory of restoration efforts and related funding. The state agencies concurred and have plans to develop this inventory by August 2019. Federal and nonfederal entities coordinate restoration efforts through two primary interagency groups. First, the state-led Puget Sound Management Conference has developed a comprehensive conservation and management plan (CCMP), approved by EPA under the National Estuary Program, that serves as the primary planning document for Puget Sound restoration. Second, the Puget Sound Federal Task Force complements the work of the management conference by coordinating the efforts of federal agencies to support the CCMP, including by developing a draft Federal Action Plan that identifies priority federal actions to protect and restore Puget Sound. The CCMP lays out a framework for assessing restoration progress, including 6 goals, 47 indicators, and recovery targets for 31 of the indicators. In 2017, the Puget Sound Partnership, a state agency, reported that progress had been made in some areas, but many key indicators had not shown improvement. For example: One indicator that showed improvement was acres of harvestable shellfish beds, which the Partnership reported increased from 2007 to 2016. One indicator that showed no improvement was the abundance of Puget Sound Chinook salmon populations, which the Partnership reported remained below desired levels. The Partnership also reported that most of the 31 recovery targets that the management conference has adopted for 2020 are not likely to be attained. However, the Partnership's ability to assess progress has been limited in some instances, in part because the management conference has not developed targets for 16 of the 47 indicators. GAO has identified measurable targets as a key attribute of successful performance measures. By working with the management conference to help ensure that measurable targets are developed where possible for the highest priority indicators currently lacking such targets, EPA would better position the Partnership to assess progress toward restoration goals. What GAO Recommends GAO is making two recommendations, including that EPA work with the management conference to help ensure that measurable targets are developed where possible for the highest priority indicators currently lacking such targets. EPA agreed with GAO's recommendations and highlighted steps the agency has begun taking and plans to take to address the recommendations.

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Background U.S. Humanitarian Assistance Funds Sent Overseas Often Rely on Multiple Banks to Reach Their Final Destination International financial transactions, including the transfer of U.S. humanitarian assistance funds, rely on a system of correspondent banking relationships. State and USAID provide humanitarian assistance through funding awards to partners. Funds to U.S. partners are deposited into the partners’ bank accounts located in the United States. The partners are then responsible for transferring the funds to recipient countries for project implementation. These transfers typically involve the use of a correspondent, or intermediary, bank to transfer the funds from a U.S.-based account to an account held at the recipient country, where the funds are then used by in-country staff to implement the project. See appendix IV for more information on the State and USAID offices providing humanitarian assistance. According to research by the Bank for International Settlements, the number of correspondent banking relationships has declined over the past several years, especially for banks that are located in higher-risk jurisdictions (such as those subject to sanctions), have customers perceived as higher-risk, and who generate revenues insufficient to recover compliance costs. Further, the Financial Stability Board noted that a decline in the number of correspondent banking relationships could affect the ability to send and receive international payments and may drive some payment flows underground, with potential consequences on growth, financial inclusion, and the stability and integrity of the financial system. U.S. Banks Must Comply with Anti-Money Laundering Regulations and U.S. Sanctions When performing overseas money transfers, U.S. banks and financial institutions must comply with the Bank Secrecy Act’s (BSA) anti-money laundering (AML) regulations and relevant regulations that implement U.S. sanctions. The BSA has established reporting, recordkeeping, and other AML requirements for financial institutions. BSA/AML regulations require that each bank tailor a compliance program that is specific to its own risks based on factors such as products and services offered, and customers and locations served. By complying with BSA/AML requirements, U.S. financial institutions assist government agencies in the detection and prevention of money laundering and terrorist financing by, among other things, maintaining compliance policies, conducting ongoing monitoring of customers and transactions, and reporting suspicious financial activity. In addition to BSA regulations established by Treasury, federal banking regulators have issued their own BSA regulations. These regulations require banks to establish and maintain a BSA compliance program that, among other things, identifies and reports suspicious activity. The banking regulators are also required to review banks’ compliance with BSA/AML requirements and regulations, and they generally do so every 12 to 18 months as a part of their routine safety and soundness examinations. Among other things, examiners review whether banks have an adequate system of internal controls to ensure ongoing compliance with BSA/AML regulations. The federal banking regulators may take enforcement actions using their prudential authorities for violations of BSA/AML requirements. They may also assess civil money penalties against financial institutions and individuals. Banks must also comply with relevant regulations that implement U.S. sanctions in certain countries. When the United States imposes sanctions on an entity or individual, it freezes assets subject to U.S. jurisdiction. All U.S. transactions with the entity or individual are prohibited, including transactions by banks and NPOs. When appropriate, Treasury’s Office of Foreign Assets Control (OFAC) may issue a general license authorizing the performance of certain categories of transactions, including funds transfers for the provision of humanitarian assistance. OFAC also issues specific licenses on a case-by-case basis under certain limited situations and conditions. Treasury Helps Prevent Financial Crimes and Considers NPOs Providing Humanitarian Assistance in High-Risk Areas Potentially Vulnerable to Exploitation Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, takes actions to help prevent financial crimes, and considers NPOs operating in conflict areas and other high risk zones as potentially vulnerable to such crimes. Treasury leads U.S. efforts to fight various financial crimes primarily through its Office of Terrorism and Financial Intelligence (TFI). TFI develops and implements U.S. government strategies to combat terrorist financing domestically and internationally, and develops and implements the National Money Laundering Strategy as well as other policies and programs to fight financial crimes. Relevant offices under TFI include: The Office of Terrorist Financing and Financial Crimes (TFFC). TFFC, the policy development and outreach office for TFI, works across all elements of the national security community – including the law enforcement, regulatory, policy, diplomatic, and intelligence communities – and with the private sector and foreign governments to identify and address the threats presented by all forms of illicit finance to the international financial system. The Office of Foreign Assets Control (OFAC). OFAC administers and enforces economic and financial sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, transnational criminal organizations, human rights abusers and corrupt actors, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States. The Financial Crimes Enforcement Network (FinCEN). FinCEN, among other duties, is responsible for administering the BSA, has authority for enforcing compliance with its requirements and implementing regulations, and also has the authority to enforce the BSA, including through civil money penalties. FinCEN issues regulations under the BSA and relies on the examination functions performed by other federal regulators, including federal banking regulators. FinCEN also collects, analyzes, and maintains the reports and information filed by financial institutions under BSA and makes those reports available to law enforcement and regulators. According to Treasury, organizations, including NPOs, implementing humanitarian assistance in high-risk areas may be vulnerable to exploitation by terrorist groups and their support networks. These terrorist groups and support networks may establish or abuse charities to raise and move funds, or provide other forms of support, that benefit the terrorist groups. As of May 2017, Treasury, through OFAC, had designated 67 charities, branches, and foreign terrorist organizations’ potential fundraising front organizations for violations of U.S. sanctions. The Majority of Selected State and USAID Implementing Partners Experienced Banking Access Challenges For 7 of our 18 selected projects, State and USAID partners told us that they had experienced banking access challenges. Additionally, 15 of the 18 partners we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects over the previous 5 years. Most of the 18 partners we interviewed told us that they were able to mitigate these challenges through various actions or the challenges were not significant enough to affect project implementation. Nevertheless, a few partners noted that projects they were implementing were adversely affected by such challenges. For example, 1 of our 18 selected projects faced repeated delays as a result of banking access challenges. Additionally, 2 partners noted that they had to reduce the scope of implementation or suspend projects in their global humanitarian assistance portfolio because of banking access challenges. Furthermore, several partners and other NPOs told us that such challenges posed potential risks to project implementation. Lastly, a recent study found that more than two-thirds of all U.S.-based NPOs that work internationally experienced banking access challenges, but that few NPOs canceled programs as a result of those challenges. Funds Transfer Delays and Denials Were among the Most Frequently Cited Banking Access Challenges Banking Access Challenges Experienced on Selected U.S.- Funded Projects For our 18 selected U.S.-funded projects, 7 of the partners told us that they had experienced banking access challenges in implementing their projects, with the majority citing delays or denials of funds transfers. Specifically, 3 (of 5) partners in Somalia and 4 (of 7) partners in Syria told us that they had experienced banking access challenges related to the selected project. None of the partners implementing selected sample projects in Haiti or Kenya noted that they had experienced any banking access challenges. Denials of funds transfers to the destination country was the most frequently cited banking access challenge (experienced by 5 of the 7 projects), followed by delays of funds transfers (experienced by 3 of the 7 projects) (see fig. 2). Fifteen of the 18 partners that we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects implemented over the previous 5 years (see fig. 3). The most frequently cited challenges were funds transfer delays and denials. Twelve partners noted that they had experienced transfer delays, with 8 noting that the delays occurred occasionally and 6 noting that the delays lasted weeks or months. Most partners that noted experiencing delays told us that the delays were caused exclusively by intermediary banks. Eleven partners noted that they had experienced transfer denials, including 5 that told us the denials occurred occasionally. Five partners also noted that transfers were denied by intermediary banks. In addition, 2 partners noted that they had experienced challenges opening new bank accounts; 3, increased costs to transfer funds; 1, a bank-initiated account closure; and 2, other challenges. For more information on the types of banking access challenges that partners identified, including details on the duration of delays and the frequency of denials, see appendix V. Some Banking Access Challenges Adversely Affected or Posed a Potential Risk to Project Implementation Some partners that experienced banking access challenges told us that those challenges had adversely affected or posed a potential risk to implementation of projects. Of those partners experiencing challenges, 3 partners noted that banking access challenges had adversely affected a project’s implementation. Specifically, 1 partner that experienced challenges on one of our selected projects and 2 partners that experienced challenges on projects outside of our sample noted that the challenges they had experienced resulted in a project being adversely affected in some form, such as: Reduced scope of implementation. One partner told us that its project in the Democratic People’s Republic of Korea was scaled back significantly because of difficulty transferring funds to the country. Delays implementing a project. One partner told us that for one of our selected projects, in part because of banking access challenges, implementation of the project was delayed and required approval for two no-cost extensions from USAID. The partner noted that it had experienced recurring issues with funds transfers to Syria, including 3- to 6-week delays and frequent denials of transfers. Suspension of an in-progress project. One partner told us that an ongoing project it implemented in Syria (outside of our sample of projects) to deliver food assistance had been suspended for about a week because its funds transfers to the country were denied. While some projects were adversely affected, 6 of the 7 partners of our selected projects that noted experiencing banking access challenges told us that the challenges they had experienced did not adversely affect project implementation. Similarly, 12 of the 15 partners that noted experiencing banking access challenges on their global portfolio of humanitarian assistance told us that the challenges did not affect project implementation. Additionally, for both our selected projects and their global portfolio of humanitarian assistance projects, the challenges experienced were either not significant enough to affect project implementation, or were mitigated through various actions. For example, partners told us that they had mitigated challenges by: Maintaining a funding buffer. Partners may keep enough funding to operate a project for several weeks in order to mitigate delays and denials of funds transfers. For example, one partner noted that projects maintain approximately 4 weeks of operating funds on hand, which is enough to mitigate transfer delays that last up to 3 weeks. Using alternate methods to move funds. Partners may use alternate methods to move funds, such as using different intermediary banks or money transmitters, or by carrying cash. For example, one partner told us that when its U.S. bank stopped allowing funds transfers to Syria, the partner opened an account with a different bank. That partner also told us that because it was unable to reliably transfer funds to Syria, it regularly transfers funds to Lebanon—either to intermediaries or to the personal accounts of individuals involved in the projects—and manually moves the physical currency to Syria. Maintaining multiple bank accounts. Partners may maintain accounts with multiple banks in order to mitigate the risk of a bank-initiated account closure. For example, one partner told us that after a bank closed all of its accounts without warning or explanation, the partner opened accounts across three different banks in order to mitigate the effects of any individual bank closing its account. While most partners’ projects did not experience adverse effects as a result of banking access challenges, three USAID partners—as well as another NPO that we spoke with—told us that banking access challenges posed a potential risk to project implementation, such as: Potential for physical violence. One partner told us that, for one of our selected projects, there were concerns of violence if payments were halted because of funds transfer delays, while another partner told us that violence was a concern if it was unable to pay vendors on time. An NPO also told us that there was a potential for physical violence if local staff were not paid on time. Potential for insolvency of vendors. One partner told us that, for one of our selected projects, transfer delays prevented it from reimbursing a money transmitter it used to move funds to Somalia, which in turn caused that money transmitter to experience financial difficulties. The partner stated that the delays were almost significant enough to affect operations, though it was able to resolve the situation in time to prevent its vendor from becoming insolvent. Potential for project suspension. One partner told us that it provides advance funding for projects to account for delays, but at times transfer delays have come close to exhausting the advance funding. For example, the partner told us that it provided funding for projects 4 weeks in advance and experienced transfer delays averaging 3 weeks. In addition, an NPO told us that staff are sometimes not paid for several months because of such delays; thus, if transfer delays worsened or staff were unwilling to work without being paid, project implementation may be adversely affected. Approximately Two-Thirds of U.S. NPOs That Operate Internationally Experienced Banking Access Challenges, According to a Trade Association Survey A recent study by Charity and Security Network on banking access for U.S. NPOs, which included NPOs that received U.S. government funds, found widespread banking challenges for U.S.-based NPOs. Data for a survey conducted as part of this study indicated that about two-thirds of the responding U.S.-based NPOs that work internationally experienced banking access challenges. The challenges included delays of wire transfers, unusual requests for documentation, and increased fees. Some NPOs also cited experiencing account closures and refusals to open accounts. About 15 percent of the NPOs that responded to the survey noted that they experienced these banking access challenges constantly or regularly, and about 3 percent of NPOs reported cancelling a project because of banking access challenges. Furthermore, transfers to all parts of the globe were affected, and the challenges were not limited to conflict zones. According to the report, NPOs with 500 or fewer staff were more likely to experience delayed wire transfers, fee increases, and account closures. Smaller organizations were more likely to receive unusual requests for documentation, according to the report. The smallest NPOs, those with 10 or fewer employees, reported experiencing more trouble opening accounts than larger organizations. According to the report, as a result of the challenges they experienced, NPOs were sometimes forced to move money through less transparent, less traceable, and less safe channels, such as carrying cash. As shown in table 1, survey data from the Charity and Security Network study indicated that there were only minor differences between NPOs receiving and not receiving U.S. government funding in terms of experiencing banking access challenges. For example, about 15 percent of responding NPOs, regardless of whether or not they received U.S. funds, noted experiencing banking access challenges regularly or constantly, with transfer delays the challenge most frequently cited by both groups. Additionally, about the same proportion of NPOs that received or did not receive U.S. funds reported that they rarely or never experienced banking access challenges. Both groups of NPOs also noted taking similar measures to deal with banking access challenges. USAID Implementing Partners’ Reports Do Not Capture Potential Risks Posed by Banking Access Challenges USAID’s partners’ written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that noted experiencing banking access challenges were USAID projects. None of those 6 USAID partners reported on the banking access challenges they had experienced to USAID in their regular project reporting. USAID requires partners to report adverse effects to their projects, but 1 partner that faced delays on its project as a result of banking access challenges did not identify these challenges as the reason for delays in its reporting to USAID. We also reviewed over 1,300 USAID partner reports for fiscal years 2016 and 2017 from high-risk countries and found no explicit discussion of banking access challenges. USAID Generally Requires Implementing Partners Only to Report Banking Access Challenges That Affect Project Implementation USAID generally requires partners implementing humanitarian assistance projects to report challenges that affect project implementation. USAID, through the Office of U.S. Foreign Disaster Assistance (OFDA) and the Office of Food For Peace (FFP), provides humanitarian assistance and monitors the implementation of projects through various methods, including periodic performance reports. USAID’s reporting requirements, as well as the number of partners of selected projects that told us they had experienced banking access challenges, are as follows: USAID/OFDA. USAID/OFDA agreements for the selected projects we reviewed require the awardee to report via email (1) developments that have a significant effect on the activities supported by the agreement, and (2) problems, delays, or adverse conditions that materially impair the ability to meet the objectives of this agreement. The agreements also require Program Performance Reports that must address reasons why established goals were not met, the impact on the program objectives, and how the impact has been or will be addressed. Four of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/OFDA projects. USAID/FFP. USAID/FFP’s Fiscal Year 2017 Annual Program Statement for International Emergency Food Assistance requires partners to report, as part of their quarterly reporting, any challenges that the project has faced during the quarter and how they were resolved and discuss any potential challenges or delays that may affect the program’s ability to achieve its objectives. Each of the agreements—both for NPOs and for public international organizations—that we reviewed require the partner to notify USAID of any developments, problems, or delays that may have an adverse effect on the project. Two of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/FFP projects. USAID Implementing Partners That Noted Experiencing Banking Access Challenges Did Not Include These Challenges in Their Program Performance Reports Five of the 6 USAID partners of selected sample projects that noted experiencing banking access challenges told us those challenges did not adversely affect project implementation and therefore did not need to be reported. The sixth—a partner that noted its project was adversely affected by banking access challenges—did not include these challenges in its reporting to USAID, although the challenges met the reporting threshold of adversely affecting project implementation. While both USAID and the partner told us that the delays were communicated to USAID through emails and conversations with a designated USAID contact and in the justification for the no-cost extensions submitted to USAID, our review of the partner’s program performance reports to USAID and the no-cost extensions found no explicit discussion of banking access challenges. USAID Partner Reports Did Not Include Any Explicit Mention of Banking Access Challenges for Fiscal Years 2016 and 2017 Our review of the over 1,300 publicly available USAID partner reports for fiscal years 2016 and 2017 from high-risk countries found no explicit discussion of banking access challenges. Overall, we identified 5 reports out of the over 1,300 that included some mention of challenges related to banking access. However, those reports lacked sufficient detail for us to determine the type, severity, or origin of the challenges. For example, one report stated that there are sometimes delays in the payment of salaries through foreign accounts, with no further details about the delays, while another report stated that subgrantees experienced delays in payments without identifying the reasons for these delays, which could include late reports, late verification, late processing, or banking issues. While most of the partners we interviewed noted that they did not report banking access challenges because the challenges did not adversely affect their projects, an NPO advocacy group and a large international NPO told us that NPOs may be reluctant to discuss or report banking access challenges publicly because of concern about being perceived as high-risk or unable to carry out their mission, and that any public mention of banking access challenges could adversely affect their ability to raise funds. Standards for Internal Control in the Federal Government require agencies to identify and respond to risks related to achieving their goals, and USAID currently has no other process for collecting information on banking access challenges affecting its partners. Without this information, USAID does not have a record of the frequency and prevalence of the challenges and may not be aware of the full extent of risks to achieving its humanitarian assistance objectives. Further, as mentioned previously, two USAID partners stated that their projects faced potential adverse effects from banking access challenges. Documenting the prevalence and frequency of banking access challenges experienced by USAID partners is important given the potential adverse effects that these challenges can have on project implementation. Treasury and State Have Taken Various Actions to Help Address Banking Access Challenges Encountered by NPOs, While USAID Efforts Have Been Limited by a Lack of Communication Both within the Agency and Externally Both Treasury and State have taken actions to help address banking access challenges encountered by NPOs; however, USAID’s efforts to address these challenges have been limited by a lack of communication about them—both within the agency and with external entities. Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, has conducted meetings between charities, banks, and government officials to discuss banking access challenges and released guidance on sanctions and other related issues. State, as a provider of funding for humanitarian assistance, has issued guidance to its overseas posts on banking access challenges. In addition, both State and Treasury are involved in international efforts led by the World Bank and the Financial Action Task Force (FATF) to help address banking access challenges. Although USAID’s partners have experienced banking access challenges, USAID has had more limited engagement than State and Treasury with other agencies, international organizations, and NPOs on addressing such challenges—in part because of a lack of communication about them, both within the agency and with external entities. Treasury Is Involved in Several Efforts to Help Address Banking Access Challenges Experienced by NPOs Treasury’s efforts to help address banking access challenges encountered by NPOs include holding roundtable meetings and issuing guidance and resources for charitable organizations. Treasury, in its role as a regulator of the banking system, serves as a nexus between the banks and the U.S. agencies providing humanitarian assistance. Treasury has organized several roundtable meetings with the charitable sector to facilitate a dialogue on banks’ expectations. These sessions brought together representatives from charities, banks, financial supervisors, and the U.S. government to discuss the factors that banks consider related to charity accounts and that examiners use in their review of banks’ procedures. Since 2013, Treasury’s Office of Terrorist Financing and Financial Crimes (TFFC) has dedicated three of these roundtable meetings specifically to banking access challenges affecting charities, as follows: December 17, 2013: This initial Treasury / TFFC working group meeting with charities included a discussion of terrorist financing risk mitigation guidance. There was also a discussion of banking access challenges, during which TFFC provided an overview of the NPO section of the manual used by bank examiners to conduct bank examinations and explained the bank examination process to the charities. March 21, 2014: This meeting focused on a discussion of access to financial services for charities. A Muslim-American charity delivered a presentation on how it has managed its banking relationships over the past several years. Several banks also delivered presentations to help charities better understand the factors that banks consider and the complex processes related to banking transactions and opening or maintaining bank accounts. November 12, 2015: This meeting included a stakeholder discussion of banking access challenges for charities, with charities, bankers, and regulators presenting each of their perspectives and discussing the challenges faced on all sides. In addition, in May 2015, Treasury, with the Department of Homeland Security, conducted a roundtable on banking access challenges with Syrian-American charities, U.S. regulators, and bankers. This event was focused on challenges affecting the Syrian-American charitable community and delivering humanitarian assistance to Syria during the worsening conflict. Treasury provided guidance related to OFAC’s general license 11a for U.S. charities to provide humanitarian assistance for Syria. Further, officials reported that Treasury also maintains contact with the charitable sector through various domestic and international events, and holds frequent meetings with members of the charitable sector in Washington, D.C. and around the United States. Treasury has also issued guidance and resources on its website for charities, including frequently asked questions and best practices. Treasury’s website provides information and resources for all stakeholders in four strategic areas—private sector outreach, coordinated oversight, targeted investigations, and international engagement. The guidance includes: voluntary best practices regarding anti-terrorist financing for charities, lists of frequently asked questions regarding sanctions and charities, list of charities that have been designated by OFAC for assisting or having ties to terrorist organizations, several international multilateral organization reports on banking access challenges and terrorist exploitation of charities, and OFAC guidance specifically related to the provision of humanitarian assistance. Lastly, Treasury has taken actions on derisking challenges more generally. According to Treasury officials, these more general actions focused on encouraging dialogue and making clear to financial institutions that they are expected to make individual risk-based decisions rather than wholesale, indiscriminate policies for entire sectors or classes of customers. Treasury officials noted that banks retain the flexibility to make business decisions such as which clients to accept, since banks are in the best position to know whether they are able to implement controls to manage the risk associated with any given client. These officials indicated that Treasury pursues market-driven solutions and cannot order banks to open or maintain accounts. The officials have stated that Treasury does not view the charitable sector as presenting a uniform or unacceptably high risk of money laundering, terrorist financing, or sanctions violations. However, charities delivering critical assistance in high-risk conflict zones have, in some cases, had terrorist organizations and their support networks exploit donations and operations to support terrorist activities. State Has Issued Guidance to All of Its Overseas Posts to Help Address Banking Access Challenges State has issued guidance to its staff overseas to help address banking access challenges encountered by NPOs and others and identified a focal point for banking access challenges within the agency. In July 2017, State issued internal guidance, through a document issued to all of its overseas embassies, regarding derisking. State, based on guidance from Treasury, developed guidance for all personnel that provides background on “de-risking” and related talking points, additional web-based resources, and an assessment framework tool to evaluate the current state of banking relationships in a given market. The guidance includes links to resources from Treasury, U.S. banking regulators, and various international organizations, such as the World Bank, International Monetary Fund, and FATF. The guidance is designed to give embassy staff some tools to work with host governments on these issues and to help identify countries and markets where further U.S. government engagement is necessary. In addition, State’s Office of Threat Finance Countermeasures serves as the main focal point for all banking access challenges brought to the attention of State. This office provides assistance to State’s embassies when banking-access-related issues are raised through the embassy to State headquarters. All embassy staff, as part of the guidance issued on derisking, have been instructed to direct all questions received on banking access issues to the Office of Threat Finance Countermeasures. In addition, this office is responsible for interfacing with Treasury on banking access issues and staff from this office have attended all of the relevant Treasury-hosted roundtable meetings focused on banking access challenges encountered by charities. Treasury and State Are Also Involved in Efforts Undertaken by the World Bank and the Financial Action Task Force Aimed at Addressing Banking Access Challenges The World Bank and FATF have several efforts underway—with participation from Treasury and State—to address banking access challenges for NPOs. The World Bank, in collaboration with the Association of Certified Anti-Money Laundering Specialists (ACAMS), is working with humanitarian organizations, banks, and U.S. regulators on the question of how humanitarian organizations can maintain access to the financial system. More specifically, the World Bank and ACAMS have launched three primary work streams focused on different aspects of banking access to improve NPOs’ understanding of what the financial institutions require and to improve the banks’ understanding of how NPOs operate. According to a World Bank official, the three workstreams are as follows: Work Stream 1: This work stream aims to ensure a better understanding of bank examiners of the NPO sector and to enable more risk differentiation on the part of those examiners when they conduct on-site supervision and examine bank client accounts. Work Stream 2: This work stream aims to help banks conduct due diligence on charities more easily through the use of technological tools, such as databases that contain key information on charities. Work Stream 3: This work stream aims to work with the regulatory bodies to help bank examiners change their perceptions of the risk potential of charities. In addition, the World Bank and ACAMS have organized roundtable meetings as part of the ongoing Stakeholder Dialogue on De-Risking. The objectives of a January 2017 meeting were to promote access of humanitarian organizations to financial services and to discuss practical measures to foster the relationship between NPOs and financial institutions, improve the regulatory and policy climate for financial access for NPOs, and build coalitions and create opportunities for sharing information and good due diligence practices. Officials from Treasury and State have been involved with the dialogues and various work streams. FATF, with participation from both Treasury and State, also has several efforts underway to help address banking access challenges, including revising its recommendations and issuing guidance. Derisking has been a stated FATF priority since October 2014. In June 2016, FATF revised its recommendation that pertains to how countries should review NPOs and its interpretive note to better reflect how to implement measures to protect NPOs from terrorist abuse, in line with the proper implementation of the risk-based approach. According to Treasury, this approach emphasizes that not all charities are considered high-risk. Specific changes included defining NPOs, removal of the words “particularly vulnerable” from previous language, and emphasis on a risk-based approach for evaluating NPOs. The FATF has also issued guidance and best practices to guide both financial institutions and regulators on how to properly implement the risk-based approach, in line with the revised FATF recommendations. Additionally, according to Treasury, the FATF updated a report analyzing the global terrorist threat to the charitable sector, gathering over 100 examples of terrorist abuse of charities to pinpoint which types of charities are considered higher-risk. This report and its findings were published in June 2014. USAID’s Efforts to Address Banking Access Challenges Are Limited by Lack of Communication, Both within the Agency and with External Entities, on Challenges Faced by Partners USAID efforts to address banking access challenges have been limited, in part because of a lack of communication within the agency and with external entities about challenges faced by USAID’s partners. Within USAID, we found that information on banking access challenges faced by partners was not always communicated beyond staff directly overseeing the project. We found that the USAID staff who had direct responsibility for managing the project were generally aware of banking access challenges that affected project implementation, and had taken steps to help mitigate these challenges on a project-level basis. However, other relevant staff, such as USAID management and country-level headquarters staff, were not aware of these challenges. For example, partners in Syria and Somalia that we interviewed noted experiencing banking access challenges, but the USAID officials representing these countries in headquarters told us they were not aware of such challenges occurring recently. This situation may be, in part, because USAID has no designated office or process that focuses on communicating these issues throughout the agency to other relevant officials, including USAID management. Federal standards for internal control note that management should use quality information to achieve the entity’s objectives, and that entity management needs access to relevant and reliable communication related to internal as well as external events. If information on banking access challenges experienced by USAID partners is only reported to program-level staff and not communicated to a wider audience within the agency, then the agency as a whole may not fully recognize the overall risks posed by banking access challenges to USAID’s ability to achieve its objectives. Further, the agency may miss opportunities to assist other partners that might be experiencing similar issues based on lessons learned from previous experiences, if staff are not aware of the banking access challenges that have been experienced by its partners implementing other projects or working in other countries. USAID participation in interagency and partner efforts to address banking access challenges has been limited, in part because of a lack of communication with these external entities. According to Treasury officials, because there is no main focal point at USAID for banking access challenges, there is no consistency on who attends, or whether anyone attends, the Treasury-hosted roundtable meetings on banking access challenges from USAID. Further, an NPO trade association and other NPOs told us that it is difficult to find a person at USAID to engage with on banking access challenges. Lastly, a USAID/OFDA official stated that USAID has had limited engagement on issues related to banking access challenges. The OFDA official stated that once OFDA fully staffs its new Award, Audit, and Risk Management Team, it will be able to more fully engage on these issues. Federal standards for internal control state that management should communicate the necessary quality information both internally and externally to achieve the organization’s objectives. Without effective communication with partners and other government agencies about banking access challenges its partners face, USAID’s ability to effectively and consistently engage with these entities or contribute to efforts to help address these challenges is limited. Conclusions The United States provides humanitarian assistance in countries that are often plagued by conflict, instability, or other issues that increase the risk of financial crimes. Some of these countries also face U.S. sanctions that are aimed at their governments or other actors that engage in terrorism or illicit activities. Additionally, to ensure that the U.S. financial system is not used for money laundering or financing terrorism, financial institutions such as banks are subject to various U.S. laws and regulations that require banks to conduct proper due diligence on entities, such as those transferring funds to high-risk countries. However, there is concern among some organizations that banks’ higher level of due diligence, especially for clients such as charitable organizations that provide humanitarian assistance in high-risk countries, may create undue difficulties, including delays, for these organizations. Charitable organizations and others believe that because the United States and a key multilateral organization previously labeled charitable organizations as high-risk, banks remain reluctant to serve these organizations even though a case-by-case assessment of risk is now recommended. As such, we found that the majority of implementing partners—many of which are charitable organizations—of U.S. government assistance that we interviewed had experienced some banking access challenges. Despite our findings and others’ findings on the prevalence of banking access challenges facing humanitarian assistance organizations, USAID’s current partner reporting does not capture information related to the potential risks of banking access challenges faced by its partners. Without collecting this information, USAID cannot help the partners mitigate banking access challenges. Additionally, if these challenges are not documented and shared throughout the agency, the prevalence of the challenges and potential risks cannot be fully assessed. Further, without communicating about banking access challenges faced by its partners throughout the agency and to others, the potential risk to agency objectives will not be known and USAID’s ability to engage with other agencies and organizations in helping to address these challenges is limited. Recommendations for Executive Action We are making the following two recommendations to USAID: The Administrator of USAID should take steps to collect information on banking access challenges experienced by USAID’s implementing partners. (Recommendation 1) The Administrator of USAID should take steps to communicate information on banking access challenges faced by partners both within USAID and with external entities, such as other U.S. agencies and U.S. implementing partners. (Recommendation 2) Agency Comments We provided a draft of this report to State, USAID, and Treasury for comment. We received written comments from USAID that are reprinted in appendix VI. USAID concurred with our recommendations. Treasury provided technical comments, which we incorporated as appropriate. State told us that it had no comments on the draft report. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of the U.S. Agency for International Development, the Secretary of the Treasury, 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) 512-9601 or melitot@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 VII. Appendix I: Banking Access Challenges Experienced by State and USAID Did Not Affect Operations in High Risk Countries State and USAID Experience Some Banking Access Challenges, Such as Delays in Overseas Transfers of Funds While the Department of State (State) and the U.S. Agency for International Development (USAID) have encountered some banking access challenges, such as closed accounts and delays in transferring funds, these challenges did not affect their operations for providing assistance to high-risk countries. To send funds overseas, State, through two U.S. disbursement offices managed by State’s Bureau of the Comptroller and Global Financial Services (CGFS), maintains foreign currency bank accounts in 172 countries. Funds are transferred from a Federal Reserve Bank to a U.S. dollar bank account maintained by State, after which the funds are directed through a correspondent bank or a foreign exchange broker to a foreign bank account maintained by State. A correspondent bank serves as the intermediary between the bank sending a transfer, in this case a U.S. dollar denominated bank account, and the bank issuing payment to the recipient, in this case the State-held account in the recipient country. Both the bank sending the transfer and the bank receiving the transfer hold an account at the correspondent bank, which is used for fund transfers, cash management, and other purposes. According to State, all State transfers overseas, as well as the majority of USAID payments overseas, are managed by CGFS, and in fiscal year 2017 CGFS’s two disbursement offices processed approximately 3 million payments through accounts managed by State in 172 countries. State officials told us that State encounters occasional banking access challenges, including short delays in funds transfers, denials of funds transfers to certain countries, and one bank-initiated account closure. Banking Access Challenges Do Not Affect State and USAID Operations State officials told us that they are able to mitigate the occasional banking access challenges that they encounter to ensure operations are not affected. For example: State’s transfers to countries sanctioned by the Office of Foreign Asset Control (OFAC) are occasionally flagged by intermediary banks. According to State, in fiscal year 2017 approximately one- tenth of one percent (0.1%) of payments were delayed because of OFAC sanctions. When this occurs, State receives questions on the details of those transfers. According to officials, this is an ongoing challenge, but State resolves such delays within 2 weeks—and typically within days—and there are no operational effects as a result of the delays. In some instances—including once in 2012, and once in 2018—an intermediary bank used by CGFS’s U.S. bank stopped processing transfers to a recipient bank in a specific country. According to State officials, in both cases State identified an alternative intermediary bank to transfer funds to the destination country. In both cases, there were no operational effects. In 2014, an intermediary bank used by CGFS’s U.S. bank ended its banking relationship with an OFAC-sanctioned country (Syria), and State was unable to move funds from its U.S.-dollar denominated accounts to that country. State, with the advice of the recipient bank in the OFAC-sanctioned country, identified an alternative intermediary bank that was able to move funds to that country using euro-denominated accounts. In 2014, a U.S. bank—at which State maintained an account and that State used to fund its operations in Brunei—notified State that it would be closing State’s account with 29 days’ notice. State worked with Treasury to identify an alternative bank that would be willing to maintain a State bank account. The operation was not affected. Appendix II: GAO-Selected Countries Have an Increased Risk of Financial Crimes For this review, we selected four countries—Syria, Somalia, Haiti, and Kenya—that may have a higher risk of financial crimes because of conflict, instability, or other issues. We selected them based on factors including the level of humanitarian assistance they received from U.S. agencies, their inclusion on multiple financial-risk-related indices, and geographical diversity. Syria. Since 2011, Syria has been plagued by an ongoing multisided armed conflict fought primarily between the government of President Bashar al-Assad, along with its allies, and various forces opposing both the government and each other. Syria’s economy has deeply deteriorated amid the ongoing conflict, declining by more than 70 percent from 2010 to 2017. During 2017, the ongoing conflict and continued unrest and economic decline worsened the humanitarian crisis, necessitating high levels of international assistance, as more than 13 million people remained in need inside Syria and the number of registered Syrian refugees increased from 4.8 million to more than 5.4 million. Multiple terrorist groups operate inside Syria, raising the potential risk of terrorist financing. Additionally, according to a Central Intelligence Agency report, Syria is a transit point for opiates, hashish, and cocaine bound for regional and Western markets, and weak anti-money-laundering controls and bank privatization may leave it vulnerable to money laundering. The U.S. maintains a comprehensive Syria sanctions program. A general license in the Syria regulations authorizes nonprofit organizations to provide services, including financial services, to Syria in support of certain not-for-profit activities, such as activities to support humanitarian projects to meet basic human needs and support education in Syria. Organizations providing humanitarian assistance that is not authorized by the general license may apply for a specific license to engage in those transactions. The United States has provided approximately $3.3 billion in humanitarian assistance for Syria since 2012. Somalia. Since 1969, Somalia has endured political instability and civil conflict, and is the third-largest source of refugees, after Syria and Afghanistan. Somalia lacks effective national governance and maintains an informal economy largely based on livestock, money transfer companies, and telecommunications. In the absence of a formal banking sector, money transfer companies have sprung up throughout the country, handling up to $1.6 billion in remittances annually. According to a 2016 State report, Somalia remained a safe haven for terrorists who used their relative freedom of movement to obtain resources and funds, recruit fighters, and plan and mount operations within Somalia and neighboring countries. The United States maintains a targeted list-based Somalia sanctions program. Organizations providing humanitarian assistance may apply for a specific license to engage in transactions that otherwise would be prohibited by the Somalia sanctions regulations. The United States has provided approximately $1.2 billion in humanitarian assistance for Somalia since 2012. Haiti. Currently the poorest country in the western hemisphere, Haiti has experienced political instability for most of its history. Remittances are the primary source of foreign exchange, equivalent to more than a quarter of GDP, and nearly double the combined value of Haitian exports and foreign direct investment. In January 2010, a catastrophic earthquake killed an estimated 300,000 people and left close to 1.5 million people homeless. Hurricane Matthew, the fiercest Caribbean storm in nearly a decade, made landfall in Haiti on October 4, 2016, creating a new humanitarian emergency. An estimated 2.1 million people were affected by the category 4 storm, which caused extensive damage to crops, houses, livestock, and infrastructure across Haiti’s southern peninsula. Haiti is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report. According to USAID, the agency has provided $187.8 million in humanitarian assistance for Haiti since 2012. Kenya. Kenya is the economic, financial, and transport hub of East Africa. Since 2014, Kenya has been ranked as a lower middle income country because its per capita GDP crossed a World Bank threshold. Al-Shabaab aims to establish Islamic rule in Kenya’s northeastern border region and coast and carried out a spate of terrorist attacks in Kenya. Kenya is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report. The United States has provided approximately $807 million in humanitarian assistance for Kenya since 2012. Appendix III: Objectives, Scope and Methodology This report examines (1) the extent to which implementing partners of the Department of State (State) and the U.S. Agency for International Development (USAID) experience banking access challenges that affect their implementation of humanitarian assistance projects, (2) USAID implementing partners’ reporting on banking access challenges, and (3) actions relevant U.S. agencies have taken to help address banking access challenges encountered by nonprofit organizations (NPO). In addition, we provide information on the extent to which State and USAID experience banking access challenges in providing assistance in high-risk countries in appendix I. To address these objectives, we examined U.S.-funded projects and their implementers in four high-risk countries—Syria, Somalia, Haiti, and Kenya. We selected these countries based on factors including the high level of humanitarian assistance they received from U.S. agencies, their higher propensity for the occurrence of financial crimes based on their inclusion on multiple financial-risk-related indices, and to obtain geographical diversity. More specifically, to identify our list of high-risk countries in terms of banking or financial risk, we used several indices including ones based on financial risk, money laundering risk, and counterterrorism-related risk. The indices we chose to use were State’s International Narcotics Control Strategy Report (2014- 2016) (Money Laundering Risks), the Department of the Treasury’s (Treasury) Office of Foreign Assets Control (OFAC) sanctions, the Organisation for Economic Co-operation and Development’s (OECD) Fragile State Index (2014-2016), the 2017 Financial Action Task Force (FATF) High Risk and Non- Cooperative Jurisdictions list, and the BASEL AML Index, 2017. We then identified 19 countries that appeared on at least two of the five lists and received at least $100 million in U.S. based humanitarian assistance from 2012 through 2017, based on data from the United Nations Office for the Coordination of Humanitarian Affair’s financial tracking system. We then applied the following primary selection criteria to select our four countries: whether they (1) appeared on at least three of the five identified lists and (2) have received at least $100 million in U.S. humanitarian assistance since 2012. Secondary considerations that informed our selection included whether a country had been identified as having banking access challenges by USAID, geographical diversity, and ensuring we had at least one country from each of the five indices we chose. The data we obtained for these four countries cannot be generalized beyond our selected projects and partners. For our first objective, to examine the extent to which implementing partners of State and USAID experienced banking access challenges that affected their implementation of humanitarian assistance projects, we conducted semi-structured interviews with 18 partners about (1) one of 18 specific projects we had selected in one of our high-risk countries and (2) their experiences implementing their global portfolio of humanitarian assistance projects over the previous 5 years. In order to determine our sample of partners, we selected a weighted, non-generalizable sample of 18 projects located in our four selected high-risk countries. We selected our projects from a list, provided by State and USAID, of 195 projects that were active as of the end of fiscal year 2017 in these countries. In making our selection of projects we made sure that our sample included a mix of projects from each country (7 projects for Syria, 5 for Somalia, 3 for Haiti, and 3 for Kenya), and a mix of State and USAID projects (3 State and 15 USAID). We selected those numbers for each country and each agency based on the number of projects in each country and the proportion of assistance provided. We selected one State project in each of the three countries where they were active. Once we had determined these parameters for our non-generalizable sample, we made the final selections of the projects at random, making sure that we did not select more than one project for any one partner. Several of the implementing partners in our sample operate in over 100 countries in every part of the world, while a few operate in 20 or fewer countries. Three of the partners are United Nations organizations. The implementing partners in our sample had fiscal year 2016 annual revenues ranging from $5.9 billion to just over $10 million. We conducted semi-structured interviews with each of the 18 implementing partners on potential banking access challenges, such as the ability to open and maintain new accounts and make transfers in a timely fashion, and the effect of those challenges on project implementation. Our interviews were separated into two distinct sets of questions—one on banking access challenges the implementing partner encountered on the selected project, and the other on any banking access challenges the implementing partner encountered in its global portfolio of humanitarian assistance projects over the previous 5 years (2013-2017). When discussing their global humanitarian assistance portfolios, the partners did not limit their responses to projects funded by U.S. government agencies, but instead considered projects funded by all of their donors. We did not ask the partners to quantify the number of projects they had implemented over the previous 5 years, nor did we ask them to quantify the number of projects in their global portfolio of humanitarian assistance for which they had experienced banking access challenges. Our interview followed a protocol that asked both closed and open-ended questions. For most banking access challenges, when interview respondents indicated that their project or organization had experienced a banking access challenge, we probed for details of the challenge, including whether the challenge had caused an adverse effect on the project, such as project delays or cancellations. After the interviews had been conducted, we content-coded some of the open- ended answers we received. Specifically, we developed codes on whether any challenges reported had adversely affected the projects, the extent and duration of delays in transferring funds, and the extent and frequency of denials of international fund transfers. Two analysts independently coded each interview. The analysts then compared their coding and reconciled any initial disagreements. We also reviewed relevant studies on banking access challenges for NPOs conducted by the World Bank and the Charity and Security Network (CSN). The study conducted by CSN included a survey that was designed to be generalizable to the population of all U.S. NPOs with activities outside the U.S., including providing humanitarian assistance. This survey received more than 300 responses, which constituted a reported response rate of about 38 percent. The researchers conducting the survey indicated that this response rate could be considered high for a public opinion telephone survey but low for a survey like the Census. The study determined the survey findings to be representative of the population with some qualifications, such as the fact that smaller organizations were more likely to complete the survey than larger organizations. The maximum margin of error was estimated to be 5.4 percent. More than 70 of the NPOs reported that they had received U.S. government funding. We requested and received some additional data analysis from the researchers who had conducted this survey. We examined the aggregate survey responses in detail and compared them to the responses we received to our semi-structured interview questions, which probed into similar aspects of financial access. We reviewed documentation and interviewed the officials responsible for the survey and determined that they had used a reasonable methodology to conduct the survey. We also interviewed several NPOs and NPO groups that were not part of our sample to obtain their views on banking access challenges affecting those delivering humanitarian assistance. For our second objective, to examine USAID implementing partners’ reporting on banking access challenges, we reviewed the fiscal year 2017 progress reports, including quarterly, semi-annual, and annual reports, that USAID provided for our selected projects to determine if banking access challenges the implementing partners told us about in the interviews had been reported in accordance with requirements in the individual award agreements. In total, we reviewed 26 reports from these partners. We also interviewed USAID agreement officers for the projects that stated they had experienced banking access challenges about implementing partners’ reporting of those banking access challenges. To obtain a broader context, we also reviewed over 1300 USAID implementing partner reports for fiscal years 2016 and 2017 from a wider selection of high-risk countries to determine the extent to which banking access challenges are being reported to USAID. To identify the relevant USAID progress reports, we searched USAID’s Development Experience Clearinghouse (DEC) for all periodic progress reports filed for fiscal years 2016 and 2017 by implementing partners working in selected 19 high-risk countries for instances of reporting on financial access challenges. Using these criteria, we identified 1,369 reports from fiscal years 2016-2017 from our selected 19 high-risk countries. The reports included annual reports, final contractor / grantee reports, final evaluation reports, and periodical and periodic reports (such as quarterly or semi-annual reports). The 1,369 reports constituted our universe of reports for which we used a textual analysis program to automatically scan and search for words and phrases that we identified in a lexicon of financial access terms. We developed this lexicon of financial access terms based on a review of relevant research, interviews with industry organizations, and a manual review of USAID progress reports. Using the lexicon, our textual analysis program identified all mentions of identified terms in the universe of reports. Next, two analysts independently reviewed the mentions identified through our textual analysis software program to determine whether the mentions actually constituted a reporting of a financial access challenge. The analysts then reconciled any differences in their reviews. For the purposes of this review, we considered a relevant financial access challenge to be any challenge encountered by the implementing partner in obtaining U.S. banking services, or in transferring funds from the United States to the destination country. We did not conduct a similar review of State partner reporting because we only had a sample of three State projects and one of the projects did not require direct written reporting to State. In addition, State does not have a central depository for partner reports that we could search, such as USAID’s DEC. For our third objective, to examine actions relevant U.S. agencies have taken to help address banking access challenges encountered by NPOs, we conducted interviews with and reviewed documentation from State, USAID, and Treasury on actions they have taken to help address these challenges. We also discussed U.S. agency involvement in efforts to help address these challenges with relevant organizations that represent NPOs. In addition, we reviewed relevant documentation published by the World Bank and the Financial Action Task Force on actions they have taken to help address banking access challenges encountered by NPOs, and interviewed relevant staff at the World Bank on efforts undertaken to address banking access challenges. To examine the extent to which State and USAID encountered banking access challenges in providing assistance in high-risk countries, we interviewed State officials responsible for conducting overseas transfers of funds for both State and USAID to determine if any banking access challenges exist that are specific to our case study countries as well as for U.S. assistance worldwide. We also interviewed State and USAID officials with responsibility for overseeing programs in our four selected countries to determine if they had seen any effects of banking access challenges. We focused primarily on these agencies’ ability to access banking services in the United States and on the transfer of funds to the ultimate destination. We conducted this performance audit from July 2017 to September 2018 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 IV: State and USAID Are the Primary Providers of U.S. Humanitarian Assistance The United States provides humanitarian assistance primarily through offices and bureaus within the Department of State (State) and the U.S. Agency for International Development (USAID). The primary humanitarian offices and bureau are: State’s Bureau of Population, Refugees, and Migration (PRM). PRM’s stated mission is to provide protection, ease suffering, and resolve the plight of persecuted and uprooted people around the world by providing life-sustaining assistance, working through multilateral systems to build global partnerships, promoting best practices in humanitarian response, and ensuring that humanitarian principles are integrated into U.S. foreign and national security policy. PRM does not operate refugee camps or give aid directly to refugees, but rather works with entities that operate these programs, including the United Nations, other international organizations, and nonprofit organizations. USAID’s Office of U.S. Foreign Disaster Assistance (OFDA). OFDA states that it helps countries prepare for, respond to, and recover from humanitarian crises. According to USAID, OFDA works with the international humanitarian community to give vulnerable populations resources to build resilience and strengthen their ability to respond to emergencies. Assistance includes provision of emergency relief supplies, establishing early warning systems, and training on search and rescue efforts, as well as programs to help victims of disasters recover. USAID’s Office of Food For Peace (FFP). FFP’s stated mission is to partner with others to reduce hunger and malnutrition, and help ensure that all individuals have adequate, safe, and nutritious food to support a healthy and productive life. According to FFP, it works to mobilize resources to predict, prevent, and respond to hunger overseas. FFP’s emergency activities include food assistance to help reduce suffering and support the early recovery of people affected by conflict and natural disaster emergencies. Appendix V: Prevalence of Delays and Denials of Funds Transfers Experienced by Selected Implementing Partners Appendix VI: Comments from the U.S. Agency for International Development Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the individual named above, Mona Sehgal (Assistant Director), Michael Maslowski (Analyst in Charge), Ming Chen, Debbie Chung, Martin de Alteriis, Leia Dickerson, Mark Dowling, Erin Guinn- Villareal, Chris Keblitis, and Benjamin L. Sponholtz made key contributions to this report.

Why GAO Did This Study Since 2012, the United States has provided approximately $36 billion in humanitarian assistance to save lives and alleviate human suffering. Much of this assistance is provided in areas plagued by conflict or other issues that increase the risk of financial crimes. The World Bank and others have reported that humanitarian assistance organizations face challenges in accessing banking services that could affect project implementation. GAO was asked to review the possible effects of decreased banking access for nonprofit organizations on the delivery of U.S. humanitarian assistance. In this report, GAO examines (1) the extent to which State and USAID partners experienced banking access challenges, (2) USAID partners' reporting on such challenges, and (3) actions U.S. agencies have taken to help address such challenges. GAO selected four high-risk countries—Syria, Somalia, Haiti, and Kenya—based on factors such as their inclusion in multiple financial risk-related indices, and selected a non-generalizable sample of 18 projects in those countries. GAO reviewed documentation and interviewed U.S. officials and the 18 partners for the selected projects. What GAO Found Implementing partners (partners) for 7 of 18 Department of State (State) and U.S. Agency for International Development (USAID) humanitarian assistance projects that GAO selected noted encountering banking access challenges, such as delays or denials in transferring funds overseas. Of those 7 projects, 1 partner told us that banking access challenges adversely affected its project and 2 additional partners told us that the challenges had the potential for adverse effects. Moreover, the majority of partners (15 out of 18) for the 18 projects noted experiencing banking access challenges on their global portfolio of projects over the previous 5 years. USAID's partners' written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that encountered challenges were USAID-funded. Of those 6 USAID projects, 5 partners told us that these challenges did not rise to the threshold of affecting project implementation that would necessitate reporting, and 1 did not report challenges although its project was adversely affected. Additionally, GAO's review of about 1,300 USAID partner reports found that the few instances where challenges were mentioned lacked sufficient detail for GAO to determine their type, severity, or origin. Without information on banking access challenges that pose potential risks to project implementation, USAID is not aware of the full extent of risks to achieving its objectives. The Department of the Treasury (Treasury) and State have taken various actions to help address banking access challenges encountered by nonprofit organizations (NPO), but USAID's efforts have been limited. Treasury's efforts have focused on engagement between NPOs and U.S. agencies, while State has issued guidance on the topic to its embassies and designated an office to focus on these issues. In contrast, USAID lacks a comparable office, and NPOs stated that it is difficult to find USAID staff to engage with on this topic. Further, GAO found that awareness of specific challenges was generally limited to USAID staff directly overseeing the project. Without communicating these challenges to relevant parties, USAID may not be aware of all risks to agency objectives and may not be able to effectively engage with external entities on efforts to address these challenges. What GAO Recommends GAO recommends that USAID should take steps to (1) collect information on banking access challenges experienced by USAID's partners and (2) communicate that information both within USAID and with external entities, such as other U.S. agencies and partners. USAID concurred with our recommendations.

gao_GAO-18-659

gao_GAO-18-659_0

Background Enforcing tax laws helps IRS collect revenue from noncompliant taxpayers and, perhaps more importantly, promotes voluntary compliance by giving taxpayers confidence that others are paying their fair share. However, every year, taxpayers fail to pay hundreds of billions of dollars in taxes. This tax gap—the difference between tax amounts that taxpayers should pay and what they actually pay voluntarily and on time—has been a persistent problem for decades. In our 2017 High-Risk Report we continued to include Enforcement of Tax Laws as a high-risk area. Key components of this high-risk area include both addressing the tax gap and improving tax compliance. IRS has four business operating divisions responsible for enforcing tax law and providing taxpayer service to ensure taxpayer compliance, as shown in table 1. For this report, we refer to these divisions as compliance units and their staff as compliance staff. Role of the Office of Appeals Formed in 1927, Appeals is the only administrative function of IRS with authority to consider settlements of tax controversies and has the primary responsibility to resolve these disputes without litigation to the maximum extent possible. IRS states that the appeal process is both less formal and costly than court proceedings and is not subject to judicial rules of evidence or procedure. The IRS Restructuring and Reform Act of 1998 (Restructuring Act) specified that IRS must provide an independent appeals function. Appeals carries out this function. Appeals is a separate unit within IRS, and its chief reports directly to the Commissioner of Internal Revenue. The Restructuring Act also prohibits communications between Appeals staff and other IRS functions without the taxpayer or representative being given an opportunity to participate. In 2016, IRS clarified that Appeals is separate from the IRS compliance functions, including examination and collection units, that initially review a taxpayer’s case and that Appeals may return cases to compliance units when taxpayers provide new information for consideration. Appeal Eligibility Taxpayers may appeal many IRS decisions, including tax collection actions and proposed tax assessments, with some exceptions. Taxpayers cannot appeal solely due to moral, religious, political, constitutional, conscientious, or other similar grounds. Taxpayers requesting appeals can range from individuals to large multinational corporations. IRS provides publications that explain taxpayer’s rights for both examination and collection appeals. IRS also developed online self-help tools to help taxpayers understand what can be appealed. For collection actions, the Restructuring Act created a statutory right for collection due process appeals and provides an impartial review for taxpayers facing possible levies for collecting delinquent taxes or who have had a notice of federal tax lien filed against them. IRS also offers a collection appeals program for a broader range of collection issues, such as when IRS rejects or terminates an installment agreement to pay taxes owed. In contrast, for examination decisions, the tax code does not provide statutory rights to administrative appeals. In certain circumstances, IRS will designate an examination issue for litigation and not offer access to the administrative appeal process. In other circumstances, IRS may decide not to refer cases docketed in the U.S. Tax Court to Appeals for settlement if it determines doing so will be in the best interest of sound tax administration. For example, IRS may decide not to refer a docketed case to Appeals in cases (1) involving a significant issue common to other cases in litigation for which it is important that the IRS maintain a consistent position or (2) related to a case over which the Department of Justice has jurisdiction. Appeal Workstreams Appeals’ workload is organized into seven workstreams based on similarities in case characteristics. Two workstreams involve collection appeals where IRS is pursuing taxpayers who failed to fully pay taxes and penalties owed. Four workstreams include a wide range of examination appeals where IRS is proposing additional tax and penalty assessments based on auditing tax returns. The last workstream covers other cases that do not fit into the collection and examination workstreams. Figure 1 below provides an overview of the appeal workstreams, including which IRS business operating divisions transfer the cases to Appeals. Appeals Funding and Workload While Appeals is separate from IRS’s examination and collection compliance functions, its budget is part of the IRS enforcement budget appropriation. From fiscal year 2010 to fiscal year 2018, Appeals represented about 4 percent of the IRS enforcement budget appropriation. Appeals’ funding has decreased by 29 percent since 2010 to $175 million in 2018 (see fig. 2). Adjusting for inflation, Appeals funding has decreased 38 percent since 2010. Over this same time period, Appeals received fewer cases as IRS enforcement activities declined. For example, the individual examination (or audit) coverage rate declined by about 50 percent from fiscal years 2010 to 2017. Also, the number of notices of federal tax liens filed declined by nearly 60 percent over the period. Faced with declining budgetary resources, IRS compliance units can prioritize and select fewer taxpayers to examine or pursue collection action. Appeals officials said their office generally must work every case received. Appeals aims to close approximately the same number of cases each year as it anticipates receiving during the year. Appeals closure rate—or the number of cases it resolved divided by the number it received in a year—improved from 98 percent for fiscal year 2010 to 103 percent for fiscal year 2017. Annual closure rates for 2017 varied by workstream, ranging from 72 percent for the innocent spouse workstream to nearly 109 percent for the examination workstream. Figure 3 shows the total number of cases received and pending at year end since fiscal year 2010. Appeals Has a Standard Process to Resolve Diverse Taxpayer Cases but Has Not Assessed Critical Skills Gaps in Its Declining Workforce IRS Uses a Standard Process to Resolve Taxpayer Appeals The diverse array of appeal requests across IRS compliance units that flow into Appeals workstreams follows the same standard process. As illustrated in figure 4, the appeal process involves multiple steps, beginning with a taxpayer filing an appeal of a proposed IRS compliance action and ending with a decision from Appeals. If the taxpayer and IRS cannot reach agreement through the appeal process, the taxpayer may have the case reviewed in federal court if eligible. While certain types of cases must go through the appeal process before review by a court, others may bypass it and taxpayers may directly petition IRS’s proposed actions in federal court. Compliance action. For proposed examination actions to assess additional taxes and penalties or collection actions, such as filing a notice of federal tax lien or proposing a levy to collect delinquent taxes, IRS notifies the taxpayer in writing about the proposed compliance action and explains their appeal rights. The notification states that the taxpayer has 30 days to file an appeal and includes a list of IRS publications and other information on how to file an appeal. Taxpayer action. Within 30 days from the compliance notification, taxpayers who disagree with the IRS proposed action must send a formal written request to appeal. The appeal request must include: the taxpayer’s name and address, and a daytime telephone number; a statement that the taxpayer wants to appeal the IRS findings to the a copy of the letter showing the proposed changes and findings that the taxpayer does not agree with; the tax periods or years involved; a list of the changes that the taxpayer does not agree with, and why the taxpayer does not agree; the facts supporting the taxpayer’s position on any issue that the taxpayer does not agree with; the law or authority, if any, on which the taxpayer is relying; and a signature on the written protest, stating that it is true, under the penalties of perjury. Taxpayers may choose to represent themselves or have professional representation before Appeals. A representative must be a federally authorized practitioner, who can be an attorney, certified public accountant, or enrolled agent authorized to practice before the IRS. Low-income taxpayers or those who speak English as a second language may be eligible for free or low cost representation from a Low Income Taxpayer Clinic. Based on our analysis of ACDS data for appeal cases closed from fiscal year 2014 through 2017, 57 percent of taxpayers had a representative and 43 percent were taxpayers representing themselves. The share of appeal cases with taxpayers representing themselves varied significantly across the workstreams, ranging from 18 percent for large case examination appeals to 95 percent for innocent spouse appeals. Taxpayers are instructed to send their appeal and supporting material to the examination or collection compliance unit that proposed the action. IRS states sending the appeal request directly to the Office of Appeals will result in delays and may result in the appeal not being considered a timely request. Compliance review. Compliance staff work directly with the taxpayer to try to resolve the issue once they determine a taxpayer is requesting an appeal. This may involve multiple interactions by telephone or correspondence. Compliance staff will review any new information submitted by the taxpayer as they attempt to resolve open collection or examination matters. Figure 5 illustrates the steps compliance staff are to follow when they receive an appeal. If compliance staff cannot reach agreement with the taxpayer, the compliance unit forwards the appeal request and documentation from the taxpayer along with the proposed compliance action documentation to Appeals. Appeals provides a case routing tool on the IRS intranet with instructions and addresses for compliance staff transferring appeal documentation to an Appeals location. In general, taxpayer appeals related to examination and collection campus cases are transferred to an Appeals campus location. Appeals for field examination and collection cases are transferred to an Appeals office near the taxpayer’s location. Compliance staff may not forward an appeal request to Appeals if the taxpayer did not file the request in time or refuses to sign the appeal under penalty of perjury, among other reasons. Appeals receipt and review. Figure 6 provides an overview of how Appeals receives and assigns cases. Upon receipt of an appeal, Appeals processing staff log each appeal case into the ACDS used to control and track cases in Appeals inventory. Most appeal cases arrive from compliance as paper files, and Appeals is working to receive certain collection cases electronically. For examination cases, Appeals processing staff also check that sufficient time remains for Appeals to complete its review. Generally, examination cases must have at least 365 days remaining on the assessment statute expiration date when the case is received in Appeals. An Appeals manager is to assess a case’s complexity and difficulty to determine how to assign the case. The manager is to consider the factual and legal complexity of the case issues and the level of conference negotiation skills needed to handle the case. The manager also is to consider whether the case has industry-wide implications or the decision would potentially affect other taxpayers and overall voluntary compliance. Generally, Appeals employees with higher skill levels and expertise are expected to be assigned more complex cases. The manager is then to assign the case to an Appeals staff person based on the employee’s grade level, ability, and case load. The Appeals employee leading the case may also draw on support from Appeals technical specialists, such as engineers and economists. For the large case examination workstream, an Appeals team case leader may oversee multiple Appeals employees working a large appeal case with highly complex issues and disputed amounts of $10 million or more. Figure 7 provides an overview of the Appeals case review process once a case is assigned to an Appeals employee. First, the Appeals employee sends a letter to the taxpayer with information about the appeal process and schedules a meeting. The letter details what additional material is needed, if any, and explains that a determination will be made on the information provided if there is no further contact from the taxpayer. The letter states that Appeals is independent from IRS compliance offices and refers to Publication 4227—Overview of the Appeals Process. Finally, the letter mentions that the taxpayer may be asked to participate in an Appeals customer satisfaction survey after they have completed the appeal process. Appeals offers conferences to provide taxpayers with an opportunity to present their position (see fig. 7). Based on our analysis of ACDS data for appeal cases closed, about 87 percent of appeal cases that were closed in fiscal year 2014 through 2017 had a conference. Most conferences are held by telephone which can be a quick and efficient means for taxpayers to resolve their issues. Appeals campus locations conduct telephone conferences because these locations currently are not configured to accommodate in-person conferences. Appeals may be able to resolve some taxpayer appeals with mail correspondence only. For perspective, about 10 percent of appeal cases that were closed and also had a conference from fiscal year 2014 through 2017 did so only by correspondence, and the penalty workstream accounted for nearly two-thirds of those appeal cases. Appeals also holds in-person conferences, usually at an Appeals office. Alternatively, under its conference policy as of August 2018, Appeals staff can meet taxpayers in a mutually convenient location when the taxpayer, representative, or business is beyond a certain distance from an Appeals office. In-person conferences may be used, among other things, for reviews involving substantial books and records, judging the credibility of witnesses, or accommodating with a taxpayer with a special need, such as disability or hearing impairment. Based on our analysis of ACDS data for appeal cases closed, about 6 percent of appeal cases that were closed from fiscal year 2014 through 2017 had an in-person conference, although this varied significantly by workstream. About half of the large case examination appeals closed over the period had in-person conferences, whereas about 3 percent of appeal cases closed in the collection due process, innocent spouse, and penalty workstreams had in-person conferences. As of August 2018, Appeals had revised its policy on in-person conferences twice since October 2016. Prior to that, campus appeal cases were transferred to a field office when taxpayers requested a face- to-face conference. For fiscal year 2017, Appeals limited in-person conferences to appeal cases meeting specific criteria, such as involving those with substantial books and records to review or where the taxpayer has special needs that can only be accommodated with an in-person conference. Appeals managers had final approval on granting taxpayer requests for in-person conferences. In October 2017, Appeals further revised its policy stating it would attempt to schedule in-person conferences requested by taxpayers for field appeal cases at a time and location reasonably convenient for both the taxpayer and Appeals. Appeals stated it was intending to strike the right balance between making in-person conferences available to taxpayers and ensuring the process is efficient and workable for Appeals. Appeals also offers virtual technology interaction to potentially allow more taxpayers, especially those in remote locations, to have an option other than a phone conference. Using IRS virtual service delivery capacity, Appeals staff at campus locations can conduct virtual conferences with taxpayers who schedule to use video terminals at some taxpayer assistance centers. In August 2017, Appeals began piloting web-based virtual conferences. If taxpayers provide Appeals with new information or evidence, or raise a new issue that requires additional investigation or analysis, Appeals will return the case to the originating compliance unit for further review. After a compliance unit transfers a case to Appeals, communication between compliance staff and Appeals staff is generally restricted without the taxpayer or representative being given an opportunity to participate. In line with its mission to resolve cases prior to litigation, Appeals is authorized to review the facts of the case considering the hazards that would exist if the case were litigated. Appeals is the only IRS unit authorized to consider hazards of litigation when deciding whether to allow taxes and penalties. This means that Appeals may recommend a fair and impartial resolution somewhere between fully sustaining and fully conceding the compliance unit’s proposal that reflects the probable result in the event of litigation. Appeals decision. Appeals makes a decision on a taxpayer’s case after weighing evidence from the compliance unit and the taxpayer. Appeals determines whether IRS compliance decisions correctly reflect the facts, as well as applicable law, regulations, and IRS procedures. To resolve an examination appeal case, Appeals may (1) agree with the IRS examination compliance unit and fully sustain its recommended assessment, (2) disagree and reduce the recommended assessment to partially sustain the assessment, or (3) fully concede to the taxpayer’s position and not sustain the assessment. To resolve a collection appeal case, Appeals may (1) agree with and sustain the proposed enforcement action, (2) disagree and modify the proposed action (e.g., propose an installment agreement rather than a levy) or defer collection, or (3) fully concede to the taxpayer’s position and not sustain the collection action. This is the final decision by Appeals. Once Appeals makes its decision, it informs the taxpayer in writing and also IRS. Taxpayers dissatisfied with Appeals’ decision may file a petition in tax court if they are eligible. Appeals Has Not Conducted a Skills Gap Analysis To handle the diverse array of taxpayer appeals across all workstreams, IRS relies on an Appeals workforce that must have sufficient numbers of staff with expertise in all areas of tax law. However, Appeals experienced nearly a 9 percent annual attrition rate from fiscal year 2015 to fiscal year 2017 and projects a similar attrition rate for fiscal years 2018 and 2019. As shown in figure 8, Appeals staffing levels have declined from 2,172 in fiscal year 2010 to 1,345 in fiscal year 2017, nearly a 40 percent decrease. As previously noted, Appeals workload also decreased over this period of time as IRS examination and collection enforcement activity declined. Appeals anticipates a continued risk of losing subject matter expertise given that a large share of its workforce is eligible for retirement. According to an Appeals report, at the end of fiscal year 2017, about one-third of the Appeals workforce was eligible for retirement. Moreover, Appeals officials reported that close to half of the staff who are critical to Appeals’ mission—including those who handle the most complex cases—were eligible for retirement. Based on our analysis of ACDS data for appeal cases closed, these types of cases accounted for about one-third of appeal cases closed in fiscal years 2014 through 2017. Gaps in available staff with critical skills and training can result in delays resolving appeal cases. For example, in fiscal year 2017 Appeals received an increased number of innocent spouse appeals, and officials told us they initially lacked sufficient numbers of trained staff ready to review those cases. As of April 2018, the time from receipt by Appeals to case closing for the innocent spouse workstream had increased by 39 percent over the same time period in 2017—from 205 days to 285 days. In response, Appeals was training additional staff and is working to resolve the increased volume of cases. Appeals has taken action to mitigate the risk of having a sufficient number of staff needed to handle its workload. Appeals has a tool that draws on historical ACDS case data to project the number of Appeals staff needed to review the numbers and types of case receipts expected from IRS compliance units. From fiscal year 2014 through fiscal year 2017, Appeals requested and received approval to hire 292 employees. In November 2017, IRS changed its policy to allow business units funded from IRS’s enforcement budget, including Appeals, to manage their own staff levels in certain instances provided they do not exceed their fiscal year staff limits. Under this policy, Appeals will be able to hire staff as its workforce declines due to attrition. While the steps Appeals has taken can be useful stopgap measures, they are not substitutes for nor do they replace the longer-term benefits of strategic workforce planning and conducting critical skills gap analysis. We have identified that key principles of effective workforce planning include that an agency must define the critical skills that it will need to meet its strategic goals and achieve its mission in the future. An agency must then develop strategies tailored to address staffing and skills gaps in its workforce, including how to acquire, develop, and retain staff to meet its goals. We have previously reported that mission-critical skills gaps within the federal workforce pose a high risk to the nation and that individual agencies must take steps to address skills gaps. We have also reported on the need to close government-wide mission critical skills gaps and to develop strategies to help agencies meet their missions in an era of highly constrained resources. Agencies that do not conduct a critical skills gap analysis risk significant negative effects. We have previously reported that in a time of declining resources, it is important for top management to take actions that ensure the agency maintains capacity—including its workforce—in order to achieve its mission. Once skill gaps are identified, strategies should be tailored to address the gaps. Appeals has identified knowledge loss and maintaining expertise during a time of declining staff levels as one of its top risks in its Business Performance Reviews. Although it has not conducted a skills gap analysis, Appeals has identified that maintaining expertise in all areas of tax law is essential because it must have staff trained to work a diverse array of appeal cases across all workstreams. Many Appeals staff who review appeal cases, including those who conduct in-person conferences, are in the appeals officer job series critical to Appeals’ mission. As of July 2018, about 60 percent of the Appeals workforce was in this job series. As of September 2018, Appeals is participating in a larger IRS effort to address workforce planning. IRS states that its workforce planning is to involve an integrated and systematic process for identifying current and future human capital needs, the competencies that align with future organizational goals, and the strategies to be implemented to reduce the gaps. Created in 2017, the IRS Workforce Planning Council is comprised of representatives from all business units, including Appeals. The council is to share workforce planning activities and best practices across IRS and assist in developing the IRS strategic workforce plan. The council is working to develop an agency-wide workforce plan, which will include identifying gaps between current and projected workforce needs and developing strategies to close the gaps. According to IRS human capital officials responsible for workforce planning, a service-wide strategic workforce planning effort will include identifying skills and competency gaps in mission critical occupations. Initially planned for the middle of fiscal year 2018, the initiative was delayed as of September 2018, according to IRS human capital officials. IRS units redirected resources to implementation of Public Law 115-97— commonly referred to by the President and many administrative documents as the Tax Cuts and Jobs Act—and requested an extension. IRS human capital officials also told us the workforce planning team lost resources due to attrition and anticipated the initiative would be complete in the third quarter of fiscal year 2019. Appeals officials told us that they expected to begin their activities once the IRS planning tools are in place. While the broader Treasury and IRS initiatives will benefit Appeals with longer-term strategic workforce planning, Appeals faces ongoing challenges in achieving its goal and may be unable to mitigate the risk of maintaining staff expertise. Gaps in the Appeals workforce could delay the timely review of Appeals cases. The large share of its staff who are critical to the mission who are eligible for retirement underscores the importance of conducting critical skills gap analysis for Appeals. Given Appeals’ unique role in ensuring taxpayers’ administrative option to dispute most IRS decisions, it is important for Appeals to have the tax expertise necessary to review appeals cases across multiple workstreams. These factors underscore the importance of Appeals conducting a skills gap analysis in coordination with Treasury and IRS human capital efforts to ensure Appeals immediate skill needs are reflected in broader agency planning. IRS Does Not Monitor Timeliness of Transfers of All Incoming Appeal Requests and Appeals Does Not Communicate Total Resolution Times to Taxpayers Appeals Has a Data- Driven Process and Measures to Track and Manage Case Workstreams Within the standard process that all appeal cases follow, Appeals has developed a series of process measures that use ACDS data to monitor the amount of time for a case to move through an Appeals workstream. These measures track the number of days from Appeals receipt through the appeal review process to when a case is closed in ACDS. Appeals also measures the amount of time for compliance units to transfer appeals cases. For the purpose of this report, total appeal resolution time is the length of time from when a taxpayer submitted the appeal request to IRS to when the case is closed in ACDS. Appeals managers use ACDS to monitor progress staff have made reviewing each case assigned to them, including holding a conference with the taxpayer and reaching a decision to resolve the appeal. ACDS inventory reports allow managers to monitor total employee time per case and determine if a case has not had any activity recorded for 60 days. Appeals officials explained that the process measures are indicators that assist in making management decisions and identifying data driven process efficiencies to control workflow within each workstream. For example, an Appeals manager may use the ACDS data to address case review backlogs and offer assistance to help expedite case review. Appeals reports its review time measure by workstream in its monthly performance report to the Commissioner of Internal Revenue. IRS Does Not Always Transfer Collection Appeals on a Timely Basis and Does Not Monitor Incoming Examination Appeals or Time to Transfer to Appeals The IRS website states that if a taxpayer has not heard from Appeals and it has been more than 120 days since the request was submitted, the taxpayer should contact the IRS office to which they sent their appeal request. According to IRS examination and collection officials we interviewed, compliance unit staff attempt to resolve all taxpayer requests and work with taxpayers to obtain additional information if needed and answer questions about pending compliance actions. According to Appeals officials, there are different levels of case complexity across the workstreams. For appeal cases closed from fiscal years 2014 through 2017, table 2 shows the average number of days from when IRS received a taxpayer appeal to when the compliance unit completed its review and transferred the case file to Appeals. Across the appeals workstreams, the compliance review time varied from 30 days for innocent spouse appeals to 108 days for large case examination appeals. Any delay during compliance review adds to the total time to resolve an appeal. As shown in table 2, compliance review accounted for about a quarter of the total resolution time for collection appeals. Among the examination workstreams, the compliance review share of total resolution time ranged from 12 percent for innocent spouse appeals to about 45 percent for penalty appeals. According to the IRM, IRS requires SB/SE collection units to review collection due process appeals within a 45 day period of receipt of the taxpayer requests. The 45 calendar days after receipt of an appeal request includes time to ensure completeness of the request, obtain additional information if necessary, and transfer the request to Appeals. Collection unit staff reviewing appeal requests may experience delays with taxpayers submitting additional material to support their requests. With management approval, collection units may have an additional 45 days to continue working with the taxpayer to resolve the collection issue in dispute. The IRM time requirement does not specifically apply to offer in compromise collection appeals. According to our analysis of ACDS data for appeals closed in fiscal years 2014 to 2017, the majority of collection due process appeals were transferred within the IRM time requirements. In fiscal year 2017, approximately 57 percent of collections due process appeals were transferred in less than 45 days and approximately 93 percent of these cases were transferred within 90 days. However, IRS did not always transfer collection due process appeals in a timely manner. For collection due process appeal cases closed in fiscal year 2017, approximately 4 percent (1,559) of these collection appeals took more than 120 days to be transferred to Appeals (see fig. 9). As shown in figure 9, the majority of offer in compromise collection appeals were also transferred within 90 days, even though the IRM time requirement applies specifically for collection due process appeals. Approximately 11 percent (995) of these collection appeals took more than 120 days to be transferred to Appeals in fiscal year 2017. Delays in transferring collection due process appeals, in turn, affect prompt resolution for the taxpayer and IRS. Each tax assessment has a collection statute expiration date of 10 years after the assessment. When a taxpayer appeals a collection action within 30 days of receiving the notice, IRS suspends further collection activity until Appeals decides the case. When the IRS suspends the collection statute for a period longer than its policy allows, this means that the taxpayer can face a longer period where IRS can collect the balance owed. Standards for Internal Control in the Federal Government states that management should establish and operate monitoring activities to monitor internal controls. Management should evaluate the results and remediate any identified deficiencies. SB/SE collection tracks the number of collection due process appeals that are not transferred to Appeals within 45 days of receipt from the taxpayer. SB/SE collection officials told us that they do not have reports or tools to systematically track transfer times for other types of collection appeals. Although SB/SE has the capacity to identify how long collection due process appeals have been waiting, collection officials we interviewed acknowledged that they do not always monitor whether they are meeting the transfer time requirement. For non-docketed cases closed in fiscal year 2017, the deficiency in transferring nearly 1,600 collection due process appeals more than 120 days after receipt points to the lack of monitoring. Evaluating the existing tracking reports for collection due process appeals and remediating deficiencies in collection staff following procedures would be a key step to achieve timely transfer of these collection appeals. Examination Appeals Unlike the requirements for collection due process cases, the IRM does not establish timeframes for compliance review and transfer of taxpayer appeals of examination disputes. According to Appeals officials, examination cases can have many issues, and the level of review to try to resolve examination issues can be significant prior to the taxpayer appeal request being transferred to Appeals. Review procedures differ across the business operating divisions. In its examination quality standards, SB/SE field examination has national standard timeframes, which include 20 days from the receipt of a taxpayer appeal request to close the examination case and then 10 days for SB/SE technical services to transfer the file to Appeals. IRS officials acknowledged that SB/SE field does not always meet its 30-day timeframe standard for appeal transfers, in part, because examiners must review any new information submitted with a taxpayer’s appeal request. Our analysis of ACDS data showed that about two-thirds of all examination appeals closed in fiscal years 2014 through 2017 had been transferred from IRS examination compliance units within 90 days. However, nearly a quarter of examination appeals took more than 120 days to be transferred to Appeals (see fig. 10). As shown in figure 11, transfer times for examination appeals varied across IRS examination compliance units. For appeal cases closed in fiscal year 2017, more than two-thirds of examination appeals originating in SB/SE and LB&I were transferred by those units within 90 days. For examination appeals originating in W&I, less than half were transferred within 90 days, and 37 percent took more than 120 days to transfer. TE/GE transferred fewer appeals than the other units, but nearly half of TE/GE appeals took more than 120 days to be transferred to Appeals. Delays in transferring examination appeal requests can result in increased costs for taxpayers because interest continues to accumulate on the tax liability during the appeal process. Further, taxpayers unsure of the status of their appeals, particularly those over 120 days, may generate additional calls and correspondence with IRS—further tying up other IRS staff to respond to inquiries on appeals experiencing delayed transfer. IRS examination officials in SB/SE and W&I, which accounted for 97 percent of all examination appeals closed in fiscal year 2017, said that their compliance units do not specifically track incoming appeal requests and the time spent on initial appeal review within compliance. In effect, appeal requests resolved during compliance review would be reflected as compliance cases closed in the examination information systems. As a result, IRS does not maintain readily available data on the total number of examination appeal requests received and how many are resolved during initial review by compliance. IRS campus examination officials we interviewed said that taxpayer correspondence delays contribute to increased time to identify and transfer correspondence examination appeals for SB/SE and W&I. A taxpayer request for an appeal arrives like any other taxpayer correspondence related to ongoing correspondence examinations. However, according to W&I campus examination officials, taxpayer requests may sit for months before they are identified as an appeal. Once compliance unit staff determine an examination dispute cannot be resolved in their unit, the appeal request will be transferred to Appeals. SB/SE and W&I examination officials we spoke with said the steps to transfer the files to Appeals take about 5 to 10 days. IRS examination officials we interviewed explained that they cannot readily track information on the number of days between the taxpayer’s request for an appeal to when the case was transferred to Appeals. They explained that it could require looking case by case in the examination systems. SB/SE and W&I officials we interviewed were not aware of any feedback from Appeals about the timeliness of the appeals requests transferred from their units. Although Appeals has this information, it does not include compliance transfer time information in its own monthly performance reports to the Commissioner of Internal Revenue. Also, Appeals officials said that they historically have not provided ACDS compliance transfer time data to IRS compliance units. Appeals has quarterly coordination meetings with the various IRS compliance units to discuss how compliance plans may affect projected appeal case volumes as well as technical training opportunities. Appeals officials said that information about transfer times has been shared at prior meetings but is not a standing agenda item. As a result, Appeals and compliance units do not consistently review performance data on the amount of time for compliance units to transfer taxpayer cases to Appeals. Critical information about the time it takes to transfer cases from compliance units is collected by Appeals as part its process measures but has not been shared within IRS, including with other units involved in the appeal process. The ongoing coordination meetings between Appeals and IRS compliance units could present a valuable opportunity to share data about the length of time it takes for cases to be transferred to Appeals. Sharing this information could be a low-cost first step to help IRS examination units understand their current performance and how compliance review factors into total appeal resolution time. Standards for Internal Control in the Federal Government also states that management should define objectives in specific terms so they are understood at all levels of the entity. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. Internal control standards require that controls be documented, and an agency’s documentation of them should be properly managed and maintained. IRS requires primary sources of guidance with an IRS-wide or organizational impact—such as policy documents, procedures, and guidelines—to be included in the IRM. This requirement is intended to ensure that IRS employees have the approved policy and guidance they need to carry out their responsibilities in administering the tax laws. The absence of defined timeframes for the initial compliance review and documented controls over incoming examination appeals make it difficult to hold IRS units accountable for ensuring timely transfer to Appeals. Appeals Case Review Times Vary Across Workstreams The IRM specifies that Appeals should complete a conference with a taxpayer in a timely manner and make a prompt decision to resolve the dispute. This enables the taxpayer to know with the least amount of delay the final IRS decision about the amount of tax liability or other issue in dispute. It also results in Treasury receiving any additional revenue involved at the earliest practicable date. Within Appeals, the time from Appeals receipt to a decision closing the case varies across the Appeals workstreams, as shown in figure 12. For fiscal years 2014 to 2017, collection due process—the workstream with the highest volume of closed cases—averaged 193 days to resolve a case within Appeals. Average appeals review time for large case examination appeals, the smallest volume, averaged 529 days. Transparency for Taxpayer Total Resolution Time Is Limited Although IRS states on its website that it takes anywhere from 90 days to 1 year for Appeals to resolve a case, this generic timeframe does not reflect the total resolution time counting from when a taxpayer requests an appeal to when a final decision is made. Further, this timeframe does not provide perspective on the range of resolution times across different types of appeals. According to our analysis of ACDS data of appeal cases closed from fiscal year 2014 through 2017, about 15 percent of all appeal cases closed within 90 days. Approximately 85 percent of all cases were resolved within 1 year of when the taxpayer requested an appeal. However, over that same period, approximately 15 percent of all appeal cases took more than one year in total to resolve, and of these, approximately 2 percent of all closed cases took more than 2 years to resolve. Total resolution times varied considerably across the Appeals workstreams, as shown in figure 13. The share of cases closed within 90 days ranged from approximately 3 percent for the collection due process workstream to 71 percent for the other workstream. The share of appeals cases closed within a year ranged from approximately 30 percent for the large case examination workstream to approximately 90 percent for the other workstream. Information about actual total appeal resolution times is not shared with taxpayers. Office of Appeals welcome letters include Appeals staff contact information and a conference date, if applicable, but do not provide total average appeal resolution time. According to the external stakeholders we interviewed, no formal communication of total appeal resolution time is shared with the taxpayer or their representative. Responses to a focus group of taxpayer representatives who went through the appeal process conducted by Appeals in 2014 shared a similar perspective. Focus group participants indicated that the acknowledgement letters did not contain enough or accurate information to set expectations. Additionally, these focus group participants noted that Appeals staff did not inform them how long the appeal process was expected to take. Critical information about total appeal resolution time is not shared with taxpayers. Without easily accessible information, taxpayers are not well informed on what to expect when choosing to request an appeal. Taxpayers may not understand how few appeals are likely to be resolved within 90 days. Faced with the general timeframe that Appeals will resolve cases in about a year, other taxpayers may choose to forgo their opportunity to appeal rather than risk interest accumulating during the appeal process. Standards for Internal Control in the Federal Government states that management should externally communicate necessary quality information to achieve the entity’s objectives. Government entities should report this information to government leaders and regulators, as well as the general public. Feeling uninformed about appeal case wait times has been a consistent theme with taxpayers and their representatives both in IRS’s customer satisfaction surveys and our interviews with external stakeholders. Total resolution time information, such as historical averages, may be especially valuable to taxpayers when considering that interest continues to accrue on tax amounts in dispute while appeals are being reviewed. In January 2017, we recommended that IRS develop and maintain an online dashboard to display customer service standards and performance information such that it is easily accessible and improves the transparency of its taxpayer service. Similarly, more detailed information on total average resolution times specific to different workstreams could provide a more transparent view of the amount of time a taxpayer can expect to receive a decision on their case from Appeals. Appeals Does Not Make Customer Service Standard Clear to Taxpayers, and It Does Not Have a Mechanism to Consider External Customer Input on Policy Changes Appeals Measures Its Customer Service Standard Internally, but Does Not Make Performance Results Available to Taxpayers GPRAMA requires that agencies, in this case the Treasury, establish a balanced set of performance indicators to be used in measuring progress toward performance goals, including goals for customer service. Executive Order 13571 stated that agencies set clear customer service standards and expectations, including, where appropriate, performance goals for customer service required by GPRAMA. Customer service standards should inform customers what they have a right to expect when they request services. The President’s Management Agenda highlights the importance of customer service through its cross-agency priority goal of Improving Customer Experience with Federal Services. In response to GPRAMA, Executive Orders, and other policies, Treasury and IRS have taken steps to define customer service targets and align them to Treasury’s and IRS’s strategic and performance plans. As part of the Appeals Quality Measurement System (AQMS) review process outlined in the IRM, Appeals defines its standard for customer service as whether Appeals has: (1) timely communications with the taxpayers in an appropriate, professional manner; (2) addressed the taxpayers’ needs; and (3) respected the taxpayers’ rights. AQMS lays out the internal attributes and internal measures which track progress towards Appeals customer service standard (see table 3). The performance results for the customer standard are shared as part of the annual AQMS report with Appeals executives and employees. For fiscal years 2014 through 2017, Appeals internal measures reflect that its customer service performance exceeded 86 percent annually. Appeals also makes a written commitment to taxpayers about what they can expect during the appeal process. IRS Publication 4227—An Overview of the Appeals Process—explains that taxpayers should expect the Office of Appeals to: (1) be fair and impartial; (2) be courteous and professional; (3) listen to their concerns; (4) explain their appeal rights and the appeal process; (5) be responsive; and (6) allow the taxpayer reasonable time to respond to any requests for information. Appeals officials explained that this publication, last updated in 2013, is included in the acknowledgement letter taxpayers receive from the Office of Appeals. However, most Appeals customers who participated in a focus group conducted by the Office of Appeals in 2014 said that they did not thoroughly review the Appeals acknowledgement letter and its enclosures, which includes Publication 4227. Therefore, relying on sharing this publication enclosed in the first letter the taxpayer receives may not be an effective mechanism to make this commitment known to taxpayers. Further, the official customer service standard and the related attributes and measures are not transparent to the public, and the performance results are not publicly reported. Taxpayer representatives with whom we spoke were not aware of the Appeals customer service standards outlined in the IRM and explained that publications included with letters from Appeals, such as Publication 4227, are often not read by taxpayers. Taxpayer representatives we interviewed also said that customer service standards are not discussed in conferences with taxpayers. Standards for Internal Control in the Federal Government outlines that management should externally communicate necessary quality information to achieve an entity’s objectives. Key elements of effective customer service standards say that making customer service standards publicly available is a key element to improve those standards and the related services. While Appeals articulates its customer service standard in the IRM and uses AQMS to internally measure customer service delivery, the standard and related results are not available on the Appeals website and not shared during interactions with taxpayers. According to Appeals officials, Appeals, like the rest of IRS, does not publish its customer service standard or explain how performance against the standard is measured. However, as a separate entity within IRS, Appeals has an opportunity to make customer service standards and related outcomes available to the public. Without standards clearly and explicitly communicated, taxpayers may not know what to expect, when to expect, and from whom to expect interactions surrounding the appeal process. Likewise, Appeals does not make its customer service performance results public, and Appeals officials said this is consistent with IRS practice. However, in 2017, we recommended that IRS take similar actions to make customer service standards and performance information easily accessible and improve the transparency of its taxpayer service. Measuring performance allows organizations to track their progress and gives managers crucial information on which to base their organizational and management decisions. The absence of publicly reported standards and related performance information does not allow customers to understand what to expect for the services they seek. Appeals Annual Customer Satisfaction Survey Identifies Factors That Affect Taxpayer Satisfaction Annual Customer Satisfaction Survey Process Appeals conducts an annual survey to assess customer satisfaction with the appeal process over time and to identify areas where Appeals can do more to improve customer service. According to Appeals officials, Appeals has conducted a customer satisfaction survey for over a decade. The annual survey yields an overall customer satisfaction score as well as qualitative written comments on the appeal process. Appeals contracts with a vendor to manage the survey sample selection based on Appeals ACDS closed case data; pre-survey notification; management of the online survey; telephone follow-up with non-respondents; and analysis of the survey data. The survey vendor sends potential respondents pre-notification invitations to complete the survey and follow-up attempts to connect with potential respondents. In fiscal years 2015 and 2016, the response rate was 36 percent and 33 percent, respectively. In fiscal year 2017, Appeals surveyed 1,447 out of approximately 107,000 possible customers with a response rate of 37 percent. According to OMB Standards and Guidelines for Statistical Surveys, agencies are to design surveys to achieve the highest practical rates of response and conduct a statistical test for potential bias if the expected response rate is below 80 percent. The vendor provides a comparison of frequencies to understand any overrepresentation in survey responses of certain taxpayer types or for different workstreams within Appeals. For example, according to the vendor’s comparison of frequencies for the fiscal year 2017 survey (the most recent available at the time of our work), fewer survey responses were received from taxpayers who went through the collection due process workstream—the workstream with the highest volume of cases—than were in the population of potential respondents. Information about Customer Satisfaction The customer satisfaction survey annual report details the analysis of the survey results and summarizes significant changes in satisfaction over time, as well as customer satisfaction by categories such as taxpayer type and the length of the appeal process. Appeals reports overall customer satisfaction in its performance reports to the Commissioner of Internal Revenue. For appeal cases closed in fiscal years 2014 through 2017, about two thirds of taxpayers who responded to the survey were satisfied overall with the appeals process. According to the fiscal year 2017 annual survey report, customers who have higher rates of satisfaction: (1) have professional representation; (2) agree with the outcome of their case; and (3) have shorter case cycle time. The 2017 report also states that customers were most satisfied with the degree of respect shown and the professionalism of the Appeals staff. Customers were least satisfied with the consideration of information presented and the length of the appeal process. The annual survey also identifies the drivers of satisfaction with the appeal process which, Appeals officials said, helps Appeals determine which specific attributes of the appeal process have the most impact on overall customer satisfaction. The 2017 survey identified the drivers of overall satisfaction including: (1) how well Appeals listened to information taxpayers presented related to their case and (2) how well Appeals considered information taxpayers presented. Taxpayer representatives we interviewed identified similar factors that affect how satisfied their clients are with the appeal process. Their responses generally corroborated the drivers of satisfaction identified in the annual customer satisfaction survey analysis. For example, taxpayer representatives explained that their clients are more satisfied when they feel their perspectives have been heard and the Appeals staff had an open mind about the case. The representatives we interviewed also stated that the amount of time, as well as transparency about the amount of time, it takes Appeals to respond to a taxpayer’s case is significant to satisfaction with the appeal process. Appeals’ Use of Customer Satisfaction Survey Information According to Appeals officials, the customer satisfaction survey is one tool to assess customer satisfaction, and the survey information is part of the overall information that Appeals uses in management decisions. The national survey report is shared with the executive level staff each year and survey results may be shared with staff. Appeals reports annual overall customer satisfaction survey scores, along with other data on business results, employee engagement, and staffing, in its performance reports to the Commissioner of Internal Revenue. According to Appeals officials, information from the customer satisfaction survey has been used to improve Appeals procedures and interactions with taxpayers, including changes to correspondence templates to improve comprehension and readability, and how Appeals schedules taxpayer conferences. Appeals Conducts Outreach but Does Not Have a Mechanism to Solicit Customer Input to Inform Prospective Policy Changes Each year, Appeals conducts outreach presentations at tax practitioner conferences to share information about its policy and procedures, including recent changes or new initiatives that affect taxpayers and the tax practitioner community. Appeals officials told us that Appeals, in recent years, has also used these outreach presentations as an opportunity to solicit input from the attendees about the appeal process and implementation of operational or policy changes. According to Appeals officials, they obtain feedback at outreach sessions and place an emphasis on listening to commentary from the tax practitioner community. Taxpayer representatives we interviewed generally corroborated this and said that they saw improvement in their ability to communicate with Appeals and offer feedback on recent policies. Outreach presentations at tax practitioner conferences present an opportunity to obtain feedback and input on prospective policy changes as well. According to taxpayer representatives that we interviewed, while Appeals executives have more openly solicited feedback on policy changes, the outreach requests for feedback usually took place after the policy decision was made and implemented. For example, in October 2016 Appeals changed its policy to limit the availability of in-person appeal conferences. Appeals officials explained that this policy change was based on its data showing that for many appeal cases transferred to field staff to accommodate taxpayer requests for in-person conferences, the taxpayers ultimately chose to have phone conferences. Appeals officials acknowledged that they had not solicited public input beforehand and had received negative feedback that this was an unpopular change. As a result of feedback from the tax practitioner community at outreach events as well as written comments, in October 2017, Appeals revised its policy and will now attempt scheduling in-person conferences requested by taxpayers for field appeal cases. In its efforts to obtain feedback from the tax practitioner community at conferences, Appeals has attempted to be inclusive of tax practitioners representing a range of taxpayer types and income levels. According to Appeals officials, Appeals obtained feedback from the Low Income Taxpayer Clinics and conducted outreach sessions at their 2017 annual conference. However, soliciting feedback at professional association meetings for accountants and attorneys means that the opportunity to provide comments to Appeals is limited to those in attendance at the conferences. One taxpayer representative we interviewed said that he was not sure how he could submit suggestions or input to Appeals other than by attending a conference where Appeals executives were present and solicited feedback from attendees. Further, several taxpayer representatives we interviewed explained that taxpayers representing themselves without professional representation face greater challenges in the appeal process. Outreach relying on professional conferences may not be inclusive of all taxpayer experiences and may miss opportunities to understand the perspectives of individual and small business taxpayers navigating without professional assistance. IRS has formal advisory committees that provide forums to discuss issues with tax administration or taxpayer issues. Among these, the Internal Revenue Service Advisory Council (IRSAC) provides an opportunity for members to provide public perspective on IRS policies and procedures and recommends policies with respect to emerging tax administration issues. Conveying the public’s perception of IRS activities to the Commissioner, the IRSAC charter states that it is to be comprised of individuals who bring substantial, disparate experience and diverse backgrounds to the Council’s activities. IRSAC reports that its membership is balanced to represent the taxpaying public, the tax professional community, small and large businesses, state tax administration, and the payroll community. Although its role is to focus on broad policy matters, IRSAC recently took action to comment specifically on recent changes to Appeals policy and operations. In its 2017 public report, IRSAC commented on attendance of IRS compliance and counsel personnel at Appeals conferences with taxpayers. IRSAC stated that ensuring the independence of Appeals from the operating divisions is indispensable to Appeals’ achieving its mission. Executive Order 13571, building on GPRAMA requirements, stated that agencies, in this case Treasury, should establish “mechanisms to solicit customer feedback on Government services” and that agencies use “such feedback regularly to make service improvements.” In its strategic plan, IRS outlines a strategic goal to collaborate with external partners proactively to improve tax administration. Appeals has identified engaging with stakeholders to improve the taxpayer experience in Appeals as a fiscal year 2018 organizational goal. Appeals officials we interviewed said that Appeals’ approach is to test and learn, and that they anticipate issues and complaints will continue to happen as future policy changes are implemented. While outreach is one way to get practitioner reaction as new policies are rolled out, other mechanisms could serve as a way to receive regular customer feedback and to hear the public’s perspective and observations about both current operations as well as proposed IRS policies, programs, and procedures. For example, IRS already uses advisory groups as another way to engage with external partners via open, two- way, external reporting lines for assistance with receiving and analyzing customer feedback as well as offering a mechanism to solicit public input before policies are finalized and implemented. Without an effective mechanism to regularly consider and review customer feedback and policy changes before implementation, Appeals is missing an opportunity to obtain public input on policy changes that can substantially affect the taxpayer’s experience in the appeal process. Possible mechanisms could include leveraging existing IRS advisory resources, exploring development of an Appeals advisory body, or offering a public comment capacity, such as an email address. Engaging with external stakeholders could offer opportunities for Appeals to gain insight on how to bring transparency to its customer service standards and measures along with providing ongoing assistance with considering results from the annual customer satisfaction survey. This would enhance Appeals’ ongoing efforts to improve customer satisfaction with planned service improvements or policy changes and make modifications where appropriate. Conclusions Each year, Appeals resolves a diverse array of taxpayer appeals of IRS enforcement actions and decisions. Faced with a declining workforce, Appeals has identified that maintaining skills and expertise necessary to review its case load is a top risk to achieving its mission. High retirement eligibility rates underscore the importance for Appeals to be positioned to identify any gaps in the skills of its workforce. Conducting a skills gap analysis specific to Appeals mission needs is a key step towards developing a strategy to help ensure Appeals will retain the necessary tax expertise to review appeals cases across multiple workstreams. Time spent by IRS compliance units on initial review of taxpayer appeals of IRS collection and examination actions can represent a significant portion of the total appeal resolution time. For appeal cases closed in fiscal year 2017, approximately 4 percent of collection appeals cases and nearly one quarter of examination appeal requests took more than 120 days to be transferred from IRS to Appeals. Delays in transferring requests to Appeals affect prompt resolution for the taxpayer and IRS. Additional monitoring of collection transfer time requirements together with establishing transfer time guidelines and procedures for examination appeal review could improve appeal review timeliness and overall taxpayer experience. Appeals maintains data on the time taken to transfer appeals and monitors the progress and time to resolve appeals within its diverse workstreams. Sharing these performance data within IRS could shed light on actual transfer times and aid compliance units in improving and establishing related controls to ensure more timely transfer. Increasing the transparency of total case resolution time with more detailed information by Appeals workstream would improve taxpayers’ understanding about what to expect when choosing to request an appeal. Improving the taxpayer experience with the appeals process also depends on clarity on customer service standards and related performance results. Under GPRAMA and Executive Orders, Treasury is responsible for customer service performance. Publicly stating what service taxpayers should expect and from whom sets the stage for a customer-focused appeals process where taxpayers can feel their story is heard. This also helps fulfill Treasury’s customer service responsibility. Appeals has demonstrated its willingness to analyze customer satisfaction feedback. IRS and Appeals share goals to work with stakeholders, and Appeals has acted to address practitioner reactions to operational changes underway. Developing a mechanism to leverage public input on future policy and procedure proposals would better position Appeals to bolster customer service and effectively implement changes to improve the taxpayer experience. Recommendations for Executive Action We are making the following five recommendations to IRS and two recommendations to the Department of the Treasury. The Commissioner of Internal Revenue should direct the Chief of Appeals, in coordination with the IRS Human Capital Office, to conduct a skills gap analysis specific to Appeals mission needs and develop a strategy for mitigating any identified gaps. (Recommendation 1) The Commissioner of Internal Revenue should evaluate the existing monitoring for collection due process appeal requests and address deficiencies in collection staff meeting the requirement for timely transfer to the Office of Appeals. (Recommendation 2) The Commissioner of Internal Revenue should establish timeframes and monitoring procedures for timely transfer of taxpayer appeals requests by examination compliance units to the Office of Appeals. (Recommendation 3) The Commissioner of Internal Revenue should direct the Chief of Appeals to regularly report and share with each compliance unit the data on the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals. (Recommendation 4) The Commissioner of Internal Revenue should provide more transparency to taxpayers on historical average total appeal resolution times. This could include publishing average total resolution times by workstream on an Office of Appeals web page as well as including total expected times in the Appeals welcome letter. (Recommendation 5) The Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, should ensure that the Commissioner of Internal Revenue takes action to make Appeals customer service standards and performance results more transparent to the public. This could include publishing customer service standards and related performance measure results on the Office of Appeals web page on IRS.gov. (Recommendation 6) The Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, should ensure that the Commissioner of Internal Revenue takes action to develop a mechanism to solicit and consider public input and customer feedback on a regular basis on current and proposed IRS appeal policies and procedures. This could include leveraging existing IRS advisory bodies or establishing an Office of Appeals advisory body representing the taxpaying public, the tax practitioner community, and businesses to solicit customer perspectives. (Recommendation 7) Agency Comments and Our Evaluation We provided a draft of this report to the Commissioner of Internal Revenue and the Secretary of the Treasury for review and comment. In its written comments, reprinted in appendix I, IRS agreed with our five recommendations directed to it and plans to provide detailed corrective action plans in its 60-day letter response to Congress. IRS also provided technical comments, which we incorporated where appropriate. In an email from the audit coordinator in the Office of the Deputy Chief Financial Officer, Treasury agreed with our two recommendations directed to it. During the agency comment period, we modified language in recommendations 6 and 7 to clarify Treasury’s role and responsibilities for customer service. Treasury agreed to monitor IRS’s actions to make Appeals customer service standards and performance more transparent as part of its coordination of the President’s Management Agenda cross-agency priority goal for customer experience. Treasury plans to monitor IRS’s actions to develop a mechanism to solicit public input on appeal policies and procedures as part of the audit management process. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. In addition, the report will be 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) 512-9110 or LucasJudyJ@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix II. Appendix I: Comments from the Internal Revenue Service Appendix II: GAO Contact and Staff Acknowledgements GAO Contact Staff Acknowledgments In addition to the contact named above, MaryLynn Sergent (Assistant Director), Keith O’Brien, (Analyst-in-Charge), James Cook, and Steven Flint, made key contributions to this report. Shea Bader, Jehan Chase, Lisa Pearson, Robert Robinson, Cynthia Saunders, and Tatiana Winger also provided support.

Why GAO Did This Study The Taxpayer Bill of Rights entitles taxpayers with the right to appeal a decision of the Internal Revenue Service (IRS) in an independent forum. GAO was asked to review this administrative appeal process within IRS. Among other things, this report (1) describes the IRS appeal process and staffing; (2) assesses how IRS monitors and manages the time to receive and resolve taxpayer appeals cases; and (3) evaluates the extent to which Appeals communicates customer service standards and assesses taxpayer satisfaction with the appeal process. GAO reviewed IRS guidance, publications, and documentation on the appeal process. GAO analyzed IRS data for administrative appeal cases closed in fiscal years 2014 through 2017 to compare appeal case resolution time for different types of cases. GAO interviewed IRS officials and a non-generalizable sample of external stakeholders, including attorneys and accountants, knowledgeable about the appeal process. Among other things, GAO compared IRS actions to federal standards for internal control and customer service. What GAO Found The Internal Revenue Service (IRS) has a standard process to resolve a diverse array of taxpayer requests to appeal IRS proposed actions to assess additional taxes and penalties or collect taxes owed. The process begins with a taxpayer filing an appeal with the IRS examination or collection unit proposing the compliance action and ends with a decision from the Office of Appeals (Appeals). Appeals must have staff with expertise in all areas of tax law to review taxpayer appeals. However, its staffing levels declined by nearly 40 percent from 2,172 in fiscal year 2010 to 1,345 in fiscal year 2017. Appeals anticipates a continued risk of losing subject matter expertise given that about one-third of its workforce was eligible for retirement at the end of last fiscal year. Appeals monitors the number of days to resolve taxpayer appeals of examination, collection, and other tax disputes. However, IRS does not monitor the timeliness of transfers of all incoming appeal requests. GAO analysis showed that the time to transfer appeal requests from compliance units varied depending on the type of case (see table below). Collections workstreams —taxpayer appeals where IRS (1) filed a notice of federal tax lien or proposed a levy (collection due process) or (2) rejected an offer to settle a tax liability for less than owed (offer in compromise). The Internal Revenue Manual (IRM), IRS's primary source of instructions to staff, requires transfer to Appeals within 45 days for the largest collection workstream. With manager approval, collection staff may have an additional 45 days to work with the taxpayer. Nearly 90 percent of collection appeals closed in fiscal years 2014 to 2017 were transferred to Appeals within 90 days. Examination workstreams —taxpayer appeals of additional tax and penalty assessments IRS proposed based on its auditing of tax returns over a wide range of examination issues. IRS does not have an IRM requirement with guidelines and procedures for timely transfer for examination appeals. Accordingly, more than 20 percent of examination appeals closed in fiscal years 2014 to 2017 took more than 120 days to be transferred to Appeals. Delays in transferring appeals can result in increased interest costs for taxpayers. Although Appeals maintains data on total appeal resolution time—from IRS receipt to Appeals' decision—such information is not readily transparent to IRS compliance units or the public. GAO analysis of IRS data found that, for fiscal years 2014 to 2017, about 15 percent of all appeal cases closed within 90 days (see figure below). About 85 percent of all cases were resolved within one year of when the taxpayer requested an appeal. Total resolution times differed by case type. However, without easily accessible information on resolution times, taxpayers are not well informed on what to expect when requesting an appeal. Although Appeals has customer a service standard and conducts a customer satisfaction survey, its standard and related performance results are not readily available to the public. Under the GPRA Modernization Act of 2010 (GPRAMA) and Executive Orders, the Department of the Treasury is responsible for customer service performance. Appeals conducts outreach to the tax practitioner community but does not regularly solicit input before policy changes. Without a mechanism, such as leveraging existing IRS advisory groups or alternatively developing its own advisory body, Appeals is missing an opportunity to obtain public input on policy changes affecting the taxpayer's experience in the appeal process. What GAO Recommends GAO makes seven recommendations to help enhance controls over and transparency of the IRS appeals process (several of the recommendations are detailed on the following page). GAO recommends, among other things, that the Commissioner of Internal Revenue Establish timeframes and monitoring procedures for timely transfer of taxpayer appeals requests by examination compliance units to the Office of Appeals. Direct the Office of Appeals to regularly report and share with each compliance unit the data on the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals. Provide more transparency to taxpayers on historical average total appeal resolution times. GAO recommends, among other things, that the Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, ensure that the Commissioner of Internal Revenue develops a mechanism to solicit and consider customer feedback on a regular basis on current and proposed IRS appeal policies and procedures. Treasury and IRS agreed with GAO's recommendations, and IRS said it will provide detailed corrective action plans.

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Background Program Fragmentation, Overlap, and Duplication Over the years, we have issued several reports on fragmentation, overlap, and potential for duplication among federally funded employment and training (E&T) programs and identified areas where inefficiencies might result. This report, like our prior work, uses the following definitions: Fragmentation refers to circumstances in which more than one federal agency (or more than one organization within an agency) is involved in the same broad area of national need and opportunities exist to improve service delivery. Overlap occurs when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve their goals, or target similar beneficiaries. Duplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries. During the 1990s, we issued a series of reports that documented program overlap among federally funded E&T programs and identified areas where inefficiencies might result. For example, we found that program overlap might hinder people from seeking assistance and frustrate employers and program administrators. In 2000 and 2003, we identified federally funded E&T programs for which a key program goal was providing E&T assistance. In our most recent report in 2011, we identified 47 E&T programs and found that 44 of them overlapped with at least one other program in that they provided similar services to a similar population. We also found that due to the American Recovery and Reinvestment Act of 2009 (Recovery Act), both the number of—and funding for—federal E&T programs had increased since our 2003 report, but little was known about the effectiveness of most programs because only five programs had conducted impact evaluations. Our guide on identifying and reducing fragmentation, overlap, and duplication notes that determining whether fragmentation and overlap exist among programs is a key step in identifying opportunities to improve efficiency and effectiveness of programs. In some cases, it may be appropriate or beneficial for multiple agencies and programs to be involved in the same programmatic or policy area due to the complex nature or magnitude of the federal effort. However, our guide states that it is also important to use the results of existing or new evaluations of identified programs to assess options to reduce or better manage negative effects of fragmentation, overlap, and duplication, such as inefficient use of program funds. Key Changes Since Our 2011 Review of Employment and Training Programs Workforce Innovation and Opportunity Act (WIOA) Enacted in July 2014, WIOA repealed and replaced the Workforce Investment Act of 1998 (WIA). WIOA placed greater emphasis on aligning and integrating workforce programs, which are administered primarily by the Departments of Labor (DOL) and Education (Education), with support from the Department of Health and Human Services (HHS) and other agencies. For example, under WIOA, DOL and Education review and approve 4-year strategic plans for states’ workforce development systems. WIOA also requires certain programs and encourages other programs to be available through centralized service delivery points referred to as American Job Centers. In addition, WIOA requires that DOL and Education collaborate to implement a common performance accountability system for six core programs, which presents agencies with an opportunity to align definitions, streamline performance indicators, and integrate reporting across these programs. Economic Conditions Since our 2011 inventory of federal E&T programs, which focused on fiscal year 2009, both the Great Recession and one-time funding made available under the Recovery Act have ended. Recovery Act funds were provided to help preserve and create jobs and promote economic recovery, among other purposes. With the end of the recession, the unemployment rate has substantially declined. The rate increased from 4.6 in 2007 to a peak of 9.6 in 2010 before declining to 4.4 in 2017 (see fig.1). Evaluation Plans WIOA encourages DOL, Education, HHS, and other relevant federal agencies to conduct program research and evaluation. For example, WIOA requires DOL to publish a plan every 2 years that describes the research, studies, and multistate project priorities of DOL concerning employment and training for the following 5-year period. This includes a provision that the plan be consistent with certain purposes, including the purpose of aligning and coordinating core programs with other partner programs provided through American Job Centers. In addition to WIOA requirements, we have also previously reported that each federal agency should require its major program components to prepare annual and multiyear evaluation plans and to update these plans annually. The planning should take into account the need for evaluation results to inform program budgeting, reauthorization, agency strategic plans, program management, and responses to critical issues concerning program effectiveness. These plans should include an appropriate mix of short- and long-term studies to produce results for short- or long-term policy or management decisions. To the extent practical, the plans should be developed in consultation with program stakeholders. Furthermore, leading organizations, including the American Evaluation Association and the National Academy of Sciences, emphasize the need for research programs to establish specific policies and procedures to guide research activities. In addition to planning for formal evaluation, Standards for Internal Control in the Federal Government emphasize the importance of managers routinely assessing the results of their actions, for which evaluation is a potential tool. Since 2011, Employment and Training Services Are Delivered through Fewer Federal Programs and with Reduced Obligations Number of Employment and Training Programs Declined, Due in Part to Eliminations The number of federal E&T programs has decreased since our last report on them in 2011. For fiscal year 2017, we identified 43 programs, four fewer than we reported in 2011. The number decreased because more programs were eliminated or defunded (6) than added (2). For example, in 2014, the Workforce Innovation and Opportunity Act (WIOA) eliminated at least four of our identified E&T programs. This included 1) DOL’s Veterans’ Workforce Investment Program, 2) Education’s Grants to States for Workplace and Community Transition Training for Incarcerated Individuals, 3) Education’s Migrant and Seasonal Farmworkers Program, and 4) Education’s Projects with Industry program. In addition, Congress did not appropriate funds for Education’s Tech Prep Education State Grants in fiscal year 2011 and DOL’s Community Based Job Training Grants programs in fiscal year 2010, according to agencies’ budget documents. We also identified two additional E&T programs through interviews with agency officials and a related GAO report: 1) Department of Veterans Affairs’ (VA) Compensated Work Therapy, and 2) Department of Defense’s (DOD) Job Training, Employment Skills Training, Apprenticeships, and Internships. For changes in the program list from our 2011 review to our current review, see appendix II. The 43 programs we identified in fiscal year 2017 are fragmented across nine federal agencies, as programs were in 2011 (see fig. 2). Federal Obligations for Employment and Training Programs Decreased, Due in Part to the End of Recovery Act Funding Our survey results showed that the federal government obligated nearly $14 billion to the E&T components of its programs in fiscal year 2017, a decrease of about $5.4 billion or 30 percent, adjusting for inflation, from the amount in our 2011 review (which reported fiscal year 2009 obligations). According to our analysis of survey data, much of the decrease in E&T obligations can be explained by the expiration of Recovery Act funding. For example, two-thirds of the Recovery Act funding designated for E&T programs went to four DOL programs that received a combined $3.8 billion in Recovery Act appropriations. From fiscal year 2009 to fiscal year 2017, the combined E&T obligations for these four programs decreased by $4.7 billion, or 58 percent. Of the 31 E&T programs that reported E&T obligations in our survey, eight programs were responsible for more than $11 billion, or 82 percent of the total in fiscal year 2017. Their shares of 2017 E&T obligations ranged from 5 percent for DOL’s Wagner-Peyser Act Employment Service to 21 percent for Education’s State Vocational Rehabilitation Services Program (see fig. 3). Among these eight programs responsible for the vast majority of E&T obligations, all must be included in state plans required under WIOA, except for DOL’s Job Corps, VA’s Vocational Rehabilitation and Employment, and HHS’ Temporary Assistance for Needy Families (TANF). In addition, all but DOL’s Job Corps and VA’s Vocational Rehabilitation and Employment are state-administered. For complete data on reported changes in E&T obligations between fiscal years 2009 and 2017, for the 29 programs that provided estimates in both years, see appendix III for numbers adjusted for inflation and appendix IV for unadjusted numbers. The number of people served by E&T programs also declined, from 24 million to 11 million individuals in the most recent year for which data were available, or a 56 percent decrease from the number reported in the 2011 report. Two of DOL’s E&T programs—the Wagner-Peyser Act Employment Service and the WIOA Adult Program—accounted for the majority of this decrease, dropping by 8 million and 4 million, respectively. Participation in certain programs, for example, Wagner-Peyser Act Employment Service and WIOA Adult Program, changed markedly as the economy improved, suggesting that enrollment is highly sensitive to economic conditions. Since we last reviewed these programs in 2011, the U.S. economy has improved and the unemployment rate dropped by 53 percent (see fig. 4). DOL officials said these factors could have reduced the demand for certain E&T services. Unemployment is an important driver of demand for some, but not all, E&T programs. For example, demand for certain employment and training services, such as vocational rehabilitation, may be relatively insensitive to economic conditions. In addition, technology has the potential to change workforce needs in certain industries, leading to workers who need retraining. In addition, DOL officials told us that under WIOA a new definition of program participant, effective in 2016, that primarily impacted the number of participants reported for Wagner- Peyser Act Employment Service, WIOA Adult Program, and WIOA National Dislocated Worker Grants. Employment and Training Programs Administered by Various Agencies Generally Overlap, but Effects of Overlap May Vary The 43 E&T programs generally overlap in that they provide similar services to similar populations, according to our survey analysis (see table 1). In our survey, almost all of the 43 programs reported providing employment counseling and assessment services as well as job search or job placement activities (39), job readiness training (38), and job referrals (37). The least commonly provided service selected from our list of service categories–high school completion or equivalency assistance–was provided by over half (26) of the programs. Through our survey, eight of the 43 programs reported serving the general population (that is, a relatively broad target) and the remaining 35 reported serving a narrower target population, such as Native Americans (8), veterans and transitioning servicemembers (7), or youth (5)., Our survey analysis shows overlap in services exists among programs serving the general population as well as among those serving each specific target population. Specifically, a majority of programs targeting the general population, Native Americans, and youth reported providing many of the same services. For example, all of the five youth programs reported providing similar E&T services, such as employment counseling and assessment and job readiness training (see fig. 5). For more information on services provided by programs serving selected target populations, see appendix VI. Many of the E&T programs targeting specific populations are fragmented across multiple agencies. For example, four agencies administer the eight Native American E&T programs and three administer the seven programs for veterans (see table 2). Other includes older workers, women, and unemployed and underemployed residents of solid and hazardous waste-impacted neighborhoods. According to VA officials, VA’s Vocational Rehabilitation and Employment program serves individuals with a service connected disability and VA’s Compensated Work Therapy program serves individuals enrolled in Veterans Health Care and does not require a service connected disability. Overlap among program services may have benefits, but it may also suggest opportunities for coordination or efficiencies in service delivery. Overlap may be beneficial in 1) helping program participants with specific needs better access E&T services, 2) providing more tailored or intensive support services, or 3) achieving higher quality outcomes for specific populations than would be achievable from their use of a more broadly targeted program. For example: A 2015 study funded by DOL on services provided to veterans through the public workforce system in Texas found that veterans who received intensive services from DOL’s Disabled Veterans’ Outreach Program Specialist or Local Veterans’ Employment Representative staff subsequently had higher earnings than veterans who did not, although these same veterans may have been eligible for similar services provided by other programs to the general population. A 2017 study funded by the U.S. Department of Agriculture (USDA) on its Supplemental Nutrition Assistance Program (SNAP) E&T— which helps participants who are eligible to receive nutrition assistance from the federal government better access E&T services —found that program participants also received support services, such as child care vouchers and transportation assistance. Participants said these services were important to their participation in the E&T program and helped those with specific needs better access E&T services. However, when multiple programs overlap or are fragmented, there is also a risk that program administrators may not make efficient use of available resources if they do not coordinate their efforts. Without careful coordination, programs may not fully leverage mutual benefits or participants may find administrative requirements burdensome or redundant. For example: A 2018 GAO report on USDA’s SNAP E&T program found that 20 states’ SNAP E&T programs did not partner with workforce agencies to provide E&T services. States that do not fully leverage resources available through the workforce development system may miss opportunities to serve a greater number of SNAP E&T participants and provide a wider variety of services. GAO recommended the administrator of the Food and Nutrition Service take additional steps to assist states in leveraging available workforce development system resources. A 2017 study funded by DOL on American Job Centers found that customers became frustrated filling out applications in what they viewed as redundant paperwork requirements for multiple programs with varying eligibility criteria. Almost All Agencies Reported Actions to Address Program Fragmentation and Overlap, but Effectiveness of these Actions Remains Uncertain Employment and Training Program Officials Reported Taking Actions to Address Fragmentation and Overlap In response to our survey of agency officials for the 43 E&T programs, almost all (38) reported taking at least one action to manage fragmentation, overlap, and/or potential duplication. Common actions included providing program guidance and technical assistance, coordinating participant services (e.g., co-locating services or co-enrolling participants), and effectively managing grants (see table 3). Our survey analysis showed that of 43 E&T programs, 31 across eight agencies reported taking at least one action to manage fragmentation. In addition, 38 programs across all nine agencies reported taking at least one action to manage overlap. For example, to address fragmentation and overlap, officials representing seven programs within DOL and Education reported in our survey that they participated in interagency workgroups to share information and to facilitate cross-agency communication to coordinate services. Likewise, VA reported that the agency and DOL updated their interagency technical assistance guide to better align the agencies’ veteran E&T programs. (See table 4.) Program officials reported that their actions were motivated by a variety of factors, including their own assessments, legal requirements such as those in WIOA, and audit recommendations. They attributed some of their actions to their assessment of the potential for duplicative services, or to promote streamlined administration. For example: In 2014, DOL released updated guidance to administrators of its Disabled Veterans’ Outreach Program to encourage coordination with its Wagner-Peyser Act Employment Service program to help ensure that the two programs were not providing similar services to veterans. Education reported that its data collection and reporting system integrates data from the State Vocational Rehabilitation Services Program and State Supported Employment Services Programs. Likewise, Education reported that its monitoring and technical assistance guide addresses both the State Vocational Rehabilitation Services Program and the State Supported Employment Services Program. In addition, DOL and other agencies reported taking actions that are either required or encouraged by federal law in order to manage fragmentation and overlap. For example: DOL officials reported that since WIOA was enacted in 2014, DOL, Education, and HHS have jointly issued directives and guidance to help states implement and administer WIOA, such as guidance on developing their required state strategic plans. Also under WIOA, DOL and Education have issued joint regulations and established common data definitions and joint data collection instruments to align performance reporting for WIOA six core programs. Agencies with E&T programs targeted toward Native Americans reported that tribes’ use of authorized plans to integrate employment, training, and related services programs can help manage fragmentation and overlap. The potential scope of such plans (referred to as 477 plans), which had been originally authorized in 1992, was increased via legislation in 2017 to include programs with more purposes. With an authorized plan in place, tribes can integrate certain federal funds received by the tribe and coordinate employment, training, and related services across multiple programs that serve the tribe. In December 2018, 12 agencies signed a memorandum of agreement intended to set forth the basic functions and relationships of those agencies in the funding and oversight of tribal 477 plans and to facilitate coordination and collaboration between the agencies. Agencies have also taken actions to improve collaboration across multiple E&T programs based on our recommendations or on internal audits. For example: In 2011, we recommended that the Secretaries of DOL and HHS work together to develop and disseminate information that could facilitate further progress by states and localities in increasing administrative efficiencies in E&T programs, such as state initiatives to consolidate program administrative structures and state and local efforts to co- locate E&T programs at one-stop centers. In response, DOL and HHS took a number of steps, including issuing a January 2015 study focused on identifying and documenting potentially promising practices in coordinating Temporary Assistance for Needy Families (TANF) and WIA services at the state and local levels. In 2012, we found that the interagency handbook used by DOL and VA to coordinate E&T services for veterans did not include, for example, incorporating labor market information into rehabilitation plans. In 2015, as GAO recommended, these agencies revised the interagency handbook by outlining how VA and DOL staff should coordinate efforts to provide veterans with labor market information when developing employment and training objectives and assist them in selecting training and credentialing opportunities as a part of their rehabilitation plans. In 2012, EPA’s Office of Inspector General conducted an audit of its Environmental Workforce Development and Job Training Cooperative Agreements program which concluded that, absent internal controls, the program was at risk for duplication with other E&T programs. To mitigate that risk, the lead program administrator now provides other federal agencies a list of program applicants to ensure that no applicant is receiving funds for the same purposes outlined in the Environmental Workforce Development and Job Training program application. While most programs reported taking action to manage fragmentation or overlap, officials from five programs reported in our survey that they had taken no action. Officials from four of these programs reported that no action was necessary because their program offered a unique service or served a specialized population. While we did not further review the need for coordination among these programs and others, they nonetheless reported one or more services in common with others serving the same population. In addition, while unique aspects may be protective to some extent against the risk of duplication, unique features may not necessarily reduce the risk of overlap or need for coordination. For example, DOD officials stated that apart from its Job Training, Employment Skills Training, Apprenticeships, and Internships program, they were not aware of any other federal program that allows servicemembers to participate in job training, including apprenticeships and internships, beginning up to 6 months before their service obligation is completed. DOL officials confirmed that its Transition Assistance Program does not offer job training to service members, but it does, like the DOD program, offer pre-separation employment services and counseling. VA also noted in its technical comments that servicemembers who meet Vocational Rehabilitation and Employment eligibility criteria may, with DOD permission, receive these job training services as part of their rehabilitative program and that it partners with DOD to train transitioning servicemembers as veterans’ services representatives. We did not further review the need for coordination among these or other programs that reported no action, but absent a more complete evaluation, it is not possible to assess whether these programs have taken sufficient steps to address overlap. Regarding duplication, 14 programs reported no action either to detect it or to prevent it. Agencies Did Not Consistently Assess the Effectiveness of their Actions to Manage Overlap and Fragmentation Agencies administering E&T programs did not consistently have information on results to know how well their actions to manage program fragmentation and overlap were working. DOL officials told us that they generally had not assessed the actions they reported in our survey to manage overlap, fragmentation, and potential for duplication, but noted that the agency has begun an implementation study of WIOA that will include examining state and local efforts to increase program coordination and collaboration. DOL expects the final report will be completed in fall 2019, and agency officials said it is coordinating with other agency partners. Asked about efforts made by specific programs to manage overlap and fragmentation, other agency officials said they had assessed results of these efforts in some cases, but not others. For example, VA officials told us that in 2016 they started tracking referrals between its Vocational Rehabilitation and Employment Program and DOL’s programs targeted to veterans to help ensure participants were obtaining labor market information from DOL programs. In contrast, in the case of integrating multiple E&T programs targeted toward Native Americans, HHS officials reported that the agency has not made specific efforts to assess the effectiveness of plans first provided for in 1992 which might reduce administrative burden by allowing tribes more flexibility to combine E&T services funded by multiple federal agencies. GAO’s guide on fragmentation and overlap states it is important to use the results of existing or new evaluations of identified programs to assess options to reduce or better manage negative effects of fragmentation, overlap, and duplication, such as inefficient use of program funds. For example, evaluation and other periodic reviews could help identify ways to address (1) gaps in information on how multiple programs are serving the employment and training needs of specific populations, such as Native Americans, youth, and refugees, or (2) the extent to which they have implemented practices to manage unwanted effects of fragmentation and overlap and improve coordination and efficiency. Agencies reported completing additional impact studies since our 2011 review, but evaluations examining their programs’ effects have generally been confined to a single program and/or specific target populations. Four of the nine agencies in our review reported that they had completed at least 13 impact studies since 2011 of individual programs that measured effectiveness in terms of outputs and outcomes. (See appendix VII for a list of these studies.) DOL officials told us that programs tend to be evaluated individually for their effectiveness in achieving individual goals and objectives rather than for collective effects or performance. DOL officials said that they perform some research covering multiple programs in preparation for conducting program impact or effectiveness studies, but that the related findings tend to be more descriptive in nature. They also cited plans to use common measures developed under WIOA to look at outcomes across the core programs. Some agencies have sponsored studies that focus on populations served by multiple programs, including customer experience with receiving services from multiple programs, and an early snapshot of the extent of state-level coordination in implementing WIOA. Specific examples of studies that reviewed issues related to implementing multiple programs include: A 2015 Mathematica study funded by HHS of WIOA-funded programs that included numerous efforts state level administrators could undertake to improve coordination among the programs, including exchanging more information on strategies and methods used by each program to address obstacles that impede coordination. A 2015 Rand Corporation study funded by DOD that examined employment support programs for reservists and recommended assessing the costs and benefits of streamlining the current program line-up to reduce any redundancies. A 2017 study by IMPAQ International funded by DOL that identified areas where customer service in WIOA job centers could be improved, such as streamlining enrollment and registration procedures and providing more information about the full array of services at the centers. However, of the six completed studies we identified that examined more than one E&T program, only one study assessed how any coordinated or integrated activities benefited the population served. We found no similar studies conducted on the effects of multiple programs targeted toward other populations, such as Native Americans, youth, or refugees. VA officials told us that it is important that reviews of E&T programs for specific population take into account the complex needs of that population to understand when there is a need for involvement of multiple programs. For example, officials said that special populations such as homeless veterans require a breadth of unique services that may not available through a single program or by programs serving the general population. Further, as programs more commonly work together, learning about the programs’ collective impact may be as important as studying the programs’ individual results. DOL officials told us that DOL, HHS, and Education tend to independently create their evaluation plans for employment and training services. After WIOA was enacted, these agencies formed the WIOA Evaluation Workgroup with the intent of establishing greater collaboration among federal agencies on E&T program evaluation. DOL E&T programs make up over a third of all federal E&T programs, and some of these programs under WIOA coordinate or align their services with programs administered by other agencies. DOL officials told us WIOA Evaluation Workgroup members interacted with staff from other agencies, such as USDA, who administered E&T programs to encourage their participation. The workgroup met for the first time in September 2017. After the initial meeting, according to DOL officials, the agencies dissolved the group because they concluded that the topic of WIOA-related evaluation could be covered through existing periodic interagency meetings. However, DOL officials told us that these efforts do not focus on evaluation across programs. In addition, the DOL agency-wide evaluation plan for fiscal year 2018—issued in September 2018—does not list evaluations focused primarily on cross-program coordination or collaboration, nor does it address potential overlap and fragmentation among its E&T services. Since 2013, DOL has not published a 5-year strategic research plan for E&T programs. In our 2011 review of DOL’s research and evaluation program for its E&T programs, we recommended that DOL develop a mechanism to enhance the transparency and accountability of its E&T research by consulting other key federal agencies and involving advisory bodies or other entities outside DOL. In 2010, the Employment and Training Administration (ETA), the division with lead responsibility for DOL’s E&T programs, began a series of meetings with a panel of outside experts to develop a 5-year research plan. This strategic research plan set the research agenda for E&T programs by identifying and prioritizing what research and evaluations would be initiated over the following 5 years. Before finalizing its research agenda, DOL obtained broad input from federal officials at Education and HHS and a range of other key stakeholders, such as officials in local and state government and academics from the workforce community. In May 2013, DOL submitted to Congress and posted on its website a 5-year strategic research plan for its E&T programs which covered program years 2012 to 2017. In contrast to the broad consultation and public exposure that characterized past strategic planning for E&T research, in recent years DOL has instead relied on an internal process to set its research and evaluation priorities for its E&T programs and publishes only an agency- wide evaluation plan that is shorter-term and developed for a different purpose. Specifically, ETA develops an annual learning agenda that officials indicated highlights its research priorities, ideas, and proposed studies. Officials stated that the E&T learning agenda is provided for consideration with other agency-wide agendas in developing an annual evaluation plan for all of DOL. While DOL’s annual evaluation plan and the results of its evaluations are posted publicly through its website and submitted to the relevant congressional committees, the learning agendas, including those for E&T programs, are internal documents, and DOL does not release them to the public. The DOL-wide evaluation plan that is published presents neither a strategy for E&T evaluation nor plans for any evaluation to be initiated more than a year in the future. The fiscal year 2018 DOL-wide evaluation plan discusses only research to be initiated during the next year (fiscal year 2019) and lists studies that remain in progress from previous years. Rather than project longer-term research needs, the plan’s main purpose, according to DOL officials, is to comply with specific appropriations language. DOL officials told us that the list of proposed studies in the learning agendas may not ultimately appear in the annual evaluation plan because they are not near-term priorities for the agency-wide plan. DOL’s fiscal year 2018 agency-wide plan describes initiation of four studies—two on apprenticeship, one on strategies to prevent improper unemployment insurance payments, and another on potential effects of application fees for certain ETA programs. WIOA requires that DOL publish a plan every 2 years that describes “the research, studies, and multistate project priorities of the Department of Labor concerning employment and training for the 5-year period following the submission of the plan.” DOL officials told us that it is complying with this requirement by providing ETA’s annual learning agendas to be included in DOL’s overall evaluation plan. However, the resulting agency- wide plan falls short of meeting best practices for robust strategic planning. As we have previously reported, these practices include: Preparing annual and multiyear evaluation plans and updating these plans annually to take into account the need for evaluation results to inform program budgeting, reauthorization, agency strategic plans, program management, and responses to critical issues concerning program effectiveness. Including an appropriate mix of short- and long-term studies to produce results for short- or long-term policy or management decisions. Developing plans in consultation with program stakeholders to help agencies ensure that their efforts and resources are targeted at the highest priorities and to create a basic understanding among the stakeholders of the competing demands that confront most agencies. A 2010 internal DOL memo stated that such a plan can guide the development of research and evaluation projects and be a valuable tool for the broader workforce research community. Furthermore, leading organizations, including the American Evaluation Association and the National Academy of Sciences, emphasize the need for research programs to establish specific policies and procedures to guide research activities. For example, a 2016 American Evaluation Association guide stated that having annual and multi-year evaluation plans is useful in guiding program decision-making in such areas as program management and budgeting, and responding to issues concerning program effectiveness. Finally, Standards for Internal Control in the Federal Government state more broadly that program managers may need to conduct periodic assessments to evaluate the effectiveness of their actions. These may include but are not limited to formal evaluations. However, without a long-term evaluation plan developed in consultation with key stakeholders, DOL may not learn whether its actions to improve E&T program coordination and integration are working, and thus may continue undertaking activities that are not leading to desired results. Conclusions With the enactment of WIOA in 2014, steps were taken toward aligning employment and training programs and ensuring greater cross-agency coordination. Since then, agencies and programs have reported taking a range of actions to increase coordination among E&T programs and manage fragmentation and overlap. However, without knowing whether these actions are working to improve program coordination and integration, agencies may persist in activities that are ineffective, fail to expand those that work, or ignore unintended consequences. Further, the lack of evaluation focused on program coordination has resulted in a void of information on programs’ collective impact. Without strategically planning the use of evaluation resources, DOL and other agencies will not learn efficiently about whether their efforts to coordinate the programs have been successful and what impact the newly coordinated programs are having, collectively, on their shared objectives. Recommendation for Executive Action We are making the following recommendation to DOL: The Secretary of DOL should develop and publish a multi-year strategic research plan for evaluation of its employment and training programs that includes assessing the completeness and results of efforts to coordinate among E&T programs to address overlap and fragmentation. In developing this plan, DOL should also consult with other federal agencies and key stakeholders on ways to address gaps in information on how multiple programs are serving the employment and training needs of specific populations, such as Native Americans, youth, and refugees. (Recommendation 1) Agency Comments and Our Evaluation We provided a draft of this report for review and comment to the Departments of Agriculture, Defense, Education, Health and Human Services, Interior, Justice, Labor, and Veterans Affairs, and to the Environmental Protection Agency. We received formal written comments from DOL and VA that are reproduced in appendix VIII and IX. In addition, DOL, Education, HHS, Interior, USDA and VA provided technical comments which we incorporated into the report as appropriate. EPA, DOD, and DOJ did not have any comments. DOL agreed with our recommendation that it develop and publish a multi- year strategic research plan for evaluation of its E&T programs consistent with the purpose of aligning and coordinating these programs. DOL stated that it actively plans and makes public the research and evaluation topics for these evaluations, but it did not identify a timeline or measures it would take to augment these basic steps. We recommended that DOL consult with other federal agencies and key stakeholders in developing a strategic research plan that assesses the completeness and results of efforts to coordinate among E&T programs to address overlap and fragmentation. Consultation should include ways to address gaps in information on how multiple programs are serving the employment and training needs of specific populations, such as Native Americans, youth, and refugees. DOL stated that it will consult with stakeholders regarding the employment and training needs of specific populations. VA commented that such reviews of E&T programs for specific populations should take into account the complex needs of the population being served and the breadth of needed services. We agree that any such reviews should address how the collection of programs is serving each population’s needs. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@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 that made key contributions to this report are listed in appendix X. Appendix I: Objectives, Scope, and Methodology This appendix discusses our scope and methodology for our three research objectives examining (1) how participation in and obligations for federal employment and training programs have changed since our 2011 report, (2) the extent to which employment and training programs continue to provide similar services to similar populations, and examples of potential effects, and (3) the extent to which agencies have taken actions to address previously identified fragmentation and overlap among the programs and lessons learned. The sections below discuss the methods we used to address each of the three objectives. In addition to these methods, we reviewed relevant federal guidance and other program documents; and interviewed federal agency officials at headquarters offices. The focus of this review was how employment and training services are coordinated among programs specifically designed to deliver such services. As such, our scope excluded some programs that offer or finance employment and training services, but for which this is not a program objective (for example, student loan programs, which focus primarily on enhancing access to postsecondary education). Similarly, we focused on programs that deliver direct service rather than tax expenditures, which may finance or incentivize similar services through tax benefits. Program Selection To address all of our objectives, we compiled a list of employment and training programs by starting with the 47 programs administered by nine federal agencies that were identified in our prior work. We updated the original list by asking federal agency officials to provide the current status of previously identified programs and identify any new ones that might meet our criteria. As in our 2011 review, we included programs for which objectives cited in the Catalog of Federal Domestic Assistance (CFDA) covered: enhancing the specific job skills of individuals in order to increase their identifying job opportunities, and/or helping job seekers obtain employment. We also searched the CFDA electronically in February 2018 to identify any additional programs that met our inclusion criteria. To conduct an electronic text search of the CFDA database, we used 12 search terms used in GAO-11-92. These included: We excluded any programs that met one or more of the following criteria: Program objectives do not explicitly include helping job seekers enhance their job skills, find job opportunities, or obtain employment. Program does not provide employment and training services itself (e.g., it provides financial support to other employment and training programs, or subsidizes the cost of employment through tax credits). Program is small or is a component of a larger employment and training program, such as a pilot or demonstration program. Programs that are economic development programs that aim to increase job opportunities but do not provide services to individuals to enhance their job skills, identify job opportunities, or find employment. Programs that aim to achieve broad workforce-related goals, such as increasing educational opportunities for minority individuals in particular fields or improving the status of and working conditions for wage-earning women, but do not provide employment or training services themselves. Education programs that fund student loans for educational expenses, initiatives for student recruitment and retention, or other student support services. Programs that support training for training providers, such as vocational rehabilitation specialists, or other programs that support job-specific training for individuals who are already employed. Two analysts independently reviewed the list of 211 programs identified in the list generated from the 2018 CFDA search against the inclusion and exclusion criteria described above. To reach concurrence on the programs list, the analysts compared their lists and reached agreement on which to include. If the analysts were undecided about including a program, another analyst was consulted. We also reviewed other GAO reports published since 2011 that provided a more in-depth review of employment and training programs to identify any additional programs that met our three inclusion criteria. As a result of that process, we identified three programs that met our criteria and added them to our list. It is important to note that the number of programs identified will vary with the definition used, and applying any definition can require subjective judgment. After evaluating all identified potential programs, we determined that 46 employment and training (E&T) programs met all criteria to be included in our audit. Once our determinations were made, we sent emails to agency liaisons asking them to confirm the list of programs to be included in and excluded from our review, and to provide the names and contact information for the officials who would be responsible for completing our planned survey. Agencies confirmed our final inclusion and exclusion decisions. After administering our survey, we excluded DOD’s Troops to Teachers Program because the program generally focused on teacher quality rather than E&T services. We also excluded DOD’s Hiring Heroes Program because DOD officials told us the program does not receive a specific appropriation and is a small program that is part of DOD’s larger effort to encourage the employment of servicemembers and veterans. After we administered our survey, DOL officials clarified that the Women in Apprenticeship and Nontraditional Occupations (WANTO) program was not a sub-program under the Registered Apprenticeship Program, but rather a discrete program. We sent a survey to WANTO program officials. At the end of this process, we confirmed that 43 programs met our definition and should be included in our review. We generally maintained consistency with decisions made in our 2011 review. Survey To address all of our objectives, we administered a survey to program officials that included questions about services provided, budgetary information, and participants served. In addition, we included questions asking agency officials to confirm or correct program objectives and eligibility and beneficiary requirements listed in the CFDA. We also included questions about agencies’ actions to manage overlap and fragmentation. We conducted two pretests with VA to ensure (1) our questions were clear and unambiguous, (2) terminology was used correctly, (3) the survey did not place an undue burden on agency officials, (4) the information could feasibly be obtained, and (5) the survey was comprehensive and unbiased. To assess the reliability of the data provided by agencies, we asked officials to identify the databases and information sources they used to respond to our survey questions and any limitations of the data they provided. We then discussed with agency officials any identified data limitations and, if unresolved issues remained, annotated the data, as appropriate. We also identified responses that appeared to be inconsistent or outliers, such as instances in which participants increased as funds declined, and submitted them to agencies for verification. From April to August 2018, we emailed the surveys to agency officials as an attached Microsoft Excel form that they could return electronically. All of the 45 surveys were completed and returned. Because this was not a sample survey, it has no sampling errors. However, the practical difficulties of conducting any survey may introduce errors, commonly referred to as nonsampling errors. For example, difficulties in interpreting a particular question, sources of information available to respondents, or entering data into a database or analyzing them can introduce unwanted variability into the survey results. We took steps in developing the surveys, collecting the data, and analyzing them to minimize such nonsampling error. For example, to minimize difficulties interpreting a particular survey question, we incorporated the suggestions from an independent reviewer to add explicit instructions for how to use the pull-down menus and consistently phrased requests for information. We reviewed the completed surveys and clarified information with agency officials, as needed. We further reviewed the survey to ensure the ordering of survey sections was appropriate and that the questions within each section were clearly stated and easy to comprehend. To reduce nonresponse, another source of nonsampling error, we sent out email reminder messages to encourage officials to complete the survey. In reviewing the survey data, we performed automated checks to identify inappropriate answers. We further reviewed the data for missing or ambiguous responses and followed up with agency officials when necessary to clarify their responses. On the basis of our application of recognized survey design practices and follow-up procedures, we determined that the data were of sufficient quality for our purposes. In terms of agency actions to manage overlap and fragmentation and to detect/prevent duplication, we followed up with select agencies to better understand what prompted the actions they took and the lessons they learned from evaluating those efforts. We did not conduct a legal analysis to confirm the various characterizations of the programs in this report, such as information on their budgetary obligations, services provided, target population, eligibility criteria, or program goals. Instead, all such program information in this report is based on our survey results, as confirmed by agency officials. Further, we did not review agencies’ financial reporting systems or audit the figures provided to us. We reviewed fiscal year 2019 budget documents to determine if they could be used to verify data provided by the agencies, but they did not consistently contain the program-level details needed. Instead, to help mitigate reliability limitations that might have accompanied agency reports, we asked agencies to identify the data source of reported budgetary information and to list any data limitations. Overlap To address our second objective to identify areas of overlap among E&T programs, we reviewed information reported by federal agency officials in our survey. We used the definition of overlap established in GAO’s prior work: overlap occurs when two or more programs provide at least one similar service to a similar population. After reviewing survey responses regarding the primary population groups served by the 43 programs and the services they provided, we categorized programs according to the primary population group served and identified programs within each category that provided similar services. We did not focus on the effects of potential duplication, which occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries. GAO has not previously identified duplication in federal E&T programs, and our objectives in this engagement focused on overlap and fragmentation previously identified in these programs. We categorized programs based on the type of program participant served according to program objectives and program eligibility criteria listed in the CFDA. Then, we verified these categorizations with agency officials. In categorizing programs by target population, we used the following categories: 1) general population, 2) dislocated workers or trade-impacted workers, 3) migrant and seasonal farm workers, 4) Native Americans (in this report, the term Native Americans refers to American Indians and Native Hawaiians), 5) people with physical or mental disabilities, 6) prisoners or ex-offenders, 7) refugees, 8) veterans or transitioning servicemembers, 9) youth, and 10) older workers, women, and unemployed and underemployed residents of solid and hazardous waste-impacted neighborhoods (collectively, other). We also categorized the VA’s Vocational Rehabilitation and Employment program with other programs that target veterans, but noted that the program serves veterans with a service-connected disability. Review of Prior GAO Reports and Agency Funded Research To address our second and third objectives, we also reviewed GAO reports and agency funded research published since 2011. We used these sources, in part, to illustrate effects of overlap and fragmentation among E&T programs and provide examples of actions agencies have taken to address our prior findings or recommendations. To address our second research objective, we reviewed this literature to identify examples of documented effects of overlap and fragmentation among these programs, including positive effects (e.g., to fill a gap or complement an existing program) and negative effects (e.g., inefficient use of resources or confusion among individuals). To address our third research objective, we conducted a literature search of agency- sponsored research on E&T programs and ultimately determined that six of these studies were sufficiently rigorous and appropriately scoped to include in our review. To identify studies on coordination and collaboration of federally-funded programs, we conducted a literature search through ProQuest. Our initial search terms included “federal employment and training” and “coordination” or “collaboration,” “overlap,” and “fragmentation”. We also reviewed these studies to assess the extent to which agencies had evaluated actions to manage overlap and fragmentation. In addition, our survey asked program officials about whether an impact study had been completed since 2011 to evaluate program performance with regard to E&T activities and, if so, to provide a citation for at least one of these studies. An impact study assesses the net effect of a program by comparing program outcomes with an estimate of what would have happened in the absence of the program. This type of study is conducted when external factors are known to influence the program outcomes, in order to isolate the program’s contribution to the achievement of its objectives. Program officials provided 16 citations of what they believed to be impact studies. Of the 16 cited studies, we determined that 13 can accurately be described as impact studies. To make this assessment, we reviewed the methodology section of each study. We conducted this performance audit from September 2017 to March 2019 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: Update on the List of Federal Employment and Training Programs since GAO 2011 Review The following table is a list of federal employment and training programs using as a baseline programs identified in our most recent prior report (GAO, Multiple Employment and Training Programs: Providing Information on Colocating Services and Consolidating Administrative Structures Could Promote Efficiencies, GAO-11-92 (Washington, D.C.: Jan. 13, 2011)). We also reviewed the Catalog of Federal Domestic Assistance (CFDA) to ensure that programs met our selection criteria and to identify new programs. We did not conduct an independent legal analysis to verify the information provided about the programs described in this appendix, such as information on their status. For a description of our methodology, see appendix I. Appendix III: Change in Federal Employment and Training Program Obligations, Adjusted for Inflation in 2017 Dollars Appendix IV: Change in Federal Employment and Training Obligations in Nominal Values Appendix IV: Change in Federal Employment and Training Obligations in Nominal Values *Program name from 2011 review was updated based on information confirmed by agency officials. Appendix V: Estimated Number of Program Participants Who Received Federal Employment and Training Services Appendix V: Estimated Number of Program Participants Who Received Federal Employment and Training Services *Program name from 2011 review was updated based on information confirmed by agency officials. Appendix VI: Employment and Training Services Provided by Federal Programs Serving Selected Target Populations Appendix VII: Agency-Funded Studies Examining Employment and Training Programs Appendix VIII: Comments from the Department of Labor Appendix IX: Comments from the Department of Veterans Affairs Appendix X: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Betty Ward-Zukerman (Assistant Director), Sheranda Campbell (Analyst-in-Charge), Camille Henley, Joel Marus, David Perkins, and Jill Yost made key contributions to this report. Also contributing to this report were Amy Anderson, Stephen Betsock, Caitlin Croake, Alex Galuten, Kristen Jones, Benjamin Licht, Mimi Nguyen, James Bennett, David Blanding, Elizabeth Mixon, Steven Putansu, Monica Savoy, Paul Schearf, Ardith Spence, Almeta Spencer, Kathleen van Gelder, and John Yee.

Why GAO Did This Study Federally funded employment and training (E&T) programs help job seekers enhance their job skills, identify job opportunities, and obtain employment. In 2011, GAO identified overlap and fragmentation among E&T programs administered by nine federal agencies. The Workforce Innovation and Opportunity Act (WIOA) was enacted in 2014, in part, to improve coordination and integration among these programs. This report examines (1) how the number of and obligations for federal E&T programs have changed since GAO's 2011 review, (2) the extent to which E&T programs continue to provide similar services to similar populations and examples of potential effects, and (3) the extent to which agencies have taken actions to address previously identified fragmentation and overlap among E&T programs and what agencies have learned about the results. To address these objectives, GAO surveyed E&T program administrators, reviewed relevant reports and studies, and interviewed federal agency officials. What GAO Found The number of federal employment and training (E&T) programs and program obligations have declined since GAO's 2011 report. In that review, GAO identified 47 E&T programs and found that 44 had overlap with at least one other program in that they provided similar services to a similar population. In fiscal year 2017, the most recent year data are available, GAO identified 43 E&T programs, or 4 fewer than in 2011 (see figure). From fiscal year 2009 to 2017, federal agencies' annual obligations for E&T programs decreased from about $20 billion to $14 billion. GAO analysis of survey data found the decrease in obligations was largely due to the expiration of funding from the American Recovery and Reinvestment Act of 2009, which had provided additional funding for selected E&T programs during and after the Great Recession. Survey results from federal administrators of the 43 E&T programs show that the programs continue to span nine agencies and generally overlap by providing similar services, such as employment counseling and assessment services (39 of 43) and job readiness training (38 of 43). Further, programs targeting a specific population, such as Native Americans, veterans, or youth, also provided similar services. In some cases, such overlap may be appropriate or beneficial, but it may also suggest opportunities for greater efficiency. Almost all (38 of 43) E&T programs reported at least one action to manage fragmentation or overlap, such as co-locating services and sharing information. However, the agencies were not able to consistently provide information on the results of these actions and few evaluations encompassed multiple programs. Among studies GAO identified, six examined more than one E&T program, but only one assessed how any coordinated activities benefited the population served. None of the six studies focused on Native Americans, youth, or refugees. The Workforce Innovation and Opportunity Act (WIOA) encourages agencies to conduct evaluations, and specifically requires the Department of Labor (DOL) to publish a 5-year plan describing certain E&T priorities, consistent with the purpose of aligning and coordinating certain programs. While DOL reported it took some steps, it continues to lack a strategic plan for E&T evaluations over a multi-year period. As a result, DOL does not know whether actions to manage overlap are successful. What GAO Recommends GAO recommends that DOL, in consultation with other federal agencies, develop and publish a multi-year strategic plan for its evaluations of employment and training that includes assessing the completeness and results of efforts to coordinate among E&T programs. DOL agreed with our recommendation.

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Background Agency Support of Presidential Travel Guidance governing executive agencies’ use of government aircraft generally does not apply to aircraft in use by or in support of the President. Memorandum opinions to the White House from the Department of Justice’s Office of Legal Counsel have provided guidance for categorizing expenses associated with official, political, and personal travel by the President or Vice President. These memoranda provide that certain individuals—such as Secret Service and military aides and support personnel—are required in the performance of their official duties to accompany the President whenever he travels. Further, the official nature of the responsibilities performed by these persons does not change depending upon whether the trip is official, political, or personal and their expenses should generally be paid from public funds. DOD organizations such as the Air Force 89th Air Wing, Presidential Airlift Group, and Marine Helicopter Squadron One provide passenger airlift for presidential travel (fig. 1). The Air Force Air Mobility Command also provides aircraft to move equipment, such as limousines, to support the President’s travel. The Military Working Dog Program and Explosive Ordnance Disposal Program support protection of the President while he is on travel by providing explosive detection capabilities. The Secret Service protects the President through a layered security plan that includes securing locations the President will be visiting, as well as physically screening individuals entering secure areas and conducting background checks on individuals scheduled to be within close proximity to the President, as deemed necessary. Secret Service personnel who support presidential travel include personnel from the Presidential Protection Division and from various headquarters divisions that support protective operations, field offices across the country that provide additional manpower, and the field office with jurisdiction over the location. Additionally, the field office with jurisdiction over the location provides logistical support, additional manpower, regional expertise, and coordinates with state and local law enforcement entities. Consistent with the Presidential Protection Assistance Act, the Secret Service requests support from other agencies—including the Coast Guard and DOD—as necessary when the President travels. The Coast Guard primarily secures the waterways in support of protecting the President, family members, and other designated protectees, as necessary. Specifically, when requested by the Secret Service, the Coast Guard will enforce security zones and provide air intercept capabilities for protectees. Local assets are used to the extent that they are available. However, the Coast Guard can request additional support from Coast Guard assets across the nation to meet the security demand. Costs Related to Presidential Travel Costs related to presidential travel fall into two primary categories: Operational costs include costs for assets used to transport or provide protection for the President or spaces used for operational purposes. These include costs for government aircraft and vehicles, such as Air Force One, Marine One, airlift, patrol boats, and hotel rooms used as command centers. Temporary duty costs are costs incurred for personnel who are traveling on official business. These costs include those for transportation, lodging, meals and incidental expenses and other travel-related expenses for personnel supporting the President’s trips. They also include travel-related expenses for personnel who operate the government aircraft and vehicles used to support the President’s trips and Secret Service agents who provide protection. They include the costs for additional personnel who provide bomb detection and disposal capability—military working dog teams and explosive ordinance disposal teams—and support personnel from the White House Military Office, the White House Communications Agency, and the White House Transportation Agency. Two regulations implement statutory requirements and executive branch policies for travel, allowing agencies to pay for or reimburse their employees’ per diem expenses (lodging, meals, and incidentals expenses) and other travel-related expenses: The Federal Travel Regulation (FTR), issued by the General Services Administration (GSA), applies to Secret Service personnel. The Joint Travel Regulations (JTR), issued by the Department of Defense, apply to DOD personnel. Both regulations allow agencies to pay for employees’ daily expenses when they travel, based on allowances set by GSA for the applicable location and date (per diem rates) or the actual expense of travel. Under the FTR, the maximum amount that a civilian employee may be reimbursed is 300 percent of the applicable per diem rate. The JTR allows uniformed service members to be reimbursed up to 300 percent when they travel in the continental United States, but they can be reimbursed more than 300 percent of the per diem rate for lodging when they travel outside the continental United States. Costs for each presidential trip may vary, because each trip is unique. Costs associated with each trip can be influenced by a number of factors, mainly the location, number of protectees, foreign visitors, time of year, the protectee’s schedule of events, and the airlift requirements—including the originating location of airlift flights. The combination of these factors can increase or decrease the cost to transport and protect the President. Specifically, an increase in the number of protectees, including foreign dignitaries, would require the Secret Service to deploy additional personnel to support its protective operations. Presidential Protection Assistance Act of 1976 The Presidential Protection Assistance Act establishes procedures and reporting requirements for protective services provided by the Secret Service. The primary aim of the legislation was to strengthen control over costs for protective services, particularly at non-governmental properties, by centralizing in the Secret Service authority and accountability for such costs. The Act continues the authority of executive departments and agencies to assist the Secret Service in meeting its protective responsibilities but specifies that protective services may only be provided at the request of the Secret Service and must be on a reimbursable basis except when temporary support is provided by DOD and the Coast Guard and is directly related to protecting the President, Vice President, or an officer immediately next in the order of succession to the office of the President. The Act further requires that the Secret Service, DOD, and the Coast Guard submit semiannual reports in March and September to six congressional committees on expenditures pursuant to the Act. Costs for the President’s Travel for Four Trips to Mar-a- Lago Totaled about $13.6 Million For the President’s four trips to Mar-a-Lago from February 3, 2017 to March 5, 2017, we estimate that federal agencies incurred costs of about $13.6 million. As shown in table 1, these costs consisted of approximately $10.6 million for operating costs and $3.0 million for temporary duty costs. DOD and DHS incurred the majority of these costs—about $8.5 million and $5.1 million, respectively. As previously mentioned, these figures do not include certain classified cost information. Moreover, they do not include the salaries and benefits of U.S. government civilian and military personnel traveling with the President or involved with agency travel preparations, because these personnel would have received their salaries and benefits for the conduct of their regular duties and responsibilities regardless of whether the President traveled. We identified about $60,000 in expenses paid to Mar-a-Lago for these four trips. DOD lodging expenses of about $24,000 were within GSA limits of 300 percent of the per diem rate. DHS expenses of about $36,000 were for space required by the Secret Service for operational purposes. The legal authorities that the Secret Service relied on to pay for these kinds of rooms do not limit how much the agency can pay; however, none of the rooms used to meet operational security standards exceeded the maximum allowed under the FTR’s actual expense reimbursement method. Costs Incurred by DOD DOD incurred an estimated $8.5 million in costs to provide support for the President’s four trips to Mar-a-Lago from February 3, 2017 to March 5, 2017, as shown in table 2 below. The majority of these costs were operational costs for DOD assets, specifically, for operating Air Force One and Marine Corps One to transport the President, as well as airlift support from the Air Mobility Command. Table 2 shows the estimated costs incurred by DOD for these trips. The cost per flying hour for military aircraft is a significant cost driver that affects the overall costs of any presidential travel. These costs are predominately borne by the Air Force and the Marine Corps, because they operate the aircraft used by the President. Generally, Air Force One costs represent the operating costs to fly the President from Joint Base Andrews, Maryland, to Palm Beach, Florida. Similarly, the Marine Corps One costs represent the operating costs to fly the President between the White House and Joint Base Andrews. For the airlift support requirements, the Air Mobility Command used aircraft departing from various U.S. Air Force bases. These aircraft arrived at Joint Base Andrews or Marine Corps Base Quantico to transport Secret Service personnel and vehicles and Marine Corps personnel and helicopters to support the trip before returning to their air base of origin (see fig. 2). DOD also incurred temporary duty costs for DOD personnel who supported these trips, including the travel associated with the aircrews and support personnel for Air Force One and Marine Corps One. Each of the military services also provided military working dog teams (see fig. 3) and explosive ordnance disposal teams to provide explosive detection and disposal capabilities and to perform patrol functions. Finally, personnel from the White House Military Office incurred travel expenses associated with the President’s trips. For these four trips, the majority of DOD personnel stayed at nearby hotels with rooms at the GSA rate or within 300 percent of the GSA per diem rate, as required by the FTR and JTR. DOD paid $24,414.70 to Mar-a-Lago for lodging expenses for DOD personnel. We reviewed lodging receipts and confirmed that these payments were within 300 percent of the GSA per diem rate. Costs Incurred by DHS DHS incurred an estimated $5.1 million in costs to provide support for the President’s four trips to Mar-a-Lago from February 3, 2017 to March 5, 2017. Of this figure, the Secret Service incurred about $1.6 million to provide support. This included per diem and other related travel expenses, such as commercial airfare or use of rental cars for officials traveling in advance of the President. We identified about $35,750 in expenses for operational space at Mar-a-Lago for these four trips. Table 3 shows the estimated costs incurred by the Secret Service and the Coast Guard for these trips. The majority of costs incurred by the Secret Service were temporary duty costs associated with travel to protect the President. The number of agents assigned to the protective detail for each trip varied based on the number of protectees present (including foreign dignitaries) and unrelated events at the same location. To execute the four trips, the Secret Service leveraged support from across the agency and field offices across the country to implement protective operations for the President’s travel. Agents were assigned as part of the protective detail—providing twenty-four hour protection for the President or other protectee; members of the advance team—determining and implementing the security plan for the site; or on-site support throughout the duration of the visit. For example, agents from the Secret Service’s Presidential Protective Division, Uniformed Division, and Technical Security Division, among others, traveled in advance of the President to assess the location and develop and implement a security plan. Further, agents from Secret Service field offices across the country provided additional manpower at Mar-a-Lago and supported the Presidential Protection Division within the Office of Protective Operations —which holds primary responsibility for the daily protection of the President—in ensuring that the location remained safe for the President and other protectees. The majority of agents who supported the four trips during our time frame did not stay at Mar-a-Lago. The Secret Service booked a limited number of rooms around the President to meet operational security requirements. According to officials, these rooms allowed the Secret Service to provide 360-degree protection around the President. For these four trips, most Secret Service agents stayed at nearby hotels at which rooms were at the GSA lodging rate or within 300 percent of the GSA per diem rate, consistent with the FTR. Coast Guard’s Costs and Resources The Coast Guard incurred about $3.4 million in costs to provide support for the four trips to Mar-a-Lago. The majority of these costs were operational costs for Coast Guard assets, specifically, the use of small response boats, special purpose law enforcement boats, deployable rotary wing aircraft, and marine protection-class cutters to provide support in waterways near Mar-a-Lago (see fig. 4). For the Coast Guard, operating costs are determined by the type of boat or aircraft used and the hourly operating costs. According to Coast Guard officials, to the extent possible, they request support from assets that they determine are within close proximity to the travel location. For the four Mar-a-Lago trips, support was requested from the local Miami sector, Kings Bay (Georgia), New Orleans (Louisiana), Houston (Texas), Boston (Massachusetts), and New York (New York). The Coast Guard incurred other travel-related costs, such as for meals and incidental expenses and lodging for officials on temporary duty assignment to support the President’s travel. Coast Guard officials noted that, if possible, personnel are to stay on the asset (for example a boat); however, if this is not possible, they are to stay in nearby lodging at or within 300 percent of the GSA per diem rate. Coast Guard officials confirmed that personnel supporting presidential travel for these four trips did not stay at Mar-a-Lago. Costs for the Secretary of Homeland Security’s Travel The Department of Homeland Security incurred costs of about $6,000 in connection with the Secretary of Homeland Security and staff’s travel to Mar-a-Lago on March 4, 2017. Costs included transportation to and from Mar-a-Lago and per diem expenses (meals and incidental expenses). According to DHS officials, agents supporting the protection of the Secretary of the Department of Homeland Security were multi-staffed and protected other protectees at the same time. Therefore, travel costs for personnel associated with the Secretary’s protective detail are captured in the overall travel costs for this trip. No lodging costs were incurred at Mar- a-Lago in connection with the Secretary of Homeland Security’s travel. Additional Costs by Other Agencies for Official Travel The Department of Justice and the Department of State incurred costs of about $29,000 for official travel to Mar-a-Lago during these four trips. The Department of Justice incurred costs of about $18,000 to transport the Attorney General, his Federal Bureau of Investigation (FBI) detail, and three Department of Justice personnel to Mar-a-Lago for one trip. The operational costs were for the FBI Gulfstream 550 used to transport the officials from the Washington, D.C. area to West Palm Beach, Florida and back. The Department of Justice provided documentation that no Department of Justice or FBI personnel had per diem expenses, since the trip was less than 12 hours. In addition, the Department of State incurred costs of about $10,000 to provide interpreter support and protocol officials associated with the President’s trip to Mar-a-Lago in February 2017 when the Prime Minister of Japan was a guest. Costs for the President’s Two Adult Children’s Travel to Uruguay, the Dominican Republic, and the United Arab Emirates Totaled about $396,000 The Secret Service incurred costs of approximately $396,000, primarily for Secret Service agents’ temporary duty costs, while protecting Donald Trump, Jr., Eric Trump, and their spouses during three international trips taken during January and February 2017, as shown in table 4 below. Eric Trump traveled to Uruguay from January 3, 2017 to January 5, 2017 and the Dominican Republic from February 2, 2017 to February 3 2017. Donald Trump, Jr., Eric Trump, and their spouses traveled to the United Arab Emirates from February 14, 2017 to February 19, 2017. The Secret Service protects presidential family members domestically and internationally. Children of the President with a protective detail are required to receive protection twenty-four hours a day, and agents who are part of their detail travel with them wherever they go. For international travel, because there are no local Secret Service field offices in most countries, the Department of State supports the Secret Service by booking and paying for all hotel reservations required by Secret Service and State Department personnel and coordinating onsite needs. This includes, but is not limited to, acquiring rental cars, phones, and interpreters at the trip’s destination. Transportation for individuals in foreign offices is booked in a variety of ways. For example, agents may book their own flights, flights may be booked by a contracted agency, or sometimes the local embassy may assist in booking transportation. Meals and incidental expenses are reimbursed to the traveler. The Secret Service and the Department of State have implemented a memorandum of understanding detailing their respective roles and responsibilities and, as required by law, the Secret Service is to reimburse the Department of State for all costs incurred in support of the Secret Service’s protective operations. Documentation provided by the Secret Service confirmed that Donald Trump Jr., Eric Trump and their spouses flew on commercial aircraft. Officials from the 89th Airlift Wing confirmed that no military aircraft supported these trips. Secret Service agents protecting the Trump family flew by commercial aircraft. Additionally, reimbursement documentation provided by both the State Department and the Secret Service confirmed that no costs were incurred for chartered air travel. As with all protective missions, Secret Service officials noted that the number of agents assigned to the detail depended on the number of protectees and the threat environment, among other things. The trips to the Dominican Republic and Uruguay each included only one protectee, and the trip to the United Arab Emirates included four protectees. Secret Service and DOD Have Not Reported Costs as Required Under the Presidential Protection Assistance Act of 1976 For fiscal years 2015 through 2017 we found that, of the three agencies required to report costs incurred for protecting the President and others under the Presidential Protection Assistance Act, only the Coast Guard reported semiannually on costs under the Act. The Secret Service did not do so consistently, and DOD did not report any protection costs during this time frame. Coast Guard: The Coast Guard submitted the semiannual reports required under the Act for fiscal years 2015 through 2017. To facilitate complying with the Presidential Protection Assistance Act, the Coast Guard developed and implemented a policy for preparing the semiannual reports to Congress. The policy contains business rules identifying what information is to be collected and by whom, who is responsible for compiling the information, and time frames for when the information is to be submitted internally. For example, the Coast Guard operationalized collection of this information by requiring a form to be used when collecting information related to protective details for the Vice President and the President. Its internal policy and additional guidance also require that information be submitted internally no more than 14 days after each event and validated no more than 30 days after each event. According to agency officials, these business rules and forms are published and provided to all Coast Guard field units, and quarterly reminders about completing the forms are disseminated via email. Secret Service: The Secret Service has not consistently submitted the semiannual reports to Congress and does not have a policy for ensuring that the semiannual reports are prepared. Specifically, we found that the Secret Service submitted semiannual reports to Congress in 2015 but had not submitted semiannual reports for fiscal years 2016 and 2017. The Secret Service notified us that it was compiling and submitting reports for fiscal year 2017 after we had brought the reporting requirement to officials’ attention during the course of our review. Secret Service officials told us that they were unaware that the reports for 2016 and 2017 had not been submitted until we requested this information. According to Secret Service officials, the division that is responsible for preparing and submitting the reports to Congress experienced a transition in leadership during the period when there was the lapse in reporting. Specifically, management and the personnel responsible for preparing and submitting the reports to Congress were no longer with the agency in 2016 and therefore could not brief incoming management hired in 2017. According to officials, this contributed to a reporting lapse. Standards for Internal Control in the Federal Government states that management should implement control activities through policies, for example, by documenting responsibilities for each unit. Control activities are the policies, procedures, techniques, and mechanisms that enforce management’s directives to achieve the entity’s objectives. Further, management should also define objectives clearly to enable the identification of risks and define risk tolerances. This would include defining objectives in specific terms so they are understood at all levels and can be carried out without regard to personnel changes. This further involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for realizing the achievement. Establishing a policy defining requirements for producing the semiannual reports to Congress—including what is to be reported, the entity responsible for preparing and submitting the reports, and reporting time frames—and an oversight mechanism to ensure that the reports are prepared and submitted to Congress, may better position the Secret Service to consistently report required expenditure data to specified congressional committees as required. DOD: DOD has issued a policy related to collecting information on its support for the Secret Service’s protective duties but has not produced and submitted the required reports to Congress in accordance with its policy. DOD officials were unaware that the reports had not been submitted until we requested them. According to DOD officials, the reports were not submitted as a result of an administrative oversight, and they could not determine when the reports had last been submitted. This situation is in part the result of weaknesses in DOD’s existing policy and implementing instruction with regard to specific information that could help ensure the reports are consistently produced and provided to Congress. For example, the policy requires that any DOD organization incurring costs associated with support provided to the Secret Service collect and report the costs to the Assistant Secretary of Defense for Homeland Defense and Global Security, the Chairman of the Joint Chiefs of Staff, and the Chief Financial Officer. However, neither the policy nor underlying instruction sets forth time frames for internal or external reporting to ensure that the semiannual dates are met. Further, DOD has no mechanism for ensuring that the required information is submitted to Congress. As previously noted, internal control standards require that management should implement control activities through policies and define objectives clearly to enable the identification of risks and define risk tolerances. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for realizing the achievement. Moreover, the policies, procedures, techniques, and mechanisms that enforce management’s directives to achieve the entity’s objectives are to be defined. According to a DOD official, in March 2018 the department began efforts to gather the information necessary to prepare the required report. However, collecting the information has been challenging, largely due to the multiple data sources and inconsistent methods for capturing the data to date. Therefore, according to DOD officials, once the department completes its initial data collection effort, officials plan to assess the adequacy of the data and review DOD’s existing guidance to identify revisions needed to ensure that future reports are submitted in accordance with Presidential Protection Assistance Act. However, the agency has not yet defined the steps necessary to fulfill near-term reporting requirements under the Act, or time frames for doing so. By addressing these issues, DOD could be better positioned to comply with the law. Further, while DOD officials anticipate updating the policy and instruction at a future date, steps and time frames for completing the update have not yet been defined, and it is unclear when or whether the updates will occur. Updating DOD’s policy and instruction to specify the requirements and establish an oversight mechanism may better position DOD to report expenditure data to Congress, as required, on a semiannual basis and enhance visibility over the costs associated with providing protective services, in particular in relation to protection at nongovernmental properties. Conclusions The Secret Service, with help from the Coast Guard and DOD, plays a vital role in protecting the President during his travels. The Presidential Protection Assistance Act was intended to establish procedures to control the expenditure of federal funds for protection at nongovernmental properties; it requires that each of these entities report expenditures under the Act. The Secret Service, the Coast Guard, and DOD have all incurred costs related to protection for the President and others. However, information on such costs is limited, because only the Coast Guard has been reporting them. As a result, Congress lacks information about the amounts that DOD and the Secret Service have expended for providing protection—including providing protection at nongovernmental properties. This limits congressional efforts to ensure accountability for these costs. The Secret Service does not have a policy in place that defines and enforces reporting requirements, and DOD’s policy and underlying instruction lack important details such as time frames for reporting expenditures and a mechanism for ensuring that the required information is submitted to Congress. DOD has initiated steps to develop required reports but has not identified the specific steps it will take and the time frames within which these efforts will be completed. Recommendations for Executive Action We are making one recommendation to the Director of the Secret Service and two to the Secretary of Defense. The Director of the Secret Service should establish a policy defining requirements for producing the semiannual reports of expenditures required by the Presidential Protection Assistance Act of 1976, as amended, and an oversight mechanism to ensure that the Secret Service consistently submits these reports to specified congressional committees. (Recommendation 1) The Secretary of Defense should ensure that the Under Secretary of Defense for Policy updates its policy and instruction on providing support to the Secret Service to define the requirements for producing semiannual reports of expenditures required by the Presidential Protection Assistance Act of 1976, as amended. These requirements should, at a minimum, include (1) the steps and time frames for completing updates to the policy and instruction, (2) time frames for reporting the expenditures, and (3) an oversight mechanism to ensure that the Department of Defense consistently submits these reports to specified congressional committees. (Recommendation 2) The Secretary of Defense should ensure that the Under Secretary of Defense for Policy defines the steps, including time frames, necessary to achieve near term reporting requirements under the Presidential Protection Assistance Act of 1976, as amended, and submit the reports as required. (Recommendation 3) Agency Comments We provided a draft of this report for review and comment to the Executive Office of the President, and the Departments of Homeland Security, Defense, Justice, and State. DHS and DOD provided written comments, which are reproduced in appendixes I and II respectively. In their comments, DHS and DOD concurred with their respective recommendation(s). DHS concurred with our first recommendation, which called for the Secret Service to establish a policy defining requirements for producing the semiannual reports of expenditures required by the Presidential Protection Assistance Act of 1976, as amended, and an oversight mechanism to ensure the Secret Service consistently submits these reports to specified congressional committees. Specifically, the Secret Service has recently updated several guidance documents related to the Act. It further plans to publish a directive during fiscal year 2019 documenting the requirements for producing the semiannual reports and defining the oversight mechanism to ensure that the reports are consistently submitted. DOD concurred with our second recommendation, which called for DOD to update its policy and instruction on providing support to the Secret Service to define the requirements for producing semiannual reports of the expenditures required by the Presidential Protection Assistance Act of 1976, as amended. DOD concurred with our recommendation that DOD define the steps, including time frames, necessary to achieve near term reporting requirements under the Presidential Protection Assistance Act of 1976, as amended, and submit the reports as required. DHS and DOJ also provided technical comments, which we incorporated into the report as appropriate. The Department of State and the Executive Office of the President had no comments. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Executive Office of the President; the Secretary of Homeland Security; the Director of the Secret Service; the Commandant of the Coast Guard; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; the Commandant of the Marine Corps; the Under Secretary of Defense for Policy; the Secretary of State; and the Attorney General. Consistent with section 10 of the Presidential Protection Assistance Act of 1976, this report is also being sent the Committees on Appropriations and on the Judiciary, the House Committee on Oversight and Government Reform, and the Senate Committee on Homeland Security and Governmental Affairs. 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 concerning this report, please contact Brian Lepore at (202) 512-4523 or leporeb@gao.gov or Diana Maurer at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Appendix I: Comments from the Department of Homeland Security Appendix II: Comments from the Department of Defense Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgements In addition to the contact named above, Gina R. Hoffman, Assistant Director; Joseph P. Cruz, Assistant Director; Tracy Barnes, Kerstin Hudon, Jennifer Kamara, Joanne Landesman, Carol Petersen, Michael Silver, Janet Temko-Blinder, and John Wren made key contributions to this report.

Why GAO Did This Study The Secret Service is responsible for protecting the President and his family, including adult children when they travel. The Secret Service can request assistance in its mission from other agencies, such as DOD and the Coast Guard. When the President travels, he must fly on DOD aircraft. GAO was asked to review the travel- related costs for four trips that the President took to Mar-a-Lago and three trips that the President's adult children made to certain overseas destinations. This report examines (1) the costs incurred by federal agencies associated with the President's travel on selected trips to Mar-a-Lago, (2) the costs incurred by federal agencies associated with certain overseas trips taken by Donald Trump, Jr. and Eric Trump, and (3) the extent to which the Coast Guard, the Secret Service, and DOD have reported their costs pursuant to the Presidential Protection Assistance Act of 1976. GAO analyzed agency cost data in connection with the President's travel to Mar-a-Lago and the President's adult children's trips to certain overseas locations. GAO also reviewed the law, agency guidance, and semiannual reports related to the Presidential Protection Assistance Act of 1976. What GAO Found GAO estimated that federal agencies incurred costs of about $13.6 million for the President's four trips to Mar-a-Lago from February 3 through March 5, 2017. This estimate consisted of approximately $10.6 million for operating costs of government aircraft and boats and $3 million for temporary duty costs of government personnel supporting the President's travel, including transportation, lodging, and meals and incidental expenses. These figures do not include certain classified cost information or the salaries and benefits of government personnel traveling with the President because, salaries and benefits would be paid regardless of whether the President was traveling. The United States Secret Service (Secret Service) incurred about $396,000, primarily for temporary duty costs, while protecting Donald Trump, Jr. and Eric Trump during three international trips taken in January and February 2017. Eric Trump traveled to Uruguay and the Dominican Republic and Donald Trump, Jr., Eric Trump, and their spouses traveled to the United Arab Emirates. Documentation provided by Secret Service officials confirmed that the Trumps and their spouses flew on commercial aircraft. Officials from the 89th Airlift Wing confirmed that no military aircraft supported these trips. Secret Service agents protecting the Trump family flew by commercial aircraft. GAO found that, of the three agencies required to report by the Presidential Protection Assistance Act of 1976, as amended, only the United States Coast Guard (Coast Guard) reported protection costs semiannually to Congress for fiscal years 2015 through 2017. GAO found that the Secret Service does not have a policy for ensuring that the semiannual reports are prepared and has not consistently submitted the reports. Secret Service officials last submitted reports in fiscal year 2015 and were unaware that reports had not been submitted in fiscal years 2016 and 2017 until GAO requested this information. GAO also found that the Department of Defense (DOD) has a policy but did not produce and submit the reports as required. Moreover, weaknesses in DOD's existing policy and instruction do not clearly establish the responsibility for preparing and reporting the costs incurred to support protection activities. Absent clear policies with an oversight mechanism to ensure that the reports are produced, Congress has not been provided required information concerning the costs for providing protective services for the President and others. What GAO Recommends GAO is making recommendations to the Secret Service and DOD to ensure that the reports required under the Presidential Protection Assistance Act of 1976, as amended, are prepared and submitted. The Department of Homeland Security and DOD concurred with GAO's recommendations.

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Background IPIA requires agencies to conduct a risk assessment for all programs and activities at least once every 3 years, and OMB guidance implementing IPIA also directs agencies to report on the assessment in either the agencies’ AFRs or PARs. Each agency must institute a systematic method of performing the improper payment risk assessment, which may take the form of either a quantitative analysis based on a statistical sample or qualitative evaluation (e.g., a risk assessment questionnaire). IPIA identifies seven risk factors and OMB guidance includes two additional risk factors that agencies are to consider when conducting improper payment risk assessments. According to OMB M-15-02, agencies’ risk assessments (either quantitative or qualitative) should consider all of the following nine risk factors that are likely to contribute to significant improper payments: 1. whether the program or activity reviewed is new to the agency; 2. the complexity of the program or activity reviewed, particularly with respect to determining correct payment amounts; 3. the volume of payments made annually; 4. whether payments or payment eligibility decisions are made outside of the agency, for example, by a state or local government or a regional federal office; 5. recent major changes in program funding, authorities, practices, or 6. the level, experience, and quality of training for personnel responsible for making program eligibility determinations or certifying that payments are accurate; 7. inherent risks of improper payments because of the nature of agency 8. significant deficiencies in the agency’s audit reports, including but not limited to the agency IG or GAO audit findings or other relevant management findings that might hinder accurate payment certification; and 9. results from prior improper payment work. OMB guidance describes these nine risk factors as the minimum factors that agencies should consider and notes that additional risk factors, such as those specific to the program or activity being assessed, should also be considered, as appropriate. If an agency’s improper payment risk assessment finds that a program is susceptible to significant improper payments, the agency is required by IPIA to estimate the annual amount of improper payments for the program, publish corrective action plans, set reduction targets, and annually report on the results of addressing these requirements for that program. IPIA states that each agency is required to publish the improper payment information in an annual report in the form and content required by OMB—typically an AFR or a PAR—for the most recent fiscal year, and post that report on the agency’s website. OMB Circular A-136 and OMB M-15-02 provide guidance for agencies on preparing their AFRs or PARs, including the reporting of improper payment information. Specifically, this OMB guidance directs agencies to disclose the following in their AFRs or PARs: (1) the basis for grouping programs and activities for improper payment risk assessments; (2) the risk factors considered during their risk assessment; and (3) a listing of all programs that were assessed for a given year, regardless of whether a program or activity was deemed susceptible to significant improper payments. Given that OMB guidance is updated periodically, some reporting directives may differ for each fiscal year. As shown in table 1, the directive to disclose the basis for grouping programs and activities was applicable for all 3 years included in the scope of our review (i.e., fiscal years 2014 through 2016). However, the directives to disclose all the risk factors considered and include a listing of all programs and activities assessed were only applicable for fiscal years 2015 and 2016. CFO Act Agencies Generally Adhered to Improper Payment Reporting Directives for Risk Assessments During fiscal years 2014 through 2016, the 24 CFO Act agencies, excluding the Department of Defense (DOD), reported in their AFRs or PARs that that they completed at least one risk assessment on at least one program or activity in one or more of those years. For the agencies that reported that they completed an improper payment risk assessment, we found that most generally adhered to the reporting directives that were applicable for fiscal years 2014 through 2016. For example, for fiscal year 2014, 21 of the 24 CFO Act agencies reported completing a risk assessment, and for those 21 agencies, we found that 19 agencies adhered to OMB guidance for reporting the basis of groupings of programs and activities and 2 did not. (See fig. 1.) For fiscal years 2015 and 2016, all 18 CFO Act agencies that reported completing a risk assessment adhered to OMB guidance for this directive. Appendix III provides additional details regarding the agencies’ reporting of completing an improper payment risk assessment each year and adherence to the OMB improper payment risk assessment reporting directives. Further details on each of these reporting directives are provided below. Reporting the basis for grouping programs and activities. During the 3-year period from fiscal years 2014 through 2016, we found two instances where the agencies—the Departments of Commerce (Commerce) and Energy (Energy)—did not adhere to the reporting directive for agencies to report the basis of grouping programs and activities. Although these two agencies did not adhere to this reporting directive in fiscal year 2014, Commerce adhered to this directive in fiscal year 2015 and fiscal year 2016. Energy adhered to this directive in fiscal year 2015, and this reporting directive was not applicable for fiscal year 2016 because Energy did not report completing any risk assessments that year. All other applicable agencies were in full adherence to this OMB directive in fiscal years 2015 and 2016. Reporting a listing of all programs and activities assessed during the agencies’ improper payment risk assessments. During fiscal years 2015 through 2016, the applicable CFO Act agencies, except for the U.S. Agency for International Development (USAID), adhered to the reporting directive for listing all programs and activities assessed during the agencies’ improper payment risk assessments. USAID did not adhere to this reporting directive in fiscal year 2015; however, in fiscal year 2016, USAID did list all programs and activities. USAID officials provided us an OMB e-mail indicating, among other things, that USAID could be on a 3- year cycle of performing risk assessments starting in fiscal year 2015. Notwithstanding that e-mail, USAID continued to perform improper payment risk assessments annually, according to USAID officials, to maintain audit readiness and expertise. These officials further stated that this OMB e-mail served as support for not adhering to the OMB directive for reporting risk assessments. However, we did not find upon our review that the e-mail explicitly provided such support. Reporting the risk factors considered during the agencies’ risk assessments. As directed by OMB guidance, agencies are to report the risk factors considered during improper payment risk assessments in their AFRs or PARs. Given that IPIA identifies seven risk factors that agencies are to consider and OMB guidance includes two additional risk factors, agencies are directed by OMB to consider a minimum of nine risk factors. Therefore, the AFRs and PARs adhering to OMB guidance are to include a discussion regarding the agencies’ consideration of these nine factors as well as any other factors considered. In our analysis, we found that six agencies failed to adhere to OMB reporting directives either in fiscal year 2015, fiscal year 2016, or both. Specifically, we found the following: The Office of Personnel Management (OPM) did not adhere to the improper payment risk assessment reporting directives in fiscal year 2015. However, OPM subsequently corrected the reporting issue in fiscal year 2016. Three agencies—USAID, the U.S. Department of Agriculture (USDA), and the Social Security Administration (SSA)—did not adhere to the improper payment risk assessment reporting directives in fiscal years 2015 and 2016. In their fiscal years 2015 and 2016 AFRs, USAID did not report its consideration of any of the nine risk factors, USDA reported that it considered four of the nine risk factors, and SSA reported that it considered six of the nine risk factors. Two agencies, the Department of Education (Education) and the Department of Labor (Labor), did not adhere to the improper payment risk assessment reporting directive in fiscal year 2016. In their fiscal year 2016 AFRs, neither Education nor Labor provided a detailed description of all the risk factors that were considered in their risk assessments. Education stated that its risk assessment analysis “included a quantitative review of questioned costs from Single Audit findings versus total program expenditures, as well as a qualitative review of other risk factors including changes in legislation or regulations and history of audit findings.” Labor did not list the risk factors considered in its improper payment risk assessments but instead provided a hyperlink to IPIA. As noted above, officials from USAID stated that an OMB e-mail served as support for not adhering to the OMB directive for reporting risk assessments, including the risk factors. However, we found upon our review that the e-mail did not explicitly provide such support. Officials from USDA, Labor, and SSA, three of the five agencies that did not adhere to the reporting directive in fiscal year 2016, informed us that they considered the nine risk factors but were not aware that they had to specifically list the nine risk factors in their AFRs or PARs. In addition, Labor officials stated that they included a link to IPIA instead of mentioning the nine risk factors to help simplify the reporting. However, OMB Circular A-136 specifically directs the agencies to include a description of the risk factors considered in their improper payment risk assessments in their AFRs or PARs. Although Labor officials stated that they considered all nine risk factors, Labor’s link to IPIA only includes seven required risk factors and not the two additional risk factors that are referenced in OMB guidance. After we brought these concerns to their attention, officials from these three agencies indicated that they plan to report the risk factors considered, as directed by OMB, which should include consideration of all nine risk factors. By adhering to the OMB directive for reporting risk factors, the agencies will improve the transparency of the risk assessments reported in their AFRs or PARs. An Education official stated that the department did not consider all nine risk factors for its non-Federal Student Aid programs during fiscal year 2016 because Education’s analysis was quantitative in nature. However, OMB guidance states that all nine risk factors must be considered in both qualitative and quantitative improper payment risk assessments. In May 2017, the Inspector General for Education recommended that Education ensure that improper payment risk assessments conform with IPIA and OMB guidance when determining whether programs may be susceptible to significant improper payments and identify all programs that may be susceptible to significant improper payments. In response to the recommendation in the Office of Inspector General (OIG) audit report, Education stated that it will align its improper payment risk assessments with the nine risk factors beginning in fiscal year 2017. A revised version of OMB Circular A-136 that was issued in August 2017 no longer directs agencies to report improper payment risk assessment information in the agencies’ fiscal year 2017 AFRs and PARs. Specifically, agencies will no longer have to report in their AFRs or PARs for a given year (1) the basis for grouping programs and activities for improper payment risk assessments, (2) a listing of all programs and activities assessed during their risk assessments, and (3) the risk factors considered during their risk assessments. OMB staff stated that their primary motivation for eliminating the risk assessment reporting directives from OMB guidance was to reduce the administrative burden on agencies. Although OMB guidance will not direct agencies to report the three items noted above, agencies are still required to complete the risk assessments, as required by IPIA and directed in OMB guidance. Further, OMB staff stated that they rely on each agency’s OIG to review the quality of each agency’s risk assessment, which should include assessing the three items noted above; therefore, these reporting directives are not necessary. While we recognize the importance of reducing administrative burden, we also have previously reported on the importance of risk assessments for managing improper payments. We believe that the requirement for agencies to publicly report the improper payment risk assessment information has helped hold agencies accountable and provided additional transparency to the agencies’ improper payment processes, as well as assisted Congress and others in their oversight of government- wide improper payments. However, if OMB is going to rely on each agency’s OIG to ensure quality risk assessments, it is important that these reviews are performed consistently throughout the federal government. In our May 2017 report, we found that OIGs inconsistently reported agencies’ compliance with the IPERA criterion for conducting program-specific risk assessments. For example, certain OIGs reported agencies as noncompliant when agencies did not consider all nine risk factors, as outlined in IPIA, OMB guidance, or both, during program- specific risk assessments, whereas other OIGs reported agencies as compliant with this IPERA criterion, despite also finding issues with the agencies’ consideration of the nine risk factors. To help ensure that government-wide compliance under IPERA is consistently determined and reported, we recommended in May 2017 that the Director of OMB coordinate with the Council of the Inspectors General on Integrity and Efficiency (CIGIE) to develop and issue guidance, either jointly or independently, to specify what procedures should be conducted as part of the OIGs’ IPERA compliance determinations. OMB did not provide any comments on our recommendation, and as of August 2017, OMB had not yet issued such guidance. CIGIE stated that it would coordinate with OMB as needed and provide feedback on any draft OMB guidance. Subsequent to the issuance in August 2017 of a revised version of OMB Circular A-136 and after we notified OMB of our views on the importance of certain data, OMB staff stated that they plan to direct agencies to report additional risk assessment data. Specifically, in September 2017, OMB staff told us that they plan to direct agencies to provide a listing of all programs and activities assessed during their risk assessments on www.paymentaccuracy.gov for fiscal year 2017 reporting, and that they plan to continue to direct agencies to report this listing for subsequent fiscal years. In addition, although the basis for grouping programs and activities for improper payment risk assessments and the risk factors considered during the risk assessments will not be required to be reported in fiscal year 2017 AFRs and PARs, OMB staff stated that they plan to revise the guidance for fiscal year 2018 so that agencies report such information in their AFRs and PARs. Six Selected CFO Act Agencies Did Not Have Properly Designed Control Activities That Included All Programs and Activities in Their Improper Payment Risk Assessments We found that three of the nine selected CFO Act agencies that we reviewed, Energy, the Department of Justice, and USAID, had documented procedures for performing the required improper payment risk assessments and these procedures included the design of control activities necessary to help ensure that all programs and activities were assessed at least once every 3 years. However, the remaining six agencies did not properly design control activities for this purpose. Specifically, three of these six selected agencies did not have documented procedures for performing the required improper payment risk assessments. The remaining three agencies improperly excluded specific programs and activities from the improper payment risk assessment process. Appendix IV provides more detail on our analysis of these selected agencies’ procedures for performing improper payment risk assessments. We did not evaluate whether all control activities related to conducting improper payment risk assessments were properly designed or evaluate other internal control components, such as the control environment. If we had done so, additional deficiencies may or may not have been identified that could impair the overall effectiveness of the control activities evaluated as part of this audit. Three Selected CFO Act Agencies Did Not Have Documented Procedures for Conducting Their Improper Payment Risk Assessments but Have Now Documented Them Three of the nine selected CFO Act agencies—Commerce, the National Science Foundation (NSF), and the Nuclear Regulatory Commission (NRC)—did not have documented procedures for conducting improper payment risk assessments for fiscal years 2014 through 2016. Although two of these three agencies (Commerce and NSF) had developed processes to help ensure that all programs and activities were assessed for susceptibility to significant improper payments at least once every 3 years, these processes were not documented in written procedures. By the end of our review, the three agencies subsequently established documented procedures during fiscal year 2017. We reviewed the procedures for Commerce, NRC, and NSF and found that they included control activities designed to help ensure that all programs and activities are included in the agencies’ improper payment risk assessments at least once every 3 years, as required by IPIA. Three Selected CFO Act Agencies Did Not Properly Design Control Activities to Help Ensure That All Programs and Activities Were Assessed Although the Departments of the Interior and State and the National Aeronautics and Space Administration (NASA) had documented procedures for conducting improper payment risk assessments, we found that these agencies did not have properly designed control activities to help ensure that all programs and activities were assessed for susceptibility to improper payments. These three agencies specifically excluded certain programs and activities from the improper payment risk assessment process, as follows. Department of the Interior (Interior). In our review of Interior’s design of control activities, we found that Interior did not include payments made by the department for certain programs. When asked why the programs associated with these payments were not assessed, Interior officials told us that the list that the department used to ensure that all programs and activities for which the department made payments were properly assessed excluded those payments from Interior’s program population. Subsequent to our inquiry, Interior officials told us that Interior will update its procedures to ensure that they capture all programs in Interior’s assessments. In addition, Interior officials provided us a draft of Interior’s updated procedures, and we found that these draft procedures included control activities designed to help ensure that all programs and activities are included in the department’s improper payment risk assessments at least once every 3 years, as required by IPIA. Department of State (State). In our review of State’s design of control activities, we found that State excluded certain programs and activities from the improper payment risk assessment based on threshold limitations on outlay data. Specifically, State only included programs and activities in the improper payment risk assessments if the outlays were greater than (1) $100 million or (2) $85 million and a 50 percent increase from the prior year. Programs and activities that fell below these thresholds were not assessed for susceptibility to significant improper payments. State officials told us that they believed the $100 million threshold limitation was reasonable because State predicted that it was improbable one of its programs would have an improper payment estimate of at least 10 percent in order to meet the IPIA threshold of $10 million. According to State officials, State’s justification for its assessment threshold was based on many factors, including sampling of expenditures, past external audits, and internal OMB Circular A-123 reviews. However, IPIA requires that improper payment risk assessments be performed for each program and activity that the agency head administers. In commenting on our draft report, State officials informed us that State had updated its documented procedures to lower the assessment threshold to the $10 million threshold identified in IPIA. State officials provided us a copy of the updated procedures, and we found that the procedures included control activities designed to help ensure that all programs and activities are included in the department’s improper payment risk assessments at least once every 3 years, as required by IPIA. NASA. In our review of NASA’s design of control activities, we found that NASA has documented procedures for conducting improper payment risk assessments; however, the procedures used for improper payment risk assessments conducted for fiscal years 2014 through 2016 were outdated. Specifically, the documented procedures, dated 2012, did not account for changes to IPIA in 2013 or updates to OMB’s guidance issued in fiscal year 2014. In June 2017, NASA subsequently updated its procedures for improper payment risk assessments to properly address OMB’s current improper payments guidance. The updated procedures also included a description of key control activities designed to help ensure that all NASA programs and activities, other than OIG activities, have undergone an improper payment risk assessment. According to NASA officials, NASA’s improper payment risk assessment process specifically excluded OIG activities because its OIG receives its own appropriation, and therefore, OIG activities are not considered part of NASA’s programs or activities for improper payment risk assessments. In addition, NASA officials stated that NASA OIG activities are excluded from the improper payment risk assessments because of concerns regarding NASA OIG’s independence as NASA OIG conducts the agency’s annual IPERA compliance audit. NASA could not provide us with any guidance or documentation that specifically addresses the exclusion of OIG activities. The NASA OIG is part of NASA, and IPIA requires that improper payment risk assessments be performed for each program and activity that the agency head administers. To the extent that the potential threat to OIG independence prevents NASA from conducting a risk assessment of payments made by the OIG’s programs and activities, the NASA Administrator may transfer this responsibility to the OIG. By not making an assessment, NASA has not determined whether OIG programs and activities are susceptible to significant improper payments. Standards for Internal Control in the Federal Government states that management should develop control activities to achieve objectives and respond to risks and implement control activities through policies. When an agency does not have properly designed policies and procedures to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years, there is an increased risk that the agency may not always identify all risk-susceptible programs and activities, resulting in incomplete improper payment estimates. Conclusions Performing improper payment risk assessments and reporting on such assessments are key to identifying programs and activities that may be susceptible to significant improper payments. Agencies’ nonadherence to the OMB guidance to report on the results of their risk assessments may result in Congress not having the information necessary to monitor and take prompt action to address problematic programs. Most of the nine selected agencies did not properly design control activities to include all programs and activities in their improper payment risk assessments at least once every 3 years during fiscal year 2014 through fiscal year 2016, the time period of our review. Subsequent to fiscal year 2016, with the exception of NASA, which did not include its OIG’s activities, the federal agencies that were identified as lacking properly designed control activities drafted or updated their procedures to help ensure that all programs and activities were assessed for susceptibility to significant improper payments. Without proper control activities, NASA may not be identifying all programs and activities that should be included in its improper payment risk assessments. If a program or activity is not assessed for risk, then an agency could be at risk of noncompliance with IPIA or nonadherence to OMB guidance as the risk assessment process is a crucial step in determining programs and activities that are susceptible to significant improper payments and thus subject to additional reporting and monitoring requirements. Recommendation for Executive Action We are making the following recommendation to NASA: The Administrator of NASA should take steps to revise the agency’s procedures for conducting improper payment risk assessments to include the activities of its OIG in its risk assessment process to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years as required by IPIA. (Recommendation 1) Agency Comments and Our Evaluation We provided a draft of this report to the 24 CFO Act agencies and OMB for comment. We received written comments from 4 agencies—NASA, State, SSA, and USAID, which are reproduced in appendixes V through VIII. We also received technical comments from Energy, OMB, State, and USAID, which we incorporated in the report as appropriate. All of the other agencies notified us that they had no comments. The following discusses the written comments we received from the four agencies noted above. In its comments, NASA concurred with our recommendation and stated that the agency will revise its procedures for conducting improper payment risk assessments to include OIG programs and activities by September 2018. In the draft report provided to State for comment, we had recommended that State reevaluate the agency’s use of dollar thresholds for excluding programs and activities from its risk assessment process and revise its procedures for conducting improper payment risk assessments to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years as required by IPIA. In its comments, State questioned the practicality of our proposed recommendation; however, State stated that it updated its procedures to lower the assessment threshold to the minimum dollar threshold of $10 million. We noted that this threshold aligns with the IPIA threshold of $10 million. We reviewed State’s updated procedures and confirmed that State had revised its dollar threshold for conducting risk assessments, which effectively addressed our preliminary findings. Therefore, we have removed the recommendation from our report. In its comments, SSA stated that it believed that its risk assessment reporting fully complied with OMB guidance. SSA stated that it considered the nine required risk factors but only reported on the risk factors that were applicable to the agency. However, given that SSA reported that it considered six risk factors and did not indicate in its AFRs that the other factors were not applicable to SSA, we continue to believe that SSA did not report, as directed by OMB guidance, on all the risk factors considered in its improper payment risk assessments for fiscal years 2015 and 2016. In its comments, USAID stated that our draft report was inaccurate in stating that USAID did not adhere to OMB reporting directives. USAID stated that an e-mail from OMB provided USAID relief from improper payment reporting. However, OMB’s e-mail did not explicitly provide USAID a waiver from the OMB risk assessment reporting directives. Moreover, USAID reported in its AFRs for fiscal years 2014 through 2016 that it conducted annual risk assessments for the time period covered in this audit. As stated in appendix III, USAID did properly report the basis for grouping programs and activities for fiscal years 2014 through 2016, and the agency also properly reported a listing of all programs and activities that were assessed for fiscal year 2016. Accordingly, we believe that USAID also should have followed all OMB risk assessment reporting directives for the time period covered for our audit, and we believe that our report accurately characterizes this issue. We are sending copies of this report to the appropriate congressional committees, the heads of the 24 CFO Act agencies, the Director of the Office of Management and Budget, 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) 512-2623 or davisbh@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 IX. Appendix I: Objectives, Scope, and Methodology This report examines the extent to which (1) the 24 agencies subject to the Chief Financial Officers Act of 1990 (CFO Act) followed Office of Management and Budget (OMB) guidance for reporting on improper payment risk assessments in their agency financial reports (AFR) or performance and accountability reports (PAR) for fiscal years 2014 through 2016 and (2) selected CFO Act agencies have designed control activities to include all of their programs and activities in an improper payment risk assessment at least once during a 3-year period, as required by the Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments Elimination and Recovery Improvement Act of 2012. At the time of our review, the latest 3-year period was fiscal years 2014 through 2016. To address our first objective, we reviewed improper payment risk assessment requirements in IPIA, as amended, and the related guidance in OMB Circular A-136, Financial Reporting Requirements, including the OMB directives for agencies’ risk assessment reporting, and OMB Circular A-123, Appendix C, Requirements for Effective Estimation and Remediation of Improper Payments (OMB M-15-02). We analyzed these statutes and guidance to identify key criteria that agencies must meet for reporting on improper payment risk assessments. IPIA, as amended, identifies seven risk factors and OMB guidance includes two additional risk factors that agencies are to consider in their improper payment risk assessment to determine susceptibility to significant improper payments. Additionally, for fiscal years 2014 through 2016, OMB M-15-02 directed agencies that conducted improper payment risk assessments to disclose in their AFRs or PARs the basis for grouping programs and activities for improper payment risk assessments. For fiscal years 2015 and 2016, OMB Circular A-136 directed agencies to report (1) a listing of programs and activities that were assessed for susceptibility to significant improper payments in a given year, regardless of whether a program or activity was deemed risk-susceptible, and (2) the risk factors considered during their improper payment risk assessments. We analyzed the AFRs or PARs of the 24 CFO Act agencies for fiscal years 2014 through 2016 to determine whether each agency met the key OMB reporting criteria described above. For our review, we focused on whether the agencies reported the risk assessment information in their AFRs or PARs and did not evaluate the quality of improper payment risk assessments completed. For any agencies that did not meet the reporting directives outlined in OMB guidance for their improper payment risk assessments, we interviewed appropriate agency officials to determine why those agencies did not meet these key criteria. For fiscal year 2017, a revised version of OMB Circular A-136 that was issued in August 2017 no longer directs agencies to report improper payment risk assessment information in the agencies’ fiscal year 2017 AFRs and PARs. Subsequent to the issuance in August 2017 of a revised version of OMB Circular A-136 and after we notified OMB of our views on the importance of certain data, OMB staff stated that they plan to direct agencies to report additional risk assessment data. Specifically, in September 2017, OMB staff told us that they plan to direct agencies to provide a listing of all programs and activities assessed during their risk assessments on www.paymentaccuracy.gov for fiscal year 2017 reporting, and that they plan to continue to direct agencies to report this listing for subsequent fiscal years. In addition, although the basis for grouping programs and activities for improper payment risk assessments and the risk factors considered during the risk assessments will not be required to be reported in fiscal year 2017 AFRs and PARs, OMB staff stated that they plan to revise the guidance for fiscal year 2018 so that agencies report such information in their AFRs and PARs. To address our second objective, we reviewed IPIA, as amended; the related OMB guidance; and relevant internal control standards to determine the relevant control activities needed to help ensure that agencies conduct improper payment risk assessments for all programs and activities at least once every 3 years. For this objective, we selected nine CFO Act agencies that did not report improper payment estimates for any programs or activities in fiscal year 2015 or 2016 except those estimates that were required to be reported pursuant to the Disaster Relief Appropriations Act, 2013. These nine agencies were the Departments of Commerce, Energy, the Interior, Justice, and State; the National Aeronautics and Space Administration; the National Science Foundation; the Nuclear Regulatory Commission; and the U.S. Agency for International Development. We reviewed these agencies’ procedures for conducting improper payment risk assessments and interviewed agency officials to determine whether the agencies designed and documented control activities to include all programs and activities in an improper payment risk assessment at least once every 3 years. To verify each agency’s assertions that all programs and activities are reviewed at least once every 3 years, we compared the line item for gross outlays contained in each agency’s Statement of Budgetary Resources for the relevant period to outlay data provided by each agency for each program and activity covered by improper payment risk assessments for fiscal years 2014 through 2016. When we identified differences between the two data sources, we interviewed agency officials to understand the cause for the differences and obtained any supporting documentation to ensure that all significant programs and activities were properly assessed. While our second objective focused on certain significant control activities related to the selected agencies’ inclusion of programs and activities in their improper payment risk assessments at least once during fiscal years 2014 through 2016, we did not evaluate all control activities and other components of internal control. If we had done so, additional deficiencies may or may not have been identified that could impair the effectiveness of the control activities evaluated as part of this audit. We conducted this performance audit from June 2016 to November 2017 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: Standards for Internal Control in the Federal Government Standards for Internal Control in the Federal Government provides the overall framework for establishing and maintaining internal control. Internal control should be designed, implemented, and operating effectively to provide reasonable assurance that the operations, reporting, and compliance objectives of an entity will be achieved. The five components of internal control are as follows: Control environment - The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives. Risk assessment - Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses. Control activities - The actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system, which includes the entity’s information system. Information and communication - The quality information management and personnel communicate and use to support the internal control system. Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews. An effective internal control system has each of the five components of internal control effectively designed, implemented, and operating and the five components operating together in an integrated manner. In this audit, we focused on certain significant control activities related to the selected agencies’ inclusion of programs and activities in their improper payment risk assessments at least once during fiscal years 2014 through 2016. Appendix III: Agency Adherence to Office of Management and Budget Reporting Directives for Risk Assessments As noted in our report, the Improper Payments Information Act of 2002, as amended by the Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments Elimination and Recovery Improvement Act of 2012, requires agencies to conduct improper payment risk assessments for all federal programs and activities in fiscal year 2011 and at least once every 3 years thereafter. During fiscal years 2014 through 2016, the 24 agencies subject to the Chief Financial Officers Act of 1990 (CFO Act), excluding the Department of Defense, reported in their agency financial reports (AFR) or performance and accountability reports (PAR) that they completed at least one risk assessment on at least one program or activity in one or more of those years. For each agency that reported completing an improper payment risk assessment in a given year, we evaluated whether the agency adhered to certain Office of Management and Budget (OMB) reporting directives. It is important to note that our audit scope did not include evaluating whether the agencies completed the required risk assessment for all programs and activities. We evaluated the 24 CFO Act agencies’ fiscal years 2014 through 2016 AFRs and PARs to determine if agencies adhered to OMB guidance for reporting on improper payment risk assessments. Table 2 summarizes agencies’ adherence to the OMB guidance to report a basis for grouping programs and activities in the AFRs or PARs for fiscal years 2014 through 2016. Table 3 summarizes agencies’ adherence to the OMB directive to list all of the programs and activities that were assessed for susceptibility to significant improper payments and describe the risk factors considered during their assessments for fiscal years 2015 and 2016. There was no directive to report this information for fiscal year 2014. Appendix IV: Summary of Agencies’ Procedures for Performing Improper Payment Risk Assessments Table 4 summarizes our analysis of the selected agencies’ procedures for performing improper payment risk assessments to help ensure that all programs and activities were properly reviewed once every 3 years. Appendix V: Comments from the National Aeronautics and Space Administration Appendix VI: Comments from the Social Security Administration Appendix VII: Comments from the Department of State Appendix VIII: Comments from the U.S. Agency for International Development Appendix IX: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Matt Valenta (Assistant Director), Michelle Philpott (Assistant Director), Laura Bednar (Auditor-in-Charge), Stephanie Adams, Youssef Amrani, Francine DelVecchio, and Kailey Schoenholtz made key contributions to this report.

Why GAO Did This Study Reported improper payment estimates totaled over $1.2 trillion government-wide from fiscal years 2003 through 2016. Agencies are statutorily required to perform improper payment risk assessments to identify programs and activities that may be susceptible to significant improper payments and are required to report an improper payment estimate for ones that are susceptible to significant improper payments. GAO was asked to review federal agencies' improper payment risk assessments. This report examines the extent to which (1) the 24 CFO Act agencies followed OMB guidance for reporting on improper payment risk assessments and (2) selected CFO Act agencies properly designed control activities to include all of their programs and activities in an improper payment risk assessment at least once every 3 years, as statutorily required. GAO analyzed the 24 CFO Act agencies' AFRs and PARs and reviewed the procedures at 9 selected agencies. GAO selected 9 agencies that did not report improper payment estimates in fiscal year 2015, except for those estimates that were mandated to be reported pursuant to the Disaster Relief Appropriations Act, 2013. For this review, GAO did not evaluate the quality of improper payment risk assessments completed. What GAO Found GAO's review of the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies' fiscal years 2014 through 2016 agency financial reports (AFR) and performance and accountability reports (PAR) found that these agencies generally adhered to the Office of Management and Budget's (OMB) improper payment risk assessment reporting directives. However, GAO found instances of nonadherence, including the following: There were two instances of nonadherence to OMB's directive for agencies to report the basis for how they grouped programs and activities, both of which occurred in fiscal year 2014. All agencies that completed risk assessments adhered to this directive for fiscal years 2015 and 2016. The Improper Payments Information Act of 2002, as amended, identifies seven risk factors and OMB guidance includes two additional risk factors that agencies are to consider when conducting risk assessments. For fiscal years 2015 and 2016 reporting, OMB directed agencies to report the risk factors considered in their risk assessments. However, GAO found six agencies that did not report one or more of the nine risk factors in their AFRs or PARs. OMB's revised guidance for fiscal year 2017 no longer directs agencies to report on their risk assessments. OMB staff stated that their primary motivation for removing such reporting was to reduce the administrative burden. After GAO notified OMB of the importance of certain data, OMB staff plan to direct agencies to provide additional data, including a listing of risk assessed programs and activities, on www.paymentaccuracy.gov for reporting beginning in fiscal year 2017. OMB staff also plan to revise the guidance for fiscal year 2018 for agencies to report the other risk assessment information in their AFRs or PARs. GAO also found that three of the nine selected agencies (the Departments of Energy and Justice and the U.S. Agency for International Development) that it reviewed had designed and documented control activities to help ensure that all programs and activities were assessed every 3 years. For the remaining six agencies, GAO found that the agencies did not properly design control activities for this purpose. Specifically, GAO found the following: Three agencies—the Department of Commerce, the National Science Foundation, and the Nuclear Regulatory Commission—did not have documented procedures for conducting risk assessments during fiscal years 2014 through 2016 but subsequently documented them. Three agencies—the Departments of the Interior (Interior) and State (State) and the National Aeronautics and Space Administration (NASA)—documented procedures for conducting risk assessments but did not include all programs and activities in their risk assessments. Interior later drafted revisions to its procedures and State updated its procedures to include them. Without properly designed and documented control activities, there is a risk that an agency may not identify all programs and activities that require a risk assessment, which could result in the agency failing to develop and report improper payment estimates for programs and activities that should have been identified as susceptible to significant improper payments. What GAO Recommends GAO recommends that NASA revise its procedures to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years. NASA concurred with the recommendation.

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Background FAA Next Generation Air Transportation System In December 2003 Congress enacted the Century of Aviation Reauthorization Act, laying the foundation for NextGen. The intent of NextGen is to increase air transportation-system capacity, enhance airspace safety, reduce delays experienced by airlines and passengers, lower fuel consumption, and lessen adverse environmental effects from aviation, among other benefits. This effort is a multi-year, incrementally iterative transformation that will introduce new technologies and leverage existing technologies to affect every part of the national airspace system. These new technologies will use an Internet Protocol-based network to communicate. NextGen consists of components that provide digital communications between controllers and pilots, and that also use satellite-based surveillance to aid in airspace navigation. Because of these new communication methods, NextGen increases reliance on integrated information systems and distribution of information, digital communication methods, and global positioning system (GPS) technology that may put the air traffic control system at greater risk for intentional or unintentional information-system failures and breaches. We have previously reported on progress that FAA has made in implementing NextGen. For example, in 2015 we found that FAA faces cybersecurity challenges in at least three areas: (1) protecting air-traffic control information systems, (2) protecting aircraft avionics used to operate and guide aircraft, and (3) clarifying cybersecurity roles and responsibilities among multiple FAA offices. Among other recommendations, we recommended—and FAA concurred—that the agency should assess developing a cybersecurity threat model. Evolution of Tracking Military Aircraft in the National Airspace Historically, FAA and DOD capabilities have allowed both agencies—as well as NORAD—to monitor and track military aircraft flying in the national airspace. For example, FAA maintains two layers of radar—primary surveillance radar and secondary surveillance radar—to track and identify aircraft flying in the national airspace system. Primary surveillance radar identifies the location of aircraft flying in the national airspace by transmitting a signal and calculating the amount of time that passes until that signal bounces off the aircraft and returns to the radar. FAA also uses secondary surveillance radar that transmits an interrogation signal to aircraft flying in the national airspace. A receiver on the aircraft receives the interrogation signal and then transmits a broadcast back to this radar with flight information. Table 1 shows the evolution and capabilities of different transponders that broadcast aircraft information to receivers. The fields identified in the table are critical for identifying and tracking aircraft. Of the different transponder modes and technology, ADS-B Out provides the most precise and comprehensive data. ADS-B Out makes it easier for third parties to identify and track aircraft, as ADS-B Out broadcasts include registration number, precise location, aircraft dimensions, and other information. This additional information reduces the need to identify aircraft using private databases and to determine aircraft location by comparing time difference of arrival among receivers. The content of these aircraft broadcasts varies depending on the type of transmitter providing the information from the aircraft. For example, earlier broadcast systems, including the Mode 3/A and Mode C systems, transmit a temporary four-digit transmit code (commonly referred to as a squawk code) assigned by air traffic control that facilitates aircraft tracking during a single flight. Since FAA was the sole source of flight data for systems preceding Mode S, the agency could filter out military aircraft flight information for security reasons before providing information to the public about other aircraft flying in the national airspace. Mode S Transponder Mode S transponders provide more information than do the Mode 3/A and Mode C transponders. For example, the Mode S transponder broadcast identifies an aircraft-specific, 24-bit fixed address (commonly known as the ICAO address) assigned under International Civil Aviation Organization (ICAO) standards. An aircraft retains this fixed address based on its registration, and thereby facilitates aircraft identification until the aircraft is reregistered and receives a new ICAO address. FAA and aviation groups have reported that with the proliferation of commercial and amateur receivers, the public can now track individual aircraft by receiving the aircraft’s ICAO address, squawk code, and altitude. In addition, these entities have reported that since aviation groups and hobbyists have connected the receivers, the networked receivers can calculate and identify the latitude and longitude of the aircraft they are tracking. In addition, according to these reports, some groups maintain aircraft information databases and receiver networks that can identify aircraft by ICAO address and can locate aircraft by comparing the time difference of arrival of Mode S signals between three or more receivers. Using data derived from this work, interested parties— including adversaries (for example, foreign intelligence entities, terrorists, and criminals)—can identify military aircraft by type and registration number, and can track the aircraft while in flight through Mode S fixed address broadcasts. Using this readily available public information, we were able to track various kinds of military aircraft that were equipped with Mode S transponders. ADS-B Technology ADS-B consists of two distinct aircraft information services, ADS-B Out and ADS-B In. As previously stated, ADS-B Out technology is one of the main components of FAA’s NextGen effort. It is a performance-based surveillance technology using GPS-enabled satellites to produce flight information, such as an aircraft’s location and velocity, and according to FAA, it is more precise than radar. These precise data provide air traffic controllers and pilots with more accurate information to keep aircraft safely separated in the national airspace. This technology combines aircraft avionics, a positioning capability, and ground infrastructure to enable accurate transmission of information from aircraft to the air traffic control system. This technology periodically transmits information without a pilot or operator involved (that is, Automatic); collects information from GPS or other suitable navigation systems (that is, Dependent); provides a method of determining 3-dimensional position and identification of aircraft, vehicles, or other assets (that is, Surveillance); and transmits the information available to anyone with the appropriate receiving equipment (that is, Broadcast). Using this readily available public information, we were able to track various kinds of military aircraft that were equipped with ADS-B transponders. ADS-B In is the technology that enables receivers to have direct access to information broadcasted through ADS- B Out transponders. FAA’s final rule requiring all aircraft that fly in certain categories of airspace to equip with ADS-B by January 1, 2020, applies to the ADS-B Out technology. FAA has not issued a rule or requirement for aircraft to equip with the ADS-B In technology, as of July 2017. However, according to representatives from Airlines for America, an airline industry advocacy organization, airlines have begun to install the ADS-B In capability on commercial aircraft due to the benefits they anticipate from the capability (for example, the ability of passenger airliners to reduce separation standards to save time and reduce fuel consumption). In addition, according to Air Force officials, the Air Force plans to install ADS-B In on future KC-46 transport/tanker aircraft. This report focuses on the ADS-B Out requirement when referencing ADS-B technology unless otherwise noted. According to DOD and FAA documents and officials, FAA has identified ADS-B implementation as providing an opportunity to save costs by divesting a number of secondary-surveillance radars. According to FAA officials, as of April 2017 the agency was re-evaluating its original ADS-B backup strategy and the need for retaining additional secondary- surveillance radars. According to these officials, FAA plans to maintain all high-altitude secondary-surveillance radars and the low-altitude secondary-surveillance radars around 30 or more of the busiest airports. Relationship between FAA and DOD in Managing National Airspace The FAA and DOD are to cooperate in order to regulate airspace use. Specifically, the FAA is responsible for providing air navigation services, including air traffic control across most of the United States, and is leading the overall NextGen efforts in the United States. The FAA’s air traffic control system works to prevent collisions involving aircraft operating in the national airspace system, while also facilitating the flow of air traffic and supporting national security and homeland defense missions. In addition, in accordance with International Civil Aviation Organization guidelines, the FAA has categorized airspace as controlled, uncontrolled, or not used in the United States. According to the ADS-B Out rule, after January 1, 2020, no person may operate an aircraft in certain categories of airspace defined by the rule unless otherwise authorized by air traffic control authorities. DOD conducts its missions within the national airspace system as both an aircraft operator and, as delegated by the FAA, as provider of air traffic control and other air navigation services. DOD has the authority to certify its own aircraft, manage airspace, and provide air traffic control-related services in accordance with FAA requirements. DOD also provides guidance to FAA concerning security matters pertaining to the national airspace system. DOD is responsible for ensuring that DOD components, such as the military services, have sufficient access to airspace to meet security requirements, and that civilian and military aircraft can operate safely both domestically and abroad. DOD also releases airspace to the FAA when it does not need the space for military purposes. The FAA also works with DOD to ensure aviation safety between civil and military aircraft. The FAA designates airspace over certain parts of the United States as Special Use Airspace, because the areas may have prohibited airspace, restricted airspace, warning areas, or alert areas. It might be hazardous for civil aircraft to operate in that restricted airspace due to these designations. Special Use Airspace allows military aircraft to operate safely in separate, clearly defined airspace in order to conduct missions in support of the National Security Strategy and the National Military Strategy. The FAA also issues safety briefings that could identify military-protected, temporarily flight-restricted areas, to prevent civil pilots from flying into the airspace. These briefings also include information such as flight safety advice and information on air traffic technology, such as ADS-B. The FAA also shares radar information with NORAD to support the defense of North America over areas such as the National Capital Region surrounding Washington, D.C. Roles and Responsibilities The FAA is responsible for providing airspace navigation services within the United States and has a particular entity—the FAA Office of NextGen—that directs its NextGen requirements. In 2007 the Deputy Secretary of Defense designated the Air Force as the lead service for representing DOD and for leading and coordinating efforts across DOD. To accomplish this responsibility, the Air Force established a Lead Service Office, hereinafter referred to as the DOD Lead Service Office. These and numerous other entities have a role in implementing NextGen and ADS-B, as shown in table 2 below. DOD and FAA Have Identified Security and Mission Risks Related to ADS-B Out Technology but Have Not Approved Any Solutions to Mitigate Them Since 2008, DOD and FAA have identified a variety of ADS-B- related risks that could adversely affect military security and missions. While DOD and FAA have identified some potential mitigations for these risks, the departments have not approved any solutions. DOD and FAA Have Identified Risks to DOD Security and Missions Related to ADS-B Technology Documents we reviewed and officials we met with identified a variety of operations and physical security risks that could adversely affect DOD missions. These risks arise from information broadcast by ADS-B itself, as well as from potential ADS-B vulnerabilities to electronic warfare- and cyber-attacks, and from the potential divestment of secondary- surveillance radars. ADS-B Information Presents Operations and Physical Security Risks Information broadcasted from ADS-B transponders poses an operations security risk for military aircraft. For example, a 2015 assessment that RAND conducted on behalf of the U.S. Air Force stated that the broadcasting of detailed and unencrypted position data for fighter aircraft, in particular for a stealth aircraft such as the F-22, may present an operations security risk. The report noted that information about the F- 22’s precise position is classified Secret, which means that unauthorized disclosure of this information could reasonably be expected to cause serious damage to the national security. Similarly, in 2012 MITRE issued a report on behalf of the DOD Lead Service Office that identified a number of risks—including the ability to track movement in and out of restricted airspaces and changes in operations—to ADS-B-equipped aircraft. In addition to these documents, DOD officials identified a number of increased operations and physical security risks associated with aircraft equipped with ADS-B technology. In DOD’s 2008 comments about FAA’s draft rule requiring ADS-B Out technology, the department informed FAA that DOD aircraft could be identified conducting special flights for sensitive missions in the United States and potentially compromised due to ADS-B technology. Such sensitive missions could include low-observable surveillance, combat air patrol, counter-drug, counter-terrorism, and key personnel transport. While some military aircraft are currently equipped with Mode S transponders that provide individuals who have tracking technology the altitude of the aircraft, ADS- B poses an increased risk. Specifically, according to documents we reviewed and officials we met with, a confluence of the following three issues has led to ADS-B technology presenting more risks to DOD aircraft, personnel, equipment, and operations: Additional information. The additional information provided through ADS-B technology— including the aircraft’s precise location, velocity, and airframe dimensions—increases both direct physical risks to DOD aircraft, personnel, and equipment, and long-term risks to DOD air operations. Accessibility of information. ADS-B technology also introduces risks to aircraft, personnel, equipment, and operations, because it provides information to the public that was not previously accessible. FAA filters information about DOD’s flights so that the information is not available to the public via any FAA data feed. According to FAA officials, this filtering was effective for protecting such information for Mode-S equipped DOD aircraft until the 2012 timeframe, when the capability of third-party networked receivers started to allow position determination for such aircraft. With ADS-B, aircraft location and other information is broadcast from the aircraft, where FAA cannot filter it. While individuals and groups could obtain additional information about DOD flights operating with Mode S, such as an aircraft’s fixed address, information such as geographic location and velocity was not included in broadcasts. Individuals could estimate location and velocity of DOD flights by locating the signal through privately owned receiver networks. By equipping military aircraft with ADS-B technology, individuals and groups would receive additional identifiers, location information, and airframe information through aircraft broadcasts and, as a result, could identify and track aircraft without the use of fixed address databases and with less receiver infrastructure. Historical data. ADS-B technology better enables individuals and groups to track flights in real time and use computer programs to log ADS-B transmissions over time. Therefore, individuals or groups could observe flight paths in detail, identify patterns-of-life, or counter or exploit DOD operations. ADS-B Could Affect Current and Future Air Defense and Air Traffic Missions While NORAD and DOD officials told us that they will benefit from information provided by ADS-B technology, NORAD, DOD, and professional organizations’ documents and officials also noted that electronic warfare- and cyber-attacks—and the potential divestment of secondary-surveillance radars as a result of reliance on ADS-B—could adversely affect current and future air operations. For example, a 2015 Institute of Electrical and Electronics Engineers article about ADS-B stated that ADS-B is vulnerable to an electronic- warfare attack—such as a jamming attack—whereby an adversary can effectively disable the sending and receiving of messages between an ADS-B transmitter and receiver by transmitting a higher power signal on the ADS-B frequencies. The article notes that while jamming is a problem common to all wireless communication, the effect is severe in aviation due to the system’s inherently wide-open spaces, which are impossible to control, as well as to the importance and criticality of the transmitted data. As a stand-alone method, jamming could create problems within the national airspace. Jamming can also be used to initiate a cyber-attack on aircraft or ADS-B systems. According to the article in the 2015 Institute of Electrical and Electronics Engineers publication, adversaries could use a cyber-attack to inject false ADS-B messages (that is, create “ghost” aircraft on the ground or air); delete ADS-B messages (that is, make an aircraft disappear from the air traffic controller screens); and modify messages (that is, change the reported path of the aircraft). The article states that jamming attacks against ADS- B systems would be simple, and that ADS-B data do not include verification measures to filter out false messages, such as those used in spoofing attacks. FAA officials stated that the agency is aware of these possible attacks, and that it addresses such vulnerabilities by validating ADS-B data against primary- and secondary-surveillance radar tracks. Both FAA and DOD have identified a potential solution to address this vulnerability. However, this solution has not been tested and as of November 2017, no testing has been scheduled. In addition to electronic warfare- and cyber-attacks, both NORAD and DOD officials expressed concerns that the air defense and military air traffic control missions would be affected if FAA were to divest secondary- surveillance radars following ADS-B implementation. According to DOD and FAA documents and officials, FAA has identified ADS-B implementation as an opportunity to save costs by divesting a number of secondary-surveillance radars. However, according to NORAD and DOD officials, in those locations where FAA divests of radars, the missions would be at higher risk if an aircraft operator were to turn off the aircraft’s ADS-B technology; if an adversary were to conduct an electronic or cyber-attack on the ADS-B system; or if the ADS-B system were to experience a technical failure. According to NORAD command officials, the command relies on information from FAA radars to monitor air traffic in the national airspace system. If an aircraft is operating without ADS-B, if a GPS or ADS-B system fails, or if an adversary has jammed an aircraft’s GPS signal or ADS-B transmissions, then the command will have to rely on primary- and secondary-surveillance radar to track the aircraft’s location. FAA officials stated that FAA is chiefly responsible for air safety, while NORAD and DOD are chiefly responsible for air defense, and that they believe there will be sufficient radar coverage for DOD to conduct its missions. FAA officials stated that they will maintain sufficient backup systems to ensure air traffic safety for all flights, and will maintain radar in excess of their needs to support NORAD’s missions. FAA officials stated that they will maintain all primary-surveillance radar, all high-altitude secondary-surveillance radar, and low-altitude secondary-surveillance radar near at least thirty major flight terminals. However, according to NORAD and DOD officials, FAA has not proposed an updated legacy primary- and secondary-surveillance radar divestment plan since 2012 for use by NORAD and DOD in assessing potential effects on the mission. NORAD is a bi-national command that requires support from U.S. federal agencies—not just DOD—and relies on FAA radar to support its mission, and it will need to ensure that sufficient air surveillance resources are in place. DOD and FAA Have Not Approved Any Solutions to Address ADS-B Risks Although DOD, FAA, and other organizations have identified risks to military security and missions since 2008, DOD and FAA have not approved any solutions to address these risks. This is because DOD and FAA have focused on equipping military aircraft with ADS-B technology and have not focused on solving or mitigating security risks from ADS-B. The approach being taken by FAA and DOD will not address key security risks that have been identified, and delays in producing an interagency agreement have significantly reduced the time available to implement any agreed-upon solutions before January 1, 2020, when the full deployment of ADS-B Out is required. Federal internal control standards state that federal agencies should make risk-based decisions in a timely manner. Specifically, OMB Circular A-123 states that management should evaluate and document internal control issues and determine appropriate corrective actions for internal control deficiencies on a timely basis. In the case of equipping military aircraft with ADS-B technology and addressing any risks associated with it, DOD and FAA have shared responsibility. In 2008 DOD informed FAA that military aircraft would need special accommodations to the ADS-B Out rule due to national security concerns, such as sensitive missions and electronic warfare vulnerabilities. In 2010 FAA responded to DOD’s comments to the draft ADS-B Out rule stating that the agency would collaborate with departments or agencies, including DOD and the Department of Homeland Security, to develop memorandums of agreement to accommodate their national defense mission requirements while supporting the needs of all other national airspace system users. Since that time, DOD components have identified actions that could mitigate some of the risks. For example, DOD and others have identified such mitigations as masking DOD aircraft identifiers, maintaining current inventory of primary-surveillance radars, allowing pilots to turn off ADS-B broadcasts, and seeking an exemption from installing ADS-B technology on select military aircraft (for example, fighter and bomber aircraft). However, as of June 2017—almost 7 years after FAA acknowledged that it would address DOD’s concerns (and less than 3 years before full deployment of ADS-B Out is required)—DOD and FAA have not approved any solutions to these risks. The DOD’s Lead Service Office and FAA have focused on developing a memorandum of agreement that they hope will create a framework for future collaboration at the local level. However, our work and that of NORAD and other DOD components identified a number of limitations to DOD’s Lead Service Office and FAA’s dependence on this draft memorandum of agreement. For example, the draft memorandum does not address the following: the details necessary to establish solutions or mitigations between DOD and FAA for identified security risks. The draft memorandum focuses on equipage of ADS-B technology on military aircraft, cost estimates, and agency and office responsibilities. DOD acknowledges that it will equip military aircraft with ADS-B technology and operate to the greatest extent possible by the January 1, 2020, compliance date. However, the draft memorandum does not identify solutions for the identified operations and physical security risks. the electronic warfare and cyber-attack concerns and the effect on sensitive defense missions that DOD has identified. the flexibility required by NORAD to support freedom of movement within the continental United States, Alaska, and Canada airspace for military missions. The draft memorandum would place negotiating accommodations for NORAD’s bi-national mission at the local level— an act that NORAD officials characterized as unfeasible because military aircraft supporting NORAD missions require uninhibited airspace access throughout the United States and Canada, as a response may be required anywhere and at any time. According to NORAD officials, the command would incur a significant burden to finalize memorandums of agreement with more than 600 air traffic control facilities and ensure commonality with all facilities in the continental United States and Alaska. Furthermore, NORAD officials stated that these missions should not be limited by local restrictions created by the ADS-B Out rule. For example, DOD aircraft flying over one state while supporting an Operation Noble Eagle mission could be stationed at a military base in another state and thus not have an agreement with local FAA controllers. potential mission risks associated with the divestment of secondary- surveillance radars. Delays in the completion of a memorandum of agreement have exacerbated uncertainty as to whether security issues will be addressed in any manner. DOD and FAA have met to discuss the existing draft memorandum of agreement since December 2016. In April 2017 officials from DOD Lead Service Office told us that they expected DOD and FAA to finalize the memorandum of agreement by June 2017; however, in May 2017 DOD officials informed us that the estimated completion date had slipped to February 2018. A significant amount of work will likely need to be accomplished between the eventual approval of the memorandum and implementation in a timely manner. For example, FAA officials acknowledged that the agency would need to issue, update, or both issue and update internal guidance once the memorandum is signed prior to local FAA officials being able to negotiate and agree to arrangements with local military commanders. Similarly, the draft memorandum, if approved, would place a significant burden on local DOD entities to negotiate agreements. For example, the Army expressed concerns that local negotiations—at 76 locations, according to Army estimates—would take from 1 to 2 years to complete after FAA and DOD have signed the memorandum of agreement. Army officials also highlight concerns that local FAA air traffic controllers may not enter into agreements with Army units, or that local agreements will be contingent upon the density of local air traffic or the personalities of those negotiating the agreements. Additionally, assuming that actions are agreed upon among the key stakeholders—DOD, FAA, and NORAD—to resolve or mitigate the identified security risks, DOD, FAA and NORAD will need sufficient time to implement these actions. This is due to the complexity of the ADS-B vulnerabilities and potential mitigations for operations and physical security, electronic warfare, cyber-attack, and potential effects of secondary-radar divestment. As of June 2017, DOD and FAA had not identified any other solutions that could address the risks and concerns identified by DOD and others since 2008. Unless FAA and DOD approve one or more solutions that address all the risks associated with ADS-B technology, DOD security and military missions could face unmitigated risks. These include physical, cyber- attack, and electronic warfare security risks, as well as risks associated with divesting secondary-surveillance radars. Furthermore, unless FAA and DOD focus on the security risks of ADS-B and approve one or more solutions in a timely fashion, they may not have time to plan for and execute any technical, programmatic, or policy actions that may be necessary before all of DOD’s aircraft are required to be equipped with ADS-B technology on January 1, 2020. DOD Has Achieved Mixed Implementation of Key ADS-B Tasks Directed in 2007 Of the eight tasks associated with the implementation of ADS-B Out technology in the 2007 DOD NextGen memorandum—issued by the Deputy Secretary of Defense to ensure that the NextGen vision for the future national airspace system met DOD’s requirements and the appropriate management of DOD’s resources—DOD has implemented two, has partially implemented four, and has not implemented two. Specifically, we found that DOD has implemented the following two tasks: Establishing a Joint Program Office. The Deputy Secretary of Defense directed the Secretary of the Air Force to establish and provide administrative support for a DOD Joint Program Office for NextGen. According to the 2007 NextGen memorandum, the office is responsible for coordinating DOD activities related to the NextGen effort, facilitating technology transfer for those research and development activities with potential NextGen application, and advocate for DOD interests, requirements, and capabilities in NextGen. The Air Force established a Joint Program Office to provide services to the entire military aviation community on communication navigation surveillance/air traffic management issues in various capacities. Officials from the DOD Joint Program Office told us that the office has tested various avionic systems for methods of meeting ADS-B requirements. The office has also established an Internet portal for the services to order avionics, including those associated with ADS-B technology. Appointing a DOD representative to the FAA’s interagency Joint Planning and Development Office. The 2007 NextGen memorandum directed that the Secretary of the Air Force appoint a DOD representative to the Joint Planning and Development Office’s board of directors responsible for assisting in the development and coordination of DOD-wide policies and decisions concerning NextGen. In March 2012 DOD’s Lead Service Office appointed an Air Force officer who also manages the DOD Lead Service Office as the DOD representative to the FAA’s interagency Joint Planning and Development Office. DOD partially implemented the following four tasks: Validating NextGen program requirements. The 2007 NextGen memorandum directed that the Secretary of the Air Force document and seek validation for NextGen program requirements through the Joint Capabilities Integration Development System process. The Air Force took the initial step in having its NextGen program requirements validated through DOD’s Joint Capabilities Integration Development System process in October 2014. However, the focus of the assessment was on the Air Force’s requirements and not that of other military services or components. This is not fully consistent with the 2007 memo, which states that the Air Force—as the lead service— should integrate the needs and requirements of the DOD components into cohesive plans and policies for inclusion in NextGen joint planning and development. Establishing guidance on DOD NextGen responsibilities and objectives. The 2007 NextGen memorandum directed the Assistant Secretary of Defense for Homeland Defense and Global Security, the DOD Chief Information Officer, and the Director of Administration, in consultation with the DOD Lead Service, to submit a proposed DOD directive within 180 days specifying the department’s objectives with respect to NextGen and the continuing roles and responsibilities of the Lead Service and the DOD Policy Board on Federal Aviation. In 2013, about 5 years after the original due date for the180-day requirement, DOD updated its DOD Directive 5030.19, DOD Responsibilities on Federal Aviation. While the updated directive references the responsibilities of the DOD Policy Board on Federal Aviation and the Secretary of the Air Force, per the 2007 NextGen memorandum, the directive does not specify DOD’s objectives with respect to NextGen, as required by the memorandum. Developing an initial plan defining actions, responsibilities, and milestones for DOD’s NextGen efforts: The 2007 NextGen memorandum required DOD’s Lead Service, in coordination with the principal members of the DOD Policy Board on Federal Aviation, to develop an initial plan defining actions, responsibilities, and milestones for DOD’s participation in the NextGen efforts and FAA’s Joint Planning and Development Office. This initial plan was to include an implementation plan for the NextGen Joint Program Office and was to be updated semiannually. In 2013 the Air Force, in executing its responsibilities as Lead Service, issued a DOD NextGen Implementation Plan to describe the strategy, principles, and actions for the transition of DOD aviation operations (air and ground) to the national airspace system environment defined by FAA in its NextGen Implementation Plan. We found that the 2013 plan identified responsibilities of DOD components and established indicators meant to give a sense of progress made in NextGen implementation. However, the plan did not include detailed transition planning for ADS- B and was not updated semiannually, as required. Incorporating NextGen into the planning, budgeting, and programming process: According to the 2007 NextGen memorandum, the Secretary of the Air Force is to coordinate DOD- wide NextGen planning, budgeting, and programing guidance in conjunction with the Under Secretary of Defense for Policy and the Director of Program Analysis and Evaluation for consideration in the formulation of planning and programming guidance documents. The memorandum also directed DOD components to coordinate with the Air Force on NextGen programs they agreed to support using inter- service memorandums of understanding, and to fund procurement through service annual program objective memorandum processes. DOD provided evidence that the military departments used the program objective memorandum process to fund ADS-B Out. However, the DOD Lead Service Office did not provide department- wide planning, budgeting, and programming guidance for ADS-B or any other NextGen elements to DOD components. Similarly, DOD did not provide any inter-service memorandums of understanding that would document NextGen programs that the services agreed to fund. According to officials from the DOD Lead Service Office, this office is not responsible for planning, budgeting, and programming because the office is organizationally located within the Air Force Headquarters Office of the Deputy Chief of Staff for Operations. However, while the office may not be responsible for planning, budgeting, and programming within the Air Force, the office can issue—or coordinate the issuance—of such guidance, as directed by the Deputy Secretary of Defense. DOD had not taken significant action or fully implemented the following two actions: Integrating NextGen requirements into plans and policies: The Secretary of the Air Force, in executing the service’s responsibilities as Lead Service, did not integrate the needs and requirements of DOD components related to ADS-B into cohesive plans and policies for inclusion in NextGen joint planning and development, as directed by the Deputy Secretary of Defense in 2007. According to officials from the DOD Lead Service Office, they met the intent of these tasks through the 2012 United States Air Force Next Generation Air Transportation System Keystone Document, the 2013 Department of Defense (DOD) Mid-Term NextGen Concept of Operations, and the 2013 Department of Defense (DOD) Mid-Term Next Generation (NextGen) Implementation Plan. However, the Air Force NextGen Keystone Document applies to the Air Force and not to NORAD or other DOD components. In addition, the DOD Mid-Term NextGen Concept of Operations and the DOD Mid-Term NextGen Implementation Plan do not discuss planning for ADS-B Out requirements, which are critical to NextGen. Providing periodic and recurring NextGen progress reports: The Assistant Secretary of Defense for Homeland Defense and Global Security did not provide periodic and recurring NextGen progress reports to the Deputy Secretary of Defense, as instructed in the 2007 NextGen memorandum. According to the memorandum, the Assistant Secretary was designated as the principal staff assistant for NextGen and was responsible for oversight, support, and advocacy for the lead service with respect to the interagency and Joint Planning and Development Office. Officials from the Office of the Deputy Assistant Secretary of Defense for Homeland Defense Integration and from Defense Support to Civil Authorities acknowledged that the Office of the Assistant Secretary of Defense for Homeland Defense and Global Security had not tracked ADS-B implementation or provided progress reports to the Deputy Secretary of Defense—with the exception of advocating for ADS-B installation exemptions for aircraft that could not comply with the mandate—for retention of ground-based radars, and some minimal advocacy related to compliance with the FAA ADS-B Out rule. DOD could not provide a clear explanation with regard to those requirements that we determined not to have been fully implemented. Officials from the DOD Lead Service Office provided a number of potential reasons to explain why the memorandum’s tasks might not have been fully implemented. For example, as noted earlier, officials stated that other documents captured those requirements. Further, officials told us they believe that implementation of many of the preceding tasks was accomplished through other means, although our analysis concluded that the task was either not implemented or was partially implemented, as noted previously. These officials also noted that—although there is no expiration date on the 2007 NextGen memorandum—many DOD officials consider such memorandums to be applicable for 12 to 18 months. In addition, DOD Lead Service Office officials noted that many DOD components had not assigned a high level of priority to NextGen implementation. As a result of DOD’s not fully implementing the 2007 NextGen memorandum—including developing or revising a DOD directive that specifies DOD’s objectives with respect to NextGen, issuing an implementation plan that includes detailed transition planning for ADS-B and is updated semiannually, and providing recurring progress reports to the Deputy Secretary of Defense—DOD components have lacked direction and cohesion while trying to address FAA’s requirement to equip military aircraft. For example: Officials from the Air Force Life Cycle Management Center’s Fighters and Bombers Directorate told us that they have not been provided any guidance. The directorate does not intend to install ADS-B technology on Air Force fighters or bombers until they receive DOD guidance. Yet, the deadline to equip DOD aircraft that will fly in the national airspace remains January 1, 2020. DOD does not have a coordinated or accurate schedule for equipping ADS-B technology on military aircraft. Although DOD submitted a schedule to Congress in June 2015, officials from the DOD Lead Service Office told us that the timeframes for that plan were no longer accurate, and that the plan would be updated as part of the memorandum of agreement in February 2018. Some DOD components have installed or plan to install civilian GPS receivers on their aircraft to meet FAA’s ADS-B technical requirements. According to DOD officials, DOD aircraft that equip with commercial GPS receivers will not be as protected from GPS security issues as they would have been had they used a military GPS receiver. According to officials from the Office of the DOD Chief Information Officer, the office with primary responsibility for GPS receiver security policy, no one within DOD—including the DOD Lead Service Office or other DOD components—had made them aware that DOD components were installing civilian receivers on aircraft. Since—according to an official within the DOD Lead Service Office— neither the Office of the Assistant Secretary of Defense for Homeland Defense and Global Security nor any other elements of the Office of the Under Secretary of Defense for Policy were engaged in discussion regarding the draft memorandum of agreement with the DOD Lead Service Office and FAA, the Secretary of Defense’s senior policy advisor may not be aware of provisions that may be incorporated in the agreement. For example, the draft memorandum of agreement contains a provision that could result in the department’s being financially responsible for sharing the costs of sustaining secondary- surveillance radars. According to a 2007 FAA document, it will cost FAA approximately $442 million to maintain these radars from fiscal years 2017 to 2035. If DOD components do not fully implement key tasks that would facilitate assurance of DOD requirements in the future NextGen system and appropriate management of DOD resources—such as those tasks that the Deputy Secretary of Defense originally directed in 2007, or any tasks that the Secretary deems appropriate—DOD may risk having less efficient and less effective implementation of NextGen requirements, increased costs of implementation, or missed opportunities to address operations risks. Conclusions The NextGen system has the potential to increase the efficiency and effectiveness of the nation’s expanding air traffic. As with many such procedural and technological innovations, DOD stands to benefit from NextGen’s vision. As is the case with all such electronic and cyber systems in the information age, this must be balanced with sufficient consideration of the operations and security effects for DOD. DOD and FAA have not approved any solutions that address risks resulting from ADS-B on DOD aircraft—including operations, physical, cyber, and electronic warfare security risks, as well as risks associated with divesting secondary-surveillance radars. Unless DOD and FAA focus their efforts on the security aspects of ADS-B on DOD aircraft and produce one or more solutions to these risks, DOD aircraft and missions will be exposed to unmitigated risks that could jeopardize safety, security, and mission success. Also, unless DOD fully implements the tasks that would facilitate consistent, long-term planning and implementation of NextGen throughout the department, DOD’s full integration into the NextGen system and the integrity and security of DOD’s forces and missions will be hindered. Given the amount of time that has transpired since DOD initially raised security concerns in 2008 and the amount of time it will take to formalize, operationalize, and train employees to implement any agreements prior to the January 1, 2020, deadline, it is critical that both DOD and FAA make this a high priority. Recommendations for Executive Action We are making two recommendations, including one to the Secretaries of Defense and Transportation, and one to the Secretary of Defense: We recommend that the Secretaries of Defense and of Transportation address ADS-B Out security concerns by approving one or more solutions that address ADS-B Out -related security risks or incorporating mitigations for security risks into the existing draft memorandum of agreement. These approved solutions should address operations, physical, cyber-attack, and electronic warfare security risks; and risks associated with divesting secondary-surveillance radars. The solution or mitigations should be approved as soon as possible in order to allow sufficient time for implementation. We recommend that the Secretary of Defense direct DOD components to implement key tasks that would facilitate consistent, long-term planning and implementation of NextGen—such as those tasks that the Deputy Secretary of Defense originally directed in 2007, or any tasks that the Secretary deems appropriate based on a current assessment of the original tasks. Agency Comments and Our Evaluation We provided a draft of the report to DOD and the Department of Transportation for review and comment. Written comments from DOD on the classified draft and from the Department of Transportation on this report are reprinted in their entirety in appendixes II and III, respectively, and summarized below. DOD and the Department of Transportation also provided technical comments, which we incorporated as appropriate. The Department of Transportation concurred and DOD partially concurred with the first recommendation to approve one or more solutions that address ADS-B Out security risks or incorporating mitigations for security risks into the existing draft memorandum of agreement and that these solutions should address operations, physical, cyber-attack, and electronic warfare security risks as well as risks associated with divesting secondary-surveillance radar. In its written comments, the Department of Transportation stated that it has recently developed and is now in the process of validating military flight tracking risk mitigation solutions that are technologically viable and operationally effective. Both the Department of Transportation and DOD stated that they would approve one or more solutions to address ADS-B Out related security risks. For example, both departments stated that among other actions, they would complete a memorandum of agreement between FAA and DOD that would incorporate security concerns identified in the report. DOD estimated that the memorandum of agreement will be signed in February 2018. We believe the steps identified by both the Department of Transportation and DOD, if implemented as planned, would meet the intent of our recommendation. DOD partially concurred with the second recommendation to implement key tasks that would facilitate consistent, long-term planning and implementation of NextGen—such as those tasks that the Deputy Secretary of Defense originally directed in 2007 or any tasks that the Secretary deems appropriate based on a current assessment of the original tasks. DOD stated the Secretary of the Air Force would identify within the next 120 days which relevant key tasks would facilitate the implementation of NextGen to include assessing the status of tasks that were directed in the Deputy Secretary of Defense memorandum, “Implementation of the Next Generation Air Transportation within the Department of Defense 2007.” DOD stated that the assessment would include a comprehensive review of modernization efforts regarding NextGen and other global initiatives and that includes suitable security and cybersecurity mitigation measures. DOD also stated that the Policy Board for Federal Aviation would track key task implementation in coordination with the Secretary of the Air Force and other appropriate DOD officials. This would also include periodic updates to the Deputy Secretary of Defense. We believe these steps would meet the intent of our recommendation if implemented as planned. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretary of Homeland Security; the Secretary of Transportation; and the commander of NORAD. We are also sending copies to the Under Secretary of Defense for Policy; the Under Secretary of Defense for Acquisition, Technology, and Logistics; the Chairman of the Joint Chiefs of Staff; the Secretaries of the military departments; and the Administrator of FAA. In addition, the report is available at no charge on the GAO website http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9971 or kirschbaumj@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 IV. Appendix I: Objectives, Scope, and Methodology Senate Report 114-255, accompanying a bill for the National Defense Authorization Act of Fiscal Year 2017, included a provision that we assess issues related to the defense implications of implementation of the Federal Aviation Administration’s (FAA) Next Generation Air Transportation System (NextGen) and Automatic Dependent Surveillance—Broadcast (ADS-B), a main component of NextGen. This report assesses the extent to which (1) the Department of Defense (DOD) and the FAA have identified security and operations risks and approved solutions to address these risks to military aircraft equipped with ADS-B Out technology; and (2) DOD has implemented key tasks in the 2007 Deputy Secretary of Defense memorandum on implementing NextGen. The scope of our review included all DOD and Department of Transportation offices responsible for oversight or administration of ADS- B implementation by DOD as part of the NextGen program. Our review also included Airlines for America, as it represented a significant portion of the civil aviation industry in negotiations with FAA on ADS-B implementation. Table 3 contains a list of the organizations and offices we contacted during the course of our review. To assess the extent to which DOD and FAA have identified security and operations risks and approved solutions to address these risks to military aircraft equipped with ADS-B Out technology, we reviewed policies, procedures, guidance, assessments, and other relevant documents from DOD, FAA, and NORAD that address ADS-B Out implementation, acquisition, operations, and cybersecurity risk management and mitigation, and any other issues that might be pertinent to identifying and addressing operations and security risks resulting from ADS-B Out. We also reviewed publicly available literature discussing potential ADS-B Out cybersecurity vulnerabilities. Specifically, we conducted a literature review of work related to vulnerabilities in ADS-B technology. To identify studies that potentially highlighted vulnerabilities that we could discuss with agency officials, we conducted key-word searches of government and private databases to identify public, private, academic, and other professional research related to ADS-B vulnerabilities. The government databases we searched included those of GAO, the Congressional Research Service, the Congressional Budget Office, and agency Inspectors General. The private databases searched include Web of Science, ProQuest, and ProQuest Professional. To determine relevance to our review, we assessed whether article subjects were related to vulnerabilities or vulnerability mitigations for ADS-B systems. We reviewed those studies cited in our report and found their methodologies to be sufficient. To further address our objective, we interviewed officials from NORAD, DOD, the military services, and FAA on potential risks, vulnerabilities, and mitigation strategies. We did not conduct independent security and vulnerability assessments of ADS-B technology to corroborate or validate security risks identified by NORAD, DOD, FAA, and others. While military aircraft and existing radar systems may be equipped with devices (including Mode S transponders) that could also pose security risks, this report focused on risks and potential solutions associated with ADS-B Out technology that FAA mandated DOD to install on its aircraft by January 1, 2020. We also visited multiple public websites to understand the extent to which the public could track current military flights over the United States. We met with a representative from one of these websites to understand the underlying sources of information and how the information was used to compile the images. To understand DOD and FAA coordination, we reviewed laws, guidance, and directives related to agency cooperation for the NextGen system and implementation of ADS-B technology. This included the 2010 FAA Federal Register entry that provided guidelines and requirements for coordination between agencies and the 2007 Deputy Secretary of Defense memorandum on implementing NextGen, which states that DOD components must develop cohesive plans and policies. To assess the extent to which DOD has implemented key tasks in the 2007 Deputy Secretary of Defense memorandum on implementing NextGen, we reviewed the Deputy Secretary of Defense’s 2007 NextGen memorandum and identified 20 tasks that were directed by the Deputy Secretary for the purpose of ensuring that NextGen meets DOD requirements, and that DOD’s resources are appropriately focused and managed. We focused on the 8 tasks wherein the accomplishment of the task would be significant to the development of plans and policies related to the implementation of the FAA’s ADS-B Out technology requirement. To evaluate the implementation status of these 8 tasks, we collected relevant documentation, interviewed officials from DOD, and reviewed this information. Initially, two analysts separately reviewed this information to determine whether each of the 8 tasks was implemented or not implemented. Later, a panel of four analysts collectively reviewed both sets of analyses completed for each task and determined whether a task would be better categorized as partially implemented, instead of implemented, or as not implemented. We conducted this performance audit from June 2016 to January 2018, 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: Comments from the Department of Defense This report (GAO-18-177) is an unclassified version of GAO-18-176C—which had report number GAO-17-509C at the time it was transmitted to DOD for comment. Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Tommy Baril (Assistant Director), Tracy Barnes, David Beardwood, Virginia Chanley, Benjamin Emmel, Kevin Newak, Joshua Ormond, Matthew Sakrekoff, Amanda Weldon, and Edwin Yuen made major contributions to this report. Colleen Candrl, Mark Canter, Raj Chitikila, Tracy Harris, Kirk Kiester, Amie Lesser, Nicholas Marinos, Madhav Panwar, John Shumann, James Tallon, and Cheryl Weissman also made contributions to this report. Related GAO Products Next Generation Air Transportation System: Improved Risk Analysis Could Strengthen FAA’s Global Interoperability Efforts. GAO-15-608. Washington, D.C.: July 29, 2015 Air Traffic Control: FAA Needs a More Comprehensive Approach to Address Cybersecurity As Agency Transitions to NextGen. GAO-15-370. Washington D.C.: April 14, 2015. National Airspace System: Improved Budgeting Could Help FAA Better Determine Future Operations and Maintenance Priorities. GAO-13-693. Washington, D.C.: August 22, 2013. NextGen Air Transportation System: FAA Has Made Some Progress in Midterm Implementation, but Ongoing Challenges Limit Expected Benefits, GAO-13-264. Washington D.C.: April 8, 2013. Next Generation Air Transportation System: FAA Faces Implementation Challenges. GAO-12-1011T. Washington, D.C.: September 12, 2012. Next Generation Air Transportation: Collaborative Efforts with European Union Generally Mirror Effective Practices, but Near-Term Challenges Could Delay Implementation, GAO-12-48. Washington, D.C.: November 3, 2011.

Why GAO Did This Study DOD has until January 1, 2020, to equip its aircraft with ADS-B Out technology that would provide DOD, FAA, and private citizens the ability to track their flights in real-time and track flight patterns over time. This technology is a component of NextGen, a broader FAA initiative that seeks to modernize the current radar-driven, ground-based air transportation system into a satellite-driven space-based system. Senate Report 114-255 included a provision for GAO to assess the national defense implications of FAA's implementation of ADS-B. This report assesses the extent to which (1) DOD and FAA have identified operations and security risks and approved solutions to address these risks to ADS-B Out -equipped military aircraft; and (2) DOD has implemented key tasks in the 2007 memorandum on implementing NextGen. GAO analyzed risks identified by DOD and FAA related to ADS-B vulnerabilities, and how they could affect current and future air defense and air traffic missions. GAO also reviewed the tasks in the 2007 NextGen Memorandum and assessed whether the eight tasks specifically related to ADS-B were implemented. What GAO Found Since 2008, the Department of Defense (DOD) and the Department of Transportation's Federal Aviation Administration (FAA) have identified a variety of risks related to Automatic Dependent Surveillance-Broadcast (ADS-B) Out technology that could adversely affect DOD security and missions. However, they have not approved any solutions to address these risks. Compared with other tracking technology, ADS-B Out provides more information, such as an aircraft's precise location, velocity, and airframe dimensions, and better enables real-time and historical flight tracking. Individuals—including adversaries—could track military aircraft equipped with ADS-B Out technology, presenting risks to physical security and operations. This readily available public information allowed GAO to track various kinds of military aircraft. ADS-B Out is also vulnerable to electronic warfare and cyber-attacks. Since FAA is planning to divest radars as part of ADS-B implementation, homeland defense could also be at risk, since the North American Aerospace Defense Command relies on information from FAA radars to monitor air traffic. DOD and FAA have drafted a memorandum of agreement that focuses on equipping aircraft with ADS-B Out but does not address specific security risks. Unless DOD and FAA focus on these risks and approve one or more solutions in a timely manner, they may not have time to plan and execute actions that may be needed before January 1, 2020—when all aircraft are required to be equipped with ADS-B Out technology. Of the eight tasks associated with the implementation of ADS-B Out technology in the 2007 DOD NextGen memorandum—issued by the Deputy Secretary of Defense to ensure that the NextGen vision for the future national airspace system met DOD's requirements and the appropriate management of DOD's resources—DOD has implemented two, has partially implemented four, and has not implemented two. DOD has established a joint program office and identified a lead service, but it has only partially validated ADS-B Out requirements, developed a directive, issued an implementation plan, and incorporated NextGen into the planning, budgeting, and programming process. DOD has not taken significant action to integrate the needs and requirements of DOD components related to ADS-B into cohesive plans and policies for inclusion in NextGen joint planning and development, and has not provided periodic and recurring NextGen progress reports to the Deputy Secretary of Defense. As a result of DOD not fully implementing the 2007 NextGen memorandum, DOD components have lacked direction and cohesion while trying to address FAA's requirement to equip military aircraft. This is a public version of a classified report GAO issued in January 2018. What GAO Recommends GAO is recommending that DOD and FAA approve one or more solutions to address ADS-B -related security risks; and that DOD implement key tasks to facilitate consistent, long-term planning and implementation of NextGen. DOD and the Department of Transportation generally concurred and described planned actions to implement the recommendations.

gao_GAO-18-478

gao_GAO-18-478_0

Background A series of laws and policy directives dating back to 1904 require DOD to rely in large part on U.S.-flag commercial vessels over government- owned or foreign-flag vessels for its sealift needs. Most recently, a 1989 National Security Directive reaffirmed the policy of relying on U.S.-flag commercial vessels to provide sealift in times of peace, crisis, and war. These requirements and policies align with the following principles from the Merchant Marine Act of 1936, as amended: A fleet of commercial vessels with military utility that are owned and operated by U.S. citizens and are able to provide reliable support during difficult wartime missions is necessary for national defense. According to testimony by the Commander of Transportation Command, during Operation Desert Shield, 7 percent of foreign-flag vessels refused to go into war zones, whereas U.S.-flag vessels continued to deliver cargo as promised. A pool of trained U.S. mariners is needed to crew the U.S.-flag fleet. According to DOD and MARAD, mariners are necessary to crew not only the U.S.-flag commercial vessels but also the U.S. government- owned reserve cargo vessels. These vessels are held in reduced operating status with minimal crew in peacetime. When put into full operating status—such as for a surge related to a wartime effort—the government needs to add additional trained and qualified mariners to operate them. U.S.-flag commercial vessels, which are required to be staffed by U.S.-citizen mariners, provide a pool of mariners who can be used for this task. Because mariners work on vessels for months at a time, commercial vessels typically have at least two full sets of mariners to crew a single vessel—one set of which is on the vessel while the other is on leave. In times of crisis, one set of mariners could continue to work on the commercial vessel, while some of those on leave could be called upon to voluntarily crew vessels in the government-owned reserve fleet. A U.S. presence in international trade is needed to carry goods overseas. According to MARAD, a U.S. presence in international trade helps ensure that both commercial shippers and the military can access vessels to carry their goods overseas at all times, both in times of peace and in times of war. In line with this policy, as of March 2018, DOD’s sealift capacity consisted of 61 government-owned reserve vessels held in reduced operating status and 113 commercial vessels operating under the U.S. flag in regular trade (see fig. 1). MARAD, in consultation with DOD, administers a program designed to ensure that needed U.S.-flag commercial vessel capacity will be available during a wartime activation. The program consists of an agreement between the U.S. government and operators of U.S.-flag commercial vessels, called the Voluntary Intermodal Sealift Agreement (VISA). MSP vessel operators are required to enroll in VISA or a similar agreement for tankers as part of their participation in the MSP, while other operators with U.S.-flag vessels may but are not required to enroll in VISA. Operators enrolled in VISA: commit to providing their intermodal resources and a certain percentage of their U.S.-flag vessel capacity to meet national defense needs during times of war or national emergency, if activated by DOD; will receive compensation during a VISA activation at rates that are set according to certain parameters established in contingency contracts between DOD and the operator; and receive priority for peacetime DOD cargo contracts, under which they carry DOD cargo at established or negotiated rates. According to Transportation Command and MARAD officials, DOD has never formally activated VISA, as vessel operators with these agreements have voluntarily met DOD’s ocean cargo carrying needs under regular operations and compensation rates established under contract with DOD. For example, these officials said that U.S.-flag vessels carried significant amounts of cargo during recent military conflicts such as those in Iraq and Afghanistan, and DOD did not have to activate VISA to obtain additional capacity. International shipping is dominated by foreign-flag vessels. According to MARAD, only about 1.5 percent of U.S. international oceangoing trade by weight is carried on U.S.-flag vessels. U.S.-flag vessels face difficulties competing in international markets due to the higher costs of operating under the U.S. flag. For example, to operate under the U.S. flag, vessel operators must comply with various U.S. laws, including requirements of the United States Coast Guard (Coast Guard), and must use U.S.-citizen and permanent resident crews, which according to a MARAD 2011 report, results in higher labor costs than are typically incurred by foreign-flag vessels for foreign crews. Since U.S.-based vessel operators engaged in international trade can choose to operate vessels under a foreign flag, according to the 2011 MARAD report, the majority of large, oceangoing, self-propelled merchant-type U.S.-owned vessels are not registered under the U.S. flag. In 2011, MARAD reported that the Marshall Islands, Singapore, and Liberia registries accounted for 52 percent of U.S.-owned vessels. According to MARAD, these registries have different requirements than the U.S. registry that result in lower associated operating costs. Further, according to MARAD data, the fleet of large U.S.-flag vessels engaged in international trade has declined from approximately 199 vessels at the end of 1990 to 82 vessels at the end of 2017 (see fig. 2). In February 2018, the number of U.S.-flag vessels dropped again, to 81 vessels. To ensure the existence of an international maritime presence of U.S.- registered and U.S.-citizen-crewed vessels, the U.S. government has, at least since 1936, had laws designed to provide financial support to offset the higher costs of operating an internationally trading vessel under the U.S.-flag. This support has provided an incentive for U.S. commercial vessel operators to register vessels under the U.S. flag in spite of the higher operating costs. Currently, this support is provided through the (1) MSP stipend for certain vessels and (2) cargo preference requirements: MSP stipend—Since fiscal year 1996, the MSP has provided an annual stipend set by statute to support a specific number of vessels. In return for receiving the stipend, the MSP vessel operator agrees to keep the vessel or an equivalent vessel under the U.S. flag for the life of a 10-year operating agreement (subject to annual appropriation), and enrolled in VISA. For fiscal year 2018, the MSP provided an annual stipend of $5 million per vessel, for a total cost of $300 million for the 60 vessels in the MSP. According to MARAD officials, the MSP was designed as a less costly replacement for the Operating Differential Subsidy that, since 1936, had subsidized the higher operating costs of the U.S.-flag fleet. According to DOT officials, the MSP currently covers approximately 80 percent of the average annual operating cost differential between U.S. and foreign-flag vessels, although this varies across vessels in the MSP. Cargo preference requirements—In general, cargo preference requirements specify that certain percentages of all U.S. government cargo, military and otherwise, must be carried on U.S.-flag vessels, to the extent the vessels are available at reasonable rates. Current law requires that 100 percent of military cargo be transported on U.S.-flag vessels. DOD charters a small number of internationally trading U.S.-flag vessels, while contracting with other internationally trading U.S.-flag vessels to carry cargo as part of the vessel’s regular operations. A minimum of 50 percent of the gross tonnage of all other government civilian cargo, such as food aid or freight sent to overseas embassies and consulates, is to be transported on privately owned commercial U.S.-flag vessels. In addition, cargoes financed by U.S. agencies, such as through loans from EXIM Bank, have been congressionally directed to be transported on U.S.-flag vessels. DOD and MARAD each play a role in managing the nation’s sealift capacity. DOD’s Transportation Command determines the vessel capacity necessary to meet national security requirements, whereas MARAD is responsible for determining whether there are enough commercial vessels and mariners available to support the activation of the government-owned reserve fleet while maintaining trade. In addition, MARAD supports the U.S.-flag fleet by administering VISA and the MSP and monitoring federal agencies’ compliance with cargo preference requirements, among other responsibilities. DOD and MARAD each maintain their own set of government-owned vessels that are part of the surge sealift fleet. U.S. Government Support for the U.S.- Flag Fleet Has Helped Meet National Defense Needs but Has Had a Negative Effect on Some Non- Defense Government Programs U.S. government support for the internationally trading U.S.-flag fleet has helped meet national defense needs. Specifically, financial support to U.S.-flag vessels through both the MSP stipend and the cargo preference requirements has helped ensure a sufficient number of internationally trading U.S.-flag vessels are available to meet DOD’s most recently stated cargo capacity needs from such vessels. In contrast, while cargo preference requirements are a means of providing government support to U.S.-flag vessels, these requirements have had a negative impact on some non-defense programs. For example, the requirement that food aid agencies send a certain percentage of food aid on U.S.-flag vessels has resulted in higher shipping costs for these agencies, and USAID and USDA officials stated that this has reduced the amount of funds the agencies can spend on their mission to reduce hunger. MSP and Cargo Preference Requirements Have Resulted in Sufficient U.S.-Flag Vessel Capacity to Date to Meet Defense Needs, At Acceptable Risk Under the MSP, DOD and MARAD Select Vessels for Government Support That Meet the Military’s Needs and Have Commercial Viability DOD’s Transportation Command conducts periodic mobility studies that, among other things, determine the overall vessel capacity needed under differing wartime scenarios, including resource-heavy scenarios involving a range of concurrent military operations for a sustained period of time. A mobility requirements study completed in 2000 found that in addition to the cargo capacity that could be provided by government-owned or long- term chartered vessels and by vessels belonging to allies, the United States would need the capacity of approximately 55 commercial vessels designed to carry dry cargo to meet mobility requirements. The study also found a potential need for additional tankers, which are designed to carry liquid cargo. At the time, the MSP stipend was provided to 47 vessels; subsequently, through the Maritime Security Act of 2003, a new MSP was established that raised funding levels to support an increase in the program fleet to 60 vessels beginning in fiscal year 2006, to include both vessels designed to carry dry cargo and tankers. According to Transportation Command officials, mobility study updates in 2010 and 2013 confirmed that this capacity remained sufficient to meet defense needs. As a result, the 60 vessels currently participating in the MSP have the ability to meet DOD’s stated cargo capacity needs. They include a mix of vessel types designed to carry dry cargo as well as two tankers for liquid cargo (see table 1). DOD is required by statute to complete a new study by September 30, 2018. According to Transportation Command officials, this study will evaluate the sufficiency of the sealift fleet in light of the current defense strategy, plans, threats, and DOD's mobility capabilities. MSP regulations establish that DOD and MARAD select vessels for the MSP based in part on their military utility. Due to different configurations and cargo capacity, some vessel types are more useful to the military than others. For example, Transportation Command officials stated that currently the most useful type of cargo vessel for DOD’s military needs is the roll on/roll off (Ro-Ro) vessel, in part because it is configured so that vehicles, including tanks, can be easily driven on and off the vessel. DOD’s priority for the selection of MSP vessels is Ro-Ro vessels, multi- purpose/heavy-lift vessels (also referred to as general cargo vessels), geared containerships, and all others (including tankers), in that order. According to Transportation Command officials, due to the need to balance military utility with commercial viability, a mix of vessel types with military utility is currently in the MSP, with over half of the vessels in the MSP being containerships. In addition to selecting vessels based on military utility, MARAD, in consultation with Transportation Command, also bases their MSP vessel selections on the commercial viability of operations. The assessment of commercial viability includes, among other things, four key areas: 1) the intermodal networks accessible to the applicant; 2) the trading routes operated by the applicant, and the ability to maintain service during military operations; 3) the applicant’s record of owning and operating vessels; and 4) the applicant’s financial condition. MARAD and Transportation Command officials cited numerous benefits to the current configuration of the MSP. First, MARAD and Transportation Command officials stated that the annual cost of the stipend is small compared to the outlay required to acquire, crew, and maintain a government-owned fleet of vessels that are not needed on a day-to-day basis. (See app. I for more information on the potential effects of discontinuing the MSP stipend and instead relying on a government- owned fleet.) Second, MSP vessels must be less than 25 years of age. According to MARAD officials, this requirement helps ensure the recapitalization of the U.S.-flag fleet participating in the program. According to our analysis of MARAD data, since the beginning of fiscal year 2006, MSP vessel operators have replaced more than 70 MSP vessels. In most cases, we found that the replacement vessels have been newer and provide greater capacity to meet DOD requirements. Finally, under the MSP’s operating agreements, participating vessel operators are required to make their commercial transportation resources, including infrastructure, available upon request by the Secretary of Defense during times of war or national emergency. In this way, according to MARAD and Transportation Command officials as well as MSP vessel operators, the MSP provides DOD with assured access to a global intermodal transportation network, including logistical management services, infrastructure, and terminal facilities. According to MARAD and Transportation Command officials, without assured access to this network and infrastructure, the government would have to undertake a multi-billion dollar effort to create such a network on its own or would have to contract for such a network separately, a process that could come with additional risks and costs in a war-time scenario. A 2006 study for the National Defense Transportation Association estimated that it would cost approximately $13 billion to replicate the Ro-Ro and containership capacity of MSP vessels and $52 billion to replicate the intermodal networks provided by MSP vessel operators. A 2012 report by the National Defense Transportation Association provided some examples of how intermodal networks made available by MSP vessel operators have helped meet DOD needs. This report states that during military action in Afghanistan, U.S. forces depended on supplies transported overland through Pakistan. However, the limited road capacity in Pakistan resulted in delayed cargo and left drivers vulnerable to attacks. In addition, U.S.-Pakistan relations became strained, and the need for an alternative delivery method arose. The report says that MSP vessel operators devised alternative distribution systems, including an overland distribution network from Baltic seaports to Afghanistan as well as a multimodal (both sea and air transport) route from other seaports in the region. Some MSP vessel operators also told us that they were willing to participate in the MSP because, as U.S.- based companies, they felt a responsibility to contribute to national security. Vessels in the MSP Rely on the Combination of MSP Stipend and Government Cargo Shipped Under Cargo Preference Requirements to Maintain Financial Viability The MSP stipend provides a fixed financial incentive for vessel operators to maintain vessels under the U.S. flag, but on its own is not sufficient to support the higher costs of operating U.S.-flag vessels, according to MARAD officials and 12 of the 14 MSP vessel operators we spoke to. According to MARAD officials, the MSP currently covers about 80 percent of the operating cost differential between U.S. and foreign-flag vessels. However, a majority of MSP vessel operators we spoke with said that in order for a U.S.-flag vessel to be financially viable, the entire operating cost differential must be somehow made up. The other key way that MSP vessel operators can make up the difference in operating costs between U.S.-flag and foreign-flag vessels is through the transport of government cargo under cargo preference requirements. According to a 2015 MARAD report, the higher freight rates that DOD and other federal agencies pay to transport government cargo on U.S.-flag vessels are critical to these vessels’ financial viability. According to this report, carriers of U.S.-flag vessels stated that in the absence of government cargo at freight rates that cover the higher commercial cost of operating under a U.S. flag, the financial support provided by MSP would be insufficient to continue operating under the U.S. flag. A 2011 MARAD report similarly stated that the portion of U.S.-flag vessels’ higher operating costs not covered by the MSP stipend is defrayed by the ability of those vessels to carry government cargo at rates that are significantly higher than commercial rates. Under cargo preference requirements, the use of U.S.-flag commercial vessels is required to the extent that such vessels are available at rates that are fair and reasonable, as determined by MARAD and the Transportation Command. According to Transportation Command guidance, even though lower prices may be available from foreign-flag carriers, a lower price for use of a foreign-flag vessel is not a sufficient basis, on its own, to determine the ocean freight rate proposed by a U.S.- flag vessel operator is excessive or otherwise unreasonable. Similarly, by regulation, MARAD’s determination of U.S.-flag vessels’ fair and reasonable rates takes into account the vessels’ operating costs, among other things, which as described previously are higher than foreign-flag vessels’ operating costs. Our analysis of DOD and MARAD data show that in total, more than 1.4- million metric tons of government cargo were shipped on MSP vessels in fiscal year 2016. Fifty-nine of the 60 MSP vessels carried government cargo in fiscal year 2016. One MSP vessel (a general cargo vessel) entered the MSP at the end of the fiscal year but did not carry any government cargo until the next fiscal year. As shown in figure 3, the MSP Ro-Ro and containership vessels carried more cargo for DOD than for civilian agencies. MSP general cargo vessels predominantly carried food aid, and during this time, tankers were used only by civilian agencies for foreign military assistance. Our analysis also found that the extent to which government cargo shipped on U.S.-flag vessels was transported on MSP vessels varied. For example, 69 percent of the cargo DOD shipped on U.S.-flag vessels was transported on an MSP vessel; 99 percent of non-food aid cargo that civilian agencies shipped via U.S.-flag vessels was transported on an MSP vessel; and 24 percent of food aid shipped on U.S.-flag vessels was transported on MSP vessels. The rest of the government cargo shipped on U.S.-flag vessels was shipped on vessels that are not in the MSP. Most of the MSP vessel operators we spoke to said that in addition to government cargo, their MSP vessels also carry commercial cargo. These vessel operators told us that because they have to compete for commercial cargo with foreign-flag vessels that have lower operating costs, commercial cargo alone typically does not have high-enough rates to maintain the financial viability of U.S.-flag vessels. However, when added to the MSP stipend and government cargo rates, the rates they receive for commercial cargo are part of the overall financial picture that allows them to operate MSP vessels under the U.S. flag (see fig. 4). Cargo Preference Requirements Have Had a Negative Effect on Some Non-Defense Agency Programs Officials at USAID and the EXIM Bank have raised concerns that the higher shipping costs that result from cargo preference requirements have had a negative effect on their missions. For example: According to officials at USAID’s Office of Food for Peace, the additional costs the agency incurs by using U.S.-flag vessels instead of foreign-flag vessels for its cargo directly reduces its budget to fulfill its mission of reducing hunger and malnutrition. For example, USAID officials stated that for each $40-million increase in shipping costs, its food aid reaches one-million fewer recipients each year. Concerns about the role of cargo preference requirements for food aid in supporting the U.S.-flag fleet are longstanding, and we reported on them in 1994, 2011, and 2015. Others have also reported on these concerns over the last few decades. According to USAID officials, due to cargo preference requirements and the limited availability of U.S.-flag bulk carriers, the agency has at times had to send bulk food, such as grain, on other types of U.S.-flag vessels that are not meant to carry this type of cargo. According to these officials, this process has resulted in additional costs and delays because the equipment used to load and unload bulk grains onto and off of a bulk cargo vessel cannot be used with other types of vessels, as wells as concerns about the appearance and health of bulk food being transported, for example, on vessels that typically carry oil or other fuels. Officials from the EXIM Bank said that U.S. shipping provisions may have put EXIM bank at a competitive disadvantage compared with other countries’ export credit agencies, thus having a negative impact on the Bank’s mission—which is to support American jobs by facilitating the export of U.S. goods and services. Cargoes financed through loans from EXIM Bank have been congressionally directed to be transported on U.S.-flag vessels. According to a 2014 survey of exporters and lenders conducted by EXIM Bank, arranging U.S. transport typically results in higher costs and can result in shipment delays. These exporters and lenders reported that the requirement to ship on U.S.-flag vessels placed them at a competitive disadvantage relative to other countries’ exporters—and may have resulted in potential clients choosing to import goods from other countries without the same requirements. According to our prior work and EXIM’s 2016 Competitiveness Report, export credit agencies in many other countries do not have such a requirement. Furthermore, food aid advocates have questioned the economic efficiency of using food aid shipments to financially support the U.S.-flag fleet for defense purposes, particularly in light of the increased costs to food aid agencies. These advocates have argued that it is inefficient to spend U.S. government funds to support U.S.-flag vessels generally considered to have little military utility—such as bulk carriers—primarily for the U.S.-citizen mariners they provide. According to our analysis of MARAD data, during fiscal year 2016, food aid agencies shipped 592,000 metric tons of cargo on U.S.-flag dry bulk carriers, providing substantial government support to a vessel type that Transportation Command officials have stated is not a priority for the military’s cargo needs and that Transportation Command and MARAD officials acknowledge has only limited military utility. Based on our analysis of data provided by DOD, during fiscal year 2016, DOD did not ship any cargo on dry bulk vessels. In contrast, based on our review of data provided by MARAD, in fiscal year 2016, 57 percent of food aid transported on U.S.-flag vessels was transported on vessels flagged by MARAD as having limited military utility. In contrast to the food aid advocates’ perspective, Transportation Command and MARAD officials stated that ensuring sufficient mariners for defense purposes is one key purpose of supporting the U.S.-flag fleet, regardless of the military utility of the vessel. The total additional cost the government incurred due to cargo preference requirements is not known, as neither Transportation Command nor MARAD track the additional costs to ship on U.S.-flag vessels. Transportation Command and MARAD officials both stated that their current processes are not designed to track the difference between what federal agencies are paying to ship government cargo on U.S.-flag vessels and what they would pay to ship the same cargo on foreign-flag vessels, and that it would require considerable time and expense for them to create processes to do this. Moreover, Transportation Command officials stated that there would be little value in tracking this information, since their focus is on complying with the requirement to transport DOD cargo on U.S.-flag vessels whenever possible. Our past work on this issue has shown that cargo preference laws have increased transportation costs to federal agencies. For example, in 1994 we reported that these costs increased by $578 million per year between fiscal years 1989 and 1993, with DOD estimating that it spent about $350 million of that amount in increased costs. More recently, in 2015, we found that cargo preference requirements for food aid increased the cost of shipping food aid by 23 percent, or $107 million, for the period from April 2011 through fiscal year 2014. MARAD and Transportation Command officials acknowledged that some agencies have raised concerns that cargo preference requirements may have adverse impacts on their programs. According to MARAD officials, while there is not overall agreement on the net benefit to the nation of cargo preference requirements, such requirements provide offsetting benefits to the U.S. maritime sector that are difficult to quantify in dollar terms. A Transportation Command official stated that cargo preference for food aid has been less beneficial in supporting U.S.-flag vessels than it once was because of recent decreases in food aid volumes. However, this official emphasized that cargo preference for food aid continues to provide value as a tool to help support the U.S.-flag vessels that provide mariners to meet DOD’s needs. Stakeholders Identified Two Primary Sustainability Challenges the Internationally Trading U.S.-Flag Fleet Faces in Meeting National Defense Needs Stakeholders we spoke with identified two primary challenges to ensuring that the U.S.-flag fleet would continue to meet DOD’s national defense needs. First, stakeholders described maintaining the financial viability of U.S.-flag vessels participating in MSP as a challenge. Second, stakeholders identified a potential shortage of U.S. citizen mariners available to crew the government-owned reserve fleet during a military activation as a challenge, in part due to the declining numbers of U.S.-flag vessels. According to Stakeholders, Maintaining the Financial Viability of Vessels Participating in the MSP Is a Challenge due to Increasing Costs and Decreasing Levels of Government Cargo According to MARAD officials, the relative cost of operating a U.S.-flag vessel compared to a foreign-flag vessel has increased in recent years, making it increasingly challenging for vessel operators to remain economically viable under the U.S. flag. While an increasing cost differential between U.S.-flag and foreign-flag vessels affects all U.S. flag vessels, MARAD officials raised particular concerns related to defense needs about maintaining the financial viability of vessels in the MSP. MARAD estimates this operating cost differential is currently between $6.2 million and $6.5 million per vessel per year, up from an estimated $4.9 million in 2009 and 2010—an increase of more than 25 percent. MARAD and MSP vessel operators we spoke with stated that the increase is due to a range of factors, primarily the rising relative costs of employing U.S. mariners as crew versus foreign crew members. For example, one MSP vessel operator indicated that labor costs for its U.S.- flag vessels are projected to increase approximately 4 percent per year compared to smaller increases in its foreign-flag crew costs. Representatives from maritime unions that we interviewed acknowledged that labor costs have risen and also noted that one factor contributing to higher labor costs in the United States is that operators are required to cover retirement benefits for employees. These representatives stated that such benefits are paid by the government in some other countries. In addition to labor costs, MSP vessel operators also mentioned that increasing insurance and maintenance and repair costs are also factors. At the same time, total government cargo volumes have fallen, compounding the challenge for vessel operators to remain viable under the U.S. flag. Figure 5 below shows the decline in total government cargo volumes between 2004 and 2014 for DOD, food aid, and other civilian agencies. According to a 2015 MARAD report on the effect of declining cargo preference volumes, vessel operators that reflagged vessels from the U.S. flag to a foreign flag, or retired vessels in recent years said that the primary reason for doing so was the loss of government cargo. However, it is not known exactly how many vessels have been reflagged, and the 2015 MARAD report stated it could not quantify the number of vessels that left the U.S. flag specifically for this reason. One vessel operator we spoke with stated that it removed five vessels from the U.S.- flag registry due to a decline in food aid shipments and an increase in the cost of operating under the U.S flag. According to MARAD officials, if government cargo volumes continue to decline in future years, the resulting decline in revenue to U.S.-flag vessels for shipping these goods may lead to further reductions in the number of U.S.-flag vessels and may also affect the financial viability of those vessels in the MSP. According to the 2015 MARAD report, the decrease in total government cargo volumes has been driven by two trends. First, the international military presence of the United States has decreased overseas. DOD, which generates 75 percent of preference cargo, has gone through a worldwide drawdown following the end of the cold war in the 1990s, notwithstanding brief upticks in volume during military escalations since that time. Second, due to reduced funding, fluctuating commodity prices, and other factors, food aid agencies, such as USDA and USAID, have shipped reduced volumes of food aid overseas. Further affecting the amount of food aid cargo on U.S.-flag vessels were changes to the cargo preference requirement and the elimination of reimbursements designed to help cover the extra cost of meeting the preference requirement. The Cargo Preference Act of 1954, as amended, requires that at least 50 percent of all U.S. government cargo be shipped on U.S.-flag commercial vessels. For food aid programs, an additional 25 percent of the tonnage of certain agricultural commodities was required beginning in 1988. This increase was repealed in 2012, and the cargo preference requirement for food aid effectively returned to 50 percent. In prior work, we found that although the reduction in the food aid cargo preference requirement reduced overall shipping costs for food aid, food aid agencies still paid a higher price to ship on U.S.-flag vessels than on foreign-flag vessels to meet cargo preference requirements. Further, in 2012 and 2013, government reimbursements to USAID and USDA to help cover the extra costs to meet cargo preference requirements were discontinued. As we reported in 2015, this change in reimbursement policy reduced the amount of food aid these agencies were able to provide. In 2015, to ensure the continued financial viability of vessels in the MSP, maritime unions advocated for and eventually received an MSP stipend increase. According to MARAD data, at the time, several companies with vessels in the MSP were in financial trouble, and all but three of the companies participating in the MSP would have been operating at a loss without the MSP stipend. Congress authorized the appropriation of a 42 percent increase in the MSP appropriation from fiscal year 2016 to fiscal year 2017—from $210 million to $299 million. The corresponding authorized stipend rose from $3.5 million to $4.99 million per vessel annually. The appropriation for fiscal year 2018 further increased this amount to $5 million, and an additional increase to about $5.23 million is authorized for fiscal year 2021. Figure 6 shows the authorized annual stipend for MSP vessels from fiscal year 1996 through fiscal year 2021. According to MARAD officials, the recent increase in the MSP stipend to the current level of $5 million in fiscal year 2018 has temporarily stabilized the financial situation of MSP vessel operators. However, concerns remain about the future of the U.S.-flag fleet. According to MARAD officials and commercial vessel operators we spoke with, if the cost differential between operating U.S.-flag and foreign-flag vessels continues to increase, the levels of government support would accordingly need to rise to ensure that vessel operators would be willing and able to keep the existing U.S.-flag vessels under the U.S. flag, including those in the MSP. In 2015, MARAD issued a statutorily-mandated report that concluded that without a comprehensive change to maritime policy, the size of the U.S.- flag fleet would continue to decline. However, in this report, MARAD did not propose specific changes or options to address this concern. MARAD and Stakeholders Identified a Potential Shortage of U.S.-Citizen Mariners as a Challenge to Meeting National Defense Needs According to MARAD and DOD officials, another challenge related to the ability of the U.S.-flag fleet to meet national defense needs is a potential shortage of U.S.-citizen mariners qualified to crew government-owned reserve vessels. While in terms of cargo capacity, the current number of U.S.-flag commercial vessels in international trade is sufficient to meet DOD’s stated needs, MARAD and DOD have raised concerns that the declining number of such U.S.-flag vessels has led to a corresponding decline in the number of U.S.-citizen mariners qualified to crew these types of vessels and who are also able to crew government-owned reserve vessels that are usually held in reduced operating status. On January 23, 2018, MARAD’s Maritime Workforce Working Group issued a statutorily-mandated report that found that the current number of U.S.-citizen mariners is insufficient to support sustained activation of the government-owned reserve fleet for military operations. Specifically, the report estimated approximately 11,768 qualified and available U.S.-citizen mariners as of June 2017—1,839 less than the 13,607 mariners the working group estimates would be needed for sustained operation of the reserve and commercial fleet. The working group based its identification of 11,768 existing qualified U.S.-citizen mariners on the number of U.S.-citizen mariners actively sailing on U.S.-flag commercial and government-owned ocean-going vessels. For the vessels in full operating status, the working group accounted for 2 mariners employed for each crew position. The double crew, which according to MARAD officials is typical for a commercial U.S.-flag vessel operating in international trade, allows each mariner, over the course of a year, to work for 6 months on the vessel and take 6 months of earned leave. According to MARAD officials, this typical double crew configuration is based on the fact that while on duty, mariners work long hours with little to no opportunity to leave the vessel. The working group assumed that during a military activation, commercial operations would continue at the same level as during peacetime—but that some U.S-citizen mariners currently working on commercial vessels would be willing to reduce the amount of earned leave they took in order to work on government-owned reserve vessels. The working group analyzed this scenario by changing the ratio of crew positions to crew from 2 (in which case half of the employed mariners are working on the vessel and half are on earned leave at any one time) to 1.75. As illustrated in figure 7, under this scenario, with an average of 26 crew positions per vessel, between 6 and 7 mariners per existing commercial oceangoing U.S.-flag vessel are made available to crew the reserve fleet. According to the working group’s methodology, given the size of the current U.S. flag oceangoing fleet and the number of currently employed mariners on this fleet, there are enough U.S.-citizen mariners to crew the reserve fleet during an initial surge, but not for a sustained activation, during which the working group estimated that the reserve vessels themselves would need a double crew to allow for crew rotations. This need for crew rotations on the reserve vessels led the working group to the estimate a shortage of 1,839 U.S.-citizen mariners. Moreover, the working group’s report found that the shortage of mariners may be understated if some of the estimated available mariners are unable or unwilling to continue sailing during times of national emergency, as available mariners are not required to crew the reserve fleet. Although the working group concluded that there is a shortage of mariners for sustained operations, its report also details data limitations that cause some uncertainty regarding the actual number of existing qualified mariners and, thus, the extent of this shortage. The working group’s approach—driven, in part, by limitations of the U.S. Coast Guard’s database that tracks mariner credentials—did not count any qualified mariners who are no longer employed on U.S.-flag oceangoing vessels or who are employed on other types of vessels but may have the required credentials. In fact, according to the working group’s analysis, over 15,000 mariners listed in the U.S. Coast Guard’s database have unlimited credentials but are unaccounted for, as they are neither currently employed on large, oceangoing vessels nor serving as civil- service mariners committed to government-owned vessels. The working group stated that the availability and continuing proficiency of these mariners remains unknown. These data limitations, which the working group was unable to resolve, are long standing. For example, in August 2015, we reported that the number of U.S. civilian mariners who would be qualified and available to serve during a prolonged defense activation was uncertain. We found that MARAD’s analysis of the sufficiency of the mariner pool could have included more qualified mariners using different assumptions, and we recommended that MARAD study this issue. MARAD was later mandated by statute to convene a working group to study the sufficiency of the U.S.-citizen mariner pool. MARAD officials emphasized to us, however, that mariners who have not worked on the right types of vessels for more than 18 months are likely to need additional training before they would be qualified to crew the reserve fleet during a military activation. The working group’s report contains several recommendations related to improving information on the number of available and willing mariners. These recommendations include that the Coast Guard database should be replaced with one that would enable a more accurate account of available mariners, and that a periodic survey of the U.S.-citizen mariner pool should be established to allow MARAD to determine, with reasonable certainty, how many qualified mariners would be available and willing to sail in U.S. government reserve vessels if called upon to do so. The report concluded that until these agencies improve the tracking of licensed mariners who may be available to crew the government-owned reserve vessels when activated into full operating status, the extent to which there is a shortage of mariners for defense needs will remain unclear. The lack of information on the extent to which there is a shortage of mariners limits the U.S. government’s ability to effectively plan for such needs. In January 2018, MARAD’s administrator testified that MARAD is working with the Coast Guard and the maritime industry to better track licensed mariners who may no longer be sailing but could serve in a time of crisis, and in March 2018, MARAD officials told us they are taking steps to initiate a new survey of mariners, as recommended in the Mariner Workforce Working Group’s report. DOT Has Not Finalized Mandated National Strategies but Has Identified Various Options to Address Challenges to Sustaining U.S.- Flag Fleet for Defense Needs Congress issued two separate mandates to DOT to develop strategies related to challenges facing the U.S.-flag fleet, specifically: The Secretary of Transportation was directed in 2014 to develop a national maritime strategy with recommendations, among other things, to increase U.S.-flag vessel competitiveness. The Secretary of Transportation and MARAD were directed in 2014 to develop, in collaboration with DOD, a national sealift strategy to ensure the long-term viability of the U.S. Merchant Marine (which encompasses U.S.-flag vessels and U.S.-citizen mariners). According to MARAD and DOD officials, MARAD has been working on a single draft maritime strategy to meet both mandates, since from their perspective, the national maritime strategy would need to encompass the national sealift strategy, as well. While there was no statutory deadline for the completion of the national sealift strategy, there was a statutory deadline of February 2015 for the national maritime strategy to be submitted to Congress. However, DOT had not finalized the national maritime strategy as of May 2018. According to MARAD officials, MARAD completed a draft strategy in 2016, which was approved by DOT and reviewed by the Office of Management and Budget (OMB) and 28 additional agencies identified as being stakeholders, including DOD. MARAD officials told us that while MARAD had reached initial concurrence with these other agencies, the strategy is now subject to the new administration’s review. MARAD and DOT officials told us that they now view the existing draft strategy as pre- decisional and emphasized that no decisions have yet been made about the extent to which it must be revised before being sent out for a new round of review by the stakeholder agencies. DOT officials provided no timeline to us as to when they expect the strategy to move forward, stating that it was not yet clear how long DOT would be reconsidering and potentially revising the strategy before moving it forward again. Similarly, no time frames have been provided to Congress. The delay in submitting this strategy to Congress means that decision-makers do not have information and recommendations from the agency to inform policy- making in this area. Moreover, it further delays a response to a specific statutory requirement that DOT make recommendations related to U.S.- flag vessel competitiveness and develop a strategy to ensure the long- term viability of U.S.-flag vessels and U.S.-citizen mariners. While DOT has been delayed in issuing the national strategy, MARAD has in other agency reports or through discussions with stakeholders identified some options to address the competitiveness of U.S.-flag vessels and the long-term viability of the U.S. Merchant Marine—issues that are very similar to the key challenges identified by stakeholders with whom we spoke. However, DOT and MARAD officials stated that they are not yet ready to address the feasibility of these options. For example, MARAD has identified the following options as having potential to reduce the costs of operating a U.S.-flag vessel—which would in turn increase U.S.-flag vessels’ competitiveness: MARAD is part of a U.S. Registry Working Group that was established in response to a 2016 report and is looking at actions to decrease the time and cost of bringing vessels under the U.S. flag, including the cost of meeting Coast Guard requirements. This working group is considering actions, such as applying internationally recognized vessel standards to U.S.-flag vessels to meet Coast Guard requirements, among others. In the current strategic plan for 2017 through 2021, MARAD identified two areas of reform—mariner income-tax relief and liability insurance reform—that could reduce the crew costs of operating under a U.S. flag. MARAD officials stated that stakeholders have recommended that MARAD consider whether a tax on U.S.-flag vessels receiving maintenance overseas should be eliminated in order to reduce maintenance costs for U.S.-flag vessels. In general, maintenance and repairs on U.S.-flag vessels not conducted at U.S. shipyards are subject to a statutory 50 percent ad valorem tax on the cost of maintenance performed overseas. According to 12 of the 14 MSP vessel operators we spoke with, U.S. shipyards are typically more expensive than foreign shipyards or may not be close to the vessel’s location or route, so they typically choose to pay the tax and have the maintenance performed overseas. Four MSP vessel operators stated that they send U.S.-flag vessels to U.S. shipyards for maintenance when it makes sense from a logistical and financial perspective. MARAD officials stated they are considering the effect of eliminating the tax, a step that would reduce costs for vessel operators but would potentially negatively affect the financial viability of U.S. shipyards, which the law was designed to assist. However, MARAD officials stated that they have not yet evaluated these trade-offs. MARAD and Transportation Command officials have also identified—but not officially proposed—several options to increase the volume of government cargo carried on U.S.-flag vessels, which was identified by stakeholders we spoke with as a cause of the challenge of sustaining the financial viability of MSP vessels. For example, Transportation Command officials told us that they consider access to cargo to be a critical means of sustaining U.S.-flag vessels. Transportation Command and MARAD officials stated that one way to increase the amount of commercial cargo on U.S.-flag vessels would be to require that certain energy export commodities, such as oil or liquefied natural gas, be carried on U.S.-flag vessels. While this option has been considered in the past, it would require new legislation and would have potential trade-offs. For example, in 2015, we analyzed the potential effects of a requirement that U.S. liquefied natural gas exports be carried on U.S.-built and flagged vessels. We found that such a requirement could potentially increase the number of U.S.-flag vessels by 100, but, due to their higher operating costs, could also increase the cost of transporting liquefied natural gas from the United States, decrease the competitiveness of U.S. liquefied natural gas in the world market, and in turn, reduce demand for U.S. liquefied natural gas. MARAD officials stated that another option would be increasing the percentage of cargo, such as food aid, that civilian agencies are required to transport on U.S.-flag vessels. This would also require an amendment to existing legislation and would also have trade-offs since as described previously, cargo preference requirements can negatively affect the missions of civilian agencies. Another option stated by MARAD officials to address declining government cargo volumes would be to increase the MSP stipend to replace some of the government support previously provided through cargo preference programs. This option was previously used to address the recent reduction in government cargo, as described previously in this report. MARAD, through its 2017 Mariner Workforce Working Group report, also identified options to address the challenge of ensuring a sufficient number of U.S.-citizen mariners for defense needs. This challenge was identified by stakeholders we spoke with and by the sealift strategy mandate’s call for DOT to ensure the long-term viability of the U.S. Merchant Marine, which includes U.S.-citizen mariners. The Mariner Workforce Working Group report identified two actions that could help increase the number of U.S.-citizen mariners. However, the working group’s report did not discuss specific costs or trade-offs related to either action or elaborate any further on them. The identified actions were as follows: MARAD should develop a broad-based reserve program that would identify and support qualified mariners willing to sail in commercial and government-owned vessels during an emergency. MARAD would provide limited financial assistance in training mariners and maintaining credentials, in turn for which mariners who participate would be obligated to sail in the event of a defense need. MARAD and other U.S. government agencies should support a healthy merchant marine (which encompasses U.S.-flag vessels and U.S.-citizen mariners). The government should fully support programs including MSP, cargo preference requirements, the Jones Act, and government chartering of privately owned vessels. When DOD determines that national needs require more mariners and vessels than can be provided through current programs, those programs should be expanded to meet such needs. MARAD and DOT officials stated that they are not yet ready to propose actions to address any of these issues. According to these officials, they have not yet developed cost estimates or analyzed the trade-offs of various alternatives to increasing U.S.-flag vessels’ competitiveness or otherwise supporting the financial viability of the U.S.-flag fleet or ensuring sufficient U.S. citizen mariners for defense purposes. The officials stated that they are therefore not ready to recommend which of the identified options, if any, should be pursued, either as recommendations in the national maritime strategy or elsewhere. Conclusions To date, U.S. government support for commercial sealift has helped meet national defense needs, but recent increases in the cost differential of U.S.-flag vessels versus foreign-flag vessels and decreases in the volumes of government cargo have made it more challenging to ensure the financial viability of U.S.-flag vessels. Moreover, with a smaller number of U.S. flag vessels in international trade than in previous years, DOD and MARAD have raised concerns about the sufficiency of the pool of U.S. citizen mariners the United States can count on to crew government-owned reserve vessels activated for national defense needs. Congress mandated in 2014 that DOT issue strategies to address these challenges. MARAD has been working on a national maritime strategy to address both mandates. However, over 3 years after a congressionally mandated issuance date of February 2015, DOT has not published this strategy or made any recommendations to increase U.S.-flag vessels’ competitiveness or to ensure the long-term viability of the U.S.-flag fleet and U.S. citizen mariners. DOT has also not developed a timeline for when it will complete and provide this strategy to Congress. The continued lack of such a strategy limits decision-makers’ ability to make policy choices related to these challenges in a comprehensive way that considers the complex issues related to the long-time government support for the U.S.-flag fleet. Recommendation for Executive Action: The Secretary of the Department of Transportation should complete the national maritime strategy and establish and provide to Congress a timeline by which the strategy document will be issued. (Recommendation 1) Agency Comments We provided a draft of this report to DOT, DOD, USDA, USAID, EXIM Bank, the Department of Energy, and the State Department for review and comment. DOT provided written comments, which are reprinted in appendix II, and technical comments, which we incorporated as appropriate. DOT agreed with our recommendation that DOT should complete the national maritime strategy and provide a timeline to Congress by which the document will be issued. USAID provided written comments, which are reprinted in appendix III. DOD and EXIM Bank provided technical comments, which we incorporated as appropriate. USDA, the Department of Energy, and the State Department informed us that they had no comments. We are sending copies of this report to the Secretary of Transportation, the Secretary of Defense, the Secretary of State, the Secretary of Energy, the Secretary of Agriculture, the Administrator of USAID, and the Chairman of EXIM Bank, as well as appropriate congressional committees and other interested parties. In addition this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-2834 or vonaha@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 IV. Appendix I: Alternatives and Potential Modifications to the Maritime Security Program In addition to the potential modifications to the Maritime Security Program (MSP) that we described in the report, we examined two alternatives to the MSP that we identified by conducting a literature search on the program and reviewing a 2009 study of the MSP. We also interviewed stakeholders about these two alternatives. These two alternatives were for the government to purchase its own vessel fleet to meet defense requirements or for DOD to charter or contract for vessels in times of need. However, these options do not present clear cost savings or would reduce the government’s ability to meet national defense goals, according to stakeholders we interviewed and the 2009 study. We also identified additional options beyond those described in the report to modify the MSP while maintaining the annual stipend by reviewing prior GAO work and interviewing the same stakeholders on ways to improve the MSP. These modifications included implementing a competitive-bidding process to select participants and varying payments to MSP vessel operators based on the vessel’s type and military usefulness, among others. Cost savings to the government associated with these modifications are likely to be small to nonexistent, according to MARAD officials, and maritime stakeholders had differing views on whether these modifications would improve the program. Tables 2 and 3 below show the potential effects, as identified by stakeholders, that each of the alternatives and modifications to the MSP would have on costs, mission, and other areas. Appendix II: Comments from the Department of Transportation Appendix III: Comments from the U.S. Agency for International Development Appendix IV: GAO Contacts and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the individual named above, Alwynne Wilbur (Assistant Director), Stephanie Purcell (Analyst in Charge), Amy Abramowitz, David Ballard, Geoff Hamilton, Bonnie Ho, Christopher Jones, Josh Ormond, Amy Rosewarne, and Kelly Rubin made key contributions to this report.

Why GAO Did This Study The U.S. government relies on U.S.-flag vessels that trade internationally to transport cargo and to provide a pool of U.S. mariners who could be called upon in times of crisis for DOD's reserve fleet. Through financial support and cargo preferences, the United States has supported the viability of the U.S.-flag fleet. However, in recent years concern has grown about the sustainability of the U.S.-flag fleet, and in 2014, Congress statutorily mandated that DOT develop national strategies related to the sustainability of the U.S.-flag fleet including recommendations for the future. GAO was asked to review U.S. government support for these U.S.-flag vessels that trade internationally. This report discusses: (1) the effect the U.S. government's support for the U.S.-flag fleet has had on national defense needs and other government programs; (2) the challenges identified by stakeholders in sustaining the U.S.-flag fleet for defense needs; and (3) the status of the mandated national strategies related to the U.S.-flag fleet. GAO reviewed relevant laws and analyzed DOT and DOD documents and government cargo data for fiscal years 2012–2017. GAO also interviewed officials from DOT, DOD, and other federal agencies subject to cargo preference; MSP vessel operators; and other stakeholders. What GAO Found U.S. government support for the U.S.-registered (U.S.-flag) fleet has helped meet national defense needs, but it has had a negative effect on some non-defense government programs. Specifically, the U.S. government supports U.S.-flag vessels through: (1) an annual stipend provided through the Maritime Security Program (MSP) and (2) cargo preferences that require federal agencies to transport certain percentages of government cargo on U.S.-flag vessels. These supports have helped ensure that a sufficient number of U.S.-flag vessels are available to meet the Department of Defense's (DOD) cargo capacity needs. Although cargo preference requirements have helped support the financial viability of U.S.-flag vessels that participate in the MSP, they have had a negative impact on some non-defense programs. For example, the requirement pursuant to which food-aid agencies send a certain percentage of food aid on U.S.-flag vessels has resulted in higher shipping costs for these agencies and has negatively affected their missions, according to officials at these agencies. Stakeholders GAO spoke to identified two primary challenges in sustaining the internationally trading U.S.-flag fleet for national defense needs. First, even with the annual MSP stipend, maintaining the financial viability of U.S.-flag vessels is a challenge. This challenge largely results from the higher costs of operating a U.S.-flag vessel. According to U.S. Maritime Administration (MARAD) officials, the additional cost of operating a U.S. flag vessel compared to a foreign-flag vessel has increased—from about $4.8 million annually in 2009 and 2010 to about $6.2 to $6.5 million currently—making it harder for such vessels to remain financially viable. In addition, government cargo volumes have fallen in recent years. In response to this challenge, Congress increased the MSP stipend from $3.5 million per vessel for fiscal year 2016 to $4.99 million per vessel for fiscal year 2017. MARAD officials said this increase has temporarily stabilized the financial situation of MSP vessel operators. However, MARAD officials stated trends in operating costs and government cargo suggest this will remain an ongoing challenge. Second, a potential shortage of U.S.-citizen mariners available to crew the government-owned reserve fleet during a crisis is a challenge. DOD counts on mariners working on U.S.-flag vessels to crew this fleet when activated. A MARAD working group recently estimated a shortage of over 1,800 mariners in the case of a drawn-out military effort, although it also recommended data improvements to increase the accuracy of the count of available mariners. The Department of Transportation (DOT) has drafted but not issued the national maritime strategies mandated by Congress. The strategies are intended to address U.S.-flag vessels' competitiveness and ensure the long-term viability of U.S.-flag vessels and U.S.-citizen mariners. According to DOT officials, a combined draft strategy was developed under the previous administration but is now being reviewed by the current administration. DOT has not established a timeline for finalizing the strategy even though it was to be completed by 2015. Without establishing a timeline to complete this required strategy, DOT continues to delay providing decision-makers the information they need to determine how best to address the challenges facing the U.S.-flag fleet. What GAO Recommends GAO recommends that DOT complete the national maritime strategy and establish time frames for its issuance. DOT concurred with our recommendation and provided technical comments, which we incorporated as appropriate.

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Background Weapon Systems Are Unique In Many Ways, but Face Common Cyber Vulnerabilities Cybersecurity issues can vary widely across different types of systems, so weapon systems cybersecurity challenges may be very different than those of some IT systems. Despite variation across systems, cybersecurity can be described using common terminology, such as the key terms below used by the National Research Council. Key Concept Security Controls are safeguards or countermeasures to protect the confidentiality, integrity, and availability of a system and its information. For example, a firewall is a common control to allow or block traffic based on a set of rules. Because it is impossible to define a rule for every scenario, attackers look for ways to access a system that are not covered by the rules. For example, a firewall may block traffic from a specific country, but attackers may make it appear that they are in a country that is not blocked. They may use tools to avoid the firewall, such as embedding malicious software in an e-mail and waiting for a user to open it and inadvertently install the code. A cyber vulnerability is a weakness in a system that could be exploited to gain access or otherwise affect the system’s confidentiality, integrity, and availability. A cybersecurity threat is anything that can exploit a vulnerability to harm a system, either intentionally or by accident. Cybersecurity risk is a function of the threat (intent and capabilities), vulnerabilities (inherent or introduced), and consequences (fixable or fatal). Although some weapon systems are purely IT systems, most—such as aircraft, missiles, and ships—are what the National Institute of Standards and Technology (NIST) and sometimes DOD refer to as “cyber-physical systems.” NIST defines these systems as “co-engineered interacting networks of physical and computational components.” These cyber systems can affect the physical world so the consequences of a cyber attack may be greater than those of attacks on other types of systems. For example, an attack on a weapon system could have physical consequences that may even result in loss of life. Nevertheless, weapon systems share many of the same cyber vulnerabilities as other types of automated information systems. Weapon systems are large, complex, systems of systems that have a wide variety of shapes and sizes, with varying functionality. Despite obvious differences in form, function, and complexity, weapon systems and other types of systems are similar in some important, if not obvious, ways. For example, DOD reports state that many weapon systems rely on commercial and open source software and are subject to any cyber vulnerabilities that come with them. Weapon systems also rely on firewalls and other common security controls to prevent cyberattacks. Weapon system security controls can also be exploited or bypassed if the system is not properly configured. Finally, weapon systems are operated by people—a significant source of cybersecurity vulnerability for any system. Anatomy of a Cyber Attack One common way to discuss cybersecurity is through the activities necessary to defend (or attack) a system. System developers and operators take steps to protect the system from cyber attacks, while attackers attempt to defeat those protections as depicted in figure 1. The cyber attack sequence is also referred to as a cyber kill chain or cyber attack lifecycle. There are multiple models for understanding cyber attacks, each with their own terminology and sequence of steps. The attack sequence below is simpler, but generally consistent with existing cybersecurity models. We identified the defend sequence below based on the steps included in cybersecurity test reports that we reviewed. Attack Sequence: Discover  Implement  Exploit Example: Importance of Patching in a Timely Manner In the 2017 Equifax cyber attack, personal data for over 145 million people were exposed. Attackers took advantage of a vulnerability in a commonly used web application to access Equifax’s credit reporting system. A patch for the vulnerability was available in March, but Equifax had not applied it by the time of the attack—in mid- May. A cyber attacker looks for ways to get around security controls in order to obtain full or partial control of the system. An attacker typically starts by learning as much as possible about the system—potentially through cyber reconnaissance—to identify vulnerabilities in the system. The more attackers know about the system, the more options they have when designing an attack. An attacker may identify a previously unknown vulnerability that the system owner is unaware of. Or the attacker could look for system components that had not applied known security updates—also called “patches.” Developers of commercial components usually publicly announce any security patches and, ironically, provide a roadmap for an attacker to attack a system or component. An attack may not happen all at once—an attacker may find the easiest way to gain initial access and then look for ways to expand their access until they reach their ultimate goal. Even once they achieve full access to a system, an attacker may wait for an opportune time to attack the confidentiality, integrity, or availability of a system. Types of attacks are described in appendix II. Security Goals: Protect  Detect  Respond/Recover The system owner wants to prevent, or at least limit, attempts to adversely affect the confidentiality, integrity, or availability of the system. The owner implements security controls such as firewalls, role-based access controls, and encryption to reduce the number of potential attack points. Many controls need to be designed into the system early in the development cycle. Ideally, the controls are designed to work together and there may be layers of controls that an attacker would have to defeat in order to gain control of the system—referred to as “defense in depth.” Key Concepts Role-based access entails allowing users to only access information and features necessary to carry out their job. Encryption is a way of transforming information so that only authorized users are able to read it. Protecting a system also includes administrative processes, such as requiring users to regularly change their passwords and applying patches on a regular schedule—referred to as cyber hygiene. However, no system can be completely secure, so system owners must also constantly monitor their systems for suspicious activity. Logging is a common system feature that automatically records system activity. Unusual patterns such as numerous failed log-in attempts from a remote location could indicate that an unauthorized person is trying to gain access to the system. Once such a cyber activity is detected, the system owner needs to take steps to end the attack and restore any system capabilities that were degraded as a result of the attacker’s actions. Attack Sophistication Levels We reported in 2015 that federal and contractor systems face an evolving array of cyber-based threats, including criminals, hackers, adversarial nations, and terrorists. Threats can range from relatively unskilled “script kiddies” who only use existing computer scripts or code to hack into computers, to well-resourced and highly skilled advanced threats who not only have sophisticated hacking skills, but also normally gather detailed knowledge of the systems they attack. Table 1 provides brief descriptions of the terminology DOD uses to categorize threats. DOD Weapon Systems Requirements and Acquisition Processes Weapons systems are developed, acquired, and deployed within the defense acquisition system, a system of statutes and regulations. Subject to control of the DOD, the Army, Air Force, Navy, and Marine Corps by law have authority to “organize, train, and equip” their services. Their decisions regarding what to develop and how best to do so are informed by documents and deliberations under DOD’s requirements and acquisition processes respectively. Early in the acquisition lifecycle, the requirements process identifies what capabilities are needed and evaluates options to best meet those needs. The acquisition process is a gated review process that assesses programs against established review criteria, such as the program’s cost, schedule, performance, and whether the weapon system is ready to move forward in the acquisition process. Numerous military-service entities are involved in these processes. Key enterprise-level organizations include the Joint Staff and Office of the Secretary of Defense organizations, such as the Office of the Under Secretary of Defense (Acquisition and Sustainment), Office of the Under Secretary of Defense (Research and Engineering), and the Director of Operational Test and Evaluation (DOT&E). Organizations Responsible for Weapon Systems Cybersecurity Example: Increased Reliance on Software In the 2015 JEEP Cherokee cyber attack, researchers remotely took physical control of a JEEP, including shutting off the engine and controlling the brakes. In 2016, we reported that electronic systems control multiple passenger vehicle functions and that vehicles include multiple interfaces that leave them vulnerable to cyber attacks. Researchers studied a JEEP to understand its systems, including the characteristics of its software code and its "CAN Bus," which connects to units that control core vehicle functions. They remotely accessed an Internet-connected component and used it as an initial entry point to access the vehicle's CAN Bus, which then allowed them to control many of the JEEP’s functions. Just as many DOD organizations are responsible for weapon systems acquisitions, many have responsibilities related to cybersecurity during the acquisition process. For example, program offices are responsible for planning and implementing cybersecurity measures for the system under development. Authorizing officials are responsible for overseeing programs’ adherence to security controls and for authorizing a system’s entry into operations based on the system having an acceptable level of cyber risk. At key decision points, the Office of the Under Secretary of Defense (Research and Engineering) is responsible for advising the Secretary of Defense and providing independent technical risk assessments that address a variety of topics, including the system’s cybersecurity posture. Military test organizations conduct cybersecurity assessments of weapon systems. DOT&E oversees those tests and is funding research on the cybersecurity of some weapon system components that pose particular cybersecurity challenges. Organizations that are traditionally associated with cybersecurity, such as NSA and Cyber Command, support some aspects of weapon systems cybersecurity. However, they are not responsible for reviewing the designs of most weapon systems to identify potential vulnerabilities, although NSA officials said that they will provide advice to acquisition programs if asked to do so. More information about these roles and responsibilities is included in appendix III. Multiple Factors Make Weapon Systems Cybersecurity Increasingly Difficult, but DOD Is Just Beginning to Grapple with the Challenge Multiple factors contribute to the current state of DOD weapon systems cybersecurity, including: the increasingly computerized and networked nature of DOD weapons, DOD’s past failure to prioritize weapon systems cybersecurity, and DOD’s nascent understanding of how best to develop more cyber secure weapon systems. Specifically, DOD weapon systems are more software and IT dependent and more networked than ever before. This has transformed weapon capabilities and is a fundamental enabler of the United States’ modern military capabilities. Yet this change has come at a cost. More weapon components can now be attacked using cyber capabilities. Furthermore, networks can be used as a pathway to attack other systems. We and others have warned of these risks for decades. Nevertheless, until recently, DOD did not prioritize cybersecurity in weapon systems acquisitions. In part because DOD historically focused on the cybersecurity of its networks but not weapon systems themselves, DOD is in the early stage of trying to understand how to apply cybersecurity to weapon systems. Several DOD officials explained that it will take some time, and possibly some missteps, for the department to learn what works and does not work with respect to weapon systems cybersecurity. DOD Weapon Systems Are Increasingly Complex and Networked, Increasing Cyber Vulnerabilities DOD’s weapon systems are increasingly dependent on software and IT to achieve their intended performance. The amount of software in today’s weapon systems is growing exponentially and is embedded in numerous technologically complex subsystems, which include hardware and a variety of IT components, as depicted in figure 2. Nearly all weapon system functions are enabled by computers—ranging from basic life support functions, such as maintaining stable oxygen levels in aircraft, to intercepting incoming missiles. DOD has actively sought ways to introduce this automation into weapon systems. For example, we have reported that for decades, the Navy has sought to reduce ship crew size based, in part, on the assumption that some manual tasks could be automated and fewer people would be needed to operate a ship. Yet this growing dependence on software and IT comes at a price. It significantly expands weapons’ attack surfaces. According to DOT&E, any exchange of information is a potential access point for an adversary. Even “air gapped” systems that do not directly connect to the Internet for security reasons could potentially be accessed by other means, such as USB devices and compact discs. Weapon systems have a wide variety of interfaces, some of which are not obvious, that could be used as pathways for adversaries to access the systems, as is shown in figure 3. DOD systems are also more connected than ever before, which can introduce vulnerabilities and make systems more difficult to defend. According to the DSB, nearly every conceivable component in DOD is networked. Weapon systems connect to DOD’s extensive set of networks—called the DOD Information Network—and sometimes to external networks, such as those of defense contractors. Technology systems, logistics, personnel, and other business-related systems sometimes connect to the same networks as weapon systems. Furthermore, some weapon systems may not connect directly to a network, but connect to other systems, such as electrical systems, that may connect directly to the public Internet, as is depicted in figure 4. These connections help facilitate information exchanges that benefit weapon systems and their operators in many ways—such as command and control of the weapons, communications, and battlespace awareness. If attackers can access one of those systems, they may be able to reach any of the others through the connecting networks. Many officials we met with stated that including weapon systems on the same networks with less protected systems puts those weapon systems at risk. Furthermore, the networks themselves are vulnerable. DOT&E found that some networks were not survivable in a cyber-contested environment and the DSB reported in 2013 that “the adversary is in our networks.” Further complicating matters, weapon systems are dependent on external systems, such as positioning and navigation systems and command and control systems in order to carry out their missions—and their missions can be compromised by attacks on those other systems. A successful attack on one of the systems the weapon depends on can potentially limit the weapon’s effectiveness, prevent it from achieving its mission, or even cause physical damage and loss of life. Despite Warnings, Cybersecurity Has Not Been a Focus of Weapon Systems Acquisitions We and other organizations have identified risks associated with increased reliance on software and networking since at least the early 1990s, as is shown in table 2. Nevertheless, DOD has only recently begun prioritizing weapon systems cybersecurity. Instead, for many years, DOD focused cybersecurity efforts on protecting networks and traditional IT systems, such as accounting systems, rather than weapons. Experts we interviewed as well as officials from program offices, the Office of the Secretary of Defense, and some military test organizations explained that, until around 2014, there was a general lack of emphasis on cybersecurity throughout the weapon systems acquisition process. Others have reported similar findings. For example, the DSB reported in 2013 that although DOD had taken great care to secure the use and operation of the hardware of its weapon systems, it had not devoted the same level of resources and attention to IT systems that support and operate those weapons and critical IT capabilities embedded within the weapon systems. The National Research Council reported in 2014 that much broader and more systematic attention to cybersecurity was needed in the acquisition process and that the Navy was in the “crawl” stage of a “crawl-walk-run” journey. Similarly, the Navy reported in 2015 that there was a lack of attention to cybersecurity in the acquisition process and platform IT systems were not engineered with cybersecurity as a key component. In the past, consideration of cybersecurity was not a focus of the key processes governing the development of weapon systems. It was not a focus of key acquisition and requirements policies nor was it a focus of key documents that inform decision-making. For example, until a few years ago, DOD’s main requirements policy did not call for programs to factor cyber survivability into their key performance parameters. Key performance parameters are the most important system capabilities, called “requirements,” that must be met when developing weapon systems. They are established early on in an acquisition program and drive system design decisions. They are also used as a benchmark to measure program performance and are reviewed during acquisition decisions and other oversight processes. Because cybersecurity key performance parameters were not required, Joint Staff officials and some program officials said that many current weapon systems had no high- level cybersecurity requirements when they began, which in turn limited emphasis on cybersecurity during weapon system design, development, and oversight. In addition, Joint Staff officials said that, historically, cybersecurity was not a factor in analyses of alternatives. This analysis is an important early step in acquiring a new weapon system and informs decisions about the relative effectiveness, costs, and risks of potential systems that could be developed. By not considering cybersecurity in these analyses, decisions about which system to develop were made without consideration of whether one proposed system might be more inherently vulnerable from a cyber perspective than others. Programs’ lack of cybersecurity requirements may have also contributed to challenges with incorporating cybersecurity into weapon systems testing. Specifically, DOT&E and service test agencies said that prior to around 2014, program offices tried to avoid undergoing cybersecurity assessments because they did not have cybersecurity requirements and therefore thought they should not be evaluated. Furthermore, test officials said that many within DOD did not believe cybersecurity applied to weapon systems. As a result, fewer cybersecurity assessments were conducted at that time in comparison to recent years. By not incorporating cybersecurity into key aspects of the requirements and acquisition processes, DOD missed an opportunity to give cybersecurity a more prominent role in key acquisition decisions. Numerous officials we met with said that this failure to address weapon systems cybersecurity sooner will have long-lasting effects on the department. Due to this lack of focus on weapon systems cybersecurity, DOD likely has an entire generation of systems that were designed and built without adequately considering cybersecurity. Bolting on cybersecurity late in the development cycle or after a system has been deployed is more difficult and costly than designing it in from the beginning. Not only is the security of those systems and their missions at risk, the older systems may put newer systems in jeopardy. Specifically, if DOD is able to make its newer systems more secure, but connects them to older systems, this puts the newer systems at risk. Furthermore, even if they are not connected, if the newer systems depend on the older systems to help fulfill their missions, those missions may be at risk. DOD Is Still Learning How to Address Weapon Systems Cybersecurity DOD is still determining how best to address weapon systems cybersecurity given weapon systems’ different and particularly challenging cybersecurity needs. Although there are similarities between weapon systems and traditional IT systems, DOD has acknowledged that it may not be appropriate to apply the same cybersecurity approach to weapon systems as traditional IT systems. RAND reported and several program officials we met with stated that DOD’s security controls were developed with IT systems, and not weapon systems, in mind. DOD policies and guidance acknowledge that tailoring may be warranted, but they do not yet specify how the approaches to the security controls should differ. Key Concept Industrial control system is a general term that encompasses several types of control systems including supervisory control and data acquisition systems, distributed control systems, and programmable logic controllers. Industrial control systems monitor or control other systems and processes and may be used to automate tasks such as opening and closing valves. DOD is still in the process of determining how to make weapon system components with particular cyber vulnerabilities as secure as possible. For example, many weapon systems use industrial control systems to monitor and control equipment, and like computers, they include software. Many weapon systems use such systems to carry out essential functions. For example, a ship may use industrial control systems to control engines and fire suppression systems. According to NIST, industrial control systems were originally designed for use in trusted environments, so many did not incorporate security controls. Government and industry reports state that attacks on these systems are increasing. However, DOD officials said that program offices may not know which industrial control systems are embedded in their weapons or what the security implications of using them are. Over the past few years, DOD has begun funding work to improve its understanding of how to best secure these systems. In addition, Office of the Secretary of Defense officials informed us that, in response to section 1650 of the National Defense Authorization Act for Fiscal Year 2017, they are working to better understand the dependency of industrial control systems on mission impact, including other key infrastructure nodes that could be vulnerable to a cyber attack and have significant impact to mission accomplishment. Key Concept Vulnerability chaining is when attackers take advantage of multiple vulnerabilities— which could be low or moderate risk in isolation—to perform a more significant attack on a system. Several weapon system-specific factors make it important to tailor cybersecurity approaches, but also make cybersecurity difficult. Because weapon systems can be very large, complex, systems of systems with many interdependencies, updating one component of a system can impact other components. A patch or software enhancement that causes problems in an email system is inconvenient, whereas one that affects an aircraft or missile system could be catastrophic. Officials from one program we met with said they are supposed to apply patches within 21 days of when they are released, but fully testing a patch can take months due to the complexity of the system. Even when patches have been tested, applying the patches may take additional time. Further, weapon systems are often dispersed or deployed throughout the world. Some deployed systems may only be patched or receive software enhancements when they return to specific locations. Although there are valid reasons for delaying or forgoing weapon systems patches, this means some weapon systems are operating, possibly for extended periods, with known vulnerabilities. Exacerbating matters, some program offices may also not yet have a solid understanding of the cybersecurity implications of their systems’ designs, including their systems’ connectivity. This situation makes it difficult to secure the system. Experts and officials from some test organizations we met with stated that programs have generally not understood the multitude of ways that information flows in and out of their systems, although this may be improving. Several program officials we met with felt that weapon systems were more secure than other types of systems and noted that they typically did not have direct connections to the Internet. In fact, weapon systems have more potential avenues of attack than may be apparent, such as radio communications receivers and radar receivers. Furthermore, the National Research Council reported in 2014 that individual warfare domains do not fully grasp risks within their own domain, let alone those that can be introduced through other domains. For example, if a space system is connected to a land system—even indirectly—an attacker may be able to move from one to the other or limit the operations of one by attacking the other. Tests Revealed that Most Weapon Systems Under Development Have Major Vulnerabilities, and DOD Likely Does Not Know the Full Extent of the Problems We found that from 2012 to 2017, DOD testers routinely found mission- critical cyber vulnerabilities in nearly all weapon systems that were under development. Using relatively simple tools and techniques, testers were able to take control of these systems and largely operate undetected. In some cases, system operators were unable to effectively respond to the hacks. Furthermore, DOD does not know the full scale of its weapon system vulnerabilities because, for a number of reasons, tests were limited in scope and sophistication. Weapon Systems Cybersecurity Assessments Identified Mission-Critical Vulnerabilities Nearly all major acquisition programs that were operationally tested between 2012 and 2017 had mission-critical cyber vulnerabilities that adversaries could compromise. DOT&E’s 2017 annual report stated that tests consistently discovered mission-critical vulnerabilities in acquisition programs, echoing a similar finding by the DSB in 2013 about DOD IT systems and networks. Cybersecurity test reports that we reviewed showed that test teams were able to gain unauthorized access and take full or partial control of these weapon systems in a short amount of time using relatively simple tools and techniques. We saw widespread examples of weaknesses in each of the four security objectives that cybersecurity tests normally examine: protect, detect, respond, and recover. Protect Key Concepts An insider is a user who is authorized to use a system (e.g., has a username and password) and has physical access to all or parts of a system. A near-sider is an unauthorized user who has physical access to all or part of a system. For example, someone taking a tour of a Navy ship would be a near-sider. A remote user is not authorized to use the system and does not have physical access to the system. Test teams were able to defeat weapon systems cybersecurity controls meant to keep adversaries from gaining unauthorized access to the systems. In one case, it took a two-person test team just one hour to gain initial access to a weapon system and one day to gain full control of the system they were testing. Some programs fared better than others. For example, one assessment found that the weapon system satisfactorily prevented unauthorized access by remote users, but not insiders and near-siders. Once they gained initial access, test teams were often able to move throughout a system, escalating their privileges until they had taken full or partial control of a system. In one case, the test team took control of the operators’ terminals. They could see, in real-time, what the operators were seeing on their screens and could manipulate the system. They were able to disrupt the system and observe how the operators responded. Another test team reported that they caused a pop-up message to appear on users’ terminals instructing them to insert two quarters to continue operating. Multiple test teams reported that they were able to copy, change, or delete system data including one team that downloaded 100 gigabytes, approximately 142 compact discs, of data. Example: Poor Password Management The 2016 cyber attack on Dyn, a company that serves as a key intermediary in directing Internet traffic, disabled websites, such as Twitter, Netflix, and CNN and brought down the Internet in some regions. The attack used malware to search the Internet for unsecured devices, such as those that used factory- default usernames and passwords, and then used those devices to send junk traffic to online targets until they could not function. The test reports indicated that test teams used nascent to moderate tools and techniques to disrupt or access and take control of weapon systems. For example, in some cases, simply scanning a system caused parts of the system to shut down. One test had to be stopped due to safety concerns after the test team scanned the system. This is a basic technique that most attackers would use and requires little knowledge or expertise. Poor password management was a common problem in the test reports we reviewed. One test report indicated that the test team was able to guess an administrator password in nine seconds. Multiple weapon systems used commercial or open source software, but did not change the default password when the software was installed, which allowed test teams to look up the password on the Internet and gain administrator privileges for that software. Multiple test teams reported using free, publicly available information or software downloaded from the Internet to avoid or defeat weapon system security controls. Test reports we reviewed make it clear that simply having cybersecurity controls does not mean a system is secure. How the controls are implemented can significantly affect cybersecurity. For example, one test report we reviewed indicated that the system had implemented role- based access control, but internal system communications were unencrypted. Because the system’s internal communications were unencrypted, a regular user could read an administrator’s username and password and use those credentials to gain greater access to the system and the ability to affect the confidentiality, integrity, or availability of the system. Programs Had Not Addressed Some Previously Identified Vulnerabilities Program offices were aware of some of the weapon system vulnerabilities that test teams exploited because they had been identified in previous cybersecurity assessments. For example, one test report indicated that only 1 of 20 cyber vulnerabilities identified in a previous assessment had been corrected. The test team exploited the same vulnerabilities to gain control of the system. When asked why vulnerabilities had not been addressed, program officials said they had identified a solution, but for some reason it had not been implemented. They attributed it to contractor error. Another test report indicated that the test team exploited 10 vulnerabilities that had been identified in previous assessments. Detect Example: Poor Detection In the 2014 Office of Personnel Management (OPM) cyber attack, attackers exfiltrated personnel files of 4.2 million government employees, security clearance background information on 21 million individuals, and fingerprint data of 5.6 million of these individuals. Attackers used a contractor’s OPM credentials to log into the OPM system, installed malware, and created a backdoor to the network. These attackers were in OPM’s networks for at least 14 months. Over 2,000 pieces of malware were later identified on OPM devices. detection. One test team emulated a denial of service attack by rebooting the system, ensuring the system could not carry out its mission for a short period of time. Operators reported that they did not suspect a cyber attack because unexplained crashes were normal for the system. Another test report indicated that the intrusion detection system correctly identified test team activity, but did not improve users’ awareness of test team activities because it was always “red.” Warnings were so common that operators were desensitized to them. A common way to detect cyber activity is to review logs of system activity looking for unusual occurrences. Multiple test reports indicated that test team activity was documented in system logs, but operators did not review them. One test report noted that the system had no documented procedures for reviewing logs. Respond/Recover Multiple test reports indicated that operators did not effectively respond to test team activities. In multiple tests, operators did not respond because, as noted above, they were simply unaware of the test team activities. In some cases, however, operators were unable to effectively respond even when they identified or were notified that the test team had carried out an attack. One test report indicated that operators identified test team intrusion attempts and took steps to block the test team from accessing the system. However, the test team was able to easily circumvent the steps the operators took. In another case, the test team was able to compromise a weapon system and the operators needed outside assistance to restore the system. DOD Has Limited Insight into Weapon Systems Cybersecurity DOD does not know the full extent of its weapon systems cyber vulnerabilities due to limitations on tests that have been conducted. Cybersecurity assessments do not identify all vulnerabilities of the systems that are tested. This is, in part, because cybersecurity assessments do not reflect the full range of threats that weapon systems may face in operation. Test teams reported that they portray realistic threats and environments. However, the nature of tests imposes limitations on testers that do not apply to potential adversaries. For example, DOD officials said that most cybersecurity assessments are conducted over a few days to a few weeks. One test report indicated that the cybersecurity assessment was cut short due to external factors so the test team only had 41 hours to work with the system. In contrast, DOD officials we spoke to said that a determined adversary could spend months or years targeting our systems. Further, because test teams have a limited amount of time with a system, they look for the easiest or most effective way to gain access, according to DOD officials we met with and test reports we reviewed. They do not identify all of the vulnerabilities that an adversary could exploit. DOT&E noted that longer-term tests generally identify more cyber vulnerabilities than shorter tests. DOD officials we spoke to said that the department has increased the amount of long-term assessments it conducts in recent years. Weapon systems cybersecurity assessments may also be limited in the types of attacks that are portrayed so entire categories of vulnerabilities are not currently addressed in some cyber assessments. The test reports we reviewed tended to portray nascent to moderate threats and generally did not target special components like industrial control systems and non-Internet enabled devices which our adversaries could target. Similarly, counterfeit parts pose cybersecurity risks to weapon systems, but were not within the scope of the cybersecurity tests that we reviewed. System-specific limitations can also affect test results. Officials from one service test agency noted that in at least one case, they could not fully assess a system’s cybersecurity because portions of the system’s networks and data were proprietary. The system utilized the contractor’s corporate networks, which the test team was not allowed to attack. In several tests, a weapon system’s connections to external systems were either limited or had to be simulated. One test report we reviewed noted that the test team was not allowed to use classified networks to attack a weapon system due to security concerns. Another test was conducted in a lab environment so the test team had to simulate external communications. Although there are practical reasons for limiting the duration and scope of cybersecurity assessments, these limitations mean that DOD may not fully understand the extent of weapon system cyber vulnerabilities, as is reflected in figure 5. Many program officials we met with indicated that their systems were secure, including some with programs that had not had a cybersecurity assessment. Some systems have not yet undergone testing either because they are not far enough along in the acquisition process, because they were fielded prior to DOD’s emphasis on penetration testing, or out of concern that cybersecurity tests would interfere with operations. Systems that have not been tested are not necessarily more or less secure than systems that have been assessed. DOD does not know the extent to which these systems have cyber vulnerabilities. Program officials cited the security controls they applied as the basis for their belief that their systems were secure. For example, officials from a DOD agency we met with expressed confidence in the cybersecurity of their systems, but could not point to test results to support their beliefs. Instead, they identified a list of security controls they had implemented. However, security controls must be properly designed and implemented in order to be effective. As we noted earlier, test teams routinely found and defeated poorly implemented security controls. Officials we spoke to stated that controls are necessary, but not sufficient, and penetration test results—rather than compliance documentation—are better indicators of a system’s security. For programs that have had cybersecurity assessments, some program officials we met with questioned the validity of the results because of concerns about the realism of the assessments. For example, officials from one program noted that the testers were given more system information and access than an adversary would have. Officials from another program noted that testers asked for detailed information about the system’s design. These officials stated that cyber assessments were unrealistic if they relied on the program office to identify problem areas for the test team. However, test organizations and NSA officials we met with dismissed these observations, noting that adversaries are not subject to the types of limitations imposed on test teams, such as time constraints and limited funding—and this information and access are granted to testers to more closely simulate moderate to advanced threats. DOD Has Begun Taking Steps to Improve Weapon Systems Cybersecurity Over the past few years, DOD has taken several major steps to improve weapon systems cybersecurity. DOD issued and updated numerous policies and guidance to improve the department’s development of cyber resilient systems. These include improvements such as specifying that cybersecurity policies apply to weapon systems and requiring more focus on cybersecurity throughout a weapon system’s acquisition life cycle. DOD and Congress have also begun promising initiatives to help DOD improve its understanding of its weapon systems cyber vulnerabilities and take steps to mitigate their risks. However, DOD faces barriers that may limit its ability to achieve desired improvements. For example, DOD is struggling to hire and retain cybersecurity personnel, who are essential to implementing these changes. In addition, DOD faces barriers to information sharing, which hinder its ability to share vulnerability and threat information within and across programs. To improve the state of weapon systems cybersecurity, it is essential that DOD sustain its momentum in developing and implementing key initiatives. DOD Has Issued and Updated Policies and Guidance Since 2014, DOD has issued or updated at least 15 department-wide policies, guidance documents, and memorandums intended to promote more cyber secure weapon systems, some of which are highlighted in table 3. One of the more significant changes is that DOD’s existing cybersecurity policies now explicitly apply to weapon systems. DOD officials said the department has had cybersecurity policies in place for decades, but applied them to weapon systems only in the past few years. For example, DOD’s Risk Management Framework (RMF) is similar to its predecessor—DOD’s Information Assurance Certification and Accreditation Process—which called for application of an extensive series of controls to protect DOD networks and information systems. However, RMF applies these controls more widely to weapon systems cybersecurity. Another important change is that, in recognition that systems cannot be 100 percent secure, DOD has begun to emphasize cyber resiliency in some of its policies. The idea behind cyber resiliency is to identify and protect key elements of a system to ensure that they can continue to operate, possibly with limited capabilities, during a cyber attack. This entails designing in features such as durability, redundancy, and added protections for certain components. Lastly, key policies that govern the requirements and acquisition processes now address cybersecurity. These changes have the potential to bring greater attention to cybersecurity in weapon systems acquisitions. Rather than being treated as distinct from the acquisition process, cybersecurity is to be integrated into key acquisition activities, such as requirements development, technology maturation, and testing. Examples of this, as called for in various policies, include the following: Requirements. Identify cybersecurity requirements and how the information flows into, out of, and through the systems. This helps identify the system’s attack surface and informs the system’s design and cybersecurity controls. Cybersecurity should become part of the requirements trade space. Technology maturation. Focus early prototyping in part on buying down cybersecurity risks prior to system development. Cybersecurity controls should be applied and assessed during prototyping to evaluate cyber risks and inform down-selection and adjustment of requirements. Department of Defense, DOD Program Manager’s Guidebook for Cybersecurity (Sept. 2015). Developmental testing. Test the cybersecurity of weapon systems as they are developed, including integration of larger subsystems and, ultimately, the entire system. Perform cybersecurity assessments in representative operating environments during developmental testing. Operational testing. Conduct operational cybersecurity testing of weapon systems to include other systems that exchange information with the system under test (system-of-systems to include the network environment), end users, administrators, and cyber defenders. Reflect representative cyber threats. These extensive changes to policies and guidance, which adopt a similar risk-based framework to that already generally in place government-wide, appear to be a step in the right direction to increase the department’s emphasis on weapon systems cybersecurity. However, they are also relatively new for DOD, so it is too early to assess whether they are resulting in improved weapon systems cybersecurity. For example, changes to the requirements process apply primarily to new programs so it could be many years before systems that have gone through the new process undergo operational testing and are fielded. DOD Has Undertaken Initiatives, in Part Directed by Congress, to Help Understand and Address Weapon Systems’ Cyber Vulnerabilities Section 1647 of the National Defense Authorization Act for Fiscal Year 2016 requires the Secretary of Defense to evaluate the cyber vulnerabilities of each DOD weapon system by the end of 2019 and develop strategies to mitigate risks stemming from those vulnerabilities. In response to this direction and The DOD Cyber Strategy, which also calls for DOD to assess and initiate improvements to the cybersecurity of current and future weapons systems, DOD is taking steps to improve its understanding of its weapon systems’ vulnerabilities, determine how to mitigate risks from those vulnerabilities, and inform future development of more secure systems. The Office of the Under Secretary of Defense (Acquisition and Sustainment) is leading this initiative in collaboration with military test organizations. DOD is compiling existing vulnerability information and conducting some new tests to provide information about the cybersecurity posture of individual systems, concentrating mostly on fielded systems. These assessments are important, in part because some of those systems did not undergo cybersecurity testing prior to fielding and DOD does not have a permanent process in place to periodically assess the cybersecurity of fielded systems. Furthermore, vulnerabilities and risks can change after fielding as system software becomes obsolete. As part of this initiative, for two mission areas, the Office of the Under Secretary of Defense (Acquisition and Sustainment) has been trying to incorporate cybersecurity into large scale military exercises to take a more integrated look at impacts of vulnerabilities across systems. The goal is to understand how vulnerabilities in some systems may affect DOD’s ability to achieve its mission and to identify what other options are available to complete a mission if certain capabilities were disabled or degraded. This work is also important, but for different reasons. DOD’s developmental and operational tests focus primarily on vulnerabilities in individual systems rather than across broader mission areas. However, as previously discussed, attackers do not necessarily limit themselves to one system and may move from one system to others. Furthermore, DOD has not previously had a process in place to examine how cyber attacks on one system could affect entire missions. Taken together, the system-specific and mission-focused activities could help DOD develop a more comprehensive understanding of its cybersecurity posture—the overall strength of its cybersecurity. Officials working on these assessments plan to use what they learn to help inform the acquisition of future weapon systems. Specifically, they plan to share lessons with DOD test organizations, the Office of the Chief Information Officer, Office of the Under Secretary of Defense (Research and Engineering), and others in the Office of the Under Secretary of Defense (Acquisition and Sustainment). Similarly, the military services have established weapon system cybersecurity-focused offices to improve their cybersecurity posture, which are described briefly in table 4. Although all of these activities promise to help DOD improve its cybersecurity posture over time, they are also relatively new for DOD. They will need sustained momentum to achieve changes over the lifecycle of acquisition programs, so it is too early to tell if they will be successful over the long term. According to multiple agency officials and our analysis of policy and guidance changes since 2014, DOD leadership has become more aware of cybersecurity issues over the past several years and has driven many of these cybersecurity activities. However, our prior work has found sustained leadership support of DOD initiatives to be key to maintaining their momentum. We also reported that there is risk that DOD will not fully implement some tasks it has begun to improve weapon systems cybersecurity if leadership does not continue to monitor their progress. For example, we reported in 2017 that DOD’s Principal Cyber Advisor closed out the task on assessing weapon systems called for under The DOD Cyber Strategy. We recommended that the Cyber Advisor modify criteria for closing tasks to reflect whether tasks have been implemented and re-evaluate tasks that have been previously determined to be completed. DOD Faces Systemic Barriers to Improving Weapon Systems Cybersecurity DOD faces barriers that will challenge its ability to develop more cyber resilient weapon systems and make it more difficult for DOD’s recent policy changes and new initiatives to be as effective as possible. Cybersecurity Workforce Challenges DOD struggles to hire and retain cybersecurity personnel, particularly those with weapon systems cybersecurity expertise. Our prior work has shown that maintaining a cybersecurity workforce is a challenge government-wide and that this issue has been a high-priority across the government for years. Program officials from a majority of the programs and test organizations we met with said they have difficulty hiring and retaining people with the right expertise, due to issues such as a shortage of qualified personnel and private sector competition. Test officials said that once their staff members have gained experience in DOD, they tend to leave for the private sector, where they can command much higher salaries. According to a 2014 RAND study, personnel at the high end of the capability scale, who are able to detect the presence of advanced threats, or finding the hidden vulnerabilities in software and systems, can be compensated above $200,000 to $250,000 a year, which greatly exceeds DOD’s pay scale. Even when cybersecurity positions are filled, it may not necessarily be with the right expertise. Officials from some program offices said that general cybersecurity expertise is not the same as weapon systems cybersecurity expertise. For example, officials said that professional IT certifications are not the same as systems security engineering expertise, which is essential to designing cyber-resilient systems. According to various program officials, weapon systems cybersecurity is a specialized area. Cybersecurity subject matter experts require knowledge of (1) DOD’s acquisition process; (2) technical knowledge of the specific weapon system—such as radar or aircraft, and (3) cybersecurity knowledge. However, it is difficult to hire and maintain a workforce with the needed knowledge due to its highly specialized nature. Without this expertise, it will be difficult for programs to effectively implement cybersecurity policies and guidance. For example, the RMF allows programs to determine which controls are most appropriate to apply, but a knowledgeable workforce is necessary for making such decisions. DOD has various efforts underway to recruit and develop the skills of DOD’s cybersecurity workforce, according to several DOD officials. For example, the services are aiming to recruit cybersecurity analysts by using internships and engaging in partnerships with secondary schools and universities. In addition, the services are developing and offering courses to grow expertise within their existing acquisition workforce. DOD is determining how to share specialized expertise related to weapon systems cybersecurity. Specific efforts related to this include the Cyber Developmental Test Cross Service Working Group that meets quarterly and invites industry expertise to present cutting edge techniques as well as a “capture the flag” competition, which will now be offered to other services as well. In addition, Navy Systems Commands employees participate in periodic regional cyber competitions to hone knowledge learned in classroom environments and use training funds to pursue additional or higher degrees and cyber certificate programs. Officials from many of the offices we interviewed, as well as the National Research Council, DSB, and RAND have expressed concerns about barriers to information sharing. It is difficult to find the correct balance between protecting information, so that it is not accessible to potential adversaries, and sharing it, so that DOD has an informed workforce. For example, classification is important because it protects information about vulnerabilities, and in some cases, intelligence methods. Access to information about vulnerabilities makes it easier for potential adversaries to attack DOD systems. Similarly, limiting the distribution of classified information to those who have the need to know is likewise important because it reduces the likelihood that internal and external threats will access it. Although DOD officials explained that there is no DOD-wide cybersecurity classification guidance, Air Force guidance and DOD officials indicated that vulnerabilities in fielded systems are typically classified as at least Top Secret or Top Secret/Sensitive Compartmented Information, and details of threats are more restricted. This high level of classification for weapon systems cyber vulnerabilities and threats helps protect sensitive information, but it makes it difficult for DOD to share information about aspects of weapon systems cybersecurity with cybersecurity personnel across DOD. For example, some experts told us that flawed designs can still be found in new systems if their designers were not aware that they resulted in vulnerabilities in other systems. More generally, because they are not sharing vulnerability and threat information across programs, programs are unaware of their full risk exposure and DOD may have less insight into vulnerabilities across its weapon systems portfolio. Officials from most organizations we spoke to, including NSA, acknowledged challenges with sharing information across all levels within DOD. Examples of these challenges are listed in table 5. Although limitations to information sharing can lead to inefficiencies and other challenges, DOD has so far opted to favor protection of information—perhaps because the stakes are so high if it does not. As we mentioned previously, one of the reasons potential adversaries collect information on weapon systems is because the better they understand a weapon system, and especially what vulnerabilities it may have, the more options they have to attack it. Reports over the years about cyber espionage attacks on defense contractors show that concerns about protecting sensitive information are warranted. Agency Comments We provided a draft of this report to DOD for review and comment. DOD provided technical comments, which we incorporated where appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; and the Secretaries of the Army, Navy, and Air Force. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at 202-512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. Appendix I: Scope and Methodology To identify factors that contribute to the current state of Department of Defense (DOD) weapon systems cybersecurity, we reviewed reports published from 1991 to the present on software, information technology, networking, and weapon systems from the National Research Council, the Defense Science Board, GAO, DOD’s Director of Operational Test and Evaluation, DOD’s Joint Chiefs of Staff, and the RAND Corporation. To inform our discussion of networking, we also reviewed concepts of operations for selected systems of systems. To determine the extent to which DOD focused on cybersecurity in weapon system acquisitions, we analyzed selected information assurance, acquisition, requirements, and testing policies and guidance. For this and all other objectives, we conducted interviews with or obtained written responses from the following organizations: Office of the Secretary of Defense organizations: Office of the Director, Operational Test and Evaluation; Office of the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation; Office of the Chief Information Officer including the Defense Information Systems Agency; Office of the Chairman of the Joint Chiefs of Staff; Office of the Under Secretary of Defense (Acquisition and Sustainment); and Office of the Under Secretary of Defense (Research and Engineering). Military service test organizations: Air Force Operational Test and Evaluation Center, Army Operational Test and Evaluation Command, Navy’s Commander Operational Test and Evaluation Force, and Marine Corps Operational Test and Evaluation Activity. Selected program offices reflecting a purposeful sample of nine major defense acquisition program offices. We identified a variety of program offices to represent each service, multiple domains, and programs that are extensively connected to other weapons systems. We are not listing the names of these offices for sensitivity reasons. Other key DOD organizations with cybersecurity responsibilities: the National Security Agency, Defense Information Systems Agency, and U.S. Cyber Command. Selected organizations with cybersecurity expertise, referred to as “experts” in the report: Carnegie Melon’s Software Engineering Institute, the MITRE Corporation, the RAND Corporation, Pacific Northwest National Laboratory, Sandia National Laboratory, and Renaissance Strategic Advisors. We selected these based on their research or roles advising DOD on weapon systems cybersecurity- related topics. To identify vulnerabilities in weapon systems under development, we reviewed cyber assessment reports of selected weapon systems conducted between 2012 and 2017. We selected at least one program from each service as well as different types of weapon systems (e.g., aircraft vs ships vs communication systems). To gain further insights into assessment findings and understand their limitations, we interviewed officials from the Office of the Secretary of Defense and military test service organizations. We discussed the cybersecurity of individual programs, implementation of controls, and assessment findings with program offices. We also interviewed officials from several organizations with cybersecurity expertise to discuss weapon system vulnerabilities and test limitations. Vulnerabilities for specific weapon systems are classified, so we have not identified the programs covered in these test reports. The examples we cite are unique to each weapon system and are not applicable to all weapon systems. Furthermore, cybersecurity assessment findings are as of a specific date so vulnerabilities identified during system development may no longer exist when the system is fielded. To determine the steps DOD is taking to develop more cyber resilient weapon systems, we analyzed key DOD information assurance/cybersecurity, acquisition, requirements, and testing policies and guidance that have been updated since 2014 to better address weapon systems cybersecurity. We selected 2014 because DOD began revising several policies at that time. These include DOD’s Risk Management Framework, Department of Defense Instruction 8500.01, Cybersecurity; the Department of Defense Instruction 5000.2, Operation of the Defense Acquisition System; DOD Program Manager’s Guidebook for Integrating the Cybersecurity Risk Management Framework into the System Acquisition Lifecycle; the Joint Capabilities Integration and Development System Manual; the Cyber Survivability Endorsement Implementation Guide; and the DOD Cybersecurity Test and Evaluation Guidebook. To identify barriers DOD faces in developing cyber resilient systems and implementing updated cybersecurity policies and guidance, we interviewed Office of the Secretary of Defense, military service test organizations, selected program offices, other DOD organizations, experts, and operators. We took additional precautions to avoid revealing sensitive information. We illustrated some concepts using notional depictions. In some cases, we were deliberately vague and excluded details from examples to avoid identifying specific weapon systems. We also presented examples of publicly known attacks in sidebars to illustrate how poor cybersecurity can enable cyber attacks. DOD conducted a security review of the report and approved it for public release. Appendix II: Examples of Types of Cyber Attacks Appendix III: Roles and Responsibilities for Cybersecurity in the Department of Defense Cybersecurity Roles and Responsibilities The Department of Defense (DOD) is responsible for defending the U.S. homeland and interests from attack, including those that occur in cyberspace and has developed capabilities for cyber operations. In order to achieve this objective, the department must be able to defend its own networks, systems, and information from cyber attack. To establish a cybersecurity program to protect and defend DOD information and information technology, DOD has assigned some of its components and senior officials with a variety of cybersecurity responsibilities, some of which are described below. Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Cristina T. Chaplain (202) 512-4841 or chaplainc@gao.gov. Staff Acknowledgements In addition to the contact named above, Raj Chitikila (Assistant Director), Brandon Booth, Laura Greifner, L.T. Holliday, Katherine Pfeiffer, James Tallon, Jacqueline Wade, and Robin Wilson made key contributions to this report. Assistance was also provided by Tommy Baril, Nabajyoti Barkakati, Mark Canter, Virginia Chanley, Kurt Gurka, Joseph Kirschbaum, Jeff Knott, Duc Ngo, and Gregory Wilshusen.

Why GAO Did This Study DOD plans to spend about $1.66 trillion to develop its current portfolio of major weapon systems. Potential adversaries have developed advanced cyber-espionage and cyber-attack capabilities that target DOD systems. Cybersecurity—the process of protecting information and information systems—can reduce the likelihood that attackers are able to access our systems and limit the damage if they do. GAO was asked to review the state of DOD weapon systems cybersecurity. This report addresses (1) factors that contribute to the current state of DOD weapon systems' cybersecurity, (2) vulnerabilities in weapons that are under development, and (3) steps DOD is taking to develop more cyber resilient weapon systems. To do this work, GAO analyzed weapon systems cybersecurity test reports, policies, and guidance. GAO interviewed officials from key defense organizations with weapon systems cybersecurity responsibilities as well as program officials from a non-generalizable sample of nine major defense acquisition program offices. What GAO Found The Department of Defense (DOD) faces mounting challenges in protecting its weapon systems from increasingly sophisticated cyber threats. This state is due to the computerized nature of weapon systems; DOD's late start in prioritizing weapon systems cybersecurity; and DOD's nascent understanding of how to develop more secure weapon systems. DOD weapon systems are more software dependent and more networked than ever before (see figure). Automation and connectivity are fundamental enablers of DOD's modern military capabilities. However, they make weapon systems more vulnerable to cyber attacks. Although GAO and others have warned of cyber risks for decades, until recently, DOD did not prioritize weapon systems cybersecurity. Finally, DOD is still determining how best to address weapon systems cybersecurity. In operational testing, DOD routinely found mission-critical cyber vulnerabilities in systems that were under development, yet program officials GAO met with believed their systems were secure and discounted some test results as unrealistic. Using relatively simple tools and techniques, testers were able to take control of systems and largely operate undetected, due in part to basic issues such as poor password management and unencrypted communications. In addition, vulnerabilities that DOD is aware of likely represent a fraction of total vulnerabilities due to testing limitations. For example, not all programs have been tested and tests do not reflect the full range of threats. DOD has recently taken several steps to improve weapon systems cybersecurity, including issuing and revising policies and guidance to better incorporate cybersecurity considerations. DOD, as directed by Congress, has also begun initiatives to better understand and address cyber vulnerabilities. However, DOD faces barriers that could limit the effectiveness of these steps, such as cybersecurity workforce challenges and difficulties sharing information and lessons about vulnerabilities. To address these challenges and improve the state of weapon systems cybersecurity, it is essential that DOD sustain its momentum in developing and implementing key initiatives. GAO plans to continue evaluating key aspects of DOD's weapon systems cybersecurity efforts. What GAO Recommends GAO is not making any recommendations at this time. GAO will continue to evaluate this issue.

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Background Nuclear Fuel Production and Uranium Enrichment Technologies Uranium is a naturally occurring radioactive element that is enriched to fuel nuclear power plants and that can also be used to meet certain national security purposes. Natural uranium is comprised of approximately 99.3 percent of the uranium-238 isotope and 0.7 percent of the uranium-235 isotope—which undergoes fission to release energy. Uranium enrichment is the process of increasing the concentration of uranium-235 in a quantity of natural uranium to make LEU to fuel nuclear power plants, or to make HEU, which is used in nuclear weapons and as fuel by the U.S. Navy. Generally, to produce enriched uranium, uranium is extracted or mined from underground deposits, converted from a solid to a gas, enriched to increase its concentration of uranium-235, and then fabricated into fuel elements, such as rods for commercial nuclear reactors, appropriate for their ultimate use. These steps make up the nuclear fuel cycle (see fig. 1). After the fuel has been irradiated in a nuclear power reactor, it is considered “spent” nuclear fuel. Spent fuel can be chemically reprocessed, and the enriched uranium recycled for reuse. The United States used to reprocess spent nuclear fuel but has not done so since the mid-1970s, primarily to discourage other countries from pursuing reprocessing because of concerns over nuclear proliferation, as we have previously reported. Currently, in the United States, spent fuel is stored as waste. LEU can also be produced by downblending HEU to LEU. This involves mixing HEU with a “diluent” or other forms of uranium—such as natural uranium—to reduce the concentration of the uranium-235 isotope in the uranium and produce an overall lower level of enrichment. Until 2013, uranium was enriched in the United States both for national security and commercial purposes. Beginning in the 1940s, DOE and its predecessor agencies provided uranium enrichment services—first for national security purposes and later for the emerging commercial nuclear power industry—using government-owned gaseous diffusion plants. In 1992, the U.S. government established the United States Enrichment Corporation (USEC) as a government corporation to take over operations of DOE’s enrichment facilities and to provide uranium enrichment services for the U.S. government and utilities that operate nuclear power plants. In 1998, the corporation was privatized under the USEC Privatization Act. From 1998 until 2013, DOE relied exclusively on USEC to obtain enrichment services for the production of LEU needed to produce tritium. In May 2013, USEC ceased enrichment at its last commercially active enrichment plant in Paducah, Kentucky, which it had leased from DOE since the time of USEC’s establishment. USEC has been the only company to enrich uranium with U.S. technology. Gas centrifuge technology, rather than gaseous diffusion technology, is currently used around the world to enrich uranium. Gas centrifuges work by spinning uranium hexafluoride in a gas form inside a centrifuge rotor at an extremely high speed. The rotation creates a strong centrifugal force, which separates the lighter uranium-235 molecules from the heavier uranium-238 molecules. The enrichment achieved by a single gas centrifuge is not sufficient to achieve the desired assay, so a series of centrifuges are connected together in a configuration called a cascade. In the United States, URENCO—a European enrichment consortium— operates a gas centrifuge enrichment plant in New Mexico. The obligations governing the use of foreign uranium enrichment technology and nuclear material in the United States are established under international agreements between the United States and foreign partners. These agreements generally impose certain terms and conditions on transfers of nuclear material and equipment, including, among other things, requiring peaceful use of the material and equipment. The agreements’ peaceful-use provisions generally state that material, equipment, and components subject to the agreements will not be used for any nuclear explosive device, for research on or development of any nuclear explosive device, or for any military purposes. National Security and Other Uses for Enriched Uranium This section discusses national security and other uses for enriched uranium, such as tritium production, highly enriched uranium, and high- assay low enriched uranium. Tritium is a key isotope used in nuclear weapons. NNSA needs an assured source of tritium to maintain the capabilities of the nuclear stockpile and has called tritium a “pressing” defense need. However, tritium has a relatively short half-life of 12.3 years and decays at a rate of about 5.5 percent per year. It must be periodically replenished to maintain the designed capability of the weapons. Some tritium may be recycled from dismantled weapons, but the inventory must also be replenished through the production of new tritium. At present, NNSA produces tritium through the use of one of TVA’s electricity-producing nuclear reactors fueled with unobligated LEU. Small quantities of tritium are the normal by-products of electricity-producing nuclear power plants, such as those owned and operated by TVA. To produce more tritium than usual and later collect it, specially designed targets—called tritium-producing burnable absorber rods (TPBAR)—are loaded with the unobligated LEU and irradiated in TVA’s Watts Bar 1 reactor. Irradiated TPBARs are unloaded during normal fuel reloading and shipped to NNSA’s Tritium Extraction Facility at the Savannah River Site in South Carolina. There the tritium is extracted and prepared for use in nuclear warheads and bombs (see fig. 2 for NNSA’s tritium production process). Prior to the use of TVA’s reactor, the United States used other government-owned reactors to produce tritium (see sidebar). In 1999, TVA signed an interagency agreement with DOE to produce tritium at its Watts Bar and Sequoyah commercial nuclear reactors. Since 2003, TVA has been producing tritium for NNSA at its Watts Bar 1 reactor. TVA does not have plans to use the Sequoyah reactors for tritium production in the near term, according to a TVA document. History of U.S. Tritium Production From 1954 until 1988, the United States produced the majority of its tritium using nuclear reactors at the Savannah River Site in South Carolina. Smaller amounts of tritium were also produced using nuclear reactors at the Department of Energy’s (DOE) Hanford Site in Washington. When the site’s last operating reactor—known as K Reactor—was shut down due to safety concerns in 1988, the United States lost its capability to produce tritium for the nuclear weapons stockpile. The amount of tritium that NNSA needs changes based on national security requirements. In fiscal year 2015, NNSA conducted a review of the tritium inventory and anticipated future demand. At that time, NNSA determined that to meet future tritium demand a second TVA reactor would be required to irradiate TPBARs and produce additional tritium. Using a second TVA reactor would increase the amount of unobligated LEU needed for tritium production using this process, according to NNSA documents. NNSA also supplies HEU for national security and other missions. NNSA provides HEU to fuel reactors for the U.S. Navy’s aircraft carriers and submarines. NNSA recovers HEU from excess dismantled nuclear weapons. According to NNSA’s October 2015 plan, HEU from these sources will meet naval reactors’ demand through 2060. After this time, NNSA will need additional sources of HEU for naval nuclear reactors. To satisfy non-defense demands, NNSA also supplies HEU to, among other things, fuel research reactors for medical isotope production and other research applications. In 1998, the Secretary of Energy announced that DOE would turn to commercial light water reactors as the sole means of meeting the future demand for tritium. From 1988 to 1998, DOE was able to meet its tritium requirements by harvesting and recycling it from dismantled nuclear warheads, as the United States decreased the size of its nuclear arsenal. However, because of tritium’s short half-life, DOE could not meet its long-term tritium needs in this manner indefinitely. Since 2003, the Tennessee Valley Authority (TVA) has been producing tritium for National Nuclear Security Administration (NNSA) at its Watts Bar 1 commercial nuclear power reactor. NNSA’s nonproliferation mission requires “high assay” LEU—meaning LEU enriched in the uranium-235 isotope to below 20 percent but above the standard 3 to 5 percent used in most commercial reactors—for research and isotope production reactor fuel. Since there are no commercial uranium enrichment facilities licensed to produce high-assay LEU, it must be produced by downblending HEU. According to NNSA documents, the HEU inventory allocated for research and isotope production reactors using high-assay LEU is projected to be exhausted by around 2030. After this time, a new supply of high-assay LEU for research and isotope production reactors will need to be identified. DOE Project Management NNSA has initiated a process to determine a long-term solution for obtaining enriched uranium and tritium. DOE’s Order 413.3B, Program and Project Management for the Acquisition of Capital Assets, governs how NNSA acquires capital assets with total project costs greater than $50 million, which could include a new uranium enrichment capability or other new capability to produce tritium. The stated goal of the order is to deliver fully capable projects within the planned cost, schedule, and performance baseline. Order 413.3B also establishes DOE’s critical decision (CD) process. This process divides the capital asset acquisition into five project phases that progress from a broad statement of mission need, to requirements that guide project execution, through design and construction, and concludes with an operational facility. Each phase ends with a major approval milestone—or “critical decision”—that marks the successful completion of that phase. A key activity during CD-0, the preconceptual design phase is the preparation of a mission need statement. A mission need statement identifies the capability gap between the current state of a program’s mission and the mission plan. DOE’s Order 413.3B provides direction for preparing a mission need statement, including that it be independent of a particular solution, and that it should not be defined by equipment, facility, technological solution, or physical end-item. This approach is to allow the agency the flexibility to explore a variety of approaches and not prematurely limit potential solutions. Under Order 413.3B, an analysis and selection of alternatives—which builds off the mission need—should be conducted during the CD-1 phase, the conceptual design phase. In addition to the requirements of Order 413.3B, DOE has guidance for identifying, analyzing, and selecting alternatives that is found throughout the seven guides associated with the order. Conducting the analysis of alternatives is a key first step to help ensure that the selected alternative best meets the agency’s mission need and that this alternative is chosen on the basis of selection criteria, such as safety, cost, or schedule. Figure 3 illustrates when DOE conducts the analysis of alternatives as part of its project management process for capital asset projects. In October 2016, NNSA approved a mission need statement for long-term capability to supply unobligated enriched uranium for tritium production and presented a preliminary set of options to meet that need. In December 2016, DOE approved CD-0 to begin the acquisition of such a capability. Consistent with direction in DOE Order 413.3B, NNSA has begun conducting an analysis of alternatives that is to identify the option that would best meet the mission need for a domestic uranium enrichment capability. In August 2017, DOE and NNSA officials stated that the analysis of alternatives will be completed by the end of 2019. Also, under DOE Order 413.3B, DOE’s technology readiness levels (TRL) are incorporated into the CD process. TRLs are used by federal agencies and industry to assess the maturity of evolving technologies. TRLs are measured along a scale of 1 to 9, beginning with TRL 1 (or basic principles observed and reported) and ending with TRL 9 (or actual system operated over the full range of expected mission conditions). DOE guidance states that a TRL of 4—system or component validation at laboratory scale—is recommended for CD-1 (conceptual design process). Projects are encouraged to achieve a TRL of 7—full scale demonstration of a prototypical system in a relevant environment—prior to CD-3 (final design phase). Best Practices for Project Cost Estimating In March 2009, we issued our cost guide to provide assistance to federal agencies with preparing cost estimates, among other things. Drawing from federal cost estimating organizations and industry, the cost guide describes best practices for ensuring development of high-quality—that is, reliable—cost estimates. A reliable cost estimate helps ensure that management is given the information it needs to make informed decisions. The cost guide identifies four characteristics of a reliable cost estimate: (1) comprehensive, (2) well documented, (3) accurate, and (4) credible. DOE’s Order 413.3B states, among other things, that its cost estimates shall be developed, maintained, and documented in a manner consistent with methods and best practices identified in our cost guide, DOE guidance, and applicable acquisition regulations and Office of Management and Budget guidance. Our cost guide can be used to evaluate the reliability of rough-order-of- magnitude estimates. Rough-order-of-magnitude estimates are typically used to support “what-if” analyses and are helpful in examining initial differences in alternatives to identify which are most feasible. However, the nature of a rough-order-of-magnitude estimate means that it is not as robust as a detailed, budget-quality, life-cycle estimate and, according to the guide, its results should not be considered or used with the same level of confidence. Further, the cost guide states that because this estimate is developed from limited data and in a short time, it should never be considered a budget-quality cost estimate. NNSA Is Taking or Plans to Take Four Actions to Extend Existing Inventories of Enriched Uranium to Address its Near-term Tritium Needs NNSA is taking or plans to take four actions to extend its existing inventories of unobligated enriched uranium to address its near-term need for tritium and has generally identified the costs, schedules, and risks for these actions. These actions would together extend the supply of unobligated LEU from 2027 until approximately 2038 to 2041, according to NNSA documents. NNSA first identified the actions to extend its unobligated LEU supply based on an analysis completed by the DOE Uranium Inventory Working Group, which was convened by NNSA in September 2014 to analyze the department’s uranium inventory and identify material and options to provide unobligated LEU for tritium production reactors. These actions were later presented in NNSA’s October 2015 plan. Of the four actions NNSA is taking or plans to take, two actions involve nuclear material accounting practices that help preserve supplies of unobligated LEU, and two of the actions involve downblending HEU. NNSA has generally identified the costs and schedules for these actions. Specifically, NNSA estimated in its October 2015 plan that the total cost of the four actions would be approximately $1.1 billion from fiscal years 2016 through 2025 and would provide additional quantities of unobligated LEU for TVA to meet NNSA’s tritium needs through 2038 to 2041. Based on our review, the actual costs and schedules through October 2017 generally align with the estimates in NNSA’s October 2015 plan. NNSA and GAO have identified some risks associated with two of these actions. One of these risks has been resolved; NNSA is taking steps to mitigate another; while other risks, such as the uncertainty of future appropriations, are unresolved. The following are the four actions, and their costs, schedules, and risks. Book Storage of TVA LEU Book storage is an industry-wide nuclear material accounting practice, where a nuclear material supplier—such as a uranium enrichment plant or nuclear fuel fabricator—can record in its accounts, or books, the amount of enriched uranium in its inventory belonging to a customer, such as a nuclear power plant operator, and hold that material for future delivery to the customer. TVA has entered into contracts with two nuclear fuel suppliers to conduct book storage to preserve unobligated LEU for TVA on behalf of NNSA. This practice effectively parks the unobligated LEU into a separate account so that the material is not inadvertently loaded into a non-tritium producing reactor. Book storage helps TVA preserve limited quantities of unobligated LEU for the future; it will eventually be used for tritium production at the Watts Bar reactor. According to agency officials, a key benefit of using book storage for LEU is that TVA does not have to physically store the material. According to these officials, book storage is significantly less expensive than paying to set up a physical storage facility. The terms of TVA’s book storage contracts, including the parties involved, schedules, and values, are proprietary and business sensitive, according to TVA officials. Based on our analysis, the actual fees paid by TVA under its book storage contracts align with NNSA’s projected costs for book storage in its October 2015 plan. NNSA is reimbursing TVA for the book storage fees it is paying. According to NNSA, the obligations preserved from using book storage for unobligated LEU through these contracts extend the LEU fuel need date by 3 years. NNSA’s October 2015 plan did not identify any specific risks for these existing book storage contracts. Obligation Exchanges of LEU Obligation exchanges are another industry-wide nuclear material accounting practice, which involves the transfer of obligations on nuclear material—such as LEU—between two entities without physically moving the material. Similar to book storage, TVA may conduct obligation exchanges on behalf of NNSA to increase the inventory of unobligated LEU available for tritium production. According to NNSA’s October 2015 plan, TVA may conduct additional obligation exchanges in the future on behalf of NNSA. According to NNSA and TVA officials, at least one future obligation exchange is anticipated but has not been scheduled. According to these officials, there are no specific costs associated with transferring the obligations on LEU between entities. In addition, if additional inventories of unobligated LEU are identified, NNSA officials told us they will encourage TVA to conduct additional obligation exchanges to preserve the material. NNSA’s October 2015 plan did not identify any specific risks for obligation exchanges. Repurposed Excess Uranium (REU) Downblending NNSA’s first downblending action involves downblending 10.4 metric tons of HEU that was previously declared excess to national security needs. NNSA initiated the 3-year REU program in 2015 and, according to NNSA officials, the last shipment of HEU for downblending is expected in December 2018. According to these officials, close-out and final operations of the contract will end in early 2019. The REU downblending is being performed through a contract between NNSA and WesDyne, which subcontracts with another company, Nuclear Fuel Services, according to DOE documents we reviewed and officials we interviewed. According to NNSA documents, NNSA is the sole customer for this downblending effort. The estimated costs for the REU downblending program are $373 million, according to NNSA’s October 2015 plan. According to NNSA and contractor officials, the fixed price of the contract is $333.8 million, and the invoiced costs for the REU downblending program through October 2017 are $141.4 million, which aligns with the terms of the contract. According to an NNSA official, NNSA is paying for the REU program through a combination of funds provided through annual appropriations and what the parties refer to as a “barter” arrangement, according to NNSA officials and documents. Under this arrangement, NNSA is compensating the downblending contractor by transferring title of the derived LEU to WesDyne, which will be retained as unobligated LEU and eventually sold to TVA for tritium production purposes. The REU downblending program will generate approximately five reactor reloads of unobligated fuel for TVA, and will likely be used in the early to mid-2030s, according to NNSA documents. Regarding the risks for the REU program, NNSA identified the uncertainty of whether NNSA would be able to continue to conduct barters of derived LEU to pay for downblending services. For example, the 2015 plan notes that, while such transactions had worked well for previous downblending campaigns, declining markets values for enriched uranium in recent years had reduced industry’s interest in being compensated for services with a portion of the derived LEU. In addition, NNSA officials identified a lawsuit challenging the legality of barters as a risk. This suit was dismissed in July 2016. As a result, this specific risk no longer affects the Department, and according to NNSA officials, the agency anticipates being able to continue compensating Nuclear Fuel Services with derived LEU for the duration of the REU program. Downblending Offering for Tritium (DBOT) NNSA’s second downblending action, which is planned to begin in 2019, will involve HEU mainly composed of undesirable scrap, primarily in the form of oxides, left over from uranium processing activities. NNSA estimates that the planned DBOT program will generate approximately 10 reloads of unobligated fuel for TVA, likely to be used in the mid-2030s. According to an NNSA document, the program is expected to run for a 6- year period from 2019 through 2025. However, the schedule for HEU downblending under the DBOT action has not yet been finalized. According to NNSA officials, as of January 2018 the agreement is still being negotiated, but NNSA officials told us they anticipate that TVA will manage Nuclear Fuel Services’ down-blending activities in support of the DBOT program as well as the resulting unobligated LEU and its associated flags. NNSA’s estimated costs for the DBOT downblending program are $770 million, according to NNSA’s October 2015 plan. NNSA plans to pay for the DBOT program solely with funds provided through annual appropriations. NNSA does not currently plan to transfer any LEU resulting from this downblending program as payment to the contractor and will instead keep all the LEU for future tritium production. The DBOT program has not been initiated, so we could not assess whether the program’s actual costs and schedule align with the estimates in NNSA’s October 2015 plan. However, NNSA officials said they have confidence in the projected costs for the DBOT program since the estimates are based on previous downblending programs that NNSA has conducted over the past decade. NNSA identified two risks, and we identified one additional risk, facing the DBOT program. First, NNSA’s October 2015 plan identified the uncertainty of annual appropriations in the amount of $770 million to support this program. In addition, NNSA’s October 2015 plan identified a second risk associated with the availability of material for the DBOT program. The DBOT material will consist largely of scrap oxide left over from weapons production processes, some to be generated in future years. Because the schedules for those processes may change, the amounts of material available for DBOT and the dates when it will be available are subject to some uncertainty. Furthermore, we identified an additional risk to the DBOT program that is not addressed in NNSA’s October 2015 plan. Specifically, NNSA did not indicate which nuclear fuel cycle company would be used for the book storage of the LEU resulting from the DBOT program, and there is no guarantee that a company would be willing to engage in book storage for NNSA. A senior NNSA official stated that this detail will be worked out once the DBOT contract is finalized. NNSA and TVA officials noted that other fuel cycle facilities have previously been uninterested in conducting book storage for NNSA, so options may be limited. According to NNSA officials, if book storage was unavailable in the future, NNSA could pay for the physical storage of the LEU for the DBOT program. Since the costs of physically storing LEU for the DBOT program are not included in NNSA’s cost estimates, this could increase the overall costs of the program. NNSA’s Preliminary Plan to Analyze Options to Supply Enriched Uranium in the Long Term is Inconsistent with DOE Directives NNSA’s preliminary plan—as outlined in its domestic uranium enrichment mission need statement—to analyze options for supplying enriched uranium in the long term is inconsistent with DOE directives. This is because the scope of the mission need statement can be interpreted to fulfill multiple mission needs, which is inconsistent with DOE directives that such a statement should be a clear and concise description of the gap between current capabilities and the mission need. Under either interpretation of the mission need statement, NNSA is not complying with these directives because it is showing preference toward a particular solution—building a new uranium enrichment capability—and the agency has not included other options for analysis. In the mission need statement, NNSA has preliminarily identified two uranium enrichment technologies as the most feasible options for reestablishing a uranium enrichment capability, but both face deployment challenges. NNSA’s Domestic Uranium Mission Need Statement Can Be Interpreted to Fulfill Multiple Mission Needs, Making it Inconsistent with DOE Directives NNSA’s preliminary plan—as outlined in its domestic uranium enrichment mission need statement—for analyzing options to supply enriched uranium in the long term is unclear because the scope of the mission need statement can be interpreted to fulfill more than one mission need, and this is inconsistent with DOE directives. Specifically, NNSA’s October 2016 mission need statement—developed by NNSA’s Office of Domestic Uranium Enrichment—identified two mission needs: (1) a need for enriched uranium for a range of national security and other missions, including LEU for tritium production, HEU for the U.S. Navy, and high- assay LEU for research needs; and (2) a specific need for tritium. Because the mission need is not clearly stated, it is not clear whether NNSA intends to identify a future source of enriched uranium that could meet a range of mission needs, or only meet the specific mission need for tritium. According to DOE guidance for the mission need statement, the mission need statement should be a clear and concise description of the gap between current capabilities and the mission need. A senior NNSA official acknowledged that the mission need statement was ambiguously written because there are a range of mission needs for enriched uranium, and the ultimate mission need that the analysis of alternatives process will meet is unclear. Under either interpretation of the intent of the mission need statement, the document does not fully comply with DOE directives. According to DOE Order 413.3B, the mission need should be independent of a particular solution and should not be defined by the equipment, facility, technological solution, or physical end-item. This approach allows the Office of Domestic Uranium Enrichment the flexibility to explore a variety of solutions and not limit potential solutions. Under the first interpretation of NNSA’s mission need statement (which appears to be its preferred interpretation, according to NNSA documents), NNSA needs a future source of enriched uranium for a range of missions—initially LEU to produce tritium, but later also to produce high- assay LEU for research needs and HEU for the U.S. Navy. Specifically, the document states that if the United States decided to reestablish a domestic uranium enrichment capability, it “could meet several national security missions.” Further, it states that “future demand for additional enrichment assays and volumes should be considered in the selection of the enrichment capacity to meet national security needs.” This suggests that NNSA may be missing opportunities to consider options for providing additional enriched uranium that do not entail reestablishing a uranium enrichment plant. For example, while the mission need statement discusses some policy options that would provide NNSA with a new source of enriched uranium without building a new enrichment capability, it excludes at least one policy option that was originally identified in NNSA’s October 2015 plan— reprocessing DOE-owned spent nuclear fuel to recover HEU (which could also be downblended to produce LEU). Reprocessing spent nuclear fuel could provide a significant quantity of enriched uranium without the need for a new enrichment capability. It is not clear why NNSA excluded this option from the mission need statement at this early point in the development of alternatives. See appendix II for a discussion of other options NNSA includes in its mission need statement that could provide NNSA with a new source of enriched uranium without building a new enrichment capability. Under the second, narrower interpretation of the mission need statement, NNSA would need to obtain LEU solely to meet its mission need for tritium. However, contrary to DOE directives that a mission need statement be independent of a particular solution and not be defined by equipment, facility, technological solution, or physical end-item, NNSA is showing preference for a particular end-item—enriched uranium—to continue the tritium production mission. The mission need statement indicates a preference for using enriched uranium to continue the tritium production mission, as it only identifies options to obtain additional enriched uranium. This approach would exclude consideration of certain technology options, such as one that may have the potential to produce tritium without the need for enriched uranium. Specifically, during our review, we identified a technology capable of producing tritium that does not require enriched uranium and is being developed by Global Medical Isotope Systems (GMIS). This technology was not included in NNSA’s mission need statement as an option to help NNSA meet its tritium production requirements. An NNSA office separate from the Office of Domestic Uranium Enrichment—the Office of Nuclear Materials Integration—has funded the GMIS technology in a demonstration effort to determine whether it can produce tritium in sufficient quantities to support NNSA’s needs. The GMIS technology is currently at a low TRL, and the tritium production estimates have not been independently verified, but a senior NNSA official and GMIS representatives told us that it produced “appreciable amounts of tritium” during the demonstration. However, another senior NNSA official stated that it would be more appropriate to consider the GMIS technology in a process being conducted by another NNSA office— the Tritium Sustainment Office—which is currently examining potential options to meet tritium needs in 2055 and beyond, when TVA’s Watts Bar reactors may no longer be operating. This official, however, told us that the program office has no plans to update its last technology evaluation from 2014, which did not include consideration of the GMIS technology. If the purpose of NNSA’s mission need statement is to meet tritium requirements, then NNSA may be missing the opportunity to assess a technology that could meet the mission need without the need for enriched uranium. Without revising the scope of the mission need statement to clarify which mission need it seeks to achieve and adjusting, as appropriate, the range of preliminary options being considered in the analysis of alternatives, NNSA may not consider all options that could satisfy its ultimate mission need. NNSA Has Identified Two Uranium Enrichment Technologies as Most Feasible for Reestablishing a Uranium Enrichment Capability, but Both Face Challenges The mission need statement identifies six potential enrichment technology options for reestablishing an unobligated uranium enrichment capability. The technology selected could be used first to produce LEU to support the tritium production mission, and potentially later used to produce high- assay LEU for research needs and HEU for the U.S. Navy, according to NNSA documents. According to NNSA’s mission need statement, these six technologies were identified by a team of federal, national laboratory, and contractor experts in uranium enrichment technologies in December 2014, later presented in the October 2015 plan, and then included in the mission need statement. Among the six technologies, four—restart of the Paducah Gaseous Diffusion Plant, electromagnetic isotope separation, atomic vapor laser isotope separation, and separation of isotopes by laser excitation—are unlikely to be feasible, according to NNSA documents (app. III provides additional information on these four enrichment technologies). Some of these technologies have produced enriched uranium in the past, but extraordinary technical or financial barriers, past research failures, or peaceful-use restrictions would likely preclude further consideration by NNSA, according to NNSA documents. According to NNSA documents, NNSA has preliminarily identified the two remaining uranium enrichment technologies as the most feasible options to supply unobligated LEU for tritium production: the AC100 (“large”) centrifuge and a “small” centrifuge design. However, both of these options face challenges to deployment. Of the identified options, the AC100, or large centrifuge, is the technology that is furthest along in development. Centrus Energy Corp.—the private company known as USEC Inc. prior to its bankruptcy in 2014—developed a large (about 40 feet tall) advanced centrifuge for uranium enrichment. From June 2012 through September 2015, DOE invested approximately $397 million to financially support a research, development, and demonstration program for the large centrifuge technology at Centrus’ demonstration facility—the American Centrifuge Plant—in Ohio (See fig. 4). However, in September 2015, DOE announced that it would not continue funding the demonstration plant in Ohio past the end of that month. According to a September 2015 DOE memorandum, the department had obtained the testing data it needed and determined that there was “minimal incremental value” in continuing demonstration operations. Centrus was unable to continue operation of the demonstration plant without further government support and, in February 2016, announced its intent to demobilize it. Appendix IV provides additional information on the development of Centrus’ AC100 large centrifuge technology. According to NNSA’s October 2015 report, at the conclusion of DOE’s support, Centrus had successfully demonstrated that the large centrifuge technology had achieved a TRL of 7 to 8—or the generally successful demonstration of a test facility. DOE has continued funding, at a lower level, Centrus’ further development of the large centrifuge technology at a test facility in Oak Ridge, Tennessee, through September 2018. The October 2016 mission need statement estimated that it would take 2 to 5 years to complete development of the technology. According to a senior DOE official, though DOE has discontinued the majority of its funding, the department has taken two actions to preserve the large centrifuge technology—preserving the intellectual property for this technology and hiring some former Centrus employees—to ensure that the technology can be deployed if it is selected in the analysis of alternatives. However, we identified several challenges that could complicate future efforts to deploy the large centrifuge technology—challenges related to the preservation of intellectual property, royalty costs for commercial deployment, and the weakening of Centrus’ U.S. supplier and knowledge base. Intellectual property. A senior DOE official stated that there were two issues with DOE’s Office of Nuclear Energy original preservation of the information. First, preservation of the schematics began before certain technical issues with the demonstration plant were discovered, and consequently, Centrus’ proposed resolution of those issues was not included in the documentation, according to DOE and NNSA officials. Second, a DOE official and Centrus representatives stated that DOE’s contract with Centrus did not specify how the schematics were to be preserved. Rather than preserving the schematics in an electronic engineering format, Centrus preserved them in a different format that will require them to be reconstructed in an engineering program, according to the DOE official. NNSA officials acknowledged there were issues with the 2014 preservation effort and stated that negotiations were under way to contract with Centrus for a second preservation effort that would include updated schematics in the correct format and the documentation on the proposed resolution of the technical issues. Royalty costs. Although DOE owns the intellectual property, by agreement, Centrus is owed royalties if the large centrifuge technology is deployed for commercial purposes. According to a June 2002 agreement between DOE and USEC, these royalties would be capped at $665 million. In a January 2017 request for information from industry, NNSA expressed interest in obtaining enriched uranium through a federal government-private industry partnership. In January 2017, NNSA officials said that they were not sure how royalties might affect such a partnership. It is possible that if a private industry partner was only interested in producing enriched uranium for the government alongside a commercial operation, the royalties could discourage such a partnership, or that some of the costs might be passed on to the government. However, the royalties may be less than the cost of developing a new enrichment capability, so such an arrangement may also attract partners interested in entering the market but not in developing new technology. Supplier base. Centrus representatives told us that Centrus assembled an extensive domestic supplier base during the demonstration program to show that enrichment services could be unobligated. According to Centrus representatives and a Centrus document, the company had sourced components for the demonstration plant from over 900 different suppliers and manufacturers in 28 states, and that following its closure, many of these companies would go out of business or lose the capability to produce the necessary parts. As a result, if the large centrifuge option is selected, a domestic supplier base will have to be rebuilt, according to Centrus representatives. NNSA officials acknowledged that—as NNSA conducts the analysis of alternatives process—Centrus’ supplier and manufacturing base will continue to diminish. Knowledge base. Centrus representatives have raised concerns that the closure of the American Centrifuge Plant and associated layoffs of qualified workers may make it difficult to re-hire experienced centrifuge workers in the future. According to a cost estimate review prepared by a contractor for NNSA, the American Centrifuge Plant employed 370 full- time equivalent workers during the demonstration program. However, as of January 2017, it employed approximately 117 staff, according to a Centrus document. NNSA officials acknowledged that the loss of skilled workers is a concern and stated that, as a mitigating measure, ORNL has hired knowledgeable former Centrus personnel for further centrifuge research projects at ORNL. The second most feasible option to supply unobligated LEU for tritium production is the design for a small centrifuge technology. NNSA is funding an experiment to develop a centrifuge design that it anticipates will be smaller (from 6 to 14 feet tall), simpler, and potentially less expensive to build and maintain than the large centrifuge, according to an NNSA document. The experiment began at ORNL in 2016 and is based on prior ORNL experience with centrifuges. According to NNSA and ORNL documents, the small centrifuge experiment will take 3.5 years to achieve a TRL of 3 to 4—successful validation at laboratory scale—and cost approximately $42 million for this validation effort. During our visit to ORNL in December 2016, laboratory representatives told us that prototypes had not yet been constructed and showed us their preliminary design work and initial construction of their facility. As of December 2017, the first prototype of three or four planned sizes had been built and tested, according to NNSA officials and ORNL representatives. Following completion of the experiment, the mission need statement estimates that it could take another 4 to 7 years to bring the technology to a TRL of 9 (ready to deploy). Like the large centrifuge technology, the small centrifuge technology faces challenges that could complicate its deployment. For example, according to NNSA officials and ORNL representatives, the small centrifuge experiment is on an aggressive testing schedule to demonstrate results and potential scalability to meet NNSA’s planned 2019 deadline to select a preferred alternative in the analysis of alternatives process. Further, according to NNSA officials and ORNL representatives, if the small centrifuge design is selected, ORNL would not build and operate the plant because it is focused on research and development. Instead, NNSA would have to identify and contract with another entity to license, transfer, and deploy the technology, according to NNSA officials and ORNL representatives. NNSA officials also stated that there will be challenges in establishing a U.S. manufacturing base of suppliers for the small centrifuge and associated equipment. NNSA’s Preliminary Cost Estimates for the Most Feasible Uranium Enrichment Technologies Are Limited in Scope and Do Not Fully Meet Best Practices Though the scope of the mission need statement is unclear, NNSA has prepared preliminary cost estimates for the two uranium technologies it considers most feasible: the large and small centrifuge. These estimates are limited in scope and the estimate for the large centrifuge was premised on assumptions that were no longer valid. In addition, even when assessed for a more limited scope—producing LEU for tritium—the cost estimates do not fully meet best practices for reliable estimates applicable to all cost estimates. NNSA’s Preliminary Cost Estimates for the Uranium Enrichment Technologies it Considers Most Feasible Are Limited in Scope, and One Is Premised on Invalid Assumptions Though the scope of the mission need statement is unclear, NNSA’s preliminary cost estimates for the two uranium technologies it considers most feasible—the large and small centrifuge—are limited in scope, and the estimate for the large centrifuge was premised on assumptions that were no longer valid. Specifically, the limited scope of the cost estimates mean that they do not reflect the full costs of building a uranium enrichment facility that could eventually provide the capacity to enrich enough uranium to meet multiple needs, not just tritium. As previously noted, NNSA identified two mission needs: (1) a need for enriched uranium for a range of national security and other missions, including LEU for tritium production, HEU for the U.S. Navy, and high-assay LEU for research needs; and (2) a specific need for tritium. According to DOE and NNSA documents and NNSA officials, NNSA appears to favor an incremental approach to reestablishing a domestic uranium enrichment capability. This incremental approach would start with the selection of an enrichment technology in an enrichment plant capable of meeting tritium production requirements but could be expanded to meet the other governmental enriched uranium needs over time, according to our review of NNSA documents. Best practices for cost estimating state that programs following such an approach should clearly define the characteristics of each increment of capability so that a rigorous life cycle cost estimate can be developed. In addition, we have recommended that agencies conducting incremental acquisitions consider establishing each increment of increased capability with its own cost and schedule baseline. However, the scope of NNSA’s cost estimates for the large and small centrifuges are limited only to an enrichment plant capable of meeting the tritium production requirements, according to DOE and NNSA documents. The cost estimates do not estimate the incremental costs of the additional enrichment capacity necessary to meet additional enriched uranium needs such as HEU. NNSA officials stated that the cost estimates were preliminary in nature and that they anticipate developing more in-depth cost estimates as NNSA progresses further in the analysis of alternatives process. By limiting the scope of the cost estimates to one mission need—LEU for tritium—and not addressing the additional costs to meet other enriched uranium mission needs, NNSA’s cost estimates may be underestimating the life cycle costs of the technology options under evaluation—which could lead the agency to select a less cost-effective technology option. We also found that NNSA relied on a Centrus-provided scenario for the large centrifuge cost estimate that was premised on assumptions that were no longer valid, rather than using a scenario that more accurately reflected conditions at the demonstration plant at the time of the analysis. We found that the large centrifuge cost estimate had not been substantially updated since fall 2014. According to DOE documents, NNSA officials, and Centrus representatives, the estimate was originally prepared by Centrus in the fall of 2014, and NNSA and its contractor made minimal updates to this estimate in January 2015 and again in fall 2016. However, this meant that NNSA officials used a scenario that assumed conditions that were no longer accurate as of October 2016, the date of the mission need statement. This scenario, for example, assumed that the demonstration plant would be left intact for 5 years—in a cold standby state—followed by a restart of operations. However, in February 2016, Centrus had already publicly announced that it would begin decontamination and decommissioning the demonstration plant in spring 2016. An alternate scenario—complete demobilization of the demonstration plant followed by a restart of operations after 10 years—may have more closely reflected conditions at the time. According to a December 2014 estimate provided by Centrus to DOE and NNSA, this scenario presented the most risk, as it meant that the site, staff, and supplier base would all have to be reconstituted after a significant break—which could be very difficult. According to this estimate, the cost of the alternate scenario would likely be $2.6 billion greater. NNSA officials stated that they had used the scenario that they thought best fit the conditions at the time, and Centrus officials agreed that cold standby was an appropriate scenario to use. However, by using the cold standby scenario rather than the demobilization scenario, NNSA appears to have underestimated the costs to build an enrichment facility by several billion dollars. A senior NNSA official noted that, for the large centrifuge, they intend to create a new estimate that does not rely on Centrus. NNSA’s Preliminary Cost Estimates for the Uranium Enrichment Technologies it Considers Most Feasible Do Not Fully Meet Best Practices for Reliable Estimates Even when assessed for a more limited scope—producing LEU for tritium—NNSA’s preliminary cost estimates for the two uranium enrichment technology options that the agency considers to be the most feasible—the large and small centrifuge technologies—do not fully meet best practices for reliable cost estimates, including those for early stages of acquisition. Our cost guide—which presents best practices for cost estimates—states that high-quality, or reliable, cost estimates—including preliminary and rough-order-of-magnitude estimates—must meet four characteristics: they must be comprehensive, well-documented, accurate, and credible. DOE Order 413.3B states that cost estimates must be developed, maintained, and documented in a manner consistent with the methods and best practices identified in, among other things, our cost guide. Reliable cost estimates are crucial tools for decision makers, according to best practices. According to the cost guide best practices, cost estimates are considered reliable if each of the four characteristics is substantially or fully met. If any of the characteristics is not met, minimally met, or partially met, then the estimates cannot be considered to be reliable. Office of Management and Budget guidance notes the importance of reliable cost estimates at the early stages of project initiation, stating that early emphasis on cost estimating during the planning phase is critical to successful life cycle management—in short, determining whether benefits outweigh costs. NNSA’s mission need statement presented rough-order-of-magnitude cost estimates of $7.5 to $14 billion to build a national security enrichment plant using the large centrifuge technology, and an estimate of $3.8 to $8.3 billion to build such a plant using the small centrifuge technology. We found that the large centrifuge cost estimate only partially met the characteristics of being comprehensive and credible, and minimally met the characteristics of being well-documented and accurate. The small centrifuge cost estimate only partially met the characteristic of being comprehensive, and minimally met the characteristics of being well- documented, accurate, and credible. Because the large and small centrifuge cost estimates do not fully meet the best practices characteristics of reliable cost estimates, we concluded that they are not reliable. We shared our assessments with NNSA officials and a representative from an NNSA contractor and discussed the findings. We reviewed their comments and any additional information they provided and incorporated them to finalize our assessments. NNSA officials explained that the cost estimates are preliminary and are intended only to be rough-order-of-magnitude estimates since the process is only in the early stages and will be revised as the analysis of alternatives process moves forward. NNSA officials stated that they are aware of the limitations of the preliminary large and small centrifuge cost estimates. By developing reliable cost estimates consistent with best practices, NNSA will reasonably ensure that it has reliable information to make an informed decision about its options. The following is a summary of our assessments. Comprehensive. Best practices state that—to be considered comprehensive—a cost estimate should include both government and contractor costs of the project over its full life cycle, from “cradle to grave.” This includes costs from the inception of the project through design, development, deployment, and operation and maintenance, to retirement of the project. A life cycle cost estimate can support budgetary decisions, key decision points, milestone reviews, and investment decisions. DOE Order 413.3B does not specifically require a life cycle cost estimate at CD-0. Nonetheless, according to best practices, having a complete life cycle cost estimate helps ensure that all costs are fully accounted for and that resources are efficiently allocated to support the project. We found that the cost estimate to build a large centrifuge facility partially met the comprehensive characteristic because it included a high-level description of the work to be performed, and presented a brief summary description of the schedule, number of machines, and activities. However, the estimate was not a life cycle cost estimate because it excluded certain costs, such as retirement and close-out costs. In addition, other than noting a government oversight fee, the documentation does not specify whether the estimated costs are government or contractor costs. The estimate contains a 17 percent add-on, which an NNSA contractor told us accounts for DOE and contractor oversight costs, but the estimate does not specify how those costs are allocated. We found that the cost estimate to build a small centrifuge facility also partially met the comprehensive characteristic. We found that the estimate included costs for manufacturing, design, testing of the centrifuges, and 11 years of operations but, similar to the large centrifuge facility estimate, did not include retirement and close-out costs. Well-documented. Best practices state that data are the foundation of every cost estimate and that the quality of the data affects an estimate’s overall credibility. Thus, the supporting documentation for an estimate should capture in writing the source data used, an assessment of the reliability of the data, and how the data were normalized to make them consistent with and comparable to other data used in the estimate. The documentation should describe in sufficient detail the calculations performed and the estimating methodology used to derive each project element’s cost such that any cost analyst could understand what was done and replicate it. Without good documentation, management may not be convinced that the estimate is credible; supporting data will not be available for creating a historical database; questions about the approach or data used to create the estimate cannot be answered; lessons learned and a history for tracking why costs changed cannot be recorded; and the scope of the analysis cannot be thoroughly defined. We found that the cost estimate to build a large centrifuge facility minimally met this characteristic. NNSA’s contractor adjusted estimates previously provided by Centrus for inflation and added an estimate for DOE’s oversight and fees. The documentation does not provide any of the supporting cost data or include descriptions of adjustments or normalization made to the data. We found that the estimate’s supporting documentation does not provide a description of the specific calculations and presents methodologies in only broad terms. The documentation does not describe the steps taken to develop the estimates and does not provide enough information or supporting data to enable an analyst unfamiliar with the program to replicate the cost estimates. We were unable to trace the calculations to assess the accuracy and suitability of the methodology. Similarly, we found the cost estimate to build a small centrifuge facility minimally met this characteristic. We found that the supporting documentation does not include information about the supporting data underlying the cost estimate. The sources of the data are not documented, and no information is included about how the data were normalized to make them comparable to other data used in the estimate. We found that it would be difficult to recreate this estimate because no supporting data or electronic cost models were documented. Accurate. According to best practices, a cost estimate should provide results that are unbiased; that is, the estimate should not be overly conservative or optimistic. An estimate is accurate when, among other things, it is based on an assessment of most likely costs, adjusted properly for inflation, and contains few, if any, mathematical mistakes. Best practices state that unless an estimate is based on an assessment of the most likely costs and reflects the degree of uncertainty given all of the risks considered, management will not be able to make good decisions. Not adequately addressing risk, especially risk that is outside the estimator’s control or that were never conceived to be possible, can result in point estimates that give decision makers no information about their likelihood of success or give them meaningless confidence intervals. We found the cost estimate to build a large centrifuge facility minimally met this characteristic. We could not determine whether the estimate is unbiased because no risk and uncertainty analysis had been performed. Portions of the work breakdown structure’s elements are based on historical costs, but neither the historical data were provided, nor was there a thorough description of how those historical costs were adjusted or used. The contractor applied a 2 percent inflation factor but did not document the source of this factor; a representative of NNSA’s contractor stated that another DOE office recommended using that factor. We found no mathematical mistakes in the overall calculations, but the model was not available to evaluate the methodologies used. For the small centrifuge, we found the cost estimate minimally met this characteristic. We found that no risk or uncertainty analysis had been performed. The estimate uses a 2.4 percent inflation factor, but there is no documentation about the origin of this factor. An independent cost review performed by DOE’s Office of Project Management Oversight and Assessments stated that this inflation factor was overly optimistic and recommended the use of a 4 percent factor. We did not detect any mathematical errors in the overall calculations, but the model was not available to evaluate the methodologies. Credible. The credible characteristic reflects the extent to which a cost estimate can be trusted, according to our cost guide. For example, to be considered credible, the cost estimate should include a sensitivity analysis that examines how changes to key assumptions, parameters, and inputs affect the estimate. This analysis helps ensure that a range of possible costs are identified, as well as risks and their effects that may affect those costs. In addition, major cost elements should be cross-checked by the estimator to validate the results, and an independent cost estimate should be conducted by an outside group. The absence of a sensitivity analysis increases the chance that decisions will be made without a clear understanding of the impacts on costs, and the estimate will lose credibility. The cost estimate to build a large centrifuge facility partially meets this characteristic. NNSA presents several case studies rather than conducting a sensitivity analysis. These case studies only differ in one key assumption—schedule—but do not differ in any other major assumptions. The cost estimate documentation identified some major cost elements as cost drivers, but no cross-check information had been documented. DOE performed cross-checks in an independent cost review. The cost estimate to build a small centrifuge facility minimally meets this characteristic. There is no evidence in the supporting documentation that a sensitivity analysis was completed. Some programmatic risks were identified in the documentation. No cross- check information had been documented. DOE performed an independent cost review which adjusted the project management cost to make it consistent with the large centrifuge project management cost estimate. Regarding the large centrifuge, an NNSA official said that the agency had requested the supporting documentation that formed the basis of the estimate Centrus prepared in 2014, but that Centrus did not provide the information, stating that it was proprietary. However, according to Centrus representatives, Centrus offered to provide updated cost estimates and supporting data—provided that they were appropriately protected—but NNSA declined the offer. According to an NNSA official, the agency has not made a renewed effort to obtain this information because Centrus is still a publicly-traded company that would like to commercialize the large centrifuge technology. Regarding the small centrifuge, an NNSA official told us that the agency did not have sufficient data to create a reliable preliminary cost estimate because the small centrifuge experiment is still in the preliminary design and development stages. In the absence of such data, ORNL based its estimate on its decades-long expertise and experience with centrifuges, as well as on the cost structure of the large centrifuge, according to NNSA documents. NNSA and DOE officials stated that they expect to have data by mid-2019 that would support a reliable cost estimate for inclusion in the analysis of alternatives process, which is expected to conclude in 2019. The officials said that they are still developing the technology and intend to create a new cost estimate. Conclusions Tritium is a key isotope used in U.S. nuclear weapons, and the United States requires an ongoing supply of tritium to sustain the nuclear stockpile. Since 2013, the United States has not had a supplier of unobligated LEU, which under the current approach is necessary to power the TVA reactor that produces tritium. NNSA recognizes that its unobligated LEU inventory is finite and declining and has taken actions to extend existing supplies of unobligated LEU in the near term. These actions have effectively bought the agency some time while it initiates an analysis of alternatives process to develop a long-term solution. However, the scope of the mission need statement underpinning the analysis of alternatives is unclear because it can be interpreted to fulfill more than one mission, which is inconsistent with DOE directives that such a statement should be a clear and concise description of the gap between current capabilities and the mission need. The mission need statement is also inconsistent with the directives’ requirement that the mission need should be independent of a particular solution and not be defined by a technological solution or physical end-item. In addition, the mission need statement indicates a preference for using enriched uranium to continue the tritium production mission and excludes consideration of certain technology options, such as one that may have the potential to produce tritium without the need for enriched uranium. Without revising the scope of the mission need statement to clarify which mission need it seeks to achieve and adjusting, as appropriate, the range of options being considered in the analysis of alternatives, NNSA may not consider all options that could satisfy its ultimate mission need. Further, the preliminary cost estimates developed by NNSA for the large centrifuge and small centrifuge technology options were limited in scope—sized for a capacity to enrich uranium only for tritium production—and do not reflect the full costs of building a uranium enrichment facility that could eventually meet a range of enriched uranium mission needs. By ensuring that the scope of the cost estimates address additional costs that align with other mission needs that the enrichment capability may be intended to fulfill, NNSA can select a more effective option. In addition, we found that the cost estimates produced for this more limited scope do not fully meet the best practice characteristics of reliable cost estimates. By developing reliable cost estimates consistent with best practices, NNSA will ensure that it has quality information to make an informed decision about which option to select. Recommendations for Executive Action We are making the following two recommendations to NNSA: The NNSA Administrator should revise the scope of the mission need statement to clarify which mission need it seeks to achieve and, as appropriate, adjust the range of options considered in the analysis of alternatives process. (Recommendation 1) The NNSA Administrator should—following clarification of the scope of the mission need statement—ensure that the agency’s cost estimates for whichever options it considers going forward are aligned with the scope of the mission need that the enrichment capability is intended to fulfill and that they are developed consistent with best practices. (Recommendation 2) Agency Comments and Our Evaluation We provided drafts of this report to NNSA, State, DOD, and TVA for review and comment. In written comments, which are summarized below and reproduced in appendix V, NNSA neither agreed nor disagreed with our recommendations. However, NNSA stated that it will take future actions consistent with our recommendations. NNSA also provided technical comments, which we considered and incorporated as appropriate. The State Department provided technical comments, which we incorporated as appropriate. The Department of Defense stated that it did not have any written or technical comments and TVA did not provide written or technical comments. We also provided a technical statement of facts to the following entities: Centrus, ConverDyn, GMIS, and URENCO. We received technical comments and incorporated them, as appropriate. In its written comments, NNSA clarified that its mission need statement is written to support a range of requirements, the most urgent of which is LEU for tritium production. Further, NNSA stated that it will evaluate a broader range of options to meet its mission need during the analysis of alternatives process, which has begun and which NNSA has targeted for completion by December 2019. Because the analysis and selection of alternatives in the CD-1 phase builds off of the mission need statement, we believe NNSA’s clarification of its mission need statement is positive and will help result in an analysis of alternatives that does not limit potential solutions. NNSA also stated that it will produce higher fidelity cost estimates leading up to the CD-1 phase, which we agree is consistent with our recommendation. NNSA stated that the preliminary cost estimates it developed do not include the full life cycle cost of building an enrichment facility to meet the range of enriched uranium missions it has now clarified as its mission need, but it stated that such estimates are neither required nor cost beneficial at this early stage. As we noted, best practices—which can be used to evaluate preliminary cost estimates—recommend having complete life cycle cost estimates even at this early stage because they help ensure that all costs are considered to support decision-making and that resources are efficiently allocated to support the project. As NNSA develops its higher fidelity estimates, following cost estimating best practices—such as, by ensuring that the cost estimates for the alternatives being evaluated align with the broad range of uranium mission needs that those alternatives are intended to address, and that full life cycle cost estimates are developed for each option—would better position NNSA to select an option going forward. We are sending copies of this report to the appropriate congressional committees, Secretary of Energy, Secretary of State, Secretary of Defense, Vice President for Government Relations of TVA, and other interested parties. In addition, this report will be 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) 512-3841 or at bawdena@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 VI. Appendix I: Objectives, Scope, and Methodology The objectives of our review were to assess (1) the actions the National Nuclear Security Administration (NNSA) is taking to extend its existing inventories of enriched uranium to address near-term tritium needs and the costs, schedules, and risks of those actions; (2) the extent to which NNSA’s plan to analyze options for supplying enriched uranium in the long term is consistent with Department of Energy (DOE) directives; and (3) NNSA’s preliminary cost estimates for long-term uranium enrichment technology options and the extent to which they meet best practices for reliable estimates. To inform all three objectives, we analyzed NNSA planning documents, such as NNSA’s October 2015 Tritium and Enriched Uranium Management Plan Through 2060 and other documents from NNSA and DOE pertaining to the management of enriched uranium and tritium. We also interviewed officials from NNSA, DOE, the Department of Defense (DOD), the Department of State (State), the Tennessee Valley Authority (TVA) and representatives of companies participating in different stages of the nuclear fuel cycle. We conducted site visits to the Oak Ridge National Laboratory (ORNL), the Y-12 National Security Complex in Oak Ridge, Tennessee, and the American Centrifuge Plant, in Piketon, Ohio, to understand the technology and nonproliferation policy issues that affect the current inventory and future supply of unobligated enriched uranium. To describe the actions NNSA is taking or plans to take to extend its existing inventories of enriched uranium to address near-term tritium needs and the costs, schedules, and risks of those actions, we reviewed and analyzed agency documents pertaining to NNSA’s estimates of the costs, schedules, and risks for the actions. Namely, we analyzed NNSA’s October 2015 Tritium and Enriched Uranium Management Plan Through 2060 and other NNSA strategies and implementation plans, including a 2014 Uranium Inventory Working Group assessment of near-term NNSA actions to extend the supply of unobligated LEU. We interviewed NNSA and TVA officials to validate the cost and schedule information for the action NNSA is taking to extend its LEU inventory. To compare the estimated costs to the actual costs for the actions NNSA is taking or plans to take to extend the unobligated LEU fuel supply for tritium production, we analyzed contracts between TVA and fuel cycle facilities for book storage and associated documentation. We then spoke with representatives from NNSA’s downblending contractor, and compared that information to the costs that had been invoiced through July 2017. To identify risks of the options that NNSA has identified, we reviewed NNSA documents and interviewed NNSA officials. To assess the extent to which NNSA’s plan to analyze options for supplying enriched uranium in the long term is consistent with DOE directives, we reviewed DOE and NNSA documents including: documents associated with DOE’s critical decision process, such as the uranium enrichment mission need statement, project requirements, and the CD-0 approval memo; DOE memos on the department’s uranium management strategy; and an intellectual property transfer contract between DOE and the United States Enrichment Corporation (USEC). We compared these documents to DOE directives, including DOE Order 413.3B Program and Project Management for the Acquisition of Capital Assets and 413. 3-4A Technology Readiness Assessment Guide, and associated guidance, such as DOE 413.3-17 Mission Need Statement Guide. ORNL and its subcontractor manage the contracts to develop and preserve the large centrifuge technology (AC100), and the contract to develop the small centrifuge technology; therefore, we also reviewed ORNL documents including a uranium enrichment production technology study, project management plans for the large and small centrifuge projects, and large centrifuge experiment test results. We interviewed DOE officials and ORNL representatives regarding efforts to assess the feasibility of other technology options identified in NNSA’s October 2015 plan—large centrifuge, small centrifuge, Atomic Vapor Laser Isotope Separation (AVLIS), Electromagnetic Isotope Separation (EMIS), Separation of Isotopes by Laser Excitation (SILEX), and the Paducah Gaseous Diffusion Plant. We also reviewed documents and interviewed representatives from Centrus and Global Laser Enrichment (GLE)—a joint venture that developed SILEX—regarding the development of the large centrifuge, AVLIS, and SILEX technologies. In addition, we reviewed industry responses to NNSA’s request for information regarding proposals for meeting NNSA’s future enriched uranium needs. We also interviewed NNSA and DOE officials, and industry representatives, to learn about any recent alternative tritium production technology developments. We conducted a site visit to an isotope production facility in Henderson, Nevada, to observe a NNSA- funded demonstration project with Global Medical Isotope Systems that is currently testing an alternative tritium production technology. To review the feasibility of policy and other options that NNSA is evaluating, we analyzed NNSA planning documents, and interviewed officials from NNSA and State to determine the extent to which the costs, schedules, and risks for these options were known. To examine NNSA’s preliminary cost estimates for long-term uranium enrichment technology options—the large and small centrifuges—and the extent to which they meet best practices for reliable estimates we compared these estimates to GAO’s Cost Estimating and Assessment Guide (cost guide), which is a compilation of best practices that federal cost estimating organizations and industry use to develop and maintain reliable cost estimates throughout the life of an acquisition program. According to the cost guide’s best practices, four characteristics make up reliable cost estimates—they are comprehensive, well-documented, accurate, and credible. To develop our assessments, we interviewed an NNSA official and a representative of an NNSA contractor who prepared the cost estimates about their methodologies and the findings that were used to support the cost estimates presented in NNSA’s mission need statement. We analyzed the cost estimating practices used by NNSA against the four characteristics of reliable cost estimates. We performed a summary analysis because NNSA’s cost estimates were at the rough- order-of-magnitude level. After conducting our initial analyses, we shared them with NNSA officials to provide them an opportunity to comment and identify reasons for observed shortfalls in cost estimating best practices. We took their comments and any additional information they provided and incorporated them to finalize our assessment. While rough-order-of- magnitude estimates should never be considered high-quality estimates, rough-order-of-magnitude estimates can be considered reliable by fully or substantially meeting industry best practices. For example, we have found that other rough-order-of-magnitude estimates substantially or fully met various characteristics of a reliable cost estimate, such as cost estimates prepared by the DOD and the U.S. Customs and Border Protection within the Department of Homeland Security. Moreover, DOE’s cost guidance states that, “regardless of purpose, classification, or technique,” the agency’s cost estimates should demonstrate quality sufficient for its intended use, be complete, and follow accepted standards such as our cost guide. DOE’s cost guidance also describes good cost estimates as including a full life-cycle cost estimate, among other things. These best practices should result in reliable and valid cost estimates that management can use for making informed decisions. We conducted this performance audit from August 2016 to February 2018 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: Other Options for Obtaining Enriched Uranium without Acquiring a New Uranium Enrichment Capability The National Nuclear Security Administration (NNSA) has identified other options for obtaining enriched uranium to evaluate in its analysis of alternatives process, but these options pose significant challenges and are likely to be eliminated during this process, according to NNSA and Department of State (State) officials. These options may require changes in policy and could have significant costs, risks, or technical challenges, according to NNSA and State officials. These options include revising domestic policy and international agreements to allow the use of foreign- obligated enriched uranium and technology for producing tritium; obtaining low enriched uranium (LEU) through the Mutual Defense Agreement between the United States and the United Kingdom; downblending highly enriched uranium (HEU) from the defense programs inventory; and reprocessing spent U.S. nuclear fuel. NNSA officials stated that they do not plan to pursue these options at this time. Revising Domestic Policy and International Agreements to Allow the Use of Foreign-Obligated Uranium and Technology for Producing Tritium Over the years, questions have been raised as to whether using foreign- obligated material and technology to produce LEU, which produces tritium that can be harvested for weapons, when irradiated in a power reactor, constitutes a peaceful use. However, according to DOE, it has been the agency’s long-standing practice to use only unobligated material for tritium production. NNSA’s mission need statement includes the option to revise domestic policy and seek to renegotiate international agreements to allow foreign-obligated LEU—that is, LEU either sourced from foreign countries or produced using non-U.S. equipment or technology—for tritium production for nuclear weapons. Specifically, NNSA discussed three variations of the option of using foreign-obligated LEU for tritium production for use in nuclear weapons: Using obligated LEU from URENCO—a European enrichment consortium operating an enrichment plant in New Mexico. The LEU produced by URENCO is enriched using foreign technology and is subject to a peaceful use provision in an international agreement between the United States and Germany, the Netherlands, and the United Kingdom. Loading TVA reactor cores with a mix of unobligated and obligated LEU fuel proportional to the extent that the reactor core is used for tritium production for commercial electricity production. Renegotiating international agreements to allow the use of foreign technologies to produce LEU for tritium production. According to NNSA and State Department officials, longstanding U.S. policy will likely preclude the use of these options. A 1998 interagency review—led by DOE—considered the nonproliferation issues associated with establishing a new means for tritium production. The 1998 review concluded that DOE should exclusively use LEU that is unobligated by peaceful-use restrictions to preserve the “military/civilian dichotomy.” Since that time, NNSA has adhered to this policy and used only unobligated LEU for tritium production, as we reported in 2015. Various U.S. interagency policy committees—which provide national security policy analysis within the National Security Council—met several times between 2014 and 2016 to reexamine the policy and consider whether to allow obligated LEU to be used for tritium production for nuclear weapons. However, the committees concluded that this is not permissible either by the United States or partner countries under applicable international agreements. Revising the policy and agreements would have significant repercussions on U.S. nonproliferation policy as well as on international agreements, according to NNSA and State officials. In addition, according to the mission need statement, U.S. partners have repeatedly requested assurances that materials supplied to the United States not be used for tritium production. In addition, NNSA and State officials stated that using only unobligated LEU for national security purposes supports U.S. nonproliferation policy goals by, for example, avoiding setting a precedent for other countries that may seek to use U.S. obligated LEU for military purposes. State officials stated that even using a mix of unobligated and obligated LEU fuel would still essentially be asking a foreign partner for the use of its material for tritium production for nuclear weapons. Revising policy to allow for the use of obligated LEU in tritium production could “blur the line” between using LEU for peaceful energy purposes and national security purposes, according to these officials. Mutual Defense Agreement NNSA also considered obtaining LEU from the United Kingdom under our mutual defense agreement with that country. The agreement provides for the transfer of special nuclear material between the two countries. In 2014, the Senate Armed Services Committee directed DOE to evaluate whether it would be possible to obtain LEU for the purposes of tritium production from the United Kingdom under the mutual defense agreement. According to State officials, the mutual defense agreement does not preclude the United States from obtaining LEU directly from the United Kingdom for the purposes of tritium production. However, this option is not likely to be pursued by the federal government, according to NNSA officials. Aside from the mutual defense agreement, State officials said that they are not aware of any other such agreements that would potentially allow the United States to obtain tritium from another country. Downblending of HEU from the Strategic Reserve NNSA’s October 2015 plan identifies a Strategic Reserve of HEU maintained by NNSA as a potential source of HEU for downblending to obtain unobligated LEU for use in tritium production. The Strategic Reserve consists of HEU metal and HEU in nuclear weapon components that are held as a backup for weapons in the U.S. nuclear stockpile. According to the October 2015 plan, this option could provide unobligated LEU for tritium production for many years. However, the October 2015 plan states that changing the quantity of HEU held in the Strategic Reserve inventory would require presidential approval. NNSA officials indicated that the agency is assessing the costs and risks of this option. According to these officials, pursuing this option would involve significant costs and risks associated with lowering the material in the Strategic Reserve, as well as accelerating the dismantlement of nuclear weapons and the disassembly of their components. While this option is currently being assessed for costs and risks, NNSA officials noted that there is currently “no plan” to access material from the Strategic Reserve. Finally, the United States’ inventory of HEU is finite; the United States has not had a domestic capability to produce HEU since 1992 and instead meets national security needs using an inventory of HEU that was enriched prior to 1992. Using this inventory for HEU downblending would consume HEU that could be used to meet other national security missions, such as providing HEU fuel for the U.S. Navy’s propulsion reactors. Consequently, this option could accelerate the date when a new enrichment capability for HEU production would be needed. Reprocessing Spent U.S. Nuclear Fuel In its October 2015 plan, NNSA identified an option of reprocessing spent U.S. nuclear fuel to obtain unobligated HEU that could be downblended to LEU and used for tritium production. However, this option was not ultimately included in NNSA’s October 2016 mission need statement. This material is spent reactor fuel from the U.S. Navy and other sources, and represents a potentially significant source of unobligated LEU that could be used for tritium production. DOE maintains a large inventory of such fuel, which includes both aluminum-clad and non-aluminum clad fuel, such as zirconium-clad fuel. Most of the aluminum-clad fuel is stored at the Savannah River Site, in South Carolina, while most of the zirconium-clad fuel is stored at the Idaho National Laboratory. Options for recovering HEU from either type of spent fuel are limited. The United States can only process and recover HEU from aluminum-clad spent nuclear fuel using the Savannah River Site’s H-Canyon facility, which is the only hardened nuclear chemical separations plant still in operation in the United States. There is a small amount of aluminum- clad fuel at the Idaho National Laboratory that would need to be shipped to the Savannah River Site. However, according to NNSA officials, it would be expensive to transport the material from the Idaho National Laboratory to the Savannah River Site, and the costs to operate H- Canyon to process the material would be high. Further, receipts of all nuclear material at H-Canyon have been halted by Savannah River Site’s management and operations contractor due to the facility’s degraded conditions and seismic risks. Even if H-Canyon were to resume operations, NNSA officials stated that processing aluminum-clad spent fuel would yield relatively small quantities of LEU usable for tritium production, as a considerable portion of the spent fuel is encumbered under a 1994 Presidential declaration. Therefore, NNSA officials reported that this is considered a long-term option due to the high costs and risks involved. DOE’s Office of Nuclear Energy is researching a process that could recover HEU from the zirconium-clad spent naval reactor fuel. In May 2017, Idaho National Laboratory completed a study examining the feasibility of processing a portion of its zirconium-clad spent fuel inventory through a new process called “ZIRCEX.” The report concluded that ZIRCEX showed promise; however, it also noted that pilot-scale testing was needed to prove that it can be used effectively at production scale. According to DOE officials, a pilot-scale demonstration is planned using ZIRCEX, with limited testing planned in fiscal year 2018. DOE officials told us the costs and schedules to implement a full-scale production plant using ZIRCEX to recover HEU from zirconium clad spent fuel are not known. Furthermore, additional processing and downblending would be needed to produce unobligated LEU. DOE considers recovering unobligated HEU for tritium production for use in nuclear weapons through the ZIRCEX process a long-term possibility that could be re- evaluated as the technology matures. Appendix III: Other Uranium Enrichment Technologies In addition to the large and small centrifuges, four other enrichment options were presented in the National Nuclear Security Administration’s (NNSA) October 2015 plan and its October 2016 mission need statement. However, these options are unlikely to be pursued, according to NNSA documents. Some of these options have produced enriched uranium in the past, but extraordinary technical or financial barriers, past research failures, or peaceful use restrictions will likely preclude further consideration by NNSA, according to agency documents. These options include: Restart of the Paducah Gaseous Diffusion Plant (GDP). Gaseous diffusion was the first uranium enrichment technology used for both national security and commercial enriched uranium needs in the United States, and involves passing uranium hexafluoride in a gaseous form through a series of filters that is then cooled into a solid. The Paducah GDP produced low enriched uranium (LEU) from the mid-1950s until 2013. It was originally operated by the Department of Energy (DOE), but leased to the United States Enrichment Corporation (USEC) beginning in 1993. Gaseous diffusion facilities used very large amounts of electricity, making them costly to operate. According to DOE, by May 2012, it became clear that USEC was no longer in a financial position to continue enrichment activities at the Paducah GDP, and—through a series of transactions—DOE transferred enough material to keep it operating long enough to produce an additional 15-year supply of LEU for future tritium production. In May 2013, USEC ceased enrichment at the Paducah GDP citing the high costs of maintaining and operating an aging plant. In October 2014, the Paducah GDP was returned to DOE, and DOE is currently deactivating the plant in preparation for decontamination and decommissioning, while it continues to complete environmental cleanup that began in the late 1980s. In April 2015, when NNSA produced a technical evaluation of uranium enrichment technology options, restarting the Paducah GDP was still a hypothetical possibility. At that time, NNSA estimated that the technology readiness level (TRL) for this option rated 7-8 on the TRL scale. Restarting the Paducah GDP was advantageous, according to NNSA, because of the facility’s high production rate. For example, according to DOE officials, if it had been operated for a relatively brief period of time after May 2013, a significant stockpile of unobligated LEU could have been produced to support tritium production for a number of years. Since 2015, the plant and equipment have significantly deteriorated, and restart of the Paducah GDP is no longer a feasible option, according to NNSA documents and Oak Ridge National Laboratory (ORNL) representatives. Due to degradation of the equipment, the expected rate of equipment failure, a lack of replacement parts, the dispersion of trained and qualified personnel, and ongoing decontamination and demolition activities, a major effort would be required to reconstitute the plant, according to NNSA’s 2015 technical evaluation and the 2015 plan. NNSA’s 2015 evaluation estimated that it would cost $425 million to $797 million to restart the plant, and between $554 million to $1 billion annually to operate it. In addition, even if the Paducah GDP were successfully restarted without major failures, the plant could likely operate at full capacity for only 1 to 3 years before incurring additional significant costs for repairs, and obtaining replacement parts for critical process equipment would be difficult. According to NNSA’s April 2015 evaluation, operating the Paducah GDP beyond 1 to 3 years would require major investments in the plant’s facilities and infrastructure. Electromagnetic Isotope Separation (EMIS). Electromagnetic isotope separation was used in the United States to enrich uranium for the Manhattan Project, but was abandoned in favor of the then- less-costly gaseous diffusion technology. Electromagnetic separation used magnetic and electronic forces to manipulate and separate charged isotopes. An updated EMIS machine has been developed by ORNL that was successful at the laboratory scale, and which had a TRL of 7, according to NNSA documents and ORNL representatives. However, when scaled to production levels, NNSA estimated that an enrichment facility using EMIS would require over 60,000 machines and cost approximately $150 billion to construct. Due to the exorbitant estimated costs, this option is unlikely to be pursued by NNSA, according to agency documents. Atomic Vapor Laser Isotope Separation (AVLIS). Lawrence Livermore National Laboratory and later, USEC, developed the AVLIS technology from 1973 through 1999. This technology relies on the phenomenon that different isotopes of uranium absorb laser light at different wavelengths. Because lasers can be finely tuned, the ability to separate the uranium-235 isotope from the uranium-238 isotope is potentially much greater than with gaseous diffusion or the gas centrifuge process. However, despite the federal government spending $1.7 billion on the technology, and USEC investing an additional $100 million, it was not successful at the pilot scale stage and USEC ended research and funding in 1999. According to NNSA’s October 2015 plan, AVLIS’ TRL was estimated to be 5-6. If development were restarted, AVLIS could reach a TRL of 9— ready to deploy—in 5 to 15 years, according to NNSA’s October 2015 plan. However, this would likely be too late to meet NNSA’s 2038 to 2041 need date for additional unobligated LEU, and there is no estimate for the cost of such a plant, according to agency documents. According to NNSA’s 2015 plan, there is no current effort to develop the AVLIS technology. Separation of Isotopes by Laser Excitation (SILEX). Global Laser Enrichment (GLE)—a joint venture between General Electric, Hitachi, and Cameco—is developing this uranium enrichment technology that also uses lasers to separate isotopes. The technology is proprietary and was developed, in part, by an Australian company. In November 2016, DOE reached an agreement to sell its depleted uranium tails to GLE for re-enrichment to natural uranium. According to a senior SILEX official, GLE intends to build an enrichment plant by 2025 adjacent to the site of the former Paducah GDP to re-enrich these tails. However, we previously found that the SILEX agreement between the United States and Australia likely prohibits using LEU produced using GLE’s process for the subsequent production of tritium, and the executive branch has long interpreted it as such. Appendix IV: Centrus’ Centrifuge Development The AC100 centrifuge (large centrifuge) design was developed by USEC Inc. (now Centrus), based off Department of Energy (DOE) centrifuge research that was terminated in the 1980s. Standing about 40 feet tall, its size means that it can produce more separative work units (SWU) per centrifuge than other centrifuge designs—making it the most advanced centrifuge design in the world, according to Centrus. In contrast to European and Japanese centrifuge designs, which are relatively small (2 to 4 meters long) and have separative work capacities in the range of 5 SWU per year to 100 SWU per year, the AC100 demonstrated a SWU production rate greater than 340 per year. When it leased a DOE site at Piketon, Ohio, for its American Centrifuge demonstration plant starting in 2004, USEC originally intended to build a 3.8 million SWU commercial uranium enrichment plant at that site with enough land nearby to expand the facility to meet total U.S. low enriched uranium (LEU) demand, including enough to meet national security needs. The planned facility would have included over 14,400 centrifuges in a facility covering over 2 million square feet. In 2010, and again in 2012, DOE and USEC signed cooperative agreements to share the cost of supporting a research, development, and demonstration program for the large centrifuge technology. DOE provided $280 million, or 80 percent of the investment in the program, with the remaining $70 million, or 20 percent, provided by USEC. With this support, USEC began operating a 120-machine commercial demonstration cascade in October 2013. In the wake of significant adverse uranium market impacts resulting from the Fukushima Daiichi accident in Japan in 2011, and in light of difficulties in securing DOE loan guarantees for deploying a commercial plant, USEC declared bankruptcy in March 2014 and later emerged as Centrus. In April 2014, following the conclusion of the cooperative agreement, the Secretary of Energy stated that DOE’s Oak Ridge National Laboratory would place Centrus under contract to operate the demonstration plant and technology with a focus on meeting national security needs. In May 2014, Centrus entered into a contract with UT-Battelle—DOE’s contractor for Oak Ridge National Laboratory—to run a program to preserve and further advance the technology readiness of the AC100 technology. Also, since 2002, Centrus has maintained a lease on a smaller test research facility, K-1600, at Oak Ridge, Tennessee, from DOE. According to a DOE document, centrifuges can be assembled and balanced at K-1600, and the test facility allows verification of centrifuge operations beyond what was possible at the demonstration plant. The K-1600 facility is located near Centrus’ manufacturing hub, the American Centrifuge Technology & Manufacturing Center, also in Oak Ridge, Tennessee. Because the May 2014 contract was set to expire in September 2015, Centrus and UT-Battelle began negotiating a new contract to support operations at the demonstration plant, the Technology and Manufacturing Center, and K-1600 in early 2015. UT-Battelle and Centrus agreed to an extension of research operations at K-1600 and the Technology and Manufacturing Center until September 2016 for $35 million annually. In addition, the Centrus lease of K-1600 was renewed until the end of calendar year 2017. However, the parties were unable to agree on further funding for the demonstration plant. On September 11, 2015, DOE announced that it would not fund the demonstration plant in Piketon, Ohio, after September 30 of that year. Centrus—unable to operate the demonstration plant without further government support—announced its intention to demobilize the plant in February 2016. Decontamination and decommissioning of the demonstration plant began in April 2016. As part of this work, Centrus is removing all of the equipment—including the centrifuges—from the demonstration plant, and will finish disposing of the machines at a secure government facility in October 2017, according to Centrus officials. However, according to DOE officials, DOE has preserved a number of the centrifuges and associated components at the Technology & Manufacturing Center. Centrus documents anticipate that the decontamination and decommissioning work will be substantially complete by the end of 2017. According to NNSA officials, Centrus has given verbal notice to DOE that it intends to terminate its American Centrifuge demonstration plant site lease in 2019. An August 2015 DOE memo states that technical issues with the existing centrifuges, peaceful-use restrictions on key components and DOE’s acquisition timeline meant that there was limited value in continuing to support the demonstration cascade after 2015. Specifically, during operation of the demonstration cascade, two technical issues were identified that made the existing centrifuges undesirable for future use. Rehabilitation of the centrifuges would have been cost prohibitive, according to NNSA officials. In addition, key components of the existing machines were constructed using foreign-sourced materials, which were subject to peaceful-use restrictions. According to an August 2015 DOE memo, the second cooperative agreement with Centrus did not require that Centrus use unobligated materials, and Centrus initially assumed it would use those machines in a larger commercial plant and not for national security. Centrus representatives and DOE officials told us that the company had since identified U.S. suppliers or workarounds for these components. However, to be used in a national security facility, these components would need to be remanufactured using those suppliers, since not all components in the demonstration cascade were unobligated. Further, under NNSA’s timeline for a domestic uranium enrichment capability, it could take until 2027 to begin construction of a uranium enrichment plant. Thus, according to an August 2015 memo, DOE concluded that it would not be economical to keep the demonstration cascade operational, and that, after the passage of so much time, parts of the centrifuges and the balance of the plant would also need to be replaced during construction. Appendix V: Comments from the Department of Energy / National Nuclear Security Administration Appendix VI: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the individual named above, Shelby S. Oakley, Director; William Hoehn, Assistant Director; Eric Bachhuber, Analyst in Charge; Julia Coulter; and Katrina Pekar-Carpenter made key contributions to this report. Also contributing to this report were Antoinette C. Capaccio, Jeff Cherwonik, Jennifer Echard, Robert S. Fletcher, Ellen Fried, Cindy Gilbert, Amanda K. Kolling, Jason Lee, Jennifer Leotta, Dan C. Royer, Anne Stevens, and Kiki Theodoropoulos.

Why GAO Did This Study NNSA has several mission needs for enriched uranium, including providing LEU to fuel a nuclear reactor that produces tritium—a key isotope used in nuclear weapons. NNSA has a pressing defense need for unobligated LEU to fuel this reactor, meaning the uranium, technology and equipment used to produce the LEU, must be U.S. in origin. Because the United States lost its only source of unobligated LEU production in 2013, the supply is finite. A House Armed Services Committee report included a provision for GAO to assess NNSA's plans to manage tritium and enriched uranium. This report examines (1) the actions NNSA is taking to extend its existing LEU inventories to address near-term tritium needs; (2) the extent to which NNSA's plan to analyze long-term options for supplying enriched uranium is consistent with DOE directives; and (3) NNSA's preliminary cost estimates for long-term uranium enrichment technology options and the extent to which they meet best practices for reliable estimates. GAO analyzed NNSA plans on costs, schedules, and risks; compared them with its guide on best practices in cost estimating; and interviewed NNSA and other officials. What GAO Found The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy (DOE), is taking or plans to take four actions to extend inventories of low-enriched uranium (LEU) that is unobligated, or carries no promises or peaceful use to foreign trade partners until about 2038 to 2041. Two of the actions involve preserving supplies of LEU, and the other two involve diluting highly enriched uranium (HEU) with lower enriched forms of uranium to produce LEU. GAO reviewed these actions and found the actual costs and schedules for those taken to date generally align with estimates. NNSA and GAO have identified risks associated with two of these actions. One of these risks has been resolved; NNSA is taking steps to mitigate another, while others, such as uncertainty of future appropriations, are unresolved. NNSA's preliminary plan for analyzing options to supply unobligated enriched uranium in the long term is inconsistent with DOE directives for the acquisition of capital assets, which state that the mission need statement should be a clear and concise description of the gap between current capabilities and the mission need. The scope of the mission need statement that NNSA has developed can be interpreted to meet two different mission needs: (1) a need for enriched uranium for multiple national security needs, including tritium, and (2) a specific need for enriched uranium to produce tritium. The DOE directives also state that mission need should be independent of and not defined by a particular solution. However, NNSA is showing preference toward a particular solution—building a new uranium enrichment capability—and the agency has not included other technology options for analysis. Without (1) revising the scope of the mission need statement to clarify the mission need it seeks to achieve and (2) adjusting the range of options it considers in the analysis of alternatives process, NNSA may not consider all options to satisfy its mission need. Although the scope of the mission need statement is unclear, NNSA has prepared preliminary cost estimates for the two uranium enrichment technology options—the large and small centrifuge—that the agency considers to be the most feasible. However, these estimates are limited in scope and do not fully meet best practices for reliable cost estimates. Based on GAO's review of NNSA documents, NNSA appears to favor an incremental approach to reestablishing an enrichment capability that could ultimately meet all national security needs for enriched uranium. The estimates' scope is limited, however, in that they reflect only the costs of the first increment—producing LEU for tritium—and do not reflect the full costs of building a uranium enrichment facility that could meet the range of enriched uranium needs. GAO's cost guide—which provides cost estimating best practices—states that the scope of preliminary cost estimates should reflect full life-cycle costs. Also, NNSA's estimates for the two options minimally or partially met best practice characteristics for reliable cost estimates even when assessed for the more limited mission scope. For example, the estimates excluded certain costs and did not describe the calculations used. NNSA officials said that the cost estimates are preliminary and will be revised. By developing reliable cost estimates that are aligned with the revised mission need statement and consistent with best practices, NNSA will reasonably ensure that it has reliable information to make a decision about which option to select. What GAO Recommends GAO is making two recommendations, including that NNSA revise the scope of its mission need statement and ensure that the scope of its cost estimates are aligned with the revised statement while developing estimates consistent with best practices. NNSA described actions planned and in process to address both recommendations.

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Background VAPIHCS provides comprehensive health care to eligible veterans who reside in Hawaii and the three U.S. territories in the Pacific— American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. According to VAPIHCS officials, the geographic distances between the Pacific Islands and the use of multiple sources of health care to provide services to veterans in this region create complex care delivery and coordination challenges for VAPIHCS. VAPIHCS and Primary and Mental Health Care Services VAPIHCS generally provides outpatient primary and mental health care services to the veterans it serves. These services are provided through its ambulatory care clinic, housed at the Spark M. Matsunaga VAMC in Honolulu, Hawaii, on the island of Oahu, and 10 clinics located in other communities across the Pacific Islands. These 10 clinics include 7 in the state of Hawaii on the islands of Oahu (1 clinic); Hawaii (2 clinics); Maui (1 clinic); Lanai (1 clinic); Molokai (1 clinic); and Kauai (1 clinic); 1 in the territory of American Samoa; 1 in the territory of Guam; and 1 in the Commonwealth of the Northern Mariana Islands on the island of Saipan. VAPIHCS provides some outpatient specialty care services through the ambulatory care clinic and through traveling VAPIHCS specialty care providers. Table 2 shows the number of enrolled veterans and the number of veterans that have used outpatient services in fiscal year 2017 at each VAPIHCS facility. VAPIHCS and Specialty Care and Inpatient Services According to VAPIHCS officials, VAPIHCS provides most specialty care and inpatient services to veterans at military treatment facilities through joint venture and sharing agreements with DOD or through non-VA providers in the community. In fiscal year 2017, VAPIHCS sent 50,000 referrals outside of VA, mostly to DOD or through the Choice Program. Military treatment facilities. Two military treatment facilities located in the Pacific Islands provide care for veterans through joint venture and sharing agreements with VAPIHCS: TAMC and NHG. According to VAPIHCS’ data, VAPIHCS made more than 8,000 referrals to these facilities in fiscal year 2017. VAPIHCS’ joint venture with TAMC: VAPIHCS’ joint venture agreement with TAMC—1 of 10 joint venture agreements in place between VA and DOD as of December 2017—states that VAPIHCS may refer veterans to TAMC providers for specialty care and inpatient services and, in return, for VAPIHCS to provide services for DOD beneficiaries, such as psychiatric and post-traumatic stress disorder services. VAPIHCS’ sharing agreement with NHG: VAPIHCS’ sharing agreement with NHG—1 of more than 200 active sharing agreements in place between VA and DOD as of December 2017—states that VAPIHCS may refer patients from the Saipan and Guam clinics to NHG for available specialty care, laboratory, emergency care, and inpatient services. NHG is located within a mile of the Guam clinic. Choice Program. VAPIHCS may also refer veterans to a non-VA provider in the community when veterans need care that is not offered by VAPIHCS, or cannot obtain the needed care in a timely manner. In fiscal year 2017, 61 percent of VAPIHCS referrals sent to community providers were through the Choice Program. (See fig. 1 for the breakdown of the number and percent of referrals sent to care outside of VAPIHCS in fiscal year 2017.) Veterans may opt to obtain health care services from a network of community providers through the Choice Program if they meet certain criteria, including: 1. the next available medical appointment with a VHA clinician is more than 30 days from the veteran’s preferred appointment date or the date the veteran’s physician determines he or she should be seen; 2. the veteran lives more than 40 miles driving distance from the nearest VHA facility with a full-time primary care physician; 3. the veteran needs to travel by air, boat, or ferry to the VHA facility that is closest to his or her home; 4. the veteran faces an unusual or excessive burden in travelling to a VHA facility based on geographic challenges, environmental factors, or a medical condition; 5. the veteran’s specific health care needs, including the nature and frequency of care needed, warrants participation in the program; or 6. the veteran lives in a state or territory without a full-service VHA medical facility. As the third-party administrator of the Choice Program for VAPIHCS, TriWest is responsible for establishing networks of community providers, scheduling appointments with community providers for eligible veterans, and paying providers for their services. TriWest has contractual time frames in which to accept and schedule the appointment, or return the referral to VAPIHCS for further action. Most Veterans in Our Review Received Primary and Mental Health Care from VA Providers within VHA’s Timeliness Goals, although Some Faced Delays Veterans in Our Review Faced Some Enrollment Delays, but Once Contacted, Most Received Initial Primary Care from VA Providers within VHA’s Timeliness Goal Our review of 30 medical records of newly enrolled veterans accessing initial primary care services at the American Samoa, Guam, or Maui clinic found some delays in processing of health care benefits enrollment applications and contacting of veterans to schedule appointments. Once contacted, however, most veterans in our sample received initial primary care within VHA’s timeliness goal. These enrollment delays may have contributed to the time taken for veterans to see primary care providers, consistent with findings from our prior work. Enrollment for VA Health Care Benefits To receive VA health care benefits, a veteran may submit an enrollment application by mail, telephone, through VA’s website, or by applying in person at a VA health care facility. Once a veteran submits an application, there are three key steps for processing the application: (1) intake of application, (2) verification of eligibility, and (3) enrollment determination. In fiscal year 2016, most enrollment applications were processed by VA medical center staff. According to Veterans Health Administration policy, staff are required to process applications within 5 business days of receipt. applications within the timeliness goal set in VHA policy. For 27 of the 30 veterans in our sample, VHA staff recorded the date the application was received, which enabled us to assess the timeliness of enrollment processing for these veterans. We found that 22 of these 27 applications were processed within VHA’s required 5 business days, with an average of 1 day for processing. (See table 3.) Five applications were not processed within the 5-day requirement; for four of these veterans, it took an average of 10 days to process the enrollment applications. For the fifth veteran, it took 627 days for VHA to process the application, and for which VAPIHCS staff could not explain the delay. New Enrollee Appointments Veterans can request on their enrollment applications that Department of Veterans Affairs (VA) staff contact them to schedule an initial outpatient appointment. After a veteran’s enrollment application has been processed, VA staff are to initiate the scheduling of appointment requests within 7 days. within 7 days of their eligibility determination as required by VHA policy. We found that 15 of the 30 veterans in our review had contact initiated within 7 days to schedule an appointment, with an average of 4 days. (See table 4.) Fifteen veterans did not have contact initiated within the 7 day requirement; for 14 of these veterans, it took an average of 20 days to initiate contact. For the 15th veteran, it took 183 days to initiate contact. According to clinic staff, gaps in communication between clinic and VAPIHCS staff responsible for veteran enrollment, as well as staffing shortages, may have contributed to delays in contacting newly enrolled veterans. Clinic staff reported differences in how they are notified that a veteran’s enrollment application has been processed and that appointment scheduling should be initiated. In addition, staff from two clinics said there were staffing vacancies for primary care appointment schedulers in their clinics during the time of our medical record sample selection (October 2016 through March 2017), which may have caused delays in contacting veterans. Timeliness of initial primary care services. For the 30 newly enrolled veterans’ medical records we reviewed, we found that, once contacted, 27 veterans received initial primary care services within VHA’s timeliness goal of 30 days of their preferred appointment dates (the date a veteran requests health care services), with an average wait time of 7 days. (See table 4.) Three veterans did not receive initial primary care appointments at the Guam clinic within the 30-day requirement, and waited an average of 62 days. However, as we have previously reported, VHA’s timeliness goal monitors only a portion of the overall time it takes newly enrolled veterans to access primary care, and does not account for the time it takes to process enrollment applications, to notify clinic staff of successful enrollments, or to contact veterans to schedule their appointments. In our March 2016 report, we recommended that VA monitor the full amount of time newly enrolled veterans wait to be seen by primary care providers, starting with the date veterans request they be contacted to schedule appointments. When accounting for the time to process applications and contact veterans, we found 6 of the 30 veterans in our review waited more than 90 days to see a provider while 9 waited 30 days or less. Most Veterans in Our Review Received Initial Mental Health Care from VA Providers within VHA’s Timeliness Goal, but There Were Some Delays Completing Comprehensive Mental Health Evaluations Our review of a randomly selected sample of 30 medical records for veterans who accessed mental health care services for the first time at one of the selected three clinics found that most veterans received initial mental health care within VHA’s timeliness goal. Although most veterans in our sample received timely initial services, our review found that those veterans needing comprehensive mental health evaluations often experienced delays receiving them. Mental Health Care Appointments Veterans can either request mental health care services, or be referred for these services, such as by their primary care providers. Once care is requested for non- emergent mental health care needs, appointments are to be scheduled within 30 days of the referral’s clinically indicated date, or in the absence of a clinically indicated date, the veteran’s preferred date for their first mental health care appointment. In addition to scheduling the initial appointment, veterans are to receive a comprehensive mental health evaluation within 30 days of that initial referral’s clinically indicated date, or in the absence of a clinically indicated date, the veteran’s preferred date for their first mental health care appointment. This comprehensive mental health evaluation occurs during a mental health appointment, and includes a diagnosis and a plan for treatment. While this evaluation does not necessarily have to occur during the first mental health care appointment, it is expected to be completed within the timeliness goals as noted. Timeliness of initial mental health care services. Our review found that 21 of the 30 veterans in our sample who needed mental health care received their initial mental health care appointments within VHA’s timeliness goal of 30 days of their documented clinically indicated dates (the date an appointment is deemed clinically appropriate by the referring provider), or in the absence of clinically indicated dates, their preferred dates. (See table 5.) These 21 veterans were seen by a mental health care provider within an average of 7 days of their clinically indicated date or preferred date. Nine veterans did not receive initial mental health care appointments within VHA’s 30-day timeliness goal, and waited an average of 46 days to receive care from a mental health provider. Timeliness of comprehensive mental health evaluations. Although 21 of 30 veterans in our sample received initial mental health care appointments in a timely manner, our review found that most veterans needing comprehensive mental health evaluations experienced delays receiving them. Of the 30 veterans in our sample, 25 were identified as needing a comprehensive mental health evaluation, and only 9 received that evaluation within VHA’s timeliness goal of 30 days of their clinically indicated date, or in the absence of a clinically indicated date, the veteran’s preferred date. (See table 6.) These 9 veterans received their evaluations within an average of 8 days. For the 16 veterans that did not receive a comprehensive mental health evaluation within the 30-day requirement, it took between 35 and 217 days (an average of 82 days) for 15 veterans to receive an evaluation from the initial referral’s clinically indicated date or veteran’s preferred appointment date. The remaining veteran had not completed an evaluation as of February 2018. The process by which veterans received comprehensive mental health evaluations varied by clinic, and this sometimes resulted in the evaluations being completed outside of VHA’s timeliness goal: American Samoa clinic staff stated that they provide veterans with a hard-copy comprehensive mental health evaluation at the veteran’s first appointment. The veteran is instructed to complete the form at home, and return to the clinic at a later date to discuss with a provider. Staff stated that allowing veterans to fill out the form on their own saves time at the clinic, and allows veterans to be more thorough in their answers. A staff member stated that the comprehensive mental health evaluation is just one piece of the diagnostic interview and that, presumably, the provider obtains sufficient information from the veteran to develop a treatment plan and initiate services for the veteran while waiting for the veteran to complete the form. Guam clinic staff said that they generally complete the comprehensive mental health evaluation during the veteran’s first mental health care appointment, but do sometimes need to schedule a second appointment to complete the entire evaluation. Staff stated that the first priority is to treat and address what is clinically indicated, so they are sometimes delayed in completing all form requirements until a later time. Maui clinic staff stated that they typically schedule the first appointment with a veteran, and if it becomes clear that the veteran needs to continue receiving mental health services, they will schedule a comprehensive mental health evaluation at a future appointment. Most Veterans in Our Review Received Follow- Up Primary and Mental Health Care from VA Providers within VHA’s Timeliness Goal Follow-Up Appointments After a veteran is seen for an appointment at a Department of Veterans Affairs (VA) facility, the provider is to document in the veteran’s medical record a clinically appropriate specific return date or interval (such as 2, 3, or 6 months), when the provider determines the veteran should return for care. This is also known as the clinically indicated date. The follow-up appointment should then be scheduled within 30 days of the clinically indicated date. Our review of a randomly selected sample of medical records for 30 veterans in the Pacific Islands (15 veterans needing primary care and 15 veterans needing mental health care) who received follow-up appointments found that most of these veterans received care within VHA’s timeliness goal. Specifically, we found that of the 30 veterans, 25 veterans received follow-up care within 30 days of the clinically indicated date determined by each veteran’s provider, in accordance with VHA policy. (See table 7.) This included 10 veterans needing follow-up primary care (who received care an average of 6 days within the veteran’s clinically indicated date), and all 15 veterans needing follow-up mental health care (who received care an average of 3 days within the veteran’s clinically indicated date). The 5 veterans needing follow-up primary care that were not seen within the required 30 days were seen between 109 and 584 days (an average of 299 days) from their clinically indicated dates. Explanations for the length of time it took for these 5 veterans to receive care varied; for example, Guam clinic staff told us that one veteran’s follow-up care was delayed due to clinical and scheduling staffing shortages. VAPIHCS Referred Most Specialty Care to Non-VA Providers within VHA’s Timeliness Goal, but Time Taken to Provide Care Was Variable and Sometimes Lengthy VAPIHCS Met VHA’s Timeliness Goal for Almost All Specialty Care Referrals in Our Sample Sent to Choice Program and DOD Providers We found that VAPIHCS referred 67 of 69 randomly selected specialty care referrals in our sample to non-VA providers in the Choice Program or through DOD within 7 days, in accordance with the timeliness goal set in VHA policy. Specifically, VAPIHCS met this goal for 28 of 30 specialty care referrals sent to Choice Program providers, and all 39 specialty care referrals sent to DOD providers at two military treatment facilities. VAPIHCS staff took an average of 2 days to review and send referrals to VAPIHCS staff responsible for Choice Program referrals, and an average of 1 day to review and send specialty care referrals to TAMC and NHG. VAPIHCS staff responsible for Choice Program referrals also are responsible for uploading the referrals into TriWest’s portal, the Choice Programs’ third-party administrator within VAPIHCS. Although VHA policy applies to referrals sent to in-house providers, a VHA official told us that VHA expects VAMCs to manage non-VA referrals as they would those referred in-house. A VAPIHCS official confirmed that it holds staff to the 7-day requirement found in VHA policy. Time Taken for Veterans in Our Review to Receive Specialty Care from Choice Program and DOD Providers Was Variable and Sometimes Lengthy We found that once specialty care referrals in our review were sent to the Choice Program or one of the two DOD military treatment facilities— TAMC and NHG—the amount of time it took veterans to receive care from these non-VA providers varied, and sometimes was lengthy. Time taken to receive care from a Choice Program provider. Once VAPIHCS staff reviews and uploads each referral into TriWest’s portal, TriWest is required to meet VA’s timeliness requirements for the Choice Program, which specify the amount of time TriWest has to (1) contact the veteran, (2) schedule the appointment, (3) and provide veterans with care. We found that for all 30 referrals in our sample, TriWest first attempted to contact the veteran within the 4 business days required once TriWest received and accepted the referral from VAPIHCS. However, we also found that TriWest did not follow the requirements for mailing letters for 3 of the referrals when it was unable to reach the veterans by phone. If TriWest is unable to reach a veteran after calling a minimum of three times over 4 business days, a letter is to be mailed to the veteran on the 7th business day after receiving the referral notifying them that they have 10 business days from the date of the letter to contact TriWest to schedule an appointment. For these 3 referrals, TriWest mailed a letter, but did not do so until one day later than the required 7th business day after receiving and accepting the referral. We found that after reaching the veteran, TriWest staff scheduled appointments for 17 of the 25 referrals within the 5 business days required for scheduling an appointment after the veteran opts in to the Choice Program. (See table 8.) We found varying reasons that may have delayed the scheduling of an appointment. For example, some records showed that TriWest staff did not begin to call a provider until 4 or more days after they reached the veteran and confirmed they wanted to utilize, or opt in to, the Choice Program to receive care. In addition, some providers required time to review the veteran’s medical record before scheduling the appointment with TriWest. We found that 20 of the 30 veterans referred to Choice Program providers received care within VHA’s 30-day timeliness goal that VA used to evaluate TriWest’s performance under its contract. TriWest has an overall timeliness goal from VHA to provide veterans care through Choice Program providers, although the way this was calculated changed during our review due to changes in their practice and modifications to the contract. The 20 veterans that received care within the timeliness goal did so within an average of 14 days. The 10 veterans that did not receive care within the 30-day timeliness goal waited between 31 and 126 days (an average of 62 days). Veteran preferences and specific provider tendencies sometimes led to delays in scheduling, causing care to be completed outside VHA’s timeliness goal. For example, our review of TriWest records found that two veterans in Guam noted that they preferred to stay on island for their ophthalmology referrals, rather than flying to Honolulu, and the non-VA Guam orthopedist sometimes took a week or more to review a veteran’s file before scheduling the appointment with TriWest. The 30-day timeliness goal that VA used to evaluate TriWest’s performance captured a portion of the overall amount of time that it took for these veterans to receive care. We found that the number of days from the referral’s creation to the date that veterans received care from Choice Program providers varied by clinic, and ranged from 19 to 239 days, with the average being 75 days. (See table 9.) This range and average includes circumstances outside of TriWest’s control; for example, four veterans in our sample chose to reschedule their appointments for a later date. One veteran from American Samoa was originally scheduled for an appointment within 40 days of the referral’s creation date; however, the veteran chose to reschedule the appointment and, in doing so, it took a total of 166 days for the veteran to be seen. three other veterans experienced delays in care after VAPIHCS initially sent their referrals to TAMC or NHG and later redirected the referrals to the Choice Program. VAPIHCS referred one veteran from Guam for specialty care at NHG. However, when VAPIHCS discovered that NHG could not provide care to the veteran, the veteran’s referral was redirected to the Choice Program 88 days after the referral creation date. This veteran encountered additional delays because of the time it took the Choice Program provider to review medical records before scheduling the appointment. As a result, it took a total of 180 days for the veteran to be seen. Time taken to receive care from a DOD provider. After referring a veteran to a DOD provider, VHA does not have any timeliness goals or requirements in place related to the scheduling of appointments, or when the veteran should receive care. Our review found wide ranges in the time it took for the 39 veterans in our sample to receive care at TAMC and NHG. (See table 10.) TAMC: It took up to 95 days for 29 veterans from the American Samoa, Guam, and Maui clinics referred to TAMC to receive specialty care, with an average of 37 days from the creation of the referral to receiving care. These time frames include some veterans that rescheduled their appointments for later dates. For example, one veteran from Maui did not show up to the originally scheduled appointment (which was scheduled for approximately a month after the referral creation date), and the appointment was rescheduled for two months later. NHG: It took up to 107 days for 10 veterans from the Guam clinic referred to NHG to receive specialty care, with an average of 47 days from the creation of the referral to receiving care. Weaknesses in VAPIHCS’ Referral Process May Have Contributed to the Time Taken to Provide Care at One DOD Military Treatment Facility When reviewing VAPIHCS’ referrals to NHG, we found weaknesses with the VAPIHCS’ referral process, including (1) incorrectly canceling referrals, (2) inconsistent guidance describing roles and responsibilities, and (3) untimely referral management. These weaknesses may have contributed to the amount of time it took for veterans to receive care, or resulted in the veteran not receiving care. Military Treatment Facility Referral Process After the Department of Veterans Affairs (VA) Pacific Islands Health Care System (VAPIHCS) staff review a referral and decide care should be rendered at a military treatment facility, there are two different processes for sending the referral to Tripler Army Medical Center (TAMC) or Naval Hospital Guam (NHG). If it is determined that a veteran needs care at TAMC, VAPIHCS staff review and send the referral to TAMC’s VA Referral Center. There, TAMC staff enters the referral information into DOD’s electronic medical record system and completes the appointment scheduling process. If it is determined that a veteran needs care at NHG, VAPIHCS staff review and send the referral to designated staff on Guam who have access to enter the referral directly into NHG’s electronic medical record. After the designated staff on Guam enter the referral into the system, NHG staff are then responsible for scheduling the veteran’s appointment. Some referrals sent to NHG were incorrectly canceled by VAPIHCS staff. Specifically, in addition to the 10 completed referrals we reviewed, we also examined 5 referrals sent to NHG that were subsequently canceled by VAPIHCS staff responsible for referral management, but with no indication of appointments ever being scheduled. The reason for cancelations recorded in the veterans’ medical records was that the referrals had been open for more than 90 days; however, this practice is not in alignment with VHA policy. According to VHA policy confirmed by a VHA official, canceling a referral is an action taken by the receiving service to alert the sending provider that additional information is needed, or to correct an obvious error in the referral; a referral should not be canceled due to the length of time the referral has been open without care being provided. VHA policy also states that canceled referrals older than 90 days are not to be resubmitted by the sending provider; instead, the sending provider must reassess the patient’s needs, as the clinical circumstances may have changed, and create a new referral, as necessary. Based on our review, it is unclear why VAPIHCS staff responsible for referral management were not following VHA policy for canceling referrals, whether it was because they did not understand the policy or for other reasons. Federal internal control standards require management to review processes in a timely manner to ensure that control activities are appropriately designed and implemented. Because our review found that in some cases VAPIHCS staff were not following VHA’s referral policy, it is important for VAPIHCS to determine why staff are not adhering to the policy and take needed steps to ensure compliance. Ultimately, in our review of the veterans’ medical records, we did not find documentation that these veterans received the recommended care included in the canceled referrals. Additionally, we did not find evidence that four of the five referrals had been updated and resubmitted, or that any new referrals had been submitted in their place, which may have delayed needed care; or that the five affected veterans were contacted by VAPIHCS to understand why appointments had not been scheduled. Inconsistent guidance exists describing the roles and responsibilities of VAPIHCS staff involved in the NHG referral process. We identified different VAPIHCS guidance that provided inconsistent descriptions of the referral process with NHG. For example, a VAPIHCS flowchart depicting the referral process states that, after review, the referral is to be sent to a VAPIHCS staff member embedded within NHG to enter the referral information into NHG’s electronic medical record. However, language in the referral itself states that, after review, the referral is sent to Guam clinic staff to enter into NHG’s record. Federal internal control standards call for management to assign responsibility and delegate authority to achieve an agency’s objectives. A VAPIHCS official stated that the embedded member within NHG entering in referrals in NHG’s electronic medical record was an interim fix and that there are plans in place for those responsibilities to be transferred to NHG staff. Specifically, VAPIHCS and NHG officials reported that NHG plans to hire two staff members to manage the referral process, but as of December 2017, these 2 staff members had not yet been hired due to budgetary constraints. Whether or not NHG hires additional staff, it is important for VAPIHCS to clarify and document the roles and responsibilities of their staff for sending, managing, and monitoring referrals to NHG. Without such clarification, there is the risk for confusion about responsibilities for entering referrals into NHG’s electronic medical record, which could potentially create delays in appointment scheduling and veterans’ receiving care. VAPIHCS did not always manage referrals to NHG in a timely way. Our review found instances throughout the NHG referral process where lack of timely referral management by VAPIHCS staff may have contributed to delays in veterans receiving care. VHA policy states that the referral process should include appropriate staff to manage referral notification, disposition, scheduling and completion; and designate staff to run referral reports, which must be reviewed at least weekly to resolve issues. In addition, federal internal control standards state than an organization should establish and operate monitoring activities to determine appropriate corrective actions on a timely basis. One factor that contributed to the lack of timely referral management was that VAPIHCS does not effectively monitor the referrals sent to NHG. First, VAPIHCS staff did not always monitor the availability of services at NHG with the frequency necessary to ensure the timeliness of referral management. NHG is to provide VAPIHCS with a list of available outpatient services no less than quarterly so VAPIHCS can determine if a referral for a specific service can be made to NHG; we confirmed that NHG provided these lists quarterly during our review time frame. However, VAPIHCS staff did not monitor whether services remained available after sending referrals to NHG in a timely manner. For example, one veteran in our review was originally referred to NHG in late November 2016, but it was not until VAPIHCS staff followed up on the referral in early February 2017 that they were informed that NHG could not accommodate the veteran at that time and that they instead should refer the veteran to a non-VA provider. This may have contributed to delay in care for the veteran by more than 2 months. Second, VAPIHCS staff did not ensure that referrals were entered into NHG’s electronic medical record system in a timely manner to begin the appointment scheduling process; under the process agreed to by VAPIHCS and NHG, it is the responsibility of designated VAPIHCS staff to enter referrals into the NHG electronic medical record system. For example, VAPIHCS staff referred one veteran for care to NHG in November 2016. However, it was not until December 2016—one month later—that VAPIHCS staff checked on the status of the referral. Finding no evidence of actions taken to schedule an appointment, staff added a reminder for the embedded VAPIHCS staff member at NHG to enter the referral into NHG’s electronic medical record, to restart the appointment scheduling process. Third, VAPIHCS staff did not always manage referrals to ensure the timely disposition and scheduling of appointments. Among the five canceled referrals that we reviewed, we found VAPIHCS staff noticed appointments had not been scheduled only when they reviewed the referrals months later. For example, of the five referrals VAPIHCS sent to NHG, one referral, sent in mid-November 2016, was canceled in early February 2017 after VAPIHCS staff found no evidence that an appointment had or would be scheduled. another referral was sent in late November 2016. After VAPIHCS staff reviewed the referral and found no evidence that an appointment had or would be scheduled, they noted that the referral was 101 days old and canceled it in late January 2017. VAPIHCS staff referred another veteran to NHG in mid-March 2017. After VAPIHCS staff reviewed the referral and found no evidence that an appointment had or would be scheduled, they noted that the referral was almost 4 months old and canceled it in June 2017. VAPIHCS’ lack of timely referral management was also due to poor communication between VAPIHCS staff and NHG. Federal internal control standards state that an organization should communicate with external bodies to receive the necessary quality information required to achieve the entity’s objectives. A VAPIHCS official stated that VAPIHCS staff do not have the same level of communication with NHG as they do with TAMC, which has its own staff to schedule veteran appointments and communicate that information back to VAPIHCS on a weekly basis, including if they cannot schedule a veteran. Instead, the official stated that VAPIHCS staff have to independently monitor the status of referrals to NHG, or ask the embedded VAPIHCS staff member at NHG to complete referral research for them. In addition, our review of the referral notes for these veterans found no evidence of communication between VAPIHCS staff and NHG staff regarding NHG’s efforts to schedule appointments for veterans before VAPIHCS staff canceled them. Furthermore, we also found no evidence of communication regarding outreach by NHG staff to VAPIHCS staff to discuss any scheduling difficulties, such as being unable to contact a veteran. Because VAPIHCS relies on NHG to provide inpatient and specialty care services for veterans from Guam and the Commonwealth of the Northern Mariana Islands, it is essential that referrals sent to NHG are managed in a timely manner, including verifying the availability of services and ensuring referrals are entered into NHG’s electronic medical record system, as well as communicating with NHG about the status of veterans’ appointments. Without a more robust referral management process, VAPIHCS is unable to ensure that veterans receive needed care in a timely manner, if they receive care at all. VAPIHCS Has Faced Physician Recruitment and Retention Challenges, but Has Not Evaluated the Strategies It Used to Help Resolve Them VAPIHCS Has Faced Physician Recruitment and Retention Challenges, Including Those Unique to the Pacific Islands, and Others Common across VHA We found that VAPIHCS has faced physician recruitment and retention challenges that are both unique to the Pacific Islands, such as the limited number of local physicians from which to recruit, and challenges that are common across VHA, such as the amount of time it takes to hire a new physician. Having an adequate physician workforce is key to ensuring veterans’ timely access to health care. Overall, there were at least 17 physician vacancies out of approximately 100 positions across VAPIHCS as of October 2017, as well as several more vacancies for other types of health care providers, some of which have been unfilled for some time. For example, Guam clinic staff told us that at one point between October 2016 and March 2017, the period of our medical record review, the clinic had 1.8 primary care physician full-time equivalents even though it was authorized for 4. VAPIHCS officials told us they are constantly trying to recruit physicians for their facilities. Recruitment and Retention Challenges Unique to VAPIHCS. Through our review of relevant literature and interviews with VAPIHCS officials, we learned that physician recruitment is challenging for VAPIHCS in the following ways, particularly because of its geographic remoteness: There is one local medical school and limited local providers from which VAPIHCS recruits. The University of Hawaii’s John A. Burns School of Medicine is the only local medical school across Hawaii, Guam, and American Samoa from which VAPIHCS recruits physicians. The islands of American Samoa, Guam, and Hawaii all include counties, facilities, or populations designated as Health Professional Shortage Areas, which indicate health care provider shortages in primary, dental, or mental health care. These designations indicate a limited number of local physicians for VAPIHCS to target in the event of a vacancy. A 2015 University of Hawaii study further highlighted these shortages. It found that the Hawaiian Islands had a deficit of more than 600 physicians, with a projected shortage of between 800 and 1,500 physicians by 2020. This requires VAPIHCS to focus its recruitment efforts on medical schools and physicians located on the mainland United States. Travel options for VAPIHCS staff and their families are limited. Finding physicians that are willing to relocate to such remote locations is difficult, according to VAPIHCS officials. In prior work, we found that other VAMCs experienced challenges recruiting physicians who were reluctant to practice in rural or geographically remote areas. This challenge is likely more pronounced for VAPIHCS, given the location of its clinics. Both American Samoa and Guam are thousands of miles from the mainland United States and travel to and from these islands requires significant time and money. For example, American Samoa only has two direct commercial flights a week (on Mondays and Fridays) and Guam has only a daily direct commercial flight to Honolulu. While the Hawaiian Islands are more accessible to the mainland, they are still geographically isolated relative to the rest of the United States, and face some of the same travel challenges as American Samoa and Guam. Residents face a high cost of living, limited community resources, and trade-offs associated with island living. While other regions of the country face similar challenges, they may be more pronounced living on an island where alternatives are limited. The cost of living in Hawaii is higher than the nationwide average, and VAPIHCS officials told us that the real estate market in Hawaii is extremely expensive. These officials also said that physician candidates have raised concerns about the quality of the public school system in some areas of the islands, which could add a potential expense of sending their children to private schools and thus deter them from accepting employment. Other concerns include, for example, the lack of a veterinarian on American Samoa. According to an official, VAPIHCS lost a candidate who had agreed to relocate to the island until learning of the lack of veterinary services. Technical issues due to locations. One physician in American Samoa told us that it can take almost 1.5 hours to access the web- based program VHA offers for voice-activated dictation of medical notes, and thus, instead, he often uses services offline, although doing so means he has to enter his notes into VA’s medical record at a later time. Guam clinic staff, including physicians, also face unique challenges due to working across the International Date Line from the Spark M. Matsunaga VAMC. Specifically, the Guam clinic information technology system operates off of a server located in Honolulu that is 20 hours, or almost a day, behind Guam. Veterans being treated in Guam are essentially being treated in the “future” according to VA’s server in Honolulu, as the date of a health care appointment in Guam is always one day ahead of the server in Honolulu. For example, if a Guam physician sees a patient on Monday at 3:00 pm, it is 7:00 pm on Sunday in Honolulu. As a result, physicians must wait until the next day to retroactively complete clinical notes. Officials also said that physicians are frustrated working in a system that may require multiple days to complete clinical notes, and that this issue has impacted physician recruitment and retention. Guam clinic staff also said that, due to the time change, they only have about 16 business hours per week that the clinic is open that overlap with business hours of VAPIHCS officials working in Honolulu, which limits the amount of time physicians at the Guam clinic can consult with other VAPIHCS physicians or administrators in Honolulu. Recruitment and Retention Challenges across VHA. VAPIHCS has encountered some of the same physician recruitment and retention challenges that we have previously found are common across VHA, although some of these challenges may be compounded by the Pacific Islands’ geographic remoteness. For example: Differences in interpretation of recruiting and hiring policies may have contributed to lengthy recruiting times. In prior work, we found that differences in VAMC officials’ understanding of some of VHA’s recruitment and hiring policies contributed to lengthy recruitment and hiring processes. We also heard differences in policy interpretations during our discussions with VAPIHCS officials for this review. For example, some officials mentioned that a physician vacancy must be posted to USAJobs; however, VHA’s hiring authorities allow facilities to hire physicians for positions without regard to civil service requirements, such as requiring public notice of the vacancy. Some VAPIHCS officials also mentioned having to wait to post a position until after the predecessor had vacated it, while another official correctly noted that the recruitment process to replace a departing physician can begin before the position is vacated. Failure to understand VHA’s hiring authorities and use an expeditious hiring process most suitable for a particular vacancy may contribute to the length of the recruitment process. Lack of interoperable electronic medical record systems between VA and DOD. We have reported for more than a decade that VA and DOD lack interoperable electronic medical record systems that permit the efficient electronic exchange of patient health information. VA and DOD partly addressed the lack of interoperability by utilizing a web-based Joint Legacy Viewer to facilitate information-sharing for VA and DOD patients, including those at VAPIHCS, NHG, and TAMC. The Joint Legacy Viewer provides VAPIHCS physicians with access to clinical notes on a veteran being treated at a military treatment facility. However, VAPIHCS and DOD officials told us that there are challenges using the Joint Legacy Viewer, including the absence of robust information found in electronic medical records, the need for physicians to toggle between multiple applications to obtain a patient’s full history, slow networks, and reduced worker productivity as a result of operating several different systems simultaneously. Retention of physicians may be difficult in an environment where the administrative burdens associated with information technology may take time away from providing patient care. VAPIHCS Has Used, but Not Evaluated, VHA Strategies to Support Physician Recruitment and Retention Primary responsibility for physician recruitment and retention rests with each Veterans Affairs medical center (VAMC) While each Veterans Integrated Service Network has a Human Resources office responsible for overseeing the VAMC-level Human Resources offices within its network, individual VAMCs are responsible for managing their employee recruitment and retention programs. The Veterans Health Administration supports VAMCs in recruiting and retaining providers by providing system- wide strategies for their use. VAPIHCS and VHA officials told us they have recruited and retained physicians to the Pacific Islands by promoting attributes of its location and by using VHA strategies, similar to other VAMCs nationwide. Locally, officials told us they have advertised the Pacific Islands’ weather and scenery during their recruitment efforts. Officials also said they promoted VAPIHCS’ unique relationship with DOD through its joint venture with TAMC in Honolulu as an incentive for moving to Hawaii. For example, some VAPIHCS physicians working in Honolulu have the opportunity to work alongside DOD physicians at TAMC—including the ability to consult face-to-face regarding care for a veteran referred to TAMC and provide care to DOD beneficiaries in certain settings. VAPIHCS also used many of the VHA strategies used at VAMCs nationwide to help with its physician recruitment and retention efforts. VAPIHCS officials discussed the use of the following VHA strategies, and noted limitations associated with some of them. Financial incentives. VAPIHCS officials reported that they sometimes used recruitment and retention bonuses and relocation allowances for physicians. For example, in fiscal year 2017, VAPIHCS paid $217,257 in recruitment incentives to three specialty care providers (for an average of $72,419 per physician). VAPIHCS did not offer any other financial incentives that year. Education Debt Reduction Program. Through the Education Debt Reduction Program, VHA reimburses qualifying education loan debt for employees, including physicians, in hard-to-recruit positions. In fiscal year 2017, three primary care physicians in VAPIHCS had applications approved for this program. Each recipient was awarded, on average, $17,000. VAPIHCS officials said the program was generally considered a “great recruiting tool,” but that its success was inconsistent given uncertainties regarding the amount of funding that would be available to the facility in a given year. Funds for the Education Debt Reduction Program, which are centrally managed by VHA’s Healthcare Retention and Recruitment Office, are based on the availability of funds and demand each year. In instances where centralized funding is not available, VAPIHCS and other VAMCs are authorized to use local funds to support program offers, but VAPIHCS officials said they have not used any local funds to support the program in the last 5 years. National Recruitment Program. VHA’s National Healthcare Recruitment Service, a division of VHA’s Workforce Management and Consulting Office, operates the National Recruitment Program, which provides direct physician recruitment services to VAMCs for hard-to- recruit positions by using private-sector recruiting techniques, including representing VHA at medical conferences and screening resumes. As part of VISN 21, VAPIHCS may also use the services of the network’s one dedicated recruiter responsible for serving the nine facilities in the VISN. In the almost 6 years since this recruiter has worked for VISN 21, he reported recruiting seven physicians and one social worker for VAPIHCS, and is in the process of recruiting a nephrologist. The recruiter observed that with recent leadership changes, VAPIHCS officials have been more engaged with his office and the recruiting assistance he can provide. VAPIHCS officials shared these sentiments, echoing their interest in increasing utilization of the VISN recruiter. Rural Health Training and Education Initiative. According to VHA officials, VAPIHCS is one of five facilities to participate in VHA’s Office of Rural Health’s Rural Health Training and Education Initiative to enhance its physician recruitment efforts. This program works with academic affiliates to help place physicians in rural areas and enhance VAMCs’ recruitment efforts and educate trainees about working within a VA rural health environment. According to VAPIHCS officials, 3 out of 16 physicians from this program who are eligible to be hired have taken positions at its clinics, including positions in Guam and Molokai. Enhanced Physician Recruiting and Onboarding Model. In 2015, VHA issued its Enhanced Physician Recruiting and Onboarding Model to standardize interpretation of its recruitment policy, strengthen overall physician recruitment at VAMCs, and shorten hiring processing time. VAMCs were not required to implement the model, and in our prior work, we found that implementation has been limited due to, for example, the lack of resources to implement the recommendation for a dedicated VAMC-based physician recruiter. VAPIHCS officials we spoke with said they were unaware of the Enhanced Physician Recruitment and Onboarding Model, but reported that they use 20 of the 30 best practices listed under the model, when asked about those practices. These best practices include, for example, leveraging increased pay rates when recruiting physicians, engaging with the VISN recruiter for hard-to-fill vacancies, and identifying interview questions and an interview panel before recruitment begins. VAPIHCS officials reported that they do not use other best practices such as utilizing VA’s human resources program for tracking recruitment actions and having a dedicated physician recruiter because they already have an alternate practice in place or a practice does not match their needs, among other reasons. However, officials told us they plan to examine whether there are opportunities to leverage any of these remaining best practices. As noted, in a prior report we recommended that VHA should conduct a comprehensive, system-wide evaluation of the physician recruitment and retention strategies used by VAMCs to determine their overall effectiveness, identify and implement improvements, ensure coordination across VHA offices, and establish an ongoing monitoring process. However, because VAMCs are primarily responsible for managing their own employee recruitment and retention programs and given the unique and ongoing challenges VAPIHCS has experienced with recruiting and retaining physicians, it is also important for VAPIHCS to similarly evaluate whether the strategies it uses are effective. An evaluation conducted by VHA on system-wide recruitment and retention strategies would not preclude the need for VAPIHCS to evaluate the strategies it uses; rather, it would further help identify those specific strategies that are most effective for recruiting and retaining physicians in the Pacific Islands. Federal standards for internal control related to monitoring calls for agencies to perform monitoring activities, including completing evaluations to monitor the design and effectiveness of the operations at a specific time. Agencies are to then evaluate the results of these activities and take corrective actions as needed. Ensuring veterans have timely access to health care services is one of VA’s objectives, which is dependent upon having an adequate number of physicians to provide the care. VAPIHCS officials told us that as of December 2017 they have not conducted any type of evaluation of their current strategies for facilitating physician recruitment and retention due to recent changes in leadership positions. Without evaluating the strategies currently used to determine their effectiveness, or determining if additional strategies offered by VHA might be appropriate, VAPIHCS risks missing the opportunity to target its efforts to those strategies that have the greatest potential to ameliorate long-standing staffing shortages. Veterans Face a Number of Challenges Accessing Health Care in the Pacific Islands, and VAPIHCS Uses Several Strategies to Improve Access Lack of Certain Specialties on the Pacific Islands and Significant Travel Are among Challenges Veterans Face Accessing Heath Care According to VAPIHCS officials, veterans face challenges accessing health care services on the Pacific Islands due to the lack of certain specialty care providers on many of the islands, the significant travel that is required to obtain these services, and limitations associated with telehealth services. Lack of certain specialty care providers. VAPIHCS officials told us that several Pacific Islands lack certain specialty care services entirely or significantly enough that there may be only one or a few of a certain provider type available to serve all residents, including veterans. Overall, VAPIHCS officials noted that the availability of different types of physicians across the islands is constantly in flux, but said that notable shortages are in gastroenterology, audiology, podiatry, rheumatology, dermatology, and neurology. For example, according to VAPIHCS officials, there is only one dermatologist on Guam practicing at NHG, and there is only one gastroenterologist in the community providing certain services; Kauai has a shortage of oncologists; Maui has a shortage of cardiologists; and American Samoa has a shortage of almost all types of specialty care providers because it only has one hospital—the Lyndon B. Johnson Tropical Medical Center—to provide medical care to its approximate 55,000 residents. VAPIHCS officials said the hospital is lacking many specialty services. According to VA, it does not authorize non-VA care there because the hospital receives funding from other federal agencies to provide medical services. Additionally, the hospital is not accredited for safety and quality. TriWest officials reiterated that there are virtually no specialty providers available on American Samoa for them to contract with; as of July 2017, there was only one Choice Program provider contracted on the island. As a result, essentially all eligible veterans must travel to Hawaii for specialty care services. Significant travel required of veterans. Because many of the islands lack certain specialty providers, VAPIHCS officials said that veterans often must fly elsewhere to obtain care. While travelling such distances helps improve veterans’ access to health care services, it also creates challenges. For example, such travel requires time away from their homes and families, which may be particularly difficult for veterans in poor health. The time and distance required for travel can also be quite significant—for example, veterans from American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands must travel thousands of miles by plane to receive services in Honolulu. A Guam veterans group said that veterans were frustrated with having to fly 8 hours to Hawaii for health care services. In instances where the necessary services are beyond those available in Honolulu, veterans must fly to the mainland United States for care—a flight from Honolulu to California adds about 5 hours. The flight times are even longer for veterans travelling from American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam. Figure 2 illustrates the locations of veterans enrolled in VAPIHCS and the distances and flight times they may need to travel to receive care. According to VAPIHCS data, most VAPIHCS veterans travelling for health care services over the years have received care in Honolulu, although some have had to travel to the mainland United States for subspecialty care or highly specialized care such as organ transplants. Eligible veterans are provided reimbursement for travel-related expenses under VHA’s Beneficiary Travel Program. In fiscal year 2017, VAPIHCS provided beneficiary travel funds to 348 veterans from American Samoa and 92 veterans from Guam to travel to Honolulu for care, for a total of 678 trips. During this same year, 15 veterans traveled to the mainland United States for care. VAPIHCS reported that, overall, 830 VAPIHCS veterans used beneficiary travel benefits to travel to Honolulu or the mainland United States for care that year. This represents approximately 2 percent of the total number of veterans (51,213) who received some type of care through VAPIHCS in fiscal year 2017. Veterans are responsible for paying for travel if they are ineligible for travel benefits and travel is required to receive care. The significant costs associated with travel among the Pacific islands—flights, lodging, meals—could be cost prohibitive for these veterans and, as a result, they may be unable to access VA or non-VA health care services off island. Limitations with telehealth services. Veterans face challenges accessing health care services due to limitations with telehealth services. For example, VAPIHCS officials told us there are limitations with the availability of internet services on the islands of Guam and American Samoa. This could lead to disruptions—or even cancellations—of veterans’ telehealth appointments. For example, VAPIHCS officials shared that damaged cables in the Pacific Ocean due to natural disasters and equipment failure on the part of internet service providers on the islands have led to disrupted and cancelled appointments for veterans. In March 2018, VAPIHCS reported that it had increased bandwidth and purchased new equipment to help support its telehealth efforts. Additionally, the extent to which a veteran can receive telehealth in his or her home versus the local clinic may depend upon the licensure of the provider delivering care. If a veteran is receiving telehealth services while he or she is physically located in a clinic, under federal law, the provider is not required to be licensed in the state in which the facility is located. When the patient is receiving telehealth services at home, however, a state may require that the provider be licensed in the state in which the patient is located. An official said that this is currently hampering VAPIHCS’ telehealth expansion efforts into the home. VAPIHCS Uses Several Strategies to Improve Veterans Access to Health Care, including the Use of Travelling Providers and Increased Use of Telehealth VAPIHCS has utilized a system of travelling VAPIHCS providers and is working to improve its use of telehealth services to better ensure veterans’ timely access to care, among other strategies, according to VAPIHCS officials. Use of travelling providers. VAPIHCS officials reported that travelling providers enable VAPIHCS to better ensure access for veterans who are not eligible for beneficiary travel, and reduce the travel burden on veterans who are. Furthermore, they noted that it can be more cost effective for VAPIHCS to send a travelling provider to an island on a set schedule than it is to fly veterans to Honolulu for care. These providers also help expand access by providing specialty care that is in short supply or missing entirely in some communities. For example, a VAPIHCS optometrist travels to American Samoa for one week each month, according to officials, because there is no board-certified optometrist on the island. In addition, the travelling providers offer veterans the opportunity to receive specialty care from a VA provider. Officials said they adjust the travelling providers’ schedules to reflect changes in service availability in the local communities. Table 11 illustrates the types of VAPIHCS travelling providers and the frequency with which they visit different clinics, as of December 2017. Increased use of telehealth services. Even though internet service on the Pacific Islands is not always reliable as previously noted, VAPIHCS has been increasing its use of telehealth services to improve veterans’ access to health care services. In fiscal year 2017, VAPIHCS reported that 3,046 VAPIHCS veterans utilized clinic-based telehealth services compared to 1,299 veterans in fiscal year 2011, an increase of more than 134 percent. VAPIHCS launched two new telehealth hubs in June 2017: According to VA officials, VAPIHCS was 1 of 8 VAMCs selected to establish a hub, or center for delivery of teleprimary care from the VAMC to distant clinics within its system. According to VAPIHCS officials, the teleprimary care hub in the Spark M. Matsunaga VAMC is currently providing services to veterans at the Guam clinic and is exploring opportunities to provide teleurgent care in partnership with VAPIHCS’ call center. Officials further noted this would allow telehealth staff to provide veterans with “almost instant access” to health care services and, if successful, help improve veterans’ timely access to care by increasing the number of appointments at the clinics that could be dedicated to more complex concerns. VAPIHCS officials also said that the teleprimary care hub would also be used for long-term coverage for clinics with provider vacancies. Similarly, VAPIHCS was one of 11 VAMCs selected to establish a telemental health hub. According to VAPIHCS officials, this hub is currently serving veterans at the Oahu, Guam, and Molokai clinics and one of the Hawaii clinics (Hilo), with plans to expand services to the Kauai clinic in the future. Overall, officials said that feedback from veterans using these hubs has been “overwhelmingly positive,” as veterans appreciate receiving care from VAPIHCS providers, the privacy afforded by telehealth, and not having to travel for their services. The number of telehealth users in VAPIHCS is likely to continue increasing as a result of these new hubs. While feedback has been positive, VAPIHCS officials said they have experienced some challenges with the launch of these hubs, including the time and date difference between Guam and Honolulu where the staff for both hubs are located. Staff from the hubs had to adjust their schedules to support Guam’s hours given that only 16 business hours per week overlap between the two islands. Having sufficient space in the clinics for telehealth services is another challenge. To address this, one official said they are encouraging veterans to hold video visits with their providers from their homes if clinical exams are not required during their appointments. Improvements to clinical space. Because sufficient examination and treatment space is lacking in many of its clinics, VAPIHCS is in the process of building new or expanding existing clinics to increase the number and type of services available to veterans. According to a VAPIHCS official, as of August 2017, VAPIHCS has plans to replace six of its existing clinics and open one new clinic. These new clinics are expected to be open by fiscal year 2020. For example, the American Samoa clinic will be expanded to include additional space for mental health consultations and group meeting spaces, while the Guam clinic will be expanded to include additional primary and mental health care clinic space. This may help address a concern of the Guam veterans group we spoke with in Guam, who said the clinic was too small and did not offer sufficient patient privacy. According to VAPIHCS officials, VAPIHCS’ new clinic, expected to open in 2020, is to be located on the island of Oahu and will be a multi-specialty outpatient clinic offering many different services, including primary care, mental health, telemedicine, women’s care, dental care, a pain clinic, physical and occupational therapy, prosthetic, laboratory and pathology, pharmacy, and imaging services. Improvements to the beneficiary travel process. VAPIHCS is in the process of updating its process for arranging beneficiary travel, which ultimately could improve veterans’ access to care. Under the old process, officials told us that much of the responsibility for coordinating veterans’ travel fell on nursing and administrative staff, creating stress and reducing the amount of time nurses could spend on providing patient care. As a result, VAPIHCS decided to centralize its beneficiary travel process in the Office of Beneficiary Travel in Honolulu. The goal, according to VAPIHCS officials, is to remove the clinic staff from the process—thereby increasing the amount of time dedicated to their clinical duties—and instead encourage veterans to work directly with the staff in Honolulu to arrange their travel. As of September 2017, VAPIHCS was still in the process of implementing this new process. VAPIHCS also created a task force to improve the process for arranging travel for American Samoa veterans needing care off-island. As a result of their efforts, VAPIHCS officials reported in December 2017 that they had managed to reduce the time clinic staff in American Samoa dedicated each day to addressing travel issues from an average of 408 minutes to 64 minutes. Communicating with veterans about VA and Non-VA services. VAPIHCS uses a variety of mechanisms to communicate with veterans about access to VA and non-VA health care services. Veterans are introduced to these services through New Veteran Orientations that are offered at some of the clinics. VAPIHCS also gives newly enrolled veterans handbooks that are specific to the clinics where they enrolled. VAPIHCS also communicates with veterans through town hall meetings, health forums, its Facebook page, television and radio shows, and community events. For example, staff from the American Samoa clinic told us that they partner with a local television station to host a 30-minute monthly segment to educate veterans about available VA services. VAPIHCS officials reported they had planned to conduct approximately 170 outreach events, spanning 9 islands and targeting about 6,000 veterans, for fiscal year 2017. VAPIHCS officials told us that they try to provide culturally appropriate communications with veterans of the different Pacific Islands. For example, they said they are planning to translate materials into Samoan for veterans from American Samoa. They also recognize that many veterans prefer face-to-face interactions with VA officials rather than receiving information electronically; for example, the Hawaiian tradition known as “talk story” focuses on informal conversations and sharing information with friends in the community. Conclusions VAPIHCS has generally provided primary and mental health care within VHA’s timeliness goals for most veterans reviewed, but there are weaknesses in the referral process for specialty care services. Because most specialty care services are provided to veterans outside of VA through DOD providers or through non-VA providers in the community, it is crucial that VAPIHCS improve its management of these referrals to ensure adherence to VHA policy. Without improvements to adherence to VHA policy in the referral process, inconsistent guidance on roles and responsibilities, and lack of timeliness of referral management, these weaknesses are likely to persist, and may add to the amount of time it takes for some veterans to receive care, or may result in some veterans not receiving care at all. In addition, maintaining an adequate clinical workforce to meet the health care needs of veterans is necessary to ensuring veterans’ timely access to care. Doing so is particularly important for VAPIHCS given the unique challenges it faces in recruiting and retaining physicians in the geographically remote Pacific Islands. It is therefore critical that VAPIHCS identify and use the most effective recruitment and retention strategies offered by VHA. However, VAPIHCS has not evaluated the strategies that it has used to determine if they are the most optimal or if other available strategies would be more effective. Without completing such an evaluation, VAPIHCS does not know if it is optimizing its resources to improve its hiring efforts and ameliorate long-standing physician shortages. Recommendations for Executive Action We are making the following four recommendations to VA: 1. The Secretary of VA should ensure that VAPIHCS review its referral process for referrals to DOD providers, including referral cancellation, to determine why VHA policy is not being adhered to and make changes as needed. (Recommendation 1) 2. The Secretary of VA should ensure that VAPIHCS clarify guidance to clearly define and document roles and responsibilities for VAPIHCS staff involved in the referral process with NHG. (Recommendation 2) 3. The Secretary of VA should ensure that VAPIHCS improves the monitoring of referrals and communication with NHG to ensure the timely management of referrals to NHG, including verifying the availability of services for veterans; ensuring referrals are entered into NHG’s electronic medical record system; and obtaining information about the status of scheduling appointments for veterans. (Recommendation 3) 4. The Secretary of VA should ensure that VAPIHCS evaluates the effectiveness of strategies it currently uses to promote physician recruitment and retention, including how the strategies could be improved. The plan should also include an assessment of whether additional strategies currently offered by VHA would be beneficial. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this report to VA and DOD for review and comment. VA provided written comments, which are reproduced in appendix I. In addition, both VA and DOD provided technical comments, which we have incorporated as appropriate. In its written comments, VA concurred with three of our four recommendations and provided information on its plans to address them. VA partly concurred with our recommendation for VAPIHCS to improve the monitoring of referrals and communication with NHG to ensure the timely management of referrals to NHG. For this recommendation, VA agreed that it should improve its monitoring of referrals by verifying the availability of services at NHG for veterans and obtaining the status of their appointments to be scheduled, and noted that VAPIHCS is developing a standard operating procedure that includes, among other things, monitoring referrals weekly to resolve issues. However, VA did not agree with ensuring referrals are entered into NHG’s electronic medical record system as part of its monitoring efforts and stated that it does not have the authority to do so. During our review, we found that designated VAPIHCS staff on Guam have access to, and are responsible for entering referrals directly into, NHG’s electronic medical record. Only after VAPIHCS staff enter referrals directly into NHG’s electronic medical record did NHG staff assume responsibility for scheduling veterans’ appointments. We confirmed this practice through interviews with VAPIHCS and DOD staff and through our review of a sample of referrals sent to NHG, which showed that VAPIHCS staff had entered the referrals. Furthermore, the sharing agreement between VAPIHCS and NHG documented the arrangement for VAPIHCS staff to be granted access to NHG’s electronic medical record. As long as VAPIHCS staff continue to be responsible for entering referrals into NHG’s electronic medical record system, we believe that it is also their responsibility to monitor the status of these referrals, including ensuring that referrals are entered correctly and timely. Because VAPIHCS relies on NHG to provide inpatient and specialty care services for veterans from Guam and the Commonwealth of the Northern Mariana Islands, it is important for VAPIHCS to monitor the entire referral management process to ensure that veterans receive needed care in a timely manner. We are sending copies of this report to the appropriate congressional committees and the Secretaries of Veterans Affairs and Defense. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or at DraperD@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 II. Appendix I: Department of Veterans Affairs Comments Appendix II: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Ann Tynan, Assistant Director, Kaitlin Coffey (Analyst in Charge), Kate Tussey, Jennie Apter, and Jackie Hamilton made key contributions to this report. Also contributing were Emily Binek, Muriel Brown, Natalie Hagy, Alexis MacDonald, and Brienne Tierney. Related GAO Products Veterans Health Administration: Better Data and Evaluation Could Help Improve Physician Staffing, Recruitment, and Retention Strategies, GAO-18-124. Washington, D.C.: October 19, 2017. VA Health Care: Opportunities Exist for Improving Implementation and Oversight of Enrollment Processes for Veterans, GAO-17-709. Washington, D.C.: September 5, 2017. VA Health Care: Improvements Needed in Data and Monitoring of Clinical Productivity and Efficiency, GAO-17-480. Washington, D.C.: May 24, 2017. Veterans Health Care: Preliminary Observations on Veterans’ Access to Choice Program Care, GAO-17-397T. Washington, D.C.: March 7, 2017. Veterans Health Administration: Management Attention Is Needed to Address Systemic, Long-standing Human Capital Challenges, GAO-17-30. Washington, D.C., December 23, 2016. Veterans Health Care: Improvements Needed in Operationalizing Strategic Goals and Objectives, GAO-17-50. Washington, D.C.: October 21, 2016. Veterans Health Administration: Personnel Data Show Losses Increased for Clinical Occupations from Fiscal Year 2011 through 2015, Driven by Voluntary Resignations and Retirements, GAO-16-666R. Washington, D.C.: July 29, 2016. VA Health Care: Actions Needed to Improve Newly Enrolled Veterans’ Access to Primary Care, GAO-16-328. Washington, D.C.: March 18, 2016. VA Mental Health: Clearer Guidance on Access Policies and Wait-Time Data Needed, GAO-16-24. Washington, D.C.: October 28, 2015. VA Primary Care: Improved Oversight Needed to Better Ensure Timely Access and Efficient Delivery of Care. GAO-16-83. Washington, D.C.: October 8, 2015. VA Health Care: Oversight Improvements Needed for Nurse Recruitment and Retention Initiatives, GAO-15-794. Washington, D.C.: September 30, 2015. VA Health Care: Actions Needed to Ensure Adequate and Qualified Nurse Staffing, GAO-15-61. Washington, D.C.: October 16, 2014. VA Health Care: Management and Oversight of Consult Process Need Improvement to Help Ensure Veterans Receive Timely Outpatient Specialty Care, GAO-14-808. Washington, D.C.: September 30, 2014. VA Health Care: Reliability of Reported Outpatient Medical Appointment Wait Times and Scheduling Oversight Need Improvement, GAO-13-130. Washington, D.C.: December 21, 2012. VA and DOD Health Care: Department-Level Actions Needed to Assess Collaboration Performance, Address Barriers, and Identify Opportunities, GAO-12-992. Washington, D.C.: September 28, 2012. Veterans’ Health Care: Service Delivery for Veterans on Guam and the Commonwealth of the Northern Mariana Islands, GAO/HEHS-99-14. Washington, D.C.: November 4, 1998. Veterans’ Benefits: Availability of Benefits in American Samoa, GAO/HRD-93-16. Washington, D.C.: November 18, 1992.

Why GAO Did This Study Veterans' access to timely health care at VA medical facilities has been a long-standing problem identified by GAO and VA's Office of Inspector General. The remote nature of the Pacific Islands creates some unique challenges for VAPIHCS, which may affect its ability to provide the approximately 50,000 veterans it serves in American Samoa, Guam, Hawaii, and the Commonwealth of the Northern Mariana Islands with timely access to primary, mental health, and specialty care. House Report 114–497 included a provision for GAO to review VHA's efforts to provide timely access to health care within VAPIHCS. Among other things, this report examines: the extent to which the VAPIHCS veterans received (1) timely primary and mental health care, and (2) timely specialty care; and (3) any challenges VAPIHCS faced in recruiting and retaining physicians, and strategies to resolve them. GAO reviewed relevant policy documents and a randomly selected, non-generalizable sample of 164 medical records, and interviewed VHA, VAPIHCS, and DOD officials. What GAO Found For the sample of veterans' medical records that GAO reviewed, most veterans received primary and mental health care from the Department of Veterans Affairs (VA) Pacific Islands Health Care System (VAPIHCS) within timeliness goals set by VA's Veterans Health Administration (VHA). However, GAO also found that some of these veterans experienced delays related to the processing of their enrollment applications, contacting them to schedule appointments, and completing comprehensive mental health evaluations. These delays were similar to some GAO had identified in previous work pertaining to veterans' access to care nationwide. For the sample of veterans' medical records that GAO reviewed, VAPIHCS referred nearly all specialty care to non-VA providers within VHA's timeliness goal, but the time taken to provide care was variable and sometimes lengthy. Specifically, VAPIHCS sent specialty care referrals to the Veterans Choice Program (Choice Program)—for veterans that GAO reviewed, the number of days to receive care from the Choice Program was, on average, 75 days. Department of Defense (DOD) military treatment facilities—for veterans that GAO reviewed, the number of days to receive care from the two DOD facilities for which VAPIHCS has agreements was, on average, 37 days from one facility and 47 days from the other. GAO identified weaknesses in VAPIHCS' management of its referral process for sending veterans for specialty care services at one of the two military treatment facilities. GAO found VAPIHCS did not always manage referrals to the military treatment facility in a timely way and there was inconsistent guidance describing the roles and responsibilities of the VAPIHCS staff involved in the process. These weaknesses may have contributed to the amount of time it took for veterans to receive specialty care services. GAO also found that VAPIHCS faces challenges recruiting and retaining physicians. As of October 2017, 17 of approximately 100 VAPIHCS physician positions were vacant, as were several other types of health care providers. Some of the challenges VAPIHCS faced are unique to the Pacific Islands, such as the availability of only one local medical school from which to recruit, along with travel burdens and a high cost of living that may discourage physicians from relocating there. Other challenges were similar to those GAO has previously identified as faced by VA medical centers across the country, such as differences in interpretation of hiring and recruiting policies. VAPIHCS officials said they use several strategies to help recruit and retain physicians, including VHA strategies used by other VA medical centers such as financial incentives and an educational debt reduction program. Although they described limits to the success of some of these strategies, they have not evaluated their effectiveness. Without completing an evaluation of its strategies, VAPIHCS may not be optimizing its resources to improve its hiring efforts and may continue to struggle with physician shortages. What GAO Recommends GAO makes four recommendations, including that VAPIHCS improve monitoring of referrals to one DOD facility and evaluate the effectiveness of physician recruitment and retention strategies. VA concurred with three recommendations and partially concurred with the fourth. GAO maintains that monitoring referrals to the DOD facility is needed, as discussed in the report.

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Background HUD established DEC in 1998 to consolidate enforcement activities of PIH, CPD, the Office of Fair Housing and Equal Opportunity (for non-civil rights violations), and MFH into one new organization. The HUD 2020 management reform plan envisioned that DEC would take enforcement action against: (1) public housing agencies that do not pass annual assessments; (2) owners of private, HUD-assisted housing that do not pass physical or financial audit inspections; and (3) local and state governments and non-profit organizations that do not comply with the requirements of grants they received from CPD and the Office of Fair Housing and Equal Opportunity (for non-civil rights violations). In addition, as part of the plan, HUD created the Real Estate Assessment Center (REAC) to help monitor public housing and HUD-insured multifamily housing projects by providing independent assessments of the physical quality and financial condition of public housing and multifamily developments. DEC’s current mission is to provide independent oversight of the administration of HUD programs and its external partners. According to HUD, DEC’s primary goal is to bring owners to full compliance so that there is no compromise in the quality of HUD-assisted housing. In instances where owners do not bring properties up to standard, and where physical and financial deficiencies persist, DEC can take appropriate enforcement action. This includes administrative sanctions, such as civil money penalties, suspension or debarment, as well as possible referral to HUD OIG when criminal activity is suspected, or to the Department of Justice for civil action. DEC also conducts more targeted oversight reviews for some program offices. These reviews are intended to provide program offices with an independent means to analyze and evaluate the efficiency or vulnerability of their programs and operations. DEC has staff in HUD headquarters and five field offices. In general, headquarters staff develops policy and coordinates the reviews of the referrals DEC receives from the HUD program offices while field office staff conducts the reviews. DEC works primarily with MFH and conducts more targeted oversight reviews for PIH and CPD. (See Appendix II for a breakdown of DEC referrals by program office and the state where the property is located.) These program offices have staff in headquarters and field offices, which are organized into 10 regions. There is at least one field office or regional office in each state, and the number of field offices varies by region. PIH further combines these regions into six networks. These program offices oversee different areas within HUD: MFH oversees the Federal Housing Administration’s multifamily mortgage insurance on loan originations, manages HUD’s portfolio of multifamily housing, provides rental assistance, and helps preserve affordable housing. Additionally, MFH administers project-based rental assistance, supportive housing for the elderly, and programs for persons with disabilities. Collectively, the properties MFH oversees provided affordable rental housing to more than 1.2 million low- income households in 2017. PIH helps low-income families through a number of programs. PIH provides assistance to state and local public housing agencies that generally own and administer units for eligible tenants. The Housing Choice Voucher program provides tenant-based rental assistance that eligible individuals and families can use to rent houses or apartments in the private housing market. Native American programs provide block grants and loan guarantees to tribal entities for housing development and assistance. PIH is supporting 2.2 million vouchers and 1.1 million public housing units in 2018. CPD provides financial and technical assistance to states and localities through the Community Development Block Grant and HOME Investment Partnerships programs—the federal government’s largest block grant programs for community development and affordable housing production, respectively. CPD also leads a number of HUD’s efforts to combat homelessness. Additionally, Congress appropriated about $36 billion in new Community Development Block Grant-Disaster Recovery funds in fiscal years 2017 and 2018 to states and local governments that experienced major disasters in 2015, 2016 and 2017. CPD oversaw more than 37,000 grants in 2017. DEC uses an internal database to manage the referrals it receives from HUD program offices. DEC’s system is designed to capture various data, including the date DEC received the referral, name of the property owner or grantee being referred, cause of the referral, status of the referral, final action to close the referral, and corrections made related to the referral, among other things. Two of Three HUD Program Offices We Examined Lack Guidance for Making Referrals and Targets Based on Program Risk DEC and the three HUD program offices we examined have agreements in place that generally describe the process the offices follow to make referrals to DEC and the responsibilities of the parties. However, two of the three program offices (PIH and CPD) do not provide their staff with specific guidance for making referrals, and the target number of referrals these two offices have established to send to DEC does not address the risk of noncompliance. Multifamily Housing Office Makes Referrals to DEC Based on Defined Thresholds MFH makes automatic and elective referrals to DEC based on specific thresholds for program noncompliance defined in its agreement with DEC. MFH properties are automatically referred to DEC if: (1) the property scores below a certain threshold on a REAC physical inspection; (2) the owner fails to submit audited financial statements to HUD within 60 days following the end of the owner’s fiscal year; or (3) REAC’s automated compliance review of the property’s financial statements identifies unauthorized uses of project funds greater than an agreed-to threshold (see figure 1). MFH also may make an elective referral to DEC based in part on specific situations of program noncompliance defined in their agreement, such as the failure to comply with program regulations or use agreements. MFH officials told us that they make these referrals on a case-by-case basis if they believe that DEC’s expertise could help resolve the concerns. In addition, MFH officials distributed a 2017 DEC notice that clarified the procedures for making an elective referral to DEC. Whereas automatic referrals are system-generated, MFH can use its discretion whether to make an elective referral to DEC. From fiscal years 2014 through 2017, the total number of referrals DEC received on MFH properties increased by 23 percent. However, as seen in figure 2, the composition of those referrals varied. Referrals related to failure to submit timely financial statements increased by about 59 percent, while referrals related to other instances of financial noncompliance decreased by about 6 percent. Referrals for physical noncompliance, while relatively few overall, increased by 113 percent. MFH officials told us that the increase in referrals for failure to file timely financial statements was due, in part, to new program participants from 2011 to 2013 who did not understand the requirements. In addition, according to MFH officials, MFH changed certain thresholds of financial noncompliance from automatic to elective referrals in 2013, which officials believe resulted in fewer referrals for those types of financial noncompliance. MFH officials also noted that the increase in physical noncompliance referrals in fiscal year 2016 likely resulted from the informal encouragement given to field offices to make more elective referrals. In addition, during this period HUD’s inspection process came under additional scrutiny due to concerns about a multifamily property in Florida. The property had received a passing REAC inspection score in August 2015 but city code inspectors subsequently found multiple and serious deficiencies. The case attracted attention from the media and Congress and culminated in a Senate hearing in September 2016. Subsequently HUD reviewed the integrity of the REAC inspection and DEC referral processes. DEC officials told us that one reason there are fewer referrals for physical noncompliance compared to financial noncompliance is that a relatively small number of properties reach the threshold for an automatic referral based on physical noncompliance (inspection score less than or equal to 30 out of 100). According to HUD data, REAC conducted approximately 8,700 physical inspections in 2017. Of these inspections, our analysis of DEC data showed that DEC received 64 referrals (0.7 percent of the inspections conducted) for physical noncompliance. PIH and CPD Program Offices Lack Specific Guidance for Making Referrals PIH and CPD do not provide specific guidance to staff on when a referral should be made to DEC. This stands in contrast to MFH, whose agreement with DEC includes a more detailed discussion of what problems should result in a risk-based referral. PIH. A PIH official told us that they periodically send an email to field offices requesting potential candidates for referrals to DEC, and that the email cites factors that might warrant such referrals—such as potential violations of statute, regulation, or agreement. However, beyond that, there is no guidance to help field staff decide when to make a referral. In addition, PIH does not provide direction to field offices on how to use the results of their quarterly risk assessment to identify high-risk PHAs for potential DEC referrals. According to PIH officials, PIH has not issued more detailed guidance because it did not want to be too prescriptive in telling field office staff when to refer a public housing agency to DEC, as a DEC referral may not always be appropriate. CPD. An official from a CPD field office told us that they may refer a grantee to DEC for an oversight review—for example, if they identify a complex financial issue requiring an in-depth financial investigation beyond the capacity of the field office. However, beyond that, neither DEC nor CPD have developed guidance to help field offices determine when to refer a grantee to DEC. In addition, CPD does not provide direction to field offices on how to use the results of their risk-based assessment of grantees to identify potential DEC referrals. CPD officials told us that they do not provide guidance because they believe that their current approach where field offices make referrals to DEC on a case-by- case basis is better and more effective. As shown in figure 3, in recent years, the number of referrals has declined slightly for PIH and varied for CPD. DEC has agreed with PIH and CPD on a target number of elective referrals they should aim to make to DEC each fiscal year. However, neither program office met their targets for referrals to DEC in fiscal years 2016 and 2017: PIH made 25 and 12 referrals, respectively, but had an annual target of 40, while CPD referred 6 each year but had a target of 10. A number of factors may help explain the decline in referrals and failure to meet targets. For example, PIH officials told us that a new requirement that PIH field offices make every attempt to satisfy oversight review recommendations may have resulted in hesitation to make referrals among some field staff. However, the lack of formal guidance for field staff may also play a role in the number of referrals made. According to officials from two CPD field offices, many field offices do not understand the role of DEC or the assistance it can provide, and officials from one field office told us that providing formal guidance would be helpful in this regard. Our analysis found that half of the CPD field offices had not made a referral to DEC during the previous two fiscal years and, according to PIH officials, the number of PIH referrals varied for reasons not related to noncompliance risks. The 2016 HUD OIG report noted that when program field offices requested DEC services, they did so largely because of personal relationships and trust between DEC and some field office managers, an observation reiterated by officials from one field office we interviewed. According to the Office of Management and Budget, a ‘‘guidance document’’ is an agency statement of general applicability and future effect, other than a regulatory action, that sets forth a policy on a statutory, regulatory or technical issue or an interpretation of a statutory or regulatory issue. The office notes that guidance documents, used properly, can channel the discretion of agency employees, increase efficiency, and enhance fairness by ensuring equal treatment of similarly situated parties. In addition, federal internal control standards state that agencies should design control activities to achieve objectives and respond to risks, such as by documenting the responsibilities for these activities through policies and procedures. Because two of the program offices (PIH and CPD) we examined have not developed specific guidance for making referrals for oversight reviews, these offices cannot ensure that field staff are identifying and making referrals on a well- supported, risk-based, and consistent basis, and this may limit DEC’s effectiveness in fulfilling its mission of providing independent oversight of HUD’s programs. Such additional guidance could include information on how the field offices should incorporate the results from their risk assessments, more detailed criteria on when the field office should make a referral, and examples of potential noncompliance that could be referred. Target Number of Referrals for Two HUD Program Offices Are Not Based on Program Risk The target number of referrals for two program offices, PIH and CPD, appears to have been selected somewhat arbitrarily, rather than based on the risks to the programs. As noted earlier, DEC, PIH and CPD have agreed to set targets annually for the number of elective referrals they will make. PIH’s quarterly target of 10 public housing agency referrals represents less than 2 percent of the total number of agencies PIH designates as very high-risk and high risk each quarter. In addition, CPD’s target of 10 referrals per year represents about .03 percent of the grantees overseen by CPD and about 1 percent of the grantees monitored by CPD each year. However, PIH and CPD officials could not explain the basis for selecting these targets, nor is it clear how these targets are related to the overall risk these program offices face. Both program offices’ agreements with DEC state that they will review the agreements each year. PIH officials said this review typically has included a general discussion of the appropriate number of referrals to set as the target. DEC officials told us that future reviews will take a more risk-based approach to selecting that number, but they could not tell us when this would occur. In addition, according to a HUD official, program offices such as CPD are reviewing their processes for managing risk, which could impact the target number of referrals to DEC needed for them to adequately manage their risk. According to federal internal control standards, management should identify, analyze, and respond to risks related to achieving the defined objectives, and management should design control activities in response to the entity’s objectives and risks to achieve an effective internal control system. Without a target number of referrals based on the risks to the programs, PIH and CPD offices cannot be confident that DEC resources are being used most efficiently to address the risks of noncompliance by housing agencies and grantees. DEC Lacks Measures Needed to Fully Assess Its Performance While DEC currently tracks some measures related to its performance, its performance measurement system is lacking in key respects that limit DEC’s ability to fully assess its performance. DEC’s performance measures include the number of work assignments completed, reduction in number of aged referrals (2 or more years old), and the number of families impacted by its enforcement activities. DEC officials told us that they also track other measures, such as the dollar amounts of recoveries, and the numbers of suspensions and debarments. These measures are contextual indicators—measures intended to provide a broader perspective on the conditions that may influence an agency’s ability to achieve its performance goals. As shown in table 1, HUD data shows that for these contextual indicators DEC has recovered millions of dollars in inappropriately used HUD program funds and suspended or debarred some individuals. HUD data shows that DEC generally exceeded its targets for the performance measures. Federal internal control standards state that agency management should define objectives in measurable terms so that performance toward those objectives can be assessed. Consistent with those standards, we identified several challenges with DEC’s system of performance measurement. Lack of Outcome Measures DEC’s performance measures do not include outcome measures, which track the results of products and services. Instead, the performance measures track outputs, which are the direct products and services delivered by a program. Prior work and guidance that we have issued stress that performance measurement should evaluate outcomes related to program activities to judge program effectiveness. Previously, DEC tracked some outcome measures, such as the increase in the percentage of residents living in acceptable insured or assisted multifamily housing as a result of civil or administrative enforcement actions. However, DEC no longer tracks those measures, and officials were unable to explain why they stopped tracking them. Similarly, the 2014 agreement between DEC and PIH included examples of outcome measures for program offices– such as financial performance improvements and early detection or prevention of fraud—but these measures are not in the current agreement. Measuring outcomes can help assess a program’s activities and operations, identify areas that need improvement, and ensure accountability for results. DEC officials told us that outcome measurement is challenging because it can be difficult to establish a direct correlation with DEC’s work. We attempted to independently examine the outcome of DEC’s work. Specifically, we tried to measure the extent to which referrals to DEC resulted in suspensions or debarments of multifamily owners, but, in general, DEC’s data did not readily allow for this type of assessment. Outcome measures such as timeliness and monetary outcomes can still be used to capture essential program information and help assess program effectiveness. By not measuring and reporting on outcomes, DEC cannot fully assess the effectiveness or impact of its activities, or determine where improvement is needed. Lack of Recommendation Tracking DEC does not track the status of its recommendations. DEC’s oversight reviews sometimes result in recommendations to program offices to ensure program compliance with regulatory and policy requirements; streamline operations; improve customer service; and reduce program vulnerabilities to fraud, waste, abuse, or mismanagement. According to PIH and CPD’s agreements, the program offices will make every attempt to satisfy the recommendations, but the program offices are not required to implement them. However, according to DEC officials, DEC does not gather information on the status of its recommendations or assess program offices’ progress in implementing them. OGC officials told us that they were concerned about the burden that would be placed on program staff for providing such information, but PIH and CPD officials told us it would not require much additional work. We have previously reported that successful performance measures demonstrate results and provide useful information for decision makers. Without tracking the status of its recommendations and the extent to which program offices are implementing its recommendations, DEC is limited in its ability to assess its effectiveness in improving program operations, such as better program compliance. Lack of Measure of Timeliness DEC does not have a performance measure to assess the timeliness of its reviews for the referrals it receives. DEC does not measure how much time it takes to complete a referral from MFH, PIH, or CPD. DEC’s guidance and its agreements with CPD and PIH state that DEC will complete oversight reviews and issue a final report to program offices within 90 business days of the referral. These reviews are intended to be completed within this timeframe so that CPD and PIH program offices will have prompt feedback to address any areas of concern. According to HUD officials, DEC tracks the timeliness of its oversight work. However, DEC has not created a performance measure to track the extent that it is meeting its goals. In addition, DEC has no target timeframe for MFH referrals because, according to DEC officials, these referrals require varying strategies for fact gathering, analysis, and determining a course of action. Our analysis of HUD data showed that from fiscal years 2014-2017, DEC took an average of 168 days to complete its review after receiving a referral from MFH for failure to file financial statements, and an average of 254 days to complete its review for referrals related to financial noncompliance. We have previously reported that one attribute of a successful performance measure was whether the measure covered a government-wide priority, such as timeliness. Because it does not have a measure related to its timeliness in completing its reviews nor report on that information, DEC cannot ensure accountability or evaluate its efficiency for completing the reviews. Lack of Consistent Recording of Dates and Corrective Actions Taken DEC did not consistently record two pieces of information that could be relevant in assessing its performance—date of referral and corrective action taken. We analyzed an internal spreadsheet DEC uses to track the referrals it received from CPD and PIH to conduct oversight reviews of grantees and housing agencies. DEC did not record the date that the referral was assigned a DEC lead analyst (the point DEC begins tracking the referrals) or the date DEC signed the final report for 36 percent of the CPD referrals and 20 percent of the PIH referrals DEC completed from fiscal years 2015-2017. Consequently, we could not reliably evaluate DEC’s average timeframes for completing an oversight review referral. In addition, DEC did not consistently record information on the corrective actions taken by DEC or MFH following a DEC review. DEC’s MFH referral-tracking database includes an “Outcomes” module with a “Corrections Made” field where DEC analysts can choose a description of the corrections made as a result of the review by either MFH or by the owner of the property, such as filing an annual financial statement. However, based on our review of this database, DEC analysts are not regularly using the “Corrections Made” field. According to DEC officials, the inconsistent recording of dates and corrective actions was likely due to human error. This may suggest the lack of a process or controls to ensure accurate and complete recording of this information. Federal internal control standards state that an agency’s managers should use quality information, such as the accurate and timely recording of transactions, to achieve the agency’s objectives and manage risk. Without such controls, DEC will continue to have unreliable data to measure its timeliness in completing reviews and will not be able to reliably track the status of its recommendations to MFH and hold that office accountable for their implementation. Information Technology Challenges Have Affected DEC’s Ability to Achieve Its Mission Information technology challenges have affected the ability of DEC to achieve its mission. Although DEC has experienced staffing declines over time, there is disagreement about the extent to which these declines have impacted DEC’s ability to achieve its mission. Further, disagreement exists over DEC’s placement within HUD and the impact on DEC’s ability to achieve its mission. Information Technology DEC has experienced various information technology challenges that have affected its ability to achieve its mission. For example, the system does not allow DEC to easily determine the basis for a financial referral it receives from REAC on MFH properties. Instead, according to HUD, to determine the issues that triggered the referral, DEC staff must review each property’s financial statements—a labor-intensive process. In addition, DEC’s information technology system is designed to share information among staff but not to analyze or track information. Its referral data are stored in databases that generally cover one fiscal year each, according to OGC officials, which makes it challenging to identify trends. Further, DEC officials told us that the system has experienced continuing outages and breaks in service. HUD has acknowledged that DEC needs more robust information technology to carry out its enforcement and tracking functions. The HUD Enforcement Management System is part of the department’s efforts to streamline, consolidate, and automate its enforcement business processes. According to HUD, the system will consolidate six enforcement-related systems into one and automate the monitoring and compliance review processes for several offices within HUD. Officials said this will help DEC manage its workflow and reviews and enable it to more easily track the focus of a review and any monetary findings. OGC officials noted that the department implemented the first phase of the HUD Enforcement Management System in December 2015, initially focusing on HUD’s Office of Fair Housing. However, HUD’s development contract expired in March 2017. Due to funding constraints, as of June 2018, HUD had not awarded a new contract that would incorporate DEC, and such funding is not expected to be allocated until at least fiscal year 2020, according to OGC officials. Staff Resources Although DEC has experienced staffing declines over time, disagreement exists within HUD about the impact of these staffing declines on DEC’s ability to achieve its mission. DEC’s staff level in fiscal year 2017 (an estimated 95 full-time equivalents) represented its lowest staff level since fiscal year 1999. HUD OIG reported in 2016 that limits on DEC resources resulted in lost opportunities to improve program effectiveness and strengthen conditions that discouraged waste, fraud, and abuse. The report also noted that these limits had prevented DEC from extending comprehensive enforcement activities to all program offices, which had reduced its effectiveness. OIG’s report further noted that DEC said it would need additional staff to perform financial analysis and enforcement if DEC were to expand its efforts with PIH and CPD. OIG recommended that OGC provide DEC with the resources and support to strengthen enforcement across HUD programs. HUD disagreed with the OIG’s conclusion that staffing declines limited DEC’s ability to achieve its mission. HUD noted that DEC’s decrease in workload over time mitigated the effect of reduced staffing. In addition, HUD said that despite its reduced resources, DEC had succeeded in preventing some individuals from participating in MFH programs through suspension or debarment, and in encouraging compliance. HUD stated that DEC had sufficient staffing to handle MFH referrals under current protocols and serve as HUD’s troubleshooter by conducting oversight reviews for CPD and PIH. As of August 2018, HUD had not provided the department’s status of actions taken or planned related to OIG’s recommendation to the OIG. Organizational Structure Disagreement also exists regarding the placement of DEC within HUD. At its creation in 1998, DEC was located within HUD’s Office of the Deputy Secretary, but in 2002 it was moved to OGC. HUD OIG and DEC officials have stated that DEC’s placement within OGC limits DEC’s ability to achieve its mission. OIG reported in its 2016 report that DEC’s initial placement within the Deputy Secretary’s office provided DEC with independent enforcement authority. In addition, DEC officials told us that DEC’s initial placement highlighted HUD’s commitment to enforcement and that its current placement limits its authority to oversee program areas and hold them accountable for corrections. In a December 2017 internal paper, DEC proposed returning to the Deputy Secretary’s office. It noted that DEC’s oversight of programmatic operations began to decline in 2016, and that PIH referrals to DEC through December 2017 represented less than one-half of the goal of one percent of PIH’s inventory. DEC’s paper also noted that a return to the Deputy Secretary’s office would highlight HUD’s responsibility to develop and maintain effective internal controls, independent of the program areas. Finally, DEC stated that its placement within the Deputy Secretary’s office would provide an opportunity to consolidate the department’s enterprise risk management functions. According to HUD officials, as of August 2018, the department had no plans to move DEC and did not request funding for such a move in HUD’s fiscal year 2019 budget. In response to the 2016 OIG report, HUD stated that DEC’s current location within OGC had not affected DEC’s ability to make referrals for enforcement or initiate suspension or debarment actions. HUD added that placing DEC within OGC achieved significant efficiencies by consolidating DEC’s administrative, information technology, and legal functions without affecting the ability of either office to carry out its mission. OGC officials told us that DEC’s current placement within OGC is similar to the Federal Bureau of Investigation’s placement within the Department of Justice. They also noted that DEC’s enforcement and compliance analysts and attorneys coordinate enforcement activities and that DEC field office directors routinely seek legal advice from OGC attorneys. According to OGC, returning DEC to the Deputy Secretary’s office would have adverse effects on the administrative efficiencies achieved. It is unclear whether DEC’s placement within OGC has adversely affected DEC’s ability to fulfill its mission. We asked DEC staff for documentation that would support a move to the Deputy Secretary’s office, but the information we received did not provide specific examples of how DEC’s current placement limited its ability to achieve its mission. Furthermore, as part of their 2017 paper discussing a proposed relocation, DEC officials did not identify how DEC’s placement in OGC adversely impacted it. Other factors besides DEC’s current location may explain why DEC may not be utilized more effectively. For example, we previously identified findings related to the lack of guidance that might contribute to program offices’ underutilization of DEC. In addition, as we note above, the absence of guidance on when program offices should make referrals may limit DEC’s ability to assess its enforcement efforts. These findings generally are independent of DEC’s organizational location. Conclusions DEC has recovered millions of dollars in inappropriately used HUD program funds, suspended or debarred some individuals, and helped strengthen program offices’ monitoring efforts. However, our review identified opportunities for DEC to better achieve its mission and assess its impact: Guidance. PIH and CPD field office staff use their discretion in deciding which cases to refer to DEC, but these decisions do not appear to always be based on well-supported assessments of risk. Without specific guidance to help staff direct their decision making, DEC and the program offices cannot ensure that referrals are made using a consistent and risk-based approach, limiting DEC’s effectiveness in fulfilling its mission of providing independent oversight of HUD’s programs. Target number of referrals. The target number of referrals that PIH and CPD aim to make to DEC has not been chosen based on a risk- based process and it is not clear how these targets related to the programs’ overall risks. Without a determination of appropriate risk- based target numbers, PIH and CPD cannot ensure that they are using DEC resources efficiently to address the risks of noncompliance by housing agencies and grantees. Performance measurement. Although DEC reports on some aspects of its performance, it lacks measures that assess outcomes rather than outputs and does not report on the timeliness of its reviews or track program offices’ implementation of its recommendations. Without improvements in its performance measurement, it will be difficult for DEC to fully assess and demonstrate its effectiveness, ensure accountability, and identify and prioritize potential improvements. Data recording. Controls to ensure that analysts consistently record referral dates and corrective actions taken would give DEC more reliable data with which to assess its timeliness and the impact of its enforcement activities. Recommendations for Executive Action We are making the following eight recommendations to HUD: The Director of the Departmental Enforcement Center and the Assistant Secretary for Community Planning and Development should develop written guidance for CPD’s field offices to use when determining whether to make a referral to the Departmental Enforcement Center. (Recommendation 1) The Director of the Departmental Enforcement Center and the Assistant Secretary for Public and Indian Housing should develop written guidance for PIH’s field offices to use when determining whether to make a referral to the Departmental Enforcement Center. (Recommendation 2) The Director of the Departmental Enforcement Center and the Assistant Secretary for Community Planning and Development should develop targets for the number of referrals that CPD should make to DEC that are based on program risk. (Recommendation 3) The Director of the Departmental Enforcement Center and the Assistant Secretary for Public and Indian Housing should develop targets for the number of referrals that PIH should make to DEC that are based on program risk. (Recommendation 4) The Director of the Departmental Enforcement Center should develop and implement performance measures that assess the outcomes, or desired results, of its enforcement activities. (Recommendation 5) The Director of the Departmental Enforcement Center should develop and implement performance measures of its timeliness in completing oversight reviews. (Recommendation 6) The Director of the Departmental Enforcement Center should track the implementation of the recommendations that it makes to program offices as a result of its oversight reviews. (Recommendation 7) The Director of the Departmental Enforcement Center should develop controls to ensure that analysts consistently and reliably record dates related to referral activity, corrective action taken, and other key information used to determine DEC’s impact. (Recommendation 8) Agency Comments We provided a draft of this report to HUD for review and comment. HUD provided written comments that are reprinted in appendix III. HUD disagreed with three of the eight recommendations and agreed with the other five. In its general comments, HUD indicated that it planned to use DEC to address the most egregious violators of HUD’s programs. HUD also anticipated assessing the current agreements between DEC and HUD program offices and, where appropriate, revising those agreements to incorporate current agency goals and priorities, among other things. HUD further noted that DEC’s work would continue to be a part of HUD’s agency-wide risk and fraud management mitigation activities. HUD disagreed with the third and fourth recommendations that DEC should work with CPD and PIH to develop targets for the number of referrals that the program offices should make to DEC that are based on program risk. In its written comments, HUD said that developing “targets” for the number of referrals made to DEC could potentially be inconsistent with the methodology of basing referrals on program risk and that a single measure of risk-based referrals would be a more effective strategy. As discussed in the report, the current target numbers of referrals for the program offices to make to DEC appear to have been selected somewhat arbitrarily and the officials could not explain the basis for selecting these targets. By identifying a target number of referrals based on the anticipated need for DEC reviews, the program offices can more efficiently plan the use of their resources. Setting the targets will also allow DEC and the program offices to better assess whether they are achieving their goals and objectives, and may encourage program offices to refer entities to DEC. HUD also disagreed with our sixth recommendation that DEC should develop and implement performance measures that measure its timeliness in completing reviews, noting that DEC has tracked the timeliness of its oversight work since 2014. However, as we discuss in the report, DEC has not included performance measures related to the timeliness of its reviews, which is separate from tracking the information. We revised the language in the final report to note that DEC tracks this information, but has not created a related performance measure. HUD agreed with our remaining five recommendations and provided information about planned steps to implement them. HUD noted in its response to our first and second recommendations that CPD and PIH would establish parameters for when a referral will be made to DEC. With respect to our fifth recommendation, HUD stated that DEC would work with relevant offices in fiscal year 2019 to develop performance measures that assess outcomes of enforcement activities and would consult with federal enforcement agencies to understand how they measure outcomes. In response to our seventh recommendation, HUD stated that DEC would make improvements to its information system to track the implementation of the oversight review recommendations. Finally, HUD noted that it anticipates incorporating quality control components into DEC’s data collection efforts to ensure that dates, corrective actions taken, and other key information are captured consistently and reliably to address our eighth recommendation. We are sending copies of this report to the appropriate congressional committees and the Secretary of Housing and Urban Development. 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) 512-8678 or GarciaDiazD@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 IV. Appendix I: Objectives, Scope, and Methodology Our objectives were to examine (1) the processes that selected Department of Housing and Urban Development (HUD) program offices have in place to make referrals to the Departmental Enforcement Center (DEC), (2) how DEC assesses its performance, and (3) challenges that may affect the ability of DEC to achieve its mission. We focused our review on DEC and three HUD program offices: Community Planning and Development (CPD), Multifamily Housing (MFH), and Public and Indian Housing (PIH). Collectively, these three program offices accounted for 73 percent of the total referrals DEC received from fiscal years 2014 through 2017 (6,724 of the 9,258 total referrals). To address the first objective, we reviewed DEC’s formal agreements with CPD, MFH, and PIH to determine the roles and responsibilities of the parties, any criteria for making referrals, and any goals on number of reviews. In addition, we reviewed guidance developed by program offices for monitoring multifamily properties, public housing agencies, and grantees to determine what, if any, criteria existed for making referrals to DEC. We also observed demonstrations of the system DEC uses to manage referrals and the risk assessment tool PIH uses in its reviews of public housing agencies. We compared the guidance and the processes for determining the role DEC should play against federal internal control standards. We analyzed data from DEC’s system for managing referrals from program offices (extracted as of March 2018) and a spreadsheet DEC maintains to track referrals from CPD and PIH (as of March 2018). We used the data extract to compute the number and type of referrals DEC received from the program offices from fiscal years 2014 through 2017. We interviewed DEC and program office staff about the number of referrals that program offices made during this time period. To assess the reliability of the data, we performed various tests—including searching for missing data and dates, and checking for completeness of the data. We concluded that the data from DEC were sufficiently reliable for purposes of describing general trends. We interviewed DEC and program office officials at HUD headquarters to discuss how program offices make referrals to DEC and any guidance or training DEC or program offices provide regarding the referral process. We also conducted interviews with staff in each of HUD’s six PIH networks and in CPD field offices in Atlanta, Georgia; Denver, Colorado; Fort Worth, Texas; and Los Angeles, California. We selected the Fort Worth and Los Angeles CPD field offices because they had made referrals to DEC between fiscal years 2016 and 2017, and selected Atlanta and Denver because they had not. To address the second objective, we reviewed the current and previous performance measures used by DEC. We compared DEC’s practices against federal internal control standards and against practices GAO has previously identified as being associated with agencies that were successful in measuring their performance. We used the data extract discussed above to compute the average number of days DEC took to complete referrals on multifamily properties and the extent that information was not recorded. We also interviewed DEC and OGC officials regarding the performance information DEC collects and reports. To address the third objective, we reviewed prior reports from GAO and from the HUD Office of Inspector General that identified and discussed challenges DEC faces in achieving its mission. We also reviewed internal HUD documents related to these challenges, including plans for a new information technology system, historical staff levels, and a proposal DEC officials created to relocate DEC back to the Deputy Secretary’s Office. We also interviewed officials from various HUD headquarters and field offices, HUD’s Office of Inspector General, and DEC about challenges DEC may face in achieving its mission. We conducted this performance audit from July 2017 to October 2018 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: Location of Entities That Were Referred to the Departmental Enforcement Center, Fiscal Years 2014-2017 From fiscal year 2014 through 2017, the Department of Housing and Urban Development’s Departmental Enforcement Center received about 8,000 referrals from the agency’s program offices. Table 3 provides details on the number of referrals by program and state from fiscal years 2014 through 2017. Appendix III: Comments from Department of Housing and Urban Development Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, GAO staff who made key contributions to this report include Marshall Hamlett (Assistant Director), Daniel Newman (Analyst-in-Charge), William R. Chatlos, Laura Gibbons, John McGrail, Marc Molino, and Tovah Rom.

Why GAO Did This Study HUD established DEC in 1998 to consolidate enforcement functions. In fiscal year 2017, DEC received about 2,800 referrals from program offices for oversight of and enforcement actions against property owners, public housing agencies, and state and local grantees that do not comply with requirements. The Joint Explanatory Statement accompanying the Consolidated Appropriations Act, 2017, included a provision for GAO to assess DEC's effectiveness addressing noncompliance. GAO examined (1) the processes selected program offices have in place to make referrals, (2) how DEC assesses its performance, and (3) challenges that may affect the ability of DEC to achieve its mission. GAO reviewed agreements and referral data between DEC and three of the nine HUD program offices that made referrals to DEC from fiscal years 2014 to 2017 (accounting for 73 percent of the total referrals during that period), and interviewed HUD staff in headquarters and field offices. What GAO Found The three program offices of the Department of Housing and Urban Development (HUD) that GAO examined have a process in place for referring cases of potential noncompliance to the Departmental Enforcement Center (DEC), but two of the offices do not provide their staff with specific guidance on when to make referrals. The Office of Multifamily Housing makes referrals to DEC based on defined thresholds for noncompliance, such as for properties that do not pass physical inspections. In contrast, the Offices of Public and Indian Housing (PIH) and Community Planning and Development (CPD) have broad guidelines but not specific thresholds for when to refer an entity to DEC. These two offices do not provide field staff with specific guidance to help determine which housing agencies or grantees to refer to DEC for possible enforcement action. As a result, the offices cannot ensure that decisions on whether to make referrals are made on a well-supported and consistent basis, potentially limiting DEC's effectiveness in fulfilling its mission of providing independent oversight of HUD's programs. In addition, PIH and CPD have targets for how many annual referrals the program office will make to DEC, but the targets are not based on program risk. According to federal internal control standards, management should identify, analyze, and respond to risks related to achieving the defined objectives. Without a target number of referrals based on program risk, PIH and CPD cannot be confident that the number of cases referred to DEC is appropriate and that DEC resources are being used efficiently. DEC tracks some performance measures, but it largely measures outputs, such as number of work assignments completed, rather than outcomes, such as financial performance improvements resulting from its work, that would help assess the impact of its activities. DEC also does not track the status of recommendations it makes to program offices or measure indicators of its timeliness in completing its reviews for the referrals it receives. In addition, GAO found that DEC staff did not consistently record two key data elements (including the corrective action taken) in the spreadsheet used to track referrals. Improving DEC's performance measurement system and data recording would be consistent with federal internal control standards and allow DEC to better assess its effectiveness, ensure accountability, and identify potential improvements. DEC has experienced various information technology challenges that have affected its ability to carry out its mission. For example, DEC's current system is not designed to allow staff to easily determine the basis for certain referrals or identify and analyze trends in referrals over multiple years. In addition, DEC has experienced continuing outages and breaks in service. HUD has developed plans for a replacement system, but funding constraints have delayed the implementation of the new system. DEC staff also noted that the organizational location of DEC within the Office of General Counsel was a challenge to carrying out its mission because it limited DEC's ability to hold program offices accountable for corrections. HUD disagreed and also stated that the department has no plans to relocate DEC. Based on GAO's review, other factors, such as the lack of guidance for making referrals (discussed above), may better explain why DEC may not be utilized more effectively. What GAO Recommends GAO is making eight recommendations to HUD related to DEC, including for staff guidance on when to make referrals; targets for the number of DEC referrals based on program risk; outcome measures to track performance; and controls to ensure consistent data recording. HUD agreed with five of the eight recommendations, noting that setting referral targets was inconsistent with basing them on program risk. GAO maintains that setting referral targets can help ensure that program offices make referrals to DEC.

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Background Abortion in the United States In 1973, the U.S. Supreme Court concluded in Roe v. Wade that a woman has a fundamental right protected by the U.S. Constitution to decide whether to terminate her pregnancy. However, the Court also recognized that a state may have an interest sufficient to regulate abortion after the first trimester of the pregnancy or proscribe abortion after the fetus reaches viability, the point at which the fetus could live outside the womb. Over time, states have adopted a range of abortion- related laws or policies, including the following examples. Gestational limits: Prohibiting abortions after a specified gestational age. Insurance limitations: Limiting insurance coverage of abortions to certain circumstances in either publicly or privately funded insurance plans. Laws regulating abortion providers: Requiring abortion providers to meet certain standards, such as standards that specify facility room size or corridor widths. Mandatory counseling: Requiring specific information, including information on fetal development or gestational age of the fetus, be provided to a woman prior to an abortion. Parental involvement: Requiring the consent or notification of one or both parents for minors seeking an abortion. Waiting periods: Requiring a certain amount of time to elapse between informed consent—which may include mandatory counseling—and having an abortion. Since Roe v. Wade was decided, many of these state laws have been challenged, and the Court, in reviewing these laws, has considered whether they impose an undue burden on a woman’s right to choose an abortion. Most recently, in 2016, the Court found that two Texas laws regulating abortion providers offered few, if any, health benefits and posed a substantial obstacle to women seeking abortions. Therefore, the Court found that these two Texas laws constituted an undue burden and were unconstitutional. The number of abortions performed in the United States has steadily declined over the past 30 years, with the abortion rate reaching its lowest point in 2014—the most recent year data were available—at 14.6 abortions per 1,000 women of reproductive age, according to a 2017 study. This study attributed this decline primarily to a decrease in the number of unintended pregnancies and to a lesser extent, laws or policies that may limit women’s access to abortions. Abortions are typically performed in a clinic or other nonhospital setting and involve one of two methods: medical abortion or surgical abortion. Medical abortions involve using prescription drugs to terminate a pregnancy. The prescription drug mifepristone, sold under the brand name Mifeprex, in combination with the prescription drug misoprostol, is the only Food and Drug Administration (FDA) approved medication for medical abortions in the United States, and is approved for use through 10 weeks gestation. FDA has restricted the administration of Mifeprex to patients in certain healthcare settings under the supervision of a certified prescriber; thus, the drug cannot be sold in retail pharmacies. According to Danco Laboratories, the manufacturer of Mifeprex, there is at least one certified Mifeprex provider in every state. Surgical abortions, which can involve different procedures depending on the stage of a women’s pregnancy, account for the majority of abortions in the United States. However, according to a recent study, the incidence of medical abortions increased 7 percent from 2011 to 2014, with medical abortions accounting for 31 percent of all nonhospital abortions in 2014. Medicaid Coverage of Abortions Medicaid expenditures are financed by both the federal government and the states. In order to receive federal funding for Medicaid expenditures, states must adhere to a broad set of federal requirements and administer their programs consistent with individual state plans approved by CMS. However, Medicaid, by design, allows significant flexibility for states to design and implement their programs. States have some discretion in, among other things, setting Medicaid eligibility standards and provider payment rates; determining the amount, scope, and duration of covered benefits; and developing their own administrative structures. For example, states must cover certain mandatory populations and services—including abortions in cases of rape, incest, or life endangerment—but may impose certain requirements on that coverage, such as requiring authorization before a service is provided. States may also opt to cover other optional populations and services, including abortions for which federal funding is not available. States may also decide how Medicaid-covered services provided to beneficiaries will be delivered. For example, states may pay health care providers for each service they provide—referred to as fee-for-service (FFS)—or contract with managed care organizations (MCO) to provide a specific set of Medicaid-covered services to beneficiaries and pay them a set amount per beneficiary, typically per month. While most states use both delivery systems, the percentage of beneficiaries served through comprehensive MCOs has grown in recent years, and represented nearly 70 percent of all Medicaid beneficiaries in 2016. Oversight of the Medicaid program is also shared by the federal government and the states, and is aimed, in part, at ensuring that funds are used appropriately and that beneficiaries have access to covered services. With respect to abortion coverage, federal law and CMS guidance outline specific requirements for federal funding to be available. For example, states that claim federal funding for abortions in the case of life endangerment must obtain a physician’s certification that the abortion is necessary for this purpose. While there is not a similar certification requirement for federal funding of abortions in cases of rape or incest, CMS guidance specifies that states may impose certain additional requirements on providers and beneficiaries as a condition of Medicaid payment for abortions eligible for federal funding, provided such requirements are reasonable and do not deny or impede coverage for such abortions. In the case of medical abortions, federal law does not specifically require Medicaid coverage of the prescription drugs used to terminate a pregnancy. However, state Medicaid programs that opt to cover prescription drugs—which is the case in all 51 states—are generally required to cover outpatient drugs of any manufacturer participating in the Medicaid Drug Rebate Program. Danco Laboratories has a rebate agreement for Mifeprex, and, as result, states should generally cover it for abortions in the circumstances eligible for federal funding. In determining states’ compliance with this requirement, CMS guidance states that the agency will consider several factors, including a state’s authority to set limitations on covered outpatient drugs under relevant state laws. To inform its oversight of Medicaid, CMS relies on state-reported data that contain information on multiple aspects of the program. States claiming federal funding for Medicaid services, including abortions, are required to report quarterly expenditures to CMS on the form CMS-64. CMS uses these data to pay states for the federal share of program spending and the agency is responsible for ensuring that federal payments are made appropriately. Additionally, states submit Medicaid expenditure and utilization data that can be linked to individual beneficiaries to CMS on a monthly basis through the agency’s new Transformed Medicaid Statistical Information System (T-MSIS). Multiple Factors Could Present Challenges to a Woman’s Access to Abortions Depending on Where She Lives Through provider interviews, we identified multiple factors that could present challenges to women accessing abortions, but the extent to which these factors were present in a state varied, as did their effect on access. In addition, the studies we reviewed examined some of these factors more than others, but often pointed to the challenges they could pose. Medicaid beneficiaries may experience further challenges accessing abortions in some states due to variation in Medicaid abortion coverage and related payment requirements. Providers and Literature Pointed to Multiple Factors that Could Present Challenges to Women Accessing Abortions across States We identified seven key factors as potential challenges to women accessing abortions based on our interviews with eight selected providers: (1) gestational limits; (2) mandatory counseling; (3) out-of- pocket costs; (4) parental involvement; (5) provider availability; (6) stigma and harassment; and (7) waiting periods. (See table 1.) The extent to which these factors are present in a state varies. For example, one provider who did not identify stigma and harassment as a factor affecting women in the state it operates in noted that women from all over the country come to its clinics. The provider said this was because women see its clinics as a safer place to obtain an abortion than seeking care in their own state, where they would likely be stigmatized or harassed. Additionally, providers in some states told us that they were able to cover the entire cost of the abortion and pay for associated costs, such as transportation, for women who could not afford to pay, while providers in other states said that they could not cover the entire cost of the abortion due to funding limitations. See figure 1 for an example of differences in factors present in two states. In addition, a factor could be more challenging in one state versus another, depending on the details of the factor and other factors present. For example, one provider noted that the 24-hour waiting period in one state it serves poses a minimal challenge, because women can complete part of the process online and only make one visit to the abortion provider. Conversely, a provider in another state said that the state’s 72- hour waiting period requires two in-person visits and that the same doctor be present at both, which can create delays in care and increase costs, particularly if the woman needs to travel a long distance for her appointments. Differences in access can also exist within a state. Most notably, some selected providers pointed out that women in a state’s rural areas typically have more limited access to abortion providers than those who live in the state’s urban areas. The 52 studies we reviewed examined the key abortion access factors identified through our interviews with selected providers, though some factors were studied more than others. (See app. I.) Most of the reviewed studies conducted statistical analyses to evaluate the effects of a factor on abortion access and often identified access challenges. For example, nearly two-thirds of the statistical studies for the three most commonly studied factors—out-of-pocket costs, parental involvement, and provider availability—found that the factor adversely affected a measure of abortion access. (See table 2.) The other factors identified by providers—gestational limits, stigma and harassment, mandatory counseling, and waiting periods—were less frequently examined in the reviewed studies, and the findings from these studies were more mixed. For example, gestational limits and stigma and harassment were the least studied of all the factors with only three and two studies, respectively, and the reviewed studies found both adverse effects on access, as well as effects that were statistically insignificant. While there were more studies on waiting periods, the results were similarly mixed, with at least one study suggesting that the type of waiting period could change the effect on access. This study found that while a waiting period requiring two in-person visits could delay care, the effect of waiting periods that required fewer in-person visits was not significant. Finally, for mandatory counseling, the studies we reviewed rarely found that the factor had a statistically significant effect on a measure of abortion access (2 of 10 studies). Variation in State Coverage and Payment Requirements Could Further Challenge Medicaid Beneficiaries’ Access to Abortions In responding to our survey, 29 states reported limiting abortion coverage for Medicaid beneficiaries to the three circumstances required under federal law—rape, incest, and life endangerment—while 21 states reported broader abortion coverage. The remaining state, South Dakota, reported that it limits abortion coverage for Medicaid beneficiaries to circumstances when the pregnancy endangers the life of the woman, and does not cover abortions in cases of rape or incest. CMS confirmed that South Dakota’s Medicaid state plan does not include coverage of abortions in cases of rape or incest, and shared a letter it sent to the state in 1994 outlining that the state’s coverage did not comply with federal law and expressing CMS’s intent to work with the state on possible solutions. However, according to CMS officials, the agency has not taken any action since that time to ensure South Dakota’s compliance, and does not have plans to do so. As a result, Medicaid beneficiaries in South Dakota do not have Medicaid coverage for abortions in cases of rape or incest. States also varied in the extent to which their Medicaid programs covered Mifeprex, the prescription drug most commonly used for medical abortions. (See fig. 2.) As previously noted, state Medicaid programs that opt to cover prescription drugs—which is the case in all 51 states—are generally required to cover outpatient drugs of any manufacturer participating in the Medicaid Drug Rebate Program, subject to a few statutory exceptions. CMS officials told us that Mifeprex, which became a covered outpatient drug in 2001, does not meet any of the exceptions for categorical exclusion from coverage. However, 14 states reported that they do not cover Mifeprex. Without such coverage, Medicaid beneficiaries seeking abortions in these states would have to find another way to pay for the drug or undergo a surgical abortion instead. CMS officials were not aware that these states did not cover Mifeprex, and thus the agency had not taken any action to address states’ non-compliance. Beyond differences in the scope of their abortion coverage, states varied in the types of requirements they imposed as a condition of Medicaid payment for abortions eligible for federal funding, which could also affect women’s access to the procedure. Provider certification that the abortion met the circumstances of rape, incest, or life endangerment was the most common requirement reported by states. Other commonly reported requirements included provider certification of counseling, beneficiary certification of rape or incest, documentation of rape or incest, and prior authorization by the state Medicaid agency. (See table 3.) The details of particular requirements also varied across states. For example, among the 32 state Medicaid programs that claimed federal funding for abortions, we reviewed available documents implementing the federal requirement that physicians certify the abortion is necessary in the case of life endangerment and found differences among the states. In particular, some states’ documents incorporated the statutory wording of the life endangerment exception, others incorporated the wording of the related federal regulation, and others used different wording. Additionally, CMS officials told us that the agency does not require that physicians fill out a specified form to meet the certification requirement, and the 32 states varied in whether or not they had such a form. In another example, of the 14 states that required documentation of cases of rape or incest, some states specifically required a police report, and other states allowed the beneficiary the option of either filing a police report or filing a report with another public agency, such as a public health agency. Finally, states also varied in terms of the number of requirements they imposed specific to Medicaid payment of abortions eligible for federal funding. For example, some states had no requirements specifically for these abortions, while one state had all five of the requirements most commonly reported. In general, states that used state-only funds to cover abortions in circumstances beyond those eligible for federal funding had fewer requirements. (See fig. 3.) Our interviews with the eight selected providers suggest that the scope of a state’s Medicaid abortion coverage and related payment requirements could affect abortion access. For example, six selected providers said that they rarely submit abortion claims to state Medicaid programs that limit abortion coverage to circumstances eligible for federal funding, in part, because obtaining payment is challenging; involves multiple, often unclear requirements; and frequently results in denied claims. One of these providers noted that not obtaining Medicaid payment puts additional pressure on already strained resources, affecting its ability to cover abortions for women in general. Conversely, two providers operating in states with broader Medicaid abortion coverage stated that they frequently submit claims for abortions and receive payment. State-reported information on denied abortion claims suggests that the difficulty the selected providers faced in obtaining Medicaid payment for abortions eligible for federal funding in certain states could exist in other states. Specifically, among the 15 states reporting information on denials of payment for abortions in circumstances eligible for federal funding, denial rates ranged from 4 percent to nearly 90 percent, with about half of the 15 states reporting denial rates of 60 percent or more. While we did not ask states to report on their reasons for denying Medicaid payment for abortions, some states provided this information. For example, one state said that its high denial rate is due to the initial denial of all claims for abortions in cases of life endangerment that do not have the recipient’s address, as required by federal regulation. In addition, 7 states reported having no payment denials, 4 of which did not receive any claims for abortions eligible for federal funding over the 5- year period. Findings from the studies we reviewed also highlight the potential effect of states’ Medicaid coverage and payment requirements on a woman’s access to abortions. Eight studies that examined the effect of limiting Medicaid abortion coverage to those eligible for federal funding found that such coverage limits were associated with a reduction in the number of women having abortions. For example, one of these studies analyzed national data from 1985 to 2005 and found that limiting Medicaid coverage to abortions eligible for federal funding reduced a state’s abortion rate by 8 to 9 percent. In addition, six studies that examined providers’ experiences obtaining Medicaid payment for abortions corroborated many of the concerns raised by our selected providers. For example, one study examining abortion provider experiences in six states found that many providers choose not to bill Medicaid for abortions, because obtaining payment for the procedure requires a significant time commitment, and when states do pay, the amount is typically lower than the cost of providing the abortion. Information on Abortions Eligible for Federal Medicaid Funding Is Incomplete, but Showed a Wide Range in the Number of Procedures Covered across States The usefulness of federal information—namely CMS-64 data—for identifying the number of abortions eligible for federal Medicaid funding is limited, which could hamper CMS’s efforts to ensure proper payments and states’ coverage of abortions in cases of rape, incest, or life endangerment. In particular, the CMS-64 does not include the following information. Abortions states paid for through MCOs. The CMS-64 does not include information on abortions eligible for federal funding provided to Medicaid beneficiaries through MCOs, because states are not required to identify expenditures for individual managed care services on the form. In our survey, 23 states reported claiming federal Medicaid funding for abortions from fiscal years 2013 through 2017 that were, at least in part, paid for through MCOs. Abortions in states reporting FFS abortions incorrectly. The CMS-64 is also an incomplete information source, because of inaccurate state reporting. CMS requires states to report FFS abortions for which they claim federal funding on line 14 of the form. However, in our survey, eight states reported that they include the costs of such abortions on other lines of the CMS-64, such as on the lines for outpatient hospital or physician services. According to agency officials, CMS conducts quarterly reviews of the CMS-64 data states report. CMS officials also said that reviewers are not required to confirm whether states that report no abortions on line 14 have accurately reported the information, which means that reviewers may not identify states reporting abortions elsewhere. As a result, information from the CMS-64 does not accurately reflect the number of FFS abortions for all states that may be claiming federal Medicaid funding. In addition, because state Medicaid programs use the CMS-64 to claim federal funding for services provided, the form does not include information from states that covered abortions for Medicaid beneficiaries in circumstances of rape, incest, or life endangerment, but did not seek federal funding for those costs. In our survey, 15 states—accounting for nearly half the Medicaid population nationwide—reported that, from fiscal years 2013 through 2017, they did not claim federal funding for abortions covered by their programs. In comparison with the CMS-64 data, the information states reported through our survey was more comprehensive. For example, 16 states claiming federal Medicaid funding provided us information on the number of abortions paid for through MCOs, information that was not captured on the CMS-64 as individual services, but often represented a significant portion of the abortions covered by these states. Similarly, the 8 states we identified as incorrectly reporting their FFS abortions on the CMS-64 reported the number of such abortions to us, and these states accounted for half of all FFS abortions for which states reported claiming federal funding in our survey. As a result, the number of abortions for which states claimed federal funding that was reported to us was substantially higher than the number in CMS’s annual reports to Congress on such abortions, which are based on CMS-64 data. From fiscal year 2013 to fiscal year 2016—the latest year of data available from CMS’s annual reports—our survey identified nearly 5,000 abortions for which states claimed federal funding versus the approximately 550 identified in the agency’s reports. However, the information on abortions eligible for federal funding that states reported to us was also incomplete. Nine states, accounting for about one-third of total Medicaid enrollment, were unable to provide any information. These states use only state funds to pay for abortions, and, for example, do not require providers to report the circumstance for the abortion when requesting Medicaid payment, including those eligible for federal funding. Six states provided only FFS information, though they also reported paying for abortions through MCOs. Because over 60 percent of Medicaid beneficiaries in five of these states are enrolled in MCOs, information was not available for a significant portion of their beneficiaries. There were also other, smaller gaps in the states’ information. For example, six states were not able to provide information for at least 1 year of the survey time frame, and one state was not able to provide information on abortions in the case of life endangerment, which, based on information provided by other states, typically accounts for the majority of abortions eligible for federal Medicaid funding. While not always complete, 42 states reported information to us on abortions eligible for federal Medicaid funding, which showed a wide range in the number of procedures covered across states. Most of these states (37 of 42) reported covering 15 or fewer abortions eligible for federal funding per year, on average, from fiscal years 2013 through 2017, though this number may be understated in some states due to the data limitations discussed above. However, during this same time frame, 3 states (Iowa, South Dakota, and Wyoming) reported covering no abortions eligible for federal funding, and 2 states (Nevada and Pennsylvania) reported annually covering an average of more than 300 and 700 such abortions, respectively. (See app. II.) Additionally, when excluding Nevada and Pennsylvania, states reporting information showed an aggregate decrease in the number of abortions eligible for federal Medicaid funding they covered during the fiscal year 2013 through fiscal year 2017 time period (from 383 to 200). When data from these two states were included, there was an aggregate increase (from 876 to 1,544), as the number of abortions covered by Nevada and Pennsylvania was much higher in later years. T-MSIS could be a potential future source of more complete information on the number of abortions eligible for federal Medicaid funding. However, in two reports issued in January 2017 and December 2017, we examined T-MSIS implementation and identified issues with the completeness and comparability of T-MSIS data across states, as well as uncertainty with respect to how CMS will ensure the quality of the data or use them for oversight purposes. Based on our findings, we recommended that CMS expedite efforts to ensure the quality of T-MSIS data and articulate its plan and associated time frame for using these data for oversight. CMS agreed with these recommendations, but as of October 2018, the agency had not fully implemented them, and we continue to believe that these recommendations remain valid. Further, due to ongoing concerns regarding the quality of T-MSIS data and the small number of abortion services relative to other Medicaid services, CMS officials said that the agency has focused its oversight efforts in other areas. Conclusions CMS has a central role in monitoring states’ compliance with federal requirements for coverage of abortions eligible for federal funding in the Medicaid program. However, our work identified limitations in CMS’s oversight. In the case of South Dakota, CMS is aware that the state does not cover abortions in cases of rape or incest, as required by federal law, but has not taken any action in 25 years to ensure the state’s compliance. CMS was not aware of the14 states that reported not covering Mifeprex despite the requirement to do so under federal law. Without such coverage, Medicaid beneficiaries seeking abortions in these states would have to find another way to pay for the drug or undergo a surgical abortion. Finally, incomplete federal data on the number of abortions eligible for federal Medicaid funding—in part, due to inaccuracies that we identified in the reporting of these expenditures by eight states—limit the agency’s ability to ensure that states are covering such abortions and that federal payments are made appropriately. Recommendations We are making the following three recommendations to the Administrator of CMS. CMS should take action to ensure South Dakota’s Medicaid state plan provides coverage for abortions in cases of rape and in cases of incest, in addition to life endangerment, to comply with federal law, which currently requires such coverage. (Recommendation 1) CMS should determine the extent to which state Medicaid programs are in compliance with federal requirements regarding coverage of Mifeprex and take actions to ensure compliance, as appropriate. (Recommendation 2) CMS should determine the extent to which state Medicaid programs are accurately reporting fee-for-service abortions on line 14 of the CMS-64 and take actions to ensure accuracy, as appropriate. (Recommendation 3) Agency Comments We provided a draft of this product to the Department of Health and Human Services for comment. In its written comments, HHS concurred with our recommendations and indicated a commitment to working with states to address them. In doing so, HHS noted that while CMS encourages states to design their Medicaid programs to meet the needs of local beneficiaries, states must operate their programs consistent with all applicable federal laws, including those referenced in our report. HHS also provided technical comments, which we incorporated as appropriate. HHS’s comments are reprinted in appendix III. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of HHS, and other interested parties. In addition, the report will be 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) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. Major contributors to this report are listed in appendix IV. Appendix I: Literature Review To identify studies examining factors that may present challenges to women, including Medicaid beneficiaries, accessing abortions, we conducted a literature review of recently published studies. Specifically, we searched for relevant studies published from January 2007 through September 2017. We searched various peer reviewed and industry journals using databases, including ProQuest, CINAHL, Dialog, and Scopus. Key terms included various combinations and iterations of “abortion,” “access,” “challenge,” “limit,” “restrict,” “obtain,” “deny,” “state regulation,” “state law,” “state rule,” “state policy,” “Medicaid,” “parental consent,” “parental notification,” “counseling,” “waiting period,” “ultrasound,” “ambulatory surgical,” “surgical center,” “admitting privileges,” “hospital distance,” “hospital proximity,” “hospital miles,” “room size,” “corridor,” “procedure room,” “transfer patient,” “targeted regulation of abortion providers,” “TRAP law,” “stigma,” “violence,” “protest,” harass,” “gestational limit,” “term limit,” “out-of-pocket,” “expense,” “provider availability,” “provider shortage,” and “provider participation.” From our search, we identified 637 studies. We systemically reviewed the abstracts of these studies to determine which ones examined factors that may present challenges to women accessing abortions. In doing so, we excluded studies where the research (1) was not focused on the United States; (2) was not empirically analytical, such as theoretical articles and opinion pieces; (3) did not directly analyze the effect of a factor on a woman’s ability to obtain an abortion (i.e., analyzed the effect of a factor on mental health outcomes, contraception use, or unintended birth); (4) did not focus on the civilian population; (5) evaluated personal characteristics or issues that may present challenges to obtaining abortions, such as income level or age; and (6) analyzed a number of factors together so the individual effect of any one factor could not be identified. For the studies remaining, we examined their methodologies to determine whether they were sufficiently reliable for the purposes of our reporting objectives. After taking these steps, 52 studies remained. The 52 studies were then reviewed and coded by analysts to determine the type of abortion access factor identified. We focused our analysis on key factors identified through interviews with selected abortion providers: (1) gestational limits; (2) mandatory counseling; (3) Medicaid challenges; (4) out-of-pocket costs, (5) parental involvement, (6) provider availability, including certain state laws regulating abortion providers; (7) stigma or harassment; and (8) waiting periods. Table 4 identifies these 52 studies and summarizes the factors they examined. Appendix II: State-Reported Information on the Number of Covered Abortions Eligible for Federal Medicaid Funding Appendix III: Comments from the Department of Health and Human Services Appendix IV: GAO Contact and Staff Acknowledgements GAO Contact Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov. Staff Acknowledgements In addition to the contact named above, Susan Anthony (Assistant Director), Rachel Svoboda, (Analyst-in-Charge), Marcia Crosse, Julianne Flowers, Sandra George, Ashley Nurhussein, Sara Rizik, and Jennifer Rudisill made key contributions to this report. Also contributing were Sarah Gilliland, Kaitlin Farquharson, Drew Long, Vikki Porter, and Eric Wedum.

Why GAO Did This Study While federal law prohibits federal funding for abortions in most circumstances, state Medicaid programs are required to cover abortions in limited circumstances. CMS is responsible for monitoring state compliance with federal requirements. However, concerns have been raised about challenges women may face obtaining Medicaid coverage for abortions eligible for federal funding, as well as with abortion access more broadly. GAO was asked to review issues related to abortion access. This report examines (1) factors that may present challenges to women, including Medicaid beneficiaries, accessing abortions; and (2) federal and state information on the number of abortions eligible for federal Medicaid funding. GAO reviewed federal laws, regulations, and data sources; surveyed and received responses from Medicaid program officials in all 50 states and the District of Columbia; conducted a literature review; and interviewed CMS officials and eight abortion providers selected based on factors such as variation in Medicaid abortion coverage and geography. What GAO Found Women could face various challenges accessing abortions depending on where they live, and Medicaid beneficiaries may face additional challenges in some states. GAO identified seven key factors that could pose challenges to women accessing abortions, based on its interviews with providers and review of the literature: gestational limits, mandatory counseling, out-of-pocket costs, parental involvement requirements, provider availability, stigma and harassment, and waiting period requirements. The presence of these factors and their effect on abortion access—such as delays in care or increased costs—varied by state. GAO also found that state variation in Medicaid abortion coverage and payment requirements could further complicate access for program beneficiaries. State Medicaid programs are generally required to cover abortions and can seek federal funding for such coverage when the pregnancy is the result of an act of rape or incest, or the life of the pregnant woman would be endangered unless an abortion is performed. States may also cover abortions under other circumstances, but federal funds may not be used. In GAO's survey, one state reported not covering abortions in cases of rape or incest, and 14 states reported not covering the drug used in medical abortions, which they are generally required to cover if the abortion is otherwise eligible for federal funding. Officials from the Centers for Medicare & Medicaid Services (CMS), the federal agency that oversees Medicaid, were unaware that these states were not covering the drug, and thus, have not taken any actions to address states' non-compliance. Federal information on the number of abortions eligible for federal Medicaid funding is incomplete, limiting CMS's ability to ensure proper payments and states' coverage of such abortions. For example, the form CMS-64, which states use to report Medicaid expenditures, does not collect information on the number of abortions paid for by managed care—the delivery system serving most Medicaid beneficiaries. It also does not include this information from 8 states that GAO identified as incorrectly reporting abortion costs on the form. While also not complete, state information reported in GAO's survey was more comprehensive, and showed a wide range in the number of abortions eligible for federal funding covered across the 42 states that reported such information. What GAO Recommends GAO is making three recommendations to CMS to ensure state compliance with federal requirements for Medicaid abortion coverage, including coverage of the drug used for medical abortions. The Department of Health and Human Services concurred with these recommendations.

gao_GAO-19-139

gao_GAO-19-139_0

Background In Federal courts, civil actions, such as lawsuits, begin with the filing of a complaint with the court. On or after filing a complaint, a plaintiff obtains a summons to the defendant from the court. The summons, among other things, names the court and the parties, states the time within which the defendant must appear before the court to defend against the complaint, and notifies the defendant that a failure to appear and defend will result in a default judgment against the defendant for the relief demanded in the complaint. Plaintiffs are responsible for providing defendants both the summons and a copy of the complaint. This procedure, known as service of process, gives parties formal notice of the initiation of court proceedings. In the event of a default judgment against a foreign state in which the defendant has not responded to a summons or complaint and the court has ruled in favor of the plaintiff, FSIA requires that service of a copy of the judgment be completed. The FSIA prescribes a sequential process for completing service on foreign governments that plaintiffs must follow before requesting that State complete service through the diplomatic channel. Federal regulations require State to complete service “promptly” although neither the regulations nor State guidance further define the term. Pursuant to these regulations, where there are no diplomatic or consular relations between the United States and the defendant foreign government or where the United States has suspended diplomatic or consular operations, service may be accomplished pursuant to the arrangement the United States has with a friendly government known as a protecting power arrangement. The protecting power arrangement specifies the consular services that the friendly government will provide in assisting the United States. As of November 2018, the United States had protecting power arrangements with the governments of the Czech Republic, France, Sweden, and Switzerland. Each of the arrangements with the Czech Republic and Switzerland contains a provision for service respectively on Syria and Iran. Based on our analysis of State and U.S. court data, from 2007 through 2017, State received 289 service requests to 33 countries. Iran alone accounted for over 60 percent of all service requests, followed by Syria with about 7 percent, and Sudan with about 5 percent. Because Switzerland and the Czech Republic serve as protecting powers for the United States in Iran and Syria, respectively, about two-thirds of all service requests were accounted for by the U.S. Embassies in Bern and Prague. Figure 1 shows the breakdown of FSIA service requests by defendant country from 2007 through 2017. Over the last 2 years, 2016 and 2017, State completed 31 and 48 cases respectively. The 48 cases represent the highest number of cases in any year for the 11-year period we reviewed (see App. II for further data on State’s provision of service since 2007.) Service requests to State were made through at least 31 federal, state, and county courts. The vast majority of service requests were made through federal district courts. One court—the U.S. District Court for the District of Columbia—was the venue for 73 percent of all completed service requests, followed by 8 percent for the U.S. District Court for the Southern District of New York and 3 percent for the U.S. District Court for the Southern District of Florida. According to some plaintiffs’ attorneys with whom we spoke, the U.S. District Court for the District of Columbia has jurisdiction over most cases involving victims of state-sponsored terrorism. Figure 2 provides information on the service requests completed from 2007 through 2017 based on the court used to make the request. According to plaintiffs’ attorneys, victims of state-sponsored terrorism who have obtained judgments against a foreign state generally seek compensation in two ways: (1) by attaching and directly seizing assets of that state pursuant to the FSIA and other applicable provisions of law and (2) from a temporary special fund called the U.S. Victims of State Sponsored Terrorism Fund (Fund). The Fund was established by Congress in 2015 with about $1 billion in appropriations. Congress established the Fund for a period of 10 years ending in 2026 and mandated that certain forfeiture proceeds, penalties, and fines be deposited into the Fund if paid to the United States after the Fund’s establishment. The Fund can provide compensation to those, who (1) have secured final judgments in a U.S. district court against a state sponsor of terrorism for a claim arising from an act of international terrorism for which the state was not found immune from the FSIA, (2) were held hostage at the U.S. Embassy in Tehran, Iran from November 1979 to January 1981, or (3) are the personal representatives of the estate of a deceased individual in one of these two categories. Victims must file appropriate documentation with the Fund, and be found to qualify. Compensation for victims is calculated on a pro-rata basis on the amount of available funds for each distribution, and is subject to certain statutory caps. The first payments from the Fund were authorized in December 2016; the second distribution is scheduled for authorization in January 2019. After 2019, eligible claims will be paid annually out of available funds, until all eligible amounts have been paid in full or the Fund terminates in 2026. State Completes Service in Several Stages That Take 5 Months to Complete On Average State’s Process for Completing Service Has Four Stages State completes service through four stages involving the courts, the Department of State, U.S. embassies, and foreign ministries through a process that took about 5 months to complete on average for the period 2007 through 2017. State’s OCS/L within the Bureau of Consular Affairs administers the diplomatic service provisions of the FSIA. Figure 3 summarizes how State completes service in countries where a protecting power assists in the completion of service under the FSIA. The steps involved are numerous and require action by litigants, courts, and the State Department, but can be summarized in four stages: 1. Preparing and submitting a request for service to State. Plaintiffs’ attorneys compile and submit the required documentation to the relevant clerk of court, who transmits the package to State. This documentation must include two copies of the complaint, summons and a notice of suit, together with a translation of each into the official language of the foreign state, or where a plaintiff has obtained a default judgment against a foreign state, translated copies of that default judgment and a notice of default judgment, as well as a cashier’s check made out to the appropriate U.S. embassy for the applicable fee. 2. Receiving and processing the request at State. OCS/L receives the package from the clerk of the court where the suit was filed, verifies that the package is complete and the check is written for the proper fee amount, works with plaintiff’s attorney or the clerk of court to resolve any errors or issues with the package, prepares language for the diplomatic note and instructions for the embassy staff, and circulates the diplomatic note and instructions for clearances from relevant Department of State offices. OCS/L sends, via diplomatic pouch, this package to the appropriate embassy depending on the defendant. In cases involving the assistance of a protecting power for the United States to serve documents under the FSIA, OCS/L sends the package via diplomatic pouch to the U.S. embassy in the country that serves as the protecting power for U.S. interests in the defendant country. In the case of suits against the government of Syria, for example, the protecting power is the Czech Republic. In cases involving countries where the United States has diplomatic relations and an embassy the package goes to the U.S. embassy in the defendant country. 3. Receiving and processing a request at U.S. embassies and working with protecting powers. At the U.S. embassy, an American consular officer prepares a diplomatic note in accordance with OCS/L guidance that is added to the package and sends the package to the Ministry of Foreign Affairs. In cases involving the assistance of a protecting power for the United States to serve documents under the FSIA, the Ministry of Foreign Affairs prepares instructions for the consular officer at the foreign interest section of the embassy in the defendant country and sends him the package. A consular officer in the U.S. interest section of the protecting power’s embassy in the defendant country prepares a diplomatic note to add to the package and delivers the package, or arranges for its delivery, to the Ministry of Foreign Affairs of the defendant country. 4. Notifying the court that service has been completed. Once service has been completed, the package is sent back to OCS/L for delivery to the clerk of court. In the instance of protecting power assistance, the package will include certifications from the foreign interest section of the protecting power that process was served on a specific date as well as other certifications by the protecting power’s Ministry of Foreign Affairs and the U.S. embassy. From 2007 through 2017, State Completed Requests In About 5 Months On Average Our analysis of State and court data shows that for the 229 service requests that we analyzed, the average (mean) time for State to complete the requests over the past 11 years was about 158 days—or about 5 months. About 50 percent of the service requests took State between 90 and 179 days to complete, and about 28 percent took 180 days or more. Seven requests took longer than 1 year. The longest request took 695 days to complete. Figure 4 shows the completion times of service requests measured in the number of days taken for 2007 to 2017, by 30- day intervals. Our analysis shows the most time-consuming stage to complete service was the period in Washington, D.C. in which State Headquarters completes document review and clearance, as shown in table 1. Slow Service Could Adversely Affect Victims’ Ability to Obtain Compensation Although neither the FSIA, State’s implementing regulations, nor federal rules of civil procedure establish a time limit for State to complete service, the length of time State takes to complete service can affect plaintiffs’ compensation. According to plaintiffs’ attorneys we interviewed, State’s taking a long time to complete service could adversely affect victims’ ability to gain compensation for two reasons. First, slow service can lengthen the time it takes to obtain a final judgment against a foreign government, thereby delaying plaintiffs’ ability to meet the requirements necessary to satisfy judgments through asset seizures or to apply for compensation from the U.S. Victims of State Sponsored Terrorism Fund. For efforts to collect judgments through asset seizures, plaintiffs’ attorneys explained that the first plaintiff to successfully make such a claim is awarded the entire asset. Thus they are competing to be first in making such claims. Second, slow service can also reduce the total award that claimants receive from the Victims Fund. For example, slow service could result in plaintiffs being unable to provide the required documentation before the deadline of a particular round of distributions for the Fund. The deadline for the 2019 distribution was September 14, 2018. The Fund’s procedures allow victims to apply for compensation after a court has issued a default judgment that includes compensation against the defendant government in their case and following their transmittal of a request for service of the default judgment through State. Of the 10 firms that submitted requests for service to State that we interviewed, 6 expressed concern that slow service could adversely affect their clients’ compensation from the Fund for one of the reasons described. Three of the firms also cited ongoing cases where compensation could be adversely affected if they are unable to obtain a default judgment and apply for service through State by the deadline established by the Fund for the next round of distribution. According to Fund officials the Fund has allocated approximately $1.095 billion for second-round payments. The Special Master will authorize second-round payments on a pro rata basis to claimants with eligible claims by January 1, 2019. State Has Not Implemented Key Controls to Manage the Completion of Service OCS/L Did Not Maintain Complete and Accurate Records OCS/L did not maintain complete and accurate records of the status of service requests completed during calendar years 2007 through 2017. State’s record-keeping guidance stresses the importance of creating and preserving records so that documentation of an office’s activities is complete and accurate. To document and manage State’s completion of service, OCS/L officials rely primarily on two forms of documentation. The first type of documentation or record is a “case tracker” spreadsheet that OCS/L uses to document the status of service requests (cases). The second type of record OCS/L relies on is case files which include various documents related to the completion of service. We analyzed the case tracker that OCS/L provided to us in November 2017. We determined that it did not contain complete and accurate data about the service requests from 2006 through 2016 because it did not contain any fields documenting the start of the process at State—for example, the date when the court sent the request to OCS/L or the date when OCS/L received the request. Without this, OCS/L lacked any data about when it first received and began working on a request. In addition, OCS/L lacked data about the status of any service request during the initial document review and clearance stage of the process, which as previously discussed, is the most time consuming stage. In response to our request for additional data to use in analyzing the timeliness of State’s service completions, in December 2017, OCS/L provided us with an updated tracker containing three fields not in the previous tracker. The three fields were designed to capture the start of the process, but were often blank. For example, 82 percent of the cases did not contain the date when OCS/L received the request from the court. By contrast, our analysis of both the November 2017 and December 2017 case trackers showed that OCS/L almost always recorded the “end dates” in the process when service was completed and when OCS/L notified the court that service had been completed. We also reviewed the 59 case files OCS/L provided for the 2015 and 2016 service completions and determined that OCS/L did not consistently keep copies of several critical documents. We chose these years because OCS/L officials said that providing case files for the entire period under review would present a significant logistical challenge and the case files for the prior years were less complete. As table 2 summarizes, all but three files contained a copy of the memorandum providing instructions to the embassy and language for the diplomatic notes. Nine case files were missing a copy of the diplomatic note. There were also 16 case files missing the certification that service was completed on a specific date. These two documents are critical to demonstrating that service has been completed. There were also 47 case files lacking a signed copy of the notification to the court. None of the 59 case files we reviewed included a copy of an email required by State guidance providing key information on the completion of service. The Foreign Affairs Manual requires embassies to send OCS/L an email documenting when documents required for service were received by the embassy, when those documents were transmitted to a foreign ministry, and the date an executed request was sent to OCS/L for relay to a court (including invoice, registry, and pouch numbers by which the documents were returned to State headquarters), but none of the files we reviewed contained this documentation. Table 2 summarizes the results of our review of the case files. In discussing why their case tracker and case files are incomplete and sometimes inaccurate, OCS/L officials noted that State’s agency-wide record-keeping guidance does not prescribe what kind of records they must keep for service requests. Federal internal control standards state that management should implement control activities through policies such as through day-to-day procedures or guidance. Additionally, these standards state that management should design controls to achieve objectives and respond to risks. These controls could, for example, document significant events in a manner that allows the documentation to be readily available for examination or require edit checks during information processing. Further these control activities should ensure that documentation and records are properly managed and maintained. In September 2018, after reviewing our analysis, State officials said that as a matter of practice they had begun digitally scanning service documents, but still did not have a standard list of documents to be maintained in case files. They also acknowledged that the level of completeness of the “case tracker” and case files varied depending on the individual maintaining the files. Additionally, in June 2018 State launched a new case tracker using a database management application. According to OCS/L officials, the new tracker will facilitate the recording and updating of key milestone information. The new tracker allows for including some information not documented in the previous case tracker spreadsheet. However, it does not capture the date the court sent the request to OCS/L. According to OCS/L officials and our analysis, the time between when the court sent the request to OCS/L and OCS/L receives the request can vary significantly. In nine instances, it took from about 3 weeks to over a year for the service request to travel from the court to OCS/L. OCS/L officials explained the new tracker does not capture the date when the court sent the package because they believe the key information they need to use in analyzing and managing the program begins at the point where OCS/L receives the package and not before. However, without capturing this data, OCS/L will not be able to determine the extent to which service requests are delayed in CA’s mailroom before being delivered to OCS/L—one of the four key stages of the process for completing service. Further, without guidance that specifies the information OCS/L must maintain in the case tracker and case files, State officials will continue to lack complete and accurate information. OCS/L Does Not Monitor Progress in Completing Service Requests OCS/L does not continuously monitor service requests to determine their progress in moving through the four stages. State’s guidance stresses the importance of continuous monitoring to achieve office, bureau, and agency-wide goals and objectives. Among other things, the Foreign Affairs Manual states that monitoring data can help determine if implementation is on time or if any timely corrections or adjustments may be needed to improve efficiency or effectiveness. Additionally, federal standards for internal control state that management should establish monitoring activities, evaluate the results, and remediate any deficiencies. OCS/L officials indicated that they have not continuously monitored service requests because they are not required to do so. OCS/L has no specific guidance requiring monitoring of the status of service requests during any stage of the service completion process and, as of October 2018, State had not established performance standards or timeframes for completing service of process and associated tasks, as discussed later in the report. Based on our analysis of data and a sample of requests, we found that OCS/L’s lack of monitoring meant that State missed opportunities to ensure the timely processing of some requests, particularly during the document review and clearance stage. To identify the factors that affect the amount of time that State takes to process service requests, we analyzed a non-generalizable sample of 16 requests that we selected to ensure we obtained detailed information on cases that took above the average amount of time, below the average amount of time, and about the average amount of time to complete. We discussed the circumstances of each of the 16 requests with OCS/L and embassy officials, as well as with plaintiff’s attorneys. We identified several reasons that cases took longer than average to complete: Two cases took longer than average to complete because of staff turnover in the relevant Department of State offices in Washington, D.C. One case took longer than average to complete when an OCS/L contractor in Washington, D.C. failed to promptly distribute the packages received by mail. In that instance, it took OCS/L 323 days to clear and send the service request to the embassy after having received the request from the court. One case took longer than average to complete when a State official at an embassy in Africa forgot to complete the service request. The request was completed only after the official’s successor arrived and noticed that the service request had not been completed. In this instance, service took 563 days to complete, of which 475 days were spent at the embassy. One case took longer than average to complete because a State official overseas misplaced two boxes of supporting documents that accompanied the service request. According to plaintiff’s attorneys, only after they called to ask about its status did OCS/L contact the embassy to determine why the necessary documents had not been delivered to the defendant state. Two cases took longer than average to complete because State officials failed to notice that the protecting power had not recorded the date of service completion on the diplomatic note for two service requests. In one case, the missing date was noticed by the plaintiffs’ attorneys only after OCS/L had notified the court that service had been completed. Once alerted to the error by plaintiffs’ attorneys, OCS/L took prompt action by requesting an amended diplomatic note from the protecting power’s Ministry of Foreign Affairs, but it took 2 additional months to obtain the document. OCS/L’s lack of monitoring also contributed to a loss of revenue. Based on our analysis of available data and records kept by the U.S. Embassy Bern we determined that the time it took OCS/L to review and clear service requests led to OCS/L’s waiving the fees because checks for payment of services had expired by the time they reached the U.S. Embassy in Bern. In one such instance, OCS/L took 131 days to send the request to Bern. OCS/L directed consular officials to proceed with the provision of service without receiving payment. Our analysis showed that this occurred in approximately 27 percent of all available service requests handled by Bern in 2016 and 2017. The amount of revenue lost was approximately $57,000. In June 2018, OCS/L officials developed a new manual that provides a written description of the roles and responsibilities of various officials in OCS/L in completing service requests. However, the manual does not require periodic monitoring of the time spent completing service by embassies. Without monitoring by OCS/L, State cannot ensure timely processing of service requests or prevent losses in revenue. OCS/L Has Not Analyzed Data on Its Completion of Service OCS/L officials said that they had not conducted any analysis that might identify the opportunities to improve their performance. State’s guidance in the Foreign Affairs Manual stresses the importance of assessing what is and is not working well in a program. However, OCS/L officials told us that they had not conducted an assessment because they did not have good data and documentation to use in assessing what was and was not working well in their completion of service. OCS/L officials provided several reasons for some cases taking longer than average in the process, in addition to those previously discussed, but these reasons were not informed by data. These included: (1) incomplete packages provided by plaintiffs’ attorneys; (2) the time it takes to deliver diplomatic pouches to embassies, which can vary by post; (3) delays due to some foreign governments’ avoidance or delay in accepting meetings with consular staff; and (4) consular officials’ level of familiarity with service requirements as well as heavy consular workloads. Our analysis of available data showed that the document review and clearance stage in Washington, D.C. took longer than the other stages. However, we were unable to determine the extent to which the longer time taken in Washington, D.C. was due to documentation that was missing from the package that was sent by plaintiffs’ attorneys because OCS/L only recorded a handful of cases where this occurred and did not record the date when OCS/L first received the service request or the date it determined the request was complete and free of errors. Moreover, while OCS/L officials attributed most of the time it took to complete the process to the time it takes to deliver documents overseas, our analysis showed that most of the time spent processing requests was consumed by OCS/L in the document review and clearance stage in Washington, D.C. Without periodically analyzing data on service requests, as called for in the Foreign Affairs Manual, OCS/L will not have a sound basis for determining the causes for delays in completing service and how to make improvements to eliminate those delays and reduce service completion times. In September 2018, OCS/L officials told us that they planned to begin using data to, among other things, measure current and past FSIA workload and performance and identify areas for improvement. However, they could not provide details or documentation of this effort. State’s Bureau of Consular Affairs Has Not Established Performance Standards to Manage and Improve Its Provision of Service Under the FSIA Consular Affairs has not established performance standards for the full process used to complete service requests. Consular Affairs officials said they have not established performance measures for the full process because they do not have good data to do so. When we began our review, Consular Affairs did not have any time frames for completing service requests. However, in June 2018, OCS/L issued a new manual that includes timeframes for certain steps of completing service within OCS/L. For example, the manual states that once OCS/L has received a service request package, the package must be reviewed within 2 business days to determine whether it contains any errors, omissions, or other issues that must be resolved. The manual also states that if OCS/L does not get clearance to send the package to the embassy within 2 weeks, then a senior OCS/L official must be notified for further action. However, the manual does not specify a deadline for staff to contact the plaintiff’s attorney to correct any problems with the package, such as missing documents, nor does the manual establish an overall timeframe for State to complete the document reviews and clearances in Washington, D.C. and U.S. embassies. GAO’s prior work has demonstrated the importance of setting performance standards that can be used across a range of management functions to improve results. In addition, federal internal control standards state that management should design control activities—such as setting of performance standards—to achieve objectives. Setting performance standards, among other things, can provide managers with crucial information on which to base their organizational and management decisions. Consular Affairs has established performance standards for some of its other activities. For example, in fiscal year 2017 Consular Affairs established performance standards for processing passport applications within published timeframes and ensuring that visa applicants were interviewed within a 3-week period. For fiscal years 2018 and 2019, among other goals, the Bureau established a performance standard of 100 percent to activate appropriate consular crises response tools, such as travel warnings and security and emergency messages, within 6 hours after notification of a crisis event. Without performance standards for completing service requests, Consular Affairs and OCS/L managers are limited in their ability to monitor performance and perform effective program management and oversight. Conclusions Plaintiffs suing foreign states in courts of the United States including some victims of state-sponsored terrorism, sometimes rely on State to promptly serve legal documents to foreign countries to receive compensation for their losses. We found that the process of serving legal documents to foreign countries takes an average of 5 months, but that some cases take considerably longer. In analyzing cases from 2007 through 2017, we identified multiple opportunities to improve the management and oversight of the process. Despite State’s recent steps to improve how it completes service, additional actions could help to ensure that service is completed in a timely manner. For example, guidance that specifies information that OCS/L must maintain in its case tracker and case files would help ensure that State has complete and accurate information on service requests. By having better record- keeping and more accurate and complete data, State will be able to monitor its progress in completing service requests and develop performance standards to measure timeliness. Additionally, periodically analyzing the data could help identify ways to improve timeliness. Recommendations for Executive Action We are making the following five recommendations to the Department of State: The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to update guidance to specify the data to be recorded in the service request case tracker. The required data should include key dates for all four stages of the process for completing service, such as the date the court sent the request to OCS/L. (Recommendation 1) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to update its record-keeping guidance for service requests to include a standard list of documents to maintain in service request case files. (Recommendation 2) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to monitor the status of service requests. (Recommendation 3) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to periodically analyze its data on service requests to identify the causes of any delays in State’s completion of service and take corrective actions as appropriate. (Recommendation 4) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs establishes performance standards for completing service, including timeframes for completing the various processes at State and at U.S. embassies. (Recommendation 5) Agency Comments We provided a draft of this report to State, the Department of Justice (Justice), and the Administrative Office of the U.S. Courts for review and comment. We received written comments from State that are reprinted in appendix III. In its comments, State concurred with all five of our recommendations and identified actions it planned to take to address them. Justice and the Administrative Office of the U.S. Courts told us that they had no formal comments on the draft report. State, Justice, and the Administrative Office of the U.S. Courts also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Deputy Attorney General, and the Director of the Administrative Office of the U.S. Courts. 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 further questions about this report, please contact me at (202) 512-6881 or BairJ@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Appendix I: Objective, Scope and Methodology In this report, we examine (1) how the Department of State (State) completes service under the Foreign Sovereign Immunities Act (FSIA) and how long it takes to perform this function and (2) whether State has implemented key controls in record-keeping, monitoring, analysis and performance management for completing service requests. To describe how State completes service, we obtained and reviewed State and embassy documentation such as regulations, official guidance, and case files. We also met with officials of State’s Bureau of Consular Affairs. Consular Affair’s Directorate of Overseas Citizens Services/Office of the Legal Affairs (OCS/L) is responsible for managing State’s completion of service. Based on discussions with OCS/L and documentation, we mapped how OCS/L manages the process in Washington, D.C and confirmed the process that we mapped with State officials. We met with officials from State’s Diplomatic Pouch and Mail Office, who described how they put together and track diplomatic pouches from State to embassies overseas. Because the role of consular and other officials at embassies overseas in completing service to defendant foreign governments is crucial, we also met with consular and other officials at the U.S. Embassies in Berlin, Germany; Bern, Switzerland; and Prague, Czech Republic. We selected these embassies based on (1) the number of service requests each handled, and (2) the method each uses to complete service. The U.S. Embassies in Bern and Prague ranked first and second on the list of embassies managing service requests, while the U.S. Embassy in Berlin ranked fourth. In the Czech Republic, we met with officials of the Czech Ministry of Foreign Affairs, who described how they receive and complete service requests from the U.S. Embassy in Prague. Similarly, the Swiss Ministry of Foreign Affairs provided us with a detailed description of how it receives and completes service on the Iranian government. We cannot generalize our findings from these two countries to any other countries, and note that the majority of the other countries received five or fewer requests for the 11 years we reviewed. To describe the process used by courts and attorneys that represent plaintiffs filing lawsuits against foreign governments under FSIA to request service from State, we met with court officials and plaintiffs’ attorneys. Using a spreadsheet that State provided us in December 2017, we identified the top four federal courts that requested service from State from 2007 to 2017 (the most recent full year available) and met with officials from three of these courts. We based our description of the procedure followed by court officials and attorneys say they follow at the United States District Court for the District of Columbia because about three-fourths of all service requests were made through that court. Using a spreadsheet that State had provided, we also identified and met with 10 firms that had requested service from State. The firms that we met with had a mix of experience requesting service from State. Some firms had extensive experience and others had little experience requesting service from State. We cannot generalize the responses to these firms to all firms that requested service from State. To determine the length of time it took for State to complete service from 2007 through 2017, in December 2017 we obtained a spreadsheet that OCS/L developed. This spreadsheet documents various milestones in the completion of service requests made during this period—for example, when the court sent the request to OCS/L, when OCS/L received the request, when OCS/L sent the request to the appropriate embassy, and when OCS/L notified the court that service had been completed. Because OCS/L officials provided data that was not complete, we developed an improved spreadsheet, using the spreadsheet we received in December 2017 as our starting point and improving the spreadsheet through the use of supplemental data. To develop the improved spreadsheet, we first identified requests for service, based on our examination of the original spreadsheet, which appeared to have not been completed or were not related to FSIA service. We requested clarification from State about whether we should keep those requests in our improved spreadsheet, and where appropriate, removed some service requests. We then checked the remaining requests in the original spreadsheet against court data obtained from the Lexis-Nexis database Courtlink. After completing this process, we once again asked OCS/L officials for clarification about certain service requests and incorporated their feedback. In June 2018, State provided us with a copy of a new case tracker that OCS/L officials had created. We incorporated data from 2017 into our improved spreadsheet and once again checked the service requests in our improved spreadsheet against court records. After making the appropriate modifications, we had 289 requests for service between 2007 and 2017. We processed the data in our improved spreadsheet using data analysis software. We estimated, among other things, the mean and median lengths of time it took for State to complete service from 2007 through 2017, as well as for the three of the four key stages of the process for which State is fully responsible. We estimated the time elapsed as the difference in calendar days between the key dates that were available, for example, between the date State notified the court that service was completed and the date the court had sent to OCS/L the request for service. The three stages for which we were able to estimate timeliness were (1) the days between the date State received the request from the court and the date OCS/L sent the request to the appropriate U.S. embassy overseas and, (2) the days between the date OCS/L had sent the request to the embassy and the date when service was completed overseas and, and (3) the days between the date that service had been completed by the embassy or protecting power and the date when OCS/L notified the court that service was completed. The time taken for these stages includes the times for a number of activities that we could not precisely estimate, such as the time it took for the court’s request to reach OCS/L and the time taken for service documentation to be sent via diplomatic pouch to and from the appropriate embassy. We used the date the court sent its request to OCS/L as our start date because that was the most complete start date data among the three options available. We restricted our analysis to those cases for which State had completed service. One limitation that we had to address in our analysis was the lack of certain key dates in OCS/L’s spreadsheet for some of the requests. In particular, while the date we used as the start date (which was the date on which the court sent its request for service to OCS/L) had the most complete data of the three possible start dates, the data were missing for 59 of the 289 requests for service that we were able to document. We calculated overall time elapsed for the document review and clearance stage using that date, but then had to do some sensitivity analysis to check that the missing dates were not skewing our results. To perform the sensitivity analysis, we identified those instances when the date the court sent its request to OCS/L was missing, but an alternative start date, either the date of the request letter, or the date when OCS recorded receiving the request, was present. We were able to identify 40 instances where this happened for the 59 missing cases. Our calculations using estimations of the missing “court sent to OCS/L” dates indicated that the results we present would likely have changed minimally if we could have included them. In addition, we conducted further analysis of the characteristics of the 17 service requests that had no start date of any kind and found that these were generally similar to ones for which we had start dates. However because these simulations indicated that there would be minor changes, we present qualified rounded numbers in the main body of the report. We also used the improved spreadsheet to extract other information, and calculate timeliness by the years for which the requests were made, the courts making requests for service, the countries for service, and the date of service requested. In addition, we estimated the time elapsed for service for each case for which we had data and generated a list of service requests sorted from the ones that took the longest to those that took the least amount of time to complete. To determine whether State has implemented key controls in record- keeping, monitoring, analysis, and performance management for completing service requests, we met with OCS/L officials in Washington, D.C. to discuss how they manage the process, as well as with consular officials from the U.S. Embassies in Berlin, Bern, and Prague. We also examined the 59 service request case files for requests received in 2015 and 2016. This sample is not generalizable to all requests for service between 2007 and 2017. We determined to what extent these files were missing key documents, such as a signed copy of the notification letter or the diplomatic note. We also reviewed the December 2017 spreadsheet that we had obtained from State to determine to what extent the spreadsheet contained missing data as well as a November 2017 spreadsheet. As discussed earlier, because OCS/L officials did not provide complete data, we created a separate improved spreadsheet using court data. We analyzed the data in the improved spreadsheet we created to determine where bottlenecks were occurring. We also used the improved spreadsheet to help identify and review 16 service requests in more depth with OCS/L officials. We selected these 16 service requests to include: 6 requests that took well above the average number of days to complete, 5 that took about the average amount of time to complete, and 5 that took below the average amount of time to complete. We met with OCS/L and consular officials, as well as plaintiffs’ attorneys to discuss events related to the 16 requests we had identified for review. We obtained documentation from the U.S. Embassies in Bern and Prague for the actions taken in providing service, the controls implemented, and the records of transactions that they maintained. We met with officials from three principal courts that request service, as well as officials of the U.S. Victims of State Sponsored Terrorism Fund (Fund) to discuss how service could affect the progress of court cases and the compensation awarded. Finally, we assessed State’s implementation of key controls against applicable laws, including the FSIA and Government Performance and Results Act of 1993, as well as State guidance and federal internal control standards. To determine the reliability of the data used in the report, we manually checked State’s December 2017 spreadsheet as well as the improved spreadsheet that we developed for logical and other errors—for example, for dates that seemed out of order. We also performed electronic checks on the improved spreadsheet to identify logical and other errors. Where appropriate, we made adjustments to the improved spreadsheet. Based on the results obtained, we determined that the improved spreadsheet that we developed is sufficiently reliable for our use, though we note the limitations in terms of the start dates, which required us to conduct sensitivity analyses, as described earlier in this OSM, to increase our confidence in the overall estimates for timeliness and for the document review and clearance stage of the process (stage 2). As noted above, we are rounding our estimates to reflect this limitation and qualifying them as approximations. We conducted this performance audit from September 2017 to December 2018 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 the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Additional Data on How Long It Takes to Complete Service We identified a total of 289 verified requests for service from 2007 to 2017. Verified requests are those that remained after we compiled the lists the State Department provided, scrubbed them for duplicates and instances when the requests were subsequently withdrawn, and checked the data against court records in the Court Link database. Figure 5 shows how those cases were distributed by year over this period. The average number of days State took to complete service varied notably by year from 2007 to 2017, as Figure 6 demonstrates. The average (mean) ranged from 77 days in 2011 to 206 days in 2008. We can also see variation in the most recent years. The mean in 2015 was 130 days while in 2016 it was 205 days. We also found that cases for European and Eurasian countries, such as Switzerland and Germany, had much lower means and medians than those sent through protecting powers to Iran and Syria. While the averages for Iran and Syria were 158 and 215 days respectively, the cases for Germany, Switzerland, the Holy See, Russia, and Poland all had averages of 106 days or less. In table 3 we provide information on the length of time it took to complete service requests by country. We looked more broadly at country type, and created three groups, one for the two countries where the State Department has to rely on the protecting powers for service, namely Iran and Syria, another group for the European and Eurasian nations, and another group for all remaining countries. Service completion was fastest for the European nations. This information by country groupings is presented in table 4. Appendix III: Comments from the Department of State Appendix IV: GAO Contact and Staff Acknowledgements GAO Contact Staff Acknowledgements: In addition to the contact named above, Kim Frankena (Assistant Director), Claude Adrien, José M Peña III, Martin De Alteriis, Candace Caruthers, Mark Dowling, Chris Keblitis, Aldo Salerno and Hannah Heidrich made key contributions to this report. Travis Cady and Jeff Isaacs provided technical assistance.

Why GAO Did This Study While foreign states generally cannot be sued in a U.S. court, under FSIA, parties can sue governments for certain crimes such as injury or death from an act of terrorism, if certain factors are present. State is required by statute to serve notice of such suits or default judgments when other means for effecting service are not available, and charges plaintiffs a fee of $2,275 to complete this task. Plaintiffs in such cases may also qualify for compensation from a fund that Congress established called the U.S. Victims of State Sponsored Terrorism Fund. In this report, GAO examines (1) how State completes this service and the length of time it takes to complete requests, and (2) whether State has implemented key controls for executing service requests promptly. GAO reviewed State regulations, guidance, case files, and data from 2007 through 2017; and interviewed State officials in Washington, D.C., the Czech Republic, Germany, and Switzerland, which handle the vast majority of cases. GAO assessed State's controls against federal internal control standards. What GAO Found The Department of State (State) notifies sovereign defendants of court proceedings under the Foreign Sovereign Immunities Act (FSIA) in a four stage process that has taken on average about 5 months to complete. State headquarters has overall responsibility for delivering legal documents but U.S. embassies and foreign governments play key roles as well. From 2007 through 2017, State completed 229 requests for delivery of legal documents in an average of about 5 months, but about 28 percent of the requests took longer than 6 months and 7 requests took more than a year. Slow delivery could adversely affect a plaintiff's ability to obtain compensation from a special victims' fund that Congress set up in 2015. State's guidance and federal internal control standards require controls such as accurate and complete record-keeping, continuous monitoring, and analysis of data; however, GAO found that State lacks several key controls to manage its delivery of legal documents. First, State's records are incomplete. For example, for 82 percent of the cases, State had no information about when it received court requests. Second, State did not monitor the progress of cases, resulting in slow service. This slow service led State to waive fees of about $57,000 because checks had expired. Third, State did not analyze case data to identify factors contributing to slow service, or establish timeframes for completing service. As a result, managers lack a sound basis for making decisions on how to improve timeliness. In June 2018, State took some actions based on GAO's review to improve its performance, including preparing step-by-step guidance and developing a new record-keeping system, but further actions could fill the gaps that have impaired program performance. What GAO Recommends GAO is making five recommendations to State, including that it update its record-keeping guidance to ensure its records are accurate and complete, monitor the progress of requests, periodically analyze data to identify causes of slow service and take corrective actions, and establish timeframes for completing service. State concurred with all five of GAO's recommendations and identified actions it plans to take to address them.

gao_GAO-19-21

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Background VHA policy requires that all medical facilities provide a safe, clean, functional environment for patients, visitors, and employees. The Joint Commission, an organization that accredits medical centers and other hospitals throughout the country, has developed standards that require medical centers to undertake several actions that relate to engineering, environmental management, and safety including: maintaining the patient environment by ensuring that a suitable temperature is maintained, that areas are clean and appropriately lighted, and furnishings and equipment are in good repair; managing utility systems to ensure operational reliability; and minimizing fire hazards and providing a safety system in case of fire. To help ensure medical centers maintain these standards, VHA requires medical centers to conduct regular environment of care inspections of the facility. According to VHA officials, because of the large size of many medical centers, most conduct environment of care inspections in a different part of their facility every week throughout the year. In 2016, a VHA directive formally established VHA’s Comprehensive Environment of Care Program (Environment of Care Program) and outlined management and oversight responsibilities for the program. Environment of care inspections are a main component of the program. In addition to the environment of care inspections, VHA uses other inspections to help execute and oversee facility operations and maintenance functions. For example, every 3 years, VA contracts for Facility Condition Assessments, where contractors evaluate all buildings and major systems at a medical facility (e.g., structural, mechanical, plumbing, and others) and identifies needed repairs and replacements. This inspection gives a graded score from A to F for VHA facilities, with “C minus” as the average facility score received for overall infrastructure conditions at VHA facilities as of 2015. This inspection focuses on major systems, while environment of care inspections focus on day-to-day facility conditions, including that of patient-care areas. Furthermore, preventative maintenance inspections are usually conducted on systems, such as boilers or heating, ventilation, and air-conditioning (HVAC) systems, and would vary in frequency based on the manufacturer requirements. Medical center staff also noted that facility operations and maintenance issues may be identified by staff in the course of their day- to-day duties and reported to engineering for repair. VHA medical centers employ staff trained in plumbing, carpentry, grounds maintenance, and other trades needed to maintain facilities, as well as housekeeping staff. These employees are responsible for carrying out the work necessary to ensure medical centers comply with safety standards, and VHA policies and inspection requirements. The majority of funding for medical centers, including funding for operations and maintenance, is determined on the basis of past years’ allocations, veteran populations served, and the types of services provided. The budget for VA medical facilities has increased by approximately 30 percent over the last 5 fiscal years. Medical Centers Rely on Environment of Care Inspections to Identify Deficiencies but May Encounter Challenges in Completing Needed Repairs Environment of Care Inspections The medical center director or a designee, such as the medical center’s Environment of Care Coordinator, has the overall responsibility for managing and leading weekly environment of care inspections at a medical center. Each medical center should have an environment of care committee, and the medical center director or a designee should facilitate committee meetings to discuss the environment of care processes, findings, trends, and any other related issues. Inspections are conducted by an environment of care inspection team, which is made up of representatives from various facility departments, including, among others: Environmental Management Service—which is responsible for ensuring a state of physical and biological cleanliness, including proper handling of waste materials—and Engineering Service, which is responsible for utilities that allow the physical plant to function, including basic systems such as heating and electrical, among others. According to VHA guidance, the team is to conduct its inspections using a VHA checklist as a guide to determine if there are any deficiencies. For example, the checklist includes questions such as: Are there loose floor tiles/carpet? Are ceiling tiles stained or other signs of leaks? Are there any electrical hazards present? Team members record information on deficiencies that they identify into an Environment of Care inspections database, which is used to document and track the status of deficiencies. During interviews with medical center staff at all six of the medical centers included in our review, officials told us they follow the environment of care inspections process that VHA guidance outlines. At two of the medical centers we visited, we accompanied inspections team on environment of care inspections and observed staff following this process. The inspection teams walked through the areas designated for inspection, for example examining conditions of floors, ceilings and fire safety systems. Also, as we discuss later in the report, VHA officials also monitor aspects of the inspections process, such as who attends the inspection. VHA officials told us they also collect data on performance measures related to utilization of the environment of care checklists and environment of care inspections process but no longer track these measures because medical centers achieved 100 percent utilization of these measures in 2015. Figure 1 below details the process used to identify and address deficiencies, as outlined in VHA guidance. As previously mentioned, VHA guidance considers these inspections to be critical to all aspects of patient care in a medical facility, and officials at all six medical centers confirmed that they rely on these inspections to identify needed repairs. For example, officials in one medical center noted that the frequency and thoroughness of these inspections has helped them determine day-to-day wear and tear issues and informed their planning processes. Medical center staff noted that condition deficiencies identified through this process are often minor but are nonetheless important to maintenance of a clean and safe patient environment. For example, a damaged or stained ceiling tile identified during an inspection could be a potential safety hazard to patients or indicate an issue with leaking pipes. The replacement of the tile itself is a minor repair, but that repair could be an indication of an important maintenance issue at the medical center. As table 2 below shows, the deficiencies commonly identified through the inspections process include items that need to be cleaned or dusted or walls that need minor repairs. Medical center staff we interviewed said, in general, the most common environment of care deficiencies can be addressed by medical center staff, but medical centers told us they sometimes use contractors if warranted. In most cases, a deficiency can be addressed with simple repairs such as patching and repainting walls, replacing stained and damaged tiles, or by cleaning. On our site visits, we saw examples of the types of issues that medical center staff address during environment of care inspections. In one case, we were shown a recurring deficiency at the medical center caused by moving hospital beds. Moving beds in and out of rooms was damaging the plaster corners of a wall near the door. We were also shown the solution, which was a metal corner guard the medical center had installed in some rooms, and the center was working to install corner guards in other locations as funds became available. Figure 2 below shows examples of deficiencies we observed during environment of care inspections at medical centers. Other types of condition deficiencies that are not directly in the environment of care, such as a broken boiler, typically would not be identified during environment of care inspections, but rather medical center staff said they are identified during scheduled preventive maintenance activities, or during other facility inspections. Regardless of how they are identified, more serious repairs often require a different funding and approval process than day-to-day maintenance. For example, if significant damage occurred to a medical center’s roof and the cost of repairs is greater than $25,000, it would most likely be deemed a non-recurring maintenance project and would require approval from either the VISN or VA’s central office. Challenges in Addressing Identified Deficiencies The buildings that VHA manages are, on average, 55 years old, and many have substantial capital repair and improvement needs. A VA- commissioned report noted that there were significant barriers that facility management staff faced in maintaining facilities to a high quality. According to the report, while some of these barriers involved immediate resource constraints such as budgets for staffing and conducting maintenance and janitorial tasks, the root cause of many of these issues is the general age and underlying condition of VHA facilities. Workload Engineering officials at medical centers told us that the amount of work associated with conducting weekly inspections and addressing environment of care deficiencies is substantial. For example, according to VHA’s data for fiscal year 2017, medical centers reported conducting about 11,000 weekly inspections, during which more than 128,000 deficiencies were identified. Most deficiencies were closed within 14 business days, as required by VHA policy, but nearly 30,000 deficiencies across all medical centers had not been addressed within 14 days or had been addressed through a plan for future work. One significant factor contributing to the number of deficiencies and the associated workload is the advanced age of many medical centers. A VHA commissioned study found that the general age and underlying condition of medical centers, including VHA buildings’ being older than 50 years on average and lack of capital investment to address infrastructure concerns, are the root causes of many barriers that facility management staff faced in achieving their objectives of maintaining high quality facilities, and exacerbate the workload issues at these medical centers. This observation was echoed by medical center officials in our review. For example at one medical center officials told us that in some cases, correcting deficiencies found on an environment of care inspection is a temporary solution for issues related to aging structures that need extensive repairs and renovations. For example, a roof that needs to be repaired due to leaks and other structural issues may result in an increase in the number of interior ceiling tiles with water stains. Maintenance staff must then continue to identify and replace stained ceiling tiles, until the root cause, which is subject to a different funding and approval process, is addressed. Also, medical center staff we interviewed said the administrative requirements associated with the environment of care program contributed to workload challenges. Medical center staff are responsible for entering deficiency data into the Environment of Care inspections database, which is used to document and track results from the environment of care inspections. The same staff can also be responsible for reconciling the environment of care inspections database with other systems, like the medical center’s work order system and other inspections databases. Medical center staff said that each deficiency can result in as many as four or more separate data entry actions in the Environment of Care inspections database and in a separate system used to track work orders. As an example of the administrative workload related to the inspection process, the Long Beach medical center in California, whose main building was built in 1967, reported the most deficiencies in its VISN. According to VHA data, this medical center reported more than 3,500 environment of care deficiencies related to facility condition in fiscal year 2017, and medical center officials said this resulted in as many as 12,000 or more separate data-entry actions. Additionally, VHA’s aging information technology systems exacerbate the administrative workload. VA medical center officials told us that VHA’s work order system lacks interoperability with the Environment of Care inspections database, resulting in the need to manually record information on deficiencies in both systems. Officials we spoke with at VA medical centers told us that this process can substantially add to post-inspection workload and to the administrative burden associated with tracking and closing out deficiencies. Medical center staff also noted that it can often be the same staff member performing environment of care inspections, conducting the work to correct deficiencies, and performing administrative tasks. Limitations in VA’s information technology systems, among other things, led GAO to designate VA health care as a high-risk area. Information technology limitations we previously identified at VA include the outdated, inefficient nature of certain systems and a lack of system interoperability. Staffing Staffing shortages have also been recognized by VA’s Central Office staff as an issue that needs to be addressed across VA facilities. For example, officials said that in addition to the engineering staff’s shortages discussed below, there is also a known shortage at many medical centers of qualified cleaning and janitorial staff, a shortage that can affect the ability for medical centers to quickly address some of the environment of care deficiencies. Additionally, we have previously reported that VA is collaborating with the Office of Personnel Management to address challenges with recruiting and retaining engineering positions. Officials at medical centers included in our review discussed the difficulty of recruiting and retaining employees to perform maintenance work, such as painters, electricians, and other relevant maintenance trades. All six of the medical centers reported vacancies during the last year in engineering department positions that are needed to complete maintenance and repairs, such as electricians and painters. The extent to which these medical centers experienced vacancies, however, varied widely. The lowest number of reported vacancies by a medical center was two and the highest number of reported vacancies was 49. Factors cited by medical center officials on why they had difficulty hiring and retaining staff encompassed a range of issues, including loss of long-time staff due to retirement, and a lack of qualified applicants for vacant positions. For example, medical centers located in and around Los Angeles, California, reported that their location—in a high cost of living area with a competitive private-sector jobs market—affected their ability to recruit and retain these employees. Conversely, medical centers located farther from urban areas reported difficulty finding and retaining staff due to their relatively rural locations and smaller overall population. Officials from all six medical centers said that while they endeavor to address all environment of care deficiencies in accordance with the inspection requirements, these vacancies affected their ability to perform maintenance and repair functions. For example, officials from one medical center reported that four out of seven electrician positions at their medical center were vacant. The officials said in addition to their rural location, their need for engineering staff knowledgeable in a range of electrical systems made recruitment difficult. Their facility has buildings that are over 50 years old, as well as newer buildings, with significantly different electrical systems. The officials noted that while all electrical work was eventually completed, the lack of staff slowed or deferred repairs, or required contract labor. Another medical center noted that a shortage of relevant engineering staff meant that work orders and preventative maintenance functions were backlogged and that they had to utilize overtime to accomplish required functions. When faced with changing workload demands and staffing shortages, medical centers can, and do, utilize contractors. VHA Takes Steps to Help Medical Centers Comply with Inspection Requirements but Does Not Have Goals or Measures to Determine Program Effectiveness While VHA provides guidance and oversight to ensure medical centers implement the environment of care inspection process, it lacks performance goals, objectives, and measures that would enable it to assess how well it is achieving its policy of a clean, safe, and functional environment. We have previously found that results-oriented organizations set performance goals to define desired program outcomes and develop performance measures that are clearly linked to these performance goals and outcomes. Program goals communicate what results the agency seeks, and performance measures show the progress the agency is making toward achieving program goals. Performance measurement also gives managers crucial information to identify gaps in program performance and plan any needed improvements. Without such goals and measures in place, VHA is limited in its ability to effectively manage the Environment of Care Program, including making effective use of program data and addressing obstacles to improving program performance. VHA’s Oversight of the Environment of Care Program Focuses on Compliance with Inspections Requirements VHA’s oversight of the Environment of Care Program focuses on ensuring that medical centers are conducting the inspections according to VHA requirements. To help medical centers achieve compliance with the inspection requirements, VHA does the following: develops guidance for medical center and VISN staff on their roles and responsibilities in conducting inspections and compliance monitoring, and on how to use the Environment of Care inspections database software; oversees the deployment and maintenance of the Environment of Care inspections database software, which medical centers use to track deficiencies and staff attendance at inspections, among other things; and provides summary reports from inspections data on deficiencies, closure status, and staff attendance rate at inspections to officials at the medical center and VISN-level for program management purposes To monitor a medical center’s compliance with environment of care requirements, VHA tracks three measures, which, according to VHA officials, were established to ensure that medical centers were meeting requirements related to the inspections process, such as having relevant staff present for the inspections. Table 3 below shows the three measures VHA currently uses along with the related performance targets. We have previously reported that performance measures should focus on outcomes to help agencies manage programs to achieve desired results. VHA’s current measures do not indicate whether desired outcomes are being achieved or how effective inspections are but rather whether staff are following policies related to inspections. As a result, these measures provide program managers with little information on the actual quality of the environment of care, such as the level of cleanliness and safety provided. For example: One performance measure is based on the requirement that medical centers address deficiencies within 14 days, either by fixing the problem or by preparing an action plan describing how the problem will be fixed. However, because this requirement can be met with an action plan, it is not a useful measure for understanding the deficiencies that have not yet been remediated. Similarly, the two performance measures on staff attendance at inspections do not directly relate to the condition of the facility but reflect the level of compliance with inspection requirements. We spoke with officials at one medical center who said vacancies within their information security office prevented them from meeting the inspection team attendance measure. However, officials said the staff absence did not affect the inspection team’s ability to perform an inspection and determine facility deficiencies, given that relevant engineering staff was present. Furthermore, we have previously reported that VHA needs to strengthen aspects of the environment of care inspection process to ensure more complete and accurate data on medical center compliance with environment of care standards, and provide better oversight of the system. VHA Has Not Established Outcome-Oriented Performance Goals, Objectives, and Related Measures VHA has not defined program goals and objectives and related performance measures, and is therefore limited in its ability to determine how well program activities, including the environment of care inspection process, are supporting the agency’s broader policy of providing a clean, safe, and functional environment. VHA’s current performance measures are not tied to specific performance goals for the Environment of Care Program, as such goals have not yet been created. Nor do these performance measures provide useful information on the actual condition of facilities or desired outcomes. As a result, these metrics provide VHA with limited information on how to better manage the program to ensure clean, safe, and functional medical facilities that, at a minimum, meet the Joint Commission standards. Without clearly defined and outcome- oriented goals, it will be challenging for VHA to determine what type of evaluative information it will need to monitor the progress of the Environment of Care Program, identify how system-wide challenges such as staffing shortages are affecting outcomes, and improve medical center conditions. VHA has stated it intends to create goals and objectives for the Environment of Care Program, along with performance measures to assess whether the goals and objectives are being achieved, but it has not yet done so. The VHA directive from 2016 that created the Environment of Care Program directed program officials to establish a steering committee, whose responsibilities would include, among other things, developing goals, objectives, and related performance measures for the program. According to a VHA official, VHA formed this committee in January 2018, following delays caused by leadership vacancies and competing demands within the agency. In June 2018, the committee finalized its charter, which states that the scope of the committee’s activities is to include defining goals, objectives, performance metrics, and targets for the Environment of Care Program. VHA officials do not have a timeline in place for when they expect to complete the steps they defined in the charter. Conclusions To provide quality care for the nation’s veterans, medical centers must be clean, safe, and functional. This standard can be a challenge given the substantial capital repair and improvement needs in many of these facilities. The Environment of Care Program is an important part of VHA’s efforts to ensure medical centers are maintained in accordance with accreditation requirements. However, absent clear goals, objectives, and performance measures, and a timeline for developing them, VHA will continue to be limited in its ability to assess how effective the program is at ensuring a safe, clean, and functional environment. Setting outcome- oriented program goals and objectives provides structure to then reevaluate existing performance measures or set new ones, all of which would improve oversight, help VHA determine the effectiveness of the program, and target areas in need of improvement. Recommendation for Agency Action We are making the following recommendation to VHA: The Undersecretary for Health should set a timeline for defining goals, objectives, and outcome-oriented performance measures for the Environment of Care Program. (Recommendation 1) Agency Comments and Our Evaluation We provided a draft of this product to VA for comment. In its written comments, reproduced in appendix I, VA stated it concurred with our recommendation. VA also provided technical comments, which we incorporated as appropriate. Additionally, VA provided general comments on our report. In those general comments, VA questioned how we characterized the Environment of Care Program in the context of Facility Condition Assessments, the age of its buildings, and software interoperability, and stated that responsibility for a successful Environment of Care Program lies at the medical center. We agree it is important to have a strong Environment of Care Program that is facilitated by leadership at the medical center and VISN-levels. However, even with strong leadership and a robust Environment of Care Program, underlying facility condition issues—impacted by the age of the facility—can affect the kind of deficiencies found during inspections. These challenges impacted elements of the Environment of Care Program at all of the medical centers in our review. VA also stated that the report did not adequately reflect the significance of the environment of care committees at each medical center, and that performance measures at the national level are measures of compliance, not a measure of success. We have made relevant revisions in the report to reflect the role these committees play as a part of the inspections process. We also agree with VA that the metrics established nationally are not a measure of success for the various medical centers’ Environment of Care Programs. While the primary responsibility for the Environment of Care Program and its inspections is at the medical center and VISN-level, it is still important for VA to have national level performance measures. Without them, gauging national level performance and analyzing trends across medical centers is difficult. In concurring with our recommendation, VA has positioned itself to create and implement measures to support medical centers and the Environment of Care Program. VA also made comments related to the non-recurring maintenance approval and funding process, and highlighted a pilot to test a tool to replace its current facility condition assessment. We have made revisions to footnotes and relevant report sections as appropriate to address the changes noted by VA to the non-recurring maintenance approval and funding process, and added a footnote acknowledging the pilot. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, the Undersecretary of Veterans Affairs for Health, 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 members have any questions regarding this report, please contact Andrew Von Ah at (202) 512-2834 or vonaha@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Appendix I: Comments from the Department of Veterans Affairs Appendix II: Inspections Related to the Condition of Veterans Health Administration’s (VHA) Facilities Appendix II: Inspections Related to the Condition of Veterans Health Administration’s (VHA) Facilities Purpose The Facility Condition Assessment evaluates all buildings and major systems at a medical facility and identifies needed repairs and replacements. This inspection gives a graded score from A to F for VHA facilities. Frequency Facility Condition Assessments are done on a rotating basis, with each Veterans Integrated Service Network (VISN) being evaluated every 3 years. The information gathered during each Facility Condition Assessment is put into a Facility Condition Assessment database for each facility identified by building, system, and condition. Each system has an associated cost for identified repairs and replacements. These data allow for planning and expenditure of resources within the VISNs. This information enables the VISN to plan, manage, and direct capital resources against identified needs in a consistently managed approach across the VA system. Green Environmental Management System ensures VHA compliance with relevant federal, state and local environmental statutes and regulations; increases the efficiency of energy, water and other resource usage; helps reduce regulated air emissions; utilizes pollution prevention principles; incorporates environmentally preferable practices for the design, construction and operation of buildings; and ensures that VHA facilities are good neighbors in the local communities. Green Environmental Management System inspections are done annually. The primary purpose and intent of the Annual Workplace Evaluation is to ensure occupational safety and health evaluations of all worksites are completed and comply with Occupational Safety and Health Administration and agency requirements. The objective is to evaluate Occupational Safety and Health Administration compliance, current building conditions, work practices, and Occupational Safety and Health Administration program implementation throughout the facility and at offsite campuses such as rented office buildings, clinics, labs, etc. Annual Workplace Evaluations are required to be performed at least once every fiscal year. The Annual Workplace Evaluation must be scheduled at least once during a 12- month period +/- 3 months from the start date of the previous Annual Workplace Evaluation. Appendix III: GAO Contacts and Staff Acknowledgements GAO Contact Staff Acknowledgments In addition to the contact named above, Heather J. Halliwell (Assistant Director), Betsey Ward-Jenks (Analyst-in-Charge), Dwayne Curry, and Colleen A. Taylor made key contributions to this report. Also contributing were Kelly Rubin, Michelle Weathers, and Crystal Wesco.

Why GAO Did This Study VHA oversees one of the largest health care systems, serving approximately 9-million veterans at numerous health care facilities, including 170 medical centers. To ensure a safe environment for veterans and employees, VHA must keep its facilities clean and well maintained. GAO was asked to examine (1) how VHA medical centers identify maintenance and repair needs and challenges they face in addressing those needs, and (2) to what extent VHA provides oversight to ensure medical centers are providing a safe, clean, and functional environment. GAO reviewed VHA's procedures and standards related to facility operations and maintenance functions at medical centers and interviewed VHA's administrative office officials regarding oversight of these functions. GAO also interviewed VHA officials from three regional offices and six medical centers selected based on factors such as geographic location and veteran population served, and conducted site visits at four of these medical centers. What GAO Found Veterans Health Administration's (VHA) medical centers conduct regular inspections of the settings in which patients receive health care services, called the “environment of care”, to identify maintenance and repair needs. These inspections also help ensure compliance with accreditation standards requiring, among other things, that utility systems operate properly and that areas are clean and in good repair. The main three steps in the process associated with these inspections are shown below. In addition to the environment of care inspections, VHA conducts other periodic assessments of facilities' major systems, such as plumbing and air conditioning. VHA inspections routinely identify deficiencies reflective of an aging infrastructure—VHA's buildings are on average 55 years old. This situation in turn is leading to workload and staffing challenges in addressing maintenance and repair needs. For example, according to VHA's 2017 data, medical centers reported conducting approximately 11,000 total inspections for the year that resulted in about 128,000 identified deficiencies. Most of these deficiencies were closed within 14 business days, as required by VHA. However, nearly 30,000 of them were not closed or had been addressed through a plan for future work. Medical center officials added that correcting deficiencies may only be a temporary solution for issues related to aging structures that need extensive repairs and renovations. In addition, VA headquarters and field officials said that staff vacancies are common and can affect the efficiency and speed of maintenance and repairs. VHA provides guidance and selected oversight to ensure medical centers implement the process for environment of care inspections. However, VHA lacks performance goals, objectives, and measures that would enable it to provide effective oversight, address challenges, and assess how well it is achieving a clean, safe, and functional environment. As part of ensuring compliance with the inspection process, VHA measures whether medical centers meet certain requirements, such as having appropriate staff present for inspections. VHA does not, however, have measures that enable it to assess how well medical centers are achieving desired outcomes. Although it has stated its intent to develop such measures, VHA has not yet committed to a time frame for doing so. What GAO Recommends GAO recommends that VHA set a timeline for defining goals, objectives, and outcome-oriented performance measures that can address challenges and help achieve a clean and safe care environment. VA concurred with the recommendation and provided general and technical comments, which GAO incorporated as appropriate.

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Background NRFU is a field-based operation that the Bureau administers following the self-response period so that it can (1) determine the occupancy status of individual non-responsive housing units and (2) enumerate them. In most instances, the Bureau typically allows up to six enumeration attempts for each nonresponsive housing unit, or case. If the Bureau is unable to enumerate the housing unit in the field, it may have to impute attributes of the household based on the demographic characteristics of surrounding housing units as well as administrative records. Within the test site in Providence County, Rhode Island, the Bureau set up an area census office to administer field operations. Figure 1 provides an overview of the managerial hierarchy of the area census office. The area census office manager oversees day-to-day operations within the office and acts as a liaison with the Bureau’s New York Regional Census Center, which is a Bureau regional office with jurisdiction over the Providence area census office. Census field managers are to monitor operational progress and performance indicators to understand any areas of concern and shift resources as needed within the test site. Census field supervisors are to act as front-line supervisors for individual performance and payroll processes and receive procedural questions from enumerators, who conduct the count. The Bureau has another operation—Group Quarters—to enumerate those living or staying in a group facility that provides housing or services. Such facilities can include skilled nursing facilities, college and university student housing, and correctional facilities. Within the Group Quarters enumeration, the Bureau also enumerates places such as soup kitchens, homeless shelters, and other service-based enumeration facilities. Prior to Group Quarters enumeration in the field, the Bureau attempts to establish the facilities’ approximate population count and preferred enumeration method through the Advance Contact operation. These facilities can choose among methods including paper listing, where the facility provides a roster of residents as of census day to the Bureau, and in-person enumeration, where a team of enumerators count residents. For the 2020 cycle, the Bureau is also adding an “eResponse” option, tested on a small scale in 2016, whereby facility administrators can electronically submit enumeration data at a date of their choosing within operational time frames. The Bureau’s testing of the peak operations that we observed during the 2018 Census Test was intended to test collection of census data from those either not responding themselves via paper, telephone, or over the Internet or those living in group quarters. Prior to the start of NRFU during the 2018 test, roughly 45 percent of anticipated housing units in the test area of Providence County, Rhode Island, self-responded, leaving more than 140,000 remaining housing units to be attempted by NRFU itself, which took place between May 9 and July 31, 2018. The Bureau conducted a test of its Group Quarters enumeration from July 25 through August 24, 2018, including service-based enumeration. Both portions of Group Quarters fieldwork were preceded by the Advance Contact activity. Dates for the peak operations we observed during the 2018 test are listed in table 1. The Bureau’s operational plans for this phase of the fieldwork for the 2018 test incorporated two innovation areas that the Bureau hopes will produce savings for 2020. Reengineered field operations. For most of NRFU during the 2018 test, the Bureau relied on automated data collection methods, including a system-based, automated process for assigning work to enumerators, a smartphone-based application for collecting enumeration data in the field, and system-generated supervisory alerts. Use of administrative records. To help reduce costly NRFU visits during the 2018 test, the Bureau reviewed and, where appropriate, applied administrative records—information already provided to the government as it administers other programs, such as Social Security, the Selective Service, or the Special Supplemental Nutrition Program for Women, Infants, and Children—to determine the occupancy status of housing units and thus remove vacant housing units from the NRFU workload, as well as to provide population counts of households not responding. The Bureau also tested multiple operational features for the first time this decennial cycle under full census-like production conditions in 2018: NRFU Closeout. During the 2018 test, the Bureau tested how best to relax certain business rules and enumeration procedures late in the NRFU operation so that it can enumerate persistently non-responsive housing units. Examples of procedural modifications include increasing the maximum allowable number of enumeration attempts for each housing unit and manually assigning cases to the highest- performing enumerators. Office-Based Group Quarters Advance Contact. In the 2010 Census, the Bureau sent enumerator crews in person to each facility in advance of enumeration to establish the facility’s preferred method of enumeration and to obtain an approximate population count. In the 2018 Census Test, the Bureau implemented a new method for 2020 that instead involved clerical staff contacting facilities by telephone and updating the group quarters address list and enumeration information remotely to reduce expenses associated with field visits for its enumerator crews. The Bureau Experienced Operational Planning, Workforce Management, and Other Issues during Its 2018 Test of Peak Operations The Bureau Did Not Determine Procedures for Late-NRFU Data Collection until after It Started the Work The Bureau began the last phase of NRFU data collection in the 2018 test without having yet determined the procedures it would use for that critical phase. Bureau planning documentation from February 2018 described a late-operation “closeout” phase of NRFU that would attempt to resolve cases that had not yet responded. However, we found that the Bureau had not determined the procedural modifications this phase would involve, either in terms of rules enumerators followed or business rules for how cases were to be assigned. By late May, nearly 3 weeks into the operation, the Bureau issued a set of closeout procedures to census areas where most cases had either been completed or where at least four of the six allowable enumeration attempt day assignments had been made. The Bureau also placed a priority on having high-performing enumerators—in terms of their ability to complete cases—available to work these cases during this phase of the NRFU testing. Table 2 summarizes the chronology for when the Bureau implemented and documented procedural changes governing the transition from early to late-NRFU data collection, as well as the nature of those changes. In late June 2018, the Bureau began testing the third phase of NRFU data collection, what it referred to as the “final attempt” phase, with officials citing a high incidence of non-interviews during prior phases as the reason. However, the Bureau had also begun this phase’s data collection before it had established the procedural modifications it would be using. The modifications were intended to further increase the chances of enumerators completing cases in the field, such as by removing the limit on the number of attempts enumerators could make at each remaining case before NRFU ended. Standards for Internal Control in the Federal Government states that agencies should implement control activities by, for example, documenting policies. However, the Bureau did not determine procedures for the final attempt phase until after testing for this phase of NRFU had begun. Enumerators and census field supervisors thus began working closeout and final attempt cases without a standardized set of test procedures. Without determining the procedural changes the Bureau would be testing—or the business rules guiding when to make those changes—the Bureau was not well positioned to collect data to assess the alternatives it used during the test to inform planning for 2020. Bureau officials shared with us that they believed their automated case assignment approach is most effective during initial data collection but that it is less effective at targeting the toughest cases to resolve late in NRFU data collection. Yet, in part because the Bureau had not established when the transition from automated to manual case management would occur—or the business rules for determining when—some of the highest-performing enumerators were unavailable to receive assignments when the Bureau needed to begin the final attempt phase, according to the area census office manager. By not establishing the scope and timing of procedural changes for late-NRFU data collection in 2020, the Bureau may not be in a position to efficiently shift from its automated assignment approach to a manual one at the right time and position its most effective enumerators to receive assignments when needed. In November 2018, the Bureau provided a draft contact strategy for NRFU in 2020 that included an outline of a multi-phase strategy for late- NRFU data collection. By including multiple phases of (1) shifting away from a fully-automated case assignment process and (2) relaxing management controls to complete as much casework as possible in areas with continued high non-response rates, this strategy appears to follow what the Bureau ultimately implemented during the 2018 test. It will be important, however, for the Bureau to determine the business rules for procedural changes and their timing in advance so that it can maximize the value of NRFU in reducing the number of housing units that have to be imputed for the 2020 Census. The Bureau Did Not Fully Ready Its Field Workforce for Enumeration Challenges Census field supervisors were not integrated into casework management. As described in the Bureau’s training and operational planning documents, census field supervisors were to be the primary points of contact in fielding and addressing enumerator questions. Census field managers—the next step above census field supervisors— were to focus their efforts on monitoring progress in completing the caseload, reviewing cases flagged by enumerators as problematic in one of a small number of pre-defined ways (e.g., dangerous addresses), and resolving significant performance issues. Among field supervisors’ key responsibilities, according to the Bureau’s plan for NRFU, were providing guidance to help enumerators understand procedural matters and to offer coaching and problem-solving support to enumerators who may need it. They also led enumerator training prior to the beginning of NRFU and generally were to train their specific team of enumerators. However, census field managers and enumerators indicated that census field supervisors were often not the primary actors involved in fielding and addressing enumerator questions. Instead, enumerators and census field managers reported having direct contact with each other over procedural questions. Moreover, seven of the nine enumerators participating in the Bureau’s operational debrief focus group who responded said they thought finding someone who could answer their questions was either difficult or very difficult. We found that census field supervisors went underutilized in part because the Bureau did not recruit and position them to assume front-line supervising and coaching responsibilities. As outlined in training documentation, the Bureau vested supervisory review authority (for special cases, such as resident refusals and language barrier issues) within census field managers, the area census office manager, clerks, and office operations supervisors instead of census field supervisors. Additionally, as part of the Bureau’s reengineered field operations for 2020, census field supervisors are given automated tools to monitor enumerators, and enumerators we observed told us that they generally did not interact in person with their supervisors apart from training. We believe that the combination of these factors resulted in census field supervisors having limited exposure to NRFU casework and any problematic situations enumerators might encounter. Officials also told us that the Bureau did not screen census field supervisors for their supervisory or coaching skillsets, though officials noted that this has been the practice in prior censuses, too. Rather, they hired census field supervisors based on their scores on the online enumerator training and because they reported an interest in supervising. Additionally, census field supervisors lacked access to certain data streams from the test that could have helped them answer or troubleshoot enumerator questions. According to two census field managers, the Bureau did not regularly share consolidated records of procedural changes with census field supervisors. Information technology (IT) and census field managers also noted that the Bureau did not share or compare observations between the census field supervisor hotline and the decennial IT hotline, even though enumerators could potentially call either or both with technical or procedural questions. As a result, without sharing how best to respond to similar questions across support lines, enumerators could receive different answers for related questions depending on which hotline they contacted. Standards for Internal Control in the Federal Government states that agency management should demonstrate a commitment to recruit, develop, and retain competent individuals. Management should establish expectations for competence in key roles and should consider the level of assigned responsibility and delegated authority when establishing expectations. Yet, the role the Bureau envisioned census field supervisors having was not aligned with the authority supervisors were given, the skills for which the Bureau hired them, or the access to information that they had for the 2018 test. When we raised this issue related to using census field supervisors, Bureau officials agreed and cited feedback they had received that census field managers felt inundated with the combination of the volume of supervisory review cases that flowed to them and with troubleshooting day-to-day enumerator questions. In October 2018, the Bureau provided documentation to us proposing a set of questions that they could use in screening applicants for the census field supervisor position to identify supervisory skills. Officials also said they were still evaluating options for granting census field supervisors more supervisory review authority. As the Bureau continues to learn from the 2018 test as part of its planning for 2020, it will be important to align census field supervisor roles with their authorities, skills, and information flows so that the Bureau does not underutilize a key portion of its field management chain. Doing so could also lessen the operational burden on higher-level census field managers. Enumerators did not receive training to address mid-operation issues. Prior to the start of 2018 NRFU testing, the Bureau trained enumerators with a series of online training modules and assessments and one full day of in-person training facilitated by census field supervisors. The training included modules on data stewardship requirements, payroll responsibilities, and procedural directions for conducting respondent interviews. However, officials acknowledged that when the Bureau implemented its closeout and final attempt phases of NRFU, it did not provide standardized training to enumerators on the rollout of procedural changes. Five enumerators we observed during these stages said they relied on informal communications from their census field supervisors or census field managers for guidance. The initial practice had been for enumerators to receive daily assignments and follow pre-specified case sequencing and routing based on the Bureau’s automated system. During the final attempt phase, enumerators were given discretion over the sequencing, routing, and number of attempts to make for cases that could be manually assigned, yet they were not given standardized training on how to handle this shift. During our field observations, some enumerators we spoke with said they were uncertain about core procedures. For example, enumerators were not consistently aware that they had some discretion in large multi-unit settings to deviate from the assigned sequence of their cases provided by the automated system. Enumerators we observed and spoke to were also not always clear on how to flag within their field enumeration application the commonly occurring cases with confusing address markings and numberings. For example, enumerators had the option of selecting a case outcome of “missing unit designation,” but they were not always sure whether this selection would capture the nuances of what they were seeing on the ground or how it differed from other selection options. Standards for Control in the Federal Government states that agencies should demonstrate a commitment to competence by, for example, tailoring training based on employee needs and helping personnel adapt to an evolving environment. Targeted informational training would help the Bureau ensure that staff understand mid-operation procedural changes, and the training could be an opportunity for the Bureau to address commonly-observed and persistent implementation issues that may be arising. By developing brief, targeted mid-operation training, either as formal modules, guidance, or other standardized job aids, such as “frequently asked questions” worksheets, the Bureau could better position itself to react nimbly to enumerator feedback. We have previously reported challenges the Bureau faces with its field work in other locations, such as connecting to the Internet during testing of address canvassing in rural West Virginia in 2017 and dealing with language barriers and other circumstances in unincorporated communities in southern Texas or with migrant and seasonal farmworkers in southern California during the 2000 Census. All challenges are not universal to all locations. Given that some of the enumeration challenges enumerators encountered in 2018 NRFU testing might not occur everywhere, and that some other areas of the country will have their own types of challenges, locally- or regionally-specific training or guidance may better address some needs. By relying solely on pre-NRFU training, the Bureau risks having little opportunity to course-correct with enumerators who may not have absorbed all of the training and are experiencing difficulty completing interviews or not collecting quality data. The Bureau Is Assessing Other Implementation Issues That Arose during the 2018 Test We observed and discussed with Bureau officials in real time several other implementation issues that occurred during the 2018 test. Bureau officials acknowledged these issues and, as of September 2018, were assessing them and developing mitigation strategies as part of their test evaluation process. These issues include: Training certification. Census field managers estimated that roughly 100 enumerators were unable to transmit their final test scores because the Bureau’s online learning management system had an erroneous setting. According to Bureau officials, this problem delayed the start of unsupervised work for these otherwise-qualified enumerators by an average of 2 days per enumerator and resulted in the attrition of some who were able to quickly find other work. Bureau officials told us they have fixed the system setting and are considering an alternative means to certify training, such as by having the option of trainees taking and verifying their final assessment as part of their final capstone day of classroom training. According to Bureau officials, development of this backup strategy will begin in December 2018. Assigning cases manually in batches. During the 2018 test, the Bureau’s automated case management system was not configured for non-Headquarters staff to manually assign multiple cases to an enumerator at once. Rather, according to officials, census field managers were faced with having to manually assign thousands of cases individually during latter stages of NRFU. According to field management, this problem presented an unexpected burden on them, delayed assignments of the hardest-to-count cases, and contributed to high- performing enumerators not receiving work timely and in some cases for days in a row. Officials told us that, as a work-around, the Bureau shifted responsibility for assigning cases to a headquarters official with access rights in the system to assign large numbers of cases at once. Bureau officials acknowledge the unsustainability of this work-around if needed at a national level and the importance of resolving this before the 2020 Census. As of October 2018, Bureau officials showed us system screenshots of how census field managers would be able to manually assign batches of cases and indicated that this functionality would be ready for the 2020 Census. Monitoring operational progress. The Bureau’s reporting on its progress in completing the NRFU casework for the 2018 test emphasized a process-oriented measure that overstated the extent to which the NRFU efforts were resulting in completed workload. In planning documentation, the Bureau listed the outcomes of interview attempts that it considered complete and thus not in need of further enumeration assignments. These outcomes—such as a full interview of the household or confirmation of a housing unit being vacant or nonexistent—would also result directly in reduction in the number of incomplete cases needing to have some of their missing data imputed by the Bureau later. Yet the daily Bureau progress report and “dashboard” the Bureau provided us for the 2018 test, which decennial leadership also identified as their primary monitoring report, did not reflect these pre-planned definitions of completed workload. Rather, as officials acknowledged, it included cases that the Bureau had unsuccessfully attempted to enumerate the maximum number of allowable times for the initial phase of NRFU being tested, even though those cases could still—and did— receive additional attempts during later phases of NRFU. Officials noted that the measure reported could be helpful during early stages of the operation in determining whether enough employees had been hired, or whether case assignments were being worked quickly enough. Figure 2 demonstrates the gap that arose during 2018 NRFU test implementation between the reported progress measure and the number of cases actually being completed. The totals reflected in the Bureau’s reported measure include those that either have to be re-worked in the field during the final attempt phase as discussed or have their data imputed after fieldwork had ended. By contrast, an outcome-based measure of operational progress, like the one the Bureau designed, would capture only those cases where the Bureau had completed enumeration of the nonresponding housing units and thus be a more accurate representation of the operation’s status. Bureau officials acknowledged the need to maintain measures that focus on process as well as outcomes—such as avoiding having to impute data for cases after field work—when measuring progress completing NRFU. They said that managers in the field and in Bureau headquarters had access to alternative measures and reports that more closely identified outcomes. The officials noted that the reporting mechanism expected to be used in 2020 was not fully available in time for the beginning of NRFU testing in 2018, so the reporting format and measures will likely differ. In addition, in October 2018, the Bureau provided a draft dashboard for 2020 that included greater detail on the number of cases that could still require work to enumerate. Such detail could help assist with determining when to transition to the final-attempt phase of the operation to address cases without sufficient information yet collected. Integrating key systems settings. At the beginning of NRFU test implementation, the Bureau’s case assignment and case sequencing systems were operating as if they were on time zones 4 hours apart. Bureau officials said that this resulted in enumerators receiving mismatched case assignment times, which hampered early NRFU production, and census field supervisors having to process erroneous “work not started” supervisory alerts. Bureau officials said they addressed the problem within the first week of the operation and that they would ensure that future updates and key settings would be coordinated across systems. Tracking employees and equipment. The Bureau used two different sets of employee identification numbers to track their payroll status and use of Bureau-issued equipment (e.g., smart phones), respectively, without cross-walking them. According to census field managers, this resulted in extra work when trying to monitor changes in enumerators’ employment statuses and whether enumerators had returned their equipment to the Bureau. The managers noted that office staff had to spend extra time comparing different lists of staff, while one manager developed a spreadsheet listing all staff by their two different identification numbers. Bureau officials said they considered this a priority issue to be resolved during final systems development for 2020 and had already developed a fix within their case management system so that the cross- walk between the two systems would be integrated within their management system. This would eliminate the need for manually reconciling the differing identification numbers. Having more enumerators work weekends. Until the latter stages of 2018 NRFU testing, the Bureau assigned cases to enumerators based on the alignment of the Bureau’s estimated probability of finding respondents at home at certain times and enumerator-reported work availability. Bureau officials told us that Saturdays are generally one of the best days to find a household member home to respond to the census. However, during the test, our analysis showed that Saturdays had the second- fewest number of enumerators assigned to cases of any day of the week. Bureau officials said that they would review whether the incentive structure for working on Saturdays should be altered and that they would examine ways to ensure that more enumerators are working on those days. This includes exploring the feasibility of hiring and assigning work to applicants who may only want to work weekends and being clearer with enumerators about what the expected peak enumeration hours are. Increasing electronic completion rates for Group Quarters. The Bureau hopes to reduce field costs for Group Quarters (such as skilled nursing homes, college and university student housing, and correctional facilities) by, for the first time, encouraging facilities to self-enumerate electronically, when possible. As previously discussed, clerical staff first establish facility enumeration preferences during Group Quarters Advance Contact, and enumeration (either in person or otherwise) takes place afterward. During the 2018 test, the Bureau reported that only 25 of the 75 facilities that selected the “eResponse” enumeration option during Advance Contact submitted responses by the enumeration deadline. As of September 2018, Bureau officials said they were still evaluating potential causes of the low response rate by Group Quarters facilities but noted that issues with the required format for the submission of response files may have prevented some submissions. Bureau officials also acknowledged the need to conduct more active follow-up with these facilities during the eResponse period to ensure a full and accurate count of Group Quarters facilities. The Bureau Has Made Progress but Continues to Face Challenges Addressing Implementation Issues Identified in Prior Tests The Bureau Has Improved Its Collection of Case Notes, but Enumerators Remain Unclear on How to Report Fieldwork Issues We reported to the Bureau during the 2015 Census Test that information enumerators were typing into their case notes did not appear to be systematically used by their managers. We also reported that, during the 2016 Census Test, the Bureau was not reviewing case notes written by enumerators providing respondent information on better times-of-day for future NRFU visits to their housing unit, and enumerators did not always have this note-taking feature available. During the 2018 test, enumerators were trained to take notes and, when appropriate, identify special cases that would later require supervisory review. We also observed that enumerators appeared to be consulting case notes from prior enumerator visits when planning NRFU visits to the same housing unit. Enumerators can use markings within their automated interview instrument to describe certain types of cases (e.g., hearing barriers and dangerous situations), which the automated system would then route to receive supervisory review. Enumerators could select other case outcomes that the automated system would apply predetermined business rules to either reassign the cases (e.g., refusal, no one home) or treat them as completed (verified vacant or not a housing unit). However, we identified multiple scenarios in which enumerators had described cases in their case notes but for which the enumerators had not selected the corresponding case flag for the situation that would have resulted automatically in a supervisory review. One census field manager described discovering several dozen cases that had been inactive where enumerators had written case notes describing language barriers encountered but had not specifically marked the flag within the device for “language barrier.” Because these cases thus were not triggered for supervisory review, they were eligible to be reassigned by the Bureau’s standard automated system. As a result, the Bureau was not controlling for the requisite language skills in assigning the cases for subsequent enumeration attempts. The Bureau’s use of automated systems to apply business rules to efficiently manage field casework for 2020—including identifying which cases receive supervisory review—relies critically on field staff understanding how to reflect what they are seeing on the ground within the choices provided to them with which to flag cases in their interview device. The Bureau’s use of remote management as part of reengineered field operations also relies on enumerators knowing when and how to report issues to their supervisors. We observed multiple field scenarios that called these conditions into question, however. For example, enumerators we observed during NRFU told us that they indicated address listing issues in their case notes, such as if the unit designation was missing or incorrectly marked. Yet, these enumerators did not know how to flag such cases in their interview instrument to trigger supervisory review. According to Bureau officials, this type of address listing issue turned out to be a broadly experienced challenge within the test area. Additionally, during Group Quarters, an enumerator we observed received supplemental information about the number of residents at a neighboring facility after that facility had been enumerated. The enumerator made note of this discrepancy and included the original facility’s identifying information but was uncertain about how, if at all, to alert the supervisor about the discrepancy. Moreover, we saw little evidence that census field supervisors or managers were systematically reviewing case notes for the purpose of identifying either cases not being marked properly or for which the selected flags may not have been fully describing the case characteristics. For example, a census field manager confirmed that case notes recorded at Group Quarters facilities that were enumerated would not be reviewed during clerical processing, leaving the possibility—such as we observed—that if enumerators relied on case notes to communicate information about the accuracy of data collected, it would not be acted on. Bureau officials told us that reviewing all case notes could require more staff time than budgeted for, and changing the automation process to selectively present unflagged cases for supervisory review could necessitate requirements changes to systems whose development is already pressed for time. Standards for Internal Control in the Federal Government states that agencies should use quality information by, for example, processing reliable information to help it make informed decisions. Bureau enumerators can record useful local knowledge about their cases with their choice of case type flags and within their descriptive case notes. While the Bureau has anticipated a broad range of types of cases for enumerators to select from when documenting their casework, enumerators we observed did not uniformly understand those options, and the descriptors did not fully anticipate what enumerators were encountering. Improving training and guidance to field staff on the intended use of case notes and on alternative ways to communicate their concerns about cases, such as flags for different types of cases, can help ensure the Bureau has reliable data on the cases during its field operations relying on automated interviewing instruments. Leveraging Information on Enumerator-Reported Technical and Procedural Issues Remains a Challenge During the 2015 Census Test, we reported that certain technical and procedural problems that enumerators were encountering in the field were going unreported and that enumerators did not always know who to contact for assistance. We further noted that the Bureau was not systematically assessing or tracking the extent of these issues during testing, and we recommended that it enable such capture of information by training enumerators on where to record issues and whom to contact. The Bureau agreed with our recommendation. During the 2018 test, the Bureau had both an information technology (IT) hotline and a census-field-supervisor hotline established for technical and procedural questions, respectively. Yet, enumerators we observed told us they did not always report to their support lines the technical issues that they were easily able to resolve by, for example, turning their devices on and off to reset. This lack of reporting kept the Bureau from getting information on commonly-occurring challenges that might be useful real- time feedback in the testing environment. Moreover, a Bureau IT manager noted that the Bureau does not formally review and share observations and troubleshooting notes from IT hotline and census field supervisor hotline calls. Because enumerators may call either or both hotlines when having difficulty operating their Bureau-issued smart phone, operators of these hotlines could be unaware of the prevalence of or solutions to a given problem if the Bureau does not monitor troubleshooting information across the two operational silos. For the Bureau to be informed on any additional training needs or other operational decisions for 2020, it will need to continue to expand its efforts in collecting information on enumerator-reported problems per our 2015 recommendation. The Bureau Continues to Assess How to Ensure Efficient Staffing Levels for Group Quarters Depending on the size of a Group Quarters facility (e.g., skilled nursing facility, college and university student housing), the Bureau can use varying sizes of enumerator crews to conduct an onsite count. During the 2010 Census, we observed overstaffing during the service-based enumeration (e.g., homeless shelters and soup kitchens) portion of Group Quarters. While determining staffing levels at these facilities can be challenging, such overstaffing can lead to poor productivity and unnecessarily high labor costs. We recommended that the Bureau determine and address the factors that led to this overstaffing prior to 2020. The Bureau agreed with our recommendation. However, the Bureau has faced challenges determining the right staffing ratios in light of complications with the Advance Contact phase of Group Quarters. As previously noted, the Bureau used this phase to establish facilities’ enumeration method preferences. For the 2018 test, most Group Quarters facilities selected the facility-provided paper listing and the eResponse enumeration options. Therefore, the Bureau allocated a large share of its enumerator and census field supervisor workforce in the test area to the 44 known service-based enumeration facilities, which were restricted in terms of the enumeration options they could select and tended to select in-person enumeration. However, only 11 of these facilities responded to initial inquiries, so the Bureau had less work than anticipated for its enumerator crews. At multiple sites we observed in the test area, enumerators appeared either idle or underutilized. Moreover, several of the Group Quarters facilities we observed had changed their initial choice of enumeration method on the day of enumeration. Enumerator crews thus ran the risk of either being overstaffed (in the case of switching to a facility-provided paper listing) or understaffed (in the case of switching to an in-person enumeration). The Bureau’s Advance Contact activities have a potential benefit—if the Bureau can get accurate information on the method of enumeration and approximate population within a facility ahead of time, Bureau managers and enumerator crews can more proactively allocate resources and prepare for the count. Bureau officials said they are still assessing outcomes of Advance Contact to see if these gains were realized and may have completed the assessment by as early as January 2019. Doing so will help the Bureau determine appropriate staffing sizes and thus address our prior recommendation. The Bureau Is Working to Determine the Causes of Elevated Non-Interview Rates According to preliminary data from the 2018 Census Test, the Bureau experienced similarly high rates of cases coded as non-interviews as it did during its last major field test of NRFU in 2016. Non-interviews are cases where enumerators collect no data or insufficient data from households either because enumerators made the maximum number of visits without a successful interview, or because of special circumstances like language barriers or dangerous situations. When this happens, the Bureau may have to impute the census data for the case, such as whether the housing unit is vacant or not, the population counts of the households, or demographic characteristics of their residents. In January 2017, we reported that, during the 2016 Census Test, the Bureau incurred what it considered high non-interview rates (31 and 22 percent across the two test sites, respectively, as the Bureau preliminarily reported at the time), and we recommended that the Bureau determine the causes of these rates. Using the same method to calculate the rate of non-interviews for the test as in 2016, the 2018 Census Test had similarly high non-interview rates— 33 percent of all NRFU cases. Bureau officials said they are still examining causes of these elevated non-interview rates and whether final attempts helped to mitigate the non-interview rate and will report out on what they learn as part of their comprehensive assessment of the test, planned for December 2018. A draft of the Bureau’s revised contact strategy for NRFU, provided in November 2018, indicates that as part of enumerator training in 2020 the Bureau will need to incorporate messaging that emphasizes the importance of obtaining sufficient data from interview attempts. Officials noted that any interim lessons learned from this assessment process would inform updates to the field enumeration contact strategies for 2020. The Bureau Experienced a Programming Error While Implementing Procedures for Proxy Interviews Enumerators are directed to try and complete a NRFU case by interviewing a proxy for a household respondent, like a neighbor, after multiple failed attempts have been made to contact someone in the household for that case. We previously observed in the 2016 Census Test that enumerators did not seem to understand the procedures for conducting these interviews and, as a result, underutilized the interviewing method. In our January 2017 report, we therefore recommended that, as part of determining the causes of its non-interview rate, the Bureau revise and test any needed changes to proxy procedures and associated training. The Bureau agreed with our recommendation and subsequently developed automated supervisory performance alerts for census field supervisors and census field managers that would inform them when an enumerator was not following prompts to conduct proxy interviews for eligible cases. However, in implementing proxy interview procedures for the 2018 Census Test, the Bureau experienced a technical glitch resulting in some confusion among some enumerators and their supervisors about related procedures. Early in NRFU data collection for the test, a programming error within the field enumeration application was prompting enumerators to make more than the allowable three attempts to interview a proxy respondent. The Bureau reported promptly implementing a technical fix to this issue; yet, enumerators we observed reported receiving varying guidance from their supervisors on whether to abide by the erroneous prompts. While some of these enumerators appeared to understand the importance of attempting proxy interviews, some did not appear to understand Bureau guidance that enumerators should make no more than three attempts to interview a proxy respondent, and some appeared conditioned to follow the erroneous prompts. Proxy interviews can be a substantial portion of completed interviews during the census. In 2018 NRFU testing, interviews of proxy respondents accounted for 27 percent of all successful interview-based enumerations of occupied housing units—compared to 24 percent during the 2010 Census and 9 percent during the 2016 Census Test. Given the role that proxy interviews play in completing census data collection, it will be important for the Bureau to fully implement our recommendation so that enumerators are properly pursuing and conducting these interviews. Enumerators We Observed Were Uncertain of How to Proceed When Property Managers Were Unavailable Initial visits to property managers of multi-unit residences can help the Bureau identify vacant and occupied housing units before sending enumerators to individual units within the facilities. We have previously reported that property managers can also be a helpful source of information on respondents who are not at home, thereby making subsequent follow-up visits to individual units more productive. During the 2016 Census Test, we observed that enumerators were uncertain of how to handle individual cases within a multi-unit once they were unsuccessful in contacting a property manager initially. As a result, we recommended in January 2017 that the Bureau revise and test procedural and training modifications as needed to aid enumerators and their supervisors in these cases. The Bureau agreed with this recommendation and indicated that the evaluations of the 2018 test would inform its strategies for 2020. However, we observed a similar issue during the 2018 Census Test in that enumerators were unclear on what, if any, proxies to attempt if they were unsuccessful in finding the listed property manager. Additionally, we observed multiple enumerators leave voicemails with their contact information—not a central number—for the listed property manager, but it was unclear how these voicemails would produce a successful interview because, later, the automated system could reassign other enumerators to visit the manager. When we raised this concern with Bureau officials, they acknowledged that they need to continue to refine procedures for handling initial property manager visits for 2020. The Bureau Provided Enumerators Access to Incomplete Closed Cases, but Enumerators Were Not Consistently Aware They Had Access Previously, during the 2016 Census Test, we observed that enumerators were unable to re-open closed non-interview cases even if they happened upon the respondent in question soon after and nearby. We noted this inefficiency, since these cases would get re-assigned later, and in January 2017, we recommended that the Bureau revise and test procedures that would grant flexibility to enumerators to access cases in these circumstances. The Bureau agreed with our recommendation. For the 2018 Census Test, the Bureau provided a list in the field enumeration application of the cases that had been worked by the enumerator that day but that had not been submitted for processing or reassignment. Training for enumerators described this enumeration option, and enumerators were authorized to access these cases when needed, but not all enumerators we observed were consistently aware of how to do so. Enumerators we spoke with cited uncertainty over how to access these cases and whether enumerators were allowed to do so as considerations. Continuing to review the procedures and guidance to enumerators on this flexibility for completing interviews, consistent with our prior recommendation, will help the Bureau make better use of it in 2020. The Bureau May Add an Extra Check on NRFU Addresses Identified by Administrative Records as Vacant or Nonexistent As we reported in 2017, the Bureau previously modified how it would treat some of the households that did not respond to the 2020 Census and that the Bureau’s use of administrative records had determined to be not occupied. The Bureau’s earlier testing had determined that the Bureau should require two—instead of just one—notices from the United States Postal Service that mail could not be delivered to these households before removing their addresses from the NRFU workload. After we provided a draft of this report to the Department of Commerce to obtain agency comments, Bureau officials provided us with findings from an evaluation of the 2018 Census Test. In the evaluation, Bureau officials observed that there were households for which they had received multiple notices from the United States Postal Service that mail was undeliverable but that Bureau enumerators recorded as occupied. While Bureau officials believe, based on their follow-up research, that these addresses may likely be vacant or not housing units, they are concerned about possible undercounting from not enumerating people who may be at these addresses. As of November 2018, the Bureau was considering adding one physical visit for each of these cases. Bureau officials said they are continuing to analyze these evaluation results and expect to document and include changes within its final operational plan for the 2020 Census due in January 2019. Conclusions The 2018 Census Test offered the Bureau its last opportunity to test key procedures, management approaches, and systems under decennial-like conditions prior to the 2020 Census. As the Bureau studies the results of its NRFU and Group Quarters testing to inform 2020, it will be important that it address key program management issues that arose during implementation of the test. Namely, by not establishing the intended procedural changes for late-NRFU data collection ahead of time, the Bureau risked not getting the most out of NRFU to minimize the number of housing units having to have their information imputed by the Bureau later. Additionally, by not aligning the skills, responsibilities, and information flows for census field supervisors, the Bureau limited their role in support of enumerators within the reengineered field operation. The Bureau also lacks mid-operation training or guidance, which, if implemented in a targeted, localized manner, could further help enumerators navigate procedural modifications and any commonly- encountered problems when enumerating. Finally, without enumerators understanding how to use case notes and flags for various types of cases in their enumeration device and to report enumeration challenges to supervisors and managers, the Bureau may be unaware of field work issues that could affect the efficiency of its operations and the quality of its data. We provided near real-time feedback to the Bureau across a range of test implementation issues. Some, such as those related to staffing ratios for the Group Quarters operation, build on long-standing implementation issues that, if addressed, can contribute to the efficiency and effectiveness of 2020 field operations. Others, like not having NRFU progress measures that provide true indications of completed workload, are issues specific to this test that the Bureau is assessing as part of its 2018 Census Test evaluations. It will be important for the Bureau to prioritize its mitigation strategies for these implementation issues so that it can maximize readiness for the 2020 Census. Recommendations for Executive Action We are making four recommendations to the Department of Commerce and the Census Bureau: The Secretary of Commerce should ensure that the Director of the Census Bureau determines in advance of Non-Response Follow-Up what the procedural changes will be for the last phases of its data collection and what the business rules will be for determining when to begin those phases, which cases to assign, and how to assign them. (Recommendation 1) The Secretary of Commerce should ensure that the Director of the Census Bureau identifies and implements changes to align census field supervisor screening, authorities, and information flows to allow greater use of the census field supervisor position to provide supervisory support to enumerators. (Recommendation 2) The Secretary of Commerce should ensure that the Director of the Census Bureau enables area census offices to prepare targeted, mid- operation training or guidance as needed to address procedural changes or implementation issues encountered locally during Non-Response Follow-Up. (Recommendation 3) The Secretary of Commerce should ensure that the Director of the Census Bureau improves training and guidance to field staff on the intended use of case notes and flags, as well as on alternative ways to alert supervisors and managers when case characteristics are not readily captured by those flags. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this report to the Secretary of Commerce. In its written comments, reproduced in appendix II, the Department of Commerce agreed with our findings and recommendations and said it would develop an action plan to address them. The Census Bureau also provided technical comments and an update on their evaluation of the test, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Commerce, the Undersecretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and the appropriate congressional committees. 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) 512-2757 or goldenkoffr@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 III. Appendix I: Objectives Scope & Methodology This report examines (1) how peak field operations were implemented during the 2018 Census Test; and (2) the extent to which implementation issues raised in prior 2020 Census tests have been addressed, and what actions the Census Bureau (Bureau) is taking to address them. To address these objectives, we reviewed 2018 Census Test and 2020 Census operational planning and training documentation. We also reviewed our prior reports and documentation on prior census testing operations. Non-Response Follow-Up (NRFU) operations took place from May 8 through July 31, 2018, while Group Quarters took place from July 25, 2018 through August 24, 2018, with the service-based enumeration portion taking place July 25, 2018 through July 27, 2018. To review the Bureau’s test implementation and mitigation strategies for previously-identified implementation issues for peak operations, we visited Providence, Rhode Island, multiple times between May and August 2018 to observe enumerators, census field supervisors, and management operations. NRFU visits took place between mid-May and late-July 2018, while we also conducted two iterations of visits of Group Quarters in late July and early-August 2018. These multiple iterations both across and within operations enabled us to see how, if at all, implementation of procedures varied over time. It also enabled us to get direct feedback from Bureau field managers on how various phases of test operations were proceeding. These visits consisted of non- generalizable observations of field enumeration and office clerical work, as well as interviews with local managers. For each of these visits, we developed data collection instruments to structure our interviews and to cover topics that were pertinent to the given phase of the operation we were observing. We also observed debrief sessions with multiple levels of the Bureau’s field workforce following the field work. To translate our observations into actionable feedback for the Bureau, we shared high-level observations in near real-time to Bureau headquarters management overseeing the operations so that the Bureau could mitigate and adapt to known issues in a timely manner. We also discussed any mitigation or evaluation strategies developed in response to our observations with the cognizant Bureau headquarters officials. For objective two specifically, we reviewed Bureau test planning documentation and our work from prior tests to examine how, if at all, the Bureau planned to address known implementation issues. To gain insight into how implementation was proceeding when we were not directly observing test implementation, we received daily management progress reports from the Bureau throughout the NRFU operation testing that included information on the total number of NRFU cases, the final outcomes of each case, and the number of cases that the Bureau reported as completed for each day of the NRFU operation. We also received Periodic Management Reports that summarized high level outcomes of both the NRFU and Group Quarters workload. To fully understand the source of the Bureau’s daily progress reports, we requested and received all transactional data collected during NRFU production. We reconciled case totals and outcomes with the final numbers in the NRFU progress reports and then used these data to analyze the Bureau’s progress during NRFU production. We also received and analyzed Bureau payroll data on enumerator hours worked during NRFU operations. Specifically, we assessed the number of enumerators working each day, the number of enumerator’ hours paid each day, and the days of the week that were worked the most by enumerators. We found the Bureau’s transactional and payroll data sources to be sufficiently reliable for our reporting purposes. We conducted this performance audit from April to December of 2018 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: Comments from the Department of Commerce Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Ty Mitchell (Assistant Director), Devin Braun, Karen Cassidy, Joseph Fread, Robert Gebhart, Krista Loose, Kathleen Padulchick, Lisa Pearson, Kayla Robinson, Robert Robinson, and Cynthia Saunders made significant contributions to this report.

Why GAO Did This Study The cost of the decennial census has steadily increased over the past several decades, with self-response rates declining over the same period. The largest and costliest operation that the Bureau undertakes, NRFU is the Bureau's attempt to enumerate households not initially self-responding to the census. GAO was asked to review NRFU implementation during the 2018 Census Test as well as the Bureau's overall readiness for peak field operations, which cover the actual enumeration of residents. This report examines (1) how peak field operations, including NRFU, were implemented during the test; and (2) the extent to which prior test implementation issues have been addressed. GAO reviewed test planning and training documentation, as well as production and payroll data. At the test site, GAO observed and interviewed enumerators, field supervisors, and managers conducting peak operations. What GAO Found In preparation for the 2020 census, the Census Bureau (Bureau) set out to enumerate over 140,000 housing units during the 2018 Census Test at a site in Providence County, Rhode Island. The 2018 Census Test marked the Bureau's last chance to test enumeration procedures for peak field operations under census-like conditions before 2020. Implementation of this test identified the following concerns: The Bureau experienced operational issues during implementation of the Non-Response Follow-Up (NRFU) as part of the 2018 Census Test. For example, the Bureau had not finalized procedures for data collection during late phases of NRFU (e.g., after multiple attempts to interview had been made) until after the work had already started. As a result, enumerators and their supervisors did not have standardized procedures during the test, which made it difficult to evaluate the effectiveness of the test procedures. GAO also observed a range of other NRFU implementation issues during the test, such as the Bureau's use of progress reporting that overstates the number of NRFU cases not needing any additional fieldwork and the Bureau having fewer of its enumerators work Saturdays, which can be among the most productive interview days. The Bureau is taking steps to assess and mitigate these and other issues that GAO identified. The Bureau's field workforce was not fully prepared to face all of the enumeration challenges that arose during the test. For instance, the Bureau expects census field supervisors to provide front-line coaching to enumerators but did not screen these employees to ensure they had the needed skills. Moreover, it did not provide them with the authorities and information that would have helped them serve that role. As a result, we believe that supervisors did not have the casework expertise, information, or authority to help enumerators with procedural questions, and higher-level census field managers ended up providing direct support to enumerators. While the Bureau provided extensive online and in-person training to enumerators prior to NRFU fieldwork for the 2018 Census Test, the Bureau lacked any standardized form of mid-operation training or guidance as new procedures were implemented. GAO observed that during the test some enumerators continued to have questions and were uncertain about procedures. Developing targeted, location-specific training could help ensure that, in 2020, enumerators receive the guidance they need to collect census data consistently and in accordance with NRFU procedures. The Bureau has made progress addressing prior test implementation issues but still faces challenges. For example, the Bureau improved its collection of enumerator case notes, which reflect real-time knowledge gained during enumeration. However, enumerators did not always report cases using flags built in to their interviewing device that would benefit from supervisory review, such as for language barriers. Moreover, supervisors were not systematically analyzing case notes to identify cases not flagged properly. As a result, critical data on fieldwork challenges were not being communicated effectively to those who could analyze and use them. What GAO Recommends GAO recommends that the Bureau (1) determine procedures for late-NRFU data collection; (2) align census field supervisor screening, authorities, and information flows; (3) prepare for targeted mid-operation training or guidance as needed; and (4) improve training on reporting cases that need supervisory attention and alternative ways to communicate these cases. The Department of Commerce agreed with GAO's findings and recommendations, and the Bureau provided technical comments that were incorporated as appropriate.

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Background Elementary and Secondary Education School Facilities According to Education, 50.3 million students were enrolled in more than 98,000 public elementary and secondary schools nationwide in the 2014- 2015 school year. These individual public schools are overseen by approximately 16,000 local educational agencies (referred to in this report as school districts) which are, in turn, overseen and supported by state educational agencies. School districts can range in size from one school (for example, in rural areas) to hundreds of schools in large urban and suburban areas. For example, the 100 largest districts in the United States together have approximately 16,000 schools and enroll about 11 million students. In addition, charter schools are public schools created to achieve a number of goals, such as encouraging innovation in public education. Oversight of charter schools can vary, with some states establishing charter schools as their own school district and other states allowing charter schools to be either a distinct school district in themselves or part of a larger district. Charter schools are often responsible for their own facilities; these may be located in non-traditional school buildings, and may lease part or all of their space. Typically, state educational agencies are responsible for administering state and federal education laws, disbursing state and federal funds, and providing guidance to school districts and schools across the state. State educational agencies frequently provide funds for capital improvements to school facilities, which school districts may use to address issues related to lead in school drinking water, among other things. Different state agencies, including agencies for education, health, and environmental protection, may provide school districts with guidance on testing and remediation of lead in school drinking water. Within a school district, responsibility for water management may be held by individuals in different positions, such as facilities managers or environmental specialists. Health Effects of Lead Lead is a neurotoxin that can accumulate in the body over time with long- lasting effects, particularly for children. According to the CDC, lead in drinking water can cause health effects if it enters the bloodstream and causes an elevated blood lead level. Lead in a child’s body can slow down growth and development, damage hearing and speech, and lead to learning disabilities. For adults, lead can have detrimental effects on cardiovascular, renal, and reproductive systems and can prompt memory loss. In pregnant women, lead stored in bones (due to lead exposure prior to and during pregnancy) can be released as maternal calcium used to form the bones of the fetus, reduce fetal growth, and increase risk of miscarriage and stillbirth. The presence of lead in the bloodstream can disappear relatively quickly, but bones can retain the toxin for decades. Lead in bones may be released into the blood, re-exposing organ systems long after the original exposure. The concentration of lead, total amount consumed, and duration of exposure influence the severity of health effects. The health consequences of lead exposure can differ from person to person and are affected by the cumulative dose of lead and the vulnerability of the individual person regardless of whether the lead exposure is from food, water, soil, dust, or air. Although there are medical therapies to remove lead from the body, they cannot undo the damage it has already caused. For these reasons, EPA, CDC, and others recommend the prevention of lead exposure to the extent possible, recognizing that lead is widespread in the environment. The Safe Drinking Water Act The SDWA authorizes EPA to set standards for drinking water contaminants in public water systems. For a given contaminant the act requires EPA to first establish a maximum contaminant level goal, which is the level at which no known or anticipated adverse effects on the health of persons occur and which allows an adequate margin of safety. EPA must then set an enforceable maximum contaminant level as close to the maximum contaminant level goal as is feasible, or require water systems to use a treatment technique to prevent known or anticipated adverse effects on the health of persons to the extent feasible. Feasible means the level is achievable using the best available technology or treatment technique. In 1991 EPA issued the LCR, which it revised in 2000 and 2007, establishing regulations for water systems covered by the SDWA. Lead concentration in water is typically measured in micrograms of lead per liter of water (also referred to as “parts per billion” or ppb). The rule established a maximum contaminant level goal of zero, because EPA concluded that there was no established safe level of lead exposure. EPA decided not to establish an enforceable maximum contaminant level, concluding that any level reasonably close to the goal would result in widespread noncompliance, and therefore was not feasible. Instead, the rule established an “action level” of 15 micrograms of lead per liter (15 ppb) in a one liter sample of tap water, a level that EPA believed was generally representative of what could be feasibly achieved at the tap. The action level is a screening tool for determining when certain follow-up actions are needed, which may include corrosion control treatment, public education, and lead service line replacement. Sample results that exceed the lead action level do not by themselves constitute violations of the rule. If the lead action level is exceeded in more than 10 percent of tap water samples collected during any monitoring period (that is, if the 90th percentile level is greater than the action level), a water system must take actions to reduce exposure. Several amendments to the SDWA are relevant to testing for lead in school drinking water. In 1988, the SDWA was amended by the Lead Contamination Control Act (LCCA), which banned the manufacture and sale of drinking water coolers with lead-lined tanks containing more than 8 percent lead; the statute defined a drinking water cooler as containing 8 percent lead or less as “lead-free.” The LCCA also required states to establish testing and remediation programs for schools. However, in 1996 a federal circuit court held that this requirement was unconstitutional. In 2011, Congress passed the Reduction of Lead in Drinking Water Act, which amended the SDWA by lowering the maximum allowable lead content in “lead-free” plumbing materials such as pipes. This provision became effective on January 4, 2014. In 2016, Congress passed the Water Infrastructure Improvements for the Nation Act which, among other things, amended the SDWA, to establish a grant program for states to assist school districts in voluntary testing for lead contamination in drinking water at schools. As a condition of receiving funds, school districts are required to test for lead using standards that are at least as stringent as those in federal guidance for schools. In March 2018, Congress appropriated $20 million to EPA for this grant program. Lead in School Drinking Water Lead can enter drinking water when service lines or plumbing fixtures that contain lead corrode, especially where the water has high acidity or low mineral content. According to EPA, lead typically enters school drinking water as a result of interaction with lead-containing plumbing materials and fixtures within the building. Although lead pipes and lead solder were not commonly used after 1986, water fountains and other fixtures were allowed to have up to 8 percent lead until 2014, as previously mentioned. Consequently, both older and newer school buildings can have lead in drinking water. Some water in a school building is not for consumption, such as water from a janitorial sink or garden hose, so lead in these water sources presents less risk to students. (See fig. 1.) The best way to know if a school’s water is contaminated with lead is to test the water after it has gone through a school’s pipes, faucets, and other fixtures. EPA Guidance for Schools To facilitate testing efforts, EPA suggests that schools implement programs for reducing lead in drinking water and developed the 3Ts for Reducing Lead in Drinking Water in Schools: Revised Technical Guidance (3Ts guidance) in 2006, which provides information on: (1) training school officials about the potential causes and health effects of lead in drinking water; (2) testing drinking water in schools to identify potential problems and take corrective actions as necessary; and (3) telling students, parents, staff, and the larger community about monitoring programs, potential risks, the results of testing, and remediation actions. The purpose of the 3Ts guidance is to help schools minimize students’ and staffs’ exposure to lead in drinking water. The guidance provides recommendations and suggestions for how to address lead in school drinking water, but does not establish requirements for schools to follow. According to the guidance, if school districts follow the procedures described in guidance, they will be assured their facilities do not have elevated levels of lead in their drinking water. The guidance recommends taking 250 milliliter samples of water from every drinking water source in a school building and having the samples analyzed by an accredited laboratory. Based on the test results of the samples, the guidance recommends remedial action if the samples are found to have an elevated concentration of lead, which is identified by using an action level. While school districts may have discretion to set their own action level, the 3Ts guidance strongly recommends taking remedial action if a school district finds lead at or above 20 ppb in a 250 milliliter sample of water. School districts can take a variety of actions including replacing pipes, replacing fixtures, running water through the system before consumption (known as flushing), or providing bottled water. However, since the amount of lead in school drinking water may change over time for a variety of reasons—for example, the natural aging of plumbing materials or a disturbance nearby, such as construction—the results obtained by one test are not necessarily indicative of results which may be obtained in the future. Roles and Responsibilities of Federal Agencies With no federal law requiring testing for lead in school drinking water, federal agencies play a limited role: Education’s mission includes fostering educational excellence and promoting student achievement, and the agency disseminates guidance to states and school districts about lead in school drinking water, but does not administer any related grants. EPA’s Office of Ground Water and Drinking Water provides voluntary guidance to schools on how to test for and remediate lead in school drinking water, as part of EPA’s mission to inform the public about environmental risks. In addition, EPA’s Office of Children’s Health Protection is responsible for working with EPA’s 10 regional offices via their healthy schools coordinators, who communicate with schools and help to disseminate the 3Ts guidance. CDC administers the School Health Policies and Practices Study, a periodic survey to monitor national health objectives that pertain to schools and school districts. The 2016 data, the most recent available, provide information on the number of school districts that periodically test for lead in their drinking water. Under the 2005 memorandum signed by these three agencies to encourage lead testing and remediation in schools, Education’s role includes working with EPA and other groups to encourage testing, and disseminating materials to schools. EPA agreed to update guidance for schools, and provide tools to facilitate testing for lead in school drinking water. CDC’s role includes identifying public health organizations to work with and facilitating dissemination of materials to state health organizations. An Estimated 43 Percent of School Districts Reported Testing for Lead in Drinking Water and About a Third of These Districts Reported Finding Elevated Levels of Lead Lead in School Drinking Water Survey Results at a Glance An estimated 43 percent of school districts tested for lead in school drinking water, but 41 percent did not, and 16 percent did not know. o Some districts tested drinking water in all sources of consumable water in all of their schools, while other school districts tested only some sources. o Among the reasons for not testing, school districts said they either did not identify a need to test or were not required to do so. Of those that tested, an estimated 37 percent of school districts found elevated lead levels—levels of lead above the district’s threshold for taking remedial action—in school drinking water. o School districts varied in terms of the threshold they used, with some using 15 ppb or 20 ppb and others using a lower threshold. School districts varied in whether they tested for lead in school drinking water and whether they discovered elevated levels of lead. For example, an estimated 88 percent of the largest 100 school districts tested compared with 42 percent of other school districts. All school districts that found elevated lead reported taking steps to reduce or eliminate the lead, including replacing water fountains or providing bottled water. An Estimated 43 Percent of School Districts Reported Testing for Lead in Drinking Water in the Last 12 Months, but 41 Percent Have Not Tested Nationwide, school districts vary in terms of whether they have tested for lead in school drinking water, with many not testing. According to our survey of school districts, an estimated 43 percent tested for lead in school drinking water in at least one school in the last 12 months, while 41 percent had not tested. An estimated 35 million students were enrolled in districts that tested as compared with 12 million students in districts that did not test. An estimated 16 percent of school districts, enrolling about 6 million students, reported that they did not know whether they had tested or not. (See fig. 2.) Of school districts that tested for lead in school drinking water, some tested all consumable water sources in all of their schools, while others may have only tested some sources in all schools or all sources in some schools. Among the reasons provided by survey respondents for not testing in all schools, some said the age of the building was the primary consideration. For example, an official in one school district we visited told us they began testing in buildings constructed before 1989, but after receiving results that some water sources had elevated lead levels, the district decided to test all of their school buildings. Other reasons reported for testing some, but not all, schools included testing schools only when a complaint about discolored water was received or testing only new schools or schools that were renovated. In addition, school districts varied in whether they sampled from every consumable water source, or just some of the sources, in their schools. For example, one district official told us they took one sample from each type of water fountain in each school, assuming that, if a sampled fountain was found to have an elevated level of lead, then all of the other fountains of that type would also have elevated lead levels. However, EPA’s 3Ts guidance recommends that every water source that is regularly used for drinking or cooking be sampled. Further, stakeholders and environmental and educational officials we interviewed said that results from one water fountain, faucet, or any other consumable water source cannot be used to predict whether lead will be found in other sources. Cost of Testing In our survey, the median amount spent by school districts to test for lead in school drinking water during the past 12 months varied substantially, depending on the number of schools in which tests were conducted (see table 1). School districts may have paid for services such as collecting water samples, analyzing and reporting results, and consultants. For example, an official in a small, rural school district—with three schools housed in one building—told us his district spent $180 to test all eight fixtures. In contrast, officials in a large, urban school district told us they spent about $2.1 million to test over 11,000 fixtures in over 500 schools. Some school districts, especially larger ones, incurred costs to hire consultants to advise them and help design a plan to take samples, among other things. EPA’s 3Ts guidance recommends determining how to communicate information about lead testing programs with parents, governing officials, and other stakeholders before testing. Of school districts that reported testing for lead in school drinking water in our survey, an estimated 76 percent informed their local school board and 59 percent informed parents about their plans to test; similar percentages provided information about the testing results. We identified a range of approaches to communicating testing efforts in the 17 school districts we interviewed. Some school districts reported issuing press releases, putting letters in multiple languages in students’ backpacks, sending emails to parents, holding public meetings, and releasing information through social media. Before testing, one district created a website with a list of dates when it planned to test the drinking water in every one of its schools. In contrast, other school districts communicated with parents and the press only upon request. Officials in one district we visited said they did not post lead testing results on their website, because they wanted to avoid causing undue concern, adding that “more information isn’t necessarily better, especially when tests showed just trace amounts of lead.” Plans to Conduct Testing on a Recurring Basis School districts generally have discretion to determine how frequently they test for lead in school drinking water except when prescribed in state law, and most school districts responding to our survey had no specific schedule for recurring testing. Specifically, an estimated: 27 percent of school districts plan to test “as needed,” 25 percent have no schedule to conduct recurring tests, and 15 percent do not know. The remaining school districts reported a range of frequencies for conducting additional tests or said they were developing a schedule to conduct tests on a recurring basis. School district officials and stakeholders we interviewed told us that it is important to test for lead in drinking water on a recurring basis, because lead can leach into school drinking water at any time. Reasons School Districts Reported for Not Testing In our survey, we asked school districts reporting that they had not tested for lead in school drinking water in the last 12 months (41 percent of districts) to provide us with one or more reasons why they had not tested. Of these school districts, an estimated 53 percent reported that they did not identify a need to test and 53 percent reported they were not required to test (see fig. 3). An Estimated 37 Percent of School Districts That Reported Testing Found Elevated Levels of Lead in Drinking Water Of school districts that reported testing for lead in school drinking water, an estimated 37 percent of districts found elevated levels of lead in school drinking water, while 57 percent of districts did not find lead (see fig. 4). Of those that found lead in drinking water, most found lead above their selected action level in some of their schools, while some districts found lead above their action level in all of their schools. For example, officials in one large school district told us they tested over 10,000 sources of water, including drinking fountains and food preparation fixtures, and found that over 3,600 water sources had lead at or above the district’s action level of 15 parts per billion (ppb). The findings resulted in extensive remediation efforts, officials said. Further, district officials reported different action levels they used to determine when to take steps such as replacing a water fountain or installing a filter. School districts generally may select their own action level, resulting in different action levels between districts. Of school districts that reported testing for lead in school drinking water, an estimated 44 percent set an action level between 15 ppb and 19 ppb. The action levels chosen by the rest of the school districts ranged from a low of 1 ppb whereby action would be taken if any lead at all was detected to a high 20 ppb where action would be taken if lead was found at or above 20 ppb. (See appendix II for the estimated percentage of school districts that set other action levels.) School Districts’ Lead Testing Efforts and Discovery of Elevated Lead Levels Varied Based on the Size, Population Density, and Location of the District Though fewer than half of school districts reported testing for lead in school drinking water, our analysis of school districts’ survey responses shows that these estimates varied depending on the size and population density of the district as well as its geographic location. For example, among the largest 100 school districts, an estimated 88 percent reported they had tested for lead in school drinking water in at least one school in the last 12 months compared with 42 percent of all other districts nationwide. An estimated 59 percent of the largest 100 school districts that tested discovered elevated levels of lead compared to 36 percent of all other districts that tested (see table 2). In addition, an estimated 86 percent of school districts in the Northeast region of the United States tested for lead in school drinking water, compared to less than half of school districts in other geographic regions. Similarly, about half of school districts in the Northeast and about 8 percent in the South found elevated levels of lead, compared to their selected action level. (See fig. 5.) All School Districts with Elevated Lead in Drinking Water Reported Taking Action, Such as Replacing Water Fountains or Flushing Pipes In our survey, every school district that reported finding lead in school drinking water above their selected action level reported taking steps to reduce or eliminate the lead. For example, an estimated 71 percent said they replaced water fountains, 63 percent took water fountains out of service without replacing them, and 62 percent flushed the school’s water system (see fig. 6). School districts officials we interviewed told us they took a range of remedial actions generally consistent with those reported to us in our survey. For example, an official in one district told us that 129 of the 608 fixtures tested above the district’s action level of “any detectable level.” He said they installed filters on all of the 106 sink faucets with elevated lead and replaced all of the 23 drinking fountains with elevated lead. The district official explained that they re-tested fixtures after the filters and new fountains were installed, and did not detect any lead in their drinking water. Officials in another school district told us that approximately 3,600 of their fixtures were found to have lead above their action level of 15 ppb. They told us the district turned off the water at the affected fixtures as an interim measure and provided bottled water to students and staff. Though they had not yet finalized their plans at the time of our interview, they said they were planning to replace the fixtures and replace old pipes with new pipes. District officials said they plan to pay for their remediation efforts using local capital improvement funds from a recently-approved bond initiative. Similar to the cost of testing, the median amount spent by school districts to remediate lead in school drinking water during the past 12 months varied substantially, depending on the number of schools in which a district took action to remediate lead (see table 3). The median expenditure for school districts taking action in one to four schools was $4,000 compared to a median expenditure for school districts taking action in 51 or more schools of $278,000. Several States Require School Districts to Test for Lead in Drinking Water and Additional States Provide Funding and Technical Assistance At Least Eight States Require School Districts to Test for Lead as of 2017, According to EPA EPA regional officials provided examples of eight states that have requirements for schools to test for lead in drinking water as of September 2017: California, Illinois, Maryland, Minnesota, New Jersey, New York, Virginia, and the District of Columbia. State requirements differ in terms of which schools are included, testing protocols, communicating results, and funding. (See fig. 7.) (For a list of testing components for the eight states, see appendix IV.) According to stakeholders we interviewed, most state legislation on testing for lead in school drinking water has been introduced in the past 2 years. Of the eight states, three states have completed one round of required testing, while other states are in the early stages of implementation or have not yet begun, according to state officials. School districts in Illinois, New Jersey, and New York completed a round of testing for lead in school drinking water by December 2017. Testing in the District of Columbia was in progress as of April 2018. Minnesota requires school districts to develop a plan to test by July 2018 and California requires that water systems sample all covered public schools in their service area by July 2019. According to state officials, schools in Maryland must test by July 2020. In Virginia, no timeline for testing is indicated in the requirement. In addition, requirements in these eight states vary in terms of covered schools and frequency of testing. For example, in Maryland, all schools, including charter and private schools, are required to test their water for lead by July 2020 and must re-test every 3 years. After regulations were approved in July 2016, New Jersey required testing within a year in all traditional public schools, charter schools, and certain private schools, and re-testing every 6 years, according to state officials. Illinois’ requirement is for public and private elementary schools constructed before 2000 to test their drinking water for lead, and does not mandate re- testing. Seven of the eight states include at least some charter schools in their testing requirements (New York does not). State testing requirements also differ in terms of action level, sample sizes, and number of samples, according to state documents. States can choose their own lead threshold or action level for remediation, and the eight states have chosen levels ranging from any detectable level in Illinois to 20 ppb in Maryland. Six of the eight states have chosen to use 250 milliliter samples of water, while California is using a one liter sample size, and Virginia delegates to school districts to choose their action level and sample size. Some states specify that all drinking water sources in a building must be tested, such as in New York and New Jersey, or allow a smaller number of samples to be tested, such as in California, which recommends that water systems take between one and five samples per school. To implement its testing requirement, the District of Columbia has installed filters in all school drinking water sources, and plans to test the filtered water from each fixture for elevated lead annually. The responsibility for the costs of testing and remediation also differ by state. According to state officials, in Minnesota, the costs of testing may be eligible for reimbursement from the state, and in the District of Columbia, the Department of General Services is responsible for the cost. California requires that public water systems cover the cost of testing for all public schools in their jurisdiction. In all other states we looked at, schools or school districts are at least partially responsible for the costs of testing. Additionally, most schools or school districts are responsible for the costs of remediation, although Minnesota, New York, and the District of Columbia will provide funds to help with the costs of remediation as well. Seven of the eight state requirements have a provision for communicating the results of lead sampling and testing in schools. For example, Minnesota requires all test results be made public and New York requires that results be communicated to students’ families. Maryland and New Jersey require that results above the action level be reported to the responsible state agency, such as the Department of the Environment or the Department of Education, and that sample results that find elevated levels of lead be communicated to students’ families. Illinois requires that all results be made available to families and that individual letters to families also be sent if lead levels over 5 ppb are found. In contrast, Virginia does not include a provision to communicate testing results in its testing requirement for schools. According to stakeholders and state officials we interviewed, states have several other common issues to consider in implementing a state testing and remediation program. First, states need to ensure that their efforts, which can be significant given the thousands of schools that operate in each state, can be completed with limited resources and by a legislated deadline. Second, coordination between relevant state agencies, which will vary by state, may be challenging. Because of the nature of testing for lead in school drinking water, multiple government agencies may be involved, necessitating a balance of responsibilities and information- sharing between these state agencies. Finally, state officials told us that imposing requirements without providing funding to implement them may be a challenge for schools in complying with testing and remediation requirements. Additional States Provided Funding and Technical Assistance to Support School District Efforts to Test for and Remediate Lead Apart from the states with requirements to test for lead in school drinking water discussed in this report, at least 13 additional states had also provided funding or in-kind support to school districts to assist with voluntary lead testing and remediation, according to EPA regional offices. Those states are Arizona, Colorado, Idaho, Indiana, Maine, Massachusetts, Michigan, New Mexico, Ohio, Oregon, Rhode Island, Vermont, and Washington. In Massachusetts, for example, officials told us the state used $2.8 million from the state Clean Water Trust to fund a voluntary program for sampling and testing for all participating public schools in 2016 and 2017. Massachusetts contracted with a state university to assist schools with testing for lead in drinking water. When the program completed its first round of testing in February 2017, 818 schools throughout the state had participated, and the state has begun a second round of sampling with remaining funds from the Clean Water Trust. In Oregon, officials told us the state legislature provided funding for matching grants of up to $8 million to larger school districts for facilities improvements, and made $5 million of emergency funds available to reimburse school districts for laboratory fees associated with drinking water testing as part of the state’s efforts to address student safety. States can also provide technical assistance to support school districts in their efforts to test for and remediate lead in drinking water. The five states we visited provided a range of technical assistance to school districts. For example, to implement the voluntary assistance program in Massachusetts, the contracted university told us they hired 15 additional staff and assisted schools in designing sampling plans, taking samples, and sending them for testing. University officials told us they oversaw the sampling of all drinking water sources in each participating school and sent the sample to state certified laboratories for analysis. State officials encouraged schools to shut off all fixtures in which water tested at or above the action level of 15 ppb and provided guidance on actions to take, such as removing and replacing fixtures, using signage to indicate fixtures not to be used for drinking water, and implementing a flushing program. The state developed an online reporting tool so that all test results could be publicly posted. State officials also supported schools in communicating lead testing results to parents and the community. Other states we visited provided technical assistance to school districts through webinars, guidance documents, in-person presentations, and responding to inquiries. In Oregon, the state Department of Education and the state Health Authority collaborated in 2016 to provide guidance to schools on addressing lead in drinking water. The Governor issued a directive requesting all school districts test for lead in their buildings and the Health Authority requested that districts send them the results. In Texas, officials at the Commission for Environmental Quality have made presentations to schools on water sampling protocols and provided templates for school districts to communicate results. Officials told us that an increased number of school districts have contacted them in the past year seeking guidance, and, in response, they directed districts to EPA’s 3Ts guidance and a list of accredited laboratories. In Illinois, state officials partnered with the state chapter of the American Water Works Association to provide a guidance document for drinking water sampling and testing to assist schools in complying with new testing requirements. In Georgia, officials at the Department of Natural Resources told us they promote the 3Ts guidance on their website and have offered themselves as a resource on school testing at presentations with local water associations. EPA Provides Several Resources on Lead, but EPA and Education Should Provide More Information to Support States and School Districts and Improve Collaboration EPA Provides Guidance, Training, and Technical Assistance on Lead Testing and Remediation, but States and School Districts Need Updated Guidance EPA provides several voluntary resources, such as guidance, training, and technical assistance, to states and school districts regarding testing for and remediation of lead in school drinking water, but some school districts we surveyed and officials we interviewed said more information would be helpful. The Lead Contamination Control Act of 1988 (LCCA) required EPA to publish a guidance document and testing protocol to assist schools in their testing and remediation efforts. EPA’s Office of Ground Water and Drinking Water issued its 3Ts guidance which provides information on training school officials, testing drinking water in schools, and telling the school and broader community about these efforts. Of the school districts that reported in our survey using the 3Ts guidance to inform their lead testing efforts, an estimated 68 percent found the guidance extremely or very helpful for conducting tests. The Office of Ground Water and Drinking Water also developed an additional online resource—known as the 3Ts guidance toolkit—to further assist states and school districts with their lead in drinking water prevention programs by providing fact sheets and brochures for community members, among other things. Some states have used the 3Ts guidance as a resource for their state programs, according to EPA officials. For example, a New York regulation directs schools to use the 3Ts guidance as a technical reference when implementing their state- required lead testing and remediation programs. The Office of Ground Water and Drinking Water provides training to support states and school districts with their lead testing and remediation programs. In June 2017, EPA started a quarterly webinar series to highlight school district efforts to test for lead. These webinars include presentations from school officials and key partners that conducted lead testing and remediation. For example, on June 21, 2017, officials from Denver Public Schools and Denver Water presented on their efforts to test for lead in the public school system. EPA’s approach to providing guidance and technical assistance to states and school districts is determined by each of the 10 EPA regional offices. Some EPA regional offices provide the 3Ts guidance to school districts upon request and others conduct outreach to share the guidance, typically through their healthy schools coordinator when discussing other topics, such as indoor air quality and managing chemicals. EPA regional offices also provide technical assistance by request, typically through phone consultations with school districts that have questions regarding the 3Ts guidance, according to EPA headquarters officials. Officials also indicated that the agency has received more requests for technical assistance from schools over the past few years regarding lead in drinking water. Officials in EPA Regions 1 in Boston and 2 in New York City told us they provided technical assistance to school districts by conducting lead testing and analysis in school facilities and Region 9 in San Francisco provided technical assistance by reviewing school district testing protocols. For example, EPA Region 2 officials said between 2002 and 2016 they worked with one to two school districts per year to assist with their lead testing efforts. As part of this effort, the regional office provided funding for sampling and analysis. Officials said they prioritized school districts based on population size and whether the community had elevated blood lead levels. Other EPA regional office approaches included identifying resources and guidance for relevant state agencies and facilitating information sharing by connecting districts that have tested for lead with districts that are interested in doing so. However, most EPA regional offices do not provide technical assistance in the form of testing, analysis, or remediation to school districts, and some do little or no outreach to communicate the importance of testing for and remediating lead in school drinking water. According to federal standards for internal control, management should externally communicate the necessary quality information to achieve the entity’s objectives. Each EPA regional office’s approach to providing resources to states and school districts varies based on differing regional priorities and available resources, according to EPA headquarters officials. Additionally, officials said that this decentralized model of providing support and technical assistance related to lead testing and remediation in schools is appropriate because of the number of schools across the United States. However, based on our survey we found school district familiarity with the 3Ts guidance varied by geographic area (see fig. 8). An estimated 54 percent of school districts in the Northeast reported familiarity with the 3Ts guidance, compared with 17 percent of districts in the South. Furthermore, the Northeast was the only geographic area with more school districts reporting that they were familiar with the 3Ts guidance than not. This awareness corresponds with the efforts made by the state of Massachusetts and EPA’s regional offices in the Northeast to distribute the 3Ts guidance and conduct lead testing and remediation in school districts. By promoting further efforts to communicate the importance of lead testing to schools to help ensure that their lead testing programs are in line with good practices included in the 3Ts guidance, EPA regional offices that have not focused on this issue could leverage the recent efforts of other regional offices to provide technical assistance and guidance, and other forms of support. EPA’s 3Ts guidance emphasizes the importance of taking action to remediate elevated lead in school drinking water, but the agency’s guidance on a recommended action level for states and school districts is not current and contains elements that could be misleading. Although the guidance recommends that school districts prioritize taking action if lead levels from water fountains and other outlets used for consumption exceed 20 ppb (based on a 250 milliliter water sample), EPA officials told us when the guidance was originally developed in response to the 1988 LCCA requirement, the agency did not have information available to recommend an action level specifically designed for schools. Furthermore, EPA officials told us that the action level in the 3Ts guidance is not a health-based standard. However, there are statements in the guidance that appear to suggest otherwise. For example, the guidance states that EPA strongly recommends that all water outlets in all schools that provide water for drinking or cooking meet a “standard” of 20 ppb lead or less and that school officials who follow the steps included in the document, including using a 20 ppb action level, will be “assured” that school facilities do not have elevated lead in the drinking water. The use of the terms “standard” and “assured” are potentially misleading and could suggest that the 20 ppb action level is protective of health. Further, state and school district officials may be familiar with the 15 ppb action level (based on a 1 liter water sample) for public water systems aimed at identifying system-wide problems under the LCR, which may also create confusion around the 20 ppb action level included in the 3Ts guidance. According to our survey, an estimated 67 percent of school districts reported using an action level less than the 20 ppb recommended in the 3Ts guidance. We found that nearly half of school districts used action levels between 15 ppb and 19 ppb. Although these action levels— the 20 ppb from the 3Ts guidance and the 15 ppb from the LCR—are intended for different purposes, the difference creates confusion for some state and school district officials. Also, according to our survey, an estimated 56 percent of school districts reported they would find it helpful to have clearer guidance on what level of lead to use as the action level for deciding to take steps to remediate lead in drinking water. In addition, officials we interviewed in four of the five states we visited said there is a need for clearer guidance on the action level. EPA officials agreed that the difference between the two action levels creates confusion for states and school districts. In addition to wanting clearer guidance on choosing lead action levels, about half of the school districts we surveyed said they would also like additional information to help inform their lead testing and remediation programs. Specifically, school districts reported that they want information on a recommended schedule for lead testing, how to remediate elevated lead levels, and information associated with testing and remediation costs (see fig. 9). For example, an estimated 54 percent of school districts responded that they would like additional information on a testing schedule, as did officials in 10 of the 17 school districts and one of the five states we interviewed. EPA’s 3Ts guidance does not include information to help school districts determine a schedule for retesting their schools. Officials in one school district told us they need information for determining retesting schedules for lead in their school drinking water, and that—without guidance—they chose to retest every 5 years, acknowledging that this decision was made without a clear rationale. Further, an estimated 62 percent of school districts reported wanting additional information on remedial actions to take to address elevated lead. For example, officials from the Massachusetts Department of Environmental Protection told us that they would like additional guidance on evaluating remedial actions to address elevated lead in the fixtures or the plumbing system. Officials with EPA’s Office of Ground Water and Drinking Water hold quarterly meetings with regional officials to obtain input on potential improvements to the 3Ts guidance, but have not made any revisions. EPA has not substantially updated the 3Ts guidance since October 2006 and does not have firm plans or time frames for providing additional information, including on the action level and other key topics such as a recommended schedule for testing. EPA officials said that they may update the 3Ts guidance before the LCR is updated, but did not provide a specific time frame for doing so. EPA has efforts underway to reconsider the action level for the LCR, which may include a change in the action level from one that is based on technical feasibility, to one that also considers lead exposure in vulnerable populations such as infants and young children, which EPA refers to as a health-based benchmark. EPA anticipates issuing comprehensive revisions to the LCR by February 2020. While the 3Ts guidance is not contingent on the LCR, EPA officials told us they would consider updates to the 3Ts guidance, including the 20 ppb action level, as they consider revisions to the LCR. By updating the 3Ts guidance to include an action level for school districts that incorporates available scientific modeling regarding vulnerable population exposures, EPA could have greater assurance that school districts are able to limit children’s exposure to lead. EPA has emphasized the importance of addressing elevated lead levels in school drinking water through its 3Ts guidance, but has not communicated necessary information about action levels and other key topics consistent with the external communication standard under federal standards for internal control. According to EPA, CDC, and others, eliminating sources of lead before exposure can occur is considered the best strategy to protect children from potential adverse health outcomes. EPA officials also told us that clear guidance is important because testing for lead in drinking water requires technical expertise. But without providing interim or updated guidance to help school districts choose an action level for lead remediation EPA will continue to provide schools with confusing information regarding whether to remediate, which may not adequately limit potential lead exposure to students and staff. Furthermore, without important information on key topics, such as a recommended schedule for lead testing, how to remediate elevated lead levels, and information associated with testing and remediation costs school districts are at risk of making misinformed decisions regarding their lead testing and remediation efforts. Education Has Not Played a Significant Role in Lead Testing and Remediation in Schools or Collaborated with EPA on These Efforts Education has not played a significant role in supporting state and school districts efforts to test for and remediate lead in school drinking water, and there has been limited collaboration between Education and EPA, according to officials. In 2005, Education, EPA, CDC, and other entities involved with drinking water signed the Memorandum of Understanding on Reducing Lead Levels in Drinking Water in Schools and Child Care Facilities (the memorandum) to encourage and support schools’ efforts to test for lead in drinking water and to support actions to reduce children’s exposure to lead. According to the memorandum, Education’s role is to identify the appropriate school organizations with which to work and facilitate dissemination of materials and tools to schools in collaboration with EPA. In addition, EPA’s role is to update relevant guidance documents for school districts—resulting in the production of the 3Ts guidance in 2006—raising awareness, and collaborating with other federal agencies and associations, among other things. Education officials told us that the agency does not have any ongoing efforts related to implementing the memorandum. However, Education and EPA officials were not aware of the memorandum being terminated by either agency and told us the memorandum remains in effect. Although Education does not have any ongoing efforts related to implementing the memorandum, the agency’s websites, including the Readiness and Emergency Management for Schools Technical Assistance Center (REMS TA Center) website, and the Green Strides portal, provide links to EPA guidance and webinars on lead testing and remediation. The REMS TA Center website, which is largely focused on emergency management planning, includes a link to EPA’s 3Ts guidance and other resources on lead exposure and children, but does not provide information regarding the importance of testing for lead in school drinking water. Education’s Green Strides portal includes a link to a number of EPA’s webinars on lead in school drinking water, but does not include all of the quarterly webinars started in June 2017 to highlight school district efforts to test for lead. An Education official told us that these EPA webinars are identified by Education without coordinating with EPA officials. Further, when searching on Education’s website for lead in school drinking water, the 3Ts guidance does not show up. Education officials acknowledged that information regarding lead testing and remediation is difficult to find on Education’s website and they could take steps to make federal guidance on lead in school drinking water more accessible. The federal government has developed guidelines to help federal agencies improve their experience with customers through websites. One such resource is Guidelines for Improving Digital Services developed by the federal Digital Services Advisory Group. It states that federal agencies should take steps to make guidance easy to find and accessible. Making guidance easy to find and accessible such as by clarifying which links contain guidance; highlighting new or important guidance; improving their websites’ search function; and categorizing guidance on Education’s websites could help raise school district awareness of the guidance, which is currently low in most areas of the country. Many school districts are not familiar with EPA guidance related to lead testing and remediation. Specifically, an estimated 60 percent of school districts reported in our survey that they were not familiar with the EPA’s 3Ts guidance. Most school district officials from our site visits told us they did not have contact with EPA prior to or during their lead testing and some said they would not have thought to go to EPA for guidance. Likewise, EPA officials reported they had received feedback from school district officials indicating that they do not know where to go for information about testing for and remediating lead in drinking water. Rather, school district officials may look to their state educational agency or Education for guidance on lead testing and remediation, as they might do when looking for guidance on other topics. Education and EPA do not regularly collaborate to support state and school districts’ efforts related to lead in school drinking water, according to EPA and Education officials. Education officials said the agency does not have a role in ensuring safe drinking water in schools, and that the mitigation of environmental health concerns in school facilities is a state and local function. Therefore, the agency does not collaborate with EPA to disseminate the 3Ts guidance beyond posting links to related guidance on their websites and newsletters. EPA officials told us they do not know which office they should collaborate with at Education. EPA regional officials also said they do not collaborate with Education to disseminate the guidance to states and school districts. However, in the 2005 memorandum, EPA and Education agreed to work together to encourage school districts to test drinking water for lead; disseminate results to parents, students, staff, and other interested stakeholders; and take appropriate actions to correct elevated lead levels. There are many school districts that have not tested for lead in school drinking water, and some conducted testing without the assistance of federal guidance—although the large majority (68 percent) of school districts who use the guidance reported finding it helpful. Officials in 11 of 17 school districts we interviewed that had conducted lead testing told us they were familiar with the 3Ts guidance and 9 of those districts said they found it helpful for designing their lead testing programs. Increased encouragement and dissemination of EPA resources about lead in school drinking water by Education and EPA could help school districts test for and remediate lead in drinking water using good practices and reduce the potential risk of exposure for students and staff. Conclusions Children are particularly at risk of experiencing the adverse effects of lead exposure from a variety of sources, including drinking water. While there is no federal law requiring lead testing for drinking water in most schools, some states and school districts have decided to test for lead in the drinking water to help protect students. However, there are a number of school districts that have not tested for lead and some that do not know if they have tested for lead in their drinking water, according to our nationwide survey. Even in states and school districts that have opted to test, officials may choose different action levels to identify elevated lead and may choose different testing protocols that do not test all fixtures in all schools. EPA has developed helpful guidance—3Ts—and webinars for states and school districts to support efforts to test and remediate lead in school drinking water. However, some EPA regional offices have not communicated the importance of testing for and remediating lead to states and school districts. By promoting further efforts to communicate the importance of lead testing to school districts to help ensure that their lead testing programs are in line with good practices, including the 3Ts guidance, regional offices that have not focused on this issue could build on the recent efforts of other regional offices to provide technical assistance and guidance and other forms of support. State and school district officials can use EPA’s 3Ts guidance to help ensure that their drinking water testing and remediation efforts are in line with good practices and said that it has been helpful for establishing their programs. However, statements in the guidance—which has not been updated in over a decade—that suggest the action level described will ensure that school facilities do not have elevated lead in their drinking water are misleading. In addition, state and school district officials told us that additional guidance—including information on a recommended schedule for retesting as well as on costs associated with testing and remediation—could help school districts make more informed decisions regarding their testing and remediation efforts. Without providing interim or updated guidance, EPA is providing schools with confusing and out of date information, which can increase the risk of school districts making uninformed decisions. EPA officials said they would consider updates to the 3Ts action level while the revisions to the LCR are being completed. However, the longer school districts are without the additional information they need to conduct their efforts in line with good practices and continue to rely on confusing and misleading information, the more challenges they will face in trying to limit children’s exposure to lead. After EPA revises the LCR, the agency would have greater assurance that school districts are limiting children’s exposure to lead by considering whether to develop, as part of its guidance, a health-based level for schools that incorporates available scientific modeling regarding vulnerable population exposures. Finally, although Education provides information to states and school districts on lead testing and remediation through the agency’s websites, that information is difficult to find. Further, Education’s website does not include all of EPA’s quarterly webinars to highlight school district efforts to test for lead. By making guidance accessible, Education could improve school district awareness of EPA resources about lead in school drinking water. In addition, EPA and Education should improve their collaboration to encourage and support lead testing and remediation efforts by states and school districts. EPA has the expertise to develop guidance and provide technical assistance to states and school districts, while Education, based on its mission to promote student achievement, should collaborate with EPA to disseminate guidance and raise awareness of lead in drinking water as an issue that could impact student success. Although over one-third of districts that tested found elevated levels of lead, many districts have still not been tested. Unless EPA and Education encourage additional school districts to test for lead, many students and school staff may be at risk of lead exposure. Recommendations for Executive Action We are making a total of seven recommendations, including five to EPA and two to Education: The Assistant Administrator for Water of EPA’s Office of Water should promote further efforts to communicate the importance of testing for lead in school drinking water to address what has been a varied approach by regional offices. For example, the Assistant Administrator could direct those offices with limited involvement to build on the recent efforts of several regional offices to provide technical assistance and guidance, and other forms of support. (Recommendation 1) The Assistant Administrator for Water of EPA’s Office of Water should provide interim or updated guidance to help schools choose an action level for lead remediation and more clearly explain that the action level currently described in the 3Ts guidance is not a health-based standard. (Recommendation 2) The Assistant Administrator for Water of EPA’s Office of Water should, following the agency’s revisions to the LCR, consider whether to develop a health-based level, to include in its guidance for school districts, that incorporates available scientific modeling regarding vulnerable population exposures and is consistent with the LCR. (Recommendation 3) The Assistant Administrator for Water of EPA’s Office of Water should provide information to states and school districts concerning schedules for testing school drinking water for lead, actions to take if lead is found in the drinking water, and costs of testing and remediation. (Recommendation 4) The Assistant Secretary for Elementary and Secondary Education should improve the usability of Education’s websites to ensure that the states and school districts can more easily find and access federal guidance to address lead in school drinking water, by taking actions such as clarifying which links contain guidance; highlighting new or important guidance; improving their websites’ search function; and categorizing guidance. (Recommendation 5) The Assistant Administrator for Water of EPA’s Office of Water and the Director of the Office of Children’s Health Protection should collaborate with Education to encourage testing for lead in school drinking water. This effort could include further dissemination of EPA guidance related to lead testing and remediation in schools or sending letters to states to encourage testing in all school districts that have not yet done so. (Recommendation 6) The Assistant Secretary for Elementary and Secondary Education should collaborate with EPA to encourage testing for lead in school drinking water. This effort could include disseminating EPA guidance related to lead testing and remediation in schools or sending letters to states to encourage testing in all school districts that have not yet done so. (Recommendation 7) Agency Comments We provided a draft of this report to EPA, Education, and CDC for review and comment. EPA and Education provided written comments that are reproduced in appendixes VII and VIII respectively. EPA also provided technical comments, which we incorporated as appropriate. CDC did not provide comments. We also provided relevant excerpts to selected states and incorporated their technical comments as appropriate. In its written comments, EPA stated that it agreed with our recommendations and noted a number of actions it plans to take to implement them. For example, EPA said its Office of Ground Water and Drinking Water is holding regular meetings with regional offices and other EPA offices to obtain input on improving the 3Ts guidance. Potential revisions include updates to implementation practices, the sampling protocol, and the action level, including clarifying descriptions of different action levels and standards. Also, EPA said that while it has not yet determined the role of a health-based benchmark for lead in drinking water in the revised LCR, it sees value in providing states, drinking water systems, and the public with a greater understanding of the potential health implications for vulnerable populations of specific levels of lead in drinking water. EPA said it would continue to reach out to states and schools to provide information, technical assistance, and training and will continue to make the 3Ts guidance available. EPA also said it would work with Education to ensure that school districts and other stakeholders are aware of additional resources EPA is developing. In its written comments, Education stated that it agreed with our recommendations and noted a number of actions it plans to take to implement them. In response to our recommendation to improve Education’s websites, Education said it would identify and include an information portal dedicated to enhancing the usability of federal resources related to testing for and addressing lead in school drinking water. Also, Education said it is interested in increasing coordination across all levels of government and it shares the view expressed in our report that improved federal coordination, including with EPA, will better enhance collaboration to encourage testing for lead in school drinking water. Education said it would develop a plan for disseminating relevant resources to its key stakeholder groups and explore how best to coordinate with states to disseminate EPA’s guidance on lead testing and remediation to school districts. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, the Administrator of the Environmental Protection Agency, the Secretary of Education, the Director of the Centers for Disease Control and Prevention, and other interested parties. In addition, the report will be 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 us at (617) 788-0580 or nowickij@gao.gov or (202) 512-3841 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 IX. Appendix I: Objectives, Scope, and Methodology In this report, we examined three objectives: (1) the extent to which school districts are testing for, finding, and remediating lead in school drinking water; (2) the extent to which states require or support testing for and remediating lead in school drinking water by school districts; and (3) the extent to which federal agencies are supporting state and school district efforts to test for and remediate lead. To address these objectives, we conducted a web-based survey of school districts, interviews with selected state and school district officials, a review of applicable requirements in selected states, a review of relevant federal laws and regulations, and interviews with federal agency officials and representatives of stakeholder organizations. We conducted this performance audit from October 2016 through July 2018 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. Web-based Survey of School Districts To examine the extent to which school districts are testing for and remediating lead in school drinking water, we designed and administered a generalizable survey of a stratified random sample of U.S. local educational agencies (LEA), which we refer to as school districts throughout the report. The survey included questions about school district efforts to test for lead in school drinking water, such as the number of schools in which tests were conducted, the costs of testing, and whether parents or others were notified about the testing efforts. We also asked questions about remediation efforts, such as whether lead was discovered in school drinking water, the specific remediation efforts that were implemented, and whether parents or others were notified about the remediation efforts. Further, we asked about officials’ familiarity with the Environmental Protection Agency’s (EPA) guidance entitled 3Ts for Reducing Lead in Drinking Water in Schools, (3Ts guidance) whether the guidance was used, and the extent to which it was helpful in conducting tests, remediating lead, and communicating with parents and others. We directed the survey to school district superintendents or other cognizant officials, such as facilities directors. See appendix II which includes the survey questions and estimates. We defined our target population to be all school districts in the 50 U.S. states and the District of Columbia that are not under the jurisdiction of the Department of Defense or Bureau of Indian Education. We used the LEA Universe database from Department of Education’s (Education) Common Core of Data (CCD) for the 2014-2015 school year to our sampling frame. For the purpose of our survey, our sample was limited to school districts that: were located in the District of Columbia or the 50 states; had a LEA type code of 1, 2, 4, 5, 7, and 8; had one or more schools and one or more students; and were not closed according to the 2014-2015 School Year. The resulting sample frame included 16,452 school districts and we selected a stratified random sample of 549 school districts. We stratified the sampling frame into 13 mutually exclusive strata based on urban classification and poverty classification. We further stratified the school districts classified as being in a city by charter status. We selected the largest 100 school districts with certainty. We determined the minimum sample size needed to achieve precision levels of plus or minus 12 percentage points or fewer, at the 95 percent confidence level. We then increased the sample size within each stratum for an expected response rate of 70 percent. We defined the three urban classifications based on the National Center for Education Statistics (NCES) urban-centric locale code. To build a general measure of the poverty level for each school district we used the proportion of students eligible for free or reduced-price lunch (FRPL) as indicated in the CCD data and classified these into the following three groups: High-poverty – More than 75 percent of students in the school district were eligible for FRPL; Mid-poverty – Between 25.1 and 75.0 percent of students in the school district were eligible for FRPL; and Low-poverty – 25 percent or fewer students in the school district were eligible for FRPL. We assessed the reliability of the CCD data by reviewing existing documentation about the data and performing electronic testing on required data elements and determined they were sufficiently reliable for the purpose of our report. We administered the survey from July to October 2017 (the survey asked school districts to report information based on the 12 months prior to their completing the survey.) To obtain the maximum number of responses to our survey, we sent reminder emails to nonrespondents and contacted nonrespondents over the telephone. We identified that four of the 549 sampled school districts were closed and one was a “cyber-school” with no building, so these were removed from the sample. Of the remaining 544 eligible sampled school districts, we received valid responses from 373, resulting in an unweighted response rate of 68 percent. We conducted an analysis of our survey results to identify potential sources of nonresponse bias using a multivariate logistic regression model. We examined the response propensity of the sampled school districts by several demographic characteristics. These characteristics included poverty, urbanicity, and charter status. We did not find any other population characteristics significantly affected survey response propensity except those used in stratification (charter schools and the largest 100 school districts). Based on the response bias analysis and the 68 percent response rate across stratum, we determined that estimates based on adjusted weights reflecting the response rate are generalizable to the population of eligible school districts and are sufficiently reliable for the purposes of this report. We took steps to minimize non-sampling errors, including pretesting draft instruments and using a web-based administration system. As we began to develop the survey, we met with officials from seven school districts to explore the feasibility of responding to the survey questions. We then pretested the draft instrument from April to June 2017 with officials in eight school districts—including one charter school district—in cities and suburbs in different states. In the pretests, we asked about the clarity of the questions and the flow and layout of the survey. The EPA also reviewed and provided us comments on a draft version of the survey. Based on feedback from the pretests and EPA’s review, we made revisions to the survey instrument. To further minimize non-sampling errors, we used a web-based survey, which allowed respondents to enter their responses directly into an electronic instrument. Using this method automatically created a record for each respondent and eliminated the errors associated with a manual data entry process. We express the precision of our particular sample’s results as a 95 percent confidence interval (for example, plus or minus 10 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that each of the confidence intervals in this report will include the true values in the study population. To analyze differences in the percentages of school districts that reported they tested for lead in school drinking water and those that discovered lead, we compared weighted survey estimates generated for school districts in different levels of the following subgroups: Poverty: low poverty, mid poverty, and high poverty; Racial composition: majority-minority and majority white; Region: Northeast, South, Midwest, and West; Population density: urban, suburban, and rural/town; Urban charter school: in urban areas, charter district and non-charter Largest 100: largest 100 districts (based on student enrollment) and all other districts. For each subgroup, we produced percentage estimates and standard errors for each level and used these results to confirm the significance of the differences between weighted survey estimates. Site Visits to School Districts and Interviews with State and School District Officials To examine school districts’ testing and remediation efforts and state support of those efforts, we conducted site visits in five states—Georgia, Illinois, Massachusetts, Oregon, and Texas—from February to October 2017. We selected these states because they varied in the extent to which they required testing of school drinking water for lead and they are located in geographic areas covered by different EPA regional offices. Within these states, we selected 17 school districts that had tested for lead in school drinking water and to achieve variation in the size and population density (urban, suburban, and rural) of the district as well as including one charter school district. Site visits generally consisted of interviews with officials in state agencies and school districts and officials in the local EPA regional office: State interviews: We interviewed officials in state environment, education, and health agencies, depending on whether they had information related to school district testing for lead in school drinking water in their state. The topics we discussed were the agencies’ roles and responsibilities related to testing for and remediation of lead in school drinking water, any related state requirements, policies, and guidance, communication and public notification about testing and remediation efforts and, as appropriate, coordination among multiple state agencies. We also discussed similar topics related to lead-based paint. In Massachusetts, we interviewed representatives with the University of Massachusetts, because of their role in implementing the state’s program to support school district efforts to test for lead in school drinking water. School Districts: Within the five site visit states, we interviewed officials in 14 school districts in person and in three school districts by phone (because we were not able to meet with them in person). We also selected one charter school that functions as its own school district which had conducted tests for lead in school drinking water. Similar to our school district survey, the interview topics we discussed with district officials included testing for and remediation of lead in school drinking water, use of guidance (such as the 3Ts guidance) and efforts to communicate or coordinate with any federal, state, or local agencies, including any other school districts. Within 13 of the school districts, we visited at least one school in which the district had tested for lead in drinking water and, as needed, took remedial action in order to gain an in-depth understanding of their testing and remediation efforts. EPA Regional Offices: We interviewed officials in all 10 EPA Regional offices. We met in-person with officials in the regional offices 1, 4, 5, and 6 and conducted phone interviews with officials in regional offices 2, 3, 7, 8, 9, and 10. We generally discussed EPA officials’ roles and responsibilities related to testing for lead in school drinking water and paint and efforts in states and school districts in their region. Information we gathered from these interviews, while not generalizable, represents the conditions present in the states and school districts at the time of our interviews and may be illustrative of efforts in other states and school districts. Review of State Requirements As part of our effort to examine school districts’ testing and remediation efforts and state support of those efforts, we reviewed related state requirements. To determine whether states had related requirements, we asked all EPA regional offices if states in their region had requirements related to testing for lead in school drinking water. EPA provided examples of eight states (California, Illinois, Maryland, Minnesota, New Jersey, New York, Virginia, and the District of Columbia that had such requirements. We reviewed relevant laws, regulations, and policy documents for these states. We then confirmed the details of the related requirements with the appropriate state officials via structured questionnaires. Also, we used available documentation to corroborate and verify the testing requirements of the states that EPA identified. GAO did not conduct an independent search of state laws. Review of Federal Laws and Regulations, and Interviews with Federal Agency Officials To examine the extent to which federal agencies have collaborated in supporting state and school district efforts to test for and remediate lead, we reviewed relevant federal laws, including the Water Infrastructure Improvements for the Nation Act of 2016, Reduction of Lead in Drinking Water Act of 2011, the Safe Drinking Water Act of 1974, as amended, and the Lead Contamination Control Act of 1988; regulations, such as the Lead and Copper Rule; and guidance, such as the 3Ts guidance. We also reviewed documentation including the Memorandum of Understanding on Reducing Lead Levels in Drinking Water in Schools and Child Care Facilities signed in 2005 by EPA, Education and the Centers for Disease Control and Prevention (CDC); Federal Partners in School Health Charter; EPA training webinar information; and other relevant guidance including the 3Ts guidance tool kit. We interviewed officials from EPA’s Office of Ground Water and Drinking Water and Office of Children’s Health Protection and officials in all 10 of EPA regional offices regarding their approach to providing support to states and school district on lead testing and remediation. We interviewed officials from Education’s Office of Safe and Healthy Students and officials from the CDC. During these interviews, we interviewed officials about the Memorandum of Understanding and about the Federal Partners in School Health initiative, both of which represent collaborative efforts that address lead in school drinking water, among other topics. We evaluated federal efforts to collaborate and support lead testing and remediation in schools against federal standards for internal control, which call for agencies to communicate quality information to external parties, among other things. We also evaluated federal efforts against the Memorandum of Understanding, in which EPA, Education, and CDC agreed to encourage testing drinking water for lead and communicate with key stakeholders, among other things. Interviews with Stakeholder Organizations To inform all of our research objectives, we interviewed representatives with the National Conference of State Legislatures, National Center for Healthy Housing, National Alliance of Public Charter Schools, the DC Public Charter School Board, and the 21st Century School Fund. We also attended a workshop entitled “Eliminating Lead Risks in Schools and Child Care Facilities” in December 2017. Appendix II: Survey of Lead Testing and Remediation Efforts The questions we asked in our survey of local educational agencies (referred to in this report as school districts) are shown below. Our survey was comprised of closed- and open-ended questions. In this appendix, we include all survey questions and aggregate results of responses to the closed-ended questions; we do not provide information on responses provided to the open-ended questions. Estimates noted with superscript “a” are based on 20 or fewer responses and were not included in our findings. For a more detailed discussion of our survey methodology, see appendix I. 1. Do any schools in your local educational agency (LEA) obtain drinking water from a public water system such as a city or municipal water plant? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) No (Skip to 20) Don’t know (Skip to 20) Section B: Testing for Lead in School Drinking Water 2. Is there a requirement that the drinking water in your LEA’s schools be tested for lead? (Please answer “Yes” regardless of whether that requirement comes from your state, municipality, local educational agency or any other governmental entity.) (Check one.) 95 percent confidence interval – lower bound (percentage) 3. Regardless of whether your LEA is required to test for lead in school drinking water, have tests been conducted for lead in the drinking water in at least one of your schools in the past 12 months? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If yes to 3: 3A. What is the number of schools in which tests were conducted in the past 12 months? Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 3B. About how many samples were taken from sources of drinking water such as water fountains and sinks in each school? (Check one.) 95 percent confidence interval – lower bound (percentage) 3C. Did any of the following develop the sampling plan, draw the samples of water, and analyze the samples? (Check all that apply.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 3D. What size samples were taken? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3D: What sample size was used? 3E: To the best of your knowledge, did the personnel drawing or analyzing samples follow a testing protocol that offers guidance on developing the sampling plan, drawing samples of water, or analyzing samples? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) No (Skip to 3F) Don’t know (Skip to 3F) If ‘yes’ to 3E: a. To the best of your knowledge, were any of the following entities involved in developing the protocol? (Check one per row.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) Contractor / water testing company EPA or another federal government agency A local government agency (aside from your LEA) If ‘other’ to 3Eh: What other entities were involved in developing the protocol? 3F. If tests were conducted in some schools in your LEA in the past 12 months—but were not conducted in every school—how was it determined which schools would be tested? (Check one per row.) Not applicable: tests were conducted in every school (Skip to 3G) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3Fe: In what other ways did your LEA use to determine which schools would be tested? 3G. How much do you estimate your LEA has spent on testing for lead in school drinking water in the past 12 months? (Please answer this question for lead testing only; the survey asks about expenditures to address concerns identified through testing later. Also, please include materials, labor, and any other expenditures related to lead testing in your estimate.) Estimated Number (Median) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 3H. Did your LEA use any of the following sources of funding for the testing in the past 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3H: What other sources of funding did your LEA use? 3I. In the past 12 months, did your LEA notify the following groups that it was planning to test for lead in school drinking water before conducting the tests? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) General public (e.g., media) If ‘other’ to 3I: What other groups did your LEA notify that it was planning to test for lead in school drinking water before conducting the tests? 3J. In the past 12 months, did your LEA report the testing results to the following groups after completing the tests? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) General public (e.g., media) If ‘other’ to 3J: To what other groups did your LEA report the testing results? 3K. If ‘no’ to 3: Were any of the following a reason your LEA did not conduct any tests in any schools in the last 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3K: For what other reasons did your LEA not conduct any tests in any schools in the last 12 months? 4. Does your LEA have a schedule for recurring tests to determine the amount of lead in the drinking water in your schools within any of the following time frames? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) Section C: Remediation of Lead in School Drinking Water 5. Has your LEA discovered any level of lead in the drinking water of any of your schools (as a result of testing) in the last 12 months? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 5A. What lead concentration (measured in “parts per billion” or “ppb”) did your LEA use to initiate remedial action? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 5A: What lead concentration did your LEA use to initiate remedial action? 5B. In the last 12 months, how many schools had at least one test result–including as few as one sample in one school–greater than the lead level your LEA used to initiate action? (Please answer regardless of whether these results were discovered in the first of multiple rounds of testing.) 5C.To address lead discovered in school drinking water, has your LEA taken any of the following actions in any of your schools in the past 12 months? 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 5D. If ‘no’ to every item in 5C: What are the reasons why your LEA has not taken actions in any of your schools in the past 12 months? 5E. If ‘yes’ to any item in 5C: How much do you estimate your LEA has spent on taking actions in the past 12 months? (Please include materials, labor, and any other expenditures related to lead remediation in your estimate.) Estimated Number (Median) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 5F. Did your LEA use any of the following sources of funding to take actions in the past 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 5F: What other sources of funding did your LEA use to take actions in the past 12 months? 5G. Did your LEA notify the following groups about its actions in the past 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) General public (e.g., media) If ‘other’ to 5G: What other groups has your LEA notified about its remedial actions in the past 12 months? 6. Does your LEA have a schedule to flush the water system as a result of concerns about lead in drinking water in at least one of your schools within any of the following time frames? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 7. Does your LEA have plans to take actions to eliminate or reduce lead in school drinking water (for example, replace drinking water fountains, replace pipes) in at least one of your schools? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘according to a schedule’ to 7: how would you describe the schedule that your LEA has developed? Section D: Guidance Regarding Lead Testing and Remediation 8. Prior to receiving this survey, were you familiar with guidance issued by the U.S. Environmental Protection Agency entitled “3Ts for Reducing Lead in Drinking Water in Schools”? (Please answer “Yes” if you had read or used the”3Ts” prior to receiving this survey.) (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8: did your LEA (or a contractor working on behalf of your LEA) follow or refer to “3Ts” during your efforts to test for or remediate lead in school drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8A: How helpful was 3Ts for conducting tests for lead in your schools’ drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8A: How helpful was 3Ts for remediating lead in your schools’ drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8A: How helpful was 3Ts for communicating with parents and other stakeholders about lead in your schools’ drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) What else, if anything, would make 3Ts more helpful? 9. Did your LEA (or a contractor working on behalf of your LEA) use any other guidance (for example, best practices, manuals, protocols, webinars) in your LEA’s efforts to test for lead in your schools’ drinking water, take remedial actions, or for notification purposes? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) What other guidance was used? 10. Would your LEA find any of the following helpful? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) Clearer guidance on a level of lead in school drinking water at which we should take action Additional guidance on determining a schedule for 41 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) regularly testing for lead in school drinking water Additional guidance on actions to take if lead is found in school drinking water Information on the costs of testing for lead in school drinking water Information on the costs of remediating lead in school drinking water 18 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other guidance or information’ to 10: What other guidance or information would be helpful? Section E: Inspecting Schools for Lead Based Paint Section F: Remediation of Lead Based Paint in Schools Section G: Other Questions 16. How many schools are owned or operated by your LEA? Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 17. How many schools in your LEA were built before 1986? (If a building has additions, we mean the original structure/the original part of the building.) Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 18. How many schools in your LEA were built before 1978? (If a building has additions, we mean the original structure/the original part of the building.) Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 19. Is there anything else you would like to share with us regarding lead testing, inspection, or remediation efforts in your school or LEA (drinking water or paint)? 20. What is the name, title, e-mail address, and telephone number of the person responsible for completing this survey? Section H: Completion 21. Please check one of the options below. Clicking on “Completed” indicates that your answers are official and final. Your answers will not be used unless you have done this. (Check one.) 95 percent confidence interval – lower bound (percentage) Appendix III: Lead Testing and Remediation in Charter School Districts Charter schools comprise a small but growing group of public schools. In contrast to most traditional public schools, many charter schools are responsible for financing their own buildings and other facilities. As a result, charters schools vary in terms of whether they own their own building or pay rent, and whether they operate in buildings originally designed as a school or in buildings which have been redesigned for educational purposes. Sometimes charter schools may also share space in their building with others, such as non-profit organizations. In addition to differences in facility access and finance, charter school governance also varies. In some states, charter schools function as their own school district, while in other states, charter schools have the option to choose between being a distinct school district or part of a larger school district. To determine the extent to which charter school districts were testing for lead in school drinking water and finding and remediating lead, our survey included charter school districts in two ways: our sampling design included three strata specifically for charter school districts in urban areas; in addition, charter school districts were retained in the sampling population, such that they could be randomly selected in our other strata. While we generally received too few responses from charter school districts to report their data separately, we are able to estimate that about 36 percent of charter school districts tested for lead in school drinking water. To learn more about experiences of charter schools, we visited one charter school district and interviewed representatives of the DC Public Charter School Board (DC PCSB). The charter school district we visited consisted of one charter school in a building it leased. The school had 10 sources of consumable water, all of which were tested in 2016 and were found to have lead below the district’s selected action level of 15 parts per billion. Before testing, district officials met with the building owner who agreed to cover the cost of any remediation. Officials with the DC PCSB told us that it paid to have tests conducted in every charter school in the District of Columbia. According to DC PCSB officials, between March and June 2016, 95 charter schools were tested, and lead above their action level of 15 parts per billion was discovered in 20 schools. Officials estimated their testing costs to be about $100,000, which was subsequently reimbursed by the District of Columbia’s Office of State Superintendent of Education. They also said that charter schools were responsible for taking steps to remediate the lead and recommended schools flush their water systems and use filters. Appendix IV: Testing Components for Eight States That Require School Districts to Test for Lead in Drinking Water Action level and sample size Not specified Communication of results Not specified 5 ppb in a 250 ml sample (from filtered fixture) Appendix V: EPA Guidance to the Public on Reducing Lead in Drinking Water The Environmental Protection Agency (EPA) provides information on its website for the public on lead in drinking water. EPA’s website includes, among other documents, a December 2005 brochure for the public and school districts entitled “3Ts for Reducing Lead in Drinking Water in Schools” (see fig.10). Appendix VI: Memorandum of Understanding between EPA, Education, CDC, and Related Associations on Reducing Lead in School Drinking Water Effective June 2005 Appendix VII: Comments from the Environmental Protection Agency Appendix VIII: Comments from the Department of Education Appendix IX: GAO Contacts and Staff Acknowledgments GAO Contacts Staff Acknowledgments In addition to the individuals named above, Diane Raynes (Assistant Director), Scott Spicer (Assistant Director), Jason Palmer (Analyst-in- Charge), Amanda K. Goolden, Rich Johnson, Grant Mallie, Jean McSween, Dae Park, James Rebbe, Sarah M. Sheehan, and Alexandra Squitieri made significant contributions to this report. Also contributing to this report were Susan Aschoff, David Blanding, Mimi Nguyen, Tahra Nichols, Dan C. Royer, Kiki Theodoropoulos, and Kim Yamane. Related GAO Products Lead Paint in Housing: HUD Should Strengthen Grant Processes, Compliance Monitoring, and Performance Assessment. GAO-18-394. Washington, D.C.: June 19, 2018. Drinking Water: Additional Data and Statistical Analysis May Enhance EPA’s Oversight of the Lead and Copper Rule. GAO-17-424. Washington, D.C.: September 1, 2017. Environmental Health: EPA Has Made Substantial Progress but Could Improve Processes for Considering Children’s Health. GAO-13-254. Washington, D.C.: August 12, 2013. Lead in Tap Water: CDC Public Health Communications Need Improvement. GAO-11-279. Washington, D.C.: March 14, 2011. Environmental Health: High-level Strategy and Leadership Needed to Continue Progress toward Protecting Children from Environmental Threats. GAO-10-205. Washington, D.C.: January 28, 2010. Drinking Water: EPA Should Strengthen Ongoing Efforts to Ensure That Consumers Are Protected from Lead Contamination. GAO-06-148. Washington, D.C.: January 4, 2006.

Why GAO Did This Study No federal law requires testing of drinking water for lead in schools that receive water from public water systems, although these systems are regulated by the EPA. Lead can leach into water from plumbing materials inside a school. The discovery of toxic levels of lead in water in Flint, Michigan, in 2015 has renewed awareness about the danger lead exposure poses to public health, especially for children. GAO was asked to review school practices for lead testing and remediation. This report examines the extent to which (1) school districts are testing for, finding, and remediating lead in drinking water; (2) states are supporting these efforts; and (3) federal agencies are supporting state and school district efforts. GAO administered a web-based survey to a stratified, random sample of 549 school districts, the results of which are generalizable to all school districts. GAO visited or interviewed officials with 17 school districts with experience in lead testing, spread among 5 states, selected for geographic variation. GAO also interviewed federal and state officials and reviewed relevant laws and documents. What GAO Found An estimated 43 percent of school districts, serving 35 million students, tested for lead in school drinking water in 2016 or 2017, according to GAO's nationwide survey of school districts. An estimated 41 percent of school districts, serving 12 million students, had not tested for lead. GAO's survey showed that, among school districts that did test, an estimated 37 percent found elevated lead (lead at levels above their selected threshold for taking remedial action.) (See figure.) All school districts that found elevated lead in drinking water reported taking steps to reduce or eliminate exposure to lead, including replacing water fountains, installing filters or new fixtures, or providing bottled water. According to the Environmental Protection Agency (EPA), at least 8 states have requirements that schools test for lead in drinking water as of 2017, and at least 13 additional states supported school districts' voluntary efforts with funding or in-kind support for testing and remediation. In addition, the five states GAO visited provided examples of technical assistance to support testing in schools. EPA provides guidance and other resources to states and school districts regarding testing and remediating lead in drinking water, and the Department of Education (Education) provides some of this information on its websites. School district officials that used EPA's written guidance said they generally found it helpful. Although EPA guidance emphasizes the importance of addressing elevated lead levels, GAO found that some aspects of the guidance, such as the threshold for taking remedial action, were potentially misleading and unclear, which can put school districts at risk of making uninformed decisions. In addition, many school districts reported a lack of familiarity with EPA's guidance, and their familiarity varied by region of the country. Education and EPA do not regularly collaborate to support state and school district efforts on lead in drinking water, despite agreeing to do so in a 2005 memorandum of understanding. Such collaboration could encourage testing and ensure that more school districts will have the necessary information to limit student and staff exposure to lead. What GAO Recommends GAO is making seven recommendations, including that EPA update its guidance on how schools should determine lead levels requiring action and for EPA and Education to collaborate to further disseminate guidance and encourage testing for lead. EPA and Education agreed with the recommendations.

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Background The Settlement Act, enacted on December 22, 1974, was intended to provide for the final settlement of a land dispute between the Navajo and Hopi tribes that originated nearly a century ago. The 1882 Executive Order, signed by President Chester Arthur, set aside approximately 2.5 million acres of land for the Hopi and “such other Indians as the Secretary of the Interior may see fit to settle thereon.” Since that time, the Navajo and Hopi tribes have disputed the rights and occupancy of the lands. In a 1962 court case, Healing v Jones, the Hopi tribe claimed exclusive rights to the entire reservation, and the Navajo claimed exclusive rights to about 80 percent of the reservation. In 1963, the U.S. Supreme Court affirmed an Arizona District Court decision that set aside about 631,000 acres of the land—known as District Six—as exclusively Hopi and designated the remaining about 1.9 million acres as a joint use area, to be managed and used jointly by the two tribes. The two tribes legally co-owned the joint use area, but the use of the land remained a source of disputes between the two tribes. The Settlement Act authorized the partitioning of the surface of the joint use area and directed that it generally be split evenly between the tribes. It required Navajo households residing on lands partitioned to the Hopi Tribe (Hopi Partitioned Lands) to relocate and, similarly, Hopi households residing on lands partitioned to the Navajo Nation (Navajo Partitioned Lands) to relocate. Figure 1 illustrates the current Navajo and Hopi reservations. Figure 2 illustrates the portion of the reservation near Tuba City, Arizona, that was subject to the land dispute, the area that was designated as exclusively Hopi (District Six), and the partitioned lands. Selected Settlement Act Provisions and ONHIR’s Responsibilities and Structure The Settlement Act and its subsequent amendments contain several key provisions for relocation and other activities. Relocation. The Settlement Act mandated that ONHIR submit a report, including a detailed plan, to Congress concerning the relocation of households and members of each tribe from lands partitioned to the other tribe. ONHIR stated that it has no authority to require any person to leave the land that was awarded to the other tribe. The act instructed that the relocation process be completed 5 years after the relocation plan took effect. The report and plan, which ONHIR transmitted to Congress in April 1981, provided details on relocation of households and their members, including generating names of those residing on the partitioned lands and identifying sites for relocation, among other things. The relocation was scheduled to be completed by July 1986. Specifically, the relocation benefits include $130,000, adjusted to current construction and housing development costs, for a household of three or fewer and $136,000 for a household of four or more to obtain a decent, safe, and sanitary replacement home, in addition to moving expenses and, within the first few years, bonus payments provided within the first years following the relocation plan. Because there were far fewer Hopi households residing on lands partitioned to the Navajo Nation, almost all of the households relocated (about 99 percent) have been for Navajo families. Resettlement land taken into trust for the Navajo Nation. The Settlement Act as amended authorizes and directs the Secretary of the Interior to take certain lands into trust for the Navajo Nation, which would become part of the Navajo Reservation. The 1980 amendments to the Settlement Act required the border of any parcel taken into trust to be within 18 miles of the Navajo reservation’s then boundary. Most of the lands taken into trust in Arizona pursuant to the Settlement Act as amended are known as the New Lands. Navajos living on Hopi Partitioned Lands could choose to relocate to the New Lands, as well as other areas on the Navajo reservation or off-reservation. Administration and use of acquired trust land. Pursuant to the Settlement Act as amended, ONHIR administers these lands taken into trust for the Navajo Nation until relocation is complete. In contrast, Interior administers other land the federal government holds in trust for Indian tribes, including the Navajo Nation. In addition, the Settlement Act as amended requires the lands taken into trust for the Navajo Nation to be used solely for the benefit of Navajo families— known as relocatees—that at the time of the Settlement Act’s enactment had been residing on lands partitioned to the Hopi. Leasing of acquired trust land. The Navajo and Hopi Indian Relocation Amendments of 1988 transferred responsibility for issuing leases and rights-of-way for housing and related facilities on the New Lands from Interior to ONHIR. In July 1990, ONHIR issued procedures for the leasing of New Lands, including homesite and business leases, in section 1810 of its management manual. ONHIR’s regulations specify that the agency’s operation is to be governed by a management manual. Navajo Rehabilitation Trust Fund. The 1988 amendments to the Settlement Act established the Navajo Rehabilitation Trust Fund in the U.S. Treasury. The Trust Fund consists of appropriations made for the fund, deposits of income from certain trust assets, and any interest or investment income accrued. The Trust Fund is essentially a loan from the federal government to the Navajo Nation to be repaid from revenues derived from leases of the lands and minerals taken into trust in New Mexico pursuant to the Settlement Act as amended. The tribe assumed responsibility for managing the Trust Fund pursuant to the American Indian Trust Fund Management Reform Act of 1994, according to Interior officials. Under this act, neither Interior, ONHIR, nor Treasury has a role in managing or overseeing the Trust Fund once a tribe has assumed responsibility for managing it. Aside from administering the relocation activities and the lands taken into trust pursuant to the Settlement Act as amended, ONHIR also operates the Padres Mesa Demonstration Ranch. The ranch was established in fiscal year 2009 on the New Lands and teaches sustainable cattle ranching and modern livestock marketing to the Navajo. According to ONHIR officials, the ranch is on approximately 60,000 acres of trust land acquired pursuant to the Settlement Act as amended. The purpose of the ranch is to teach relocatees methods to maximize income from cattle- raising operations and be good stewards of the land. In addition to purchasing cattle, ONHIR hired an employee to manage the ranch’s operations and contract cowboys to work on the ranch. ONHIR sells the cattle raised on the ranch and uses the proceeds to help pay for ranch operations. According to ONHIR documents, from fiscal years 2009 through 2016, ONHIR obligated approximately $1.8 million for the ranch’s operation from a mixture of appropriations and cattle sale revenue. Over the same period, cattle sales generated over $1.4 million, according to ONHIR documents. The Settlement Act established a three-member commission, the Navajo and Hopi Indian Relocation Commission, to administer the relocation program. The 1988 amendment abolished the three-member Relocation Commission and established in its place ONHIR as an independent entity of the executive branch under the authority of a single Commissioner. ONHIR has not had a Commissioner since 1994 and has been under the leadership of its Executive Director. As of December 2017, ONHIR said that they had 31 employees among its three offices in Flagstaff, Sanders, and Chambers, Arizona. ONHIR was not designed to be a permanent agency, but a specific closing date has not been determined. ONHIR previously developed plans to close out its activities in 2008, according to ONHIR officials, but has continued to operate. The Settlement Act states that ONHIR will cease to exist when the President of the United States determines that its functions have been fully discharged. During a testimony at a congressional hearing in February 2016, ONHIR’s Executive Director said that ONHIR was working toward completing its work so the office can close by the end of fiscal year 2018. ONHIR has developed a draft transition plan, dated March 2017, that identifies, among other things, four areas of activity that would need to be transferred to another entity in the event of its closure in September 2018: (1) appeals and eligibility; (2) housing; (3) administration of the New Lands; and (4) the Padres Mesa Demonstration Ranch. In the draft transition plan, ONHIR primarily identified offices within Interior—including BIA, the Office of Hearings and Appeals, and the Office of the Solicitor—to take over several key activities, as well as other entities including the Department of Justice and the Navajo Nation government. In October 2017, ONHIR supplemented the draft transition plan with an implementation plan to outline the transfer of these four areas, among other things. Other Federal Agencies and Tribal Entities with Responsibilities in Indian Country BIA is generally responsible for the administration and management of land held in trust by the United States for Indians and Indian tribes. BIA provides services to 573 federally recognized tribes and about 1.9 million individual American Indians and Alaska Natives. BIA’s responsibilities include regulating grazing on trust land, leasing trust land, and maintaining roads in Indian country, among other things. BIA administers the vast majority of land held in trust for Indian tribes and has issued regulations governing leasing of and grazing on trust land that it administers, including the Hopi Partitioned Lands and the portions of the Navajo reservation that are not administered by ONHIR. BIA’s regulations do not apply to the lands acquired pursuant to the Settlement Act as amended because under the act, ONHIR is responsible for administering those lands. BIA also administers a Housing Improvement Program that funds rehabilitation of housing units. Other federal agencies, such as HUD and the Indian Health Service, provide housing assistance and infrastructure in Indian country and tribal entities, such as the Navajo Tribal Utility Authority, provide services on the Navajo reservation. HUD, through its Office of Native American Programs, awards block grants (known as the Indian Housing Block Grant program) to tribally designated housing entities, such as the Navajo Housing Authority. These grants can be used to provide housing assistance for tribal members, such as constructing homes. The Indian Health Service is authorized to provide drinking water and sanitation services to Indian homes and communities, among other things. ONHIR and the Indian Health Service have an interagency agreement to share the cost of connecting relocation homes on the reservation to water and sewer lines. Most of the electricity, water, and wastewater on the Navajo reservation are operated by the Navajo Tribal Utility Authority, an enterprise of the Navajo Nation government. Similarly, ONHIR and the Navajo Tribal Utility Authority have an interagency agreement for the construction of electrical power lines and related services for relocation homes. The Navajo Nation government makes decisions about allocation of resources, including federal grants it receives. The Navajo Nation Council hosts 24 council delegates representing 110 Navajo Nation chapters. The chapters are political subdivisions of the Navajo Nation with delegated authority to address local issues pertaining to the land and health status of their respective chapter populations. In a March 2014 report, we found each chapter could have different development priorities and approval processes for housing programs and services. In its comments on a draft of this report, ONHIR stated that more than 400 families have moved to the New Lands, and over 1,200 families have moved to locations outside the Navajo Nation. The New Lands are part of the Nahata Dziil Chapter. Housing Issues in Indian Communities We have previously found that American Indians have historically faced worse housing conditions than other socioeconomic groups. They disproportionately experience socioeconomic challenges, including high unemployment and extreme poverty, which affect housing conditions on Indian reservations and in Indian communities. Overcrowding, substandard housing, and homelessness are far more common in American Indian communities. For example, a 2017 Urban Institute report prepared for HUD found that 5.6 percent of American Indian households had problems with plumbing, 6.6 percent had problems with the kitchen, and 12 percent had problems with heating. In comparison, 1.3 percent of households in the United States had problems with plumbing, 1.7 percent had problems with the kitchen, and 0.1 percent had problems with heating. As we have previously found, common housing challenges in Indian communities are largely related to remoteness and other geographical factors, lack of adequate infrastructure, land use regulation, and other factors. Some remote areas where Indian tribes are located can present unique logistical challenges, including a lack of buildable land and limited supply of building materials. In some regions, tribes face challenges related to a lack of adequate infrastructure, such as roads, water, and sewer systems. According to Navajo Nation officials, traditionally, tribes lived a lifestyle that was connected to their traditional and ancestral lands, with homes and other structures built from natural materials and constructed in communities with extended families. For example, many of the Navajo who were on the Hopi Partitioned Lands were self-sufficient and lived in traditional homes called hogans, which are made of wooden poles, tree bark, and mud. See figure 3 for an example of a traditional home. ONHIR Has Changed Relocation Eligibility Requirements and Application Deadlines for Various Reasons, and Additional Applicants Could Still File Court Appeals ONHIR Developed an Eligibility Certification Process, and Denied Applicants Can Appeal Their Eligibility Determination ONHIR’s process for certifying applicants’ eligibility to receive relocation benefits has generally been consistent over time since ONHIR began accepting applications. All applicants must apply through ONHIR for relocation benefits and demonstrate that they meet eligibility criteria, discussed later in this report. Based on eligibility criteria, in general, a certifying officer determines whether an applicant is certified or denied. If an applicant is certified, the applicant becomes an ONHIR client for relocation. If an applicant is denied, the applicant is eligible to file for appeals—first, an administrative appeal, then an appeal with the U.S. District Court for the District of Arizona, if the administrative appeal upholds the denial decision. Figure 4 illustrates this process. If an applicant is denied, he or she can obtain assistance from the Navajo-Hopi Legal Services Program, an entity established in 1983 within the Navajo Nation’s Department of Justice to assist individual members of the Navajo and Hopi tribes who were affected by the Settlement Act. Applicants’ denial letters indicate that the applicant can seek counsel through this program; however, not all applicants are represented by counsel for the administrative hearing. As of July 2017, ONHIR had spent about $1.5 million on legal services and over $1.2 million on the hearing officer who adjudicates the administrative appeals. In addition, about $285,000 was spent for an attorney salary at the Navajo-Hopi Legal Services Program from 2009 through 2011 and, according to ONHIR officials, about $418,000 was spent on attorney fees for applicants whose eligibility for relocation benefits was reversed in the U.S. District Court. As of December 2017, ONHIR had certified more than 3,800 households since the agency began reviewing its first applicants in 1977. The certification process on average has taken about 979 days for those who were certified without a need to file for an appeal and 3,301 days for those who were certified through the appeals process (that is, those who had their denied application reversed through the appeals process). Figure 5 illustrates these time frames. ONHIR Has Extended Application Periods and Changed Eligibility Requirements for Varying Reasons For various reasons, ONHIR provided three additional application periods after the first application period deadline in 1986, which were not included in the plan ONHIR submitted to Congress. After the original deadline, ONHIR provided a second application period from April 1997 through March 2000 after the enactment of a new law, which ratified a formal agreement under which the Hopi tribe agreed to allow traditional Navajo residents to remain living on Hopi Partitioned Lands for 75 years. In conjunction, the formal agreement provided that ONHIR relocate all eligible Navajo residents on Hopi Partitioned Lands who (1) did not sign an individual agreement to remain on the land, or (2) signed but then surrendered their signed individual agreement before the February 2000 deadline. ONHIR accepted applications again from May 2005 through June 2006 (third application period) based on language in a 2005 Senate bill to provide a last chance for Navajos living on Hopi Partitioned Lands to relocate, which passed the Senate but was not enacted, according to ONHIR officials. ONHIR was not required to reopen its application process, but it chose to do so. Even though ONHIR issued relocation notices in newspapers and at chapter facilities at the time of the original application period, ONHIR officials said that the additional application periods were in recognition that not all Navajo residing on the Hopi Partitioned Lands had moved, an outcome that was not considered in the original plans. ONHIR also accepted applications from February 2008 through September 2010 (fourth application period) in response to a federal court decision that concluded that ONHIR had not provided personal notice to a potentially eligible applicant before July 7, 1986 (the deadline for the initial application process) to enable him to apply for relocation benefits. According to ONHIR officials, in consultation with the Department of Justice in Washington, D.C. and the U.S. Attorney’s Office in Arizona, ONHIR reopened the process for applications to help ensure that everyone who might be eligible for benefits was given the opportunity to apply, rather than litigating a series of similar cases. ONHIR officials said they worked closely with the Navajo Nation to send out letters of notification to potential eligible applicants, even though they were not required to reopen the application process. These three additional application periods have resulted in more applicants and time required for ONHIR to review applications. The numbers of applicants and outcomes across the different application periods are summarized in table 1. The attempts to prompt more Navajos to relocate in the second and third application periods resulted in a limited number of applications, 129 and 167 applicants, respectively. However, ONHIR received nearly 2,300 applicants during the fourth application period. Throughout the multiple application periods, applicants demonstrated two key eligibility criteria: (1) head of household status and (2) residency on the lands partitioned to the other tribe. However, ONHIR chose and applied varying eligibility rules related to residency status over the different application periods. Original application period. Under the original residency status criterion, applicants had to demonstrate that they were residents of the partitioned lands on December 22, 1974 (the date the Settlement Act was passed) and had not moved there within the previous year. Second and third application periods. During the second and third application periods, ONHIR used provisions for late applicants— persons who had not applied for relocation benefits before the original deadline—that were established in 1986 amendments to ONHIR’s regulations and that revised the residency status eligibility criterion. Unlike the original residency criterion, the agency guidance applicable to applicants during the second and third application period stated that applicants must demonstrate continuous residence on the partitioned lands from December 22, 1974, to July 7, 1986 (the original deadline) and until eligibility determination is rendered. There were exceptions for demonstrating continuous residency as set out in the agency guidelines interpreting the regulations, including for those who were temporarily away for school, prison, medical treatment, and military service. Fourth application period. During the fourth application period, ONHIR decided to apply the original criterion, without the continuous residency requirement implemented in the guidelines for the second and third application periods, for all applicants. ONHIR officials said they made this decision in response to a federal court decision, discussed previously, that concluded that ONHIR had not provided personal notice to a potentially eligible applicant before the original July 1986 deadline; the U.S. District Court District of Arizona applied the original criterion in this decision. The applicant has the burden of proof for providing evidence to meet the eligibility criteria. Demonstrating head of household or residency status has been difficult for residents for several reasons, according to a Navajo-Hopi Legal Services Program representative and Navajo Nation chapter officials we interviewed. For example, Navajo is an oral culture that historically existed mostly on a livestock or cash economy in which transactions were not documented, making it difficult to document the source of income or head of household status. In its comments on a draft of this report, ONHIR stated that the legal residence determination was complicated because many Navajos performed seasonal work and lived outside the Hopi Partitioned Lands for extended periods. According to Navajo Nation officials, oral evidence has not been allowed by the ONHIR Hearings Officer, and language and cultural barriers have also been obstacles. Some Navajos have limited English proficiency, although ONHIR offers translators for Navajo speakers. In its comments on a draft of this report, ONHIR stated that oral evidence has always been allowed but has sometimes been found not to be credible. Another unique characteristic of the Navajo is the use of shared mailboxes at trading posts—a place in the community for people to meet and receive their mail—making it difficult to ensure that ONHIR denial letters or other notifications reach individual applicants. For example, in one appeals case a court found that applicants who did not personally sign for the receipt of a denial letter must be notified of the court’s decision to allow those applicants to file a waiver of the appeal deadline. ONHIR also stated that it offered administrative appeals to Navajos for whom ONHIR could not show actual receipt of denial letters. Although ONHIR Officials Believe That Most Eligible Applicants Have Been Processed, the Potential for Future Court Appeals Remains While ONHIR officials said that eligibility determination has been completed, the potential exists for further federal court appeals, potentially resulting in the need for additional eligibility determinations. As of January 2018, ONHIR officials said that 24 of the remaining 25 households that were denied eligibility benefits have gone through the hearing process and are awaiting their decisions, which officials said should be completed in early 2018. Households whose denials are upheld will be eligible to file for an appeal with the U.S. District Court for the District of Arizona. Additionally, any households that have been denied and are within the 6-year statute of limitations are still eligible to file for appeals in federal court. Eleven cases were pending in the federal district courts and four in federal appeals court as of March 2018, and according to ONHIR officials, at least 240 households that were denied eligibility benefits and whose decisions were upheld by the hearing officer (and are within the 6-year statute of limitation) could potentially file for appeals in federal court before the end of fiscal year 2018. Any additional court appeals could result in the need for additional eligibility determinations in the future. For example, a federal court recently remanded a case to ONHIR to review the applicant’s income information and reevaluate the eligibility determination. According to ONHIR officials, they are taking steps to review the applicant’s case file, investigate the evidence of the applicant’s income to demonstrate the head of household status, and share the findings with the applicant’s attorney. ONHIR officials stated that due to the unique situation of each applicant, they review the information in the applicant’s case file to comply with the court’s order on eligibility determination. ONHIR Has Nearly Completed Home Building but Provided Limited Contractor Oversight, and Outstanding Warranties Remain in Effect ONHIR Developed Policies and Procedures for the Home-Building Process ONHIR’s policies and procedures are intended to provide certified applicants who are eligible for relocation benefits with decent, safe, and sanitary homes, as mandated in the Settlement Act. For example, ONHIR’s management manual includes policies that require ONHIR to provide counseling on the home-building process and home maintenance training for relocatees. Figure 6 shows an example of a relocation home. Prior to moving to relocation homes, many families lived in one-room houses that they constructed themselves with no basic infrastructure, such as electricity, water, or plumbing facilities, and some families were unfamiliar with the features of a modern home. Families lived a spiritual and religious lifestyle that was connected to their traditional culture and ancestral lands, with homes constructed in communities with extended families. ONHIR’s management manual also includes policies that require employees to work with clients on the home acquisition process starting from the time clients are certified and continue until 2 years after the client has been relocated, including assisting clients with finding contractors, signing home-building contracts, understanding home maintenance, and requesting warranty repairs. ONHIR works with families after they have moved into their relocation home by providing assistance with warranty issues; assistance in adjusting to their new community; and referrals to agencies in the new community that provide health care, supplemental nutrition, financial assistance, behavioral health, employment, and other social services. Relocation homes are the property of the client, and ONHIR has no responsibility for relocation homes after a 2-year warranty period on each home expires. ONHIR wrote a standard template of a contract that clients and contractors must sign, but ONHIR is not a signatory of the home-building contract. However, ONHIR is a signatory to the 2-year home warranty contract, along with the client and the contractor. Additional policies and procedures required by ONHIR’s management manual are summarized in table 2. ONHIR’s management manual also includes policies for overseeing contractor performance. ONHIR officials provide clients with a list of home-building contractors, but clients may choose any licensed contractor in the jurisdiction where the home is built. ONHIR officials estimate that more than 95 percent of relocation homes have been built by contractors from its list. ONHIR officials said that contractors on the list ONHIR provides to clients must demonstrate good standing and must be licensed by the state of Arizona, as stated in its policy. In addition, ONHIR’s policy states that ONHIR may take action against contractors whose work results in an excessive number of warranty complaints. Most Building Is Complete, but Weaknesses in Oversight Allowed Poor Performing Contractors to Build Homes The majority of ONHIR’s home-building work is now complete. As of December 2017, according to officials, ONHIR had relocated 3,687 families into new homes, and ONHIR officials said they expect construction on the remaining 20 homes to be completed by September 2018. Although most home-building activities are complete, we found that ONHIR has historically allowed contractors with a history of performance issues to build relocation homes. For example, ONHIR provided us with a report generated from its contractor performance database that shows a contractor who had failed 42 percent of final inspections during a 11-year period—from January 2006 through September 2017—continued to receive home-building contracts. Similarly, we identified homes with multiple warranty complaints in ONHIR’s warranty database. Specifically, one home in the warranty file database had 17 warranty defect complaints attributed to the contractor. ONHIR officials said that they do not track complaints by contractor in a database nor do they have a defined number of complaints for removing contractors. ONHIR officials said that they have not removed a contractor involuntarily from their list since the 1990s. ONHIR officials explained that these contractors continued building homes because it is difficult to find contractors who want to work on the reservation due to the isolated nature of homesites. Moreover, in recent years they said they did not track complaints by contractor because they would be aware of complaints about a contractor due to the smaller number of relocation homes that have been built. As a result, according to ONHIR officials, they have not needed to take actions to remove contractors from their list since the 1990s or to generate reports on contractor performance. In addition, ONHIR officials said some warranty complaints were trivial, such as peeling paint or visible carpet seams, and thus terminating contractors for such issues was unnecessary. ONHIR officials also noted that all homes eventually passed their final inspections and any failed inspection items were corrected and reinspected before contractors received payments. Some Tribal Government Officials and Relocatees Said ONHIR Has Not Discharged Its Responsibilities because of Construction, Societal, and Infrastructure Concerns Although ONHIR said it has nearly completed its relocation obligations, some relocatees, the Hopi tribe, and Navajo Nation government officials said that it has not completed its work. Specifically, Navajo Nation officials and some relocatees said the office should remain open to address various concerns with relocation homes and the societal effects of relocation. Moreover, according to some relocatees and Navajo Nation government officials, these concerns include homes that were built with faulty materials and with unfinished infrastructure, such as electricity. As previously mentioned, ONHIR has no responsibility over relocation homes after the 2-year warranty period on each home expires. However, an official from the Navajo-Hopi Legal Services Program said that homeowners had concerns with their homes beyond the 2-year warranty period. While ONHIR has attributed such issues to a lack of homeowner maintenance, relocatees have attributed these issues to ONHIR’s lack of oversight of the home-building process. Concerns some relocatees and tribal government officials described include the following: Construction. Navajo Nation officials from three separate chapters told us that relocation homes were not built properly. The President of the Navajo Nation said that homes frequently have construction issues related to cheap materials or poor workmanship, while another official said that ONHIR does not properly oversee contractors. Another official told us that the windows fall out of homes when it gets too windy. One official said that some families have left their relocation homes behind because of structural issues. Hopi tribe officials said relocatees from their tribe were provided the cheapest homes available and that the conditions of mobile homes are substandard. See figure 7 for examples of homes with cracked foundations and broken windows. ONHIR officials said they inspect all complaints on relocation homes, even after the warranty period has expired. If the investigation reveals an issue that is a result of a construction defect, ONHIR officials said they will fix the issue, whereas they will not fix issues they deem are the result of poor homeowner maintenance. Soil settling. Navajo Nation officials from two chapters told us that ONHIR did not conduct soil tests on homesites and others said that some homes have experienced foundation issues. For example, one relocatee said her relocation home has cracks in the walls and the floors. ONHIR helps clients to apply for homesite leases, and according to ONHIR officials, they assigned engineering technicians to conduct feasibility studies to assess the condition of the soil for all on-reservation homesites, as required by ONHIR policy. However, ONHIR officials also acknowledged that expansion and contraction of soil over time in Arizona is common and that shifting soil can lead to cracks in the foundation or walls of homes. As reported by the Interior Inspector General in 2016, 5 relocatee homes on the Navajo reservation experienced cracks and other visible signs of damage due to soil settling and have consequently been replaced by ONHIR. ONHIR officials acknowledged that they have demolished and replaced an additional 9 homes due to foundation issues related to soil expansion and other issues, such as leaks in utility lines and septic tanks. For the homes experiencing foundation issues outside of the 14 homes ONHIR has replaced, ONHIR attributed continued soil collapse to homeowners not maintaining the proper degree of slope around their home to allow for drainage. In addition, they said that homes may now be occupied by three generations of families. According to a 2016 Interior Inspector General report, ONHIR officials said this leads to increased water use inside the homes which, in their opinion, exacerbates the soil-settling issue. Societal effects. Relocated families expressed that relocation has contributed to societal ills such as depression; alcoholism; drug abuse; and suicide due to substandard living conditions and homesites away from their family and previous sources of livelihood. The Navajo Nation stated that relocatees experienced hardships adjusting to a new way of life and felt a loss of connection with their culture moving away from their ancestral lands and traditional way of life. According to a report issued by the Navajo Nation Human Rights Commission, relocatees were promised by the federal government, the Hopi Tribe, and the Navajo Nation that relocation would offer a better life that did not materialize. ONHIR officials noted that both the Navajo Nation and the Hopi Tribe have requested extended counseling beyond the warranty period; however, according to the March 2017 transition plan, ONHIR does not believe providing it is within their statutory authority. Connections to utility infrastructure. According to Navajo Nation officials, some homes are not properly connected to utility infrastructure, such as electricity and water. For example, they stated that a number of relocation homes in the Navajo area do not have electricity. In its comments on a draft of this report, ONHIR stated that some relocatees chose to relocate to remote areas and signed a form to affirm that they wanted solar or cistern rather than grid utilities. A representative from the Hopi Tribe told us that in one home, contractors installed plumbing systems that were subsequently covered in concrete, which made repairs difficult. Another chapter official said that a septic tank in one relocation home continually overflowed because the tank was smaller than the specifications. ONHIR officials said all homes are built to code at the time of construction and have proper connections to infrastructure in terms of water and electricity. They said they verify that homes pass necessary inspections, including framing; mechanical; plumbing; and insulation, prior to disbursing payments to the contractors. Community infrastructure. Some Navajo Nation chapter members and ONHIR officials disagree as to whether ONHIR had an obligation to provide additional community infrastructure under the Settlement Act. Some chapter members said that ONHIR should not close because it has not met its responsibilities to provide infrastructure projects, such as paved roads and running water. The Navajo Nation Human Rights Commission report states that relocatees were told they would be provided with running water and the ability to raise livestock, among other things. Provisions in the Settlement Act directed ONHIR to create a report with a plan to ensure that infrastructure such as water, sewers, and roads would be available at their relocation sites. ONHIR published a report to meet the provision in 1981. This provision was repealed in November 1988. ONHIR officials acknowledged that relocatees have expressed the need for additional infrastructure, but said it is not within ONHIR’s statutory responsibility to provide it. The Settlement Act as amended does not require ONHIR to provide infrastructure for the New Lands. Warranty Commitments on Homes Already Built and Homes for Newly Eligible Applicants Are Activities That May Continue into the Future Although ONHIR’s home building for certified applicants is nearly complete, responsibilities remain for existing homes under warranty and any additional homes built for newly certified applicants. As previously discussed, relocation homes are under warranty for 2 years, starting at the time when the house passes final inspection. During this 2-year period, ONHIR is responsible for helping homeowners, who are located on-reservation, request warranty repairs. After September 2018, 52 relocation homes will remain under the 2-year warranty period, according to ONHIR officials. In addition, as previously discussed, ONHIR officials told us that at least 240 denied applicants could still file for appeals in the federal court and become eligible for relocation benefits, which would necessitate the construction of additional homes. A 2-year warranty period would then begin after these houses pass final inspection. Executive Branch or Congressional Action May Be Needed to Terminate ONHIR and Effectively Transfer Remaining Relocation Activities ONHIR Has Not Yet Requested a Presidential Determination for Closure As previously mentioned, ONHIR was not designed to be a permanent agency. The Settlement Act states that ONHIR will cease to exist when the President of the United States determines that its functions have been fully discharged. Although ONHIR officials have said they are working toward completing their tasks so the office can close by the end of fiscal year 2018, they acknowledge that not all activities will be complete by that time. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives. For example, information necessary to communicate to an agency’s oversight body includes significant matters related to risks or changes. However, according to ONHIR officials, they have not specifically communicated with the President about the determination on whether the agency has fully discharged its functions and whether the office should close. Instead of directly requesting that the President make a determination for ONHIR to cease operations, ONHIR has been making plans to close through other means and transition remaining activities. Specifically, ONHIR officials told us that they anticipate that closure of the office will need to occur through a legislative change or through the termination of program funds through the budget and appropriations process. As stated in the March 2017 transition plan, the plan was developed in response to direction from the Office of Management and Budget and the Senate and House Appropriations Committees that ONHIR should wind down its activities. Further, in its comments on a draft of this report, ONHIR stated that it has had regular communications with executive and legislative branch offices on completing its work and closing. However, neither the draft transition plan nor the October 2017 implementation plan indicates how ONHIR would request a determination from the President that ONHIR has fully discharged its responsibilities and can be terminated. Without such a presidential determination, ONHIR has not met the explicit requirements for being permitted to cease operation under the Settlement Act. ONHIR Has Not Developed Complete Information on Its Remaining Activities Although ONHIR officials anticipate that the agency will close by September 2018, they have not ensured that complete information related to its relocation activities can be made available to other successor agencies. This lack of planning and information could hamper the efforts of a successor agency or agencies to effectively take over these activities. Eligibility and appeals. As previously mentioned, there is the possibility for 240 or more denied households to appeal their eligibility decision in the future, and the paper case files and client database contain important information regarding eligibility for the continuation of ONHIR’s relocation activities. Specifically, paper case files contain comprehensive information on each applicant from the time he or she applied for relocation benefits, including documents submitted to prove head of household or residency status for eligibility determination. In addition, the client database tracks decisions and dates related to the eligibility determination process and is necessary to identify applicants’ status. In its March 2017 transition plan and October 2017 implementation plan, ONHIR has not developed detailed information on how it plans to identify and prepare information in the paper case files and client database for the 240 or more denied households that could file for federal appeals. ONHIR officials said that they have not prepared eligibility determination and appeals information for transfer because they expect eligibility determinations to be completed by the time the office plans to close. In the event that such transfers are needed, they said the transfer of these records will be through an agreement between ONHIR, the National Archives and Records Administration, and BIA. However, such an agreement has not yet been developed, and discussions on the transfer of records—such as during monthly transition meetings—are high-level and mostly unrelated to information needed for potential eligibility determination responsibilities. In addition, officials said that information about appeals filed in the future in the federal court could be obtained from an online federal database. Federal internal control standards state that management should use quality information to achieve the entity’s objectives. Additionally, the standards state that management should identify, analyze, and respond to risks related to achieving the defined objectives. If ONHIR does not take the steps to ensure that complete information for the 240 or more denied households eligible to appeal their eligibility decision is available to a successor agency, a successor agency could face difficulty in administering eligibility determinations and remaining appeals in the future. Warranties and contractor performance. As previously discussed, ONHIR’s remaining home-building responsibilities include managing the 52 remaining 2-year warranty agreements and assisting in the construction of homes for any newly certified applicants. To fulfill these responsibilities, complete information on home warranties and contractor performance is critical. ONHIR’s warranty database has data fields to track relevant information on concerns reported to ONHIR—including warranty expiration date, date warranty complaint received, type of complaint (possible warranty defect or homeowner maintenance issue). However, the database is incomplete. For example, our review found that about 98 percent of warranty complaints in the warranty database have no record of the date of warranty repairs. Moreover, ONHIR does not list the names of contractors in its database. ONHIR officials said the information is not recorded because they rely on memory and paper files to supplement the information in the warranty database about contractors. ONHIR officials also said they do not regularly use the database to monitor contractors’ performance because it became too cumbersome to track electronically. However, in its comments on a draft of this report, ONHIR stated that it has the capability in its electronic data system to search for warranty complaints. In its October 2017 implementation plan, ONHIR suggested BIA’s contract office as a potential successor agency for administering the remaining warranty provisions in the event that it closes before these home-building responsibilities are fully discharged. With regard to any newly certified applicants deemed eligible for benefits through the appeals process, the October 2017 implementation plan suggests that these applicants be given the cash equivalent of a relocation home instead of building new homes. However, the Settlement Act provides for no authority to issue cash payments and Congress has not otherwise authorized cash payments, and any future home-building activities may need to be assumed by a successor agency. Because OHNIR does not have complete information on existing warranties and contractor performance, another successor agency could be hampered in its ability to assume ONHIR’s remaining home-building responsibilities. Federal internal control standards state that management should identify, analyze, and respond to risks related to achieving the defined objectives. Additionally, the standards state that management should use quality information to achieve the entity’s objectives. Without complete warranty and contractor information, a successor agency may have difficulty understanding what warranty issues have already been addressed or have difficulty overseeing contractors to help ensure that newly certified applicants secure decent, safe, and sanitary relocation homes. The Settlement Act Does Not Include Provisions for Transferring Remaining Relocation Activities to Successor Agencies In its transition and implementation plans, ONHIR has identified a number of potential successor agencies that could be selected to take over ONHIR’s remaining activities in different areas. However, officials at these agencies said they currently do not have the authority to undertake these activities under the Settlement Act. Appeals and eligibility. Should ONHIR close before the 6-year statute of limitations has expired for all denied applicants, another agency or agencies would need statutory authority for coordinating eligibility determinations and home-building for any newly certified applicants. As previously discussed, at least 240 households that had been denied relocation benefits as of September 2017 may choose to contest their denial in federal court, according to ONHIR officials. ONHIR’s March 2017 transition plan states that the Department of Justice will continue to represent the government on behalf of ONHIR in any federal court hearings, and ONHIR has also identified Interior’s Office of Hearing and Appeals to hear any matter remanded to the agency by the federal court for a further hearing. Home-building. Another entity would need authority to assume remaining home-building activities. Alternatively, ONHIR’s October 2017 implementation plan suggests that newly certified applicants be given the cash equivalent of a relocation home. However, as previously mentioned, cash payments are not currently authorized under the Settlement Act and legislation would be needed to provide such payments. Moreover, Navajo Nation officials said they do not approve of using cash payments in place of providing relocatees with a home. In November 2017, ONHIR officials said that, as an alternative to cash payments, they discussed with the Navajo Nation the potential for the Navajo Housing Authority—a recipient of the HUD Indian Housing Block Grant Program—to administer remaining home-building activities. They did not make a decision, however, because the Navajo Nation wanted to inquire about the capacity of the Navajo Housing Authority to assume these activities. Although ONHIR has not identified HUD as an agency with a potential role, such as assuming or providing oversight of Navajo Housing Authority administration of remaining home-building activities, HUD officials told us that HUD would not be able to assume ONHIR housing functions. This is due to the nature of its block grant program, restricted oversight mechanisms, and limited capacity in terms of staff resources and technical skills to supervise construction. In addition, HUD officials said that their current oversight is limited to reviewing a sample of Indian Housing Block Grant program grantees’ policies, procedures, and implementation of procurement and environmental regulations, which may not be consistent with the oversight or authority needed should the Navajo Housing Authority administer the remaining ONHIR home-building activities. Warranties. Should ONHIR close before 2-year home warranties expire on the remaining homes constructed under ONHIR’s oversight, another agency would need statutory authority to oversee these home warranties. As previously mentioned, ONHIR is currently a signatory to the warranty along with the contractor and the client, and more than 52 homes will have warranties in effect after ONHIR’s proposed closure date of September 2018, according to ONHIR officials. In its draft transition plan, ONHIR suggests transferring warranty-related activities to the BIA Contract Office. However, according to BIA officials, BIA does not currently have the authority to conduct these activities, and BIA is not equipped to implement warranties. Post-move counseling. Another agency would need statutory authority to provide post-move counseling to the 52 clients who will remain under warranty after ONHIR’s proposed closure date of September 2018. Currently, ONHIR provides relocatees with post-move counseling during the 2-year warranty period. According to ONHIR’s management manual, the purpose of post-move counseling is to assist families in adjusting to their new house, connect families to local service agencies, and gain understanding about the client’s familial and employment situation. ONHIR’s March 2017 transition plan suggested that the post-move counseling program could be transitioned to BIA. However, BIA officials said BIA currently does not have the authority to conduct these activities. In November 2017, ONHIR officials said the program would discontinue for any newly certified applicants if cash settlements for relocation benefits were authorized, but they did not address what would happen to the 52 clients that will remain within the 2-year warranty period after September 2018. The Settlement Act does not include provisions on the transfer of activities after ONHIR’s closure, and as described above several activities will remain past ONHIR’s planned closure date. Without legal direction to authorize the transfer of ONHIR’s remaining activities to other federal entities, the future of these activities remains uncertain and may adversely affect those in the process of relocating. ONHIR Has Not Always Managed Navajo Trust Land in Accordance with Its Policies ONHIR Has Entered Into Lease and Other Agreements for Navajo Trust Land but Has Not Properly Managed Them ONHIR is statutorily required to administer the land taken into trust for the Navajo Nation pursuant to the Settlement Act as amended until relocation is complete. The act also authorizes ONHIR to issue leases for housing and other related facilities on the New Lands. ONHIR’s management manual, which governs its operations, states that it will grant appropriate requests for leases of the New Lands—both developed and undeveloped land—for homesites, businesses, and community services facilities, among other things. According to the manual, entities that want to lease property in the New Lands are to submit an application form and supporting documents to ONHIR. Since the 1980s, ONHIR has received applications from and granted leases to various businesses, the New Lands chapter, and other tribal entities. The leases give the lessee permission to occupy and use the land, including, in the case of developed land, any structures on it, for terms varying from 2 to 99 years. In addition, ONHIR has entered into or administered surface use agreements for the New Lands. Unlike ONHIR’s eligibility determinations and home-building activities, which were intended to have a finite end, the Navajo trust land will need to be managed in perpetuity so long as it is held in trust by the federal government. ONHIR’s draft transition and implementation plans identify BIA and the Navajo Nation as entities that could assume responsibility for managing the trust land once ONHIR terminates. However, ONHIR does not have the authority to transition management of the trust land it administers to another entity. Moreover, we identified a number of concerns with how ONHIR has maintained information or established controls for proper administration of leases and agreements for the New Lands, which could further hinder an eventual transition of these responsibilities to another entity. ONHIR Does Not Have a Complete Inventory of Leased or Occupied Land ONHIR does not have a comprehensive inventory of leased and vacant properties on or surface use and other agreements for Navajo trust land it administers. ONHIR officials identified 23 properties on trust land they administer through documentation and in interviews. Of these 23 properties, ONHIR possessed the current lease for 15 properties. ONHIR officials also identified 5 surface use agreements for Navajo trust land they administer, 3 of which are listed as active on their transition website. ONHIR officials said they have not maintained a comprehensive inventory because they had a long tenure with the agency and are cognizant of what properties and agreements exist. Federal internal control standards state that management should design control activities to achieve objectives and respond to risk. For example, as part of control activities, management clearly documents all transactions and other significant events in a manner that allows the documentation to be readily available for examination. Without developing a comprehensive inventory of leased and vacant properties on Navajo trust land that ONHIR administers, the entity which assumes responsibility for leasing the land will not have the information it needs to carry out that responsibility. As of December 2017, ONHIR Does Not Have Written Leases for Some Occupied Lands ONHIR has occupied or has allowed others to occupy Navajo trust land it administers without a written lease or agreement, which is inconsistent with ONHIR’s management manual. Specifically, of the 23 existing properties on trust land ONHIR officials identified, 7 were in use as of December 2017 but did not have a written lease, as required, for various reasons: ONHIR issued a permit for the use of one property in 2000 that was valid through 2005 and then, according to ONHIR officials, had an oral agreement to indefinitely extend the permit. The officials also said they had an oral agreement to lease another property. ONHIR itself occupies and uses 4 properties without leases, including a headquarters and New Lands office and two structures on the Padres Mesa Demonstration Ranch, discussed below. A lease for 1 property expired in 2011 but it has not been renewed and does not include an option to extend the lease beyond its initial termination date. The Navajo Nation is currently working to renew the lease because it has assumed responsibility from BIA for leasing its trust land. In its comments on a draft of this report, ONHIR stated that in the meantime the federal agency using the property has continued to pay rent to ONHIR while a new lease is negotiated. ONHIR officials said some of these properties do not have written leases because the agency deferred to the tribe’s wishes. However, not having written leases for these properties on trust land is inconsistent with ONHIR’s management manual, which calls for written leases and land use approvals for the New Lands. Without written leases for these properties, the entity which assumes responsibility for leasing the Navajo land that ONHIR has been administering will not know the status of these properties because they are being used without written leases. For Most of the Leases, ONHIR Is the Lessor Rather than the Tribe and No Successor Has Been Identified There are at least two parties to every lease of land, the lessor and the lessee. The lessor is generally the landowner, and the lessee is the party to whom the lease grants permission to use or occupy the land. However, the New Lands are held in trust by the federal government for the Navajo Nation, and federal law provides that trust lands may be leased by the Indian owners with the approval of the Secretary of the Interior. ONHIR is the lessor for 20 of the 22 leases that we reviewed. ONHIR officials said the leases were done this way because its management manual called for ONHIR to serve as the lessor. However, ONHIR changed its management manual in 2011 to say the Navajo Nation should serve as the lessor for business; commercial; industrial; and mineral leases unless the tribe requests ONHIR to be the lessor. ONHIR did not revise the leases in effect in 2011 to reflect this change. After the 2011 changes to the management manual, ONHIR became the lessor for the one business lease entered into for the New Lands. ONHIR did not provide documentation that the tribe requested ONHIR to serve as lessor for this lease. Navajo Nation officials said ONHIR informs the tribe about leases out of courtesy and does not seek the tribe’s permission to lease Navajo trust land. Moreover, the Navajo Nation Department of Justice has taken the position that ONHIR does not have the authority to lease Navajo trust land. In addition to these leases, ONHIR identified 5 surface use agreements for Navajo trust land it administers. In 3 of 5 of these agreements, ONHIR, not the tribe, is the party granting the right to access and use the Navajo trust land. However, ONHIR is not the landowner and this is also inconsistent with BIA’s leasing practices. In addition, of the current leases of New Lands with ONHIR as the lessor, 2 leases specify what is to happen should ONHIR close. None of the surface use agreements specify what is to happen should ONHIR close. ONHIR officials said that they have not updated or amended the other leases and agreements because there is no need to do so yet. ONHIR’s transition and implementation plans also do not identify which leases and agreements need to be amended or assigned upon ONHIR’s closure. In its March 2017 transition plan, ONHIR identified BIA as the successor agency for managing leases on the Navajo trust land ONHIR is currently administering. However, this is inconsistent with the Navajo Nation’s assumption of responsibility for leasing its trust land from BIA. Federal internal control standards state that management should design control activities to achieve objectives and respond to risk, for example, to ensure that transactions such as leases are properly executed. In addition, federal internal control standards state that management should design control activities to identify, analyze, and respond to change, including changes to the entity’s activities. Without ONHIR identifying which leases and other agreements need to be amended or assigned because they identify ONHIR as the lessor, any entity that assumes responsibility for leasing these trust lands in the event that OHNIR closes will not be able to effectively manage these properties. ONHIR Has Collected and Retained Revenues from These Lands Half of the 22 leases we reviewed required the lessee to pay a non- nominal amount (i.e., more than $1 a year) of annual rent to ONHIR. In addition, annual payments for 3 of 5 surface use agreements are made to ONHIR, according to ONHIR officials. According to agency documents, since the 1990s, ONHIR has collected and retained over $1 million in revenue from these leases of and surface use agreements for Navajo trust land it administers. ONHIR deposits the lease revenue into ONHIR’s Treasury account. ONHIR officials said they have used the revenue to aid relocation efforts by renovating facilities located on Navajo trust land ONHIR administers, providing grants to Navajo chapters, and funding other activities to benefit the relocatees. However, the Settlement Act as amended does not state that ONHIR may collect, retain, and use revenue from leases of Navajo trust land, and ONHIR officials have not identified another statute authorizing the agency to do so. ONHIR officials said the agency retained this revenue to ensure that all net revenues from these trust lands are used exclusively for the benefit of relocatees because the Settlement Act as amended requires the trust lands be administered for the benefit of relocatees. However, this statutory provision does not authorize ONHIR to receive lease revenues. ONHIR Is Operating the Padres Mesa Demonstration Ranch without a Land Use Agreement and Grazing Permit ONHIR is operating the Padres Mesa Demonstration ranch on Navajo trust land, but has not leased the land, which is inconsistent with ONHIR’s management manual. As mentioned previously, ONHIR’s management manual calls for written leases for and land use approvals of the New Lands. According to ONHIR officials, there is no requirement for them to have a lease or obtain permission from the tribe to occupy the structures on the ranch, including a range office, or operate a ranch on Navajo trust land. In addition, ONHIR’s grazing of the ranch’s cattle on the New Lands without a grazing permit is inconsistent with ONHIR’s regulations. ONHIR’s grazing regulations require a grazing permit for all livestock grazed on the New Lands, but ONHIR does not have a grazing permit for the cattle on the ranch because ONHIR officials decided it was not necessary to issue a permit to itself. Moreover, ONHIR is not eligible for a grazing permit under its regulations because it is a federal entity and only enrolled Navajo tribal members are eligible for permits. We are examining ONHIR’s use of appropriations to establish and operate a cattle ranch in a separate legal opinion. ONHIR has identified two different entities to assume operation of the ranch in the event of its closure. ONHIR’s March 2017 transition plan identified BIA as the entity to oversee the continued operation of the Padres Mesa Demonstration Ranch. However, BIA officials said the agency does not have the statutory authority to operate a for-profit ranch. Moreover, these officials said they are not interested in doing so because it is a role for the tribe and would be a conflict of interest for the agency since BIA regulates grazing on trust land. In addition, ONHIR’s October 2017 implementation plan indicates that the Navajo Nation would assume responsibility for the ranch after ONHIR’s closure and after negotiating an agreement with the chapter. Because the ranch is located on Navajo Nation trust land, the tribe could choose to continue its operation after ONHIR closes. Navajo officials said they are interested in operating the ranch but they have not determined how the for-profit ranch would be managed if the tribe also regulated grazing on the New Lands, which it is also interested in doing. Congressional Action May also Be Needed to Address Other Provisions in the Settlement Act as Amended Congressional action may also be needed to address other provisions in the Settlement Act as amended regarding (1) the use of the acquired trust lands, (2) trust acquisition, and (3) the Navajo Rehabilitation Trust Fund. Use of Acquired Trust Lands to Benefit Relocatees and Regulation of Grazing Trust land is generally held in trust for the benefit of an Indian tribe or individual Indian. However, the Settlement Act as amended requires the land taken into trust pursuant to the Settlement Act, including the New Lands, to be used solely for the benefit of relocatees. The New Lands chapter government wants this restriction to continue if and when ONHIR terminates. However, without congressional action to continue this restriction, it is likely the trust lands acquired in Arizona pursuant to the Settlement Act as amended would be administered for the benefit of the tribe as a whole rather than to solely benefit the relocatees. In addition, as part of its administration of the New Lands, ONHIR’s regulations governing grazing of livestock on the New Lands are different from how grazing is regulated by BIA for other Indian trust land. The purpose of ONHIR’s regulations was to aid in the resettlement of Navajo Indians residing on Hopi Partitioned Lands to the New Lands and to preserve the New Lands’ forage, land, and water resources. Under these regulations, grazing permit holders must be permanent residents of the New Lands. In contrast, under BIA’s regulations that apply to the portions of the Navajo reservation not under ONHIR’s administration, any Navajo tribal member is eligible for a grazing permit. Navajo Nation and chapter officials told us they would like ONHIR’s grazing regulations to continue if ONHIR were to close. ONHIR’s implementation plan identifies BIA as the entity to regulate grazing on the New Lands after ONHIR closes. ONHIR’s implementation plan also says BIA officials have agreed to regulate grazing on the New Lands in accordance with ONHIR’s regulations. However, BIA officials said Interior currently does not have the authority to regulate grazing on the New Lands, so they cannot make any decisions on how to do so. In addition, Navajo Nation officials said they want to assume responsibility for regulating grazing on the New Lands and prefer to have ONHIR’s grazing regulations, which are stricter than BIA’s, remain in place at least at the Padres Mesa Demonstration Ranch. Should ONHIR close, Congress will need to consider addressing how grazing on the New Lands will be regulated after ONHIR’s closure. Mandatory Trust Acquisition Provision for the Navajo Nation The Settlement Act as amended provides for two categories of land to be taken into trust for the Navajo Nation: (1) up to 250,000 acres of BLM land in Arizona and New Mexico that is transferred to the tribe (category 1) and (2) up to 150,000 acres of land held in fee by the Navajo Nation (category 2). No more than 35,000 of the 400,000 acres selected could be in New Mexico. The tribe was authorized to select the lands in both categories for 3 years after the 1980 amendments’ enactment, and then ONHIR was authorized to select the lands after consultation with the Navajo Nation. Once the lands are selected, the Settlement Act as amended provides for the mandatory acquisition of these selected lands as land held in trust by the federal government for the Navajo Nation. Mandatory trust acquisitions are not subject to BIA’s regulatory requirements for discretionary trust acquisitions under the Indian Reorganization Act. As of December 2017, about 12,000 of the 400,000 acres had yet to be selected, and about 24,000 acres that had been selected had yet to be taken into trust (see table 3). The over 11,000 acres of category 1 land selected but not yet taken into trust are located in New Mexico. These lands have not been taken into trust because of unprocessed coal preference right lease applications. Congress will need to determine whether the Navajo Nation should be able to select the entire 400,000 acres and have that land taken into trust as a mandatory trust acquisition, as provided for in the Settlement Act as amended. Without congressional action, any additional land the tribe acquired and wanted taken into trust would be a discretionary trust acquisition subject to BIA’s regulations. Furthermore, the Navajo Nation has raised two additional issues regarding the trust acquisition provision that Congress may also need to address. Deselection and reselection. The Navajo Nation would like to make changes to some of the land it has selected and make new selections, but the Settlement Act as amended does not authorize deselection of land the tribe previously selected to be taken into trust pursuant to the act’s mandatory trust acquisition provision. Deselection had not occurred as of January 2018, but bills have been introduced in Congress that would cancel some of the tribe’s land selections and authorize the tribe to replace those with new selections. Without statutory authorization, the Navajo Nation cannot deselect these lands and make new selections to reach the 400,000 acres provided for in the Settlement Act as amended. Trust status versus restricted fee status. The Navajo Nation has indicated that it is interested in having a statutory option for the selected land to be held in restricted fee status rather than held in trust. In 2016, a law was enacted that mandated a trust acquisition for certain parcels of land unassociated with the Settlement Act unless the Navajo Nation elected to have the land conveyed to it in restricted fee status. The President of the Navajo Nation has testified before Congress that the tribe is interested in having this option in future legislation involving the Settlement Act. Without statutory authorization, the land not yet selected pursuant to the Settlement Act as amended could not be held in restricted fee status if the tribe so chooses. However, without congressional action this cannot be changed. The Navajo Rehabilitation Trust Fund Established in the U.S. Treasury by the 1988 amendments to the Settlement Act, the Navajo Rehabilitation Trust Fund is essentially a loan from the federal government to the Navajo Nation to be paid back from revenues derived from leases of the lands and minerals taken into trust in New Mexico pursuant to the Settlement Act as amended. From fiscal years 1990 through 1995, Congress appropriated approximately $16 million to the Trust Fund. The Settlement Act as amended requires all net income derived by the Navajo Nation from the surface and mineral estates of lands in New Mexico taken into trust pursuant to the act to be deposited into the Trust Fund. Moreover, the net income is required to be used to reimburse the general fund of the Treasury for the amounts originally appropriated to the Trust Fund. According to leasing and other documents from the Navajo Nation and BLM, several of these parcels have been generating modest income since at least the 1990s. Specifically, BLM identified several parcels of the New Mexico trust land with grazing allotments or oil and gas leases. In addition to these sources of revenue, the tribe entered into an agreement for use of a parcel of the New Mexico trust land that requires, beginning in 2015, annual rent payments of $25,000 to be paid to the Trust Fund. The Navajo Nation has not reimbursed the general fund of the Treasury for the approximately $16 million appropriated to the fund, contrary to the statutory requirement to do so. While the Navajo Nation acknowledges its legal obligation to repay the Treasury, the tribe is seeking loan forgiveness because the Trust Fund’s purpose was to aid the relocatees and the tribe views such aid as an unfulfilled federal obligation, according to tribal officials. Further, these officials said repaying the Treasury would eliminate any benefit the relocatees received from the land because the revenue generated from the New Mexico trust lands and minerals has not been sufficient to justify partial payment. Because much of the land the Navajo Nation selected in New Mexico has not been taken into trust and the land that has been taken into trust is generating modest income, Congress will need to consider whether to continue the statutory repayment requirement or repeal it. If Congress decides to repeal the repayment requirement, it will need to consider specifying whether revenues from the trust lands acquired in New Mexico pursuant to the Settlement Act as amended are to be used by the tribe exclusively for the benefit of relocatees. Conclusions The relocation of Navajo and Hopi families has taken more time than originally anticipated when the Settlement Act was enacted in 1974, extending ONHIR operations more than 30 years beyond the original estimates. ONHIR has proposed to close by the end of fiscal year 2018 and initiated steps to identify agencies to handle the remaining activities. However, the Settlement Act does not give other agencies the authority to undertake various ONHIR responsibilities. Therefore, if ONHIR closes without congressional actions, any potential successor agency will not have the appropriate authority to administer any remaining activities. As a result, newly certified applicants and clients who remain under the 2-year warranty period will not have an entity to assist with securing decent, safe, and sanitary relocation homes, as intended in the Settlement Act. Further, several other provisions in the Settlement Act as amended may need congressional action. These include (1) the requirement for the trust lands acquired in Arizona pursuant to the Settlement Act as amended to be used solely for the benefit of relocatees and whether grazing on the New Lands should be regulated consistent with ONHIR’s current regulations; (2) the mandatory trust acquisition provision for the Navajo Nation; and (3) the requirement for the Navajo Nation to repay the U.S. Treasury for appropriations made to the Navajo Rehabilitation Trust Fund. In addition, although ONHIR believes it has completed most of its responsibilities under the act and believes it can close by September 2018, it does not have the authority to make this decision. Rather, the Settlement Act states that ONHIR will cease to exist when the President of the United States determines that its functions have been fully discharged. However, ONHIR has yet to request that the President make this determination. Moreover, OHNIR has not prepared complete information about its various activities, such as eligibility determinations, appeals, and home building, which increases the risk that successor agencies will not be able to effectively assume ONHIR’s activities. Finally, ONHIR has not appropriately managed leases and other agreements for Navajo trust land it administers or identified changes that would need to be made in leases in the event that it closes. Because the land ONHIR administers is held in trust by the federal government, another entity will need to assume these responsibilities if ONHIR closes. However, OHNIR does not maintain a complete inventory of leased or occupied land and does not have written agreements for some occupied land. Further, ONHIR has not identified which leases will need to be amended to identify the appropriate lessor and the entity to receive the lease revenue. Without these actions, the entity that assumes responsibility for leasing the New Lands will not have the information it needs to effectively manage the properties. Matters for Congressional Consideration We are making the following four matters for congressional consideration for when ONHIR closes: Congress should consider providing necessary authority for other agencies to continue remaining activities when ONHIR closes. (Matter for Consideration 1) Congress should consider determining (1) whether the requirement for the land acquired pursuant to the Settlement Act as amended to be used solely for the benefit of relocatees should continue and (2) how grazing on the New Lands should be regulated. (Matter for Consideration 2) Congress should consider addressing the mandatory trust acquisition provision for the Navajo Nation in the Settlement Act as amended. (Matter for Consideration 3) Congress should consider whether the requirement for the Navajo Nation to repay the U.S. Treasury for appropriations made to the Navajo Rehabilitation Trust Fund should continue. (Matter for Consideration 4) Recommendations for Executive Action We are making the following five recommendations to ONHIR. The Executive Director of ONHIR should request a presidential determination as to whether ONHIR has fully discharged its responsibilities and whether it should close. (Recommendation 1) The Executive Director of ONHIR should prepare complete information on the remaining denied households who could still file for federal appeals. Such information could include paper case files and information in ONHIR’s client database for those households. (Recommendation 2) The Executive Director of ONHIR should prepare complete information on warranties and contractors. Such preparation should include linking warranty complaints to the relevant contractor, completing missing warranty information, and completing information on contractors’ past performance. (Recommendation 3) The Executive Director of ONHIR should establish a comprehensive inventory of (1) properties located on trust land it administers, (2) leases of those properties, and (3) surface use and other use agreements for trust land it administers. (Recommendation 4) The Executive Director of ONHIR should identify which leases and other agreements need to be amended or assigned because (1) ONHIR is the lessor, (2) the lease or agreement provides for annual payments to be made to ONHIR, and/or (3) the lease or agreement terminates upon ONHIR’s closure. (Recommendation 5) Agency Comments and Our Evaluation We provided a draft of this report to the Office of Navajo and Hopi Indian Relocation (ONHIR); Department of the Interior; Department of Justice; Department of Housing and Urban Development (HUD); Department of Health and Human Services; Department of the Treasury; the Navajo Nation; and the Hopi Tribe for review and comment. The Department of Justice, Department of the Treasury, and the Hopi Tribe did not provide comments. The Department of the Interior and the Department of Health and Human Services provided technical comments that we incorporated as appropriate. We received comments via e-mail from HUD’s Acting Director of Grants Evaluation in the Office of Native American Programs. In this e-mail, the Acting Director stated that HUD believes the report should clearly state that HUD would not be an appropriate agency to continue ONHIR’s housing functions, because it does not provide direct services to tribes, review or approve actions or transactions, or have the technical capacity to assume ONHIR housing functions. We have acknowledged this in the report and our objective was to identify legislative actions that may be necessary to transition remaining relocation activities. Therefore, our focus was on whether or not additional authorities might be needed if ONHIR were to close. Although we present background information about other federal agencies and tribal entities with responsibilities in Indian Country as well as perspectives from various agencies on the transition and remaining activities, we did not independently evaluate these agencies’ authorities or capacity and do not draw conclusions about which agencies and tribal entities including HUD should be provided the necessary authority by Congress to continue ONHIR’s remaining activities. In ONHIR’s comments, which are summarized below and reproduced in appendix II, ONHIR did not explicitly agree or disagree with our five recommendations but stated that it had either already taken steps or had plans to once a successor is identified. With regard to the draft report’s first recommendation to request a presidential determination as to whether ONHIR has fully discharged its responsibilities and whether it should close, ONHIR stated that it has worked for decades with the Office of Management and Budget within the Executive Office of the President on completing its work. While this may be the case, our review found that no presidential determination for ONHIR to cease operation has been requested, and no such decision has been communicated, therefore we believe our recommendation is valid. With regard to the second recommendation to prepare complete information on the remaining denied households that could still file for federal appeals, ONHIR stated that it has a solid grasp of potential appeals. Specifically, ONHIR said that case files have been identified and all needed information already exists in the case files and in its database. ONHIR stated that it will provide potential successor agencies with any information they request. However, because it is unclear when ONHIR will close and which agency will assume ONHIR’s remaining eligibility and appeals activities at that time, a successor agency will not have the institutional knowledge to follow and connect the information needed for determining eligibility and providing support for cases for which appeals were filed in federal court. Therefore, we maintain that ONHIR should proactively prepare the necessary information associated with these appeals for any successor agency. Preparing complete and readily available information could minimize the challenges the successor agency may encounter in administering future appeals and eligibility determinations. With regard to the third recommendation to prepare complete information on warranties and contractors, ONHIR stated that up- to-date and complete information on warranty status appears in the existing case files. We maintain our concern about the accuracy of ONHIR’s warranty database because in its comment letter ONHIR acknowledged that some complaints were entered multiple times due to data entry issues. Moreover, ONHIR states that its staff know which relocatee homes will still be under warranty as of September 30, 2018, and have compiled a list of such homes. However, preparing the case file and list of such homes does not address the deficiencies that we found in the warranty database. While we revised the report by including ONHIR’s statement that its system has the capability to search warranty complaints, we continue to believe that the information available through searches will be incomplete for a successor agency because the information is disconnected. Without linking warranty complaints to the relevant contractor, completing missing warranty information, and completing information on contractors’ past performance, any successor agency may have difficulty understanding what warranty issues have already been addressed or have difficulty overseeing contractors to help ensure that newly certified applicants secure decent, safe, and sanitary relocation homes. With regard to the fourth recommendation to establish a comprehensive inventory of (1) properties located on trust land it administers, (2) leases of those properties, and (3) surface use and other use agreements for trust land it administers, ONHIR stated that such documentation exists and is maintained and updated. However, this statement is inconsistent with what we found during our review. We reviewed information provided by ONHIR from various sources as part of our review, and the information available did not include a comprehensive inventory of leased and vacant properties on or surface use and other agreements for Navajo trust land ONHIR administers. We continue to believe that without developing a comprehensive inventory of leased and vacant properties on Navajo trust land that ONHIR administers and leases and agreements for those properties, the entity that assumes responsibility for leasing the land will not have the information it needs to carry out that responsibility. With regard to the fifth recommendation to identify which leases and other agreements need to be amended or assigned because (1) ONHIR is the lessor; (2) the lease or agreement provides for annual payments to be made to ONHIR, and/or (3) the lease or agreement terminates upon ONHIR’s closure, ONHIR stated that it will move forward with specific transition activities after a successor entity is identified. We believe that such an approach is risky because it assumes that ONHIR staff will be available to work closely with staff from a new successor entity to personally transfer their knowledge to the new staff. However, there is no guarantee that ONHIR will continue operating or that its many retirement-eligible employees will be available to assist any successor entities during a transition period. We, therefore, maintain that the Executive Director of ONHIR should identify which leases and other agreements need to be amended or assigned. ONHIR also made other comments in its letter, which we have responded to in appendix II. The Navajo Nation and the Navajo Nation Human Rights Commission also submitted comments on a draft of this report, which are reproduced in appendix III and IV. We are sending copies of this report to the appropriate committees and the Office of Navajo and Hopi Indian Relocation, Department of the Interior, Department of Justice, Department of Housing and Urban Development, Department of Health and Human Services, Department of the Treasury, the Navajo Nation, and the Hopi Tribe. 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 us at (202) 512-8678 or shearw@gao.gov or (202) 512-3841 or fennella@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: Objectives, Scope, and Methodology This report examines (1) ONHIR’s management of the eligibility and appeals processes and the status of these activities; (2) ONHIR’s management of the home-building process and the status of these activities; (3) executive branch or legislative actions that may be necessary to terminate ONHIR in an orderly manner and transition remaining relocation activities; (4) ONHIR’s management of Navajo trust lands and related transition activities; and (5) legislative actions that may be necessary to address other Settlement Act provisions. To address these objectives, we reviewed our prior related reports and other studies and analyzed relevant laws and regulations. We interviewed ONHIR officials on relocation and other key activities, and we interviewed ONHIR’s hearing officer to better understand his role in the appeals process. We also interviewed federal officials from the Department of the Interior’s (Interior) Bureau of Indian Affairs (BIA), Office of Inspector General, and Bureau of Land Management (BLM); Department of Housing and Urban Development (HUD); Department of the Treasury (Treasury); and Indian Health Services within the Department of Health and Human Services. We also conducted interviews with tribal government officials from the Navajo Nation and the Hopi Tribe including officials from the Navajo-Hopi Legal Services Program, the Navajo-Hopi Land Commission Office, and the Navajo Nation Human Rights Commission. Additionally, we conducted two visits in August 2017 to ONHIR’s offices in Flagstaff and Sanders, Arizona, and the Navajo region where we interviewed ONHIR staff, observed a transition meeting, took two separate tours of homes (one with ONHIR officials and the other with Navajo Nation officials) and observed rangeland management activities, and attended presentations in three Navajo Nation chapters. Additionally, to address the first, second, and third objectives, we reviewed ONHIR’s management manual, policy memorandums, the 1981 Report and Plan, and the 1990 Plan Update on relocation activities, including the eligibility and appeals processes, and home-building activities. We obtained two data files as of June 2017 from ONHIR’s Client Database—Client Master and Hearing File—to analyze the time frame for becoming certified for relocation benefits and relocating to the house provided by ONHIR. Using the case numbers in the Hearing File, we identified those applicants that were certified for relocation benefits through the administrative appeals process. We assessed the reliability of ONHIR’s data files by conducting a file review of a random sample of 30 case numbers, which we selected based on the distribution of two factors: (1) application date, and (2) type of determination. We recorded the relevant information in the paper files— such as date applied, date of determination, determination code, and date relocated—and compared it to the data fields in the electronic files. We determined that ONHIR’s data files were sufficiently reliable for the purpose of our report. We also reviewed home-building-related documentation, including contractor lists, contracts, warranty information, and contractor performance reports, to understand ONHIR’s oversight of home-building activities. In addition, we reviewed ONHIR’s transition-related documentation including transition guiding principles, the draft transition plan, and the draft “From Transition Plan to Transition Implementation” document to understand ONHIR’s planned closure. We also reviewed and assessed the original statute to determine the extent to which ONHIR has the authority to transfer those activities. We interviewed ONHIR and Interior officials to identify any opportunities for modifying or continuing other Settlement Act provisions. To address the fourth and last objectives, we obtained from ONHIR copies of all leases and use agreements for Navajo trust land it administers pursuant to the Settlement Act as amended from the 1980s to the present. We reviewed the terms of the leases and agreements provided to identify specific elements, such as the identity of the lessor, lessee, and any concurring parties; start and end dates; required rental payments, if any; and any provisions on the leases’ continuation or termination in the event that ONHIR closes. We compared the leases to ONHIR’s list of properties on Navajo trust land it administers to determine if all of the properties were covered by leases. We also reviewed information, such as summary spreadsheets, on sources of revenue ONHIR collects, retains, and uses, including documentation of Treasury accounts where such revenue is deposited. We cross-checked the revenue information ONHIR provided with information from Treasury about deposits into ONHIR’s Treasury account and we interviewed ONHIR officials regarding discrepancies. Revenues from the Padres Mesa Demonstration Ranch were included as part of the revenue information and ONHIR provided a separate accounting of the obligations, expenditures, and revenues for the ranch. We reviewed ONHIR’s regulations and management manual for policies and procedures on leasing and grazing on the New Lands and compared them to the agency’s practices. We also reviewed BIA’s regulations on leasing and grazing on Indian trust lands under the agency’s administration to identify comparable grazing and leasing policies and procedures. Furthermore, we interviewed ONHIR, Interior, BLM, Treasury, and Navajo Nation officials and reviewed documents from the agencies and tribe to identify any opportunities for modifying or continuing other Settlement Act provisions. We conducted this performance audit from March 2017 to April 2018 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: Comments from the Office of Navajo and Hopi Indian Relocation GAO Comments 1. We revised the report to state that ONHIR has no authority to require any person to leave the land that was awarded to the other tribe. 2. We disagree with the Office of Navajo and Hopi Indian Relocation’s (ONHIR) characterization of our report and did not make a change based on this comment. Our report focuses on ONHIR’s management of the home building process and the status of these activities. To appropriately address our audit objective on the home building process, we included the experiences of the population that was being served by ONHIR. While ONHIR states that the information included in our report is unsubstantiated, we do not assert that the views on home building from those we attributed—tribal government officials and relocatees—are accurate or draw conclusions about the reasons for the condition of the homes. Further, we presented ONHIR’s counterargument to the concerns raised by the relocatees to provide context and balance, with additional details explained in footnotes. Throughout our report, we ensured a balanced presentation with an objective tone, consistent with generally accepted government auditing standards and our quality assurance framework. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Moreover, our description of Navajo Nation chapters was reviewed and verified by the Navajo Nation, therefore we believe it accurately states the views of Navajo Nation officials. 3. We revised the report to indicate the attorney fees reported were over a 35-year period. 4. We revised the report to state that, for the third application period, the requirement was for applicants to maintain legal residency until their contact with ONHIR. 5. We made revisions to the report to include ONHIR’s efforts related to eligibility determination, such offering administrative appeals to Navajos for whom ONHIR could not show actual receipt of denial letters and using restricted delivery certified mail for almost 30 years. 6. We made revisions to the report to include ONHIR’s perspective on the difficulties in determining residency because of the nature of Navajos’ employment opportunities. 7. Our report does not evaluate the reasons that have affected the length of the appeal process because it is not pertinent to our objectives. Therefore, we did not make a change to the report in response to this comment. 8. Although this is new information that was not presented to us during our review, it does not materially affect our findings, therefore we did not make a change in the report. 9. We clarified the report to state that ONHIR consulted with the Department of Justice in Washington, D.C, and the U.S. Attorney’s Office in Arizona. 10. We clarified the report to indicate that, in response to the Herbert decision, ONHIR was required to provide notices to “potentially” eligible applicants. 11. Our report focuses on actions that may be necessary to terminate ONHIR in an orderly manner and transition remaining relocation activities. We did not make a change in the report in response to ONHIR’s comment because ONHIR had not identified and compiled the case files during our review that would be necessary or easily accessible for a successor agency. While ONHIR states in its letter that case files have been identified and all needed information already exists in the case files and in its database, because these activities may have occurred subsequent to our review, we cannot confirm the accuracy of this comment. We maintain our concerns about ONHIR’s database given its admission of data entry issues as stated in the comment letter. 12. We revised the headings of two report sections to emphasize the distinction between administrative appeals and appeals to the federal court. 13. We revised the report to include ONHIR’s perspective on allowing oral evidence. 14. We revised the report to incorporate information ONHIR provided related to the communities to which relocatees have moved. 15. We clarified the report to state that relocatees with existing Navajo homesite leases can have their relocation home built on the homesite lease site if it meets feasibility requirements. 16. We revised the report to incorporate information ONHIR provided on relocatees who chose to relocate to remote areas. 17. Our report focuses on ONHIR’s management of the home building process. We did not make a change to the report in response to ONHIR’s comment because we already describe several procedures related to home building, including contractor licensing requirements and feasibility studies. The report also acknowledges that houses have passed final inspection. 18. As described in comment 2, we disagree with ONHIR’s characterization of our methodology. We did not make a change in the report because we maintain that including the experiences of the population served by ONHIR is appropriate for balance. 19. We disagree with ONHIR’s characterization of our report and did not make a change to the report based on this comment. Throughout the body of the report, we have included ONHIR’s policies, its implementation of activities, as well as the statements of officials related to relocatees’ home-building concerns. 20. We have made revisions to clarify the figure title. The two photographed houses are on the Navajo reservation, shown to us during our site visit. Because one of the houses was shown to us by ONHIR officials, we believe the home was built by ONHIR. The other home was from a separate tour with Navajo Nation officials. The Navajo Nation officials indicated that the home was built by ONHIR. 21. As described in comment 2, we disagree with ONHIR’s characterization of our methodology. We did not make a change in the report because we maintain that including the experiences of the population served by ONHIR is appropriate for balance. 22. As described in comment 2, we disagree with ONHIR’s characterization of our methodology. Throughout the report, we specifically attribute all the views on home building to those we interviewed—tribal government officials and relocatees. We also do not draw conclusions about the reasons for the condition of the homes. We did not make a change in the report because we maintain that including the experiences of the population served by ONHIR is appropriate for balance. 23. We revised the report to include ONHIR’s statement about the search capability of its electronic data system. 24. During our review, ONHIR officials did not identify contracting for post- move counseling services as an option that they have considered nor did we find any such reference in transition documents we reviewed. Therefore we have not made any changes to the report based on this comment. 25. We disagree with ONHIR’s characterization of our report. We reviewed information provided by ONHIR from various sources, and accurately reported that ONHIR does not have a comprehensive inventory of leased and vacant properties or surface use and other agreements for Navajo trust land it administers. Therefore, we made no changes in response to this comment. 26. We disagree with ONHIR’s characterization of our report and did not make a change in the report based on this comment. ONHIR’s management manual calls for written leases and land use approvals for the New Lands, whether or not the Navajo Nation requests these. It is not the responsibility of the trust beneficiary to request a written lease. The trustee has a duty to maintain clear, complete, and accurate books and records regarding trust property. 27. We disagree with ONHIR’s statement that it will wait until a successor is identified to inform it of the leases. Moving forward with specific transition activities only after a successor entity is identified is a risky approach because it assumes that ONHIR staff will be available to work with staff from a successor entity to transfer their knowledge to the new staff. However, there is no guarantee that ONHIR will continue to be operating at that time or that its many retirement- eligible employees will be available to assist any successor entities during a transition period. ONHIR has proposed closing on September 30, 2018. As of March 2018, no successor entities have been designated or authorized to assume any ONHIR activities. As we recommended, clearly documenting what needs to happen as part of the transition will help ensure a smoother transition in the event that there is not a transition period between ONHIR and a new successor entity. 28. We revised the report to indicate that, according to ONHIR, Federal Aviation Administration has continued to pay rent to ONHIR while a new lease is negotiated. 29. We disagree with ONHIR’s characterization of the report and did not make a change based on this comment. As we reported, the Settlement Act as amended does not specifically authorize ONHIR to collect, retain, and use revenues from leases of Navajo trust land it administers. The Settlement Act as amended also does not specify whether ONHIR, the Navajo Nation, or the relocatees should receive lease revenues. However, as we reported, under BIA’s regulations for trust land it administers, revenue from leases is to be either paid directly to the tribe whose trust land is being leased or to BIA, which deposits the revenue in the tribe’s trust account that generally earns interest. BIA officials told us leases of trust land that provide for BIA to retain lease revenue would not be consistent with the agency’s trust responsibility. 30. We recognize that ONHIR is not, and has never been, part of BIA. As we note in the report, the comparison to BIA is instructive because BIA administers the vast majority of Indian trust land. In addition, ONHIR in its comments and draft transition plan identify BIA as a possible successor entity for some activities. 31. As described in comment 29, we disagree with ONHIR’s characterization of its duties and powers as a trustee and did not make a change to the report. The Settlement Act as amended does not specifically authorize ONHIR to collect, retain, and use revenues from leases of Navajo trust land it administers. Moreover, BIA officials told us leases of trust land that provide for BIA to retain lease revenue would not be consistent with the agency’s trust responsibility. 32. We disagree with ONHIR’s characterization of the realities of leasing Navajo trust land and did not make a change to the report. ONHIR did not provide documentation of requests from the Navajo Nation for ONHIR to serve as the lessor on some commercial leases. When ONHIR served as the lessor, ONHIR provided the Navajo Nation with some leases for “technical review” or for “review and comment”. However, only one of the leases we reviewed includes the Navajo Nation President’s signature when the tribe, or a tribal entity, is not the lessee. Moreover, as we reported, the Navajo Nation Department of Justice repeatedly informed ONHIR that it lacked the authority to lease Navajo trust land. 33. As described in comment 27, we disagree with ONHIR’s planned approach to wait until a successor is identified and did not make a change in the report. Moving forward with specific transition activities only after a successor entity is identified is a risky approach because it assumes that ONHIR staff will be available to work with staff from a successor entity to transfer their knowledge to the new staff. However, there is no guarantee that ONHIR will continue operating or that its many retirement-eligible employees will be available to assist any successor entities during a transition period. 34. We clarified the report to note that another entity is needed to assume remaining home building activities. 35. We clarified the report to include ONHIR’s statement that it has had regular communications with executive and legislative branch offices on completing its work and closing. 36. We disagree with ONHIR’s comments that the report is misleading related to a presidential determination. Although we included ONHIR’s statement on its communications about closure in the report, we maintain that without a presidential determination, ONHIR has not met the explicit requirements for being permitted to cease operations under the Settlement Act. 37. As described in comment 11, during the course of our review, ONHIR did not have complete information readily available for use by a successor agency. We cannot assure that any efforts ONHIR has taken subsequently to compile this information as stated in its comment letter are accurate. We continue to believe that ONHIR should proactively compile necessary information rather than waiting for a successor to request it. Moreover, we maintain our concerns about ONHIR’s database given its admission of data entry issues in its comment letter. Therefore, we did not make a change in the report based on this comment. Appendix III: Comments from the Navajo Nation Appendix IV: Comments from the Navajo Nation Human Rights Commission Appendix V: GAO Contacts and Staff Acknowledgments GAO Contacts Staff Acknowledgments In addition to the contact named above, Jill Naamane and Jeffrey Malcolm (Assistant Directors), Chir-Jen Huang (Analyst in Charge), Susan Baker, William Chatlos, Brad Dobbins, Justin Fisher, Randi Hall, Erik Kjeldgaard, Ellie Klein, Jessica Sandler, Jennifer Schwartz, Jena Sinkfield, and Jeanette Soares made key contributions to this report.

Why GAO Did This Study In 1974, the Settlement Act was intended to provide for the final settlement of a land dispute between the Navajo and Hopi tribes that originated nearly a century ago. The act created ONHIR to carry out the relocation of Navajo and Hopi Indians off land partitioned to the other tribe. ONHIR's relocation efforts were scheduled to end by 1986. However, those efforts continue today. GAO was asked to review ONHIR's operations. Among other things, this report discusses (1) ONHIR's management and the status of relocation activities and (2) executive branch and legislative actions that may be needed for ONHIR to close and transfer remaining activities. GAO reviewed documentation; interviewed officials at ONHIR and other federal agencies, as well as from the Navajo Nation and Hopi Tribe; and conducted two site visits to ONHIR's offices and the Navajo reservation in Arizona. What GAO Found As of December 2017, the Office of Navajo and Hopi Indian Relocation, and its predecessor agency (collectively, ONHIR), has relocated 3,660 Navajo and 27 Hopi families off disputed lands that were partitioned to the two tribes and provided new houses for them. Although the Navajo-Hopi Settlement Act of 1974 (Settlement Act) intended for ONHIR to complete its activities 5 years after its relocation plan went into effect, the agency has continued to carry out its responsibilities for over three decades beyond the original deadline and the potential remains for relocation activities to continue into the future. For example, GAO found that by the end of fiscal year 2018 at least 240 households whose relocation applications were previously denied could still file for appeals in federal court and if the court rules in their favor these households could become eligible for relocation benefits under the Settlement Act, and ONHIR is still responsible for helping homeowners who might request repairs for 52 relocation homes that remain under warranty. ONHIR believes that it has substantially completed its responsibilities under the Settlement Act and has stated its intent to close by September 2018. However, ONHIR does not have the authority to close its operations and has not yet taken the steps necessary to facilitate such a closure. GAO identified a number of areas where either executive branch or congressional actions would be needed to affect a closure of ONHIR, as shown in these examples: The Settlement Act states that ONHIR will cease to exist when the President determines that its functions have been fully discharged. ONHIR, however, has not requested a determination nor provided specific information to the President that could facilitate such a decision. ONHIR has prepared a transition plan and identified potential successor agencies that could assume its remaining activities. However, officials at these agencies said they currently do not have authority under the Settlement Act to undertake ONHIR's activities. Without congressional authorization these agencies would not be able to succeed ONHIR. ONHIR has prepared an implementation plan to guide its closure but has not yet taken necessary steps to ensure that all the key information about its activities has been compiled. For example, ONHIR's database for tracking warranty requests is missing information, such as the date of warranty repairs and other contractor information. Similarly, ONHIR has not prepared complete information from its files on the remaining denied households who could file for federal appeals. Federal internal control standards state that agencies should identify and respond to risks and use quality information. By not preparing complete information on the relocation activities it has been engaged in, ONHIR places an effective transition of its functions to another agency at risk. This is because any successor agency authorized to continue these activities will not have the complete information needed to effectively fulfill these functions. What GAO Recommends GAO is making four matters for congressional consideration; including that Congress provide successor agencies necessary authority to continue ONHIR's remaining activities if it closes. GAO is also making five recommendations to ONHIR, including that it request a closure determination from the President and prepare necessary information to facilitate the transfer of its activities to a successor. ONHIR neither agreed nor disagreed with the five recommendations and stated it had either already taken steps or planned to once a successor is identified. GAO continues to believe the recommendations are valid, as discussed in the report.

gao_GAO-18-476

gao_GAO-18-476_0

Background NASA’s Commercial Crew Program is a multi-phased effort that began in 2010. Across the phases, NASA has engaged several companies, using both agreements and contract vehicles to develop and demonstrate crew transportation capabilities. As the program has passed through these phases, NASA has generally narrowed down the number of participants. The early phases of the program were under Space Act agreements, which is what NASA calls the agreements entered into pursuant to its other transaction authority. These types of agreements are generally not subject to the Federal Acquisition Regulation (FAR) and allow the government and its contractors greater flexibility in many areas. Under these Space Act agreements, NASA relied on the commercial companies to propose specifics related to their crew transportation systems, including their design, the capabilities they would provide, and the level of private investment. In these phases, NASA provided technical support and determined whether the contractors met certain technical milestones. In most cases, NASA also provided funding. For the final two phases of the program, NASA awarded FAR-based contracts. By using FAR-based contracts, NASA gained the ability to procure missions to the ISS, while continuing to provide technical expertise and funding to the contractors. NASA levied two sets of requirements on the contractors: the ISS program requirements, which must be met by all spacecraft visiting the ISS whether they carry cargo or crew; and the Commercial Crew Program requirements, which have a focus on system capabilities and safety rather than design. The program also established a verification closure notice process, in which the contractors submit data to NASA to verify they have met all the requirements to be certified. This certification must occur before contractors are allowed to fly initial crewed missions to the ISS. Current Program Contracts In September 2014, NASA awarded firm-fixed-price contracts to Boeing and SpaceX, valued at up to $4.2 billion and $2.6 billion, respectively, for the Commercial Crew Transportation Capability phase. Under a firm- fixed-price contract, the contractor must perform a specified amount of work for the price negotiated by the contractor and government. This is in contrast to a cost-reimbursement contract, in which the government generally agrees to pay the contractor’s allowable costs regardless of whether work is completed. During this phase, the contractors will complete development of crew transportation systems. Boeing’s spacecraft—CST-100 Starliner—is composed of a crew module and a service module. The crew module will carry the crew and cargo. It also includes communication systems, docking mechanisms, and return systems for Earth landing. The service module provides propulsion on-orbit and in abort scenarios as well as radiators for thermal control. SpaceX’s spacecraft—Dragon 2—is composed of a capsule, which we refer to as the crew module, and a trunk, which we refer to as the support module. The crew module is composed of a pressure section and a service section. This module will carry the crew and cargo. It also includes avionics, docking mechanisms, and return systems for a water landing. The support module includes solar arrays for on-orbit power and guidance fins for escape abort scenarios. Figure 1 shows the spacecraft and launch vehicles for Boeing and SpaceX’s crew transportation systems. The Commercial Crew Transportation Capability phase contracts include three types of services: Contract Line Item 001 encompasses the firm-fixed-price design, development, test, and evaluation work needed to support NASA’s certification of the contractor’s spacecraft, launch vehicle, and ground support systems. Contract Line Item 002 covers any service missions that NASA orders to transport astronauts to and from the ISS. Under this indefinite-delivery, indefinite-quantity line item, NASA has ordered six post-certification missions from each contractor. Each service mission is its own firm-fixed-price task order. NASA must certify the contractors’ systems before they can fly these missions. Contract Line Item 003 is an indefinite-delivery, indefinite-quantity line item for any special studies, tests, and analyses that NASA may request. These tasks do not include any work necessary to accomplish the requirements under contract line item 001 and 002. As of April 2018, NASA had funded studies worth approximately $30 million to Boeing, including approximately $27 million for additional testing of the parachute system. NASA had funded studies worth approximately $44 million to SpaceX, including approximately $34 million for additional testing of the parachute system. For each contractor, the maximum value of this contract line item is $150 million. NASA has made changes to the contracts that have increased their value. While the contracts are fixed-price, their values can increase if NASA adds work or otherwise changes requirements, among other means. As of April 2018, NASA requirement changes had increased the value of contract line item 001 for Boeing by approximately $191 million and for SpaceX by approximately $91 million. Certification NASA divided the certification work under contract line item 001 into two acceptance events: the design certification review and the certification milestone. An acceptance event occurs when NASA approves a contractor’s designs and acknowledges that the contractor’s work is complete and meets the requirements of the contract. The first acceptance event—the design certification review—verifies the contractor’s crew transportation system’s capability to safely approach, dock, mate, and depart from the ISS, among other requirements. After the contractor has successfully completed all of its flight tests, as well as various other activities, the second acceptance event—the certification milestone—determines whether the crew transportation system meets the Commercial Crew Program’s requirements. Following this contract milestone is an agency certification review, which authorizes the use of a contractor’s system to transport NASA crew to and from the ISS. Figure 2 shows a notional path leading up to the agency certification review. The Commercial Crew Program’s certification plan outlines how the program will incrementally review required deliverables leading up to, and supporting, the agency certification review. For each review, the plan describes the information that the contractor and the program will present. At the agency certification review, which is chaired by the Associate Administrator of the Human Exploration and Operations Mission Directorate, the agency will review the program’s formal recommendation to certify the contractor’s crew transportation system. Program officials said that their goal is to develop and review certification evidence incrementally in order to reduce the risk that issues will be identified during the agency certification review. Prior GAO Work In our February 2017 report, we evaluated the progress made by the two contractors on the Commercial Crew Program and found the following: Both of the Commercial Crew Program’s contractors had made progress developing their crew transportation systems, but both also had aggressive development schedules that were increasingly under pressure. We reported that both Boeing and SpaceX had determined that they would not be able to meet their original 2017 certification dates, and both expected certification to be delayed until 2018. We found that the schedule pressures were amplified by NASA’s need to provide a viable crew transportation option because its contract with Russia’s space agency was to provide crew transportation to the ISS for six astronauts through 2018 with rescue and return through late spring 2019. Purchasing additional seats from Russia involves a contracting process that typically takes 3 years. Without a viable contingency option for ensuring uninterrupted access to the ISS in the event of further Commercial Crew delays, we concluded that NASA was at risk of not being able to maximize the return on its multibillion dollar investment in the space station. The Commercial Crew Program was using mechanisms laid out in its contracts to gain a high level of visibility into the contractors’ crew transportation systems, but maintaining that level of visibility through certification could add schedule pressures. We noted that, for example, due to NASA’s acquisition strategy for this program, its personnel were less involved in the testing, launching, and operation of the crew transportation system. While the program developed productive working relationships with both contractors, obtaining the level of visibility that the program required had also taken more time than the program or contractors had anticipated. Ultimately, we noted that the program had the responsibility for ensuring the safety of U.S. astronauts, and its contracts gave it deference to determine the level of visibility required to do so. We concluded that the program office could face difficult choices moving forward about how to maintain the level of visibility it feels it needs without adding to the program’s schedule pressures. In order to ensure that the United States had continued access to the ISS if the Commercial Crew Program’s contractors experienced additional schedule delays, we recommended in our February 2017 report that the NASA Administrator develop a contingency plan for maintaining a presence on the ISS beyond 2018, including options to purchase additional Russian Soyuz seats, and report to Congress on the results. NASA concurred with this recommendation, and in February 2017, NASA executed a contract modification that purchased two seats and included an option to purchase three additional crewmember seats from Boeing on the Russian Soyuz vehicle. These seats represent a contingency plan for U.S. access to the ISS through 2019. In April 2017, NASA informed the Congress of this action. Contractors Have Made Progress, but NASA Has Not Finalized Plans to Ensure ISS Access Given Persistent Delays Boeing and SpaceX continue to make progress developing their crew transportation systems, but both contractors have further delayed the certification milestone to early 2019. These changes have occurred as the contractors continue to work to aggressive schedules, and they have had to delay key events regularly. Further delays are likely as the Commercial Crew Program’s schedule risk analysis shows that the certification milestone is likely to further slip. In addition, as of mid-June 2018, NASA officials told us that these dates may change soon but that both contractors have not yet provided official updates to their schedules to NASA. NASA has not fully shared information with Congress regarding the risks of future schedule delays for the contractors and, as a result, Congress lacks insight into when the contractors will be certified. Also, there may be a gap in access to the ISS if the Commercial Crew Program experiences additional delays. While NASA has begun to discuss potential options, it currently does not have a contingency plan for how to ensure an uninterrupted presence on the ISS beyond 2019. Contractors Continue to Make Progress, but Risks Remain Boeing and SpaceX have continued to make progress finalizing their designs and building hardware as they work toward their certification milestones. The contractors are manufacturing test articles to demonstrate system performance and flight spacecraft to support the uncrewed and crewed flight tests, which are expected to demonstrate the ability to meet contract requirements. As table 1 shows, these test articles and spacecraft vary in levels of completion. Some are built and undergoing testing while others are starting the manufacturing phase. Should any issues arise during integration and test or the flight tests, the contractors may have to complete rework on the spacecraft already under construction. While both contractors are making progress, the Commercial Crew Program is tracking risks that each contractor has to address through testing and other means as they work towards the certification milestone. As we have previously reported, these types of risks are inherent in NASA’s major acquisitions, which are highly complex, specialized, and often pushing the state of the art in space technology, but they could also delay the contractors’ progress if issues arise during testing. The Commercial Crew Program’s top programmatic risks identified for Boeing include challenges related to its abort system performance, parachutes, and launch vehicle. Abort System: Boeing is addressing a risk that its abort system, which it needs for human spaceflight certification, may not meet the program’s requirement to have sufficient control of the vehicle through an abort. In some abort scenarios, Boeing has found that the spacecraft may tumble, which could pose a threat to the crew’s safety. To validate the effectiveness of its abort system, Boeing has conducted extensive wind tunnel testing and plans to complete a pad abort test in July 2018. Parachute System: Boeing is also addressing a risk that during descent, a portion of the spacecraft’s forward heat shield may re- contact the spacecraft after it is jettisoned and damage the parachute system. Boeing’s analysis indicates the risk exists only if one of two parachutes that pull the forward heat shield away from the spacecraft does not deploy as expected, and that potential re-contact is non- detrimental. However, NASA’s independent analysis indicates that this may occur even if both parachutes deploy as expected. If the program determines this risk is unacceptable, Boeing would need to redesign the parachute system, which the program estimates could result in at least a 6-month delay. Launch Vehicle Data: One of the program’s top programmatic and safety concerns is that it may not have enough information from Boeing’s launch vehicle provider, United Launch Alliance, to assess whether the Atlas V launch vehicle prevents or controls cracking that could lead to catastrophic failures. NASA estimates that unfinished work in this area could take Boeing and the United Launch Alliance until the fourth quarter of 2018 to complete. Additionally, the first stage of the Atlas V is powered by the Russian built RD-180 engine, and, according to program and Boeing officials, access to its data is highly restricted by agreements between the U.S. and Russian governments. Since our last report, the Commercial Crew Program has lowered the risk that certification of the launch vehicle might not occur by negotiating steps to access necessary data, but work is still ongoing. The Commercial Crew Program’s top programmatic risks identified for SpaceX are in part related to ongoing design and development efforts related to its launch vehicle design, the Falcon 9 Block 5. Composite Overwrap Pressure Vessel: This Block 5 design includes SpaceX’s redesign of the composite overwrap pressure vessel, which is intended to contain a gas under high pressure. SpaceX officials stated the newly designed vessel aims to eliminate risks identified in the older design, which was involved in an anomaly that caused a mishap in September 2016. SpaceX plans to qualify the updated design for flight prior to the uncrewed flight test design certification review. Engine Turbine Cracking: The Block 5 design also includes design changes to address cracks in the turbine of its engine identified during development testing. NASA program officials told us that they had informed SpaceX that the cracks were an unacceptable risk for human spaceflight. SpaceX officials told us that they have made design changes to this Block 5 upgrade that did not result in any cracking during initial testing. However, this risk will not be closed until SpaceX successfully completes qualification testing in accordance with NASA’s standards without any cracks. As of March 2018, SpaceX had not yet completed this testing. Propellant Loading Procedures: Both the program and a NASA advisory group have raised SpaceX’s plan to fuel the launch vehicle after the astronauts are on board the spacecraft to be a potential safety risk. In the May 2018 meeting minutes, however, the Aerospace Safety Advisory Panel stated that with appropriate controls in place, this approach could be a viable option for the program to consider. SpaceX’s perspective is that this operation may be a lower risk to the crew because it reduces the crew exposure time while the launch vehicle is being loaded with propellant. To better understand the propellant loading procedures, the program and SpaceX agreed to demonstrate the loading process five times from the launch site in the final crew configuration prior to the crewed flight test. The five events include the uncrewed flight test and the in-flight abort test. Therefore, delays to those events would lead to delays to the agreed upon demonstrations, which could in turn delay the crewed flight test and certification milestone. Program’s Schedule Risk Analysis Indicates More Delays Likely to Certification Milestone Both contractors have notified NASA that their certification milestones have slipped to January 2019 for Boeing and February 2019 for SpaceX, but the Commercial Crew Program’s schedule risk analysis indicates more delays are likely. This analysis identifies a range for each contractor, with an earliest and latest possible completion date, as well as an average. In April 2018, the program’s schedule risk analysis found there was zero percent chance that either contractor would achieve its current proposed certification milestone. The analysis’s average certification date was December 2019 for Boeing and January 2020 for SpaceX. Figure 3 shows the original Boeing and SpaceX contract schedules and the current proposed schedule for five key events in each contract, as well as NASA’s schedule risk analysis for the certification milestone. Each month, the program updates its schedule risk analysis based on the contractors’ internal schedules as well as program officials’ perspectives and insight into specific technical risks. The Commercial Crew Program manager told us that differences between the contractors’ proposed schedules and the program’s schedule risk analysis include: The contractors are aggressive and use their schedule dates to motivate their teams, while NASA adds additional schedule margin for testing. Both contractors assume an efficiency factor in getting to the crewed flight test that NASA does not factor into its analysis. The program manager also told us that the program meets with each contractor monthly to discuss schedules and everyone agrees to the relationships between events in the schedule even if they disagree on the length of time required to complete events. The program manager added, however, that she relies on her prior experience to estimate schedule time frames as opposed to relying on the contractors’ schedules, which are often optimistic. Our analysis also shows that the contractors often delay their schedules. Both contractors have repeatedly stated that their schedules are aggressive and have set ambitious—rather than realistic—dates, only to frequently delay them. Since the current contracts were awarded in 2014, the Commercial Crew Program has held 13 quarterly reviews for each contractor. For the five key events identified above, Boeing has reported a delay at 7 of those quarterly reviews and SpaceX has reported a delay at 9 of them. In mid-June 2018, NASA officials told us that the dates for these key events may change soon. The information presented in Figure 3 above is based on first quarter calendar year 2018 data. NASA officials stated both contractors have not yet officially communicated new schedule dates to NASA as of the second quarter calendar year 2018. We found that both contractors have updated schedules that indicate delays are forthcoming for at least one key event, but NASA officials told us they lack confidence in those dates until they are officially communicated to NASA by the contractors. As a result, NASA is managing a multibillion dollar program without confidence in its schedule information as it approaches several big events, including uncrewed and crewed flight tests. NASA Has Neither Shared Complete Information on Delay Risk with Congress nor Developed a Contingency Plan The risk of future delays in the contractors’ schedules is critical information that NASA has not fully shared with Congress. Moreover, NASA has not yet developed a contingency plan to address the potential gaps that these delays could have on U.S. access to the ISS after 2019. Specifically, in the Explanatory Statement accompanying the fiscal year 2018 Consolidated and Further Continuing Appropriations Act, the House Appropriations Committee stated its expectation that NASA report quarterly to the Senate and House Committees on Appropriations on the status of the Commercial Crew Program contracts. Previously, members of Congress had asked for this information in order to ensure that Congress had adequate insight into this program. While NASA includes both contractors’ proposed schedules in its quarterly report to Congress, NASA does not include the results of its own schedule risk analysis. Given the frequency with which the contractors delay key events in their schedules, the program’s schedule risk assessment provides valuable insight into potential delays that NASA currently is not providing to Congress. In addition, as previously mentioned, NASA executed a contract modification that purchased two seats and included an option to purchase three additional crew member seats through Boeing for an undisclosed value and reported this action to Congress in April 2017. Ultimately, the option was exercised, and NASA purchased a total of five seats on four different Soyuz flights. Boeing obtained these seats through a separate settlement with the Russian firm RSC Energia, which manufactures the Soyuz. These seats were intended to serve as a contingency plan based on schedule information available at that time. However, subsequent delays, as well as the risk of future delays as discussed above, indicate that this contingency plan will likely no longer be sufficient. The earliest and latest possible completion dates for certification in NASA’s April 2018 schedule risk analysis indicate it is possible that neither contractor would be ready before August 2020, leaving a potential gap in access of at least 9 months. We calculated the potential gap based on the contractor certification milestone dates, but there could be some additional time required between that review and the first post-certification service mission to the ISS. As seen in figure 4, if the contractors can maintain their current proposed schedules for their respective certification milestones, a gap in access to the ISS is not expected. However, there would be a gap in access to the ISS if neither contractor has its certification milestone before November 2019, which is when NASA expects the final Russian Soyuz seat for a U.S. astronaut to return. Senior NASA officials told us that sustaining a U.S. presence on the ISS is essential to maintain and operate integral systems, without which the ISS cannot function. Given the importance of maintaining a U.S. presence on the ISS, NASA officials have stated they are working on options to address the potential gap in access. However, officials told us that planning for contingencies is difficult given the extensive international negotiations required for some options. Obtaining additional Soyuz seats seems unlikely, as the process for manufacturing the spacecraft and contracting for those seats typically takes 3 years—meaning additional seats would not be available before 2021. As a result, according to NASA’s Associate Administrator for Human Exploration and Operations, the options NASA is considering include: Refine the remaining Soyuz launch schedule to allow for a return in January 2020, as opposed to November 2019. This would provide 2 additional months of access to the ISS before the commercial crew flights need to start. Use the crewed flight tests as operational flights to transport U.S. astronauts to and from the ISS. In March 2018, NASA modified Boeing’s contract to allow NASA to add a third crew member and extend the length of the flight test, if NASA chooses to do so. This would have limited usefulness, however, in filling a potential gap in access to the ISS if the schedule for Boeing’s crewed flight test slips past the return date for the last Soyuz flight and SpaceX also continues to experience delays. NASA’s Associate Administrator for Human Exploration and Operations stated that he is “brainstorming” other options to ensure access to the ISS but does not have a formal plan. While options are not unlimited and decisions have to be made within the context of the current geopolitical environment, Congress stated in the NASA Authorization Act of 2005 that it is U.S. policy to possess the capability for human access to space on a continuous basis. In 2010, Congress further stated that one of the key objectives of the United States’ human spaceflight policy is to sustain the capability for long-duration presence in low-Earth orbit through full utilization of the ISS. If NASA does not develop options for ensuring access to the ISS in the event of further Commercial Crew delays, it will not be able to ensure that the U.S. policy goal and objective for the ISS will be met. Agency Certification Process Includes Mechanisms to Assess Safety, but Is Complicated by Assessment of Key Safety Metric and Oversight Structure The Commercial Crew Program relies on several contractual mechanisms to assess safety throughout the certification process, and those mechanisms are in varying stages of completion. The program itself, its contractors, and two of NASA’s independent review organizations have raised concerns about the program’s ability to assess and evaluate all of the deliverables in a timely manner. In addition, one of the key safety requirements levied by the program is loss of crew, which captures the probability of death or disability to a crew member. NASA does not have a consistent approach for how to incorporate key inputs to assess this metric, which means the agency as a whole may not clearly capture or document its risk tolerance with respect to loss of crew. Further, the program’s chief safety and mission assurance officer is dual hatted to serve simultaneously in a programmatic position as well as the program’s safety technical authority. This approach creates an environment of competing interests because it relies on the same individual to manage technical and safety aspects on behalf of the program while also serving as the independent oversight of those same areas. Program Has Several Contractual Mechanisms to Assess Safety The contractors are required to provide several key deliverables to the Commercial Crew Program, which inform the agency certification review and help NASA determine the level of risk it is accepting with respect to safety of each spacecraft. As described below, these deliverables are in varying stages of completion and the program itself, its contractors, and two of NASA’s independent review organizations have raised concerns about the program’s ability to assess and evaluate all of the deliverables in a timely manner. Certification Data Package. Among other things, the certification data package includes a list of seven system safety assessments. For example, the certification data package includes a fault tolerance assessment, which describes the system’s ability to sustain a certain number of undesired events, such as software or operational anomalies. A human error analysis—one of the seven assessments in the data package—evaluates human errors to minimize their negative effects on the system. Boeing held its uncrewed flight test design certification review in December 2017 and submitted its certification data package for NASA approval. Boeing plans three more updates to this data package prior to the final certification milestone. SpaceX has begun to submit data and plans to submit its final certification data package as part of its crewed flight test design certification review, which is scheduled for September 2018. According to the program’s certification review plan, program officials will review and approve the contractors’ certification data packages, which will be used to inform the agency certification review. Phased Safety Review Process. A three-phased safety review process informs the program’s quality assurance activities, and it is intended to ensure that the contractors have identified all safety-critical hazards and implemented associated controls prior to the first crewed flight test. In phase one, the contractors identified risks in their designs and developed reports on potential hazards, the controls they put in place to mitigate them, and explanations for how the controls will mitigate the hazards. In phase two, which is nearing completion, the program reviews and approves the contractors’ hazard reports and develops strategies to verify and validate that the controls are effective. For example, if a control requires that an item be waterproofed, verification and validation strategies could include inspections and tests to confirm that the item is waterproof. As of April 2018, the program had yet to complete this phase, having approved 97 percent of Boeing’s phase two reports and 72 percent of SpaceX’s phase two reports. In phase three, the contractors will conduct the verification activities and submit the hazard reports to the program for approval. The program has begun phase three, including approving 19 percent of Boeing’s phase three reports. Program Requirements. While the program manager told us that all of the requirements contribute to the safety of the commercial systems, safety officials are required to approve a subset of these requirements. Examples of requirements approved by safety officials include the ability to leave the spacecraft in an emergency or to abort a launch. When a contractor is ready for NASA to verify that it has met a requirement, the contractor submits data for NASA to review through a verification closure notice. We define “safety-specific notices” as those requiring safety officials’ approval. As shown in table 2, as of March 2018, the program had approved 2 percent of Boeing’s safety-specific notices and 0 percent of SpaceX’s safety-specific notices. Testing. The program also requires testing to verify and validate the crew transportation system. Agency officials emphasized the importance of testing to safety, stating that testing reduces uncertainty about a system’s performance and can uncover unknown problems. As noted above, both contractors will be conducting an uncrewed and a crewed flight test prior to being certified. While a certain level of risk needs to be accepted to conduct human spaceflight, these flight tests help to mitigate this risk by validating the integrated performance of the hardware and software. Agency and program officials stated that the contractors’ flight tests are critical evidence to support certification of a safe and reliable system. As evidenced by the data above, the program still has a significant amount of work ahead with respect to approving certification packages and closing hazard reports and verification closure notices. We have previously found that the program’s workload was an emerging schedule risk, and the contractors have continued to express concern about program officials’ ability to process and approve certification paperwork in a timely manner. Workload has also been a concern for two of NASA’s independent review organizations. For example, the Aerospace Safety Advisory Panel noted in its January 2018 annual report that the sheer volume of work that remains for the program in terms of closing hazard reports and verification closure notices is significant. In addition, the program’s safety and mission assurance office identified the upcoming bow wave of work in a shrinking time period as a top risk to achieving certification. NASA Lacks a Consistent Approach to Assess Key Safety Metric One mechanism the program put in place to assess the overall safety of each spacecraft—loss of crew—has been a focus of the Aerospace Safety Advisory Panel, Members of Congress, our prior work, and the program itself. Loss of crew captures the probability of death or permanent disability to one or more crew members. It has received a lot of attention, in part, because it has been a top risk for the program since 2015. Specifically, the program has been concerned that neither contractor would be able to meet the contract requirement of a 1 in 270 probability of incurring loss of crew. We identified two key concerns with how NASA is using the loss of crew metric: (1) inconsistent approaches to assess the loss of crew metric and (2) no identified plan to share lessons learned about using the loss of crew metric as a safety threshold. A loss of crew value is generated through a probabilistic safety analysis, which models scenarios that could result in the loss of crew using various inputs. According to the program’s analysis, the probability of on-orbit debris damaging the vehicle has the greatest effect on a loss of crew value. This probability is informed by an orbital debris (debris) model, which was updated in 2014, after the loss of crew requirement was established. The updated debris model makes it harder to meet a loss of crew value, in part, because the modeling environment where the contractors’ systems will operate has changed. For example, the updated model includes a larger span of orbit, greater range of debris sizes, and the addition of material density classifications, which were not included in the former model. Further, the probabilistic safety analysis may include operational mitigations, such as on-orbit inspections that would include using cameras on the ISS to visually survey the spacecraft for damage, which, according to officials, makes it easier to meet a loss of crew value. NASA describes the probabilistic safety analysis as a powerful tool that should be used as part of the overall risk management process to ensure the risk associated with development and operation of a system is understood, evaluated, managed, and mitigated. However, we found differences in the approaches that officials plan to use to assess loss of crew as well as in the loss of crew value being measured that could limit the usefulness of this tool. Agency Certification. The agency certification review for each contractor will include an assessment of whether its crew transportation system meets a loss of crew threshold of 1 in 150 for missions to the ISS, which is based on a May 2011 safety memo from the Office of Safety and Mission Assurance. A loss of crew value with a higher denominator, such as 1 in 270, is harder to meet than with a lower denominator, such as 1 in 150. According to the Chief of the Office of Safety and Mission Assurance, he will assess the 1 in 150 threshold using a probabilistic safety analysis that includes the updated debris model and operational mitigations, such as the on- orbit inspections cited above. Program Office. According to program officials, they will assess whether either contractor meets a 1 in 270 loss of crew value based on a probabilistic safety analysis using the former debris model (not the updated model) and not including operational mitigations. Contracting Officer. According to the contracting officer, each contractor’s loss of crew requirement is 1 in 270 without including operational mitigations. The contracting officer stated that SpaceX’s contract requirement uses the updated debris model in the probabilistic safety analysis, whereas Boeing’s contract requirement uses the former debris model in the probabilistic safety analysis. Program’s Chief Safety and Mission Assurance Officer. According to the program’s chief safety and mission assurance officer, he will conduct a probabilistic safety analysis using the updated debris model and will not include operational mitigations to assess whether each contractor meets a 1 in 200 loss of crew value. This loss of crew value stems from a program update that occurred after the initial contracts were signed. These different approaches are summarized in table 3 below. Agency policy requires human spaceflight programs to set a safety threshold, which NASA did for the Commercial Crew Program when it identified the 1 in 150 loss of crew threshold in the May 2011 safety memo. Subsequently, the program set more rigorous loss of crew values in contract and program documents. NASA also updated the debris model, which we previously noted makes it more difficult to meet a loss of crew value. As a result, NASA does not have a consistent approach for how to incorporate key inputs to the probabilistic safety analysis, including changes to the debris model. Instead, the risk tolerance that NASA is accepting with loss of crew varies based upon which entity is presenting the results of its probabilistic safety analysis. For example, it is possible that the program’s assessment will determine that neither contractor will meet the 1 in 270 contract requirement, but that the agency’s assessment will determine that the contractors meet the 1 in 150 agency certification value because that analysis will include operational mitigations. Or the program’s assessment could determine that Boeing meets the 1 in 270 contractual loss of crew requirement, but the agency’s assessment may determine that Boeing does not meet the 1 in 150 agency certification value because that analysis will use the updated debris model. Federal internal controls state that agency management should define objectives clearly to enable the identification of risks and define risk tolerances. Specifically, management should define risk tolerances in specific and measurable terms, so they are clearly stated and can be measured. In this case, because there will be multiple analyses conducted using different inputs, NASA risks not clearly capturing or documenting, in a coherent manner, its overall risk tolerance with respect to loss of crew before a final decision must be made on whether to certify either crew transportation system. Moreover, capturing the challenges and lessons learned from using the loss of crew metric is critical, particularly because agency officials told us that this is the first time this metric has been used as a safety threshold. Also, there are different viewpoints about the utility of the metric as a safety threshold across the agency. The program manager repeatedly told us that loss of crew is best used as a design tool. For example, program officials told us that both contractors incorporated additional orbital debris shielding into their designs to mitigate the orbital debris risk and improve their loss of crew values. In addition, the Aerospace Safety Advisory Panel reported in 2018 that loss of crew should not be viewed as an absolute measure of actual risk during operations. However, the May 2011 agency safety memo states that a breach of the loss of crew threshold would initiate a termination review of the Commercial Crew Program, which is a more strict application of the loss of crew metric. Both program and safety officials told us that, after the agency certification is complete and lessons learned are available to be compiled, sharing those lessons learned across NASA would be a good idea given the complexities associated with assessing the loss of crew metric. As of April 2018, however, agency officials said they did not have a plan for loss of crew knowledge-sharing. We have previously found that lessons learned provide a powerful method of sharing good ideas for improving work processes, facility or equipment design and operation, quality, safety, and cost-effectiveness. Further, according to NASA’s Knowledge Policy on Program and Projects, which is managed through the Office of the Chief Engineer, a principle of each center and mission directorate’s knowledge strategy is that knowledge is the cornerstone of NASA’s ability to achieve mission success. The policy acknowledges that NASA faces continuous challenges in using what it knows effectively. These challenges include, but are not limited to, enabling the identification and flow of knowledge across organizational boundaries; preserving knowledge at risk of being lost; and providing means for individuals, teams, and the organization to learn from experiences. If NASA does not capture lessons learned from the Commercial Crew Program on using the loss of crew requirement to set a program’s safety threshold and whether it met the agency’s intended goal, future programs will not be able to benefit from the knowledge gained from this multibillion dollar investment. The Commercial Crew Program’s Organizational Structure Impairs Independence of Safety Technical Oversight Supporting the Certification Process NASA’s governance model prescribes a management structure that employs checks and balances among key organizations to ensure that decisions have the benefit of different points of view and are not made in isolation. As part of this structure, NASA established the technical authority process as a system of checks and balances to provide independent oversight of programs and projects in support of safety and mission success through the selection of specific individuals with delegated levels of authority. The technical authority process has been used in other parts of the government for acquisitions, including the Department of Defense and Department of Homeland Security. The Commercial Crew Program is organizationally connected to three technical authorities within NASA: the Office of the Chief Engineer technical authority, the Office of Chief Health and Medical technical authority, and the Office of Safety and Mission Assurance (safety) technical authority. The safety technical authority is responsible for ensuring from an independent standpoint that the program’s products and processes satisfy NASA’s safety, reliability, and mission assurance policies. The NASA safety technical authority has delegated authority through the Kennedy Space Center Director to the Chief Safety and Mission Assurance Officer for the Commercial Crew Program. We have previously reviewed how NASA has organized its technical authorities for its Exploration Systems Development organization—an organization that oversees the development of the Space Launch System, Orion crew capsule, and associated ground systems that have the goal of extending human presence beyond low-Earth orbit. In October 2017, we found that the Exploration Systems Development organization had established an organizational structure in which the technical authorities for engineering and safety and mission assurance were dual hatted simultaneously in programmatic positions. We found that having the same individual simultaneously fill both a technical authority role and a program role created an environment of competing interests, where the technical authority’s ability to impartially and objectively assess the programs while at the same time acting on behalf of the Exploration Systems Development organization in programmatic capacities may be subject to impairments. We found that this was in contrast to a recommendation from the Columbia Accident Investigation Board report—the result of an in-depth assessment of the technical and organizational causes of the 2003 Space Shuttle Columbia accident—for NASA to establish a technical authority to serve independently of the Space Shuttle program, so that employees would not feel hampered to bring forward safety concerns or disagreements with programmatic decisions. The board’s findings that led to this recommendation included a broken safety culture in which it was difficult for minority and dissenting opinions to percolate up through the hierarchy; dual center and programmatic roles vested in one person that had confused lines of authority, responsibility, and accountability and made the oversight process susceptible to conflicts of interest; and oversight personnel in positions within the program, increasing the risk that these staffs’ perspectives would be hindered by too much familiarity with the programs they were overseeing. In October 2017, we recommended that the division no longer dual hat two individuals who had both programmatic and technical authority responsibilities. As of April 2018, NASA had taken steps to separate the engineering technical authority position from the programmatic position, and NASA’s Chief of Safety and Mission Assurance said he planned to separate the safety position but had not yet completed that action. The Commercial Crew Program employs a similar structure to the Exploration Systems Development organization in that the safety technical authority is dual hatted simultaneously in a programmatic position as the Commercial Crew Program’s Safety and Mission Assurance Manager. According to the program’s safety technical authority, in his programmatic role for the program, he helps set priorities for safety issues, including how staff will be utilized to meet those priorities. In the technical authority role, he provides independent oversight in support of safety and mission success. In his dual-hatted role, this official will be responsible for endorsing the program’s certification recommendations in two different capacities: as the technical authority and as a program authority. As a result, this structure relies on the same individual to completely separate two roles—one to manage the Commercial Crew Program’s safety issues within programmatic cost and schedule constraints, and the other to assess the same issues in an independent oversight role. While the Commercial Crew Program may have an additional level of separation between the safety technical authority and the program’s involvement in the design of commercial systems due to its shared assurance model with the commercial providers, the Commercial Crew Program still maintains a structure where one individual simultaneously serves in both technical authority and programmatic roles. Figure 5 describes some of the conflicting roles and responsibilities of this official in his two different positions. During our review, officials cited several factors in support of a dual- hatted approach: The safety technical authority retains independence because his technical authority reporting path and performance reviews are not under the purview of the Commercial Crew Program chain of command. Due to the Commercial Crew Program’s shared assurance model with commercial providers, the program is operating in a quality assurance role that provides an additional level of separation between the safety technical authority and the program’s involvement in the design of commercial systems. For safety decisions involving cost and schedule where the individual who is dual hatted with both technical authority and programmatic responsibilities may feel conflicted, he stated that he would discuss these matters with his management to validate the logic behind his decision. There are cost and knowledge efficiencies gained from one individual serving in both programmatic and safety technical authority capacities. NASA’s Chief of Safety and Mission Assurance stated that he has great confidence in the individual currently serving in the dual hatted role for the Commercial Crew Program, but acknowledged there is inherent conflict even with the program’s shared assurance model. In December 2017, he stated that, based on our previous work and current discussions, he intends to decouple the programmatic and technical authority responsibilities for the Commercial Crew Program but had not done so as of April 2018. Federal internal control standards state that an agency should design control activities to achieve objectives and respond to risks, which includes segregation of key duties and responsibilities to reduce the risk of error, misuse, or fraud. By overlapping technical authority and programmatic responsibilities, NASA will continue to run the risk of creating an environment of competing interests for the Commercial Crew Program’s safety technical authority. Conclusions NASA’s Commercial Crew Program is a multibillion dollar effort to facilitate the commercial development of a crew transportation system that can end the United States’ reliance on Russia to maintain an uninterrupted presence on the ISS. Boeing and SpaceX continue to make progress developing a capability to fly to the ISS, but both have continued to experience delays. Program analysis indicates risks of further delays in each contractor’s current schedule, but NASA has not provided that information to Congress in its routine briefings. Without this information, Congress does not know the full extent of potential delays to inform decision making. Additional delays could also disrupt U.S. access to the ISS. While NASA is working on potential solutions, there is no contingency plan in place to address this potential gap. Without a viable contingency plan, NASA puts at risk achievement of the U.S. goal and objective for the ISS. NASA must balance safety with acceptable risk for human spaceflight. As part of the certification process for each contractor’s spacecraft, NASA has developed one key safety metric, loss of crew. However, the complicated nature of this metric is further muddled by the inconsistent approaches being used across NASA about what inputs to be considered. As a result, there is no clear articulation of what level of risk NASA will accept with respect to this program. In addition, NASA does not have plans to capture lessons learned from how the Commercial Crew Program has used this metric to assess safety and is missing an opportunity to capture this knowledge for future human spaceflight programs. Finally, a space program’s management and oversight approach is an integral part of ensuring that human spaceflight is as safe and successful as possible. Independence of the program management and oversight functions is key to achieving the balance between safety and success. The Commercial Crew Program’s approach, however, burdens the safety technical authority with both programmatic and independent technical authority responsibilities. As a result, NASA has limited assurance that independence can be maintained as part of its institutional process to ensure safety and success. Recommendations for Executive Action We are making the following five recommendations to NASA: The NASA Associate Administrator for Human Exploration and Operations should direct the Commercial Crew Program to include the results of its schedule risk analysis in its mandatory quarterly reports to Congress. (Recommendation 1) The NASA Administrator should develop and maintain a contingency plan for ensuring a presence on the ISS until a Commercial Crew Program contractor is certified. (Recommendation 2) The NASA Administrator should direct the Chief of Safety and Mission Assurance, the NASA Associate Administrator for Human Exploration and Operations, the Commercial Crew Program Manager, and the Commercial Crew Program Contracting Officer to collectively determine and document before the agency certification review how the agency will determine its risk tolerance level with respect to loss of crew. (Recommendation 3) After completing the agency certification review, NASA’s Chief Engineer and Chief of Safety and Mission Assurance, with support from the NASA Associate Administrator for Human Exploration and Operations and the Commercial Crew Program Manager, should document lessons learned related to loss of crew as a safety threshold for future crewed spaceflight missions, given the complexity of the metric. (Recommendation 4) The NASA Chief of Safety and Mission Assurance should restructure the technical authority within the Commercial Crew Program to ensure that the technical authority for the Office of Safety and Mission Assurance is no longer dual hatted with programmatic and independent technical authority responsibilities. (Recommendation 5) Agency Comments and Our Evaluation We provided a draft of this report to NASA for review and comment. NASA provided written comments that are reprinted in appendix II. In its response, NASA concurred with three of our recommendations, did not concur with one, and partially concurred with another. NASA concurred with our recommendation to develop and maintain a contingency plan to ensure a U.S. presence on the ISS and expects to take action to close this recommendation by the end of December 2018. NASA concurred with our recommendation to document lessons learned related to the loss of crew requirement and expects to take action to close this recommendation by the end of May 2019. NASA concurred with our recommendation to restructure the safety technical authority so that it is no longer dual hatted with programmatic and independent technical authority responsibilities. NASA expects to take action to close this recommendation by the end of August 2018. NASA did not concur with our recommendation that the Commercial Crew Program should include the results of its schedule risk analysis in its quarterly reports to Congress. NASA stated that it uses the contractors’ schedules as a baseline to provide qualitative statements in the NASA summary that accompanies each contractor’s quarterly reports to Congress. NASA believes that this approach is appropriate and is in accordance with the explanatory statement accompanying the Consolidated and Further Continuing Appropriations Act, 2015. NASA also stated that it will be working to ensure that the contractors’ schedules and the program’s internal assessments sync up as the program gets closer to launch. As a result, NASA explained that there will not be a requirement for a detailed NASA assessment, because the contractors’ schedule will either match NASA’s analysis or NASA will discuss its position as it has done in previous reports to Congress. We continue to believe the recommendation is valid because the program’s schedule risk analysis would provide Congress with valuable insight into potential delays, which are likely. Both contractors have repeatedly stated that their schedules are aggressive and that the dates are ambitious. As a result, we found that the contractors frequently delay dates for key events. For example, Boeing has delayed its certification milestone by 17 months and SpaceX by 22 months since the original schedules were established. The program’s recent schedule risk analysis indicates that more delays to certification are likely, but that information is not presented to Congress in NASA’s quarterly reports. Without this information, Congress does not know the full extent of potential delays to inform decision making. NASA partially concurred with our recommendation that the Chief of Safety and Mission Assurance, the NASA Associate Administrator for Human Exploration and Operations, the Commercial Crew Program Manager, and the Commercial Crew Program Contracting Officer should collectively determine and document how the agency will determine its risk tolerance level with respect to loss of crew before the agency certification review. In its response, NASA stated that it documented the agency’s risk tolerance level with respect to loss of crew for the program in its May 2011 safety memo. Further, NASA stated that it documented the requirement to limit risks to the loss of crew in a certification requirements document. NASA stated that ultimately the Commercial Crew Program is accountable for ensuring that the contractors’ systems meet the loss of crew value in this certification requirements document, which is a loss of crew value of 1 in 270. If a contractor’s system cannot meet that loss of crew value, or any other requirement, the program will request a waiver as part of the human rating certification process to ensure transparency. NASA acknowledged in its response that the existence of multiple documents defining residual risk requirements and an agency threshold for loss of crew can be confusing. NASA’s response, however, does not address our finding that it does not have a consistent approach for how to incorporate key inputs, including which debris model should be used or whether to include operational mitigations. NASA stated that it had taken action to address this recommendation; however, NASA did not outline any steps it took to resolve the concern that the risk tolerance for the loss of crew requirement depends on which entity is presenting the results of its analysis. We continue to believe that, before the agency certification review, the key parties must collectively determine how the agency will determine its risk tolerance with respect to loss of crew. We believe this approach will reduce confusion and increase transparency. We are sending copies of this report to NASA Administrator and interested congressional committees. 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)512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology The objectives of our review were to assess (1) the extent to which the contractors have made progress towards meeting the National Aeronautics and Space Administration’s (NASA) certification requirements and NASA’s plans to help ensure continued access to the International Space Station (ISS); and (2) how NASA’s certification process addresses safety of the contractors’ crew transportation systems. To assess the contractors’ progress towards certification, we obtained and reviewed program and contractor documents, including monthly and quarterly updates from April 2017 through May 2018. We interviewed program and contractor officials to discuss the contractors’ recent progress, including upcoming events and any expected delays, and to understand technical risks, potential consequences, and planned mitigation activities. To identify total delays to date, we compared original contract schedules to Boeing and SpaceX’s calendar year 2018 first quarter proposed schedules, which are the most recent. Based on our review of program and contractor documents, we defined the contractors’ key events as: the uncrewed and crewed flight tests, the design certification reviews for each of those flights, and the certification milestone. We selected the two flight tests for each contractor as key events because they are intended to test key system capabilities, including the ability to launch, dock with the ISS, and return safely to Earth. We selected the design certification reviews because they verify the contractors’ crew transportation systems’ capability to safely approach, dock, mate, and depart from the ISS, among other requirements. We selected the certification milestone because it determines whether the crew transportation system meets the Commercial Crew Program’s requirements. To determine the extent to which contractors have delayed these key events over time, we analyzed the contractors’ schedule data from the 13 quarterly progress reports to date, from first quarter 2015 through first quarter calendar year 2018. We also obtained the results of the program’s April 2018 schedule risk analysis. We presented the schedule analysis range from the end of the month of the earliest possible completion date to the end of the month of the latest possible completion date. We reviewed the program’s Congressional requirements to report on cost, schedule, and technical status. Finally, to assess the potential effects of any certification delays on NASA’s access to ISS, we reviewed NASA’s contracts with Boeing and the Russian Federal Space Agency for transportation on the Soyuz vehicle. We interviewed officials from the ISS program and NASA’s Human Exploration and Operations Mission Directorate to determine if the agency had developed contingency plans to mitigate the effects of any certification delays on its access to the ISS. To assess how NASA’s certification process addresses safety of the contractors’ crew transportation systems, we reviewed agency safety policies, program plans, and contract documents to identify what safety assessments were required of the program, which safety factors would be considered in certification reviews, and when certification approval would be granted. We also interviewed program officials and the contractors about their safety policies and procedures as well as about the certification process. We identified the loss of crew requirements for the program and the contractors, and interviewed program and agency officials to determine how loss of crew would be assessed and considered throughout the certification process. To gain a broader understanding of the relative importance of loss of crew, we reviewed NASA safety policies, prior GAO reports, and annual reports from the Aerospace Safety Advisory Panel. To determine how the Orbital Debris Engineering Model (ORDEM) was updated and to assess differences between the former and updated models, we reviewed NASA documentation about the ORDEM 2000 and ORDEM 3.0 models and obtained information about the models from NASA’s Orbital Debris Program Office. To assess the program’s progress in closing requirements, including those requirements specifically related to safety, we reviewed program data for each contractor on contract requirements and closure status. We limited this analysis to requirements included in the CCT-REQ-1130 ISS Crew Transportation and Services Requirements Document because these requirements are verified by the Commercial Crew Program, whereas requirements contained within SSP 50808 ISS to Commercial Orbital Transportation Services Interface Requirements Document are managed by the ISS Transportation and Integration Office. We classified requirements as “safety-specific” when the program’s Office of Safety and Mission Assurance was listed as a verification closure notice signatory (i.e., approver). We then analyzed the program’s data to determine how many verification closure notices had been approved for all requirements and for the subset of safety-specific requirements. We reviewed program and agency documentation, such as organizational charts, program plans, and safety policies as well as interviewed program and agency officials, to determine the role of the safety and mission assurance technical authority in the program. We also reviewed the 2003 Columbia Accident Investigation Board’s Report’s findings and recommendations related to culture and organizational management of human spaceflight programs. We reviewed annual briefings and reports and met with representatives from two organizations that provide NASA with independent assessments of the program, the program’s standing review board and the Aerospace Safety Advisory Panel, to gain their perspectives on the contractor’s progress and how NASA addresses safety in its certification process. We also met with representatives from the National Transportation Safety Board and three experts with background on safety in human spaceflight in order to increase our contextual understanding of the role of safety in human spaceflight missions. We conducted this performance audit from April 2017 to July 2018 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: Comments from the National Aeronautics and Space Administration Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Cristina T. Chaplain, (202) 512-4841 or chaplainc@gao.gov. Staff Acknowledgments In addition to the contact named above, Molly Traci, Assistant Director; Kazue Chinen; Lorraine Ettaro; Lisa Fisher; Laura Greifner; Kurt Gurka; Miranda Riemer; Juli Steinhouse; Roxanna T. Sun; Hai Tran; Kristin Van Wychen; and Alyssa Weir made significant contributions to this report.

Why GAO Did This Study In 2014, NASA awarded two firm-fixed-price contracts to Boeing and SpaceX, worth a combined total of up to $6.8 billion, to develop crew transportation systems and conduct initial missions to the ISS. In February 2017, GAO found that both contractors had made progress, but their schedules were under mounting pressure. The contractors were originally required to provide NASA all the evidence it needed to certify that their systems met its requirements by 2017. A House report accompanying H.R. 5393 included a provision for GAO to review the progress of NASA's human exploration programs. This report examines the Commercial Crew Program, including (1) the extent to which the contractors have made progress towards certification and (2) how NASA's certification process addresses safety of the contractors' crew transportation systems. GAO analyzed contracts, schedules, and other documentation and spoke with officials from NASA, the Commercial Crew Program, Boeing, SpaceX, and two of NASA's independent review bodies that provide oversight. What GAO Found Both of the Commercial Crew Program's contractors, Boeing and Space Exploration Technologies Corporation (SpaceX), are making progress finalizing designs and building hardware for their crew transportation systems, but both contractors continue to delay their certification milestone (see figure). Certification is the process that the National Aeronautics and Space Administration (NASA) will use to ensure that each contractor's system meets its requirements for human spaceflight for the Commercial Crew Program. Further delays are likely as the Commercial Crew Program's schedule risk analysis shows that the certification milestone is likely to slip. The analysis identifies a range for each contractor, with an earliest and latest possible completion date, as well as an average. The average certification date was December 2019 for Boeing and January 2020 for SpaceX, according to the program's April 2018 analysis. Since the Space Shuttle was retired in 2011, the United States has been relying on Russia to carry astronauts to and from the International Space Station (ISS). Additional delays could result in a gap in U.S. access to the space station as NASA has contracted for seats on the Russian Soyuz spacecraft only through November 2019. NASA is considering potential options, but it does not have a contingency plan for ensuring uninterrupted U.S. access. NASA's certification process addresses the safety of the contractors' crew transportation systems through several mechanisms, but there are factors that complicate the process. One of these factors is the loss of crew metric that was put in place to capture the probability of death or permanent disability to an astronaut. NASA has not identified a consistent approach for how to assess loss of crew. As a result, officials across NASA have multiple ways of assessing the metric that may yield different results. Consequently, the risk tolerance level that NASA is accepting with loss of crew varies based upon which entity is presenting the results of its assessment. Federal internal controls state that management should define risk tolerances so they are clear and measurable. Without a consistent approach for assessing the metric, the agency as a whole may not clearly capture or document its risk tolerance with respect to loss of crew. What GAO Recommends GAO is making five recommendations, including that NASA develop a contingency plan for ensuring a U.S. presence on the ISS and clarify how it will determine its risk tolerance for loss of crew. NASA concurred with three recommendations; partially concurred on the recommendation related to loss of crew; and non-concurred with a recommendation to report its schedule analysis to Congress. GAO believes these recommendations remain valid, as discussed in the report.

gao_GAO-18-504T

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Background USDA’s Food and Nutrition Service (FNS) is responsible for promulgating SNAP program regulations, ensuring that state officials administer the program in compliance with program rules, and authorizing and monitoring retailers from which recipients may purchase food. States are responsible for determining applicant eligibility, calculating the amount of their benefits, issuing benefits on Electronic Benefit Transfer (EBT) cards—which can be used like debit cards to purchase food from authorized retailers—and investigating possible program violations by recipients. SNAP Work Requirements SNAP recipients are subject to various work requirements. Generally, all SNAP recipients ages 16 through 59, unless exempted by law or regulation, must comply with work requirements, including registering for work, reporting to an employer if referred by a state agency, accepting a bona fide offer of a suitable job, not voluntarily quitting a job or reducing work hours below 30 hours a week, and participating in a SNAP E&T program or a workfare program—in which recipients perform work on behalf of the state—if assigned by the state agency. SNAP recipients are generally exempt from complying with these work requirements if they are physically or mentally unfit, responsible for caring for a dependent child under age 6 or an incapacitated person, employed for 30 or more hours per week or receive weekly earnings which equal the minimum hourly rate set under federal law multiplied by 30, or are a bona fide student enrolled half-time or more in any recognized school training program, or institution of higher education, amongst other exemptions. SNAP recipients subject to the work requirements—known as work registrants— may lose their eligibility for benefits if they fail to comply with these requirements without good cause. One segment of the work registrant population, SNAP recipients ages 18 through 49 who are “able-bodied,” not responsible for a dependent child, and do not meet other exemptions—able-bodied adults without dependents (ABAWDs)—are generally subject to additional work requirements. In addition to meeting the general work requirements, ABAWDs must work or participate in a work program 20 hours or more per week, or participate in workfare, in which ABAWDs perform work to earn the value of their SNAP benefits. Participation in SNAP E&T, which is a type of work program, is one way for ABAWDs to meet the 20 hour per week ABAWD work requirement, but other work programs are acceptable as well. Unless ABAWDs meet these work requirements or are determined to be exempt, they are limited to 3 months of SNAP benefits in a 36-month period. At the request of states, FNS may waive the ABAWD time limit for ABAWDs located in certain areas of a state or an entire state under certain circumstances. A waiver may be granted if the area has an unemployment rate of over 10 percent or there are an insufficient number of jobs to provide employment for these individuals. If the time limit is waived, ABAWDs are not required to meet the ABAWD work requirement in order to receive SNAP for more than 3 months in a 36-month period yet they must still comply with the general work requirements. SNAP Employment and Training Programs Federal requirements for state SNAP E&T programs were first enacted in 1985 and provide state SNAP agencies with flexibility in how they design their SNAP E&T programs, including who to serve and what services to offer. The state has the option to offer SNAP E&T services on a voluntary basis to some or all SNAP recipients, an approach commonly referred to as a voluntary program. Alternatively, the state can require some or all SNAP work registrants to participate in the SNAP E&T program as a condition of eligibility, an approach commonly referred to as a mandatory program. Further, states determine which service components to provide participants through their SNAP E&T programs, although they must provide at least one from a federally determined list. This list includes job search programs, job search training programs, workfare, programs designed to improve employability through work experience or training, education programs to improve basic skills and employability, job retention services, and programs to improve self-sufficiency through self- employment. Total federal expenditures on SNAP E&T programs were more than $337 million in fiscal year 2016. States are eligible to receive three types of federal funding available for state SNAP E&T programs: 100 percent funds—formula grants for program administration, 50 percent federal reimbursement funds, and ABAWD pledge funds—grants to states that pledge to serve all of their at-risk ABAWDs. SNAP Program Integrity The Office of Management and Budget has designated SNAP as a high- priority program due to the estimated dollar amount in improper payments—any payments that should not have been made or were made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. According to USDA’s fiscal year 2015 agency financial report, $2.6 billion, or 3.66 percent, of all SNAP benefits paid in fiscal year 2014 were improper, the most recent year for which data are available. SNAP improper payments are caused by variances in any of the key factors involved in determining SNAP eligibility and benefit amounts, and, according to USDA, household income was the most common primary cause of dollar errors. States review the accuracy of SNAP payments to recipients on an ongoing basis, and FNS assesses the accuracy of state reviews and determines a national improper payment rate annually. FNS and states share responsibility for addressing SNAP fraud, which can occur through the eligibility process and when benefits are being used. Specifically, recipients may commit eligibility fraud when they misrepresent their household size, income, or expenses in order to fraudulently obtain SNAP benefits. Another type of fraud—trafficking— occurs when recipients exchange benefits with authorized retailers or other individuals for cash or non-food items (e.g. rent or transportation). In a typical retailer trafficking situation, for example, a retailer may charge $100 to a recipient’s EBT card and give the recipient $50 in cash instead of $100 in food. The federal government reimburses the retailer $100, which results in a fraudulent $50 profit to the retailer. State agencies are directly responsible for preventing, detecting, investigating, and prosecuting recipient fraud, including eligibility fraud and trafficking by SNAP recipients, under the oversight and guidance of FNS. States play a key role in preventing fraud when determining eligibility for SNAP. State agencies collect applicant information, such as household income and employment, and verify it through data matches with other information sources. After benefits are issued, the agencies may monitor EBT transaction data to identify spending patterns that may indicate trafficking. If an individual or household intentionally violates SNAP rules, such as by trafficking or making false or misleading statements in order to obtain benefits, states conduct administrative disqualification hearings or, in some cases, refer the case for criminal prosecution. FNS is responsible for authorizing and overseeing retailers who participate in the program—totaling more than 263,000 in fiscal year 2017—including investigating potential retailer trafficking. In order to participate in SNAP, a retailer applies to FNS and demonstrates that they meet program requirements, such as those on the amount and types of food that authorized stores must carry. FNS verifies a retailer’s compliance with these requirements and generally authorizes retailers for 5 years. FNS then monitors retailers’ continued compliance with program requirements and administratively disqualifies, or assesses money penalties on, those who are found to have trafficked benefits. To this end, FNS officials collect and monitor EBT transaction data to detect irregular patterns of transactions that may indicate trafficking and also conduct undercover investigations. If found to be trafficking, retailers are generally permanently disqualified from SNAP or incur a monetary penalty in lieu of permanent disqualification. A Small Percentage of SNAP Recipients Participate in SNAP E&T Programs, Which Have Experienced Changes in Characteristics and FNS Oversight A Small Percentage of SNAP Recipients Participate in SNAP E&T According to FNS data, about 14 percent of SNAP recipients, or about 6.1 million, were work registrants who were subject to work requirements, and about 0.5 percent of SNAP recipients, or about 200,000, participated in state SNAP E&T programs, in an average month of fiscal year 2016. (See fig. 1.) According to FNS, most SNAP recipients are exempt from work requirements. For example, according to FNS, almost two-thirds of SNAP recipients were children, elderly, or adults with a disability in an average month of fiscal year 2016—groups that are generally exempt. Further, adults who are already working at least 30 hours a week are also exempt from SNAP work requirements, and according to FNS data, more than 31 percent of non-elderly adult SNAP recipients were employed in an average month of fiscal year 2016. SNAP work registrants who are not participating in SNAP E&T programs may be participating in other activities to meet work requirements or eligible for other exemptions. FNS officials told us that the state data reported to FNS on SNAP E&T participants are the best and most recent data available on this group, yet they also have limitations, which we will continue to explore in our ongoing work. In recent years, the number and percentage of SNAP recipients and work registrants participating in SNAP E&T programs appears to have decreased, according to FNS data. From fiscal year 2008 through fiscal year 2016, the average monthly number of SNAP E&T participants decreased from about 256,000 to about 207,000, or by 19 percent, according to state data on SNAP E&T participants reported to FNS. (See fig. 2.) However, over the same time period, the average monthly number of SNAP recipients appears to have increased from about 27.8 million to about 43.5 million, and work registrants appears to have increased from about 3 million to about 6.1 million, according to FNS data. As a result, the percentage of total SNAP recipients participating in SNAP E&T programs decreased from about 0.9 to about 0.5 percent, and the percentage of SNAP work registrants participating in these programs decreased from approximately 8.1 percent to 3.4 percent, from fiscal year 2008 through fiscal year 2016. Available information suggests the characteristics of SNAP E&T participants are generally similar to those of SNAP work registrants who do not participate in these programs. A recent FNS study, which surveyed SNAP E&T participants and SNAP work registrants who had not participated in SNAP E&T, found that members of the two groups had similar demographic characteristics, including age and gender, and received similar monthly SNAP benefit amounts. Further, at the time they were surveyed, about one third of each group were employed, and their average wage rates were similar, at about $10 per hour. State SNAP E&T Programs Have Changed in Several Ways State SNAP agencies have broad flexibility in how they design their SNAP E&T programs, and the characteristics of these programs have changed in several ways over the last decade. For example, states have increasingly moved from mandatory to voluntary programs, focused on serving ABAWDs, and partnered with state and local organizations to deliver services. States Have Increasingly Moved from Mandatory to Voluntary Programs According to FNS data, states have increasingly moved from mandatory to voluntary SNAP E&T programs in recent years. In fiscal year 2010, 17 states operated voluntary programs; however, by fiscal year 2017, 35 states operated voluntary programs, according to FNS data. (See fig. 3.) FNS officials told us that they have been actively encouraging states to provide more robust employment and training services, such as vocational training or work experience, through voluntary programs. They said that they believe these types of robust services are more effective in moving participants toward self-sufficiency, but that funding may not be sufficient to provide these to the large numbers of participants served in mandatory programs. In addition, FNS officials told us that voluntary programs are less administratively burdensome than mandatory programs, as they allow states to focus on serving motivated participants rather than sanctioning non-compliant individuals. According to FNS officials, when states move to a voluntary program, they generally experience a decline in SNAP E&T participation—a trend consistent with our analysis of FNS data—which may have contributed to the decline in overall SNAP E&T participation. Of the 22 states or territories that changed from a mandatory to a voluntary program from fiscal year 2010 through fiscal year 2016, according to FNS data, 13 experienced a decrease in SNAP E&T participation—ranging from a 21 percent decrease to a 93 percent decrease. Overall, voluntary programs are generally smaller than mandatory programs, according to our analysis of FNS data. In fiscal year 2016, for example, the 32 states or territories operating voluntary programs together served less than half of the total number of SNAP E&T participants served by the 21 states or territories operating mandatory programs, although these two groups of states had similar numbers of new work registrants. Furthermore, states operating voluntary programs served an average of nearly 7,000 SNAP E&T participants per state, while states operating mandatory programs served an average of 23,000 SNAP E&T participants per state. Focus on ABAWDs Has Increased as Waivers Have Expired Evidence suggests that states have increased their focus on serving ABAWDs—a sub-population of SNAP recipients subject to benefit time limits and additional work requirements—through SNAP E&T, as related waivers have expired in recent years, according to FNS data. During and after the 2007-2009 recession, the majority of states operated under statewide waivers of the ABAWD time limit due to economic conditions. However, as the economy recovered, most statewide waivers expired, and the ABAWD time limit was reinstated. For example, according to FNS data, in fiscal year 2011, 45 states or territories had a statewide waiver and 7 states had a partial waiver—one applying to certain localities. By fiscal year 2017, the number of states or territories with a statewide waiver had decreased to 9, while 27 states had partial waivers. FNS officials and state SNAP agency officials we spoke with in some states told us that, as the waivers have ended, state SNAP E&T programs have become increasingly focused on serving ABAWDs. Although state data on SNAP E&T programs reported to FNS suggest a greater percentage of ABAWDs have been participating in these programs in recent years, according to FNS officials, these data have limited usefulness in assessing state trends in serving ABAWDs for several reasons. For example, in recent years, FNS officials learned that there was widespread confusion among states regarding the need to track ABAWDs when waivers were in place, and that as a result, some states had not been tracking ABAWDs or properly documenting SNAP recipients’ ABAWD status. This is consistent with what some of the selected states we spoke with reported. As part of our ongoing work, we are continuing to explore the availability and reliability of data on ABAWDs. States Increasingly Developed Partnerships to Deliver SNAP E&T Services State SNAP agencies have increasingly partnered with other state and local organizations, such as workforce agencies, community-based social service providers, and community colleges, to provide services to SNAP E&T participants in recent years, according to FNS and states we selected for our review. In fiscal year 2018, nearly all states partnered with at least one other organization to deliver SNAP E&T services, with the majority partnering with more than one, according to an analysis by FNS. In recent years, FNS has urged states to make use of the broad network of American Job Centers. The American Job Centers, also known as one- stop centers, are funded through the Department of Labor’s Employment and Training Administration and designed to provide a range of employment-related services, such as training referrals, career counseling, job listings, and similar employment-related services, to job seekers under one roof. Our prior work has highlighted the value of coordination between federally funded employment and training programs to ensure the efficient and effective use of resources. Despite encouraging such partnerships, FNS officials said that American Job Centers typically provide lighter touch services to SNAP E&T participants, such as job search and job search training, and they therefore may not be well suited for SNAP E&T participants who have multiple barriers to employment. In our 2003 work on SNAP E&T, we found that while workforce system programs offered some of the activities needed by SNAP E&T participants, officials from 12 of the 15 states we contacted said that most participants were not ready for these activities, in part, because they lacked basic skills, such as reading and computer literacy, that would allow them to successfully participate. An alternative service delivery strategy that FNS has promoted is the development of third party partnerships with community-based social service providers, community colleges, and other entities to help states enhance their SNAP E&T programs. According to FNS, in this model, third party organizations use non-federal funding to provide allowable SNAP E&T services and supports, which are then eligible for 50 percent federal reimbursement funds through the state’s SNAP E&T program. According to FNS officials, third party partnerships enable states to leverage additional resources, grow their SNAP E&T programs, and reach more SNAP participants. In addition, FNS officials said that these partnerships allow states to improve their program outcomes by tapping into providers currently serving communities that include SNAP recipients. Federal 50 percent reimbursement funds expended increased from nearly $182 million to more than $223 million, or by 23 percent, from fiscal year 2007 to fiscal year 2016. FNS Has Taken Steps to Increase Support and Oversight of SNAP E&T FNS has taken steps to increase federal support of states’ SNAP E&T programs by increasing the number of federal staff responsible for SNAP E&T and providing additional technical assistance to states. Specifically, FNS officials said that in 2014, they created the Office of Employment and Training to provide support and oversight for the SNAP E&T program and expanded SNAP E&T staff in FNS headquarters from one to five fulltime employees. FNS has also taken steps to increase technical assistance to states. For example, they have developed tools, including the SNAP E&T Operations Handbook, intended to help states implement and grow their program, and by adding a dedicated SNAP E&T official in each of FNS’s seven regional offices. According to FNS, regional officials have targeted technical assistance to states on, for example, developing third-party partnerships, and they have emphasized evidence-based approaches to administering the program, such as providing skills-based training for in-demand occupations. FNS officials rely on various information sources to oversee states’ SNAP E&T programs, including participant outcome data reported by states for the first time in January 2018. For example, FNS officials conduct management evaluation reviews of states, annually review states’ SNAP E&T plans for compliance, and collect data from states on program participation and expenditures. In addition, as of January 2018, FNS has begun receiving new data on SNAP E&T program participants and outcomes from states. These data include employment outcomes, such as the number of SNAP E&T participants in unsubsidized employment after participation in the program, and participant characteristics, such as the number of participants entering the program with a high school degree or equivalent. FNS officials said that although states generally submitted the new data on time, states experienced challenges that likely affected the accuracy of the data. For example, some states needed to manually collect data on participant characteristics due to the limited capacity of their data systems. Further, according to FNS officials, some states did not correctly interpret certain reporting definitions or time periods. To address these challenges, FNS officials have been providing technical assistance to states to help them refine their participant and outcome data reports. Officials told us that they expect the states to submit revised reports by May 2018; we will examine these data and related issues in our ongoing work. FNS Has Taken Steps to Address SNAP Program Integrity Issues, but Concerns Remain FNS and the states partner to address issues that affect program integrity, including improper payments and fraud, and FNS has taken some steps to address challenges in these areas, but concerns remain. For example, regarding SNAP recipient and retailer fraud, FNS has taken some steps to address challenges identified in our 2006 and 2014 reports related to fraud committed by SNAP recipients and authorized retailers, but more remains to be done. We currently have ongoing work to assess the steps FNS and states have taken to address our recommendations related to recipient and retailer fraud and other program vulnerabilities. SNAP Improper Payments In 2016, we reviewed SNAP improper payment rates and found that states’ adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. For example, when states adopted available SNAP policy flexibilities that simplified or lessened participant reporting requirements, these changes reduced the opportunity for error and led to a decline in the improper payment rate, according to a USDA study. In addition, we found that the methodology SNAP used to calculate its improper payment rate was generally similar to the methodologies used for other large federal programs for low- income individuals, including Medicaid, Earned Income Tax Credit, and Supplemental Security Income. However, we also found that some of the procedural and methodological differences in the rate calculation among these programs likely affected the resulting improper payment rates, such as how cases with insufficient information or certain kinds of errors were factored into the improper payment rate. In 2014, USDA identified SNAP improper payment data quality issues in some states and has since been working with the states to improve improper payment estimates. Although USDA reported national SNAP improper payment estimates for benefits paid through fiscal year 2014, USDA did not report a national SNAP improper payment estimate for benefits paid in fiscal years 2015 or 2016. In response to a report from USDA’s Office of Inspector General that identified concerns in the application of SNAP’s quality control process, which is used to identify improper payments, USDA began a review of state quality control systems in all states in 2014. According to USDA, due to the data quality issues uncovered in 42 of 53 states during the reviews, the improper payment rates for those states could not be validated, and the department was unable to calculate a national improper payment rate for benefits paid in fiscal year 2015. To address the data quality concerns, USDA updated guidance, provided training to relevant state and federal staff, and worked with states to update their procedures to ensure consistency with federal guidelines. According to USDA, the department also required individual states to develop corrective action plans to address issues identified and monitored progress to ensure states took identified actions. On June 30, 2017, USDA notified the states that the department would not release a national SNAP improper payment rate for benefits paid in fiscal year 2016 and remained focused on conducting the fiscal year 2017 review. SNAP Recipient Fraud FNS has increased its oversight of state anti-fraud activities in recent years by developing new guidance and providing training and technical assistance to states on detecting fraud by SNAP recipients and reporting on anti-fraud activities to FNS. In 2014, we reported on 11 selected states’ efforts to combat SNAP recipient fraud and made several recommendations to FNS to address the challenges states faced. We found that FNS and states faced challenges in the following areas: Guidance on use of data tools to detect fraud: States faced challenges using FNS-recommended data tools to detect fraud, and FNS is in the process of developing improved guidance to address this concern. Specifically, FNS’s guidance on the use of EBT transaction data to uncover potential patterns of benefit trafficking lacked the specificity states needed to uncover such activity, and we recommended FNS develop additional guidance. Since then, FNS contracted with a private consulting firm to provide 10 states with technical assistance in recipient fraud prevention and detection, which included exploring the use of data analytics to analyze and interpret eligibility and transaction data to identify patterns or trends and create models that incorporate predictive analytics. FNS officials also recently told us that the agency is developing a SNAP Fraud Framework to provide guidance to states on improving fraud prevention and detection. FNS officials anticipated releasing the framework in mid- 2018. Tools for monitoring e-commerce websites: We also found FNS- recommended tools for automatically monitoring potential SNAP trafficking on e-commerce websites to be of limited use and less effective than manual searches, and FNS has developed but not finalized guidance on using such tools. We recommended that FNS reassess the effectiveness of its current guidance and tools for states to monitor e-commerce and social media websites. In August 2017, FNS officials told us that they had developed revised guidance for states on using social media in detection of SNAP trafficking. According to FNS, the guidance will be incorporated into the SNAP Fraud Framework. Staff levels: During the time of our 2014 work, most of our 11 selected states reported difficulties conducting fraud investigations due to reduced or stagnant staff levels while numbers of SNAP recipients had greatly increased, but FNS decided not to make changes to address this issue. Specifically, 8 of the 11 states we reviewed reported inadequate staffing due to attrition, turnover, or lack of funding. Some states suggested changing the financial incentive structure to promote fraud investigations because agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible people from receiving benefits. Specifically, when fraud by a SNAP recipient is discovered, a state may generally retain 35 percent of any recovered overpayments. However, there are no recovered funds when a state detects potential fraud by an applicant and denies the application. To help address states’ concerns about resources needed to conduct investigations, we recommended in our 2014 report that FNS explore ways that federal financial incentives could be used to better support cost-effective anti-fraud strategies. FNS reported that it took some steps to explore alternative financial incentives, through a review of responses to a Request for Information in the Federal Register. However, FNS decided not to pursue bonus awards for anti-fraud and program integrity activities. Given that FNS has not made changes in this area, state SNAP fraud agencies may continue to report resource concerns in addressing fraud. Reporting guidance: We also found that FNS did not have consistent and reliable data on states’ activities because of unclear reporting guidance, and FNS has since revised its data collection form and provided training on the changes. To improve FNS’s ability to monitor states and obtain information about more efficient and effective ways to combat recipient fraud, we recommended in 2014 that FNS take steps, such as providing guidance and training, to enhance the consistency of what states report on their anti-fraud activities. In response, FNS revised the form used to collect recipient integrity information and changed the reporting frequency from annual to quarterly, effective fiscal year 2017. FNS officials also reported providing training to approximately 400 state agency and FNS regional office personnel on the updates to the form and related instructions. In our ongoing work, we are further reviewing states’ use of data analytics to identify SNAP recipient fraud, including that which may be occurring during out-of-state transactions. Because transactions that may appear suspicious—such as those made out-of-state—may in fact be legitimate, states may use data analytic techniques to include additional factors that may help them better target their efforts to identify potential fraud. However, states may have different levels of capacity for using data analytics to detect fraud. We are examining how 7 selected states are using data analytics and identifying the advantages and challenges states have experienced in doing so. We are also assessing FNS’s efforts to assist states in implementing GAO’s leading practices for data analytics outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs. In addition, we are conducting our own analysis of EBT out-of-state SNAP transaction data. We expect to report on our findings later this year. SNAP Retailer Trafficking FNS has taken some steps to prevent, detect, and respond to retailers who traffic SNAP benefits since our last report on the issue in 2006, but trafficking continues to be a problem. For example, in February 2018, a federal jury convicted a grocery store operator in Baltimore on charges of wire fraud in connection with a scheme to traffic more than $1.6 million in SNAP benefits for food sales that never occurred. The grocery store operator paid cash for SNAP benefits, typically paying the recipient half the value of the benefits and keeping the other half for himself. In our 2006 report, we found that SNAP was vulnerable to retailer trafficking in several areas, including: Requirements for food that retailers must stock to participate in SNAP: In 2006, we found that FNS had minimal requirements for the amounts of food that retailers must stock, which could allow retailers more likely to traffic into the program, although the agency has since taken steps to increase these requirements. In our 2006 report, FNS officials said that they authorized stores with limited food stock to provide access to food in low-income areas where large grocery stores were scarce. At that time, retailers were generally required to stock a minimum of 12 food items (at least 3 varieties of 4 staple food categories, such as fruits and vegetables), but FNS rules did not specify how many items of each variety would constitute sufficient stock. FNS officials told us that a retailer that only carries small quantities of food, such as a few cans of one kind of vegetable, may intend to traffic. In 2016, FNS promulgated a final rule increasing food stock requirements. FNS officials told us that these new rules are designed to encourage stores to provide more healthy food options for recipients and discourage trafficking. According to FNS, retailers are now generally required to stock at least 36 food items (a certain variety and quantity of staple foods in each of the 4 staple food categories). Focus on high-risk retailers: We also found in 2006 that FNS had not conducted analyses to identify characteristics of retailers at high risk of trafficking and to target its resources—a shortcoming FNS has since taken some steps to address. For example, we reported that some stores may be at risk of trafficking because one or more previous owners had been found trafficking at the same location. However, FNS did not have a system in place to ensure that these retailers were quickly targeted for heightened attention. In addition, once a store was authorized to participate in the program, FNS staff typically would not inspect the store again until it applied for reauthorization 5 years later. We recommended that FNS identify the stores most likely to traffic and provide earlier, more targeted oversight to those stores. In 2009, FNS began establishing risk levels for each authorized retailer, identifying high-risk stores as those with a prior permanent disqualification at that location or a nearby location. In 2013, FNS required all high-risk retailers to go through reauthorization and to provide additional documentation regarding store ownership. That same year, FNS also consolidated its retailer management functions, including those for authorizing stores and analyzing EBT transaction data, into a single national structure known as the Retailer Operations Division. FNS officials told us that this structure enables the agency to identify and deploy their investigative resources to the areas of highest risk nationally, rather than within a given region. Penalties to deter retailer trafficking: We also found in our 2006 report that FNS’s penalties for retailer trafficking may be insufficient to deter traffickers, and since then, FNS has proposed—but not finalized—rules to increase them. FNS imposes administrative penalties for retailer trafficking—generally a permanent disqualification from the program or a monetary penalty. FNS relies on the USDA Office of Inspector General (OIG) and other law enforcement entities to conduct investigations that can lead to criminal prosecutions. In our 2006 report, we recommended that FNS develop a strategy to increase penalties for trafficking. The Food, Conservation, and Energy Act of 2008 (known as the 2008 Farm Bill) gave USDA authority to impose higher monetary penalties, and the authority to impose both a monetary penalty and program disqualification on retailers found to have violated relevant law or regulations (which includes those found to have trafficked). In 2012, FNS proposed regulatory changes to implement these authorities. However, FNS has not finalized these rules, and as of fall 2017, the rules were considered “inactive.” In our ongoing work, we are continuing to assess FNS’s efforts to prevent, detect, and respond to retailer trafficking, as well as examining what is known about the extent of retailer trafficking nationwide. As part of this work, we are continuing to review FNS’s response to our prior recommendations, as well as related recommendations made by USDA’s OIG. We are also studying FNS’s periodic estimates of the rate of retailer trafficking, expressed as the dollar value and percentage of all SNAP benefits that were trafficked and the percentage of retailers involved. These data suggest an increase in the estimated rate of retailer trafficking since our 2006 report. However, we and others, including a group of experts convened by FNS, have identified some limitations with the retailer trafficking estimates. For example, the trafficking rate is calculated based on a sample of retailers that FNS considers most likely to traffic. Although FNS adjusts the data to better represent the broader population of authorized retailers, it is uncertain whether the resulting estimates accurately reflect the extent of trafficking nationwide. We are reviewing these limitations and FNS’s efforts to address them in our ongoing work. Chairman Jordan, Chairman Palmer, Ranking Member Krishnamoorthi, Ranking Member Raskin, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this testimony, please contact Kathryn Larin, Director, Education, Workforce, and Income Security Issues at (202) 512-7215 or LarinK@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony include Rachael Chamberlin, Celina Davidson, Swati Deo, Rachel Frisk, Alexander Galuten, Danielle Giese, Kristen Jones, Morgan Jones, Lara Laufer, Monica Savoy, and Kelly Snow. 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.

Why GAO Did This Study SNAP is the largest federally funded nutrition assistance program. In fiscal year 2017, it provided about $63 billion in benefits. USDA and the states jointly administer SNAP and partner to address issues that affect program integrity, including improper payments and fraud. GAO has previously reported on various aspects of SNAP, including state SNAP E&T programs, improper payment rates, recipient fraud, and retailer trafficking. This testimony discusses GAO's prior and ongoing work on (1) SNAP E&T programs, including program participants, design, and USDA oversight, and (2) USDA's efforts to address SNAP program integrity, including improper payments, as well as recipient and retailer fraud. As part of its ongoing work on SNAP E&T programs, GAO analyzed E&T expenditures and participation data from fiscal years 2007 through 2016, the most recent data available; reviewed relevant research from USDA; and interviewed USDA and selected state and local officials. The prior work discussed in this testimony is based on four GAO products on E&T programs (GAO-03-388), improper payments (GAO-16-708T), recipient fraud (GAO-14-641), and retailer trafficking (GAO-07-53). Information on the scope and methodology of our prior work is available in each product. What GAO Found Overseen by the U.S. Department of Agriculture (USDA) and administered by states, Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T) programs served about 0.5 percent of the approximately 43.5 million SNAP recipients in an average month of fiscal year 2016, according to the most recent USDA data available. These programs are generally designed to help SNAP recipients increase their ability to obtain regular employment through services such as job search and training. Some recipients may be required to participate. According to USDA, about 14 percent of SNAP recipients were subject to work requirements in an average month of fiscal year 2016, while others, such as children and the elderly, were generally exempt from these requirements. States have flexibility in how they design their E&T programs. Over the last several years, states have 1) increasingly moved away from programs that mandate participation, 2) focused on serving able-bodied adults without dependents whose benefits are generally time-limited unless they comply with work requirements, and 3) partnered with state and local organizations to deliver services. USDA has taken steps to increase support and oversight of SNAP E&T since 2014, including collecting new data on participant outcomes from states. GAO has ongoing work reviewing SNAP E&T programs, including USDA oversight. USDA and the states partner to address issues that affect program integrity, including improper payments and fraud, and USDA has taken some steps to address challenges in these areas, but issues remain. Improper Payments. In 2016, GAO reviewed SNAP improper payment rates and found that states' adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. Although USDA reported improper payment estimates for SNAP in previous years, USDA did not report an estimate for benefits paid in fiscal years 2015 or 2016 due to data quality issues in some states. USDA has since been working with the states to improve improper payment estimates for the fiscal year 2017 review. Recipient Fraud. In 2014, GAO made recommendations to USDA to address challenges states faced in combatting recipient fraud. For example, GAO found that USDA's guidance on the use of transaction data to uncover potential trafficking lacked specificity and recommended USDA develop additional guidance. Since then, USDA has provided technical assistance to some states, including on the use of data analytics. GAO has ongoing work reviewing states' use of data analytics to identify SNAP recipient fraud. Retailer Trafficking. In 2006, GAO identified several ways in which SNAP was vulnerable to retailer trafficking—a practice involving the exchange of benefits for cash or non-food items. For example, USDA had not conducted analyses to identify high-risk retailers and target its resources. Since then, USDA has established risk levels for retailers based on various factors. GAO has ongoing work assessing how USDA prevents, detects, and responds to retailer trafficking and reviewing the usefulness of USDA's estimates of the extent of SNAP retailer trafficking. What GAO Recommends GAO is not making new recommendations. USDA generally concurred with GAO's prior recommendations.

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Background Global defense posture is an enabler of U.S. defense activities and military operations overseas and is a central means of defining and communicating U.S. strategic interests to allies, partners, and adversaries. It is driven by a hierarchy of national-level and DOD-specific guidance, which includes the National Defense Strategy and the National Military Strategy. Under DOD Instruction 3000.12, global defense posture includes three elements: Forces: forward stationed or rotationally deployed forces, U.S. military capabilities, equipment, and units (assigned or allocated). Footprint: networks of U.S. foreign and overseas locations, infrastructure, facilities, land, and prepositioned equipment. Agreements: treaties and access, transit, support, and status- protection agreements and arrangements with allies and partners that set the terms regarding the U.S. military’s presence within the territory of the host country. EUCOM is one of six geographic combatant commands and is responsible for missions in all of Europe, large portions of Asia, parts of the Middle East, and the Arctic and Atlantic Oceans (see figure 1). EUCOM evaluates the adequacy of posture in Europe to support relevant plans and achieve military objectives. EUCOM shares responsibility with the Chairman of the Joint Chiefs of Staff and the Office of the Secretary of Defense for U.S. military relations with allies and partners in Europe and the North Atlantic Treaty Organization (NATO). The number of U.S. military sites located in EUCOM’s area of responsibility and the number of military personnel assigned to Europe have decreased substantially since the end of the Cold War, and two heavy combat brigades had been deactivated by the end of fiscal year 2014. As of May 2016, EUCOM supported one airborne infantry brigade and one Stryker brigade, as well as approximately 62,000 military personnel across approximately 250 sites. Since 2009, we have reported on issues related to DOD’s efforts to estimate and report on the total cost of its global defense posture. In 2009, we identified weaknesses in DOD’s approach for adjusting its global defense posture and recommended, among other things, that DOD issue guidance for estimating total costs for global defense posture and modify its annual report to Congress to include the total cost to complete each planned posture initiative. In February 2011, we reported that EUCOM lacked comprehensive cost data in a key posture planning document and that therefore decision makers lacked critical information that they needed to make fully informed posture decisions. We recommended that the Chairman of the Joint Chiefs of Staff revise the Joint Staff’s posture planning guidance to include direction on how the combatant commands should analyze costs and benefits when considering changes to posture and to require that posture plans include comprehensive cost estimates. DOD agreed with the recommendations in both reports and subsequently took steps to implement them. In June 2012, we reported that DOD did not fully understand the cost implications of two posture initiatives in Europe—including its decision to return two heavy brigades from Europe to the United States—and that key posture planning documents did not completely and consistently include cost data. We recommended that DOD fully estimate the cost implications of these two initiatives, clarify components’ roles and responsibilities for estimating costs, and develop a standard reporting format for cost data. DOD generally agreed with our recommendations and has taken steps to implement two of them. Following the President’s June 2014 announcement of ERI, EUCOM identified five lines of effort that it would pursue under ERI, as described in table 1. Three of ERI’s lines of effort are expected to enhance DOD’s posture in Europe. For example, DOD is using ERI to increase the forces present in Europe by rotating an armored brigade combat team and elements of a combat aviation brigade to Europe every nine months. DOD also plans to enhance its footprint in Europe by using ERI funding to make infrastructure improvements and establish locations for prepositioned equipment. Finally, in order to implement ERI’s lines of effort and support U.S. activities, DOD is partnering with the State Department to negotiate host nation agreements that, among other things, establish protections for U.S. military personnel and provide DOD the authority to improve host nation installations and infrastructure. DOD is also supporting additional exercises and training to improve interoperability with partner countries while providing them with the capability and capacity to defend themselves, but these efforts are not expected to affect DOD’s long-term posture in Europe. DOD Has Expanded ERI’s Objectives and Funding, Contributing to Enhancements in Its Posture in Europe Since 2014, DOD has expanded ERI’s objectives, increased its funding, and planned enhancements to posture in Europe. In fiscal years 2015 and 2016, ERI’s objective was to provide short-term reassurance to allies, and the initiative had little funding for long-term enhancements to posture. DOD focused its efforts on bolstering the security and capacity of NATO allies and partners by funding training, conducting exercises, and temporarily rotating Army and Air Force units to Eastern Europe. In fiscal year 2017, DOD expanded ERI’s objectives to include deterring Russian aggression in the long term and developing the capacity to field a credible combined force should deterrence fail. Recognizing that ERI’s expanded objectives would require DOD to alter its posture in Europe, DOD has requested increased ERI funding. DOD will have requested approximately $4.5 billion in ERI funding for posture enhancements through the end of fiscal year 2017; about $3.2 billion of this was requested for use in fiscal years 2017. During the time of our review, EUCOM had identified a need for additional funding over the next several years for additional posture enhancements in Europe. Specific details about EUCOM’s future posture plans and funding requirements were omitted because they are classified. DOD has requested increased funding to support planned enhancements to all three posture elements—forces, footprint, and agreements—in Europe: Force deployments to Eastern Europe: In fiscal years 2015 and 2016, the Army deployed armored brigade combat teams to Eastern Europe to provide short-term reassurance to allies and partners, which DOD officials said included Estonia, Latvia, Lithuania, and Poland, among other countries. These short-duration deployments were intermittent and focused on demonstrating U.S. commitment to allies and partners. Additionally, the Air Force deployed air units on 4- month rotations to help protect allies’ and partners’ air space. In the fiscal year 2017 budget justification materials provided to Congress, as ERI’s objectives expanded, DOD requested funding to retain Air Force fighter units in Europe. It also began deploying a rotational armored brigade combat team so that one such brigade would be present in Europe at all times (see figure 2). The first deployment, in January 2017, included approximately 4,000 personnel, 90 Abrams tanks, 90 Bradley Infantry fighting vehicles, and 112 supporting vehicles. Additionally, DOD began procuring and prepositioning equipment for two planned armored brigades in Europe, one of which will include modernized tanks, as an additional deterrent. According to Army officials, these force enhancements in Europe give the Army the ability to quickly deploy a substantial ground force in the event of a conflict. As of April 2017, DOD was still evaluating force enhancements in Europe as part of its fiscal year 2018 budget submission. Specific details were omitted because they are classified. New locations and improvements to infrastructure: Since ERI was announced in 2014, DOD has established new enduring locations in Europe. An enduring location is designated by DOD and is a geographic site that DOD expects to access and use to support U.S. security interests for the foreseeable future. During our review, DOD had not yet determined whether additional enduring locations would be needed to support ERI. In addition to establishing new enduring locations, DOD plans to improve installations and infrastructure. From fiscal years 2015 through 2017, DOD requested funding in its budget justification submissions to Congress for major military construction projects in nine European countries and to improve support infrastructure—such as roads, railheads, and airbasing—at these locations. Major military construction projects are those projects specified in National Defense Authorization Acts. During the time of our review, DOD was considering addition improvements to existing infrastructure, specific details of which are classified. According to DOD and State Department officials, DOD is also working with U.S. allies and partners to determine what infrastructure improvements to roads, railroads, and bridges need to occur outside enduring locations to allow rapid response to a conflict. New host nation agreements: Since ERI was announced, DOD and the State Department have completed host nation agreements with six European nations in support of ERI efforts: Romania, Bulgaria, and Poland, implementing previous agreements, in order to facilitate U.S. construction on installations and areas in the host country (June and July 2015 and June 2016). Estonia, Latvia, and Lithuania, providing an overarching framework for protections for U.S. personnel and U.S. access to installations in host nations (January 2017). DOD Does Not Prioritize Posture Initiatives Funded Under ERI against Those in Its Base Budget, Estimate Their Sustainment Costs, or Communicate Future Costs to Congress DOD is using a separate process instead of its established posture planning process to plan for ERI’s posture initiatives because of the emergent nature of ERI requirements and their having been funded through the OCO budget. DOD has established global defense posture management and base budget development processes that plan for posture initiatives and collectively support the department’s efforts to establish priorities, evaluate resource requirements, and develop strategy and policy. As a result of its not using its established processes, DOD is not prioritizing posture initiatives funded under ERI against posture initiatives funded through its base budget, estimating these initiatives’ long-term sustainment costs, or communicating their future costs to Congress. DOD is Not Using Its Established Processes to Plan for and Fund ERI Posture Initiatives DOD is planning ERI posture initiatives outside of its established processes and is funding these enduring initiatives—including rotational deployments and infrastructure projects—out of its OCO budget. We have previously identified risks associated with DOD’s practice of completing construction projects outside of its established processes. For example, in September 2016 we reported that DOD had not issued implementing guidance to establish a formal process for reevaluating ongoing contingency construction projects when missions change and that as a result DOD risked completing unnecessary construction projects. We also found that DOD lacked visibility into the amount of funding it was spending on operations and maintenance-funded construction projects in U.S. Central Command and that this increased financial risk and duplication risk for the department. Like U.S. Central Command, EUCOM is using DOD’s OCO budget to fund construction projects and is planning those projects outside of its established processes. Based on our analysis, DOD plans to spend approximately $503 million from fiscal year 2015 through the end of fiscal year 2017 on ERI-related construction projects—about $279 million for major military construction projects and $224 million for minor military construction and facilities maintenance and repair projects (hereafter, minor construction and repair), as shown in table 2. DOD has established global defense posture management and base budget development processes that plan for posture initiatives and collectively support the department’s efforts to establish priorities, evaluate resource requirements, and develop strategy and policy. According to DOD Instruction 3000.12, DOD’s global defense posture processes apply to DOD forces, footprint, and agreements that support joint and combined global operations and plans in foreign countries. According to the instruction, DOD’s components use these processes to address planning for global defense posture, resource requirements, and policy development, among other things. Further, it states that these processes are overseen by an executive council that provides recommendations, inputs, and expertise on global defense posture to key national strategy products. DOD’s Planning, Programming, Budgeting, and Execution Process serves as the annual resource allocation process for DOD and is intended to enable DOD to align resources to prioritized capabilities; balance necessary warfighting capabilities with risk, affordability, and effectiveness; and provide mechanisms for making and implementing fiscally sound decisions in support of the national security strategy and the national defense strategy. DOD is using a separate and evolving process to plan ERI’s posture initiatives—rather than following its established processes—because ERI is being funded through DOD’s OCO budget. According to officials from the Office of the Secretary of Defense, Cost Assessment and Program Evaluation, the department has recognized that the short-term planning process used to develop DOD’s OCO budget can create problems when it is used to plan for enduring initiatives. As a result, DOD has developed a separate process to plan for ERI. As part of the fiscal year 2018 planning process, EUCOM provided a prioritized list of potential requirements and an estimate of its annual costs by appropriation account to the Director for Cost Assessment and Program Evaluation. According to officials from the Office of the Secretary of Defense, Cost Assessment and Program Evaluation, DOD completed its review and provided recommendations to DOD’s senior leaders for approval in October 2016 and final decisions were made within DOD in April 2017. The specific criteria by which DOD assessed EUCOM’s potential requirements are classified. DOD is requesting funds for ERI’s posture initiatives as part of its OCO budget, which is generally intended to be short-term funding for ongoing contingency operations. In February 2009, the Office of Management and Budget, in collaboration with DOD, issued criteria to assist in determining whether funding properly belonged in DOD’s base budget or in its OCO budget. These criteria were updated in September 2010 and currently indicate that funding requests should be for specific geographic areas where combat or direct combat support operations occur (such as Iraq and Afghanistan). Further, budget items must meet other criteria. For example, OCO funding requests may be for constructing facilities and infrastructure in the theater of operations in direct support of combat operations. In these cases, the level of construction should be the minimum needed to meet operational requirements, and construction completed at enduring locations must be tied to surge operations or major changes in operational requirements. In January 2017, we reported that DOD did not apply the OCO criteria to ERI prior to deciding to budget for its requirements using its OCO budget. We recommended that DOD, in consultation with the Office of Management and Budget, reevaluate and revise the criteria for determining what can be included in OCO budget requests. DOD concurred with our recommendation and noted that it plans to propose revised OCO criteria. As of May 2017, the department has not implemented our recommendation. DOD Does Not Prioritize ERI Initiatives against Those in Its Base Budget, Estimate Long-Term Sustainment Costs, or Communicate Future Costs to Congress DOD’s planning for ERI’s posture initiatives does not establish priorities for ERI initiatives relative to those in the base budget, estimate long-term sustainment costs for some posture initiatives funded under ERI, or communicate future ERI costs to Congress. DOD Does Not Review and Prioritize Posture Initiatives Funded Under ERI Relative to Those in Its Base Budget When planning ERI’s posture initiatives, DOD establishes priorities among ERI’s initiatives but does not review posture initiatives funded under ERI relative to those funded in the military services’ base budgets. DOD’s posture management process is intended to establish priorities among global posture elements and is overseen by a Global Posture Executive Council. According to DOD Instruction 3000.12, the Executive Council is responsible for reviewing, prioritizing, and endorsing across the combatant commands key posture elements such as military construction projects and international agreements. The Executive Council’s endorsements inform the military services’ budget deliberations. For the fiscal year 2017 ERI budget, EUCOM requested funding for several posture initiatives, including the continuous, rotational deployment of an armored brigade combat team and the establishment of prepositioned equipment in Europe. Officials representing the Under Secretary of Defense for Policy and the Director, Cost Assessment and Program Evaluation said that as part of its planning process for ERI the Deputy’s Management Action Group evaluated and prioritized posture initiatives funded under ERI. However, DOD could not provide documentation that it had established priorities relative to posture initiatives funded through the base budget. Further, the Global Posture Executive Council did not review or prioritize posture initiatives funded under ERI relative to posture initiatives funded through DOD’s base budget. Similarly, as DOD prepared the fiscal year 2018 ERI budget request, the Global Posture Executive Council did not prioritize EUCOM’s proposed ERI posture initiatives relative to initiatives funded through DOD’s base budget. More detailed information about these proposals, and their potential funding requirements, are classified. According to officials from the Office of the Under Secretary of Defense for Policy and the Joint Staff, DOD did not prioritize posture initiatives funded under ERI against base-budget funded posture initiatives, because ERI is funded through DOD’s OCO budget—which does not directly affect the services’ base budgets. However, because it does not prioritize ERI initiatives against other initiatives funded through the base budget, DOD lacks an understanding of the relative importance of initiatives funded under ERI and may begin investing in projects that it would not support in the absence of funding from DOD’s OCO budget. For example, Army officials noted that if funding were to become unavailable in DOD’s OCO budget, the Army is unsure how initiatives funded under ERI would rank in importance relative to other posture initiatives funded in its base budget. Consequently, the Army would be forced to make critical—and potentially costly—decisions quickly and without a clear idea of which posture initiatives were most important to the department. DOD Does Not Estimate Long- Term Sustainment Costs for Some Posture Initiatives Funded Under ERI In planning for posture initiatives funded under ERI, EUCOM and the military services have not fully estimated the long-term sustainment costs of ERI’s posture initiatives to establish prepositioned equipment and construct new facilities. DOD’s global defense posture guidance indicates that, when evaluating potential changes to posture, the combatant commands should work with the military services to estimate the full cost of planned posture initiatives, including sustainment costs. DOD’s guidance on economic analysis also notes the importance of understanding both the size and timing of costs. Finally, our prior work has demonstrated that comprehensive cost estimates of current and future resource requirements are critical to making funding decisions and assessing program affordability. DOD leadership emphasized throughout the fiscal year 2018 budget review process that the services would need to fund ERI posture sustainment costs through their respective base budgets, but DOD did not direct the services and EUCOM to estimate these costs as they would have under their established processes. Officials from the Office of the Secretary of Defense, Cost Assessment and Program Evaluation said that DOD leadership emphasized that the military services would need to fund all future sustainment costs for ERI projects from their base budgets. Based on DOD’s approach for calculating rough order sustainment costs, we determined that ERI sustainment costs for prepositioned equipment and construction could be substantial. Army and Air Force officials said that they were working to identify and incorporate these costs into future base budget submissions. DOD officials said that we correctly applied DOD’s approach for estimating sustainment costs, but noted that actual costs may be lower than the estimated costs, because the military services may not fully fund sustainment. Additionally, officials said that EUCOM is trying to negotiate burden sharing agreements with host nations; however, it is unclear whether these negotiations will be successful or how any resulting agreements would affect DOD’s future costs. Without comprehensive estimates of the sustainment costs for the prepositioned equipment and major military construction projects in Europe, DOD decision makers have been limited in their ability to evaluate the affordability of these initiatives. Further, in the absence of these estimates, the services have been limited in their ability to plan for costs in future budgets, because they have an incomplete understanding of the magnitude of those costs and of when they are likely to be incurred. DOD Does Not Communicate to Congress the Future Costs of Enduring ERI Activities Funded through OCO The funding plan that DOD submits to Congress for ERI does not contain information about ERI’s future costs. This is in contrast to the way DOD submits its funding plan for its base budget, where DOD provides Congress with cost projections over a 5-year period, by appropriation, leaving Congress with a better understanding of how and when to allocate resources. In reviewing the fiscal year 2018 ERI request, the Director for Cost Assessment and Program Evaluation assessed future costs associated with posture initiatives funded under ERI. We previously reported that DOD was not developing enduring requirements funded through its OCO budget as part of its budget and programming process. Officials from the Office of the Under Secretary of Defense (Comptroller) and the Office of the Secretary of Defense, Cost Assessment and Program Evaluation told us that DOD has not been required to provide estimates for future OCO costs for ERI to Congress previously. An official from the Office of the Under Secretary of Defense (Comptroller) told us that DOD does not plan to provide these future costs to Congress along with its fiscal year 2018 ERI budget submission. Additionally, in preparing its posture requirements, EUCOM did not identify assumptions regarding host nation and NATO burden sharing. For example, officials from the Office of the Under Secretary of Defense for Policy said that DOD has submitted a request to the NATO Security Investment Programmé for $200 million in funding to build a facility in Poland to store Army equipment. Officials told us that, as a result, this construction project was identified as a lesser priority in EUCOM’s fiscal year 2018 request for funding. A senior Army officer told us that completion of a facility in Poland was critical to its plans in Europe. Officials from the U.S. Mission to NATO told us that as of July 2016 NATO had approved funding to complete preliminary architectural and engineering design for this project. Officials expect additional funding will be made available in July 2017 to complete final design and site preparation and the full cost of the project will be approved in early 2019. However, these officials noted that additional funding beyond what has been approved by NATO may be required to meet U.S.-specific requirements. Similarly, EUCOM officials said that they are working to identify opportunities to defray future costs through host nation contributions, but it is unclear how much funding—if any—host nations will provide moving forward. Congress has expressed interest in knowing the future costs of enduring activities being funded through DOD’s OCO budget. The Senate Appropriations Committee’s report accompanying a bill for DOD’s fiscal year 2015 appropriations stated that the committee does not have an understanding of enduring activities funded by the OCO budget. The committee further noted that there is a potential for risk in continuing to fund non-contingency-related activities through the OCO budget. Both GAO’s and other federal standards emphasize that agencies should provide complete and reliable information on the costs of programs externally, so that decision makers can make informed decisions when allocating resources. DOD has not provided Congress projections of future costs for posture initiatives funded under ERI because it is reviewing those requirements outside of its budget and programming processes, and DOD officials said that the department is not required to provide this information. As a result, DOD is limiting congressional visibility into the resources needed to achieve ERI’s objectives. If DOD does not provide Congress with projections of the future costs of posture initiatives funded under ERI and information on its assumptions pertaining to host nation support and burden sharing, it will continue to impede congressional visibility into the resources that are needed to fully implement these initiatives. Conclusions Russia’s annexation of Crimea and the subsequent threat of further aggression led DOD to establish and later expand ERI’s objectives and enhance posture in Europe to support a new U.S. strategy toward Russia. DOD has requested funding for these enhancements using its OCO budget; however, the processes DOD uses to develop its OCO budget were not designed to plan for and fund long-term, enduring initiatives such as ERI. By following a separate planning process when funding ERI with OCO, DOD is taking on risk by not reviewing and prioritizing ERI posture plans against other posture initiatives, estimating the costs for sustaining ERI initiatives, and providing Congress with estimates of ERI’s future costs. DOD risks making decisions that lack a strategic vision in comparison to other DOD priorities and may fund initiatives that cannot be sustained over the long term. Furthermore, Congress is likely to face challenges in assessing DOD’s estimated costs for ERI and the affordability of initiatives funded under ERI over the long term. Recommendations for Executive Action To better ensure that DOD can target resources to its most critical initiatives and establish priorities across its base budget and overseas contingency operations budget, we recommend that the Secretary of Defense prioritize posture initiatives under ERI relative to those funded in its base budget as part of its established posture-planning processes. (Recommendation 1) To better enable decision makers to evaluate the full long-term costs of posture initiatives under ERI, we recommend that the Secretary of Defense direct EUCOM and the military services to develop estimates for the sustainment costs of prepositioned equipment and other infrastructure projects under ERI and ensure that the services plan for these long-term costs in future budgets. (Recommendation 2) To support congressional decision making, we recommend that the Secretary of Defense provide to Congress, along with the department’s annual budget submission, estimates of the future costs for posture initiatives funded under ERI and other enduring costs that include assumptions such as those pertaining to the level of host nation support and burden sharing. (Recommendation 3) Agency Comments and Our Evaluation We provided a draft of the classified report to DOD for review and comment. DOD partially concurred with all three of our recommendations, and we have reproduced DOD’s comments on the classified report in appendix II. DOD also provided technical comments, which we incorporated as appropriate. DOD partially concurred with our first recommendation to use its established posture-planning processes to prioritize ERI’s posture initiatives relative to those funded in DOD’s base budget. In its comments, DOD stated that it will continue to prioritize the negotiation of international agreements supporting ERI through the Global Posture Executive Council, and that an on-going Strategic Review will inform ERI and guide both EUCOM and the services in their program planning efforts. These are positive steps. DOD also stated it will adjudicate its ERI-funded force requirements through its global force management process, adding that it will continue to resource OCO funds for ERI requirements until there is a sufficient increase in DOD’s base budget to do so. However, we continue to believe, as noted in our report, that DOD could improve its planning for posture initiatives funded under ERI, whether or not they are funded through OCO, by using DOD’s established posture planning processes. Although DOD’s global force management process directly affects overseas military posture in the near term, this process is not designed to evaluate long-term posture priorities. If DOD does not prioritize the forces and infrastructure projects funded under ERI against those funded using the military services’ base budgets, it will continue to lack an understanding of the relative importance of the posture initiatives funded under ERI. Without such an understanding, DOD increases the risk that the services will need to make critical and potentially costly decisions without a clear idea of which posture initiatives are most critical to the department. DOD partially concurred with our second recommendation that EUCOM and the military services develop estimates for future sustainment costs and plan for these costs in future budgets. In its comments, DOD stated that its components will continue to estimate the sustainment costs for prepositioned stocks and other infrastructure projects during DOD’s annual program and budget review process. DOD also commented that without additional topline base budget funding, some portion of the associated sustainment costs will need to be financed with OCO funds. However, as we noted in our report, neither the Army nor the Air Force has fully estimated these potentially significant future costs, nor had either service incorporated them into their future budgets. Using OCO funds would mark a departure from DOD leadership’s emphasis that the services would need to fund ERI posture sustainment costs through their respective base budgets. Additionally, not developing robust estimates for sustaining these initiatives could increase long-term fiscal risk for the department if DOD shifts more ERI-associated enduring costs into its OCO budget. In the absence of robust cost estimates and deliberate planning to address those costs in future budgets, DOD will continue to be limited in its ability to evaluate the affordability of posture initiatives funded under ERI, and the military services may not plan adequate funding to sustain posture investments in Europe. DOD partially concurred with our third recommendation, to provide Congress with estimates of the future costs for posture initiatives funded under ERI and information on any underlying assumptions, such as those pertaining to the level of host nation support and burden sharing. In its comments, DOD stated that it does not currently prepare a formal 5-year Future Years Defense Program for OCO-related costs. Moreover, DOD commented that it factors in host nation support and burden sharing when preparing budget estimates for Congress. However, DOD does not state whether it will begin to provide Congress future estimates and any underlying assumptions with its budget submission. It is critical that DOD increase congressional visibility into ERI’s future costs and its underlying assumptions to facilitate congressional oversight and reasonably ensure that initiatives can be sustained over the long-term. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Commander, U.S. European Command. 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 (404) 679-1816 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in Appendix III. Appendix I: Unspecified Minor Military Construction and Facilities Maintenance and Repair Projects Funded under the European Reassurance Initiative in Fiscal Years 2015 through 2017 The Army and Air Force identified approximately $224 million in unspecified minor military construction and facilities maintenance and repair projects (hereafter, minor construction and repair) that were programmed or obligated for the European Reassurance Initiative (ERI) in fiscal years 2015 through 2017. This includes $157 million for minor construction and repair projects identified by the Army and nearly $67 million for minor construction and repair projects identified by the Air Force. According to U.S. European Command officials, Navy and Marine Corps construction projects funded under ERI were either major military construction or exercise-related construction projects. The tables below do not include Navy and Marine Corps exercise-related construction projects. Using the data provided by the military services, we compiled the programmed and obligated funding for these minor construction and repair projects by fiscal year, country, location, and project name in tables 3 and 4. The information in these tables was provided by U.S. Army Europe and U.S. Air Force Europe in response to our request for a list of minor military construction and repair projects. The data provided did not identify the appropriations used for each project. Accordingly, we have not conducted a review to examine whether funds were appropriately used for a given project. Appendix II: DOD Comments Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Kevin O’Neill, Assistant Director; Alex Winograd, Analyst-in-Charge; Scott Bruckner, Adrianne Cline, Martin De Alteriis, Joanne Landesman, Jennifer Leotta, Carol Petersen, Michael Shaughnessy, and Jena Sinkfield all made key contributions to this report.

Why GAO Did This Study In response to Russia's annexation of Crimea in March 2014, the President announced the ERI, to reassure allies in Europe of U.S. commitment to their security. This initiative has been funded using OCO appropriations, which Congress provides in addition to DOD's base budget appropriations. The Joint Explanatory Statement accompanying the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, included a provision for GAO to review matters related to ERI. In this report, we (1) describe changes in ERI's objectives, funding under ERI, and DOD's posture in Europe since 2014 and (2) evaluate the extent to which DOD's planning processes for posture initiatives funded under ERI prioritize those initiatives, estimate their long-term costs, and communicate their estimated costs to Congress. GAO analyzed DOD strategy documentation, budget and cost analysis guidance, budget justification materials, and cost and obligations data. GAO also interviewed knowledgeable officials within the Office of the Secretary of Defense, U.S. European Command, the military services, and the State Department. What GAO Found Since 2014, the Department of Defense (DOD) has expanded the European Reassurance Initiative's (ERI) objectives, increased its funding, and planned enhancements to European posture. DOD expanded ERI's objectives from the short-term reassurance of allies and partners to include deterring Russian aggression in the long term and developing the capacity to field a credible combined force should deterrence fail. With respect to funding, DOD will have requested approximately $4.5 billion for ERI's posture enhancements through the end of fiscal year 2017 (about $3.2 billion for fiscal year 2017 alone), and in July 2016 EUCOM identified funding needs for future posture initiatives. The expansion of ERI's objectives has contributed to DOD's enhancing its posture in Europe. Specifically, DOD has increased the size and duration of Army combat unit deployments, planned to preposition Army equipment in Eastern Europe, added new enduring locations (e.g., locations that DOD expects to access and use to support U.S. security interests for the foreseeable future), improved infrastructure, and negotiated new agreements with European nations. As of April 2017, DOD was considering further force enhancements under ERI as part of the department's ERI budget request. DOD also was reviewing whether new enduring locations to support ERI were needed and was considering other improvements to existing infrastructure. DOD's process for planning ERI has not established priorities among posture initiatives funded under ERI relative to those in its base budget, nor estimated long-term sustainment costs for some posture initiatives funded under ERI, nor communicated future costs to Congress. ERI is being planned using a separate process from DOD's established processes and is funded from DOD's overseas contingency operations (OCO) appropriations. GAO found several weaknesses: Lack of prioritization : DOD establishes priorities among ERI posture initiatives but has not evaluated them against base budget initiatives using its posture management process. As a result, DOD lacks an understanding of the relative importance of ERI initiatives and may be investing in projects that it will not continue should OCO funding become unavailable. Lack of sustainment costs : EUCOM and the military services have not fully estimated the long-term costs to sustain equipment and construction funded under ERI. Based on DOD's approach for calculating rough order sustainment costs, GAO determined that these costs could be substantial. DOD officials said that GAO correctly applied DOD's approach for estimating sustainment costs, but noted that actual costs may be lower, because the military services may not fully fund sustainment. In the absence of comprehensive estimates, DOD has been limited in its ability to assess affordability and plan for future costs. Not communicating future costs : DOD limits Congress's visibility into the resources needed to implement ERI and achieve its objectives because it does not include future costs in its ERI budget request. This is a public version of a classified report issued in August 2017. Information on specific posture planning, guidance, and budget estimates that DOD deemed to be classified have been omitted from this report. What GAO Recommends GAO recommends that DOD prioritize ERI posture initiatives against initiatives in its base budget, develop cost estimates for sustaining initiatives, and communicate future costs to Congress. DOD partially concurred with GAO's recommendations. GAO continues to believe that these recommendations are warranted.

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Background Biodefense Roles and Responsibilities Multiple federal departments and agencies—including DOD—have responsibilities as part of their missions to assess the threat of biological agents and carry out key biodefense roles as delineated in Homeland Security Presidential Directive 10, Biodefense for the 21st Century, and the National Strategy for Countering Biological Threats. Since the 2001 anthrax incident, in which powdered Bacillus anthracis spores were deliberately put into letters that were mailed through the U.S. postal system that resulted in five deaths, the federal government has experienced growth and proliferation of research programs to protect public health and agriculture in the event of a natural emergency, man- made biological incident, or act of biological terrorism. DOD laboratories that handle and research deadly pathogens are important components of the U.S. biodefense infrastructure that supports such biological research programs. The Federal Select Agent Program Select agent research is subject to federal oversight and regulations and is guided by the principles and practices of biosafety and biosecurity. The Federal Select Agent Program was established to regulate the possession, use, and transfer of BSAT, in response to security concerns following bioterrorism attacks in the 1990s and early 2000s. The Federal Select Agent Program is jointly managed by the Centers for Disease Control and Prevention (CDC), Division of Select Agents and Toxins, within the Department of Health and Human Services (HHS), and the Animal and Plant Health Inspection Service (APHIS), Agriculture Select Agent Services, within the Department of Agriculture (USDA). These two agencies jointly regulate and oversee laboratories in the United States that are registered to work with BSAT. The Federal Select Agent Program also conducts inspections of registered entities for compliance with the select agent regulations. DOD’s Designated Infrastructure Manager for CBDP, Including BSAT CBDP was established to develop defense capabilities to protect the warfighter from current and emerging chemical and biological threats. The CBDP Enterprise’s mission is to enable the warfighter to deter, prevent, protect against, mitigate, respond to, and recover from chemical, biological, radiological, and nuclear threats and effects as part of a layered, integrated defense. The CBDP Enterprise conducts research and develops defenses against chemical threats—such as cyanide and mustard gases—and biological threats—such as anthrax and Ebola—and tests and evaluates capabilities and products to protect military forces from them. We reported in June 2015 on the need for DOD to designate an entity to identify, align, and manage its chemical and biological defense infrastructure, which includes its BSAT-related infrastructure. We found that CBDP had not fully identified the infrastructure capabilities required to address threats, had not planned to identify potential duplication without considering information from existing federal studies, and had not updated its guidance and planning process to include specific responsibilities and time frames for risk assessments. As a result, we recommended, among other things, that DOD identify and designate an entity within the CBDP Enterprise with the responsibility and authority to lead the effort to ensure achievement of infrastructure goals, and establish time lines and milestones for achieving the goals it has identified for chemical and biological infrastructure, including the Program Analysis and Integration Office’s 2008 recommendation that the CBDP Enterprise identify its required infrastructure capabilities. DOD concurred with all of our recommendations. In response to our recommendations, DOD, among other things, designated an infrastructure manager for CBDP and is implementing a three-phase process to identify and define the roles and responsibilities of the position by the end of 2018. As part of its BSAT infrastructure, DOD currently has five covered facilities that contain various laboratories across the military services that possess and handle BSAT. Each of these facilities currently is registered with the Federal Select Agent Program to possess BSAT in the United States. A sixth DOD facility, the BioTesting Division at Dugway Proving Ground, Utah, is working to regain its certification as a covered facility (see fig. 1). DOD officials said that other DOD facilities, in addition to these six, are registered with the Federal Select Agent Program to handle BSAT in an emergency outbreak situation. However, according to DOD officials, they do not currently possess BSAT. CBDP officials stated that DOD used to have more facilities that possessed and handled BSAT, but as a result of prior base realignment and closure activities, the department has consolidated its BSAT laboratory capabilities within the six facilities highlighted in figure 1, based on the unique capabilities and missions performed by each facility to support the warfighter. One of these unique capabilities, for example, is the Whole System Live Agent Test Chamber located at the BioTesting Division at Dugway Proving Ground, Utah, a one-of-a-kind chamber designed and constructed primarily for biological agent aerosol testing. For more information on the unique capabilities DOD has identified for each of the DOD laboratories that handle BSAT, scroll over figure 1 to see an interactive display of information on each facility or see appendix II for static images of this information. BSAT Policies and Guidance DOD and the military services have issued a number of policies and guidance aimed at ensuring safety and security for BSAT materials and establishing standards for the handling of BSAT within DOD facilities. In particular, DOD issued Instruction 5210.88, Security Standards for Safeguarding Biological Select Agents and Toxins (BSAT), which established security standards for safeguarding BSAT materials and identified roles and responsibilities for BSAT biosecurity. These include oversight responsibilities for the BSAT security program, which is led by the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs. Oversight responsibilities include establishing security standards for safeguarding BSAT, coordinating with the Federal Select Agent Program, and establishing and maintaining a database of all BSAT at DOD covered facilities. In response to DOD Instruction 5210.88, each of the military services has received waivers or issued separate policies for securing BSAT materials. The Army has been granted a waiver to its existing policies that are inconsistent with DOD Instruction 5210.88 and, according to Army officials, is in the process of updating its policies to align with the DOD instruction. According to Navy officials, the Navy has been granted waivers while it is updating existing policies that do not currently align with DOD Instruction 5210.88. The Air Force has issued policies directing alignment with the DOD instruction. Further, a national strategy and a number of executive orders and presidential directives have been issued addressing a range of concerns, such as biological defense and safety and security for handling BSAT. For example, in 2010 the President issued an executive order directing federal agencies to harmonize their policies and guidance on BSAT to align them with the select agent regulations in order to mitigate any conflicting direction and promote research and innovation. The Army’s Investigation into the May 2015 Dugway Incident In May 2015, DOD discovered that the Life Sciences Division—currently known as the BioTesting Division—at Dugway Proving Ground, Utah, had inadvertently made 575 shipments from 2004 through 2015 of incompletely inactivated Bacillus anthracis—the bacterium that causes anthrax—to 194 laboratories and contractors worldwide (see fig. 2 for locations). Laboratory officials at Dugway Proving Ground believed that the samples of Bacillus anthracis (see sidebar) they were shipping had been inactivated—that the hazardous effects of the pathogen had been destroyed, while the pathogen retained characteristics of interest for research purposes. DOD was inactivating samples to support research on the detection, identification, and characterization of biological threats (see fig. 3). Anthrax is a serious infectious disease caused by the pathogen known as Bacillus anthracis. This pathogen occurs naturally in soil and commonly affects domestic and wild animals around the world. It can survive in the environment for decades. Contact with Bacillus anthracis can cause severe illness in both humans and animals. The bacteria can multiply, spread out in the body, produce toxins (poisons), and cause severe illness. Humans can be infected by breathing in spores, eating food or drinking water that is contaminated with spores, or getting spores in a cut or scrape in the skin. It is very uncommon for people in the United States to become sick with anthrax. Because Bacillus anthracis is both infectious and exceptionally resilient, it is ideally suited for potential adversaries’ biological weapons programs. Therefore, Department of Defense (DOD) biodefense officials believe that it is critical for the department to have a strong countermeasures program to protect the warfighter against this dangerous pathogen. As of March 2018, DOD reported having implemented 18 of 35 recommendations in the Army’s 2015 investigation report. DOD reported that it has actions under way to implement the remaining 17 recommendations. The Secretary of the Army, as Executive Agent for DOD’s BSAT Biosafety and Biosecurity Program, is responsible for implementing the recommendations from the 2015 investigation report. Since 2015, the Army has taken multiple types of actions—including operational, administrative, and personnel actions—to implement the recommendations from the report. We asked DOD to characterize the relative priority of the recommendations and describe those actions that have been taken or are under way. DOD reported that 12 recommendations were considered “high” priority, 7 of these being assessed as implemented and 5 as in progress, 18 recommendations were considered “moderate” priority, 10 of these being assessed as implemented and 8 as in progress, and 5 recommendations were considered “low” priority, 1 being assessed as implemented and 4 as in progress. Appendix III shows the implementation status of the 35 recommendations from the Army’s 2015 investigation report that we reviewed. Rather than focus exclusively on the recommendations from the Army’s 2015 investigation report, the BSAT Biorisk Program Office (BBPO) incorporated actions to implement the 2015 recommendations into broader Army efforts to improve biosafety, biosecurity, and overall program management. Appendix IV describes BBPO’s roles and responsibilities. For example, Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program, incorporates some of the recommendations from the Army’s 2015 investigation report, such as establishing a mentorship program for laboratory staff and others who work with BSAT, as well as directing studies into the science of inactivation of Bacillus anthracis. In addition, the Army has developed implementation guidance to carry out Army Directive 2016-24, which provides clarification on the directive and on the reporting requirements to the BBPO and Executive Agent Responsible Official (hereafter referred to as the EARO) in support of the NDAA for Fiscal Year 2017. BBPO officials told us that recommendations from the Army’s 2015 investigation report that are not incorporated in the directive have been or are being addressed through a combination of establishing working groups and, at one time, through a General Officers Steering Committee. This committee monitored implementation through updates to the EARO and the Director of the Army Staff. For example, BBPO officials told us that, from 2016 to 2017, quarterly meetings between the General Officers Steering Committee and the Director of the Army Staff were used to discuss the status of requirements in Army Directive 2016-24. These quarterly meetings also provided status updates on target completion dates for the Army’s 2015 investigation report recommendations that were incorporated in the directive. We found that the quarterly information briefs included information on the status and time frames for implementing recommendations that were incorporated into the Army directive. BBPO Has Not Yet Developed an Approach to Measure the Effectiveness of Actions Taken to Address Recommendations In carrying out broader biosafety efforts and implementing recommendations from the Army’s 2015 investigation report as well as recommendations from other entities, BBPO has established processes to track the status of actions that it has taken and monitor time lines for completion by responsible DOD organizations. This helps BBPO understand what actions have been taken and where they fit into a larger plan to improve biosafety at specific facilities and organizations and across the DOD BSAT enterprise. According to Standards for Internal Control in the Federal Government, an internal control provides reasonable assurance that the objectives of an entity will be achieved, including the use of ongoing monitoring, evaluations, or a combination of the two to obtain reasonable assurance of the operating effectiveness of the entity’s internal controls over the assigned process. It also states that managers should identify, analyze, and respond to risks. Such evaluations and risk assessments are necessary to help officials understand whether the actions they have taken—or will take—address the situations that prompted the original recommendations. We found that BBPO’s approach to planning for and executing actions to implement the 2015 Army recommendations and other recommendations fulfills the monitoring element of the internal control standards. BBPO has not, however, systematically carried out the evaluation element. Based on our review of DOD documentation, such as the quarterly information briefs on status of recommendations, and on subsequent interviews with BBPO officials, we found that BBPO has not developed an approach to assess the effectiveness of each implemented recommendation in achieving its intended purpose. According to DOD officials, BBPO has been focused on implementing not only the recommendations from the 2015 Army investigation report but also its broader efforts for the DOD BSAT Biosafety and Biosecurity Program and has not yet formalized an approach to evaluating the effectiveness of actions taken to address the recommendations from the 2015 Army investigation report. There are many ways to assess effectiveness that could assist BBPO in improving its implementation processes. One approach we found related to DOD’s implementation of recommendations for the defense nuclear enterprise provides an example that may be useful. In 2017, we reported on DOD’s process to monitor progress and identify risks while implementing recommendations within the defense nuclear enterprise—a community that, like chemical and biological defense, operates in a low- probability, high-risk environment. In that report, we noted that DOD’s Office of Cost Assessment and Program Evaluation had developed a tracking tool that applied a systematic approach for stating the underlying problem, identifying and overseeing offices of responsibility, implementation actions, milestones, and metrics to measure the effectiveness of the actions taken toward implementing each of the recommendations to support the defense nuclear enterprise. We also found that identifying risks can help an agency to track and measure the completion of tasks over time. This example incorporates both the monitoring and evaluation elements of internal control that we discussed earlier. Measuring the effectiveness of each implemented recommendation would help bolster BBPO’s existing efforts. It would also help BBPO to better determine whether the actions taken are working, whether there are unintended consequences, or if further action is necessary. The Army Has Implemented a BSAT Biosafety and Biosecurity Program but Does Not Have a Completed Strategy and Implementation Plan The BSAT Biosafety and Biosecurity Program Is a Broad Effort to Improve Management, Coordination, Safety, and Quality Assurance In response to the 2015 incident at Dugway Proving Ground and various subsequent DOD and external reviews of management, operational, coordination, safety, and quality assurance incidents between 2004 and 2015, DOD has initiated a broad range of efforts to address these types of incidents and to improve DOD’s BSAT enterprise. The designation of the Army as the DOD Executive Agent for the DOD Biosafety and Biosecurity Program is one example of DOD’s efforts to improve management. Prior to 2015, there was no centralized oversight authority for DOD’s BSAT enterprise. The Secretary of the Army’s designation as the Executive Agent and subsequent delegation of this authority to The Army Surgeon General has, according to BBPO and laboratory officials, resulted in improved coordination and communication across DOD and with the Federal Select Agent Program. According to these same officials, BBPO also has contributed to improved communication between DOD laboratories by establishing working groups and is developing a process for approving standard operating procedures for working with BSAT across the CBDP Enterprise. DOD has made key safety improvements by taking a number of actions to address the incident at Dugway Proving Ground and the recommendations from the Army’s 2015 investigation report. These key safety improvements include (1) establishing a DOD Executive Agent and a support office to provide oversight, (2) implementing improved quality control and assurance standards at its covered facilities, (3) developing a new quality management system, (4) conducting additional scientific studies on BSAT inactivation, and (5) taking multiple actions to address requirements associated with Army Directive 2016-24 and the Army’s 2015 investigation report. Appendix V provides detailed information on the key safety improvements DOD has completed in response to the incident at Dugway Proving Ground and the recommendations from the Army’s investigation report. According to BBPO officials, in addition to implementing improved quality control and assurance standards at covered facilities, they also have established a quality control and assurance working group to address and track implementation of the recommendations in accordance with the Army’s Implementation Guidance for Army Directive 2016-24 and to implement the quality control and assurance measures from section 218 of the NDAA for Fiscal Year 2017. Further, the EARO has established a BSAT Biorisk and Scientific Review Panel to review and assess biosafety and biosecurity concerns associated with new and existing procedures conducted at DOD BSAT laboratories and to provide recommendations to the EARO on their acceptability for use to enhance biosafety and biosecurity across the DOD BSAT programs. To provide additional insights into DOD’s actions to make safety improvements and to better understand the effects of those actions on laboratory staff and operations following the 2015 incident at Dugway Proving Ground, we conducted facilitated discussions with a non- generalizable sample of supervisory and non-supervisory staff at the six DOD laboratories that handled BSAT. We used these facilitated discussions to obtain the views of those laboratory staff who have and will be implementing key biosafety and biosecurity actions from multiple sources. Appendix VI presents selected comments, organized by key themes, from laboratory staff at DOD facilities that handle BSAT in response to actions taken by DOD following the 2015 incident at Dugway Proving Ground. We heard a broad range of views on the effects of the Dugway incidents as well as the effects of subsequent actions to improve the BSAT Biosafety and Biosecurity Program. For example, some individuals were concerned about the effect of administrative requirements on the efficiency of their work, while others believed that the organizational changes made by the Army have improved communication and coordination. We did not validate any of the views expressed to us, but they may be of value to BBPO and officials throughout the BSAT enterprise in considering both how their program efforts are perceived and how best to carry them out. BBPO Has Not Completed a Strategy and Implementation Plan to Assist the Program in the Long Term BBPO has begun to develop a draft concept plan to establish roles and responsibilities for the BSAT Biosafety and Biosecurity Program. However, we found that BBPO has not developed a strategy or implementation plan for the long term. BBPO’s draft concept plan identified manpower and funding requirements for the BSAT Biorisk Program Office but did not go further in laying out a strategy and implementation plan. According to BBPO officials, BBPO currently is relying on DOD Instruction 5210.88 as overarching guidance for managing BSAT biosecurity operations and bringing DOD into compliance with Executive Order 13546, Optimizing the Security of Biological Select Agents and Toxins in the United States, and select agent regulations. BBPO also relies on DOD Manual 6055.18-M for managing DOD BSAT biosafety operations. In addition, DOD is in the process of drafting an overarching directive for the combined DOD BSAT Biosafety and Biosecurity Program that will be based on DOD Instruction 5210.88 and DOD Manual 6055.18-M. According to BBPO officials, BBPO plans to develop a multi-service policy to consolidate biosafety and biosecurity initiatives for combined biorisk management and replace Army Directive 2016-24 once the Army has fully implemented its directive. While efforts to develop the draft concept plan and overarching guidance are important, BBPO has not identified long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, an evaluation plan for monitoring goals and objectives, and an overall time frame for completion of a strategy and implementation plan. According to Office of Management and Budget Circular (OMB) A-11, in addition to fulfilling the requirements of the GPRA Modernization Act of 2010, strategic planning serves a number of important management functions related to achieving an agency’s mission. For example, strategic planning is a valuable tool for communicating a vision for the future and should include goals and objectives that align with resources and guide decision making to accomplish priorities and improve outcomes. An overall strategy would also help to prioritize funding; accomplish priorities to improve outcomes; and coordinate biosafety and biosecurity protocols, practices, and procedures to achieve harmonization across the military services and the DOD BSAT enterprise. To accomplish these things, a strategy and implementation plan can include such things as long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, and a time frame for completion. BBPO officials acknowledged that they need a strategy and implementation plan for the BSAT Biosafety and Biosecurity Program. They said that once they complete the concept plan, they will develop a strategy that will include specific goals and tasks to support programmatic efforts. They explained that they have not been able to develop a strategy and implementation plan because BBPO still is organizing the office and carrying out its other responsibilities while working toward obtaining stakeholder support for the program. As DOD completes a concept plan for the program and turns its attention to a strategy and implementation plan for the program over the long term, BBPO has an opportunity to incorporate the following key elements typically found in such strategies and implementation plans and specified in OMB guidance: long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, evaluation of the plan to monitor goals and objectives, and an overall time frame for completion of the strategy and implementation plan. Without a strategy and implementation plan, Dugway Proving Ground and DOD’s currently covered facilities may not be able to determine how to inform DOD’s long- term planning efforts. In addition, components of the DOD BSAT enterprise may remain unclear about the department’s strategy to harmonize BSAT operations to ensure safety, security, and standardization of procedures throughout DOD’s BSAT enterprise. A strategy and implementation plan could also help ensure unity of command among the military services to employ department-wide policies and procedures for managing the biosafety and biosecurity of BSAT. They also could help DOD to identify the capabilities necessary to support laboratory improvements, mitigate biological mishaps similar to the 2015 incident at Dugway Proving Ground, and allocate resources that support the BSAT enterprise. The Army Has Not Fully Institutionalized Measures to Ensure the Independence of Edgewood Chemical Biological Center’s Test and Evaluation Mission The Army has not fully institutionalized measures to ensure that its biological test and evaluation mission remains independent from its biological research and development mission at Edgewood Chemical Biological Center. This is important for preventing undue influence of test and evaluation procedures on research and development procedures, and vice versa. In April 2016, the Army issued General Order 2016-04 in response to a recommendation from the Army’s Biosafety Task Force, which directed the transfer of the West Desert Test Center – Life Sciences Division at Dugway Proving Ground, Utah, and its reassignment to the U.S. Army Materiel Command-Research, Development and Engineering Command – U.S. Army Edgewood Chemical Biological Center at Aberdeen Proving Ground, Maryland. This transfer took place in July 2016, and the former Life Sciences Division was subsequently renamed the BioTesting Division. Edgewood Chemical Biological Center’s traditional mission primarily is focused on research and development, while the West Desert Test Center’s traditional mission is focused on test and evaluation. DOD subsequently reported to the congressional defense committees on April 10, 2017, that it had realigned the BioTesting Division in order to place it under staff with more experience in handling BSAT. According to the CBDP’s 2017 Annual Report to Congress, the realignment of the BioTesting Division will enable tracking, reporting, and meeting of audit requirements within an approved framework for managing governance, risks, and compliance. Figure 4 illustrates the transfer of command and control of the BioTesting Division. Officials at Edgewood Chemical Biological Center identified a number of steps they have taken and plan to take to address concerns related to potential conflict of interest, including the following: In June 2016, the Army Test and Evaluation Command and Army Research, Development and Engineering Command signed a memorandum of agreement addressing reassignment of the BioTesting Division that lays out roles and responsibilities for test processes and procedures between the two entities. The memorandum also notes that the Research, Development and Engineering Command will develop a mitigation strategy for conflicts of interest when Edgewood Chemical Biological Center is the developer and the BioTesting Division is the tester. In November 2017, Edgewood Chemical Biological Center elevated the BioTesting Division from a branch to a division to raise its visibility and alleviate concerns about independence between the test and evaluation functions and the research and development functions of Edgewood Chemical Biological Center. However, as of March 2018, the Army has not institutionalized measures, such as policies, standard operating procedures, protocols, and roles and responsibilities to ensure independence between the biological research and development mission and the test and evaluation mission. Specifically, the Army has not provided any measures beyond the memorandum of agreement that acknowledged the potential for conflict of interest, such as the conditions under which one or more officials—even without intent—exercises undue influence of test and evaluation mission procedures on research and development procedures. The Army also recognizes the need for a mitigation strategy—to ensure independence between the biological research and development function and the test and evaluation function that takes the transfer of command and control into account. The memorandum of agreement does not contain, for example, criteria that distinguish the mission requirements for operational test and evaluation for the BioTesting Division from the mission requirements for research and development, and risk management guidelines to mitigate risks associated with potential conflicts of interest between the Edgewood Chemical Biological Center research and development mission and the BioTesting Division’s test and evaluation mission. Army officials explained that a mitigation strategy has not been developed—and that there is no time frame for developing such a strategy—because there is no testing of BSAT materials under way at the BioTesting Division, since its BSAT registration has been withdrawn. According to Army officials, this condition could last for at least 1 to 2 years. While a mitigation strategy to prevent potential conflict of interest is envisioned by the memorandum of agreement, Edgewood Chemical Biological Center officials currently are focused on re-registering the BioTesting Division with the Federal Select Agent Program and bringing it back up to full operational capability. A senior official at Edgewood Chemical Biological Center acknowledged that the risk to independence between Edgewood Chemical Biological Center and the BioTesting Division is an issue that remains unresolved and there are currently no measures in place to prevent potential conflict of interest. According to Army Regulation 73-1, Test and Evaluation: Test and Evaluation Policy, independence is important to ensure that the decision maker is provided with, for example, unbiased, objective advice about the status of the development of a system. In addition, as we have reported, independence between research and development functions and test and evaluation functions is key to the effectiveness of operational test and evaluation. We have reported long-standing conflicts between the research and development mission and the test and evaluation mission when there is a lack of independence, including (1) how many and what types of tests to conduct; (2) when testing should occur; (3) what data to collect, how to collect it, and how best to analyze it; and (4) what conclusions are supportable given the analysis and the limitations of the test program. One example where the Army considered a potential conflict of interest was between the Army Test and Evaluation Command’s chemical test and evaluation mission and Edgewood Chemical Biological Center’s chemical research and development mission. Specifically, Army Directive 2016-24 directed the Army Test and Evaluation Command to conduct a separate evaluation to determine whether to transfer the “remaining elements,” that is, the chemical mission, from West Desert Test Center to Edgewood Chemical Biological Center. Officials from the Army Test and Evaluation Command stated that after developing alternative courses of action, they decided—in contrast to their decision on the biological mission—to keep the chemical mission under the Army Test and Evaluation Command rather than transferring it to the Edgewood Chemical Biological Center. According to officials at the Army Test and Evaluation Command, the transfer of operational command and control of their chemical mission could create an independence issue by placing the chemical test and evaluation function within the same command as the research and development function. The chemical mission represents a major operational command and control element of the Army Test and Evaluation Command. Without measures in place to preserve independence—such as criteria that establish mission requirements for operational test and evaluation for the BioTesting Division or risk management guidelines—there is a potential risk to the independence of the testing and evaluation mission conducted by the BioTesting Division. For example, the BioTesting Division might be compelled to prioritize the testing of Edgewood Chemical Biological Center products over those of other DOD and non- DOD customers. Officials in the Army Test and Evaluation Command stated that the transfer of the biological test and evaluation mission may increase the complexity of the evaluation mission by requiring additional coordination. Furthermore, the BioTesting Division’s procedures on particular efforts could be influenced, resulting in test and evaluation that may not be objective or reliable. Without developing measures to prevent conflicts of interest, the Army will not have reasonable assurance of the independence of the BioTesting Division’s test and evaluation mission. DOD Has Not Completed the Study and Evaluation Required by the NDAA for Fiscal Year 2017 to Determine Specific Infrastructure Needs for the BSAT Program DOD has not completed its BSAT infrastructure study to determine its infrastructure needs, as required by the NDAA for Fiscal Year 2017. DOD was to report to the congressional defense committees by February 1, 2017, among other things, on the results of its study to evaluate (1) the feasibility of consolidating covered facilities within a unified command to minimize risk, (2) opportunities to partner with industry for the production of BSAT and related services in lieu of maintaining such capabilities within the Army, and (3) whether operations under the BSAT production program should be transferred to another government or commercial laboratory that might be better suited to produce BSAT for non-DOD customers. Moreover, Standards for Internal Control in the Federal Government provides specific guidance to federal agencies on how to communicate clearly defined objectives that are to be achieved— including time frames for completing those objectives—and to inform decision makers in a timely manner. DOD provided a report to the congressional defense committees on April 10, 2017, stating that the department is still identifying its BSAT infrastructure requirements. However, as of March 2018, CBDP officials acknowledged that these study efforts are still ongoing and that there are no estimated time frames for completing any of them. DOD officials stated that they are focusing on identifying enterprise-wide infrastructure for CBDP, of which BSAT infrastructure is just one part. Officials explained that they have prioritized their efforts to first address the recommendations from our 2015 report, which included calling for DOD to designate an entity to take responsibility for CBDP Enterprise infrastructure. CBDP officials stated that when they established the infrastructure manager position, they decided to study CBDP Enterprise infrastructure from a “clean slate” and leverage lessons learned from previous studies. According to DOD officials, this information will be used to identify any capability gaps, right-size the CBDP Enterprise infrastructure, and support DOD’s final report to Congress regarding BSAT infrastructure. Regarding DOD’s first required task—to study the feasibility of consolidating covered facilities within a unified command to minimize risk—DOD officials stated that study efforts are ongoing and highlighted initial consolidation actions the department has taken. Specifically, DOD officials stated that (1) DOD had established the Secretary of the Army as Executive Agent to further consolidate command oversight of DOD’s BSAT Biosafety and Biosecurity Program and (2) the Army had transferred the command and control of the BioTesting Division from the Army Test and Evaluation Command to Edgewood Chemical Biological Center, as previously discussed. Regarding DOD’s second required task, DOD officials stated that the Army and DOD have not yet begun any specific studies on opportunities to partner with industry to produce BSAT and related services as an alternative to maintaining these capabilities within the Army. CBDP officials stated that they continually look for opportunities to partner with industry on production. CBDP officials told us that they plan to determine if there are opportunities to partner with industry after the CBDP Enterprise-wide study effort is completed. In the meantime, officials highlighted that the Army’s Defense Biological Product Assurance Office within the Joint Program Executive Office for Chemical and Biological Defense—formerly known as the Critical Reagents Program—has taken action to study its office’s BSAT-related commercial product line, which has resulted in the office divesting itself of inactivated BSAT materials. Regarding the third required task, the NDAA for Fiscal Year 2017 required DOD to study whether BSAT production operations should be transferred to another government or commercial laboratory that might be better suited to produce BSAT for non-DOD customers. DOD reported that it has taken steps to support a future decision on this issue and, according to DOD officials, once it has completed the CBDP Enterprise- wide study of infrastructure capabilities and capacity, it will determine whether the BSAT community needs to transfer any part of its production to another entity. With regard to the production of BSAT for non-DOD customers, Army officials stated that when the BioTesting Division at Dugway Proving Ground becomes fully operational and re-registers with the Federal Select Agent Program in fiscal year 2019, it will no longer be producing and shipping BSAT to non-DOD customers. The Army took steps to address the issue prior to the NDAA for Fiscal Year 2017. Specifically, in August 2015, the Army established a Biosafety Task Force working group that examined, among other things, DOD’s covered facilities and options for locations for producing BSAT. Subsequently, in February 2016, the Army recommended that additional analysis be conducted before any decision is made to change the current BSAT laboratory infrastructure. Appendix VII shows what DOD has reported and completed in response to the requirements in the NDAA for Fiscal Year 2017. The NDAA for Fiscal Year 2017 is not the first time that DOD has been directed to review its BSAT infrastructure. Biosafety, biosecurity, and biodefense issues have been long-standing concerns for the nation. We found that the federal government—including DOD—has spent over a decade studying biosafety and biosecurity issues, including BSAT infrastructure. DOD has contributed to and is continuing to support a number of federal efforts regarding size, safety, security, and oversight of high-containment laboratories across the United States, including the efforts of the Federal Experts Security Advisory Panel and Fast Track Action Committee to examine the size and scope of laboratories working with BSAT across the United States. Appendix VIII describes and provides a summary of selected federal panels, task forces, and working groups that have examined biosafety, biosecurity and biodefense issues since 2004. (Our prior reports related to these matters are included in Related GAO Products at the end of this report.) According to CBDP officials, once CBDP gathers information on the capacity and needs of its enterprise-wide infrastructure and determines where there are capability gaps, it anticipates providing a report to the congressional defense committees. These officials said that the report will provide information on whether DOD should consolidate or transfer infrastructure and opportunities to partner with industry on BSAT. The EARO has periodically met with congressional authorizers, according to BBPO officials, to provide programmatic updates on the DOD BSAT Biosafety and Biosecurity Program. However, CBDP officials stated that they have not provided an update to the congressional defense committees on the results of the study efforts since they issued their preliminary report on April 10, 2017. In addition, CBDP officials told us that they do not have an estimated time frame for when they will be able to provide the final report on the results of the study of BSAT infrastructure. DOD has reported that its mandated study efforts on BSAT-related infrastructure still are ongoing because DOD is focused first on identifying CBDP Enterprise-wide infrastructure and has no estimated time frames for completing the mandated study. Unless DOD establishes time frames for finalizing its study, decision makers will not have reasonable assurance that DOD is taking the necessary steps in a timely manner to provide the required BSAT infrastructure CBDP needs to support the warfighter. Conclusions The inadvertent shipments of incompletely inactivated Bacillus anthracis from Dugway Proving Ground, according to the Army’s 2015 investigation report, constituted serious breaches of regulations and raised biosafety and biosecurity concerns. Since then, DOD has taken steps to improve biosafety and biosecurity and made significant progress in addressing the recommendations from the Army’s investigation report. The department currently has an opportunity to take several additional management actions that, if implemented fully, will help it capitalize on the progress that it has made. Addressing the gap in assessing how effectively the recommendations and actions taken address the original condition and contributing factors they were intended to resolve would bolster the Army’s long-term efforts. The Army could incorporate such an approach into its existing processes to monitor the implementation of recommendations from the Army’s 2015 investigation report. The Army clearly has a concept in mind for the BSAT Biosafety and Biosecurity Program. However, that concept does not constitute a strategy and implementation plan that identifies specific long-term goals, objectives, external factors that can affect goals, and tasks to support programmatic efforts through the use of metrics to gauge progress; milestones; an evaluation of the plan; and an overall time frame for completion. Without a strategy and implementation plan, the Army may not be able to harmonize BSAT operations to ensure safety, security, and standardization of procedures throughout DOD’s BSAT enterprise. The Army recognizes that the transfer of operational command and control of the BioTesting Division from West Desert Test Center at Dugway Proving Ground, Utah, to Edgewood Chemical Biological Center at Aberdeen Proving Ground, Maryland, could result in unintended consequences, such as a potential risk to the independence of the testing and evaluation mission. However, although Army officials said they intend to develop a strategy to mitigate this risk, there is no time frame for doing so, because there is no testing under way at the BioTesting Division and there will be none for at least 1 to 2 years. This hiatus in testing should not preclude Army efforts to develop a mitigation strategy. Without measures in place to prevent or mitigate a risk to independence, the transfer of operational command and control could ultimately compromise the quality of future technologies used by the warfighter. Finally, DOD is focusing on identifying the enterprise-wide infrastructure necessary for CBDP. However, it has not yet determined time frames for completion of the study required by the NDAA for Fiscal Year 2017 related to consolidation of command, transfer of BSAT production responsibilities, and opportunities to partner with industry for the production of BSAT. Without time frames for reporting on the final results of this study, DOD is unable to provide decision makers with key information needed to determine infrastructure requirements for the BSAT program and contribute to federal-level efforts to determine the appropriate number of high-containment laboratories in the United States. Recommendations for Executive Action We are making the following four recommendations to the Department of Defense: The Secretary of the Army should ensure that The Surgeon General of the Army, as the EARO for DOD’s BSAT Biosafety and Biosecurity Program, incorporates into existing processes an approach for assessing how effectively the recommendations from the Army’s 2015 investigation report address the original condition and contributing factors that they were intended to resolve. (Recommendation 1) The Secretary of the Army should ensure that The Surgeon General of the Army, as the EARO for DOD’s BSAT Biosafety and Biosecurity Program, develops a strategy and implementation plan for the DOD BSAT Biosafety and Biosecurity Program that includes long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, an evaluation plan for monitoring goals and objectives, and a time frame for completion. (Recommendation 2) The Secretary of the Army should ensure that the Commander of Army Materiel Command establishes measures to prevent the potential risk to independence posed by transferring operational command and control of the BioTesting Division from West Desert Test Center to the Edgewood Chemical Biological Center. Such measures could include, for example, criteria that establish mission requirements for operational test and evaluation for the BioTesting Division, in accordance with DOD and Army regulations, and risk management guidelines to mitigate risks associated with potential conflicts of interest between the Edgewood Chemical Biological Center research and development mission and the BioTesting Division’s test and evaluation mission. (Recommendation 3) The Secretary of Defense should ensure that the Deputy Assistant Secretary of Defense for Chemical and Biological Defense establishes time frames to complete the study and its evaluations required by the NDAA for Fiscal Year 2017, Section 218(d), regarding the feasibility of consolidating covered facilities within a unified command, opportunities to partner with other industry for the production of BSAT, and transfer of BSAT production responsibilities. (Recommendation 4) Agency Comments and Our Evaluation In written comments on a draft of this report, DOD concurred with all four of our recommendations, discussed actions it is taking and plans to take to implement them, and provided target dates for completing implementation of these actions. The full text of DOD’s written comments are reprinted in appendix IX. DOD also provided us with several technical comments, which we incorporated in the report, as appropriate. We believe these actions, if fully implemented, will address our recommendations. USDA and HHS did not provide formal agency comments on a draft of this report, but provided us with a technical comment, which we incorporated in the report, as appropriate. We are sending copies of this report to the congressional defense committees as well as other appropriate congressional committees; the Secretaries of Defense, Agriculture, and Health and Human Services; the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs; the Deputy Assistant Secretary of Defense for Chemical and Biological Defense; the Department of Defense Inspector General; the Secretaries of the Army, the Air Force, and the Navy and the Commandant of the Marine Corps; the Directors, Centers for Disease Control and Prevention and Animal and Plant Health Inspection Service; and other cognizant officials, as appropriate. 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 concerning this report, please contact Joseph Kirschbaum at (202) 512-9971 or KirschbaumJ@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 X. Appendix I: Objectives, Scope, and Methodology The National Defense Authorization Act (NDAA) for Fiscal Year 2017 included a provision for us to report on the Department of Defense’s (DOD) actions to address findings and recommendations of the Army’s December 2015 investigation report (hereafter, the Army’s 2015 investigation report) regarding the inadvertent shipment of incompletely inactivated Bacillus anthracis from Dugway Proving Ground, Utah. It also included a provision for us to report on DOD’s efforts to implement quality control and assurance measures for the department’s Biological Select Agents and Toxins (BSAT) Biosafety and Biosecurity Program, among other things. This report discusses the extent to which (1) DOD has implemented the recommendations from the Army’s 2015 investigation report and has developed an approach to measure the effectiveness of actions taken to address the recommendations, (2) the Army has implemented the BSAT Biosafety and Biosecurity Program and developed a strategy and implementation plan, (3) the Army has developed measures to ensure that its biological test and evaluation mission remains independent under its biological research and development mission, and (4) DOD has carried out a study and evaluation in compliance with the requirements contained in section 218, subsection (d), of the NDAA for Fiscal Year 2017. To determine how DOD has implemented the recommendations from the Army’s 2015 investigation report and has developed an approach to measure the effectiveness of actions taken to address the recommendations, we reviewed the Army’s 2015 investigation report recommendations and assessed the subsequent actions that DOD had taken to address those recommendations. To determine whether specific recommendations have been addressed, we analyzed guidance that DOD and the Army issued to instruct department and military service activities on roles and responsibilities and implementation efforts to support DOD’s BSAT Biosafety and Biosecurity Program, such as DOD Instruction 5210.88, Security Standards for Safeguarding Biological Select Agents and Toxins (BSAT); Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program; and Implementation Guidance for Army Directive 2016-24. We also analyzed supporting documentation from DOD officials to demonstrate how those specific recommendations were addressed. As of March 2018, DOD had designated a priority level and had updated the completion status of its implementation for each of the 35 of 39 recommendations from the Army’s 2015 investigation report that we reviewed. This update and priority level designation was conducted at our request. We also asked that DOD provide us with milestones and risk assessments associated with the implementation of the recommendations from the Army’s investigation report. However, DOD was unable to provide this information. (We did not review the 4 recommendations in the investigation report that pertain to individual accountability.) We interviewed cognizant DOD and military service officials to obtain their perspectives on efforts to address the recommendations in response to the 2015 incident at Dugway Proving Ground. In addition, we reviewed Standards for Internal Control in the Federal Government and DOD Instruction 5010.40, Managers’ Internal Control Program Procedures to identify criteria for communicating quality information and performing monitoring and reporting activities. To determine the extent to which the Army has implemented the BSAT Biosafety and Biosecurity Program and developed a strategy and implementation plan, we obtained documentation from DOD officials on current policies, procedures, and directives identifying oversight and governance authorities involved in supporting DOD’s BSAT Biosafety and Biosecurity Program. Also, we obtained examples of working groups responsible for developing quality control and assurance guidance and standard operating procedures for working with BSAT in DOD laboratories and across the Chemical and Biological Defense Program (CBPD) Enterprise. In addition, we compared the actions of the BSAT Biorisk Program Office (BBPO), such as developing the draft Department of Defense Biological Select Agents and Toxins Biorisk Program Office Concept Plan, to leading practices for sound management identified in the GPRA Modernization Act of 2010, and the Army’s 2015 investigation report recommendations. Further, we interviewed DOD officials from the military services to determine their strategies and efforts in supporting DOD’s plans to effectively manage DOD’s BSAT Biosafety and Biosecurity Program. We also interviewed cognizant officials to determine any biosafety and biosecurity improvements made since the 2015 incident at Dugway Proving Ground. We toured all six DOD BSAT laboratory facilities, five of which currently are responsible for handling BSAT, to observe the current physical space—both operational and under construction—for handling and testing BSAT. These site visits were conducted at the (1) BioTesting Division, Dugway Proving Ground, Utah; (2) Edgewood Chemical Biological Center, Aberdeen Proving Ground, Maryland; (3) U.S. Army Medical Research Institute of Infectious Diseases, Fort Detrick, Maryland; (4) Naval Medical Research Center, Fort Detrick, Maryland; (5) Chemical, Biological, and Radiological Defense Division, Naval Surface Warfare Center – Dahlgren Division, Dahlgren, Virginia; and (6) 711th Human Performance Wing, Wright – Patterson Air Force Base, Ohio. We also conducted facilitated discussions between September 2017 and November 2017 with groups of laboratory non-supervisory staff at each of the six DOD BSAT laboratories—five of which currently are responsible for handling BSAT—to obtain their views of the effects of the 2015 discovery at Dugway Proving Ground and the subsequent investigation and management actions to respond to identified problems. Generally, discussion groups are designed to obtain in-depth testimonial information about participants’ views, opinions, and/or experiences on specific issues, which cannot be easily obtained from single interviews. In preparation for each discussion group, we asked the leadership at each of the six DOD laboratories to distribute our e-mail inviting all laboratory staff to participate in an on-site discussion group. These small groups consisted of self-selected volunteers, and were not random samples of research staff at each of these laboratories. The number of non-supervisory laboratory staff participants in each group ranged from 3 to 17 and totaled 44 participants. A GAO team member facilitated each discussion group, using a structured discussion guide with open-ended questions. The team did not record the discussions. Instead, multiple GAO team members took notes of the discussion, without ascribing comments to specific individuals. We later summarized the information collected for each discussion group and identified recurring themes. We did not design these discussion groups to provide results that were generalizable to the whole research staff at each laboratory. Laboratory staff who did not participate in these discussion groups may have different opinions and observations from those who participated in our discussion groups. Moreover, while we designed our discussion method to encourage participants to offer whatever comments they wished, we cannot assume that participants mentioned all of the effects that may have influenced their laboratory activities since 2015. We also reviewed our prior work on the management of hazardous biological agents in high-containment laboratories at federal departments and agencies, including DOD. A list of related GAO products on high- containment laboratories is included in the Related GAO Products pages at the end of this report. To examine the extent to which DOD has developed measures to ensure that the BioTesting Division’s test and evaluation mission remains independent from the research and development mission that resides at Edgewood Chemical Biological Center, we reviewed and compared Army Regulation 73-1 on testing and evaluation to Army General Order 2016-04, which first directed the transfer of the Life Sciences Division— later renamed the BioTesting Division—from the Army Test and Evaluation Command to Edgewood Chemical Biological Center. We also compared AR 73-1 to Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program, which provided additional guidelines for this transfer. We also reviewed the memorandum of agreement between the Army Test and Evaluation Command and the Army Research, Development and Engineering Command to assess plans, roles, and responsibilities for transfer and reassignment of the BioTesting Division from the West Desert Test Center to the Edgewood Chemical Biological Center. We also conducted interviews with senior staff at the BioTesting Division, the West Desert Test Center, and the Edgewood Chemical Biological Center to determine what procedures are in place to ensure that the BioTesting Division’s test and evaluation activities are not being influenced by the Edgewood Chemical Biological Center’s research and development efforts. To examine the extent to which DOD has carried out a study and evaluation in compliance with the requirements contained in section 218, subsection (d), of the NDAA for Fiscal Year 2017, we compared the relevant requirements from the NDAA for Fiscal Year 2017 with DOD’s April 10, 2017, report to the congressional defense committees to determine whether the report included all of the required elements concerning consolidation, transfer, and opportunities to partner with industry on the production of BSAT. We also obtained—through interviews with agency and written responses—the status of DOD’s efforts to address NDAA for Fiscal Year 2017 concerning infrastructure requirements for the BSAT program and enterprise-wide infrastructure for CBDP. We reviewed the Standards for Internal Control in the Federal Government to identify criteria providing guidance to federal agencies to communicate clearly defined objectives that are to be achieved, including time frames for completing those objectives and informing decision makers. Information used in our analysis primarily covers the period from May 2015 through July 2018 and the information is the most recent available. We included budget information from fiscal year 2016 to fiscal year 2018. To conduct our work, we obtained documentation and interviewed cognizant officials from DOD organizations, offices, and military commands responsible for funding, managing, and overseeing the production, handling, testing, and shipment of BSAT; the Departments of Health and Human Services (HHS) and Agriculture (USDA) agencies that manage the Federal Select Agent Program, which jointly regulate and oversee covered entities in the United States that are registered to possess, use, and transfer BSAT; and all six DOD BSAT laboratories, five of which currently are responsible for handling BSAT. See below for a complete list of organizations and agencies. Department of Defense Department of Agriculture Department of Health and Human Services Centers for Disease Control and Prevention, Atlanta, Georgia We conducted this performance audit from May 2017 to September 2018 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: Static Images and Information for Map of Department of Defense Biological Select Agents and Toxins Laboratories ECBC fosters research, development, testing, and application of technologies for protecting warfighters, first responders, and the nation from chemical and biological warfare agents. ECBC currently is developing better ways to remotely detect these chemical and biological materials and technologies to counter everything from homemade explosives to biological aerosols to traditional and non-traditional chemical hazards. USAMRIID’s mission is to provide leading edge medical capabilities to deter and defend against current and emerging biological threat agents. USAMRIID has the largest BSAT program within DOD and is committed to protecting U.S. Armed Forces from biological threats worldwide by conducting a range of efforts in the research and development of medical countermeasures and other technologies to prevent or mitigate the health effects of biological agents and emerging diseases. ECBC BioTesting Division, Dugway Proving Ground’s primary mission is to support the Chemical Biological Defense Program through test and evaluation of biological systems, methodologies, and any associated need that requires biological capabilities. ECBC Dugway possesses the Whole System Live Agent Test Chamber, a high capacity, one-of-a-kind biological agent aerosol containment chamber designed and constructed primarily for biological warfare agent aerosol-detection system testing. The Chemical, Biological, Radiological Defense Division at NSWCDD provides full-spectrum life cycle support for chemical, biological, and radiological detection, protection, decontamination, and modeling and simulation systems. This mission includes shipboard, fixed-site, and expeditionary chemical, biological, and radiological defense applications. NSWCDD maintains the only Navy Biological Safety Level-3 laboratory devoted to non-medical chemical, biological, and radiological defense applications, and is a leader in chemical and biological decontamination research, centering on the decontamination of Bacillus anthracis. The Biological Defense Research Directorate at the Naval Medical Research Center serves as a national resource providing testing and analysis for the presence of potential biological hazards. The researchers are considered leaders in the field of detection, including hand-held assays, molecular diagnostics, and confirmatory analysis. The 711th Human Performance Wing conducts research on technologies for the rapid detection of chemical, biological, and radiological events; hyperbaric medical research; and light, durable intensive care capabilities for aeromedical evacuation. It also has the nation’s only Radiological Assessment Teams available for 24/7 deployment. Appendix III: Actions Taken to Implement Recommendations from the Army’s 2015 Investigation Report as of March 2018 The National Defense Authorization Act for Fiscal Year 2017 contained a provision for us to review the actions taken by the Department of Defense (DOD) to address the findings and recommendations of the Army’s 2015 investigation report regarding the incident at Dugway Proving Ground, including any actions taken to address the culture of complacency in the biological select agents and toxins (BSAT) program that was identified in the report. As of March 2018, DOD had designated a priority level and had updated the completion status of its implementation for each of the 35 of 39 recommendations from the Army’s 2015 investigation report that we reviewed. This update and priority level designation was conducted at GAO’s request. We also asked that DOD provide us with milestones and risk assessments associated with the implementation of the recommendations from the Army’s investigation report. However, DOD was unable to provide this information. We did not review the 4 recommendations in the investigation report that pertain to individual accountability. Of the 35 recommendations, DOD officials identified 12 as high priority, 18 as moderate priority, and 5 as low priority. DOD officials also provided us with an update of the completion status for implementation of each of the recommendations. Of those 35 recommendations, DOD officials indicated that 18 had been completed and 17 were in progress. (We did not independently assess whether each recommendation and DOD’s subsequent actions addressed the problems identified in the Army’s report.) Table 2 lists the 35 recommendations (tasks) by category, the priority assigned to each recommendation by DOD, the reported actions DOD has taken to address them, and the completion status DOD has reported for each as of March 2018. Appendix IV: Delegation of Authority for the Biological Select Agents and Toxins Biosafety and Biosecurity Program The Deputy Secretary of Defense designated the Secretary of the Army on July 23, 2015, as the Executive Agent for the Department of Defense’s (DOD) Biological Select Agents and Toxins (BSAT) Biosafety Program. According to DOD Instruction 5210.88, the Secretary of the Army is responsible for performing technical reviews and conducting inspections, and harmonizing protocols and procedures across DOD laboratories that handle BSAT. DOD used a sequential delegation of authority to establish leadership roles and responsibilities initially for the DOD BSAT Biosafety Program and subsequently for the DOD BSAT Biosecurity Program. First, on October 26, 2015, the Secretary of the Army designated The Surgeon General of the Army as the Executive Agent Responsible Official (EARO) for the DOD BSAT Biosafety Program to consolidate oversight of BSAT biosafety operations across the department. Second, on December 9, 2016, The Surgeon General of the Army further delegated EARO authority to the Commanding General, U.S. Army Medical Research and Materiel Command, for the DOD BSAT Biosafety Program. Third, on January 3, 2017, the Deputy Secretary of Defense designated the Secretary of the Army as the DOD Executive Agent for the BSAT Biosecurity Program. Fourth, on March 31, 2017, the Secretary of the Army further designated The Surgeon General of the Army as the EARO for the DOD BSAT Biosecurity Program. Finally, on May 30, 2017, The Surgeon General of the Army delegated EARO responsibility for the DOD BSAT Biosecurity Program to the Commanding General, U.S. Army Medical Research and Materiel Command. Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program, directs The Surgeon General of the Army to coordinate with the Office of the Deputy Assistant Secretary of Defense for Chemical and Biological Defense for requirements and resources— including force structure, manpower, and infrastructure—and to prioritize resources for research requirements to advance the field of BSAT biosafety. Figure 10 shows the alignment and organization of offices within DOD and the military services that are responsible for carrying out and supporting the Chemical and Biological Defense Program Enterprise. According to BSAT Biorisk Program Office (BBPO) officials, BBPO was established in March 2016 to support the EARO in its oversight of DOD’s BSAT Biosafety and Biosecurity Program and implementation of tasks and recommendations in Army Directive 2016-24. BBPO manages a scientific review panel, inspection of DOD laboratories, harmonization of DOD’s BSAT-related regulations and procedures, and coordination of interaction and information with the Federal Select Agent Program. BBPO also is responsible for establishing a system to track and manage BSAT and BSAT-related products across DOD, providing oversight for laboratory biosafety, and advancing BSAT-related scientific research to address knowledge gaps. According to DOD officials, in fiscal year 2016, BBPO received approximately $805,000 for operation costs; in fiscal year 2017, BBPO received approximately $2 million. In addition, in fiscal year 2018, BBPO received approximately $2 million. As part of BBPO’s oversight responsibilities, it acts as a single point of contact for coordinating with the Federal Select Agent Program. In June 2017, the EARO and the directors of the Centers for Disease Control and Prevention, Division of Select Agents and Toxins, and the Animal and Plant Health Inspection Service (APHIS), Agriculture Select Agent Services, on behalf of the Federal Select Agent Program, executed a memorandum of understanding that articulates agency responsibilities. This memorandum includes (1) oversight coordination, (2) Centers for Disease Control and Prevention and APHIS notifying DOD BSAT Biosafety and Biosecurity Programs of any referrals of a DOD-registered entity to the Department of Health and Human Services Office of Inspector General that may involve compliance violations with select agent regulations, and (3) facilitating coordinated inspections. For example, according to BBPO officials, BBPO receives every inspection report and reviews it for DOD-wide implications. The Army has established a joint service inspection program that is led by the Department of the Army Inspector General. That office, according to BBPO officials, has worked closely with the Federal Select Agent Program in coordination with BBPO to enhance the effectiveness of joint inspections and unannounced or short-notice inspections. According to an Army official, the Department of the Army Inspector General coordinates with the other military services’ Inspectors General, who identify subject matter experts with operational experience to serve on every joint service inspection team. In addition, BBPO officials told us that, as part of its oversight and coordination responsibilities, the office established the BSAT Biorisk and Scientific Review Panel, which was formally chartered in August 2017. This panel is charged with convening at least twice a year to review and assess biosafety, biosecurity, and technical concerns associated with currently established and new procedures conducted at DOD BSAT laboratories. The panel will review and assess scientific evidence that supports the mitigation of biosafety risks and provide recommendations to the EARO on approval of new or existing laboratory procedures. It also serves in an advisory capacity to the EARO on any matters that pertain to biosafety and biosecurity associated with BSAT-related research. Appendix V: The Department of Defense Has Made Key Safety Improvements by Implementing Recommendations The Department of Defense (DOD) has made key safety improvements by taking a number of actions to address the incident at Dugway Proving Ground and the recommendations from the Army’s 2015 investigation report. Key safety improvements include (1) establishing a DOD Executive Agent and a support office to provide oversight, (2) implementing improved quality control and assurance standards at its covered facilities, (3) developing a new quality management system, (4) conducting additional scientific studies on biological select agents and toxin (BSAT) inactivation, and (5) taking multiple actions to address Army Directive 2016-24 and the Army’s 2015 investigation report. These safety improvements are discussed below in more detail. DOD Has Established an Executive Agent for DOD’s BSAT Biosafety and Biosecurity Program One of the key safety improvements DOD took in response to the incident at Dugway Proving Ground was to establish an Executive Agent for the BSAT Biosafety and Biosecurity Program (see appendix IV). Specifically, at the direction of the Deputy Secretary of Defense, the Secretary of the Army was designated in July 2015 as the Executive Agent for DOD’s BSAT Biosafety Program, and subsequently in January 2017 as the Executive Agent for the DOD BSAT Biosecurity Program. In October 2015, the Secretary of the Army further designated The Surgeon General of the Army as the Executive Agent Responsible Official for the DOD BSAT Biosafety Program to consolidate oversight of BSAT biosafety operations across the department. The Secretary of the Army, as outlined in DOD Instruction 5210.88, is responsible for performing technical reviews, conducting inspections, and harmonizing protocols and procedures across DOD laboratories that handle BSAT. DOD Has Improved Quality Control and Assurance at Dugway Proving Ground and Currently Covered Facilities Another key safety improvement DOD took in response to the incident at Dugway Proving Ground was to improve quality control and assurance at Dugway and other DOD facilities that currently handle BSAT. The Army’s 2015 investigation report made several recommendations to the Army to enhance and improve quality control and assurance at Dugway Proving Ground. These included (1) establishing a quality control and assurance manager, (2) carrying out an environmental sampling and inspection program, and (3) developing and enhancing the video surveillance program. BSAT Biorisk Program Office (BBPO) officials explained that the DOD BSAT laboratories had some quality control and assurance measures in place prior to the National Defense Authorization Act (NDAA) for Fiscal Year 2017. The quality control and assurance recommendations from the Army’s 2015 investigation report, which initially applied only to Dugway Proving Ground, were subsequently enacted in section 218 of the NDAA for Fiscal Year 2017 to apply to all DOD covered facilities. These requirements include: 1. designation of an external manager to oversee quality assurance and 2. environmental sampling and inspections; 3. production procedures that prohibit operations where live BSAT are used in the same laboratory where viability testing is conducted; 4. production procedures that prohibit work on multiple organisms or multiple strains of one organism within the same biosafety cabinet; 5. a video surveillance program that uses video monitoring as a tool to improve laboratory practices in accordance with regulatory requirements; 6. formal, recurring data reviews of production in an effort to identify trends and nonconformance issues before such issues affect end products; 7. validated protocols for production processes to ensure that process deviations are adequately vetted prior to implementation; and 8. maintenance and calibration procedures and schedules for all tools, equipment, and irradiators. BBPO officials told us that, in response to the requirements in the NDAA for Fiscal Year 2017, they are developing a department-wide quality control and assurance program for the BSAT community. BBPO also developed several policies that address the measures mandated by the NDAA for Fiscal Year 2017. These policies address setting minimum requirements for (1) monitoring environmental quality, (2) performing maintenance on laboratory equipment, and (3) controlling laboratory cross-contamination between organisms or strains within the same biological safety cabinet and between live and inactivated BSAT. DOD officials said that some NDAA for Fiscal Year 2017 requirements do not necessarily apply to every laboratory. According to DOD officials, some of these requirements are no longer relevant as a result of certain events, such as the inadvertent shipment of incompletely inactivated anthrax from the BioTesting Division at Dugway Proving Ground that currently is not handling BSAT. Furthermore, some of the requirements need further clarification. For example, the NDAA for Fiscal Year 2017 required DOD covered facilities to implement quality control and quality assurance measures, including a video surveillance program that uses video monitoring, in accordance with regulatory requirements. (In providing technical comments on a draft of this report, both the Department of Health and Human Services’ Centers for Disease Control and Prevention and Department of Agriculture’s Animal and Plant Health Inspection Service—which jointly manage the Federal Select Agent Program—said that select agent regulations do not require development and utilization of a video surveillance program.) The Army’s 2015 investigation report also recommended the development and utilization of a video surveillance program in accordance with Federal Select Agent Program regulatory requirements. DOD officials stated that there is no such requirement in federal select agent regulations and, therefore, to implement a video surveillance program would result in laboratories having an unfunded requirement for maintenance costs. According to a BBPO official, DOD officials reached out to congressional staff to obtain clarification on implementing this requirement and, according to these officials, were advised to “interpret the requirement as appropriate.” DOD officials stated that because the federal select agent regulations do not require video surveillance, DOD is not obligated to implement a video surveillance program in accordance with the provision in the NDAA for Fiscal Year 2017. Army Regulation 190-17 for the BSAT security program, however, already includes a requirement that all Army Biosafety Level-3 and 4 laboratories have operational closed-circuit television cameras installed and positioned so that all areas of the research room can be viewed. In response to the NDAA for Fiscal Year 2017 and its requirement to implement a video surveillance program, BBPO officials stated that recommendations for the use of video surveillance are being established by the Quality Assurance Working Group that supports BBPO for all laboratories in each of the military services that handle BSAT. DOD is Developing a New Quality Management System Example of a Potential Quality Control and Assurance Procedure at the Department of Defense (DOD) DOD’s future quality management system will include critical control points for helping to prevent personnel from making mistakes while conducting scientific procedures. For example, a certain procedure for extracting genetic information from pathogens that also inactivates pathogens uses a chemical mixture called TRIzol. The quality management system will include a critical control point for this procedure in the form of achieving a ratio of pathogen sample to the amount of TRIzol. In this new system, the scientist or laboratory technician may be required to enter the amount into the new system to show that the ratio is correct to inactivate the pathogen. DOD officials report that, to enhance quality control and assurance at Dugway Proving Ground and across DOD’s currently covered facilities, the Joint Program Executive Office for Chemical and Biological Defense, on behalf of BBPO, is in the process of developing a new quality management system known as the Joint Interagency Biorisk System. The system would centralize information on DOD’s BSAT Biosafety and Biosecurity Program, such as operational and governance documentation. For example, the system would gather applicable quality assurance-related information from Dugway Proving Ground and DOD’s currently covered facilities to provide BBPO with the ability to track inventory and shipment of BSAT materials and ensure that approvals and waivers for exceptions to laboratory protocols are made at the appropriate level, among other things. DOD currently is identifying the critical control points that would be built into the Joint Interagency Biosafety System to ensure quality throughout the BSAT handling, production, storage, containment, shipment, destruction, and inactivation processes. According to officials from BBPO, DOD’s future quality management system will include critical control points to help personnel prevent mistakes while conducting scientific procedures (see sidebar for additional information). DOD Has Conducted Studies on Inactivating Pathogens and Is Continuing Its Research In response to the results of DOD’s July 2015 30-day review, the Deputy Secretary of Defense directed the Under Secretary of Defense for Acquisition, Technology and Logistics to develop a plan for research related to the development of standardized irradiation and viability testing protocols. The Army’s subsequent 2015 investigation report also identified specific actions the Secretary of the Army should consider taking, including directing additional research to address existing gaps in scientific knowledge regarding the inactivation of BSAT. Chemical and Biological Defense Program officials said that they are developing a validated method for inactivating Bacillus anthracis spores using irradiation to improve safety. DOD reported completion of the first phase of the study for developing a validated method with scientists from three DOD laboratories, using a weakened strain of Bacillus anthracis. The second phase of the Bacillus anthracis inactivation study was completed in October 2017, according to Army officials, using a potentially lethal strain of Bacillus anthracis. In April 2018, DOD officials stated that as a result of the first two phases of this study, they have received approval from peer reviewers to publish their study results, which will recommend these results as a validated inactivation method. The next step will be to analyze the data from these studies to determine whether additional studies are needed to answer further questions about factors that may affect testing for the presence of live pathogens. The Army Has Taken Multiple Types of Actions at Dugway Proving Ground to Implement Recommendations from the Army’s 2015 Investigation Report Since 2015, the Army also has taken multiple types of actions specifically at Dugway Proving Ground—including operational, administrative, and personnel actions—to implement the recommendations from the Army’s 2015 investigation report. The report made several recommendations for improvements at the BioTesting Division at Dugway Proving Ground. The Army’s subsequent Directive 2016-24 assigned responsibility for implementing some of these recommendations and called for additional actions, including reassigning command and control of the division to the Army’s Edgewood Chemical Biological Center at Aberdeen Proving Ground, Maryland. According to DOD officials, as part of this action, a new management team was established at the BioTesting Division that includes new managers responsible for quality control and assurance. In addition to hiring personnel, the BioTesting Division established training programs for all laboratory staff, including training sessions on biological safety, for which participants received certification after completing coursework. In response to the 2015 incident at Dugway Proving Ground, the Centers for Disease Control and Prevention suspended Dugway Proving Ground’s BioTesting Division’s certificate of registration in accordance with federal select agent regulations in August 2015. In May 2017, DOD’s request for withdrawal of the laboratory’s registration was approved and remaining BSAT in its possession was either transferred or destroyed. DOD officials explained that the withdrawal of the BioTesting Division’s registration has allowed the division time to implement recommendations, modernize and make repairs to laboratories, and retrain personnel without the added burden of continuous inspections. Officials from the BioTesting Division stated that they are in the process of re-registering with the Federal Select Agent Program and are taking a phased approach in anticipation of reaching full operational status in fiscal year 2019. Figure 11 is a timeline of selected actions DOD has taken. Because BBPO is focused on broader issues and not just the Army’s 2015 investigation report recommendations, BBPO officials have also compiled and consolidated recommendations and actions from multiple reports, including the Army’s 2015 investigation report, the DOD Review Committee Report, a DOD Inspector General report, and the NDAA for Fiscal Year 2017. BBPO officials explained that they developed tasks to operationalize the recommendations and acknowledged that BBPO and the now-terminated General Officers Steering Committee had not yet developed a standardized definition for recommendations deemed complete. BBPO officials told us they consider all of these recommendations to be part of their broader DOD biosafety efforts. Appendix VI: Key Themes and Selected Comments from Staff at Department of Defense BSAT Facilities As part of our review, we conducted facilitated discussions between September 2017 and November 2017 using a self-selected sample of supervisory and non-supervisory staff at six Department of Defense (DOD) laboratories, five of which currently handle biological select agents and toxins (BSAT). The purpose of the discussions was to better understand the effects of DOD actions on laboratory staff and operations following the 2015 discovery that staff at Dugway Proving Ground had incompletely inactivated Bacillus anthracis and subsequently shipped live anthrax to multiple locations. The intent was to obtain the views of those laboratory staff who have and will be implementing recommendations from multiple reports. Using a protocol we developed, one of our analysts facilitated each discussion group by asking a similar set of questions about effects of the DOD response to the 2015 incident at Dugway Proving Ground. Our analysts documented laboratory staffs’ comments as closely as possible to the original language used by participants. During subsequent reviews and sorting (coding) of the participants comments, we found that four key themes emerged. Within each of the four themes, our analysts also identified related sub-themes. For the purposes of selecting individual comments as shown in table 3 below, our analysts considered several factors including clarity and relevance to our study’s objectives. Our self-selected convenience sample of laboratory staff provided comments describing the various effects of the 2015 anthrax incident on laboratory staff and operations. We did not verify the factual basis of the laboratory staff comments. Moreover, the comments that we have identified cannot be generalized to all DOD laboratory staff at the six facilities we visited. Table 3 lists the key theme, sub-theme, and selected comments made by laboratory staff during our facilitated discussion groups at each of the six DOD covered laboratories, five of which currently handle BSAT. Appendix VII: Department of Defense Reported Responses to Tasks Required by the NDAA for Fiscal Year 2017 The Department of Defense (DOD) issued a report to the defense congressional committees on April 10, 2017, in response to section 218 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017. As of March 2018, DOD officials stated that the tasks required by the NDAA for Fiscal Year 2017 to study the consolidation of commands, opportunities to partner with industry for the production of biological select agents and toxins (BSAT), and the transfer of BSAT production responsibilities are still ongoing. Table 4 shows the status of DOD’s efforts to respond to the tasks required by the NDAA for Fiscal Year 2017. Appendix VIII: Summary of Selected Federal Panels, Task Forces, and Working Groups Examining Biodefense-Related Issues Biosafety, biosecurity, and biodefense issues have been a long-standing concern for the nation. The federal government has been examining biosafety, biosecurity, and biodefense issues for over a decade through many voluntary and federally mandated commissions, task forces, and federal panels and working groups. These issues have been reviewed from a variety of perspectives—scientific, regulatory, academic, health, national defense, and homeland security. Table 5 provides a summary of some key recommendations and observations to address biosafety, biosecurity, and biodefense issues and related topics. The Department of Defense (DOD) participated in many of these efforts, some of which are ongoing, including the National Science Advisory Board for Biosecurity and the Federal Experts Security Advisory Panel. Observations represent comments made by individual participants and do not represent organizational recommendations. Appendix IX: Comments from the Department of Defense Appendix X: GAO Contact and GAO Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact name above, GAO staff who made key contributions on this report include Mark A. Pross (Assistant Director); Latrealle Lee (Analyst-in-Charge); Amy Bowser; Patricia Farrell Donahue, Ph.D.; Alexandra Gonzalez; Ashley Grant, Ph.D.; Matthew Jacobs; Joanne Landesman; Amie Lesser; Amber Lopez Roberts; Timothy M. Persons, Ph.D.; Bethann Ritter Snyder, and Lillian Yob. Glossary assay: A quantitative or qualitative procedure for detecting the presence, estimating the concentration, and/or determining the biological activity of a macromolecule (e.g., an antibody or antigen, molecule, ion, cell, pathogen, etc.). Assays are based on measurable parameters that allow differentiation between sample and control. biodefense: Prevention, protection against, and mitigations for biological threats that could have catastrophic consequences to the nation. biological agent: Microorganism (or derived toxin) that causes disease in humans, animals, or plants. biological weapon: A harmful biological agent used as a weapon to cause death or disease usually on a large scale. biorisk management: The effective management of risks posed by working with infectious agents and toxins in laboratories; it includes a range of practices and procedures to ensure the biosecurity, biosafety, and biocontainment of those infectious agents and toxins. biosafety: The combination of practices, procedures, and equipment that protect laboratory workers, the public, and the environment from the infectious agents and toxins used in the laboratory. biosecurity: The measures taken to protect infectious agents and toxins from loss, theft, or misuse. biotechnology: The manipulation of living organisms or their components to produce useful usually commercial products. biological select agents and toxins certified personnel: Personnel certified and cleared to work with biological select agents and toxins. covered facility: Any facility of the Department of Defense that produces biological select agents and toxins. decontamination: The removal or count reduction of contaminating pathogens present on an object. Federal Select Agent Program: A regulatory program established to regulate the possession, use, and transfer of biological select agents and toxins. high-containment laboratory: Biosafety level (BSL)-3 or 4 facilities in which studies are conducted on a variety of dangerous pathogens and toxins. inactivation: A procedure to render pathogens as non-toxic while retaining characteristics of interest for future use. irradiation: A process by which radiation (e.g., ultraviolet light, gamma rays, and X-rays) is used. nonviable: A pathogen that is no longer capable of growing, replicating, infecting, or causing disease. protocol: A detailed plan for a scientific procedure. select agent: A biological agent or toxin that (1) potentially poses a severe threat to public health and safety, animal or plant health, or animal or plant products and (2) is regulated by select agent rules for possession, use, and transfer (7 C.F.R. Part 331 (2018), 9 C.F.R. Part 121 (2018), and 42 C.F.R. Part 73 (2018)). toxin: The toxic material or product of plants, animals, microorganisms (including, but not limited to, bacteria, viruses, fungi, or protozoa), or infectious substances, or a recombinant or synthesized molecule, whatever their origin and method of production, and includes (1) any poisonous substance or biological product that may be engineered as a result of biotechnology produced by a living organism or (2) any poisonous isomer or biological product, homolog, or derivative of such a substance. ultracentrifuge: A high-speed centrifuge able to separate colloidal and other small particles and used especially in determining the sizes of such particles or the molecular weights of large molecules. validation: For the purpose of inactivation methods, the method must be scientifically sound and produce consistent results each time it is used such that the expected result can be ensured. Methods of validation may include (1) use of the exact conditions of a commonly accepted method that has been validated, (2) a published method with adherence to the exact published conditions, or (3) for in-house methods, validation testing should include the specific conditions used and appropriate controls (from the Federal Select Agent Program). validated inactivation procedure: A procedure to render a select agent non-viable but which allows the select agent to retain characteristics of interest for future use; or to render any nucleic acids that can produce infectious forms of any select agent virus non-infectious for future use. The efficacy of the procedure is confirmed by demonstrating the material is free of all viable select agents. Related GAO Products DOD Personnel: Further Actions Needed to Strengthen Oversight and Coordination of Defense Laboratories’ Hiring Efforts. GAO-18-417. Washington, D.C.: May 30, 2018. High-Containment Laboratories: Coordinated Efforts Needed to Further Strengthen Oversight of Select Agents. GAO-18-197T. Washington, D.C.: November 2, 2017. High-Containment Laboratories: Coordinated Actions Needed to Enhance the Select Agent Program’s Oversight of Hazardous Pathogens. GAO-18-145. Washington, D.C.: October 19, 2017. Biodefense: Federal Efforts to Develop Biological Threat Awareness. GAO-18-155. Washington, D.C.: October 11, 2017. Public Health Information Technology: HHS Has Made Little Progress toward Implementing Enhanced Situational Awareness Network Capabilities. GAO-17-377. Washington, D.C.: September 6, 2017. High-Containment Laboratories: Actions Needed to Mitigate Risk of Potential Exposure and Release of Dangerous Pathogens. GAO-16-871T. Washington, D.C.: September 23, 2016. High-Containment Laboratories: Improved Oversight of Dangerous Pathogens Needed to Mitigate Risk. GAO-16-642. Washington, D.C.: August 30, 2016. High-Containment Laboratories: Comprehensive and Up-to-Date Policies and Stronger Oversight Mechanisms Needed to Improve Safety. GAO-16-305. Washington, D.C.: March 21, 2016. High-Containment Laboratories: Preliminary Observations on Federal Efforts to Address Weaknesses Exposed by Recent Safety Lapses. GAO-15-792T. Washington, D.C.: July 28, 2015. Chemical and Biological Defense: Designated Entity Needed to Identify, Align, and Manage DOD’s Infrastructure. GAO-15-257. Washington, D.C.: June 25, 2015. Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 2014. High-Containment Laboratories: Recent Incidents of Biosafety Lapses. GAO-14-785T. Washington, D.C.: July 16, 2014. High-Containment Laboratories: Assessment of the Nation’s Need Is Missing. GAO-13-466R. Washington, D.C: February 25, 2013. Homeland Security: Agriculture Inspection Program Has Made Some Improvements, but Management Challenges Persist. GAO-12-885. Washington, D.C.: September 27, 2012. Environmental Justice: EPA Needs to Take Additional Actions to Help Ensure Effective Implementation. GAO-12-77. Washington, D.C.: October 6, 2011. High-Containment Biosafety Laboratories: Preliminary Observations on the Oversight of the Proliferation of BSL-3 and BSL-4 Laboratories in the United States. GAO-08-108T. Washington, D.C.: October 4, 2007. Test and Evaluation: Impact of DOD’s Office of the Director of Operational Test and Evaluation. GAO/NSIAD-98-22. Washington, D.C.: October 24, 1997.

Why GAO Did This Study In May 2015, DOD discovered that one of its laboratories (formerly called the Life Sciences Division) at Dugway Proving Ground, Utah, had inadvertently made 575 shipments of live Bacillus anthracis —the bacterium that causes anthrax—to 194 laboratories and contractors worldwide from 2004 through 2015. A December 2015 investigation by the Army determined that there was insufficient evidence to establish a single point of failure and made recommendations for improving safety and security at DOD laboratories that handle BSAT. The NDAA for Fiscal Year 2017 included a provision for GAO to review DOD's actions to address the Army's recommendations. GAO assessed the extent to which (1) DOD has implemented recommendations from the Army's 2015 investigation report, (2) the Army has implemented the BSAT Biosafety and Biosecurity Program and developed a strategy and implementation plan, (3) the Army's biological T&E mission is independent from its biological R&D mission, and (4) DOD has carried out a required study and evaluation. GAO reviewed DOD documents and key actions in response to the Army's recommendations and conducted site visits to DOD's BSAT laboratories. What GAO Found The Department of Defense (DOD) has made progress by taking a number of actions to address the 35 recommendations from the Army's 2015 investigation report on the inadvertent shipments of live Bacillus anthracis (anthrax). However, DOD has not yet developed an approach to measure the effectiveness of these actions. As of March 2018, DOD reports 18 recommendations as having been implemented and 17 as having actions under way to implement them. These actions are part of a broader effort to improve biosafety, biosecurity, and overall program management. For example, in March 2016, DOD established the Biological Select Agents and Toxins (BSAT) Biorisk Program Office to assist in overseeing the BSAT Biosafety and Biosecurity Program and implementation of the recommendations. Measuring the effectiveness of each implemented recommendation would help better determine if the actions taken are working, if there are unintended consequences, or if further action is necessary. The Secretary of the Army, as DOD's Executive Agent, has implemented a BSAT Biosafety and Biosecurity Program to improve management, coordination, safety, and quality assurance for the DOD BSAT enterprise. However, DOD has not developed a strategy and implementation plan for managing the program. Without a strategy and implementation plan, Dugway Proving Ground, Utah, and DOD's laboratory facilities that currently produce and handle BSAT may be unclear about DOD's strategy to harmonize BSAT operations to ensure safety, security, and standardization of procedures throughout DOD's BSAT enterprise. The Army has not fully institutionalized measures to ensure that its biological test and evaluation (T&E) mission remains independent from its biological research and development (R&D) mission so that its T&E procedures are objective and reliable. In April 2016, the Army directed the transfer of the operational T&E mission from West Desert Test Center-Life Sciences Division at Dugway Proving Ground, Utah, to Edgewood Chemical Biological Center, Maryland. The Army issued a memorandum of agreement between the two entities to lay out roles and responsibilities for test processes and procedures. However, the memorandum does not distinguish T&E from R&D mission requirements, and does not contain guidelines to mitigate risks associated with potential conflicts of interest between the R&D and T&E missions. Without these measures, there is a potential risk to the independence of the T&E mission. The National Defense Authorization Act (NDAA) for Fiscal Year 2017 required DOD to report by February 1, 2017, on the feasibility of consolidating BSAT facilities within a unified command, partnering with industry for the production of BSAT in lieu of maintaining such capabilities within the Army, and whether such operations should be transferred to another government or commercial laboratory. DOD has not completed this required study and evaluation of its BSAT infrastructure which, when complete, will affect the future infrastructure of the BSAT Biosafety and Biosecurity Program. Further, DOD officials have no estimated time frames for when DOD will complete the study and evaluation. Without time frames for completing the study and evaluation, DOD is unable to provide decision makers with key information on its infrastructure requirements. What GAO Recommends GAO recommends that DOD develop an approach to assess the effectiveness of the recommendations, a strategy and implementation plan for its BSAT Biosafety and Biosecurity Program, measures to ensure independence, and time frames to complete a study. DOD concurred with all four of GAO's recommendations.

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Background Characteristics of Postsecondary Institutions In fall 2015, almost 20 million students were enrolled in over 4,500 2- and 4-year postsecondary institutions, according to IPEDS data. Postsecondary institutions vary in terms of their funding, the length and type of programs offered, and instructional mission, among other characteristics. Public institutions, which include state universities and community colleges, are traditionally supported by federal, state, and local funds, in addition to revenue from tuition and fees. Private, not-for- profit schools are owned and operated by independent or religious organizations, and their net earnings do not benefit any shareholder or individual. Tuition and fees as well as other revenue sources primarily support these schools. For-profit institutions are privately owned and earnings can benefit shareholders or individuals. Two-year institutions often provide career-oriented programs at the certificate and associate’s degree levels. Four-year institutions tend to have a broad range of instructional programs at the undergraduate level leading to bachelor’s degrees. Many 4-year institutions also offer master’s or doctorate level programs, and some 4-year institutions have a research focus. The landscape of postsecondary institutions has changed over the past 20 years, particularly with respect to for-profit institutions. The number of public institutions remained relatively constant and the number of private institutions declined slightly; however, the number of for-profit institutions more than tripled between 1995 and 2011 before declining slightly to 2015 levels (see fig. 1). How National Data Count Faculty IPEDS and CPS both provide data on postsecondary faculty. IPEDS data can provide information on positions filled by different types of faculty across postsecondary education or by types of institutions (see sidebar for how we categorize institutions using IPEDS data). In terms of faculty types, IPEDS distinguishes between tenure-track and contingent positions and also has data on graduate assistants, though we cannot determine whether these graduate teaching assistants are the instructors of record for courses or are instead providing classroom support (e.g., grading, leading discussions, and lab setup). Because IPEDS counts positions, any faculty who teach at more than one institution are counted multiple times—for each position they fill. CPS counts the number of actual workers in a given occupation and, in terms of faculty, provides data on how many individuals are employed as postsecondary teachers in colleges and universities nationwide. CPS does not differentiate faculty by type of institution or by tenure status. For example, CPS cannot identify full-time contingent faculty separately from full-time tenure-track faculty. Contingent Faculty Fill Most Instructional Positions Nationwide and Teach Close to Half or More of All Courses at Public Institutions in Three Selected States From 1995 to 2011, the Number of Instructional Positions Filled by Contingent Faculty More than Doubled While Those Filled by Full-Time Tenure- track Faculty Increased By 10 Percent According to IPEDS data, from 1995 to 2011, the percentage of postsecondary instructional positions filled by contingent faculty increased from 57.6 to 71.6 percent. During this period the number of instructional faculty positions at all institutions nationwide grew by over 60 percent— though most of this growth was among positions held by contingent faculty. More specifically, the number of positions held by full-time and part-time non-tenure-track faculty—which we define as contingent—both doubled during this period, while the number of positions held by full-time tenure-track faculty grew by about 10 percent (see table 1). In addition to full- and part-time contingent faculty, some graduate assistants may also teach courses. During the same period, the number of graduate teaching assistant positions grew by 63.8 percent. Some of the increase in the percentage of contingent faculty positions is due to the growth of the for-profit sector and growth among 2-year institutions, which as a whole rely primarily on contingent faculty. For example, the number of positions nationwide across for-profit institutions in 2011 was almost 9 times as many as in 1995. However, the shift towards contingent faculty positions was clear even among only 4-year public and private institutions (see fig. 2). Contingent Faculty Fill about 70 Percent of Instructional Positions Nationwide, Though This Varies Greatly by Institution and Many of These Positions Have Some Job Stability Contingent faculty currently fill most instructional positions nationwide, though these numbers cannot be compared to historical data. According to 2015 IPEDS data, contingent faculty fill 69.5 percent of the 1,444,774 postsecondary instructional positions across all institutions nationwide, including about 61.4 percent of instructional positions at 4-year institutions, 83.5 percent at 2-year institutions, and 99.7 percent at for- profit institutions (see fig. 3). As noted previously, aggregated IPEDS data count faculty who teach at multiple institutions multiple times; therefore, there are likely more contingent faculty positions than there are contingent faculty workers. Although it is unknown how many faculty hold jobs at multiple institutions, this is likely to be more prevalent among faculty filling part-time positions. To illustrate, according to CPS data— which counts individuals—an estimated 31.7 percent (+/- 4.1) of individuals employed as postsecondary teachers in colleges and universities worked part-time in 2015. In contrast, according to IPEDS data, part-time faculty held about 50.0 percent of instructional positions. Though the majority of instructional faculty positions across institutions are contingent, employment stability among these positions may vary widely. Many of these contingent positions may have some job stability, depending on contract specifics. For example, about a quarter of contingent positions across all institutions have full-time, annual, multi- year, or potentially pseudo-tenure contracts (see fig. 3). Some of these positions may expire at the end of a set term or have no option for renewal—potentially requiring a new application process—while others may be relatively long-term with continuously repeating contracts. For example, officials at one North Dakota institution we visited described their non-tenure-track positions as “tenure light” because full-time faculty receive 1-year contracts for their first 4 years and then, after a successful promotion review, receive continuous 3-year contracts that can be terminated only for adequate cause, such as gross professional misconduct. In contrast to these more stable contingent positions, more than half of the contingent positions across all institutions nationwide are part-time and have less-than-annual contracts or lack faculty status— which we define as being among the least stable (see fig. 3). For some of the faculty filling these positions, this employment may be their sole source of income. Similar to contingent workers in the broader labor force, as we reported previously, these faculty may face volatility and uncertainty in their economic circumstances. Other faculty in these positions may have employment or sources of income outside of teaching. For example, some part-time instructors are employed full-time in their fields and teach on the side as subject-matter experts or to stay connected with their local university community. Examples of Part-Time Faculty Situations from Faculty Discussion Groups at Selected Institutions Two part-time faculty members at an institution in Ohio said they had jobs outside of teaching and said they teach on the side because they love it, rather than relying on it for subsistence. One part-time faculty member at an institution in Georgia said that she was retired, but teaches courses to keep a foot in the education world while also enjoying free time in retirement. One younger part-time faculty member at an institution in North Dakota stated that she teaches on a semester-to-semester contract and that this was her primary employment. While it is unknown how many faculty rely on their instructional positions as their primary employment, nationally representative data from the Current Population Survey (CPS) and Survey of Doctorate Recipients (SDR) provide some limited information that suggests many part-time faculty prefer working part-time. The CPS data show that an estimated 46.2 percent (+/- 6.3) of part-time faculty reported wanting to work part- time, while only 10.0 percent (+/- 5.1) reported working part-time because they could only find a part-time job or because of seasonal or temporary fluctuations in the availability of employment. Similarly, SDR data on doctorate-holding instructional faculty in STEM (science, technology, engineering, and math), health, and social sciences fields show that most part-time contingent faculty report wanting to work part-time, though among those who reported wanting a full-time job, most reported not being able to find one (see table 2). According to IPEDS data, different types of postsecondary institutions rely more heavily on different segments of the instructional workforce. As shown in figure 4, many 4-year institutions employ tenure-track, full-time contingent, and part-time contingent positions—though the balance varies. Far fewer 2-year institutions and very few for-profit institutions have tenure-track positions. Part-time and short-term positions are substantially more prevalent at these institutions. For example, part-time contingent positions make up 67.9 percent and 80.5 percent of instructional positions at 2-year and for-profit institutions, respectively, as compared to 39.8 percent at 4-year institutions. Beyond institution type, reliance on different types of faculty positions also varies by institutional characteristics, such as size and highest degree offered. For example, across 4-year institutions with more than 10,000 students, 43.1 percent of positions are tenure-track, as compared to 30.6 percent across institutions with fewer than 5,000 students. Similarly, a higher percentage of instructional positions are tenure-track across 4-year institutions that offer doctorate degrees, compared to those institutions that do not offer doctorate degrees (see fig. 5). At 4-Year Public Institutions in Three Selected States, Contingent Faculty Teach Close to Half or More of All Courses and Credit Hours Contingent faculty fill more than half of instructional positions at 2- or 4- year public institutions in the three selected states (see fig. 6). Two-year public institutions in North Dakota and Ohio were especially reliant on contingent faculty, where they fill about 72 and 84 percent of instructional positions, respectively (see sidebar for our definition of instructional faculty in the state data, as compared to our other data analyses). We examined several different demographic characteristics of contingent faculty including gender, race, educational attainment, and age. Gender According to 2015 IPEDS data, instructional positions nationwide are divided roughly evenly between the sexes, but women fill fewer tenure- track positions and more contingent positions than men do. As shown in figure 7, across all institutions, women hold a substantially lower proportion of full-time tenured positions (38.4 percent) than men do, though women fill 48.9 percent of full-time positions that are on a tenure track but not yet tenured, and that are generally more recent hires. Across all institutions, women also hold a slightly greater proportion of contingent positions (about 53 percent). This imbalance in representation, in part, reflects the higher concentration of women at 2-year and for-profit institutions, where they fill 54.3 and 55.9 percent of positions, respectively. These institutions generally rely more heavily on contingent faculty positions than do 4-year institutions. White (non-Hispanic) faculty fill almost three-quarters of instructional positions across all institutions nationwide. This racial/ethnic representation is relatively consistent across full-time tenure-track, full- time contingent, and part-time positions. Though filling 27.6 percent of positions across all institutions, racial and ethnic minorities have slightly greater representation at institutions in large cities (33.2 percent) and at for-profit institutions (38.4 percent). Educational Attainment Our analysis of state data suggests that across 4-year public institutions in North Dakota and Ohio, lower proportions of individuals in contingent positions have a graduate or doctoral degree (see fig. 8). While the differences between tenure-track and contingent faculty are substantial, possible explanations include variation in degree requirements by discipline or individual circumstances, such as having professional experience in the field. Across public institutions in all three selected states, and excluding positions held by instructional graduate students, most positions held by the youngest faculty are contingent, and the most common positions held by the oldest faculty are part-time contingent. More specifically, most positions held by individuals under age 40 are contingent—60.2 percent in Georgia, 66.9 percent in North Dakota, and 74.5 percent in Ohio (excluding instructional graduate assistants). This suggests that newer graduates may be more likely to be hired into contingent rather than tenure-track positions. In addition, the most common positions held by faculty ages 70 and older are part-time contingent positions—51.0 percent in Georgia, 45.5 percent in North Dakota, and 59.4 percent in Ohio (excluding instructional graduate assistants). This suggests that a segment of the part-time contingent workforce may consist of retirees or workers who are approaching retirement. Administrators Said Contingent Faculty Have a Range of Responsibilities, and They Consider Multiple Needs When Determining Faculty Makeup Full-Time Contingent Faculty at Institutions We Visited May Have a Variety of Responsibilities, but Part-Time Contingent Faculty Generally Focus on Teaching According to administrators we interviewed, institutions utilize full-time contingent faculty for different purposes, which may involve responsibilities beyond teaching. Administrators said full-time contingent faculty are hired primarily to teach and generally have larger course loads than tenure-track faculty who may teach fewer courses per semester due to significant research responsibilities. However, they also noted that— similar to tenure-track faculty—many full-time contingent faculty carry out additional responsibilities. For example, some full-time contingent faculty may perform service, conduct research, advise students, serve as department chairs, or manage student recruitment efforts for their programs. Many other full-time contingent faculty serve as instructors or lecturers whose sole responsibility is to teach. For example, administrators from one institution explained that they employ professional instructors who teach four courses per semester and have no service or research responsibilities. In addition, some full-time contingent faculty are hired because they have certain professional qualifications or experience. For example, one institution we visited employed academic professionals who may teach one or two courses per year while carrying out administrative, marketing, mentoring, or other duties. While full-time contingent faculty may have a variety of responsibilities, administrators stated that part-time contingent faculty generally focus on teaching, though they also may fulfill different purposes. In some cases, part-time contingent faculty serve as expert practitioners who teach specific subject matter. For example, administrators from one institution said that they hire part-time contingent faculty to teach instrumental music courses because teaching each instrument requires specialized expertise, and there may not be enough students learning any single instrument to warrant a full-time position. In other cases, part-time contingent faculty teach general education courses, such as Introduction to English Composition, which most students are required to take. In addition, while some part-time contingent faculty may have full-time jobs outside of academia, others may be working toward long-term careers as tenure-track professors, according to administrators. Administrators from some institutions also told us that they hire part-time contingent faculty help to manage lab courses (e.g., setting up laboratory equipment, assisting students) or to serve as mentors to students in specific programs (e.g., theological studies). Administrators Consider Financial, Institutional, Faculty, and Student Needs When Determining Faculty Makeup University and college administrators we interviewed identified a number of financial and institutional considerations as well as faculty and student needs that affect their decisions regarding faculty makeup (see fig. 9). Administrators stated that utilizing contingent faculty allows for flexibility in managing various financial considerations, including the following: Budget uncertainty: Administrators from several public institutions explained that utilizing contingent faculty helps them manage uncertainty regarding the level of public funding they may receive. Administrators have the option not to renew contracts of contingent faculty if they experience a decrease in their funding, whereas institutions commit to retain tenure-track faculty until they retire. In addition, administrators from several public institutions noted that, as a result of decreased state funding, they have become more reliant on tuition to meet their budget needs. They told us that hiring contingent faculty to focus on teaching rather than research allows the institution to offer more classes and serve additional students, which in turn, generates more tuition revenue. Compensation costs: Administrators stated that, in general, they cannot employ tenure-track faculty for all courses because they can be more expensive to employ than contingent faculty. In addition to the long-term commitment associated with tenure, other costs may include spending to support research conducted by tenure-track faculty (e.g., investment in specialized labs or equipment). Legal or grant program requirements: Some administrators said that legal or grant program requirements affect their decisions regarding the utilization of contingent faculty. For example, administrators from several institutions told us that they had reduced teaching loads for part-time faculty because the Patient Protection and Affordable Care Act (PPACA) requires certain employers to provide health insurance for employees working 30 hours or more per week. Administrators from another institution stated that they utilized in-house faculty and hired additional contingent faculty to staff a federal grant program aimed at providing training for inmates at correctional facilities because—after receiving notification that they had been awarded the grant—they had approximately 2 months to staff 160 course sections. In addition, since they did not know whether the grant would be renewed, they did not know whether they would be able to retain those faculty at the end of the program. Institutional Considerations Administrators said that utilizing contingent faculty also allows flexibility to meet different institutional needs. Examples of institutional considerations cited by administrators include the following: Enrollment: By utilizing contingent faculty, institutions have more flexibility to meet course demand if there is a surge in enrollment or to downsize if there is a drop in enrollment, according to administrators. For example, administrators from one 2-year institution noted that enrollment generally increases when the economy is weak and decreases when the economy is strong. These administrators also said that their enrollment fluctuates greatly with changes in the economy and that, in their experience, prospective students are more likely to choose 4-year institutions rather than 2-year institutions when the economy is strong. In addition, when offering a course, administrators said part-time faculty may teach that course during a trial period while administrators decide whether to offer the course long term. Location and market demand: Some administrators stated that they offer contingent faculty positions in response to market conditions. For example, administrators from institutions located in small towns or rural areas said they rely on local professionals to teach certain courses on a part-time basis, in part, because of challenges finding qualified faculty and having fewer students enrolled at remote sites. Some administrators also said contingent faculty positions offer certain advantages that help them recruit high quality instructors. For example, administrators from one university noted that their institution offers stable, full-time employment to recent graduates looking to gain experience before applying for tenure-track positions at other institutions. Specialized experience: Contingent faculty may bring professional expertise to certain courses. For example, administrators from several institutions stated that their programs for health professionals rely on contingent faculty working in their field to teach clinical courses so that students may gain experience at an established medical practice. Administrators said that hiring practitioners from local industry as part- time instructors is an effective way to support specialized courses that have a limited number of sections. Administrators from one institution also noted that practitioners may have the qualifications needed to meet accreditation requirements for certain programs and departments (e.g., professional and technical programs). Balancing priorities: Administrators said that utilizing a combination of tenure-track and contingent faculty helps their institutions fulfill both teaching and research missions and accommodate the hiring needs of different programs and departments. For example, administrators from one institution noted that the additional revenue from increased course offerings—staffed by part-time contingent faculty—allows them to invest more money in research programs for tenure-track faculty. Administrators from two institutions explained that hiring part-time contingent faculty in a given department allows them to reallocate resources as needed, for example, to hire full-time contingent or tenure-track positions in another department. In addition, while contingent faculty may help fulfill accreditation requirements for certain programs, administrators from several institutions also stated that their accrediting bodies require a balance of contingent and tenure-track faculty, or alternatively, full-time and part-time contingent faculty. For example, administrators from one 4-year institution told us that part-time faculty may teach no more than 25 percent of student credit hours within their business school. Faculty Needs As part of faculty utilization decisions, administrators said that they consider the personal and professional needs of faculty. Examples of faculty needs cited by administrators include the following: Flexibility: Administrators told us that they offer part-time positions, in part, because many qualified candidates want to work part-time for professional, family, or other reasons. For example, administrators at one institution said that part-time contingent faculty positions allow expert-practitioners to continue working full-time in their field while pursuing an interest in teaching. Alternatively, for those teaching as full-time contingent faculty, in some cases, their position may offer a more predictable schedule or other benefits compared to their professional field. Course loads: Administrators at some institutions said they prioritize the professional needs of existing full-time faculty before hiring part- time faculty by ensuring that full-time faculty have enough courses to meet their required teaching loads. Career paths: Some institutions have established mechanisms to support long-term career paths for full-time contingent faculty. For example, administrators from one institution stated that full-time contingent faculty may qualify for multi-year contracts that can be terminated only for adequate cause, such as gross professional misconduct. Administrators from several institutions said that they offer the full set of professorial ranks (i.e., Assistant Professor, Associate Professor, and Professor) to some full-time contingent faculty positions in order to provide opportunities for advancement. Student Needs Administrators stated that having a combination of tenure-track and contingent faculty—or full-time and part-time contingent faculty at institutions without tenure—is necessary to meet different student needs. Examples of student needs cited by administrators include the following: Learning opportunities: Administrators stated that different types of faculty may offer different opportunities to students. For example, administrators told us that tenure-track faculty may provide research and academic networking opportunities whereas contingent faculty may not have the same opportunities to develop professional networks or conduct research in their field. Some administrators also said that the academic freedom associated with tenure or having faculty who conduct research in their field may be beneficial to students. Nonetheless, administrators from several institutions emphasized that contingent faculty were equally qualified to teach and that their positions allowed them to focus on teaching. Administrators also noted that contingent faculty may bring professional expertise and real-world experiences to the classroom. In addition to courses that require specialized experience, administrators from one institution said they also value the outside experience that contingent faculty bring to general education courses. As an example, they stated that part-time contingent faculty with experience from other jobs or professions may be able to relate to the real-world needs of their students because the majority of students will seek employment outside of academia. Community: Administrators said that, regardless of tenure status, they depend on having full-time faculty to help create a sense of community. They discussed informal ways that faculty support their campus community. For example, some administrators noted that full- time faculty contribute by mentoring students and participating in activities on campus. In contrast, part-time faculty are not able to spend as much time on campus because they often have other jobs or commitments, according to administrators. Absent National Information on Pay Rates, Contingent Faculty in Two Selected States Are Paid Less per Course, and Relatively Few Part- Time Faculty Receive Health or Retirement Benefits Data from Two States Show Contingent Faculty Are Paid Less per Course, Though Disparities Shrink If Pay for Research and Service Is Excluded National data on contingent faculty pay rates are not available, but data from two states show that contingent faculty are paid less per course. IPEDS data cannot be used to determine faculty pay rates because salary data are not collected for part-time faculty nor are they collected at the individual faculty level, and CPS data do not differentiate between full- time tenure-track and full-time contingent faculty. Given the limitations of national data, we used data from two states to compare annual earnings across different types of faculty. The differences in median annual earnings shown in table 5 provide some insight into the generally lower overall compensation of contingent faculty, though these data are not generalizable. Further, particularly for part-time faculty who may be paid on a piecemeal or per-course basis, this measure does not provide information about whether compensation differences are due to lower pay rates or less work performed (e.g., courses taught or hours worked). Thus, we use the state data to calculate and examine comparable pay rates per course for all faculty types. Private organizations have attempted to collect data specifically on pay-per-course rates for part-time faculty, though efforts have been limited. On a per-course basis, we found that contingent faculty at public institutions in two states are paid less per course taught, on average, than full-time tenure-track faculty, though the extent of differences varies depending on contingent faculty group and pay measure. We conducted regression analyses of total pay per course and instructional pay per course, which provide two different perspectives on faculty compensation (see sidebar for explanations of these approaches and see appendix I for details on our methods). These analyses controlled for other factors that may affect earnings, such as employing institution, discipline, highest degree earned, and demographics. As shown in table 6, in terms of total pay per course, we found the following: Part-time contingent faculty in both states are paid about 75 percent less per course regardless of whether the population includes all faculty or is limited to “primarily teaching” faculty. The primarily teaching group excludes faculty who primarily hold other roles unrelated to instruction (e.g., administrators and research faculty). Full-time contingent faculty are paid about 35 percent less per course in North Dakota and about 40 percent less per course in Ohio, among primarily teaching faculty—differences are larger in Ohio if all faculty are included. Instructional graduate assistants earn more per course than part-time faculty (though still less than full-time tenure-track faculty). However, compensation for these groups is fundamentally different because instructional graduate assistants generally receive a stipend, similar to an annual salary, rather than being paid by the course like many part- time faculty. In addition, graduate assistantships may be awarded for academic merit or recruitment, and could also be considered as compensation for a graduate assistant’s work as a student. Disparities in instructional pay per course—which measures pay for equivalent work (see sidebar above)—are smaller for all contingent faculty groups than those for total pay per course. As shown in table 7, we found the following: Part-time contingent faculty in both states are paid about 60 percent less per course regardless of whether the population includes all faculty or is limited to primarily teaching faculty. Among primarily teaching faculty in both states, full-time contingent faculty are paid about 10 percent less per course than full-time tenure- track faculty. As with total pay, the instructional pay disparity for full-time contingent faculty in Ohio is larger if all faculty are included. However, when all faculty are included in North Dakota, the pay difference between full- time contingent and full-time tenure-track faculty is not significant at the 95 percent confidence level. Consistent with our other findings, when we analyzed national data from the 2013 Survey of Doctorate Recipients (SDR), we also found that contingent faculty in sciences fields earned less annually than full-time tenure-track faculty. Full-time contingent faculty earned 22 percent less than full-time tenure-track faculty, on average, and part-time contingent faculty earned 70 percent less, among instructional, doctorate-holding faculty in STEM, health, and social sciences fields. Unlike our analyses of state data, the SDR analysis cannot account for differences in the number of courses taught, and thus the results represent the combined effects of lower pay rates and smaller workloads, to the extent either exists. Relatively Few Part-Time Contingent Faculty Receive Health or Retirement Benefits from Their Employment Data from North Dakota and Georgia, as well as national data covering different populations, suggest that relatively few part-time contingent faculty receive health or retirement benefits from their employment though full-time contingent faculty may. Although not generalizable, data from North Dakota and Georgia include data on actual benefits provided to faculty by institutions, as opposed to self-reported rates of coverage found in national survey data. Relatively few part-time contingent faculty and instructional graduate assistants in the North Dakota and Georgia data receive retirement, health, and life insurance benefits from their employment. For example, in Georgia and North Dakota, about 98 percent or more of individuals in full-time tenure-track and full-time contingent positions receive work-provided retirement benefits, compared to 19.4 and 9.3 percent, respectively, of those in part-time contingent positions (see table 8). An even smaller percentage of instructional graduate assistants in both states receive any of these benefits from their employment; however, instructional graduate assistants are students, so the terms of their employment may be different than traditional full-time and part-time employees. Similarly, our analysis of SDR and CPS data show that relatively few part- time contingent faculty nationwide receive retirement benefits from their employment. According to the 2013 SDR data, among instructional, doctorate-holding faculty in STEM, health, and social sciences fields, an estimated 48.4 percent (+/- 4.2) of part-time contingent faculty report having access to “a retirement plan to which employer contributed,” compared to the vast majority of full-time tenure-track and full-time contingent faculty. According to CPS data covering employment in 2015, an estimated 16.6 percent (+/- 6.1) of part-time faculty report participating in a work-provided retirement plan, as compared to 60.8 percent (+/- 4.7) of full-time faculty. National Data on Health Insurance Benefits While comparing health insurance coverage is complicated because workers may be covered by other family members’ plans, in both the SDR and CPS data, smaller proportions of part-time faculty had health insurance through their own employment. According to the 2013 SDR data, only 39.4 percent (+/- 4.6) of part-time contingent faculty had access to “health insurance that was at least partially paid by employer” compared to almost all full-time tenure-track and full-time contingent faculty. Similarly, in the CPS data, much smaller percentages of part- time faculty than full-time faculty report having health insurance through their own employment (see table 9). Data from a 2013 Sample of Faculty with Doctorates Show That Contingent Faculty Were Less Satisfied with Certain Aspects of their Economic Circumstances In addition to the lower pay and access to benefits experienced by some contingent faculty, among a national sample of instructional, doctorate- holding faculty in STEM, health, and social sciences fields, contingent faculty were less satisfied with their job security and career prospects. Based on our analysis of 2013 SDR data, the vast majority of all instructional faculty, including contingent faculty, stated that they are very or somewhat satisfied with their employment overall. However, compared to full-time tenure-track faculty, more contingent faculty reported some level of dissatisfaction (see fig. 10). While most faculty reported satisfaction with their employment, at least a third of both full- and part- time contingent faculty stated that they are dissatisfied with their job security and opportunities for career advancement. For example, an estimated 55.1 percent (+/- 4.5) of part-time contingent faculty reported some level of dissatisfaction with opportunities for advancement (see fig. 10), and the proportion who said they were very dissatisfied—26.1 percent (+/- 3.8)—is around 5 times greater than for full-time tenure-track faculty. While Contingent Faculty at Selected Institutions Said Their Work Offers Certain Advantages, They Expressed Concerns about Contracts, Wages, and Institutional Support Contingent Faculty Identified Certain Advantages of Their Work Contingent faculty at selected institutions said their work offers certain advantages, including those allowing them to balance professional and personal responsibilities, develop skills, or work with students. Part-time contingent faculty in some discussion groups said they choose to work part-time because it gives them needed flexibility to balance teaching with working full-time or to meet family needs, such as childcare or caring for sick parents. As stated previously, our analysis of nationally representative 2013 SDR data showed that, among a sample of instructional faculty with doctorate degrees in STEM, health, and social sciences fields, many faculty preferred to work part-time for reasons including family responsibilities or holding another job. In terms of developing skills, one instructional graduate assistant told us that having teaching experience gives her an advantage in the job market. In addition, in both full- and part-time discussion groups, some contingent faculty told us they primarily want to teach, and their roles allow them to do that rather than having to conduct research or take on other responsibilities. In some discussion groups, contingent faculty said they are committed to teaching because they find it rewarding to interact with students. Insight from a Full-Time Contingent Faculty Member about Connecting with Students “I have yet to meet a contingent faculty member that does not say that student contact is extremely important to them…We’re excellent teachers. We’re interested in teaching. We are interested in being with students.” Contingent Faculty Expressed Concerns about Short-term Contracts, Untimely Contract Renewals, and Compensation Contract-Related Concerns Contingent faculty in some of our discussion groups expressed concerns about contractual issues. In particular, they cited concerns regarding contract length, untimely contract renewals, or insufficient notice about their class schedules. Full- and part-time contingent faculty said short- term contracts—annual or semester-to-semester contracts—produce anxiety about job stability because of uncertainty about whether contracts will be renewed. Part-time faculty who teach at multiple institutions additionally said that short-term contracts hinder their ability to form lasting relationships with institutions or students. In some discussion groups, full- and part-time contingent faculty said untimely contract renewals can make it difficult to find another position if a contract is not renewed. For example, a full-time contingent faculty member said she received notification in August that her contract was not being renewed for the fall semester, at which point she could not find another position elsewhere for that semester. Part-time contingent faculty told us that notices about the status of their class schedules are also sometimes untimely. One full-time contingent faculty member said that, when he worked part-time, he sometimes did not know, until the first night of class, that a course he was scheduled to teach had been given to a full-time faculty member instead. While some contingent faculty expressed concerns about contract lengths and renewals, some contingent faculty said they do not have concerns in this area. Faculty members in some part-time discussion groups told us teaching is not their primary source of income or they are retired, so they are not concerned about job security and contract renewals. Insight from a Full-Time Contingent Faculty Member “The lack of long term job security/stability that results from short term contracts is my biggest concern. I find it insulting when comments like “great work, we’re committed to you” are coupled with actions like one year contracts when I have been in this position for 15 years. It does not make me feel valued.” Compensation-Related Concerns Contingent faculty we spoke with identified insufficient compensation as a disadvantage of their employment (see table 10). Full-time and part-time contingent faculty in some discussion groups said they must supplement their teaching income to cover their living expenses. For example, one full-time contingent faculty member said he does consulting work, bookkeeping, and product reviews to increase his income because his teaching salary is not adequate. In addition, some part-time faculty said they teach at several institutions to make ends meet financially and some instructional graduate assistants also said they take on extra work to cover living expenses. Union officials at the national level said their members have expressed similar concerns. Specifically, Service Employees International Union (SEIU) officials told us some contingent faculty members qualify for public assistance due to the low level of compensation they receive. Insight from Part-Time Contingent Faculty Member Teaching at Multiple Institutions “Society at large, I think, associates the college professor with a rather well paid and stable career. And I think most of us who worked in this field know that is anything but the case.” Some contingent faculty in both full- and part-time discussion groups said they are not paid for all of their job requirements or are undercompensated given their qualifications. Full- and part-time contingent faculty and graduate student instructors said they are required to assume extra responsibilities at no additional pay. For example, a faculty member in a full-time discussion group told us she was given additional duties of advising 15 students and attending meetings, neither of which was included in her contract. Both full- and part-time faculty in some discussion groups said their pay is not commensurate with their academic credentials. One full-time faculty member told us an administrator with a doctorate who works in the local school district near her institution is paid double her salary. Similarly, a part-time faculty member told us her salary is less than $20 an hour, a rate she considers as too low for a professional with a doctorate. Some Contingent Faculty at Selected Institutions Said They Have Limited Career Advancement or Institutional Involvement Opportunities and Lack Certain Types of Professional Support Limited Career Advancement Opportunities Contingent faculty in some discussion groups said they would like to move into a tenure-track or full-time position, but face barriers doing so, and union officials expressed similar views. For example, one full-time contingent faculty member told us teaching 6 to 10 classes per year does not allow her time to conduct the research needed to be competitive for a tenure-track position. In some discussion groups, both full- and part-time faculty said that they perceive that their colleagues sometimes view them as less capable because they are not tenure-track faculty. As a result, these faculty may not be considered for tenure-track positions when they become available. A part-time contingent faculty member who teaches at multiple institutions noted that availability of full-time positions may be limited because many institutions hire only part-time faculty. Union officials from the American Association of University Professors (AAUP) and SEIU also cited the decline in the availability of tenure-track positions as a barrier regarding career advancement for contingent faculty. Insight from a Part-Time Contingent Faculty Member Who Teaches at Multiple Institutions “It wasn’t that long ago that once you went to work for a college as an adjunct and you were there a certain number of years, there was a real expectation that you would be offered a full-time position or at least you would move to an annual contract so you only had to worry once a year. That’s disappearing. More and more colleges are moving away from that. Also, a lot of colleges are moving away from full-time positions.” Limited Institutional Involvement Contingent faculty in some discussion groups expressed concerns that they do not have a voice in institutional decision-making because they cannot serve on some department or university-level committees or vote on particular issues. They explained that sometimes a school’s policy prohibits their service or relevant policy is not clearly articulated. For example, a full-time contingent faculty member told us that contingent faculty members at her institution cannot participate on governance committees, which she said leaves administrators free to ignore the concerns of contingent faculty. Insight from a Full-Time Contingent Faculty Member “We have no voice. We have no say. We have no governance. We don’t have any of that. And yet, we all—every one of us around here earned the same degree, worked the same amount. So there is huge inequality between choosing to focus on research primarily, and therefore, getting this basic job guarantee until die and choosing to focus on teaching, not having that , even though in many other ways we are equivalent.” Contingent faculty in some discussion groups also told us they are reluctant to voice their views because they do not have job protections. For example, a full-time contingent faculty member in one discussion group told us she would feel more comfortable speaking up if she had a continuing contract rather than her current annual contract. An official from the National Center for the Study of Collective Bargaining in Higher Education and the Professions said that an issue for contingent faculty broadly is whether they are protected by due process. He said it can be unclear for contingent faculty whether they can be terminated without due process consideration when, for example, a student complains about the content of a faculty member’s lecture. Despite concerns about opportunities for institutional involvement, contingent faculty told us they preferred to use informal mechanisms to raise issues with the administration and had mixed views about the value of unions. Several full- and part-time faculty members said they are comfortable approaching their department chairperson or even university administrators to ask questions or express concerns. In terms of unions, some faculty in both full-time and part-time discussion groups said they were opposed to unions based on prior experiences or not wanting to pay dues. In contrast, some faculty said they thought a union could be beneficial by helping with certain issues, such as compensation and working conditions. Union officials told us there has been greater interest in recent years from contingent faculty—including graduate assistants—in learning about faculty unionization or in organizing into unions. However, one union official noted that it can be challenging for part-time faculty to form a union because they may move from one institution to another. Institutional Support Examples of Academic Associations’ Efforts to Focus on Contingent Worker Issues The American Political Science Association (APSA): Convened a committee in 2016 on the status of contingent faculty in the profession to expand ways to support contingent faculty members. The committee sponsored a roundtable at the APSA Annual Meeting in August 2017 to examine a range of topics related to contingent faculty, including promotion paths, fairness within the profession, and the role of unionization. The American Sociological Association (ASA): Formed a task force on contingent faculty in November 2015 to examine the implications of the recent growth of contingent employment among sociologists. The task force’s interim report, issued in August 2017, includes recommendations to ASA and universities, for improving contingent faculty working conditions. The Modern Language Association: (MLA) Convened a committee that will work through June 2019 to examine issues that affect contingent faculty, including salary and benefits, workplace issues and conditions of employment, demographics, participation in departmental and institutional governance, academic freedom, and professional development. The committee plans to identify effective policies and practices related to contingent faculty. The American Institute of Physics (AIP): Conducted a survey of individual faculty in 2016 that included questions on school climate and culture. As of February 2017, AIP was in the early stages of analyzing the survey response rates and results. Contingent faculty in some discussion groups also described a lack of institutional support in areas that can affect faculty teaching duties, such as access to information systems or office space. For example, a part- time faculty member told us her access to institutional email and the online grading system was terminated too soon because her contract ended a few days before she gave final examinations. Part-time faculty and faculty teaching at multiple institutions also raised concerns that they sometimes lack appropriate office space to ensure student privacy. Union officials we spoke with also said contingent faculty nationwide commonly cite these areas of limited institutional support as concerns. Some discipline-specific academic associations have also begun to focus on issues related to contingent faculty (see sidebar). Insight from a Part-Time Contingent Faculty Member Who Teaches at Multiple Institutions “The office space problem is a big problem. Either one doesn’t have any office space or it’s a jointly shared office space, a very large space with lots of people in it. It is very difficult to have kind of close conversations with students. I think it brings up some Family Educational Rights and Privacy Act (FERPA) problems, anonymity problems as well.” Agency Comments, Third Party Views, and Our Evaluation We provided a draft of this report to Education, NSF, and experts on contingent faculty issues or the data used in this report for their review and comment. Education did not have any comments. NSF and expert reviewers provided technical comments, which we incorporated, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, to the Secretary of Education and the Director of the National Science Foundation, and to other interested parties. In addition, the report will be 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) 512-7215 or brownbarnesc@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 III. Appendix I: Objectives, Scope, and Methodology The objectives of this review were to determine (1) what is known about the makeup and utilization of the postsecondary instructional workforce; (2) the roles different types of faculty fill at selected institutions and the factors administrators consider when determining their faculty makeup; (3) what is known about how economic circumstances compare across different faculty types; and (4) what contingent faculty members report as advantages and disadvantages of their work. To address objectives 2 and 4, we interviewed administrators and contingent faculty members during site visits at selected institutions in three states—Georgia, North Dakota, and Ohio. In each state, we visited one 4-year public institution, one 4-year private (non-profit) institution, and one 2-year public institution (see table 11). We selected institutions in these states, in part, to provide context for our analysis of faculty and course data that we obtained from their postsecondary data systems (see Section 1 of this appendix for more information). In addition to data availability, we considered size and geographic location as part of our state selection process. When selecting institutions within each state, we considered factors such as the size of the instructional faculty workforce, the percentage of contingent faculty, and whether the institution is located in an urban, suburban, or rural area. In our interviews with administrators—chief academic officers, vice presidents, or deans, among others—we asked about the roles different types of instructional faculty fill and the factors administrators consider when determining their institution’s faculty makeup. In addition to administrators at the institutions above, we also interviewed administrators from one large online-based for-profit institution, which we selected primarily based on size of the institution. In total, we interviewed administrators from 10 institutions. The findings from these interviews are not generalizable. At each institution, we held discussion groups with full-time and part-time contingent faculty and graduate student instructors, where applicable. University administrators solicited participants for the discussion groups on our behalf. During these discussion groups, we asked contingent faculty broad, open-ended questions about the advantages and disadvantages of their work and about their working conditions. Participants were invited to complete a written questionnaire to provide demographic information about themselves. Among the 109 contingent faculty members who completed our questionnaire, the average age of full- and part-time contingent faculty we met with was 53. Graduate student instructors were younger, with an average age of 30. Contingent faculty we interviewed came from a range of disciplines, including English, music, engineering, and the health professions. The vast majority of full- and part-time contingent faculty indicated that they held a master’s or doctorate degree. At the institutions we visited in Georgia, North Dakota, and Ohio, the majority of part-time faculty worked at one institution. To ensure we collected a broad range of perspectives, we conducted two additional discussion groups with contingent faculty who taught at multiple institutions. In total, we conducted 21 discussion groups with contingent faculty. Finally, we conducted additional interviews to obtain background and context for our work. We met with individuals knowledgeable about issues related to postsecondary faculty and unions representing postsecondary faculty, including the American Association of University Professors and the Service Employees International Union. For all questions, we also reviewed relevant federal laws and regulations. The remainder of this appendix provides detailed information about the data and quantitative analysis methods we used in our review, as follows: Section 1: Key data sources Section 2: Quantitative analysis methods used to address the makeup, utilization, and economic circumstances of postsecondary instructional faculty (objectives 1 and 3) Section 3: Pay-per-course regression analysis methods (objective 3) Section 4: Annual earnings regression analysis methods (objective 3) Section 1: Data Sources To address our objectives, we used data from multiple sources (see table 12). To gain an understanding of and provide context for the relevant faculty data that we analyzed, we interviewed officials from federal, state, and non-governmental agencies who collect and maintain the respective datasets, including the Department of Education (Education), Labor, National Science Foundation, North Dakota University System (NDUS), Ohio Department of Higher Education (ODHE), University System of Georgia (USG), and American Academy of Arts & Sciences (AAAS). The Integrated Postsecondary Education Data System (IPEDS) and the state administrative data represent the entire populations they cover, and while the Current Population Survey (CPS), the Survey of Doctorate Recipients (SDR), and the Humanities Departmental Survey (HDS) are sample survey data, when weighted, they also represent the populations they cover. Because the sample surveys followed a probability procedure based on random selections, each respective sample is only one of a large number of samples that might have been drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as the margin of error (i.e. the half width of the 95 percent confidence interval—for example, +/- 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples that could have been drawn. Throughout our analyses, for estimates from survey data we reported the applicable margins of error. In some cases, the confidence intervals around our estimates were asymmetrical; however, we presented the maximum half-width for simplicity and for a consistent and conservative representation of the sampling error associated with our estimates. Our analyses of CPS and SDR survey data are weighted analyses using sample design information, replicate weights, and survey analysis software to get the proper sample survey estimates and margins of error. Additional details about the datasets follow. Integrated Postsecondary Education Data System (IPEDS) IPEDS is a system of interrelated surveys conducted annually by Education’s National Center for Education Statistics (NCES). IPEDS gathers information from every college, university, and technical and vocational institution that participates in federal student financial aid programs, as well as other institutions that report data voluntarily. In 2015, more than 7,500 institutions reported data to IPEDS. IPEDS collects data in the following 12 areas: institutional characteristics; completions; 12-month enrollment; fall enrollment; graduation rates; 200% graduation rates; student financial aid; outcome measures; admissions; human resources; finance; and academic libraries. As of the 2005 IPEDS data collection, information on faculty and staff are collected as part of the human resources survey component, and include information on faculty demographics and types of positions, among other things. We used IPEDS data from 1995, 1999, 2003, 2007, 2011, and 2015. We utilized IPEDS as our primary data source because we are able to identify a universe of postsecondary institutions and also because the data allow us to distinguish between tenure-track and contingent positions. Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) The CPS is sponsored jointly by the Census Bureau and the Department of Labor’s Bureau of Labor Statistics. It is the source of official government statistics on employment and unemployment in the United States. The basic monthly survey is used to collect information on employment, such as employment status, occupation, and industry, as well as demographic information, among other things. The survey is based on a sample of the civilian, non-institutionalized population of the United States. Using a multistage stratified sample design, about 54,000 households are interviewed monthly based on area of residence to represent the country as a whole and individual states; the total sample also includes additional households that are not interviewed for various reasons, such as not being reachable. In addition to these interviewed and non-interviewed households from the basic CPS monthly sample, the ASEC includes additional households; the total sample size for the 2016 ASEC was almost 100,000 households. The ASEC provides supplemental data on work experience, income components, such as earnings from employment, and noncash benefits, such as health insurance coverage, among other things. Data on employment and income refer to the preceding calendar year, although demographic data refer to the time of the survey. This report used data from the March 2016 ASEC, which refers to employment and income during calendar year 2015. Survey of Doctorate Recipients (SDR) SDR is a biennial survey conducted by the National Science Foundation’s (NSF) National Center for Science and Engineering Statistics (NCSES) that provides demographic and career history information about individuals with a research doctoral degree in a science, technology, engineering, and math (STEM), health, or social sciences field from a U.S. academic institution. The survey follows a large sample of individuals throughout their careers from the year they received their doctoral degree until age 75, plus a sample of new doctoral recipients added in each cycle. The survey includes questions regarding occupation (including discipline area for postsecondary faculty), earnings, job satisfaction, faculty tenure status, and faculty rank, among other topics. While some data from the survey are released publicly, other data are restricted from public use—including data on tenure and rank— in order to protect the anonymity of survey respondents. This report used data from the 2013 SDR, which refers to employment in February 2013. We obtained the publicly available data and a few additional restricted-use variables that NCSES recoded for our use. Faculty and Course Data Received from Selected States The data from Georgia, North Dakota, and Ohio contained variables on faculty characteristics, earnings and benefits, and courses taught. We developed data requests through discussions with officials in each state. Georgia Postsecondary Institution Administrative Data (USG data) The data from USG covered all 4-year public institutions in Georgia identified in our IPEDS universe and included course and enrollment data from an academic database merged with faculty and earnings data from USG’s Human Resources Data Mart. The Georgia data also included information on the percentage of individual faculty members’ roles comprised of instruction, research, and other responsibilities. The course and enrollment data covered academic year 2015-16—courses taught during fall term 2015, spring term 2016, and summer term 2016. Most faculty data are from fall 2015. For some faculty who were not in the fall 2015 data file because they started teaching in spring 2016, for instance, USG matched fall 2016 faculty data to the course data. Earnings data covered calendar year 2015 and included earnings year-to-date through November. North Dakota Postsecondary Institution Administrative Data (NDUS data) The data from NDUS officials covered all non-tribal 4-year and 2-year public institutions in North Dakota identified in our IPEDS universe and included course and enrollment data, as well as faculty and earnings data. All of the data covered academic year 2015-16—courses taught and earnings during fall term 2015, spring term 2016, and summer term 2016. The data included common unique identifiers that allowed us to merge extracts we received according to faculty ID and institution. The data were downloaded by NDUS officials from a centralized data system into which the North Dakota institutions report their data directly. Ohio Postsecondary Institution Administrative Data (ODHE data) The data from ODHE covered all 4-year public institutions and most 2- year institutions in Ohio identified in our IPEDS universe and included: (1) course and enrollment data, (2) faculty data, and (3) faculty earnings data. All of the data were from ODHE’s Higher Education Information (HEI) system, a comprehensive relational database that includes student enrollment, course, financial aid, personnel, finance, and other data submitted by Ohio’s colleges and universities. The course and enrollment data covered academic year 2014-15—courses taught during summer term 2014, fall term 2014, and spring term 2015. Faculty and earnings data covered fiscal year 2015 (i.e., July 2014 through June 2015). Humanities Departmental Survey (HDS) The HDS is a collaborative effort to collect and analyze information from humanities departments across a number of academic fields. The HDS is sponsored by AAAS, and national humanities organizations and disciplinary associations, such as the Modern Language Association and the American Historical Association, helped develop the HDS. The survey collects a variety of information for each humanities field, including data on the number and types of faculty and students taught by faculty type. The survey has been administered twice, covering academic years 2007- 08 and 2012-13. In both instances, the Statistical Research Center of the American Institute of Physics administered the surveys to a nationally representative stratified sample of humanities departments in four-year colleges and universities that existed in 2007-08 and was updated for new disciplines in 2012-13. The 2012-13 survey included 2,127 departments in its sample across 13 humanities fields, and its overall response rate was 71 percent. Information about faculty referred to employment levels as of fall 2012. We identified several other discipline-specific academic associations that have collected or are currently collecting data on faculty makeup in their departments, including contingent faculty. However, we did not compare the results of other department surveys to the HDS because the response rates in other surveys were too low to be considered generalizable or because any observable differences in faculty composition could be attributed to differences in survey methodology or timeframe covered. Data Reliability For each of the datasets described above, we conducted a data reliability assessment of variables included in our analyses. We reviewed technical documentation and related publications and websites with information about the data. We spoke with the appropriate officials at each agency or organization to review our plans for analyses, as well as to resolve any questions about the data and any known limitations. We also conducted electronic testing, as applicable, to check for logical consistency, missing data, and consistency with data reported in technical documentation. We determined that the variables we used from the data we reviewed were sufficiently reliable for the purposes of this report. Section 2: Quantitative Analyses of the Makeup, Utilization, and Economic Circumstances of the Postsecondary Instructional Workforce This section discusses the quantitative analysis methods (not including regression analyses) we used to address the makeup, utilization, and economic circumstances of the postsecondary instructional workforce. We used federal data from CPS, IPEDS, and SDR, state data from Georgia, North Dakota, and Ohio, and non-governmental data from HDS for these analyses. In each of the analyses that follow, our population of analysis was postsecondary instructional faculty. However, our definition of instructional faculty varied depending on the data source, as different sources provide different information regarding instructional responsibilities. For example, IPEDS indicates whether an individual’s responsibilities are primarily instructional whereas the state data indicates whether an individual teaches a course. For each set of analyses, we explain what definition of instructional faculty we used. Within our population of instructional faculty, we defined as contingent faculty any full-time or part-time faculty who do not have tenure or are not on the tenure track. IPEDS Analyses of Historical and Current Makeup To analyze whether and how the size of the contingent faculty workforce has changed over time, we used IPEDS data to identify instructional staff nationwide by type of institution in 1995, 1999, 2003, 2007, 2011, and 2015, which is the most recently available year of data. The five historical snapshots used data from the fall staff surveys to examine counts of faculty and any trends in postsecondary education during the period 1995-2011. The 2015 snapshot used data from the “employees by assigned position” survey to examine current counts of faculty by position type and used data from the fall staff survey to examine counts of faculty by gender and race. We could not compare the historical and current snapshots of faculty counts due to a significant change in 2012-13 to how IPEDS defines instructional staff. Prior to this change, instructional staff included those “whose primary responsibility is instruction, research, and/or public service” combined in a single category. After the change, instructional staff included only those whose responsibilities are primarily instructional or those “for whom it is not possible to differentiate between instruction or teaching, research, and public service because each of these functions is an integral component of his/her regular assignment.” As a result, data on instructional faculty collected since 2012 is not comparable to data collected prior to 2012. For each of these years of faculty data, we merged information from the IPEDS institutional characteristics file and focused our analyses on a universe of institutions that fit as close as possible to the following definition: Active, Title IV, degree-granting 2-year and 4-year primarily postsecondary institutions that are generally open to the public, have at least 15 full-time equivalent staff, and reported at least 1 instructional staff member or graduate teaching assistant. The number of postsecondary institutions can change from year to year due to new schools opening or existing schools closing or consolidating with other schools, as well as due to changes in how schools elect to report data to IPEDS. Not all of the same variables were available in the 1999 and 1995 IPEDS institutional characteristics files. As a result, for the 1999 data, we used different variables that also identified institutions that fit this definition. For the 1995 data, we approximated this definition by identifying institutions that offered at least an associate’s degree or higher and that were active institutions eligible for student financial aid (to approximate Title IV institutions). For the historical snapshots, we identified counts of faculty by institution type (i.e., control: public, private, for-profit; and level: 2-year, 4-year). We categorized faculty according to the following position types: full-time tenure-track (both tenured and non-tenured but on a tenure track); part-time; and graduate teaching assistant. The historical IPEDS data (from the fall staff surveys) do not break out part-time tenure-track from part-time contingent. For the 2015 snapshot, we identified counts of faculty by institution type, as well as by other institutional characteristics, such as size and the highest degree offered by the institution. We categorized faculty according the following position types: full-time tenure-track (both tenured and non-tenured but on a tenure track); part-time tenure-track (both tenured and non-tenured but on a tenure part-time contingent; and graduate teaching assistant. We also identified contingent faculty positions by their contract types: non-faculty status. We used the 2015 IPEDS fall staff survey data to identify faculty by gender and race/ethnicity group. For full-time faculty, we were able to examine the full spectrum of tenure-track versus contingent with various contracts. However, because these data were from the 2015 IPEDS fall staff survey, the data do not break out part-time tenure-track from part- time contingent. The IPEDS race/ethnicity categories we analyzed were: Black or African American Other or unknown (includes the IPEDS race/ethnicity categories: American Indian or Alaska Native; Native Hawaiian or other Pacific Islander; two or more races; and race/ethnicity unknown) White (non-Hispanic) Aggregated IPEDS data represent the universe of postsecondary instructional faculty positions, rather than a mutually exclusive count of unique instructional faculty members. IPEDS data are reported at the institution level, and so for any given institution the counts they report represent both the number of faculty at the institution and the number of positions they fill. However, because faculty who teach at more than one institution are counted and reported by each institution, when faculty counts are aggregated across multiple institutions, these faculty are counted multiple times—for each position they fill. As a result, aggregated counts based on IPEDS data represent the universe of unique instructional faculty positions, rather than the universe of unique faculty workers. CPS Analyses of Current Faculty Makeup and Economic Circumstances We used CPS data from the March 2016 ASEC to estimate the numbers of workers employed as postsecondary teachers in colleges and universities nationwide during calendar year 2015. We categorized as postsecondary instructional faculty any worker whose employment was in both the “postsecondary teachers” occupation (census code 2200) and the “colleges and universities, including junior colleges” industry (Census code 7870). We also determined whether a worker was employed full- time (35 hours or more) or part-time (less than 35 hours) using another variable in the ASEC. Among other differences with IPEDS data (see discussion of IPEDS above), CPS data capture the number of workers rather than the number of positions in postsecondary education and counts each worker once even if they work at multiple institutions. In addition, because CPS represents the entire labor force, the data include workers at postsecondary institutions that we may have excluded from our IPEDS analyses (e.g., non-degree-granting institutions). We utilized CPS data to provide context for the total number of postsecondary teachers and to estimate the proportions of the instructional workforce represented by full- time and part-time faculty. However, analysis of CPS data was not a primary component of our report because the data cannot differentiate workers by institution or by tenure status. As a result, the estimated population of full-time faculty includes both tenure-track and contingent faculty. Because CPS identifies workers as opposed to positions (which might yield a lower count than the IPEDS data) and includes workers at postsecondary institutions that we excluded from our IPEDS analyses (which might yield a higher count than the IPEDS data), the count of workers in the CPS data and the count of positions in the IPEDS data are not directly comparable. We also examined the reasons part-time faculty reported they worked part-time. We focused our analysis on 3 groups of part-time faculty: (1) those who reported wanting to work part-time; (2) those who reported they could only find a part-time job; and (3) those who reported seasonal or temporary fluctuations in the availability of employment (i.e., “slack work”)—we combined the latter two groups because they are both related to economic circumstances. To analyze the economic circumstances of contingent faculty, we used CPS data to estimate the median earnings of full-time and part-time faculty, as well as their receipt of work-provided retirement and health benefits. Our analysis of median earnings used ASEC data on the self- reported amount earned from a worker’s employer before deductions. In examining benefits, we used the term “work-provided” rather than “employer-sponsored” because the ASEC survey questions ask about benefits offered by a worker’s employer or union. For our analysis of access to work-provided retirement plans, we counted a worker as having a work-provided retirement plan if they responded “yes” to both of the following questions from the ASEC: (1) “Other than Social Security, did the employer or union that worked for have a pension or other type of retirement plan for any of the employees?” and (2) “Was included in that plan?” We also estimated the percentages of full- time and part-time faculty who were covered by any private health insurance plan; were covered by private health insurance in their own name; or had a work-provided health insurance plan. Those individuals without insurance could have received insurance coverage through a family member or other means. SDR Analyses of Compensation and Employment Experiences To compare—at the national level—the compensation and employment experiences of contingent faculty and tenure-track faculty, we used 2013 SDR data to identify different faculty types and examined the extent to which there were differences in earnings, benefits, and job satisfaction. SDR data only include doctorate holders in STEM, health, and social sciences fields, and thus our estimates cannot be generalized to non- doctorate holders or to fields outside of STEM, health, and social sciences fields. For that reason, we did not present faculty population size estimates using SDR data. We created our analysis population of instructional faculty based on responses to questions regarding work activities and institution type. Using these variables, we classified as instructional faculty any respondents who said that their “primary or secondary work activity is teaching,” and whose institution type was a 2-year college; 4-year college or university; medical school; or university-affiliated research institute. This resulted in an analysis population of 7,232 instructional faculty respondents; however, our analyses are weighted analyses that generalize to the population. Within our analysis population, we identified faculty types based on tenure status (i.e., tenured/on the tenure track or not on the tenure track) and whether respondents said they worked 36 hours or more per week or less than that (i.e., full-time versus part-time). We categorized graduate assistants separately, though we chose not to present estimated percentages for graduate assistants. Given that SDR is a survey of doctorate holders, it may be that graduate assistants in the SDR data are—for example—working toward another doctoral degree or have remained at their degree-granting institution in a postdoctoral position. In either case, we believe the working arrangements and economic circumstances of these individuals may be unique from those of most other graduate assistants. Without more detailed information, the data do not allow us to determine the exact nature of graduate assistant positions in the SDR data or explain how they compare to other types of positions. We also chose not to present estimated percentages for part- time tenure-track faculty given that they represented a small proportion of our analysis population. To analyze the economic circumstances of contingent faculty, we used SDR data to calculate median annual earnings by faculty type, as well as data on the availability of work-provided benefits. We calculated median earnings using data on basic annual salary from the respondent’s principal job. We analyzed data on the following types of benefits: health insurance, pension or retirement plans, profit-sharing plans, and paid vacation/sick/personal days. Respondents were asked whether each type of benefit was available to them regardless of whether they chose to take the benefits. To analyze the employment experiences of contingent faculty, we used SDR data on job satisfaction, reasons for working part-time, and attendance of professional meetings. To examine job satisfaction, we used data on satisfaction with overall employment, job security, opportunities for advancement, salary, and benefits, from which we estimated the percentage of faculty who were satisfied, somewhat dissatisfied, or very dissatisfied by faculty type. Our analysis of part-time work first included whether a respondent who reported working part-time said they wanted to work full-time. Secondly, among those who wanted—and who did not want—to work full-time, we calculated the percentage who said they worked part-time (1) for family reasons, (2) because a full-time job was not available, (3) because they did not need/want full-time work, and (4) because they were a student, had an illness, or held another job. Respondents could indicate more than one reason for working part-time. We also analyzed a variable on attendance of professional meetings to calculate the percentage of faculty, by faculty type, who reported attending professional association meetings or conferences during the past 12 months. The SDR data included other variables that identify a respondent’s academic position, such as research faculty, administrators, adjuncts, and others. We analyzed these variables to determine whether to use them to categorize faculty, but found that they were not the most appropriate for our purposes. However, we observed that these variables may have implications on the economic circumstances of different types of faculty and so used them as control variables in two of our regression models on annual earnings. For example, we analyzed earnings of instructional faculty who said they were “adjunct” faculty or administrators. Among full-time and part-time contingent faculty, estimated median annual earnings decreased when we included only faculty who said that they were adjunct faculty (see table 13). However, the data do not allow us to explain how or whether the positions for faculty who identified as adjuncts are different compared to the positions of those who did not identify as adjuncts, and, based on our team’s interviews with administrators, different institutions and individuals apply different meanings to the term “adjunct.” As may be expected, among full-time tenure-track and full-time contingent faculty, estimated median annual earnings increased when we limited the population to only those faculty who said they were administrators (see table 13). State Data Analyses of Makeup and Utilization We used consistent methods to analyze data from Georgia, North Dakota, and Ohio on faculty workforce makeup and utilization, though we analyzed the data from each state separately. In addition, while each state dataset was structured slightly differently, used different variable names, and contained some unique elements or ways of capturing information about faculty or courses, we restructured and compiled the information to provide consistency across the states. In the state data, we identified instructional faculty as any individual who taught a course during the given academic year. This definition includes a variety of staff (e.g., deans, administrators, coaches, research faculty, and postdocs) who fill about 2-10 percent of positions, depending on institution type and state. In addition, instructional graduate assistants— who are listed in the state data as instructors of record—fill about 8 to 15 percent of positions at 4-year institutions in the three states. Each state’s data were ultimately structured as a set of unique faculty- institution pair observations—where faculty were listed once, by their employing institution. Each faculty-institution pair observation had variables describing the faculty member’s and institution’s characteristics, as well as counts of courses, students, and student credit hours taught by the faculty member at that institution (including by academic term and by course characteristics). Faculty Data Compilation and Restructuring For all three state datasets, we coded and grouped certain faculty characteristics variables, including academic rank, age group, race/ethnicity, sex, and tenure status, to ensure consistency across states. For example, in coding tenure status, we consistently categorized faculty as “non-tenure-track” if they were identified in the source data as not in a tenure-track position, as having been denied tenure, as being in some other status, or as being in a position for which tenure was not applicable. Some faculty characteristics variables were structured differently in each of the three states and thus required unique methods of recoding, though we applied consistent approaches and logic in each case (see table 14). We also identified each individual’s academic discipline based on information provided in each state’s data about their department. Faculty members’ departments in the Georgia and Ohio data are identified by their standardized Classification of Instructional Programs (CIP) code. The North Dakota data did not include the CIP code for faculty members’ departments and department names in the North Dakota data were not consistent across institutions. Thus, we coded North Dakota departments by matching them manually to corresponding CIP codes. After manually assigning CIP codes to faculty in the North Dakota data, we identified the highest level 2-digit CIP code for each faculty member in all three state datasets. However, because the 2-digit CIP code identifies over 40 fields of study, we grouped these by academic discipline for our analyses. To group departments, we used a crosswalk provided by Ohio that listed CIP codes according to 12 possible disciplines they were most closely associated with. Although the Department of Education’s CIP coding system does not include a commonly accepted list of disciplines, we determined that Ohio’s convention was reasonable and we applied the coding consistently across all three states to identify the academic discipline of each individual. The North Dakota data included multiple observations for some faculty members within a single institution and term. This occurred for a variety of reasons, such as a faculty member holding two positions at the same institution (e.g., both a coach and an instructor, or half time as an instructional graduate assistant and half time as a research graduate assistant). To compile a consistently structured dataset of unique faculty- institution pair observations, we implemented the following sequential process to select and eliminate duplicate faculty observations. We confirmed with North Dakota officials that our approach and methods were appropriate. For faculty with multiple observations, we dropped any observations where (1) no earnings were listed in any term or earnings were only listed for the summer term but the faculty member taught no courses at the given institution in the summer; or (2) the work responsibilities associated with the faculty observation were not directly related to teaching (e.g., graduate assistant research or grading, management, administration, research, or coaching) and a different observation for that faculty member at the same institution had teaching duties listed. We dropped these duplicate observations because there was a more appropriate observation to be used for the given faculty member at the given institution with earnings information and an associated instructional position. For the remaining faculty with multiple observations, we sequentially kept one observation as the primary faculty position based on hierarchical logic we developed. For example, we dropped any additional observations with an employee status other than “active” or a position identified as “temporary.” As appropriate, we either aggregated hours worked and earnings across the multiple observations before dropping the duplicate observations or we took the hours worked and earnings values from the observation identified as primary. Course Data Compilation and Restructuring Course data from all three states included each unique course section taught over the academic year by institution, term, and faculty instructor. We analyzed course sections for which there was an instructor identified and enough information about that faculty member to categorize them by faculty type (e.g., full-time tenure-track versus part-time contingent, etc.). For all three states, we aggregated these data by course type and other information to the level of the unique faculty-institution pair. For example, a single faculty member at a single institution may have taught 10 course sections, all at the undergraduate level and spread across the year—4 in fall term, 4 in spring term, and 2 in summer term. Courses are listed in the state data at both the course number level (e.g., Biology 101) and the course section level (e.g., Biology 101, Sections A, B, and C). Our analyses generally examined unique course sections by faculty member (e.g., two separate sections of Biology 101 are considered as two courses), as that is a more accurate depiction of faculty workload. Thus, for consistency and clarity throughout our report, we use the term “courses” to refer to our analyses of course sections. In a few special circumstances, we counted courses at the course number level instead of the course section level to minimize potential bias in our work (see additional information below). The course data included information about courses that we systematically coded and grouped to ensure consistency across the three states. For example, each state identified the academic level of each course. The Georgia and North Dakota data identified courses along a spectrum—generally developmental, freshman, sophomore, junior, senior, or graduate. The Ohio data had a different classification series: Developmental: All courses which are below college level General Studies: All courses which are general, introductory, or core Technical: Only those courses which are part of an associate degree program of technical education and are within the technical portion of a curriculum Baccalaureate: All courses which are specialized within a discipline Master’s / Doctoral / Professional – All graduate courses of various To categorize undergraduate course levels consistently across the states, we identified courses as (1) undergraduate lower if they were at the freshman, sophomore, general, or technical levels; or (2) undergraduate upper if they were at the junior, senior, or baccalaureate levels. Developmental and graduate courses were identified consistently in each state’s data. We made a number of decisions about how to categorize and count courses consistently across institutions and states. For example, we dropped cancelled courses or courses with no student enrollment. We also excluded from our primary analyses courses that would likely be student-led or student-initiated and thus could be considered atypical courses. We excluded these courses to minimize the potential bias of inflating the percentage of courses taught and deflating the earnings per course of one faculty type relative to another. After reviewing course types and titles, as well as associated student enrollment numbers and credit hours, we identified courses that met this definition and categorized them as atypical. Among the courses we identified as student-led or student-initiated were: Art or musical exhibitions, performances, or recitals Independent, supervised, dissertation, or thesis research Internships, fieldwork, practicums, cooperative experiences Varsity athletics These atypical courses made up close to a quarter of all courses across 4-year institutions in the three states and less than 10 percent of courses at 2-year institutions. As expected, and due to many being independent or single-student enrollment courses, they generally represented much smaller proportions of student credit hours across all institutions. Across 4-year public institutions in all 3 states, tenure-track faculty taught close to 75 percent or more of these courses. We also accounted for cross-listed courses and multiple lab sections to more accurately capture faculty workloads. Some courses in the Georgia and North Dakota data were cross-listed in multiple departments with different course acronyms for each department. For example, the course “Intro Robotics Research” taught by a single faculty member at one institution was listed three times under different department acronyms, with several students enrolled under each listing. Course sections listed multiple times due to being cross-listed would artificially inflate counts of courses taught, as these cross-listings actually represent only one course section. To avoid inappropriately counting them as separate courses, we counted cross-listed courses by using their course numbers (and also their course name in North Dakota) without the course acronyms attached. Thus, when we aggregated counts of courses by faculty- institution pair, term, and course type, these cross-listed courses were counted as one course and numbers of students and student credit hours were aggregated in association with the course. Due to inconsistencies in how lab sections were organized in the data, we aggregated labs by their course number (within a faculty-institution pair and term). For example, some lab sections were listed as 4-credit courses that appeared to have the lecture and lab components combined in a single listing, while others had a 3-credit lecture course listed and multiple sections of a 1-credit lab. To be as consistent across states as possible and to minimize the potential bias of inflating the percentage of courses taught and deflating the earnings per course of one faculty type relative to another, we combined lab sections into a single course count. To do so, we identified the lab sections within a particular course number, instructor, institution, and term and then flagged the first lab section for counting. Thus, similar to the cross-listed courses, when we aggregated counts of courses by faculty-institution pair, term, and course type, these lab sections were counted as one course and enrollment numbers aggregated in association with the course. For outlier faculty who taught especially large numbers of course sections, we counted their courses taught at the course number level (e.g., Biology 101) instead of the course section level (e.g., section 1 of Biology 101). After compiling the data and producing preliminary counts of course sections taught, some faculty in all three states emerged as outliers—teaching large numbers of course sections in a given term, in some cases, more than 50, for example. Though the data do not provide exact reasons for the large numbers of course sections taught, these outliers may have a number of possible explanations that could vary by state and institution. Among other effects, these outlier observations could artificially inflate the percentage of courses taught and deflate the earnings per course of one faculty type relative to another. To mitigate these effects, we counted courses taught for these outlier faculty at the course number level—where they are clearly distinct—instead of the course section level—where it is less clear why there are multiple sections. For example, Biology 101 is clearly a different course than Biology 201 or Chemistry 101 (regardless of section number), whereas section A of Biology 101 could actually be combined with section B and they are just listed separately for other reasons. We did not set a maximum number of courses that an individual could teach (i.e., individual faculty could still be listed as teaching large numbers of courses if they were associated with large counts at the course number level). We counted course numbers for outlier faculty because their large numbers of course sections listed suggested the possibility of a data anomaly; for all others (non-outlier faculty), we counted course sections. We set our outlier threshold as 15 course sections taught over the academic year based on an examination of the range of course sections taught by faculty in the three states’ data and conversations with administrators during our site visits. According to preliminary counts of course sections taught after excluding atypical courses, more than 95 percent of faculty in each state taught 15 course sections or fewer over the entire academic year. In addition, during our site visits, the largest number of course sections taught per term that administrators identified was 6, which could reasonably result in 15 course sections over the year (6 in fall term, 6 in spring term, and 3 in summer term—half the amount due to the condensed format). Analysis of Faculty Makeup and Utilization To analyze faculty makeup and utilization by institution, we merged information about institutional characteristics from IPEDS onto our state datasets. We analyzed faculty makeup, including counts and percentages of faculty positions by type of position and faculty characteristics (e.g., age, education, and academic discipline), by the following faculty categories (based, in part, on faculty tenure and work statuses): We sometimes analyzed full-time and part-time contingent faculty and instructional graduate assistants combined as “contingent faculty” and full-time and part-time tenure-track combined as “tenure-track faculty.” Unlike our analyses of IPEDS data, we included instructional graduate assistants in our combined contingent faculty group because they were listed as teachers of record for courses in the state data. We analyzed administrators/management as a separate group because these individuals represent a non-traditional class of faculty. For example, administrators may not have tenure-track status due to their management roles, but are in positions that may not be appropriate to be considered “contingent” (e.g., a dean might not be a tenure-track faculty member, but neither are they a contingent faculty member). We analyzed educational attainment of faculty by calculating the percentage of faculty with graduate or doctoral degrees by faculty type and institution type in in North Dakota and Ohio. Table 15 shows the total number of instructional faculty positions by institution type in each state, as well as selected faculty demographics. We analyzed faculty utilization by aggregating counts of courses, students, and student credit hours taught by each faculty category above, and by term and type of course, and by calculating percentages taught out of the entire population and certain subgroups. As a first step in this process, we aggregated counts of courses, students, and student credit hours for each faculty-institution pair by term and type of course. As a result, each faculty-institution pair had count variables that listed, for example, how many courses and students they taught in fall term at the undergraduate upper level. The Georgia and Ohio data listed courses multiple times if multiple faculty share the instructional responsibility. To ensure course sections were not double-counted, we counted them in fractional terms based on how many instructors were listed; for example, if a course section was listed twice—with two faculty members having equal responsibility for the course—we counted each faculty member as teaching half of that course. We also used this fractional count to pro-rate or assign responsibility for students and student credit hours. We calculated this fractional count slightly differently for the Georgia and the Ohio data: Georgia: The Georgia data provided a teaching responsibility percentage for each faculty member associated with a course section. For example, a course section that was listed 3 times (for 3 different faculty with responsibility) might be split evenly 1/3-1/3-1/3 or might be split as 50-30-20 percent responsibility to each of the three faculty members. Thus, we used this individually provided fractional value. Ohio: The Ohio data did not provide a teaching responsibility percentage for each faculty member associated with a course section. Thus, we assigned equal responsibility (as the simplest assumption) to all staff listed for a course. After aggregating counts to the faculty-institution pair level, we further aggregated counts to the faculty category and institution type level. Our analyses focused on counts and percentages of courses and student credit hours by these faculty categories. Table 16 shows the total number of courses taught by institution and faculty types in each state. We also analyzed economic circumstances by examining median annual earnings and receipt of work-provided retirement, health insurance, and life insurance benefits by faculty type. We calculated an annual earnings amount for each faculty member and then analyzed median earnings by faculty type. For benefits, we identified whether individual faculty received a given benefit during the year, and then calculated the percentage of each faculty type receiving those benefits. We were unable to analyze benefits in this way for faculty in Ohio. See table 14 above for additional details about our earnings and benefits calculations by state. HDS Analyses of Faculty Makeup To estimate population percentages by faculty type and discipline in humanities departments at 4-year institutions, we used HDS data that were published in a technical report sponsored by AAAS. Our population of instructional faculty included faculty in humanities departments at 4-year institutions. The sample was stratified by discipline and degree level of courses taught (i.e., bachelor’s, master’s, and doctoral degree courses). We were unable to access the data with the sample design information (i.e. sampling weights and stratification identifiers) necessary to calculate margins of errors that took into account the sample design features. To allow us to estimate margins of error for the estimates presented in the report, AAAS provided information on the number of respondents associated with each response category since the survey had unit and item nonresponse. We incorporated this information into a simple random sampling formula, which we adjusted for the design effect due to unequal weighting that resulted from stratification within departments (e.g., differences in the extent to which departments may offer bachelor’s, master’s, and doctoral degree courses). Section 3: Pay per Course Regression Analysis (State Data) This section discusses the regression analysis methods we used to analyze and compare pay-per-course rates across different types of faculty at public institutions in North Dakota and Ohio. We used data from the three states to conduct multivariate regression analyses that examined rates of compensation across faculty types. Data from North Dakota and Ohio allowed us to link faculty members’ pay over the course of an academic year with the number of courses they taught to calculate pay-per-course rates that are comparable across faculty types. Data from Georgia did not allow us to do this because the earnings data from Georgia is for a calendar year that did not align with the course data for the academic year. However, we used Georgia’s data to develop assumptions about faculty work activities (see below for more details). The state data we used to analyze pay-per-course rates covered courses taught and earnings from fall 2015 through summer 2016 for North Dakota, and summer 2014 through spring 2015 for Ohio. Analysis Population The faculty populations included in our regression analyses of the North Dakota and Ohio data begin with the same population of instructional faculty analyzed elsewhere in our work—any individual who teaches a course at a 4-year or 2-year public institution in the state. However, due to some faculty observations missing information for independent variables, as well as the specifications of some of our models that focused on subgroups within the data, the number of faculty observations in our regression analyses differed slightly from those in our other analyses. In assessing the association between faculty type (e.g., contingent faculty) and pay per course, we focused on three primary populations: (1) all faculty; (2) primarily teaching faculty; and (3) primarily teaching faculty at 4-year institutions. The primarily teaching faculty group excludes faculty who primarily hold other roles unrelated to instruction (e.g., administrators and research faculty). We also examined a population limited to 4-year institutions because their pay and faculty utilization structures may differ substantively from 2-year institutions. North Dakota: Compared to the 3,608 faculty observations with complete faculty and course identification data across North Dakota public institutions that we analyze for workforce makeup and utilization, the number of observations included in our regression analysis population is reduced to 3,486 due to our dropping of cases where total earnings was less than one dollar or missing, or where the number of in-scope courses taught was zero (more information below under discussion of dependent variables). After introducing the full range of independent variables in our complete model with all faculty at all institutions, our population is reduced to 3,485 due to one faculty member being omitted due to missing data. When we limit the population to primarily teaching faculty at all institutions, there are 3,404 observations, and when we only include 4-year institutions, there are 2,876 observations. Ohio: Compared to the 34,461 faculty observations with complete faculty and course identification data across Ohio public institutions that we analyze for workforce makeup and utilization, the number of observations included in our regression analysis population is reduced to 30,672 due to our dropping of cases where total earnings was less than one dollar or missing, or where the number of in-scope courses taught was zero (more information below under discussion of dependent variables). After introducing the full range of independent variables in our complete model with all faculty at all institutions, our population is reduced to 30,656 due to 16 faculty members missing data for covariates. When we limit the population to primarily teaching faculty at all institutions, there are 28,811 observations, and when we only include 4-year institutions, there are 21,482 observations. Approximating Instructional Pay from Georgia Data on Faculty Work Activities As explained earlier in the report, we examined instructional pay per course as a way to isolate the earnings for comparable work across faculty types—for example, those who only teach (salaried or paid by the course) versus those who have other responsibilities beyond teaching. Institutions do not generally structure compensation by types of work activities, though some faculty have work responsibility expectations associated with their positions; for example, a full time tenure-track assistant professor may have work responsibly expectations of 60 percent instructional, 30 percent research, and 10 percent other service to the institution. If this faculty member earns $80,000 per year and teaches 8 courses over the course of the year, her total pay per course, which ignores time spent on research and other activities, would be $80,000/8 = $10,000 per course. However, prorating the earnings to those for instructional work activities only, the instructional pay per course would be ($80,000*0.6)/8 = $6,000. We assessed each regression model based on the outcomes of total pay per course and instructional pay per course, where earnings were prorated for instructional time. Because information about faculty work activity was unavailable in the North Dakota and Ohio data, but was available in the Georgia data, we used empirical data that we received on four of the Georgia 4-year public institutions to identify work activity percentages by faculty type. We then assigned those percentages to similar faculty in North Dakota and Ohio. We identified the median instructional work activity percentages for the faculty in Georgia’s 4-year public institutions within profiles based on a combination of faculty characteristics including faculty category (e.g., full- time tenure-track, full-time non-tenure-track, part-time non-tenure-track, etc.), job category (e.g. administration/management, teaching faculty, research/other faculty, etc.), and when applicable, rank (e.g. full professor, assistant professor, instructor/lecturer, etc.). We then applied the median instructional work activity percentage from the Georgia data by these profile groups to faculty at 4-year institutions in the North Dakota and Ohio data with the same profile. For faculty in the job categories of administrators/management staff, instructional graduate assistants, coaches, and postdocs, the median instructional work activity percentage in those groups overall was sufficiently explanatory. For the remaining two job category groups of instructional faculty and research/other faculty, we used median work activity percentages by faculty category (e.g., full- time tenure-track) and rank (e.g., full professor). If a faculty member did not have a rank identified in the data, we used the median work activity percentage for the faculty category overall (see table 17). Because the data on work responsibilities pertained to public 4-year institutions in the Georgia data, we did not prorate faculty at 2-year institutions accordingly. Because 2-year institutions generally do not have a research mission, we coded all faculty at 2-year institutions as 100 percent instructional, except for administrators/management staff. We prorated administrators/management staff according to the same method as at 4- year institutions due to their likely having substantial non-teaching responsibilities. Faculty earnings in the North Dakota and Ohio data were multiplied by the relevant median instructional work activity percentage in order to adjust pay to reflect instructional work activity, resulting in an “instructional pay” amount. The majority of adjustments—prorating of earnings to account for non-instructional activities—were applied to faculty in the full-time tenure-track group, who were most likely to have other work responsibilities. Some adjustment to earnings also occurred in the full- and part-time contingent groups, as well as for faculty who had a job type that indicated substantial administrative and management roles. No prorating occurred for instructional graduate assistants. Dependent Variables We conducted regressions using the following dependent variables: a) Log (total pay per course) – In our analysis of the North Dakota and Ohio data, we used the natural logarithm of the total pay per course, which is defined as the total annual earnings (i.e., total pay) divided by the total courses taught within that year. b) Log (instructional pay per course) – In our analysis of the North Dakota and Ohio data, we also used the natural logarithm of the instructional pay per course, which is defined as total annual earnings adjusted to reflect instructional work activity (i.e., instructional pay) divided by the total courses taught within that year. We excluded cases from our analysis if they were missing values for either total annual earnings or total courses taught within that same year because these variables were the primary components of pay per course. We dropped cases where total earnings were less than one dollar or missing (19 observations in North Dakota and 2,869 observations in Ohio) or the number of courses taught was zero (103 observations in North Dakota and 920 observations in Ohio) since division by zero is undefined, and our population is intended to reflect any individual who actually teaches a course at 4-year and 2-year public institutions in the state. We then divided pay (total or instructional) by the number of courses taught to obtain the pay-per-course value. We use the log of total and instructional pay per course for the dependent variables in a linear model reflecting both the assumption that the underlying distribution is closer to the log normal than normal, and also to present results in terms of percentage changes in pay per course. In the Ohio data, because we use fractional counts for courses when multiple faculty are listed as having responsibility for the course, 3,453 faculty in the analysis population teach less than 1 course. For those faculty, we round all course counts that are less than 1 up to 1 to avoid dividing faculty earnings by a fractional course count (between 0 and 1), which would result in an inaccurate and substantially large pay-per- course value. Independent Variables The primary independent variable of interest in our analysis was faculty type. We categorized faculty into five types: full-time tenure-track, full-time contingent, part-time tenure-track, part-time contingent, and graduate assistant. Our main interest was comparing contingent faculty and graduate assistants to full-time tenure-track faculty. We controlled for the part-time tenure-track group, but due to the small size of this population (at most, 35 faculty in North Dakota and 274 faculty in Ohio), we did not substantively examine these estimates. All regression models set the base group for faculty type as full-time tenure-track. We included in our regression models additional independent variables as controls for faculty and institution characteristics. Faculty characteristics include sex, race, age, age squared (to account for the potential non- linear relationship between earnings and age), highest degree earned, and academic discipline. Other faculty characteristics we controlled for in our models included whether a faculty member had grant funds (North Dakota only), whether a faculty member taught summer courses, and indicators identifying non-traditional faculty roles, such as administrators/management or coaches. We also included fixed effects for institutions to control for differences between institutions, especially in terms of pay due to factors such as size, sector, and research/graduate component, among other things. We also examined rank of faculty (e.g. associate professor, assistant professor, instructor/lecturer, etc.), but excluded it from our complete models due to collinearity with the faculty type variable. Regression Model Detailed Results Tables 18 and 19 (below) shows the coefficients and standard errors from each of our final pay-per-course regression models, as well as for the unadjusted model that included only the primary independent variable of interest (total pay-per-course results at the top and instructional pay-per- course results below). For our categorical variables, estimated coefficients are relative to the excluded (reference) category. For example, since the reference category for our main independent variable, faculty type, was full-time tenure-track, the estimated coefficients for other categories of this variable are always relative to this excluded reference category, holding all other variables in the model constant. Thus, in model 2 for North Dakota, the coefficient for full-time contingent faculty is 0.682. This can be interpreted as full-time contingent faculty pay per course is 0.682 that of full-time tenure-track faculty (i.e., full-time contingent faculty are paid 68.2 percent what full-time tenure-track are, per course), holding all other variables in the model constant. Because the dependent variables in the earnings models are the natural logarithms of earnings, subtracting one from the presented coefficients on categorical variables can be interpreted as the percentage change in the dependent variable associated with a change in the categorical variable, relative to the reference category, holding all other variables constant. In this same example, full-time contingent faculty are paid an estimated 31.8 percent less than full-time tenure-track faculty, because 0.682 – 1 = -0.318, or 31.8 percent less. Additional Analyses and Sensitivity Tests The North Dakota and Ohio data used in the regression analyses include a small number of faculty (1.1 and 0.5 percent of observations, respectively) who are listed as teacher of record for more than 15 courses over the year, which may represent unusually high workloads or data anomalies. In addition, some faculty have small or large pay-per-course values when compared to the overall distribution. To preserve the integrity of the data, we did not exclude these observations from the analyses. However, we tested our models with and without these observations to assess the effect on our substantive regression results. In order to assess the effect of faculty with a large workload, we conducted regression models 3 and 4 (in tables 18 and 19 above) limited to faculty who taught 15 or fewer courses over the year. In order to assess the effect of faculty with the outermost values of the dependent variable pay per course, we conducted the same regression models limited to faculty whose pay per course was within the middle 98 percent of pay-per-course values (i.e., we trimmed the bottom and top 1 percent of observations). In both of these sensitivity analyses, we found substantively similar results. We also ran our regression models on a more refined population that only included primarily teaching faculty at 4-year institutions (faculty at 4-year institutions represent most of our analysis population). As shown in table 18 above, in terms of total pay per course, full-time contingent faculty in North Dakota and Ohio are paid about 40 and 43 percent less per course, respectively, than full-time tenure-track faculty—compared to 35 and 40 percent less per course, respectively, when both 4-year and 2-year institutions are included. This slightly larger pay-per-course disparity as compared to the population overall may be, in part, because pay and utilization of full-time faculty vary somewhat by institution type (e.g., at 4- year institutions, pay is generally higher but less flat, and some full-time tenure-track faculty teach fewer courses due to their more extensive research responsibilities). Section 4: Annual Earnings Regression Analysis (SDR Data) This section discusses the regression analysis methods we used to analyze and compare annual earnings among different types of faculty using national 2013 SDR data on doctorate-holding faculty in the STEM, health, and social sciences fields. Dependent Variable We conducted regressions using the following dependent variable: Log (annual salary)—the natural logarithm of annual salary, defined as the basic annual salary from the respondent’s principal job. Independent Variables The primary independent variable of interest in our analysis was faculty type. We categorized faculty into five types: full-time tenure-track, full-time contingent, part-time tenure-track, part-time contingent, and graduate assistant. Our main interest was comparing contingent faculty to full-time tenure-track faculty. Though we controlled for the part-time tenure-track and graduate assistant groups, we did not substantively examine these estimates. All regression models set the reference group for faculty type as full-time tenure-track. We included in our regression models additional independent variables as controls for faculty and institution characteristics. Faculty characteristics included sex, race, age, age squared, number of weeks worked per year, and academic discipline. Other faculty characteristics we controlled for included the year of highest degree earned—which we used as proxy for general experience—and whether a respondent indicated that they were an administrator. We also included institution type (e.g., 4-year college or university, 2-year college or university). After introducing the full range of independent variables in our complete model, our analysis sample was reduced from 7,232 faculty respondents to 7,226 due to 6 faculty respondents being omitted due to missing data. We examined faculty rank (e.g. professoriate, instructor/lecturer) and academic position variables for “adjunct” faculty and postdocs, but we excluded these variables from our complete model, as we determined they did not have meaningful information for the purpose of our analyses. Regression Model Detailed Results In our complete model, full-time and part-time contingent faculty earned 22 percent less and 70 percent less, respectively, than full-time tenure- track faculty annually (see table 20). Across our preliminary models (not shown below) and complete model, the coefficients related to our main independent variable remained relatively constant, ranging from 0.76 to 0.86 for full-time contingent faculty and 0.26 to 0.43 for part-time contingent faculty, expressed as proportion of full-time tenure-track faculty earnings. Appendix II: IPEDS Data on the Racial and Ethnic Distribution of Faculty Positions Nationwide, 2015 Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Nagla’a El-Hodiri (Assistant Director), Nisha R. Hazra (Analyst-in-charge), Sandra Baxter, Justin Gordinas, Michael Kniss, and Alexandra Squitieri made key contributions to this report. Also contributing significantly to this report were Melinda Cordero, Grant Mallie, Jean McSween, Moon Parks, and Sonya Vartivarian. Key support was provided by James Ashley, James Bennett, Grace Cho, Jessica Orr, James Rebbe, Almeta Spencer, and Elaine Vaurio.

Why GAO Did This Study Contingent faculty play a large role in postsecondary education but may not have the same job protections as tenured or tenure-track faculty. In 2015, GAO reported that contingent workers—those in temporary, contract, or other non-standard employment arrangements—earn less, are less likely to have work-provided benefits, and are more likely to experience job instability than standard workers. GAO was asked to examine issues related to contingent faculty. This report examines (1) what is known about the makeup and utilization of the postsecondary instructional workforce; (2) the roles different types of faculty fill at selected institutions and the factors administrators consider when determining faculty makeup; (3) what is known about how economic circumstances compare across different faculty types; and (4) what contingent faculty members report as advantages and disadvantages of their work. GAO analyzed data from nationally representative sources and from public institutions in three states—Georgia, North Dakota, and Ohio. GAO selected these states based primarily on data availability. GAO interviewed administrators from 9 postsecondary institutions in these states and one large for-profit institution. GAO selected institutions based on factors such as institution size and percent of contingent faculty. GAO also conducted 21 discussion groups with contingent faculty. The Department of Education did not have comments on this report. The National Science Foundation provided technical comments, which we incorporated, as appropriate. What GAO Found According to 2015 Department of Education data, contingent faculty—those employed outside of the tenure track—made up about 70 percent of postsecondary instructional positions nationwide, though this varied by type of institution. In addition, data from three selected states show that contingent faculty teach about 45 to 54 percent of all courses at 4-year public institutions, and higher proportions at 2-year public institutions. In terms of job stability, some full-time contingent positions with annual or longer contracts may be relatively stable while part-time positions with short-term contracts may be among the least stable, though it is unknown whether faculty in these positions have other employment. In contrast, tenure-track positions are often viewed as having a high degree of job security that is somewhat unique to postsecondary education. Administrators GAO interviewed at selected postsecondary institutions said full-time contingent faculty generally carry heavy teaching loads, and some also take on additional responsibilities, such as conducting research or advising students. However, administrators stated that part-time contingent faculty generally focus solely on teaching. As shown in the figure below, administrators also described factors they consider in determining their institution's faculty makeup. GAO examined recent data from North Dakota and Ohio public institutions and found that, among faculty who primarily teach—which excludes individuals such as administrators or researchers—part-time and full-time contingent faculty were paid about 75 percent and 40 percent less per course, respectively, compared to full-time tenure-track faculty. This comparison includes earnings for all of their responsibilities, including teaching and any other duties. However, when estimating faculty earnings for teaching duties only, pay disparities decreased to about 60 percent and 10 percent less per course for these contingent faculty, respectively. In addition, state and national data also showed that relatively few part-time contingent faculty received work-provided health or retirement benefits. In discussion groups with GAO, contingent faculty cited advantages such as the flexibility to balance professional and personal responsibilities, skill development, or working with students, and described disadvantages that included uncertainty due to short-term contracts, untimely contract renewals, and pay—including a lack of compensation for some of their work. Other concerns they cited included limited career advancement opportunities, not having a voice in institutional decision-making, and not having certain types of institutional support.

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Background As we have previously reported, transportation systems and facilities are vulnerable and difficult to secure given their size, easy accessibility, large number of potential targets, and proximity to urban areas. TSA’s mission is to protect the nation’s transportation systems by providing effective and efficient security to ensure freedom of movement for people and commerce. Accordingly, TSA is responsible for managing vetting and credentialing programs to ensure that individuals that transport hazardous materials or have unescorted access to secure or restricted areas of transportation facilities at maritime ports and TSA-regulated airports do not pose a security threat. In order to carry out this responsibility, TSA conducts background checks—known as security threat assessments— on individuals seeking an endorsement, credential, access, and/or privilege (hereafter called a credential). Specifically, TSA reviews applicant information and searches government databases, such as criminal history records from federal, state, and local sources in the Federal Bureau of Investigation’s National Crime Information Center database and Terrorist Screening Database, which is the federal government’s consolidated terrorist watchlist. This information is used to determine whether the applicant has known ties to terrorism and whether the applicant may be otherwise precluded from obtaining a credential based on his or her immigration status and criminal history, among other factors. If TSA determines that an applicant does not pose a security threat, a credential may be supplied by an issuing entity. If it determines an applicant should be denied, the agency issues a preliminary determination of ineligibility letter to the applicant. The applicant may seek redress by appealing the determination or requesting a waiver. TSA’s security threat assessments support over 30 credentialing programs in the maritime, surface, and aviation transportation segments. The largest programs include the Transportation Worker Identification Credential program for maritime workers, Hazardous Materials Endorsement program for commercially licensed drivers, the Aviation Worker program, and TSA Pre® for travelers at airport checkpoints. According to TIM program officials, these transportation programs are collectively estimated to have processed about 12.8 million enrollments by October 2017. Table 1 describes the largest transportation credentialing programs, by segment, and purpose of each. TSA Established the TIM Program to Address Shortcomings with Security Threat Assessments and Credentialing Systems TSA’s legacy IT systems that are currently used to help conduct its security threat assessment and credentialing functions are an aggregation of stove-piped solutions that were developed over a period of time to support individual transportation screening programs. These systems are duplicative and lack needed sophistication to effectively detect, for example, if an individual is attempting to gain access to multiple facilities across different transportation programs in an effort to find any successful entry point. Early detection of this type of threat is difficult and time consuming because many aspects of the current systems are not fully automated. Additionally, we and the DHS Office of Inspector General (OIG) have previously reported numerous shortfalls with TSA’s security threat assessment and credentialing systems. We reported in 2011 that the demand for security threat assessments is expected to continue to grow and the existing credentialing systems will not be able to accommodate this growing enrollment demand. In July 2013, we reported on functional limitations and technical problems with TSA’s legacy credentialing systems that were to be addressed by the TIM system. These limitations included the inability to run reports to measure TSA response times to applicants, track adjudication of cases, and address case workload backlogs. We also reported on delays in processing new cases. We made recommendations to address these issues and DHS agreed with our recommendations. DHS has taken several actions to implement the recommendations, such as establishing a process for developing accurate workload projections and hiring additional adjudicators. In June 2015, DHS’s OIG reported on issues with TSA’s lack of continuous vetting once a credential was issued, referred to as recurrent vetting. For example, the OIG reported on the need for recurrent vetting of aviation workers. Specifically, it found that TSA did not have effective controls in place for ensuring that aviation workers had not committed crimes that would disqualify them from having unescorted access to secure areas of airports, and that they had lawful immigration status and were authorized to work in the United States. Instead, TSA depended on the commercial airports and air carriers to verify criminal histories of workers who already hold credentials, and on the credential holders themselves to report disqualifying crimes to the airports where they worked. The DHS OIG recommended that TSA pilot the Federal Bureau of Investigation’s Rap Back program and take steps to institute recurrent vetting of criminal histories at all commercial airports. TSA concurred with the recommendation and stated that it planned to initiate a pilot Rap Back program to help ensure full implementation across all eligible TSA- regulated populations in the future. In September 2016, DHS’s OIG reported that, although TSA required Transportation Worker Identification Credential cardholders to self- report to the administration and surrender their card when charged with a disqualifying offense, this self-reporting occurred only once between 2007 and 2016. The report also stated that TSA was testing two methods to implement recurrent vetting into its credentialing programs—the Federal Bureau of Investigation’s Rap Back program to check for criminal violations and the use of DHS’s Automated Biometric Identification System to check for both criminal and immigration violations. However, TSA’s plans did not include a method for determining the best approach, and the OIG reported that this would impede TSA’s ability to implement recurrent vetting successfully and efficiently. Accordingly, the OIG recommended that TSA establish measurable and comparable criteria to use in evaluating and selecting the best criminal and immigration recurrent vetting option, and TSA concurred with this recommendation. Also, in September 2016, the DHS OIG reported that the background checks for the Transportation Worker Identification Credential program were not as reliable as they could be. For example, the OIG found that TSA did not have processes in place to ensure the proper separation of duties for adjudicators, who had the ability to assign, review, and perform quality assurance on the same case. The OIG also found missing supervisory review controls in the terrorism vetting process. Accordingly, the OIG recommended that TSA identify and implement additional internal controls and quality assurance procedures; TSA agreed with the recommendation. In response, TSA planned to make improvements to the TIM system to include an additional quality assurance component in which the system would automatically select cases for senior adjudicators to review and to incorporate into the overall reporting and monitoring activities. The TIM system is intended to address the shortfalls identified in these prior reports by providing a modern and centralized end-to-end credentialing system. The system is also intended to provide counter- terrorism and trend analytic capabilities to help identify unusual activities (e.g., credential shopping and using multiple aliases) across the entire credentialing process and all transportation populations supported by TSA’s security threat assessments. In addition, the system is expected to enable automated recurrent vetting of individuals against criminal and immigration databases to ensure that a credential or endorsement is revoked if an individual commits a disqualifying act. The planned credentialing process that is to be supported by the TIM system includes: Registration and enrollment: Individuals seeking a credential or endorsement under one of the transportation programs supported by the system are expected to be able to apply for a security threat assessment at a Universal Enrollment Center or via the system’s online portal. The biographic and biometric information collected from the applicant is to be received and processed by the system. Eligibility vetting and risk assessment: The system is to conduct automated vetting of the applicant’s information against criminal, immigration, and terrorism watchlists to determine the security risk associated with allowing access privileges based on the criteria for the credential or endorsement that the individual is seeking to obtain. If the results return a flag for a potentially disqualifying factor, the applicant’s case is to be sent for adjudication. TSA adjudicators are to use the system to review and adjudicate cases that did not pass automated vetting by comparing the applicant’s information to the criteria for the credential or endorsement that the individual is seeking to obtain. The adjudicators are to determine the applicant’s eligibility for the credential or endorsement, and approve or deny the individual’s application. Issuance: When an applicant is approved through eligibility vetting or adjudication, the system is to notify the applicant of approval and provide instructions on how to receive the credential, which is to be activated by the system and supplied by the issuing entity. The applicant also is to be able to login to the online portal to view the status of the application. Verification and use: Use of the credential in secured areas is to be verified, including determining that the credential is authentic, that the individual is the correct recipient of the credential, and that the credential’s status is valid (not revoked or expired). Revocation and expiration: The system is expected to conduct subsequent automated recurrent vetting of individuals who previously had been approved against criminal, immigration, and terrorist databases on an ongoing basis. If, as a result of recurrent vetting or self-reporting, there is new information indicating that an applicant’s credential should be revoked, the system is to alert the adjudicators who are then to determine if revocation is needed. The system is to prompt credential expiration at the end of a specified period of time. Redress or waiver: An applicant that is denied a credential is to be able to apply to TSA to either appeal the decision, to include providing documentation to prove that he/she is eligible, or request a waiver from having to meet the eligibility criteria. Trend analytics: The system is to allow TSA’s Office of Intelligence and Analysis users to select from a standardized suite of analysis tools that would allow them to identify unusual activities across transportation populations. A key objective would be to identify through analysis those adversaries and terrorists who may attempt to hide behind multiple personas and aliases. Figure 1 provides an overview of the intended future credentialing process which the TIM system is expected to support. Agile Software Development TIM program officials decided to adopt an Agile software development approach—a type of incremental development—which calls for the rapid delivery of software in small, short increments rather than in the typically long, sequential phases of a traditional waterfall software development approach. This decision is consistent with OMB’s guidance as specified in its IT Reform Plan, as well as the legislation commonly referred to as the Federal Information Technology Acquisition Reform Act. Agile emphasizes early and continuous software delivery, as well as using collaborative teams and measuring progress with working software. Figure 2 provides a depiction of software development using the Agile approach compared to a waterfall approach. The Agile approach significantly differs in several ways from traditional waterfall software development. Table 2 highlights major differences between the Agile and waterfall software development approaches. Additionally, Agile practices integrate planning continuously throughout the life-cycle. Although Agile requires some high-level, up front planning, in general, planning in Agile focuses on the near term of the next few software releases. Planning sessions are conducted to support each release, iteration, and every work day. For example, development teams have daily meetings, where the team members discuss what they did yesterday and what they plan to do that day. Frequent planning is aimed at ensuring the program is delivering the needed capabilities to the end users. As we have previously reported, numerous frameworks are available to Agile practitioners to guide their Agile software development activities. Scrum is one common framework, which is widely used in the public and private sectors and its terminology is often used in Agile discussions. The following are key Scrum terminology and concepts: Product owners represent the end user community and have the authority to set business priorities, make decisions, and accept completed work. Scrum iterations (also called sprints) are where development teams build a piece of working software during a short, set period of time (e.g., 2 weeks). A collective set of sprints is bundled into a software release. Sprint teams (or development teams) conduct the Agile software development and testing work. These teams collaborate with minimal management direction, often co-located in work rooms. They meet daily and post their task status visibly, such as on wall charts. Scrum masters, similar to project managers, are responsible for removing impediments to the sprint teams’ ability to deliver the product goals and deliverables. User stories convey the customers’ requirements at the smallest and most discrete unit of work that must be done to create working software. Each user story is assigned a level of effort, called story points, which is a relative unit of measure used to communicate complexity and progress between the business and development sides of the project. To ensure that the product is usable at the end of every iteration, teams adhere to an agreed-upon definition of what constitutes acceptable, completed work. Backlogs are lists of requirements, such as user stories, to be addressed by working software. If new requirements or defects are discovered, these can be stored in the backlog to be addressed in future iterations. Velocity is a metric which is used to track the rate of work completed using the number of story points completed or expected to be completed in an iteration (i.e., sprint), or release. For example, if a team completed 100 story points during a 4-week iteration, the velocity for the team would be 100 story points every 4 weeks. Another framework, referred to as the Scaled Agile Framework (SAFe), is a governance model for organizations to use to align and collaborate the product delivery for modest to large numbers of Agile software development teams. The framework is intended to be applied to several organizational levels, including the development team level, the program level, and the portfolio level. It is also intended to provide a scalable and flexible governance framework that defines roles, artifacts, and processes for Agile software development across all levels of an organization. DHS has sought to establish Agile software development as the preferred method for acquiring and delivering IT capabilities. Specifically, in February 2016, the DHS Under Secretary for Management initiated an Agile software development pilot to improve the execution and oversight of the department’s IT acquisitions. The Under Secretary for Management selected five DHS programs that were in various stages of the acquisition life-cycle, including the TIM program, to be part of the pilot. As part of this pilot initiative, DHS established integrated product teams designed to support each of the five programs in their efforts to adopt Agile practices. These teams were directed to focus on effectively planning and executing the pilot programs, as well as developing appropriate documentation to support program execution. According to the Under Secretary for Management, the department plans to use lessons learned from the pilots to develop and update policies and procedures for executing the pilot programs and future IT acquisitions. As of May 2017, department officials had not determined a completion date for the pilot. Additionally, DHS established a headquarters-level Agile team intended to collaborate across the department on improvements to policy, governance, and acquisition guidance. This group is intended to support Agile delivery; codify and publicize process improvement artifacts generated by the program-level integrated product teams; and eliminate redundancies and conflicting guidance so that oversight groups speak with one voice, reducing time through the acquisition process. DHS Oversight Framework In addition to the use of Agile software development principles, the TIM program is subject to the department’s oversight framework. Specifically, the program is to adhere to DHS’s acquisition policy, including its systems engineering life-cycle framework, which is intended to support efficient and effective delivery of IT capabilities. The Under Secretary for Management serves as the decision authority for the program, and is responsible for overseeing adherence to DHS’s acquisition policies for the department’s largest acquisition programs (i.e., those with life-cycle cost estimates of $1 billion or more). The Under Secretary for Management is supported by two offices within the department. The first of these offices—the Office of Program Accountability and Risk Management (PARM)—is responsible for DHS’s overall acquisition governance process. PARM is responsible for, among other things, periodically conducting program health assessments to evaluate acquisition programs, in terms of a program’s management, resources, planning and execution activities, requirements, cost and schedule, and how these factors are impacting a program’s ability to deliver a capability. The other key supporting office—the DHS Chief Information Officer (CIO)—is responsible for, among other things, setting departmental IT policies, processes, and standards. The CIO is also responsible for ensuring that acquisitions comply with the department’s IT management processes, technical requirements, and the approved enterprise architecture. Within the Office of the Chief Information Officer (OCIO), the Enterprise Business Management Office is to ensure that the department’s IT investments align with its missions and objectives. As part of its responsibilities, this office periodically assesses investments to gauge how well they are performing through a review of program risk, human capital, cost and schedule, and requirements—referred to as the CIO’s program health assessment. According to the CIO, the Chief Technology Officer, which is responsible for leading the development of IT and standards across the department, and for management of the Agile pilot initiative, offers guidance and assistance to programs to help improve their execution. In addition, the Director of the Office of Test and Evaluation is to provide oversight of components’ independent test and evaluation activities. The DHS Acquisition Review Board is chaired by the Under Secretary for Management and is made up of many executive level members including the CIO, the Executive Director of the Office of PARM, and the Chief Procurement Officer. The board is to meet periodically to oversee programs’ business strategies, resources, management, accountability, and alignment to strategic initiatives. Additionally, the department has established executive steering committees, which generally are comprised of component and DHS executive-level members, such as the component CIO and Chief Financial Officer, as well as the DHS Chief Technology Officer and the Executive Director of the Office of PARM. The committees are to provide governance, oversight, and guidance to programs and their related projects and initiatives to help ensure successful development and operations. Figure 3 shows the organizational structure of the key DHS organizations with IT acquisition management responsibilities. TSA Organizations Involved with the TIM Program The TIM program office resides within the Mission Operations component of TSA’s Office of Information Technology. The expected users of the TIM system come from multiple offices under the Office of Intelligence and Analysis, including the Security Threat Assessment Operations office, which is responsible for conducting the security threat assessments, and the Program Management office, which is responsible for managing TSA’s maritime, surface, and aviation credentialing programs. The TIM program’s Executive Steering Committee is chaired by the TSA CIO, who is the head of the Office of Information Technology, and the TSA Deputy Component Acquisition Executive, and meets quarterly. In addition, the TSA Operational Test Agent is to perform operational testing and evaluation of the TIM system’s operational effectiveness, interoperability, cybersecurity, and suitability. As previously mentioned, the DHS Director of the Office of Test and Evaluation is to provide oversight of these test and evaluation activities. Figure 4 shows the key TSA organizations involved with the TIM program. After Experiencing Significant Cost, Schedule, and Performance Issues with the Initial TIM System Deployment, TSA Implemented a New Strategy The TIM program experienced significant cost, schedule, and performance issues during its initial implementation efforts. Specifically, in May 2014, TSA launched an initial version of a commercial-off-the-shelf (COTS) system for the maritime transportation segment of TIM that was to support the Transportation Worker Identification Credential program. However, as we previously reported, in September 2014, TSA reported to DHS that the program had breached its baseline because it had significant cost, schedule, and performance issues due to, among other things, the addition of newly created credentialing programs that were added to the program’s scope, such as TSA Pre® and Chemical Facility Anti-Terrorism Standards. TIM program officials also reported in the breach remediation plan other issues that led to the breach, including different expectations between TSA officials and the contractor regarding the extent of reuse of system functionality among the different transportation segments. Specifically, TSA expected that it would be able to reuse more of the maritime functionality for the surface and aviation populations, while the contractor expected there to be less reuse. In January 2015, the Acting Under Secretary for Management directed program officials to suspend all planning and development efforts related to the other two segments of the program—surface and aviation—until the issues with the maritime segment could be resolved. In August 2015, program officials prepared a revised life-cycle cost estimate which increased costs to approximately $1.34 billion (about $713 million more than the original 2011 estimate), and delayed full deployment of the TIM system (to include all three transportation segments) to fiscal year 2022 (7 years later than originally planned). Also, in September 2015, the Director of the Office of Test and Evaluation issued a letter of assessment which concluded that initial operational testing of the COTS system for the maritime segment had determined that the system was not operationally effective and not operationally suitable. The Under Secretary for Management directed the DHS CIO to conduct a thorough review of the proposed plans for moving forward with the TIM program. After conducting the review, the CIO did not support the program’s proposal. As a result, in November 2015, the Under Secretary for Management continued the suspension of all developmental efforts for the surface and aviation transportation segments, but authorized the program to continue resolving problems that were identified during initial operational testing for the COTS system being used by the maritime segment. The Under Secretary for Management also directed the CIO to form and lead an integrated product team with senior TSA representatives and the TIM program office to develop a new strategy for the program. In March 2016, DHS and TSA officials completed a new strategy for delivering TIM capabilities. This strategy included the following changes: replace proprietary COTS applications with custom-developed applications using open source code; transition traditional, large development teams using a waterfall system development methodology to an Agile software development framework to enable rapid, incremental development and deployment; and migrate from a defined, fixed data center environment to a scalable Federal Risk and Authorization Management Program (FedRAMP) certified cloud computing environment. Also, according to the new strategy, the move from the COTS product to an open source solution is to include replacing the COTS product that had already been deployed to the maritime segment with the open source solution. It is also to include replacing the legacy systems that support the credentialing programs from the other two transportation segments (surface and aviation) with the open source solution. TSA plans to incrementally transition the program from these legacy systems between fiscal years 2018 and 2021. Additionally, the system is expected to interface with at least 19 other information systems, including the following key systems: TSA’s Transportation Vetting System, which conducts initial and recurrent name-based matching against defined terrorist related data sets. The Federal of Bureau of Investigation’s National Crime Information Center, which is an electronic clearinghouse of crime data. DHS’s Automated Biometric Identification System, also referred to as IDENT, which is the central DHS-wide system for storage and processing of biometric and associated biographic information for national security, law enforcement, immigration and border management, intelligence, and other background investigative purposes. TSA’s Secure Flight, which identifies individuals who may pose a threat to aviation or national security and designates them for enhanced screening or prohibition from boarding an aircraft, as appropriate. The U.S. Citizenship and Immigration Service’s Systematic Alien Verification for Entitlements, which is the primary data source for government agencies to verify legal entry and presence in the United States of a non-U.S. citizen or naturalized U.S. citizen. In April 2016, the Under Secretary for Management approved the TIM program’s new strategy and, in September 2016—almost 2 years after the program was initially suspended—the program was rebaselined to reflect the new strategy. As we previously reported, the estimated cost and schedule in the revised baseline was significantly different than the initial baseline. The revised baseline estimate was for about $1.27 billion (a $74 million decrease from the previous 2015 cost estimate and an overall increase of $639 million from the original 2011 estimate), with full deployment planned for 2021 (a 1-year acceleration from the previous 2015 schedule and an overall delay of 6 years from the original 2011 schedule). Table 3 shows the estimated costs and schedules reflected in the initial and revised estimates. According to TIM officials, in the program’s first 8 years (between October 2008 and September 2016), TSA spent over $280 million to deploy the initial COTS solution to the maritime segment and address critical fixes in the solution (i.e., the solution that TSA determined it needs to replace). Also during 2016, TSA began transitioning to an Agile software development framework. In September 2016, TSA issued two task orders to a contractor to provide Agile software development services. The orders were issued to the same design and development contractor that had assisted with the initial deployment of the TIM COTS solution. From October 2016 to June 2017, the program deployed four software releases using Agile software development practices. These releases were focused on, for example, deploying new functionality to the COTS system to enhance the criminal and immigration vetting data provided to adjudicators. In December 2016, between the first and second Agile releases, the program suspended new development for 1 month while officials reconsidered the order in which they would deliver functionality. Also during this period, the program developed and deployed a smaller release which program officials refer to as a “half release.” According to program officials, this release did not produce any new capabilities and instead addressed operations and maintenance-related fixes to the deployed COTS system. After development of the second software release, at the end of March 2017, the program was reviewed by DHS’s Acquisition Review Board. The purpose was to review the results of follow-on operational testing that was performed to determine whether the program had adequately addressed the prior system and usability issues and implementation of the program’s new strategy. The meeting was also intended to discuss the status of several action items from a prior review board meeting that occurred in September 2016, such as finalizing a test and evaluation master plan, conducting a cybersecurity threat assessment, updating the program’s mission needs statement and concept of operations, and establishing software development cost metrics. Implementation of the new strategy continues to be monitored by DHS and TSA oversight bodies. The New Strategy for the TIM Program Has Addressed Selected Prior Challenges, but Concerns Remain The new strategy for the TIM program addressed a number of major challenges that the program faced during earlier efforts to develop and deploy the system; nevertheless, key challenges remain. Specifically, of the seven major challenges that the program faced during its initial implementation of a COTS solution for the maritime segment, four challenges have been addressed related to (1) system performance and usability issues, (2) data migration issues, (3) information security testing, and (4) the inadequacy of the program’s previous hosting facility. However, the remaining three challenges regarding constraints with COTS product, significant addition of new transportation programs (e.g., TSA Pre®), and insufficient stakeholder coordination and communication have not been fully addressed. Fixes Have Been Implemented to Address Critical System Performance and Usability Issues According to DHS guidance, among other things, an operational test and evaluation examines systems for operational effectiveness. Specifically, it tests for the ability of a system to accomplish a mission when used by representative users in the expected environment. The 2015 initial operational testing of the maritime segment (supporting the Transportation Worker Identification Credential program) found that the COTS system was extremely unreliable due to frequent critical failures, and had several system performance and usability issues that limited users’ ability to execute tasks in a timely and accurate manner. These issues included lags, freezes, the need for excessive refreshes, inadequate reporting and case management functionalities, as well as an interface that was not user-friendly. For example, the system was unable to produce accurate reports on case workload and status, so users expended significant effort creating spreadsheets to manually assign cases and manage their progress. The system was also unable to perform certain waiver functions in a timely and complete manner, which resulted in a significant backlog. The program office has addressed the issues identified in the initial operational test report by first identifying a list of over 900 action items. According to TIM officials, they validated this list with the operational test agent and prioritized the action items with the product owners (i.e., end users) to identify which were the most critical to complete. For example, critical items included addressing issues with the waiver functions, assigning cases, and issuing credentials. The program implemented the critical fixes by developing seven software releases from September 2015 to October 2016. In January 2017, the TSA operational test agent reported that follow-on operational testing of the COTS system confirmed that the program had adequately addressed the prior system and usability issues. As a result, according to the test agent, the program’s previously deployed maritime segment of the system performed as intended. Actions Have Been Taken to Better Account for the TIM Program’s Future Data Migration Efforts According to leading practices, IT programs should identify potential problems before they occur. This allows programs to plan and execute activities to mitigate the risk of such problems having adverse impacts on the program. When the TIM program transitioned maritime users from the legacy system to the COTS system, according to TSA’s breach remediation plan, program officials found that cleaning and properly migrating data was very difficult and time consuming because the legacy systems were old and the data mapping information was not readily evident. Program officials stated that the data migration efforts were also difficult because of the proprietary nature of the COTS product, which impacted the ability to effectively migrate data from legacy systems. The additional time needed for data migration resulted in higher than anticipated costs for the maritime transportation segment. Program officials have taken action to better account for the TIM program’s future data migration efforts. Specifically, as part of the new strategy, the officials plan to defer legacy data migration until after system deployment efforts are complete to avoid disrupting deployment efforts. The strategy focuses on the program migrating only closed case data from the legacy systems to the new system. As such, adjudicators are to continue to complete and close any security threat assessment cases opened in the legacy system even after the new system is deployed, and the new system is to only handle newly opened security threat assessment cases. Once final disposition of the cases in the legacy system is complete, those cases would then be included in the closed case data migration effort, which is planned to occur at the end of development, around fiscal years 2020 to 2021. In addition, the new strategy includes streamlining the data migration by using the open source solutions to help simplify the migration of data on transportation populations from the legacy systems. As a result of the new approach, the program should be better positioned to more effectively migrate data during future transitions between the legacy systems and new system. Prior Information Security Weaknesses in the TIM System Have Been Addressed, and Deferred Cybersecurity Threat Testing Is Planned According to DHS guidance, the operational test and evaluation also should examine the department’s systems for operational suitability, which is the degree to which a system is deployable and sustainable. The evaluation is to take into account factors such as reliability, maintainability, availability, and interoperability. The 2015 initial operational testing of the COTS system found that it was not suitable because the system had significant information security weaknesses. Specifically, the system inappropriately provided users with greater access than was necessary to do their jobs, which undermined the security benefits of controlling what different users were able to do in the system based on their role. The COTS system also contained critical and high-risk system security vulnerabilities which could result in the compromise of sensitive system information, such as passwords, and could hinder TSA officials’ ability to effectively respond to incidents. Program officials took actions to address the security weaknesses previously identified. For example, in response to the findings from the initial operational testing, between September 2015 and October 2016, they developed and released fixes to the significant security weaknesses. In April 2017, the results of the follow-on operational testing confirmed that the COTS system was free of critical or high-risk system security vulnerabilities and that it appropriately restricted access to the system by only allowing users to access areas of the system needed to support their specific business tasks. In addition, critical steps to evaluate the system’s cybersecurity have been planned, but not yet completed. Specifically, testing for realistic cybersecurity threats which is used to help categorize the system’s risk- level in terms of confidentiality, integrity, and availability, was deferred until March 2018. Program officials decided to defer this test until new hosting environments for TIM are implemented, rather than testing TIM in an environment that will soon be retired. These environments are intended to enable the development, testing, and production of the system. However, implementation of those environments has been delayed until December 2017, and as a result, the cybersecurity vulnerability assessment has been deferred to March 2018. The identification of a time frame in which the program plans to conduct this important cybersecurity test is a step in the right direction, and avoiding additional delays will be important. TSA Decided to Discontinue Use of a DHS-Provided Cloud, and Recently Took Actions to Address Delays in Implementing Interim Hosting Environments According to OMB, a hosting facility or data center is to process or store data and must meet stringent availability requirements. Additionally, cloud computing can be used as a means for enabling on-demand access to shared and scalable pools of computing resources. During the initial implementation of TIM, the system was hosted in a cloud that operated out of a DHS data center (referred to as DHS Data Center 1). However, the DHS cloud was higher in operations and maintenance costs than the program originally planned, which presented a challenge for the program. To address this challenge, in 2016, TIM program officials decided to move the COTS system that was previously deployed (the maritime segment) out of the DHS cloud and set it up in a public cloud environment. They also planned to use the public cloud environment to develop, test, and operate the future TIM open-source based system. The officials planned to use a phased migration that consisted of first establishing hosting environments at two data centers—DHS Data Center 1 and TSA Colorado Springs Operations Center. The officials planned to use the data centers for the development, testing, and production of the future TIM open-source based system, and then eventually transition to a public or hybrid cloud once the system reaches full operational capability in fiscal year 2021. As part of this approach, officials planned to establish 10 development, testing, and production environments at these data centers from January to July 2017, so that TIM’s development teams did not have to compete for the same environments during Agile software development and testing efforts. While the program experienced delays in setting up its production environment, officials recently took actions to address these delays. Specifically, the program was expected to have a new production environment available at the TSA Colorado Springs Operations Center by March 2017; however, it was delayed until May 2017. Additionally, while migration of the TIM system to the new hosting environments was planned to occur by September 2017, it has been delayed. These delays have contributed, in part, to delays in other aspects of the program, including the execution of the cybersecurity vulnerability assessment, as well as delays in the implementation of automated testing and deployment tools (discussed later in this report). In response to these delays, program officials recently established a revised schedule in May 2017 for setting up the new environments by December 2017. Effectively executing against this updated schedule should help to keep the program on track with delivering these important environments and fully addressing the related challenge that the program experienced during its prior implementation efforts. TSA Decided to Move the TIM System from COTS to Open Source, but Implementation Plans Continue to Significantly Change According to leading practices and guidance, technology decisions should seek to enable services to scale easily and cost-effectively and to avoid vendor lock-in by, for example, using open source solutions. The benefits of using open source solutions can include improved software reliability and security through the identification and elimination of defects from continuous and broad peer review of publicly available source code that might otherwise go unrecognized by a more limited core development team; unrestricted ability to modify software source code; no reliance on a particular software vendor due to proprietary restrictions; reduced software licensing costs; and the ability to “test drive” the software with minimal costs and administrative delays in a rapid prototyping and experimentation environment. Also, according to leading practices, IT programs should ensure that their plans include how they will transition from the current state to the final state of system operations. Such planning provides a mutual understanding to relevant stakeholders of how programs are to accomplish the transition. According to TSA’s breach remediation plan, the TIM program’s use of a COTS solution led to several challenges. For example, program officials reported that the COTS product restricted their ability to make changes to the product to improve system usability and, as previously discussed, impacted the ability to effectively migrate data from legacy systems because of the proprietary COTS product. Program officials also reported that they were highly dependent on the COTS vendor to remediate compatibility issues and resolve problems, which required additional time. The plan also stated that the COTS product required a complex system architecture which prevented the program from implementing modern software development and testing tools. Finally, use of the COTS product resulted in higher software licensing costs. The TIM program’s new strategy is intended to address these challenges by moving away from using a COTS product to a custom-developed open source solution. However, the program’s approach for developing and delivering this new solution has been in a continual state of fluctuation and implementation plans have not been defined. As such, this challenge has yet to be fully addressed. Specifically, In September 2016—after the 2-year pause in the program and completion of its extensive rebaselining effort—DHS and TSA officials decided that TSA would incrementally retire legacy systems as the transportation programs that use those systems are migrated to the open source solution; they also decided to eventually replace the COTS system that was previously deployed to support the maritime Transportation Worker Identification Credential program and migrate to the open source solution. This was to be completed using a staged approach between the migrations, and also by using two versions of the COTS system as well as the open source system. However, the program lacked a plan detailing how it was going to migrate from the current legacy state, to the interim environment (with the two versions of COTS plus an open source system), to the final state. As previously mentioned, in December 2016, new development for the TIM system was paused once again to, among other things, further evaluate the transitioning approach that was agreed to 3 months prior. Four months later (in mid-March 2017), program officials decided to continue pursuing the approach that was agreed to in September. Subsequently, the high-level implementation schedule was revised to adjust for delays that this most recent replanning effort contributed to (other contributing factors for the delay are discussed later in this report). The revised schedule delayed deployment of the initial Pre® capabilities by 6 months and other key functionality up to 12 months. Further adding to the fluctuation in the program, at the end of March 2017, the DHS Acquisition Review Board requested that the program’s implementation approach be revised to accelerate the delivery of the TIM program’s front-end interface for adjudication and redress functions. However, it is unclear how the acceleration of the development and implementation of these functions will impact the delivery of the other planned functionality, and what tradeoffs the program will need to make. Program officials were expected to develop an overview of the acceleration efforts associated with cost, schedule, risk, and impacts on the program and deliver it to PARM and the Office of the Chief Technology Officer in August 2017. As a result, while it has been 8 months since the TIM program was rebaselined, the details of how the program will transition from its current state, to an interim state, then to the final state of full open source, have yet to be determined. This is contrary to leading practices that we have previously identified, which state that when pursuing an IT modernization effort, organizations should develop a plan for transitioning from the current to the target environment. In response to our concerns, program officials stated that after they determine how they will adjust to incorporate the Acquisition Review Board’s recent acceleration request, they will determine the details of how the program will achieve the desired final state. However, until the program establishes and implements specific time frames for determining key implementation details, including how it will transition the program from its current state to an interim state and to the final state, the TIM program office, and TSA and DHS oversight bodies cannot be certain about how the program will ultimately deliver its complete open source solution. New Transportation Programs Have Been Incorporated in TIM’s Rebaselined Schedule, but the Program Is Experiencing Significant Delays According to leading practices, programs should manage changes to requirements as they evolve during the project. Programs should also ensure that planned schedules provide a realistic forecast for completion of activities, including providing reasonable slack (i.e., flexibility in the schedule). After the TIM program was initiated in 2008, it experienced significant increases in scope, such as the addition of TSA Pre® and Chemical Facility Anti-Terrorism Standards populations in 2012, which required more functionality and considerably more processing demands than originally planned. The TIM program was challenged to accommodate the additional work needed to incorporate these new transportation populations and capabilities, and, in part, contributed to a significant breach in its original cost and schedule estimates. To address the challenge, the TIM program incorporated the additional functionality and processing requirements into its cost and schedule rebaseline that was approved in September 2016. In addition, the program’s new strategy addressed the need to be adaptable to accommodate any new transportation populations and capabilities that could be added in the future by taking an enterprise-level approach to providing capabilities. Nevertheless, while the TIM program incorporated TSA Pre® into its new plans, the implementation schedule for the program was very compressed and program officials did not establish a schedule that realistically forecasted when activities would be completed. Specifically, program officials planned to deploy initial TSA Pre® capabilities by May 2017 without any slack in the schedule. According to program officials, the reason for this approach, was because TSA Pre® was considered a high priority for migrating from its legacy system in order to accommodate an expected influx of applicants during the summer months. However, slack was not incorporated in the implementation schedule; therefore, when the program experienced schedule delays, it resulted in the program missing the May 2017 implementation deadline and being rescheduled to November 2017. The 6-month delay in delivering initial Pre® capabilities was due to the delays discussed in the prior section associated with replanning the strategy for transitioning to the open source system, as well as delays in onboarding additional development team members and setting up new development and production environments. The delay in delivering Pre® capabilities is especially problematic because program officials have reported that the legacy system is at risk of exceeding its processing capacity. Additionally, as previously mentioned, the program’s revised schedule shows the delivery dates for almost all (8 of 10) capabilities being significantly pushed back—with 2 capabilities being delayed up to 12 months. Moreover, not only were the implementation dates delayed for these efforts, the time to complete a number of these efforts was reduced by about 1 to 12 months—thus further exacerbating our concerns about unrealistic schedules. Without a schedule that realistically forecasts when activities will be completed, TIM program officials cannot ensure that they will meet the dates that they have committed to, such as when key capabilities for TSA Pre® are to be deployed. Efforts to Improve Stakeholder Coordination and Communication for the TIM Program Have Begun, but Key Actions Have Not Been Implemented According to leading practices, programs should coordinate and collaborate with relevant stakeholders (i.e., those that are affected by or in some way accountable for the outcome of the program, such as program or work group members, suppliers, and end users). Stakeholder coordination includes, for example, involving stakeholders in reviewing and committing to program plans, agreeing on revisions to the plans, and identifying risks. Programs should also identify the needs and expectations of stakeholders and translate them into end user requirements. However, during prior implementation efforts with the COTS solution, the program experienced challenges with effectively coordinating and communicating with end-users. For example, according to program documentation, it had not adequately collaborated with end users in developing and implementing business requirements and conducting post-deployment user satisfaction assessments. This led to frustration among end users who felt inadequately informed and prepared for the new COTS system. To address this challenge, the TIM program’s new strategy includes establishing a product owner role, which, as previously mentioned, is intended to represent the end user community and have the authority to set business priorities, make decisions, and accept completed work. The program’s adoption of the Agile software development approach has also significantly increased the frequency of the program’s engagement with stakeholders to define, test, and implement software releases. In addition, program officials established an organizational change management strategy in October 2016 that is intended to, among other things, focus broadly on establishing overall communication processes for program stakeholders. This strategy identifies key steps such as, establishing a communication team and hiring a communication lead to oversee the development and execution of the communication action plans, establishing a communication working group, and serving as chair of the communication working group. This group is to be responsible for developing four communication action plans for key stakeholder groups (e.g., new transportation populations, existing transportation populations, and management). These particular steps were to be completed from November 2016 through January 2017. However, while as of May 2017, the TIM program had implemented certain steps from the organizational change management strategy, such as establishing a communication team, the program has been delayed in implementing other steps. Specifically, the communication lead position was to be filled in November 2016. However, in March 2017 TIM program officials stated that the position had not yet been filled due to the federal hiring freeze. Additionally, because of the vacancy in the communication lead position, other key actions have been delayed, such as the development and execution of the communication action plans. Program officials have not established new time frames for completing the remaining steps outlined in the organizational change management strategy. Until these time frames are established and effectively executed, program officials will have less assurance that there will be effective communication with stakeholders and customers to ensure that the program is meeting their needs. The TIM Program Has Not Fully Implemented Leading Practices for Transitioning to Agile Software Development As discussed previously, transitioning a program from waterfall development to Agile software development is a significant effort, and requires the implementation of fundamental practices to ensure that the transition is successful. According to leading guidance, an organization transitioning to Agile software development should establish critical practices to help ensure successful adoption of the Agile approach, such as obtaining full support from leadership to adopt Agile processes, enhancing Agile knowledge, ensuring product owners are engaged with the development teams and have clearly defined roles, establishing a clear product vision, prioritizing backlogs of requirements, and implementing automated tools to enable rapid system development and deployment. While the TIM program has fully implemented the first two of these leading practices necessary to ensure the successful adoption of Agile, the remaining four practices have not been fully implemented. The gaps we have identified with the program’s implementation of Agile are concerning given that it did not follow key IT acquisition best practices when using its waterfall development approach during the program’s first 8 years and spent over $280 million on a system that TSA has determined it needs to replace. The TIM Program Has Received and Maintained Support from TSA and DHS Leadership to Adopt Agile Practices According to leading practices and guidance, an organization transitioning to Agile software development should get and maintain full support from the organization’s leadership to adopt Agile processes. Leadership support helps empower employees to continuously improve the use of Agile software development practices. DHS and TSA leadership have approved the TIM program’s adoption of Agile software development, and continue to support the transition. For example, the DHS OCIO worked closely with TSA officials in 2015 and 2016 to develop the new strategy for the program which included moving away from a waterfall development approach to Agile software development. As previously mentioned, the Under Secretary for Management selected the TIM program to be part of the DHS Agile pilot initiative in February 2016 and approved the program’s new strategy in April 2016. Moreover, the DHS Office of the Chief Technology Officer has continued to provide guidance and resources to the program since it adopted Agile. For example, TIM program officials stated that the DHS Chief Technology Officer added two of the office’s full-time and one part-time staff members to the TIM program. DHS and TSA officials stated that the Chief Technology Officer also provided an Agile coach to assist the TIM Program Manager about 3 days per week with establishing an Agile governance framework. Finally, DHS established an Agile Integrated Product Team that is co-chaired by PARM and the TIM Program Manager. The team meets bi-weekly to provide guidance on adopting Agile processes. As a result of the sustained leadership commitment, the program is better positioned to continuously improve its Agile practices. Key TIM Program Staff Have Received Agile Training to Enhance Knowledge According to leading practices and guidance, an organization transitioning to Agile software development should ensure that the entire program team receives Agile training. This allows organizations to achieve a faster shift away from the previous culture and processes and toward a more agile culture. Toward this end, the TIM program requires its Agile contractor to ensure that development teams are trained and skilled in Agile methods, as well as in the specific Agile frameworks the program has adopted, which include the Scrum and SAFe frameworks. Additionally, the program provided initial Agile training for key program staff when it began transitioning to Agile software development. Specifically, the program provided a mandatory 2-day Agile workshop in October and December 2016 which covered basic Agile principles and the Scrum and SAFe frameworks. This training was provided to many key staff members, including contractor support staff, a contracting officer representative, and product owners. Further, in December 2016, the program began providing training on the SAFe framework to its government employees. This training was tailored based on different roles, such as Agile practitioner, program manager or product owner, and scrum master. The training courses were provided to key staff members, including TIM program leadership, team leads, branch managers, and scrum masters. As a result of providing Agile training, the program’s staff should be able to more effectively adopt and apply Agile software development processes. TIM Program Product Owners Frequently Engage with Development Teams, but Roles and Responsibilities Are Not Clearly Defined According to leading practices and guidance, an organization transitioning to Agile software development should designate a product owner who represents the user community and establishes priorities based on business needs, approves user stories and their acceptance criteria, and decides whether completed work meets the acceptance criteria and can be considered done. The product owner should also maintain close collaboration with the development teams by, among other things, providing daily support to help clarify requirements and attending key Agile meetings, such as sprint- and release-level planning sessions and system demonstrations. Additionally, roles and responsibilities among relevant stakeholders, such as the product owner, should be clearly defined and documented by the organization that is transitioning to Agile software development, so that the stakeholders are aware of their responsibilities and given the authority to perform their roles. The TIM program has two different groups of individuals that collectively share the responsibilities of product owner, and while these groups frequently engage with the development teams, program officials have not yet clearly defined the groups’ roles and responsibilities. Specifically, according to program officials, the first group consists of five product owners that represent end users and are collectively responsible for supporting all development teams, attending all Agile meetings, and prioritizing and approving planned and completed work. In addition, according to program officials, these five individuals are also responsible for approving user stories associated with new system functionality. The other group is referred to as the solutions team, which includes, for example, the TIM Chief Architect and Chief Engineer. According to program officials, the technical work (which is to help enable the system functionality, such as ensuring network connectivity and proper software licenses) is approved by the solutions team. Nevertheless, while program officials told us about these high-level roles and responsibilities, the program’s documentation does not clearly define them among the five product owners and the solutions team. Moreover, program officials have not defined the rules of engagement for these product owners, such as how competing priorities among different product owners should be handled. According to program officials, the lack of clearly defined roles and responsibilities has not been a problem for the program because the product owners and the solutions team regularly communicate and coordinate with each other, and thus far, have been in agreement on the priorities for the program. However, the program recently scaled up the amount of work being conducted simultaneously, which adds to the volume of the decisions that need to be made and the coordination that has to occur among the five product owners and solutions team. Thus, even if the program has not yet experienced issues with coordination, without more clarity in the roles and responsibilities among the groups that are responsible for prioritizing and accepting work, the program risks facing challenges in establishing priorities, approving user stories, and deciding whether completed work meets the acceptance criteria. The TIM Program Established a Vision, but It Does Not Always Align to the Requirements; Recent Corrective Actions Should Yield Improvements According to leading practices and guidance, a program transitioning to Agile software development should have a clearly defined vision. This can be in the form of a product roadmap, to guide the development of the product and to help inform the planning and requirements development of Agile software development releases. Consistent with leading practices, TSA established a vision for the TIM program. This vision is articulated in multiple documents—including the Mission Needs Statement, Concept of Operations, and Operational Requirements Document. Officials also use a strategic roadmap to articulate the program’s vision, which specifies the high-level system capabilities that are to be deployed over the life-cycle of the program through 2021. However, the program’s vision has not always informed the planning of requirements for the software releases, as intended by leading practices. Specifically, the capabilities outlined in the program vision documents, such as the strategic roadmap, do not consistently map to program requirements. While 5 of the 10 capabilities in the strategic roadmap align to the high-level and large scope requirements, referred to as epics, the other half of the capabilities do not clearly align to the epics. For example, the adjudication and redress capabilities that are in the strategic roadmap do not align to any epic. In addition, the capability for public-facing portals does not clearly track to any epic. TIM officials recognized the alignment issues, and in August 2017, stated that they are in the process of establishing alignment from the program’s vision down to the lowest level of requirements, by refining the program’s vision and requirements. Officials also stated that they expected this effort to be completed by 2018. Effective execution of this effort should help ensure the program’s vision is informing requirements planning. Requirements for the TIM System Have Not Been Fully Prioritized According to leading practices and guidance, a program transitioning to Agile software development should have a prioritized list of the requirements that are to be delivered—referred to as the backlog. This backlog should be maintained so that the program can ensure it is always working on the highest priority requirements that will deliver the most value to the users. In addition, according to TIM Agile management documentation and program officials, the program’s backlog of features (i.e., mid-sized requirements) is expected to represent the features that are to be delivered over the next several software releases. These features are to be assigned priority levels to help determine which should be selected for development when planning the next release. According to TIM Agile management documentation, the TIM program is expected to manage a backlog for each software release, which is to identify the features and their derived user stories (i.e., the smallest and most detailed requirements) that are to be delivered in a specific release. The documentation also indicates that each feature and user story is to be assigned priority levels to determine which should be included in the development of the next release and associated sprint. Figure 5 illustrates the intended prioritization in the features, releases, and user stories backlogs. However, as of July 2017, the program’s backlogs did not contain specific prioritization levels for each of the features and user stories, as called for in DHS guidance. According to program officials, instead of assigning specific prioritization levels, they had more generally identified which features should be developed within the near-term (e.g., in the next several Agile releases). Program officials recognized that they still needed to prioritize their backlogs by assigning priority levels to all features and user stories, but they did not have a time frame for completing this effort. Without ensuring full prioritization of current and future features and user stories, the program is at risk of delivering functionality that is not aligned with the highest needs of those that are responsible for conducting security threat assessments to protect the nation’s critical transportation infrastructure. The TIM Program Has Been Delayed in Implementing Many of the Planned Automated System Development and Deployment Tools According to leading practices and guidance, automating system development and deployment work and avoiding manual work is especially important for Agile programs, as it enhances the ability for rapid development and delivery of high quality software. Specifically, a program transitioning to Agile software development should use an automated tool for managing Agile activities, such as maintaining the product backlog and tracking the status of completed work. The program should also establish automated testing and deployment capabilities to improve the quality of the system. For example, according a DHS’s Agile development instruction manual, the vast majority of software defects are discovered during system integration testing, and—if automated—this testing can be run multiple times on a sprint or release in order to identify more defects sooner. In addition, automated tools can enable more efficient processes for frequently integrating computer code that is developed by different team members (e.g., hourly or daily), in order to quickly detect any code integration errors. Automation of testing can also help decrease the risk of introducing security flaws due to human error. However, program officials deferred implementation of an automated Agile program management tool and many other testing and deployment tools. Specifically, while the program had been using Agile software development practices since October 2016, the program has not used an automated management tool for tracking the status of completed work for its first three Agile software releases. Instead the program has used spreadsheets that require TIM program officials to manually populate and track large amounts of program status information. Program officials had planned to implement an automated management tool by October 2016, but did not do so until the end of April 2017. According to the officials, the delay occurred because they were in the process of tailoring the SAFe governance framework and the management tool needed to be customized to reflect the tailored approach. Regarding tools for testing and deployment, as of May 2017, the program was only using 4 of the16 automated tools that program officials planned to use. These included tools that enable the management of software code development, defect tracking, and components of automated functional testing. However, the remaining 12 testing and deployment tools had not yet been implemented. These include, among others, tools that enable the automated building of software code, frequent merging of an individual piece of software code with the main code repository so that new changes are tested continuously (referred to as continuous integration), small automated tests to verify that each individual unit of code written by the developer works as intended, and installation of application patches to protect against known vulnerabilities. TIM program officials stated that these testing and deployment tools are not expected to be implemented until the new development, testing, and production environments are set up. However, as previously mentioned, the program has experienced challenges in implementing these environments. As a result, the program’s use of manual processes have been time consuming, impeded visibility into the process, and hindered software testing. In addition, without automated tools, program performance metrics were being manually calculated and this increases the risk for incomplete and inaccurate data. While the automated Agile management tool has just been implemented, until the remainder of the automated Agile testing and deployment tools are implemented, the program is likely to continue to operate at reduced efficiency levels, and be limited in its ability to ensure product quality. TSA and DHS Have Not Fully Implemented Most Key Practices for Overseeing the TIM Program’s Cost, Schedule, and Performance According to leading practices, to ensure effective program oversight of cost, schedule, and performance, organizations should: ensure that corrective actions are identified and tracked until the desired outcomes are achieved, document relevant governance and oversight policies and monitor program performance and progress, and rely on complete and accurate data to review performance against expectations. While TSA fully implemented the first practice, the remaining three practices were not fully implemented by DHS and TSA. As a result, the effectiveness with which the governance bodies oversee and monitor the program has been limited. TSA Established a Process for Ensuring Corrective Actions Are Identified and Tracked for the TIM Program According to leading practices, effective program oversight includes ensuring that corrective actions are identified and tracked until the desired outcomes are achieved. In this regard, governance bodies should collect and analyze data on program risks and issues and determine corrective actions to address them and track them to completion. TSA has established a process for ensuring that corrective actions are identified and tracked. Specifically, the program has a process for identifying corrective actions and monitoring the status of these actions in its weekly program status reviews. The program also uses an automated tool to track and maintain a complete list of all actions that have been identified. As of February 2017, the list contained 89 actions and included the status of the actions—83 of which had been tracked to completion. As a result of the program having a process that can identify and track corrective actions, it is better positioned to address significant deviations in cost, schedule, and performance parameters. TSA and DHS Have Documented Selected Oversight and Governance Processes for the TIM Program, but Other Key Processes Are Underdeveloped According to leading practices, effective program oversight includes the use of documented policies and procedures for program governance and oversight, such as reporting and control processes. These processes may include, among others, requiring programs to report on the status and progress of activities; expected or incurred program resource requirements; known risks, risk response plans, and escalation criteria; and benefits realized. Oversight and governance documentation may also include threshold criteria to use when analyzing performance, and the conditions under which a program or project would be terminated. TSA and DHS have documented selected policies and procedures for governance and oversight of the TIM program. Specifically, DHS documented procedures for its Acquisition Review Board and its Executive Steering Committee for the TIM program on how these governance bodies are to review the cost, schedule, and performance of the program. For example, according to the Committee’s charter, it is responsible for assessing the health of the program and identifying major issues and risks, utilizing a standard reporting format at oversight meetings. TSA has also documented processes for the program’s Agile milestone reviews, such as conducting workshops at the end of the release cycle to perform a system demonstration, review qualitative metrics, and promote continuous quality improvement. TSA also developed a risk management plan tailored for the Agile approach to guide TIM staff members in identifying, managing, and mitigating risks and issues impacting cost, schedule, and performance of the program. The agency also developed a test and evaluation master plan that outlines how it and DHS will conduct and oversee testing and evaluation of the program’s capabilities under the new Agile software development approach. However, TSA and DHS have not developed or finalized other key oversight and governance documents. Specifically, three oversight and governance policies have not been finalized and/or appropriately updated: the TIM program’s tailoring plan for SAFe, a DHS-level oversight policy for Agile programs, and DHS Office of the Chief Technology Officer’s guidance for Agile programs to use for collecting and reporting on performance metrics. The TIM program has not updated its Systems Engineering Life Cycle Tailoring Plan (which outlines the Agile governance process and all milestone reviews that are required for planning and deploying Agile releases), to reflect changes in the way officials have reported using the SAFe governance framework. As a result, there are inconsistencies in the governance documentation. For example, the Systems Engineering Life Cycle Tailoring Plan describes four levels of governance—portfolio, value stream, program, and team—while program officials have reported omitting the value stream level from the governance framework. According to TSA officials in May 2017, they planned to update the Systems Engineering Life Cycle Tailoring Plan to reflect the revised governance framework, but they did not have a specific time frame for completing the revision. Until the TIM program fully updates its Systems Engineering Life Cycle Tailoring Plan to reflect the revised governance framework, the program lacks a clearly documented and repeatable governance process to effectively oversee the program. DHS officials stated that they plan to conduct biannual oversight reviews of the five Agile pilot programs (including TIM), instead of the annual reviews that are typically conducted for traditional waterfall development programs. According to the officials, the purpose of moving to biannual reviews is to better ensure cost, schedule, and performance remain on track for these Agile programs. However, officials in the Office of the Chief Technology Officer stated that DHS- level Agile governance and oversight policies and procedures have not been revised to reflect this new oversight approach because consensus among DHS leadership on related changes needs to be established before this new oversight approach can be documented in the department’s guidance. As of May 2017, officials had not specified a time frame for reaching such consensus. Until DHS leadership reaches consensus on needed oversight and governance changes, and then documents and implements associated changes, the program continues to plan as though it is undergoing annual oversight reviews, versus biannual reviews. As of early May 2017, officials in the Office of the Chief Technology Officer were also in the process of drafting guidance for Agile programs to use for collecting and reporting on performance metrics, but did not know when this guidance will be finalized. According to TSA officials, in the absence of complete Agile guidance, the TIM program receives support from DHS’s Agile team supporting the pilot initiative, which, as specified in the team’s charter, is intended to help the program (as well as the other four pilot programs) facilitate Agile software development. However, this team is not intended to perform oversight functions to ensure that the program is meeting cost, schedule, and performance targets. Thus, until the Office of the Chief Technology Officer completes guidance for Agile programs to use for collecting and reporting on performance metrics, TIM program officials may not report the most informative Agile performance metrics to oversight entities. TSA and DHS Consistently Conduct Program Performance Reviews, but Lack Insights from Key Performance Metrics According to leading practices, effective program oversight includes monitoring program performance and progress by comparing actual cost, schedule, and performance data with estimates in the plan and identifying significant deviations from established targets or thresholds for acceptable performance levels. Program reviews are to be conducted at predetermined checkpoints or milestones in order to determine progress by measuring programs against cost, schedule, and performance metrics. In addition, Agile programs should be measured on, among other things, velocity (i.e., number of story points completed per sprint or release), development progression (e.g., the number of features and user stories planned and accepted), product quality (e.g., number of defects and unit test coverage), and user satisfaction. The TIM program management office conducts frequent and regular performance reviews and focuses on several important Agile release- level metrics. Specifically, program management officials monitor TIM’s performance and progress during weekly program status review meetings and in periodic Agile reviews that are conducted at the end of each release. These reviews also include officials from the development teams and program stakeholders. The reviews focus on, among other things, velocity, progress, and product quality. They also include the status of key activities and risks impacting cost, schedule, and performance. Nevertheless, while the program management office uses performance metrics, the program has not established thresholds or targets for acceptable performance levels for these metrics. For example, program status reports showed that about 47 percent of the work that was planned to be completed in the first Agile release was accepted by the product owners. While the program appears to have been improving in this metric—74 percent was accepted in the second Agile release and 94 percent in the third Agile release—program officials have not established the thresholds or targets to determine the acceptable level of performance. Program officials stated that they considered the performance in the first Agile release to be low, but they have not yet established targets or thresholds. According to program officials, they planned to establish targets based on the capacity of work that development teams are expected to complete in a release, which can be better predicted as the teams spend more time together. However, the program has since developed three releases and continues to lack performance thresholds and targets. Until program officials establish performance thresholds or targets, oversight bodies may lack important information to ensure the program is meeting acceptable performance levels. In addition, the program management office’s performance reviews have included limited information on program cost. According to TIM officials, the program manager holds weekly meetings with the contract, finance, and budget groups to review costs associated with TIM’s contracts. However, management does not review or produce reports on overall life- cycle cost performance for the program or Agile software development cost performance. Program officials said they have not yet determined how best to measure cost performance in an Agile software development environment. In September 2016, the Under Secretary for Management instructed the program to collaborate with DHS’s Cost Analysis Division and the headquarters-level Agile integrated product team to establish agreed-upon software development cost metrics as well as a method for collecting and reporting on those metrics by the end of the March 2017. However, as of May 2017, this effort was still in progress. Until the TIM program begins collecting and reporting on Agile-related cost, oversight bodies will have limited information by which to monitor TIM costs. Department-level oversight bodies have focused on reviewing certain program life-cycle metrics for the TIM program. Specifically, the DHS Acquisition Review Board conducts periodic reviews of the program to monitor the program’s performance and hold the program accountable. Since the program was rebaselined in September 2016 and transitioned to Agile software development, the Acquisition Review Board has conducted one review. In addition, the Executive Steering Committee, which is chaired by the TSA CIO and Deputy Component Acquisition Executive, and includes representatives from the DHS Chief Technology Officer and PARM, reviews the program quarterly. As of July 2017, the Executive Steering Committee had conducted three reviews of the TIM program since implementing its new development approach. These oversight bodies reviewed, for example, performance information such as comparisons of the dates that milestones were actually achieved, against the planned schedule, and the burnup charts for the program (i.e., graphical representations of accumulated story points planned and completed per release). However, the Acquisition Review Board and the Executive Steering Committee have not been measuring the program against the rebaselined life-cycle costs, or important Agile release-level metrics, which are essential for providing early indicators of issues with the program. For example, these oversight bodies did not review the program’s velocity, number of features/user stories planned and accepted, product quality, or Agile software development cost metrics. In addition, while we have previously reported that there was overlap in the DHS OCIO’s and the PARM office’s assessments of certain IT programs, neither of these offices assessed the TIM program’s progress against key Agile performance metrics or cost performance. Specifically, the DHS OCIO and the PARM office conducted periodic (monthly or quarterly health assessments) of the program that included, among other things, schedule and system performance indicators for the entire life- cycle of the program (similar to what is used to review traditional waterfall programs). While these metrics are useful for understanding the program’s progress against the full schedule (60 months to full operational capability, or 30 Agile releases), they do not offer insight into the progress of individual Agile releases, which are deploying high-priority capabilities for the TIM program every 2 months. For example, as of April 2017, these two oversight bodies did not include Agile performance metrics which would have offered important insights into the progress of individual releases, such as velocity, progress metrics, quality metrics, post-deployment user satisfaction, or Agile software development costs. Thus, until DHS-level oversight bodies review key Agile performance and cost metrics and use them to inform management oversight decisions, the oversight bodies will be limited in their ability to obtain early indicators of any issues with the program, and to call for course correction, if needed. Recently, the TIM program also began measuring user satisfaction. Specifically, in April 2017, the DHS Acting Under Secretary for Management directed TSA’s Operational Test Agent to implement a continuous evaluation dashboard based on the results from the program’s third Agile release by the end of June 2017. This dashboard was to measure, among other things, post-deployment user satisfaction. TSA subsequently implemented the continuous evaluation dashboard in June 2017. Table 4 summarizes the extent to which performance metrics are reviewed by various oversight bodies. TSA and DHS Do Not Always Rely on Complete and Accurate TIM Performance Data According to leading practices, effective program oversight includes relying on complete and accurate data to review program performance against stated expectations. Complete and accurate data allow oversight bodies to have transparency into the performance of programs and helps them identify when course correction is needed. However, TIM’s reported performance data were not always complete and accurate. Specifically, when reporting on the velocity (i.e., total number of story points completed per sprint and/or release across the development teams) of TIM’s first release after it was deployed, program officials inconsistently reported velocity among the program’s performance reports, thus calling into question the accuracy and completeness of the information. Since the data were being reported on a completed release, the velocity should have been reported as one consistent number that did not change. According to program officials, the reason for inconsistent reporting was that, despite best practices, the program’s methodology for measuring velocity was not consistent and was calculated differently each time. For example, table 5 shows three different numbers that were to represent the collective velocity across the development teams, and that officials reported to program management after the deployment of the first software release. While there was less variation in the velocity data reported after the second software release was deployed, discrepancies were still present. For example, table 6 shows the different numbers that officials reported to TIM program management after the deployment of the second software release. Program officials stated that the reason for the inconsistencies in reported velocity data was that during the first release they were still in the process of adapting Agile and were working to determine how best to calculate velocity. However, as shown in table 6 inconsistent data continued to occur beyond that first release. These inconsistencies in reported data call into question the completeness and accuracy of the velocity numbers reported, and the potential impact on oversight bodies’ ability to hold the program accountable. For example, velocity is most useful when tracked over time to ensure consistent performance and for forecasting how quickly development teams can work through the items in a backlog. However, without a complete and accurate velocity number from each release, it is difficult for oversight bodies to ensure the program is producing work at an acceptable pace to enable the program to meet its cost, schedule, and performance targets. In addition, the program had been reporting inaccurate unit test coverage data using a manual measurement approach. Specifically, from December 2016 to March 2017, program officials were reporting that, for each release, they tested every line of code, based on a manual estimate (i.e., 100 percent). However, testing each line of code manually is unrealistic because with manual tests, it is difficult to determine which function, line of code, or logic decision is executed, and which is not. As such, program officials were reporting that they were testing every line of code, even though they were unable to confirm that they were actually doing so, thus calling into question the reliability and accuracy of the data reported. In response to our concerns, program officials acknowledged that they could not confirm whether they had tested every line of code. Accordingly, program officials stopped estimating this metric manually and stated that they planned to begin measuring unit test coverage again once lines of code could be tracked using automated tools. As previously discussed, program officials stated that the testing and deployment tools are not expected to be implemented until the new development, testing, and production environments are set up. However, until the program has complete and accurate unit test code coverage data, program officials will not know if portions of its code are going untested, which could lead to undetected issues and impact the quality of the product. Conclusion TSA’s TIM program has taken notable steps to address several of the major issues it faced during prior system development and deployment efforts, such as implementing system fixes to address critical performance and usability issues found in the maritime segment. Nonetheless, a number of significant challenges have not been fully addressed. In particular, until the TIM program establishes specific time frames for determining key implementation details, ensures its schedule provides planned completion dates based on realistic estimates, and establishes new time frames for implementing the actions identified in the strategy, it is at significant risk of repeating past mistakes and experiencing the same pitfalls as it did during its initial implementation attempts. An indication of concern is that the program is currently experiencing a delay of at least 6 months in the rebaselined schedule for delivering TSA Pre® capabilities. While the program has also taken certain steps to successfully make the transition from a waterfall development approach to Agile software development—a substantial and complex effort—TIM has not defined key roles and responsibilities, prioritized features and user stories, or implemented automated capabilities that are essential to ensuring effective adoption of Agile. The gaps we identified with the program’s implementation of Agile are concerning given that it did not follow key IT acquisition best practices when using its waterfall development approach, in which the program spent approximately 8 years and over $280 million on a system that TSA has determined it needs to replace. While selected corrective actions have been taken, until the TIM program is implemented in accordance with leading practices, the program will be putting at risk its ability to deliver a quality system that strengthens and enhances the sophistication of TSA’s security threat assessment and credentialing programs. In addition, while TSA and DHS have implemented certain practices for overseeing and governing the program, the lack of other practices has impeded their oversight effectiveness, including the lack of thresholds or targets for acceptable performance levels, the lack of reporting on Agile- related cost metrics, and inconsistent measuring and reporting of program velocity and unit test coverage for software releases. These gaps limit the ability of DHS oversight bodies to obtain early indicators of any issues with the program, and to call for course corrections, if needed. Further, until DHS leadership reaches consensus on needed oversight and governance changes related to Agile programs, and then documents and implements associated changes to align oversight reviews with the timing of Agile software releases, the department will not be well positioned to hold the program accountable. Moreover, until the Office of the Chief Technology Officer completes guidance for Agile programs to use for collecting and reporting on performance metrics, and DHS-level oversight bodies require the TIM program to report on key Agile performance and cost metrics and use them to inform management oversight decisions, the department will also be limited in its ability to hold the TIM program accountable and ensure that it is meeting its cost, schedule, and performance targets. Recommendations for Executive Action We are making the following 14 recommendations to DHS: The TSA Administrator should ensure that the TIM program management office establishes and implements specific time frames for determining key strategic implementation details, including how the program will transition from the current state to the final TIM state. (Recommendation 1) The TSA Administrator should ensure that the TIM program management office establishes a schedule that provides planned completion dates based on realistic estimates of how long it will take to deliver capabilities. (Recommendation 2) The TSA Administrator should ensure that the TIM program management office establishes new time frames for implementing the actions identified in the organizational change management strategy and effectively executes against these time frames. (Recommendation 3) The TSA Administrator should ensure that the TIM program management office defines and documents the roles and responsibilities among product owners, the solution team, and any other relevant stakeholders for prioritizing and approving Agile software development work. (Recommendation 4) The TSA Administrator should ensure that the TIM program management office establishes specific prioritization levels for current and future features and user stories. (Recommendation 5) The TSA Administrator should ensure that the TIM program management office implements automated Agile management testing and deployment tools, as soon as possible. (Recommendation 6) The TSA Administrator should ensure that the TIM program management office updates the Systems Engineering Life Cycle Tailoring Plan to reflect the current governance framework and milestone review processes. (Recommendation 7) The TSA Administrator should ensure that the TIM program management office establishes thresholds or targets for acceptable performance-levels. (Recommendation 8) The TSA Administrator should ensure that the TIM program management office begins collecting and reporting on Agile-related cost metrics. (Recommendation 9) The TSA Administrator should ensure that the TIM program management office ensures that program velocity is measured and reported consistently. (Recommendation 10) The TSA Administrator should ensure that the TIM program management office ensures that unit test coverage for software releases is measured and reported accurately. (Recommendation 11) The Secretary of Homeland Security should direct the Under Secretary for Management to ensure that appropriate DHS leadership reaches consensus on needed oversight and governance changes related to the frequency of reviewing Agile programs, and then documents and implements associated changes. (Recommendation 12) The Secretary of Homeland Security should direct the Under Secretary for Management to ensure that the Office of the Chief Technology Officer completes guidance for Agile programs to use for collecting and reporting on performance metrics. (Recommendation 13) The Secretary of Homeland Security should direct the Under Secretary for Management to ensure that DHS-level oversight bodies review key Agile performance and cost metrics for the TIM program and use them to inform management oversight decisions. (Recommendation 14) Agency Comments and Our Evaluation DHS provided written comments on a draft of this report, which are reprinted in appendix II. In its comments, the department concurred with all 14 of our recommendations and described actions it has planned or taken to address them. For example, with regard to recommendation 6, which calls for DHS to implement automated Agile management testing and deployment tools, the department stated that TSA plans to implement such tools by June 30, 2018. Additionally, for recommendation 14, the department stated that DHS intends to ensure that oversight bodies review key Agile performance and cost metrics for the TIM program by June 30, 2018. If implemented effectively, these actions should address the weaknesses we identified. The department also described recent actions that it and TSA had taken to address three of the recommendations, and requested that we consider these recommendations resolved. Specifically, in response to recommendation 9, calling for TSA to ensure that the TIM program management office begins collecting and reporting on Agile-related cost metrics, the department stated that the program is now reporting these metrics on a monthly basis. In response to recommendation 10, calling for TSA to ensure that the program’s velocity is measured and reported consistently, the department stated that velocity is now being reported consistently and in accordance with DHS guidelines. Further, in response to recommendation 13, which calls for DHS to complete guidance for Agile programs to use for collecting and reporting on performance metrics, the department stated that the guidance had recently been published and provided to us. However, to date, we have received only draft versions of the guidance. We will work with the department to obtain finalized documentation related to the three recommendations, to determine if the recent actions fully address the recommendations. In addition to the aforementioned comments, we received technical comments from DHS and TSA officials, which we incorporated, as appropriate. We are sending copies of this report to the Secretary of Homeland Security and interested congressional committees. In addition, the report will be 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) 512-4456 or harriscc@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 III. Appendix I: Objectives, Scope, and Methodology Our objectives were to (1) describe the Transportation Security Administration’s (TSA) past implementation efforts for the Technology Infrastructure Modernization (TIM) program and its new implementation strategy; (2) determine the extent to which TSA’s new strategy for the program addresses the challenges encountered during earlier implementation attempts; (3) determine the extent to which TSA has implemented selected key practices for transitioning to an Agile software development framework for the program; and (4) determine the extent to which the TSA and the Department of Homeland Security (DHS) are effectively overseeing and governing the TIM program to ensure that it is meeting cost, schedule, and performance requirements. To address our first objective, we reviewed program documentation, such as initial and current acquisition program baselines, initial and current life- cycle cost estimates, acquisition decision memorandums, and program plans documenting a new strategy for implementing the program. We used the information in this documentation to summarize the program’s earlier attempts to implement TIM capabilities and its new implementation strategy for delivering the program, including estimated costs, schedule, and key decisions made. We also interviewed TSA officials, including the TIM Director and Deputy Director, on the status of TIM program office efforts. To determine the extent to which the TIM program’s new strategy addresses the challenges encountered during earlier implementation attempts, we reviewed documentation on the challenges the TIM program faced when it breached cost and schedule thresholds and experienced system performance issues, such as those described in initial operational test reports, the breach remediation plan, and the results of a technical evaluation of program challenges. We synthesized the information in these documents to identify a consolidated list of key challenges the program had faced. We did not include challenges that were already being evaluated as part of other objectives, such as the use of the waterfall software development approach. We then reviewed documentation on the program’s new strategy, such as plans documenting the new strategy, follow-on operational test reports, program schedules, program status reports, and identified risks. We assessed the extent to which the new strategy outlined in these documents addressed the prior challenges by comparing them against criteria identified in leading practices and guidance, such as DHS’s Systems Engineering Lifecycle Guide and the Software Engineering Institute’s Capability Maturity Model® Integration for Development. In addition, we conducted a site visit at the TSA Adjudication Center in Reston, Virginia. During this site visit, we observed demonstrations of the current commercial-off-the- shelf system and legacy systems for TSA Pre® and Aviation Workers, and we interviewed adjudicators and supervisors on current security threat assessment processes and limitations. Further, we interviewed TSA officials, including the TIM Director and Deputy Director, on the program office’s efforts to address prior challenges. To determine the extent to which the program has implemented selected key practices for transitioning to an Agile software development framework, we identified leading practices and guidance outlined in the following sources: GAO, Software Development: Effective Practices and Federal Challenges in Applying Agile Methods Software Engineering Institute, Agile Readiness and Fit TechFAR handbook TSA Agile Scrum guidance CMMI® for Development, version 1.3 Software Engineering Institute, Agile Metrics After reviewing the sources listed, in consultation with our internal expert, we grouped practices that were identified as being critical to establish when transitioning to an Agile software development framework, and selected the practices that were most relevant based on the status of the program’s transition and we discussed the practice areas with TSA officials. The practices included: full support from leadership to adopt Agile processes, enhancing Agile knowledge, ensuring product owners are engaged with the development teams and have clearly defined roles, establishing a clear product vision, prioritized backlogs of requirements, and implementing automated tools to enable rapid system development and deployment. We reviewed program management documentation against these practices, such as Agile training records, Agile contracts, program roadmaps, backlogs, test plans, Agile release artifacts, program status reports, and identified risks. Additionally, we observed Agile release and sprint development activities at TSA facilities in Annapolis Junction, Maryland, and at a contractor’s facilities in Beltsville, Maryland, and we observed a demonstration of how user stories map from high-level capabilities and tracked through development and testing. We also interviewed TSA officials, including the TIM Director and Deputy Director and the five TIM product owners, on their efforts to transition the program to an Agile software development framework. Further, we interviewed DHS officials, including the Chief Technology Officer, on their efforts to conduct an Agile pilot to assist programs like TIM in adopting Agile software development processes. We assessed the evidence against leading practices to determine the extent to which TSA met the practices. To determine the extent to which TSA and DHS are effectively overseeing and governing the program to ensure that it is meeting cost, schedule, and performance requirements, we identified leading practices and guidance outlined in the following sources: TSA Agile Scrum guidance CMMI for Development, version 1.3 Software Engineering Institute, Agile Metrics After reviewing the sources listed, we grouped practices related to oversight and governance for programs using Agile software development into four key practice areas and we discussed the practices with DHS and TSA officials. These areas included: Document relevant governance and oversight policies and procedures. Monitor program performance and progress. Rely on complete and accurate data to review performance against expectations. Ensure that corrective actions are identified and tracked until the desired outcomes are achieved. To assess the extent that TSA and DHS had addressed these key practices, we reviewed the most current program management and governance documentation as of April 2017. Specifically, we analyzed documentation on program management processes, such as TIM’s Systems Engineering Life Cycle Tailoring Plan, TIM Agile and Technical Strategy, TIM Agile software development contract, and draft DHS Agile Acquisition Program Delivery Metrics Playbook; and artifacts from TIM’s program execution and review, such as Agile release artifacts, program status reports, contractor status reports, program schedules, life-cycle cost estimates, risk registers, TSA Executive Steering Committee reviews, DHS program health assessments, DHS Agile pilot integrated product team meetings, DHS Office of the Chief Technology Officer Agile pilot reviews, and DHS Acquisition Review Board reviews. Additionally, we interviewed TSA officials, including the TIM Director and Deputy Director, on their efforts to oversee TIM’s development. Further, we interviewed DHS officials, including the Chief Technology Officer, on their efforts to oversee the program’s Agile software development activities. We compared this evidence against leading practices to determine the extent to which TSA and DHS met the practices. To assess the reliability of the data that we used to support the findings in this report, we reviewed relevant program documentation to substantiate evidence obtained through interviews with agency officials. We determined that the data used in this report were sufficiently reliable for the purposes of our reporting objectives. We made appropriate attribution indicating the sources of the data. We conducted this performance audit from September 2016 to October 2017 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 III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, the following staff made key contributions to this report: Shannin G. O’Neill (Assistant Director), Jeanne Sung (Analyst in Charge), Jennifer Beddor, Rebecca Eyler, Bruce Rackliff, and Dwayne Staten.

Why GAO Did This Study TSA conducts security threat assessment screening and credentialing activities for millions of workers and travelers in the maritime, surface, and aviation transportation industries that are seeking access to transportation systems. In 2008, TSA initiated the TIM program to enhance the sophistication of its security threat assessments and to improve the capacity of its supporting systems. However, the program experienced significant cost and schedule overruns, and performance issues, and was suspended in January 2015 while TSA established a new strategy. The program was rebaselined in September 2016 and is estimated to cost approximately $1.27 billion and be fully operational by 2021 (about $639 million more and 6 years later than originally planned). GAO was asked to review the TIM program's new strategy. This report determined, among other things, the extent to which (1) TSA implemented selected key practices for transitioning to Agile software development for the program; and (2) TSA and DHS are effectively overseeing the program's cost, schedule, and performance. GAO compared program documentation to key practices identified by the Software Engineering Institute and the Office of Management and Budget, as being critical to transitioning to Agile and for overseeing and governing programs. What GAO Found The Transportation Security Administration's (TSA) new strategy for the Technology Infrastructure Modernization (TIM) program includes using Agile software development, but the program only fully implemented two of six leading practices necessary to ensure successful Agile adoption. Specifically, the Department of Homeland Security (DHS) and TSA leadership fully committed to adopt Agile and TSA provided Agile training. Nonetheless, the program had not defined key roles and responsibilities, prioritized system requirements, or implemented automated capabilities that are essential to ensuring effective adoption of Agile. Until TSA adheres to all leading practices for Agile implementation, the program will be putting at risk its ability to deliver a quality system that strengthens and enhances the sophistication of TSA's security threat assessments and credentialing programs. TSA and DHS fully implemented one of the key practices for overseeing the TIM program, by establishing a process for ensuring corrective actions are identified and tracked. However, TSA and DHS did not fully implement the remaining three key practices, which impede the effectiveness of their oversight. Specifically, TSA and DHS documented selected policies and procedures for governance and oversight of the TIM program, but they did not develop or finalize other key oversight and governance documents. For example, TSA officials developed a risk management plan tailored for Agile; however, they did not update the TIM system life-cycle plan to reflect the Agile governance framework they were using. The TIM program management office conducted frequent performance reviews, but did not establish thresholds or targets for oversight bodies to use to ensure that the program was meeting acceptable levels of performance. In addition, department-level oversight bodies have focused on reviewing selected program life-cycle metrics for the TIM program; however, they did not measure the program against the rebaselined cost, or important Agile release-level metrics. TIM's reported performance data were not always complete and accurate. For example, program officials reported that they were testing every line of code, even though they were unable to confirm that they were actually doing so, thus calling into question the accuracy of the data reported. These gaps in oversight and governance of the TIM program were due to, among other things, TSA officials not updating key program management documentation and DHS leadership not obtaining consensus on needed oversight and governance changes related to Agile programs. Given that TIM is a historically troubled program and is at least 6 months behind its rebaselined schedule, it is especially concerning that TSA and DHS have not fully implemented oversight and governance practices for this program. Until TSA and DHS fully implement these practices to ensure the TIM program meets its cost, schedule, and performance targets, the program is at risk of repeating past mistakes and not delivering the capabilities that were initiated 9 years ago to protect the nation's transportation infrastructure. What GAO Recommends GAO is making 14 recommendations, including that DHS should prioritize requirements and obtain leadership consensus on oversight and governance changes. DHS concurred with all 14 recommendations.

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Background TSA Roles and Responsibilities The Aviation and Transportation Security Act designated TSA as the primary federal agency responsible for securing all modes of transportation. In fiscal year 2005, Congress appropriated funds for surface transportation security, and the accompanying conference report directed that some of those funds go to rail compliance inspectors, the predecessors to today’s surface transportation security inspectors— referred to as surface inspectors. Public and private transportation entities have the principal responsibility to carry out safety and security measures for their services. As such, TSA coordinates with public and private transportation entities to identify vulnerabilities, share intelligence information, and work to mitigate security risks to the system. See table 1 for examples of the entities TSA works with to secure the various surface transportation modes. TSA Surface Security Budget and Regulations In fiscal year 2005, $10 million of TSA’s surface transportation security appropriation was to hire and deploy up to 100 rail compliance inspectors. TSA assigned inspectors to oversee security and provide oversight and assistance to railroads, and subsequently, other surface transportation modes, including mass transit and passenger rail, freight rail, highway, and pipeline sectors. TSA has since increased the number of surface inspectors, and since 2013 has maintained more than 200 Full Time Equivalent (FTE) positions. See table 2 for additional details on the number of TSA surface inspector FTEs from fiscal years 2013 through 2017. In August 2007, the 9/11 Commission Act was signed into law and required TSA to issue security regulations for freight and passenger rail, among other requirements. TSA also issued regulations governing surface transportation security on its own initiative. As of July 2017, TSA has issued the following regulations related to surface transportation: Rail Inspections: Issued in November 2008, 49 C.F.R. part 1580 requires certain freight railroad carriers and passenger rail operations (passenger railroad carriers and rail transit systems) to designate a rail security coordinator, notify the Transportation Security Operations Center regarding any significant security concerns, and, if applicable, ensure a secure chain of custody of rail cars containing certain hazardous materials, and be able to provide location and shipping information for certain rail cars, among other things. The hazardous materials subject to this regulation include certain explosives, toxic inhalation hazardous materials (TIH), and radioactive materials. See appendix II for additional details. Maritime Inspections: TSA also partners with the U.S. Coast Guard (USCG) in securing maritime ports, facilities and vessels. TSA’s responsibilities include enrolling Transportation Worker Identification Credential (TWIC) applicants, conducting background checks to assess the individual’s security threat, and issuing TWICs. In addition, TSA is authorized to conduct inspections of persons using TWIC to access the secured area of a regulated maritime facility. TSA Organizational Structure for Managing Its Surface Inspectors Surface inspectors work under the direct command authority of the Federal Security Director (FSD) in the field. As of fiscal year 2017, TSA used a staffing model to allocate surface inspector staff to 49 different field offices, separated into seven geographic regions around the country. According to TSA, all but one surface field office locations are at or near major airports. Figure 1 depicts surface field office locations by region. Surface inspector policies and procedures, and operational oversight are managed separately. Program Guidance: Within TSA’s Office of Security Operations, the Surface Compliance Branch plans surface transportation security activities and programs, and develops an annual work plan that lays out the minimum required activities to be completed for surface inspectors in the field. The Office of Security Policy and Industry Engagement (OSPIE) collects and analyzes data on certain surface inspector activities such as the Baseline Assessment for Security Enhancement (BASE) program, TIH attendance rates, and freight rail compliance rates; coordinates with industry stakeholders, and; develops strategic plans, among other things. Operational oversight: The Assistant Federal Security Director for Inspections (ASFD-I) in each field office manages surface inspectors on a day-to-day basis, oversees the scheduling of surface inspector work plan activities, and reviews inspectors’ documentation of activities in PARIS, TSA’s system of record. FSDs are ultimately responsible for ensuring that surface inspectors complete their annual work plan requirements. In 2010, TSA created the Regional Security Inspector (RSI) position in an effort to improve oversight of surface inspectors in the field and standardize inspections across field offices. One RSI is assigned to each of the seven geographic regions and serves as a liaison between TSA headquarters staff and surface inspectors in the field. Each RSI is also assigned to be the lead liaison between TSA and the Class I railroads within their assigned geographic region. See figure 2 for surface inspectors’ command structure as of 2017. TSA Risk-Based Security for Surface Transportation TSA documents state that it employs a risk-based approach for securing transportation modes and identifies managing risk as one of its strategic goals to help identify and plan security priorities and activities. According to TSA officials, TSA uses the National Infrastructure Protection Plan (NIPP) risk management framework and the DHS Risk Management Fundamentals as its primary risk guidance. In June 2006, DHS issued the NIPP which established a six-step risk management framework to establish national priorities, goals and requirements. Most recently updated in 2013, the NIPP defines risk as a function of three elements: threat, vulnerability and consequence. Threat is an indication of the likelihood that a specific type of attack will be initiated against a specific target or class of targets. Vulnerability is the probability that a particular attempted attack will succeed against a particular target or class of targets. Consequence is the effect of a successful attack. TSA uses the TSSRA, a bi-annual risk assessment that considers the three elements of risk to measure the risk of various terrorist attack scenarios, evaluate transportation modes, and identify surface security priorities. Surface Inspectors Conduct Regulatory Inspections and Voluntary Security Assessments but TSA Has Incomplete Information on Their Activities Surface Inspectors Enforce Regulations through Inspections and Assist Surface Transportation Entities on a Voluntary Basis Surface inspectors conduct a variety of activities to implement TSA’s surface transportation security mission, including (1) regulatory inspections for freight and passenger rail systems, (2) regulatory TWIC inspections, and (3) non-regulatory security assessments and training which surface transportation entities participate in on a voluntary basis. Surface inspector activities are, in part, determined by an annual surface work plan that lays out the minimum required number of surface inspector activities to be completed by each field office. Specifically, the work plan requirements are designed to take up about one-third of inspectors’ available working hours, with the expectation that the other two-thirds of inspectors’ time will be used for related activities, such as documentation and follow-up, or other tasks as determined by local AFSD-Is and FSDs in the field. To develop the annual surface work plan, officials from Office of Security Operation’s Surface Compliance Branch and OSPIE meet with each of the RSIs once a year to determine the requirements for each office. According to TSA officials, they rely on the previous year’s requirements as well as data on surface inspectors’ past activities as logged in PARIS as a starting point to develop the requirements, and adjust the work plan based on their professional judgment of the unique environment in each field office’s area of responsibility. TSA officials stated that they consider variables such as the compliance rates for inspections, the amount of TIH materials being shipped through an area, and any other relevant risk- related information when they develop the work plan. Regulatory Rail Inspections Surface inspectors conduct inspections to enforce several freight and passenger rail security requirements. Table 3 provides descriptions of these inspections and appendix II provides a complete listing of TSA’s regulatory activities. TSA also tracks the rate at which the inspected entities comply with the regulations discussed in table 3. According to TSA data, on average, overall compliance rates for inspections have remained relatively high, and the compliance rates have generally improved over the years as entities have become more familiar with the processes and expectations of each type of inspection. Regulatory Maritime Inspections Surface inspectors work with the USCG to conduct inspections of TWIC card holders attempting to access the secured area of maritime facilities regulated by the Maritime Transportation Security Act of 2002 (MTSA). TSA first issued the TWIC regulation in 2007 in cooperation with the USCG, and according to TSA officials, began nationwide implementation of TSA inspection of TWICs at maritime facilities in fiscal year 2017. Surface inspectors scan cards using a TWIC card reader to verify that the card presented is valid and belongs to the card holder. TSA may pursue civil enforcement and can refer violators for criminal proceedings through the USCG. TSA officials stated they set the total minimum required TWIC inspections at 1,315 combined across all surface inspector field offices for fiscal year 2017 as a starting point, and would modify the requirements in subsequent years, as discussed below. According to TSA, it is too soon to determine compliance rates for TWIC inspections. Non-regulatory Security Activities Surface inspectors perform a variety of non-regulatory surface-related activities, such as various types of assessments, which require surface entities’ voluntary participation. Table 4 provides a list of key non- regulatory activities surface inspectors perform. For a full list of activities surface inspectors perform see appendix II. TSA Has Taken Steps to Expand the BASE Review Program and Address Implementation Challenges Since 2006, TSA has made adjustments to the BASE program to expand its use to more surface modes and address implementation challenges. To conduct a BASE review, surface inspectors use a standardized checklist to evaluate and score an entity’s security policies and procedures for areas such as employee security training, cybersecurity, and facility access control, among other items. According to TSA officials, the results of the BASE reviews are intended to help track the entity’s progress in implementing specific security measures over time and improve overall security posture among surface transportation entities, as well as inform transportation security grant funding. Surface inspectors also use entities’ BASE review scores to help inform Exercise Information System (EXIS) training programs inspectors facilitate for transportation entities. Initially, the BASE program was designed to assess large mass transit entities in major metropolitan areas that transported 60,000 riders or more daily. TSA officials stated in 2017 that TSA has completed initial and follow up BASE reviews for the top 100 mass transit agencies in the country which comprise approximately 80 percent of the ridership in the United States. In 2012, TSA expanded the BASE reviews to the highway mode to include trucking, motor coach, and school bus operators. Additionally, TSA has taken steps to address challenges related to the implementation of the BASE reviews, including an initial lack of training and guidance for surface inspectors in conducting and evaluating the BASE reviews and difficulty applying the BASE template for smaller mass transit entities and highway entities. For example, surface inspectors we interviewed at six field offices indicated that they received limited to no training to conduct the initial BASE reviews. Office of Security Operations officials acknowledged that the BASE program initially lacked scoring guidance to allow surface inspectors to make objective evaluations. Additionally, two industry entities we spoke with stated that some BASE questions, as initially developed, seemed inappropriate or irrelevant given the scope of their operation, and that their scores reflected areas that they were not able to modify based on their limited size and resources. Further, in 2010, the DHS Office of Inspector General reported that TSA needed to provide increased training and guidance for inspectors to ensure that BASE assessments gather effective, objective data. In response, officials from TSA’s Surface Compliance Branch stated that they established a BASE Advisory Panel and held a series of training workshops throughout the country on how to conduct BASE assessments. Specifically, in fiscal year 2014, TSA established a panel comprised of mass transit experts to adjust the BASE tool by modifying topics and removing outdated questions in an effort to improve the quality and applicability of the assessments for the industry stakeholders. TSA has also modified the BASE template over time to include areas such as cybersecurity and active shooter training, among others. TSA reported that it held a series of 16 workshops in 2015 around the country where headquarters officials met with inspectors to train them on how to conduct BASE assessments and correctly apply scoring guidance to help ensure inspectors applied the BASE criteria consistently. Moreover, in fiscal year 2016, TSA developed a targeted BASE that focuses only on an entity’s areas of concern as identified by surface inspectors in a previous BASE review. Further, TSA is piloting a modified BASE template in fiscal year 2017 that eliminates questions that may not apply for smaller mass transit and highway entities. According to Surface Compliance Branch and OSPIE officials, these changes have led to more consistent and more reliable results in the BASE scores. We believe that TSA efforts to improve training and guidance as well as establishing the BASE Advisory Panel will help address the agency’s previous concerns related to the implementation of the BASE review. TSA Has Incomplete Data on Surface Inspector Activities because It Cannot Account for All Aviation-related Activities According to TSA headquarters and field officials, in addition to surface inspection activities, surface inspectors are tasked, to varying degrees, with aviation activities. However, TSA officials told us that they are unable to identify the total time surface inspectors spend on aviation activities because of data limitations. For example, surface inspectors may perform aviation activities on a regular basis as a “duty agent,” or on an as- needed basis as determined by their local manager—their AFSD-I. TSA guidance directs surface inspectors to report the time they spend on all activities into TSA’s PARIS database. TSA officials responsible for managing PARIS told us that it has two independent modules – aviation and surface – and that surface inspectors enter aviation-related activities in both the aviation and surface modules. Specifically, TSA guidance directs surface inspectors to document their time serving as “duty agent” in the surface module of PARIS, but to document time spent on aviation inspections, incidents, or investigations – including those that take place during an inspector’s time serving as the duty agent – into the aviation module of PARIS. See table 5 for examples of the types of aviation activities surface inspectors record in each separate PARIS module. TSA officials told us that it is not possible to identify the time surface inspectors document in the aviation module of PARIS because there is no efficient, reliable way to distinguish surface inspectors from aviation or cargo inspectors in the data. Since TSA cannot reliably identify activities surface inspectors have entered into the aviation module of PARIS, TSA is only aware of the portion of time surface inspectors spent on aviation activities that was logged in the surface module. As a result, TSA does not have complete information on how surface inspector resources are being used or the extent to which surface inspectors are being used to perform aviation activities. According to some surface inspectors we spoke to, these resources can be substantial. Surface inspectors we interviewed at 16 of the 17 TSA field offices contacted stated that they perform aviation duties. One inspector stated she had received calls to respond to 12 different aviation incidents in one shift as duty inspector, and other inspectors stated that each incident report could subsequently take between 2 and 12 hours to complete. Surface inspectors from another office located near a major airport told us they have to work overtime to complete aviation incident reports and still meet their required surface activities. Further, we met with surface inspectors stationed at four different major airports who each estimated spending 20 percent, 25 percent, 30 percent, and 50 percent of their total working hours on aviation tasks, respectively. Standards for Internal Control in the Federal Government states that agencies should use complete information to make informed decisions and evaluate the agency’s performance in achieving key objectives. As stated previously, one of TSA’s key objectives is to employ a risk-based approach to all operations to identify, manage, and mitigate risk. Standards for Internal Control in the Federal Government also states that agencies should clearly document all activities in a manner that allows the documentation to be readily available for examination. Without having access to complete information on all inspector activities, including aviation activities, TSA cannot monitor how frequently surface inspectors are being used to support aviation. In addition, by not using complete information on how much time surface inspectors spend working in support of aviation, TSA is limited in its ability to make informed future decisions on annual resource needs for surface inspectors, which will be especially important as TSA takes steps to expand its inspection activities with the promulgation of new surface security regulations. By addressing the limitations in the aviation module of PARIS, TSA would be able to more reliably access complete information on all inspector activities. Also, it would have the information it needs to make fully informed decisions about surface inspector resources and activities, and to evaluate surface inspectors’ performance in achieving key surface security objectives. Since there is no way to identify surface inspectors in the aviation module of PARIS at the aggregate level, we were unable to conduct our own analysis of all surface inspector activities. However, we were able to analyze data on how surface inspectors reported spending their time in the surface module of PARIS, including time spent on aviation activities as documented in this particular module. Our analysis showed that from fiscal years 2013 to 2017, surface inspectors reported spending approximately 80 percent of their time on non-regulatory activities, while spending approximately 20 percent on regulatory inspections. Figure 3 shows a breakdown of the time surface inspectors recorded spending in the surface module of PARIS for fiscal year 2016, the most recent complete year of data available. See appendix III for similar breakdowns for each fiscal year from 2013 to 2017. TSA Used a Risk- Informed Process to Allocate Surface Inspector Staff, But Inspector Activities Did Not Align With Risk TSA Used a Risk-Informed Model to Allocate Surface Inspectors to Field Offices In fiscal year 2017, TSA’s Surface Compliance Branch implemented an updated staffing model to redistribute 222 surface-funded positions across its 49 surface field offices based on the factors described in table 6 below. TSA considered four of these factors – HTUA/Urban Area Security Initiative (UASI), Mass Transit, TWIC, and TIH – to be related to risk. For example, TSA derived its list of HTUAs based on risk assessments conducted under the UASI program. We have previously reported that the UASI methodology for determining risk scores and distributing grant funds is reasonable, and that UASI grant allocations are strongly associated with a city’s current relative risk score. Additionally, according to TSA, inspectors focus on entities within surface transportation modes or shipments of certain hazardous materials the agency determines could pose the greatest security vulnerability and which could potentially be more likely to be targeted by terrorists. The DHS Risk Lexicon 2010 and the 2013 NIPP risk management framework, which are TSA’s primary risk guidance, define risk-informed decision-making as the determination of a course of action predicated on the assessment of risk, the expected impact of that course of action on that risk, as well as other relevant factors. The DHS Risk Lexicon 2010 further states that risk-informed decision-making may also take into account multiple sources of information not included specifically in the assessment of risk. Because TSA considered multiple risk factors in addition to other information, such as the number of regulated entities in an area and the number of required activities, in its staffing model, we determined that TSA used a risk-informed model to allocate surface inspector staff to its 49 offices. Between Fiscal Years 2013 and 2017 Surface Inspector Activities Did Not Align With Identified Risks for Surface Transportation Modes TSA surface inspectors perform a wide range of regulatory and non- regulatory activities to fulfill the agency’s objective of employing risk- based security, but we found that between fiscal years 2013 and 2017 surface inspector activities did not align with the risks TSA identified for surface transportation. To inform its security strategy, TSA assesses risk within and across the aviation, freight rail, passenger rail/mass transit, highway, and pipeline modes approximately every 2 years using the TSSRA. According to the TSSRA’s cross-modal risk assessments between fiscal years 2013 and 2017, one particular surface mode consistently posed the highest risk, and another consistently posed the lowest risk out of all surface transportation modes. For example, in fiscal year 2016, TSA found that the lowest risk mode posed approximately 6 percent of domestic total risk while the highest risk mode posed 27 percent of domestic total risk. However, our analysis of data from the surface module of PARIS showed that inspectors reported spending between 35 and 45 percent of their time on the lowest risk mode between fiscal year 2013 and fiscal year 2016 – the most time spent on any surface mode. Of the time reported in the surface module of PARIS in fiscal year 2016, surface inspectors reported spending 38 percent of their time on the lowest risk transportation mode while they reported spending approximately 16 percent of their time on the highest risk surface mode according to the TSSRA. See figure 4 for a comparison between the percent of time inspectors recorded spending on each mode and the percent of risk identified in the TSSRA. We found that TSA did not use the results of risk assessments that measure threat, vulnerability, and consequence, like the TSSRA, when it developed surface inspector work plans, or when it monitored activities inspectors conducted, including those in addition to the minimum work plan requirements. While TSA officials told us that they considered the results of the TSSRA, TSA officials could not provide evidence that they incorporated the results of the TSSRA or other risk assessments when developing the work plan and monitoring inspector activities, as required by DHS risk management guidance. For example, TSA officials could not provide documentation of how and why they selected certain work plan activities to address lower risk modes, or how they monitored the extent to which implemented activities aligned with or addressed risks. Monitoring Activity Implementation We found that TSA did not incorporate the results of the TSSRA or other risk assessments when it monitored how surface inspector activities were implemented beyond the minimum requirements laid out in the work plan. Specifically, we found that between fiscal years 2013 and 2017, inspectors spent about half their working hours fulfilling work plan requirements. Surface Compliance Branch officials told us that they reviewed PARIS data on all surface inspector activities, as reported in the surface module of PARIS, annually to inform staffing decisions and conducted detailed analysis of surface inspector time starting in fiscal year 2015. However, this analysis did not evaluate the extent to which surface inspector time beyond the work plan requirements corresponded to surface transportation risks as identified by the TSSRA or other risk assessments. Further, TSA officials told us that they did not think surface inspector time should be compared to risks identified in cross-modal risk assessments like the TSSRA because required regulatory inspections are unpredictable and can take a significant amount of time. However, as previously discussed, we found that, of the time reported in the surface module of PARIS, inspectors reported spending approximately 20 percent of their time on regulatory inspections, with the remaining 80 percent spent on non-regulatory activities. More than half of the industry representatives we spoke to (9 of 15) identified benefits from inspectors’ activities in surface transportation modes other than freight rail. For example, two of the three representatives of MTSA-regulated companies we spoke to said that TSA’s TWIC inspections had significant benefits for the security of their facilities, and stated that they wanted more TWIC inspections and civil enforcement activities from inspectors because these activities discourage misuse of TWICs at their facilities. Representatives from two maritime companies, one highway company, and three public transportation systems told us that they wanted TSA surface inspectors to do more. Additionally, a representative for one national industry organization stated that his organization was concerned that TSA is mainly focused on freight rail when the principal threat resides in the passenger and mass transit modes, and suggested that TSA deploy inspection resources from the freight rail mode to support more non- regulatory initiatives in the passenger rail/mass transit mode. According to TSA, the agency employs a risk-based approach – which the DHS Risk Lexicon defines as using the assessment of risk as the primary decision driver – to all operations to identify, manage, and mitigate risk in all TSA lines of business. One TSA risk strategy document specifically emphasizes the importance of linking the TSSRA, among other risk assessments, to the identification of risk-reduction activities as part of a risk-based approach to security. Moreover, the NIPP risk management framework and the DHS Risk Management Fundamentals Doctrine, which TSA officials told us are TSA’s primary risk management guidance documents, also state that entities should systematically prioritize and implement activities and resources to mitigate and manage risks identified in risk assessments. These documents also state that monitoring implemented decisions and comparing observed and expected effects to influence subsequent risk management decisions are key steps in the homeland security risk management process. The DHS Risk Management Fundamentals Doctrine further states that agencies should document the development and selection of alternative risk management actions, including assumptions and risk strategies such as the decision to not take action and accept risk, in order to provide decision-makers with a clear picture of the benefits of each action. It also explains that the risk management process allows organizations to clearly explain the rationale behind resource decisions. TSA did not use the results of risk assessments – such as the TSSRA – or other risk information when it developed its surface inspector work plan requirements. Instead, TSA prioritized the lowest-risk surface transportation mode, reducing the amount of surface security resources available to address identified risks in other, higher-risk surface transportation modes. As a result, TSA’s limited surface transportation security resources were not used in a risk-based way. By incorporating the results of its risk assessments when it plans and monitors surface inspector activities, including those not required by the work plan, TSA would be better able to ensure that its limited surface transportation security resources are being used to effectively and efficiently address the highest risks to surface transportation, especially as risks evolve. Incorporating risk assessment results in planning and monitoring surface inspector activities will also allow TSA to ensure that its surface inspectors are making progress toward achieving TSA’s objective of risk- based security. Additionally, by documenting its risk mitigation decisions and strategies, TSA would be able to more clearly explain the rationale for its resource decisions, including when TSA decides to accept risk or prioritize lower-risk activities for any reason. TSA Cannot Ensure That New Risk Mitigation Efforts Address High-Risk Entities and Locations In fiscal year 2012, TSA began developing the Risk Mitigation Activities for Surface Transportation (RMAST) program in support of TSA’s risk- based security initiative. According to TSA’s fiscal year 2017 work plan, the RMAST program incorporates specific risk reduction measures and focuses time and resources on high-risk locations through (1) public observation, (2) site security observations, and (3) stakeholder engagement activities. Though TSA field officials told us that inspectors have been conducting these activities in some format in the past, TSA began piloting this particular program in fiscal year 2014 and made RMAST a work plan requirement for each office starting in fiscal year 2017. In addition to TSA demonstrating its commitment to the RMAST program by adding it as a required work plan activity, we found that inspectors reported spending an increasing amount of time conducting RMASTs since fiscal year 2014, and that RMASTs now comprise a larger percentage of inspector time (see table 7). Although surface inspectors reported spending an increasing amount of time on RMAST activities, we found that TSA has not identified or prioritized the high-risk entities and locations on which the RMAST program is intended to focus time and resources. For example, the fiscal year 2017 surface inspector work plan states that the required number of RMASTs each office should conduct was developed based on the presence of applicable stakeholders in each office’s area, but we found that TSA did not identify any such stakeholders in its work plan. Specifically, while the work plan guidance directed surface inspectors to conduct RMASTs with entities that fit “listed” criteria, this list consisted of all surface modes of transportation for which TSA has authority and did not include any criteria surface inspectors could use to identify the highest-risk and most critical locations, such as by type, characteristics, or location of high-risk entities. TSA officials told us that they have not identified high-risk entities for RMAST because there are too many potential entities and stated that there is no way to provide a full list of all entities in each office’s area. However, the intent of the RMAST program is to focus time and resources on high-risk entities and locations, which precludes the need to provide a complete list of all surface transportation entities in each area. Further, TSA officials told us that TSA has not provided any guidance to the field beyond the work plan on how to identify appropriate entities for RMASTs, but that they rely on surface field offices to identify the highest-risk entities in their own areas. Officials from three field offices told us that inspectors try to conduct RMASTs based on threat information or previous BASE scores, but inspectors in one of those offices said that the intelligence information they receive from TSA is insufficient to help them identify threats and conduct outreach for RMASTs. As previously discussed, the NIPP risk management framework and the DHS Risk Management Fundamentals Doctrine both state that entities should identify and assess risks and prioritize resources to mitigate those risks. If TSA identified and prioritized the types of high-risk entities and locations it intends the RMAST program to reach, surface inspectors would have information that would enable them to implement these activities in a more risk-based manner. Defining Measurable and Clear Objectives While TSA has identified broad objectives for the RMAST program, it has not defined these objectives – and associated program activities – in a measurable and clear way. Specifically, in its description of RMAST in the fiscal year 2017 work plan implementation guidance, TSA stated that the RMAST program will be risk-based, intelligence-driven, and mitigate current threats and vulnerabilities, but did not provide further information that would allow TSA to measure progress toward achieving these objectives. Similarly, in its budget justifications for fiscal years 2014, 2015, and 2016 TSA stated that RMAST is intended to improve security and reduce the need for stakeholders to stretch limited resources to harden security at their most critical and high-risk locations, but TSA did not describe how it would measure whether security had improved, or if stakeholders’ resource needs were reduced. While our review of the fiscal year 2017 work plan guidance showed that TSA identified general categories of activities – public observation, site security observation, and stakeholder engagement – TSA did not identify what specific activities within each of these categories constitute an RMAST, or describe how those activities would help TSA achieve its objectives for the RMAST program. Some inspectors told us that the purpose of RMAST was unclear, that they had not been given the tools to perform RMAST in an effective and efficient way, or that the observation component of RMAST was not a valuable activity. TSA has not defined the RMAST program’s objectives and associated activities in a measurable and clear way because, according to TSA officials, TSA has not identified an approach for determining the effectiveness of activities conducted under the program. Standards for Internal Control in the Federal Government states that management should establish proper controls – including the establishment and review of clearly defined objectives and performance measures – so that program objectives and processes are understood at all levels and progress toward achieving objectives can be assessed. By defining the program’s objectives and associated activities in a measurable and clear way, TSA would be better positioned to measure progress toward achieving the program’s goal of mitigating current threats and vulnerabilities, and surface inspectors may better understand how to effectively carry out the program. Conclusions TSA has employed surface inspectors for a variety of regulatory and non- regulatory activities intended to mitigate risks to surface transportation and enhance the security of the United States’ surface transportation systems and networks. Working with surface transportation entities, who have the primary responsibility for securing their respective entities, TSA surface inspectors enforce security regulations for the freight and passenger rail modes, but spend the majority of their time conducting non-regulatory activities such as security assessments, exercises, and observations. While TSA uses information on some surface inspector activities to monitor and make decisions on these activities, limitations in the PARIS data system prevent TSA from readily accessing complete information on how much time inspectors spend working in support of aviation. Without addressing these limitations TSA is limited in its ability to make informed future decisions on annual resource needs for surface inspectors, which will be especially important as TSA take steps to expand its inspection activities with the promulgation of new surface security regulations. Given that TSA spends only about 3 percent of its budget on surface activities, it is crucial that the agency have complete information on how resources are being used in order to best allocate these limited federal surface transportation security resources. According to TSA, the agency implements risk-based security – security activities that are driven primarily by the assessment of risk – to deliver the most effective security in the most efficient manner. While TSA has implemented a risk-informed process to allocate surface inspectors to its field offices, it has not taken steps to ensure that surface inspector activities align more closely to the risks TSA has identified in its risk assessments. As a result TSA could continue to prioritize its limited resources to lower risk surface modes, leaving fewer resources available for higher risk modes. By using the results of risk assessments like the TSSRA when it plans and monitors surface inspector activities, TSA would be better able to ensure that limited surface transportation security resources are used to effectively and efficiently address the highest surface transportation security risks. Additionally, by documenting its risk mitigation decisions and strategies, TSA would be able to more clearly explain the rationale for its resource decisions, including when TSA decides to accept risk or prioritize lower-risk activities for any reason. Furthermore, by identifying and prioritizing highest risk entities and locations for its new RMAST program, surface inspectors would have information that would enable them to implement risk mitigation activities in more of a risk-based way. In addition, by clearly defining the program’s goals and activities, TSA would be better able to measure whether RMAST activities are achieving the program’s goal of increasing surface transportation security. Recommendations for Executive Action We are making the following four recommendations to TSA: The Administrator of TSA should address limitations in TSA’s data system, such as by adding a data element that identifies individuals as surface inspectors, to facilitate ready access to information on all surface inspector activities. (Recommendation 1) The Administrator of TSA should ensure that surface inspector activities align more closely with higher-risk modes by incorporating the results of surface transportation risk assessments, such as the TSSRA, when it plans and monitors surface inspector activities, and that TSA documents its rationale for decisions to prioritize activities in lower-risk modes over higher-risk ones, as applicable. (Recommendation 2) The Administrator of TSA should identify and prioritize high-risk entities and locations for TSA’s Risk Mitigation Activities for Surface Transportation (RMASTs). (Recommendation 3) The Administrator of TSA should define clear and measurable objectives for the RMAST program. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this report to DHS for their review and comment. DHS provided written comments, which are noted below and reproduced in full in appendix IV, and technical comments, which we incorporated as appropriate. DHS concurred with all four recommendations in the report and described actions underway or planned to address them. With regard to the first recommendation that TSA address limitations in its data system to facilitate ready access to information on all surface inspector activities, DHS concurred and stated TSA’s Compliance Division will maintain a staffing tool that identifies the modal assignments of transportation security inspectors that can be used to more effectively analyze all surface inspector activities. If fully implemented, such that data on all activities surface inspectors perform are readily accessible, this system should address the intent of the recommendation. With regard to the second recommendation that TSA align surface inspector activities more closely with higher-risk modes by incorporating the results of surface transportation risk assessments, such as the TSSRA, when it plans inspector activities, and document its rationale for decisions to prioritize activities in lower-risk modes, TSA concurred and stated relevant risk information would be more clearly incorporated into the Surface Work Plan development process. Further, TSA plans to explain decisions and rationale for deviating surface inspector planned activities from mirroring the TSSRA in its program guidance documentation. TSA estimates it will complete this process by January 31, 2018. If TSA is able to fully incorporate risk assessment results, such as the TSSRA, into its decisions for assigning surface inspector tasks across surface transportation modes, and document its rationale if planned inspector activities do not align with risk assessment results, TSA’s planned actions would address the intent of the recommendation. With regard to the third recommendation to identify and prioritize high-risk entities and locations for TSA’s Risk Mitigation Activities for Surface Transportation (RMAST), TSA concurred and stated the Surface Compliance Branch will prioritize entities for RMAST activities within the Surface Work Plan or other applicable program guidance documents using results from the TSSRA and using high threat urban area designations. TSA estimates this process will be completed by January 31, 2018 and if fully implemented, this process should address the intent of the recommendation. With regard to the fourth recommendation that TSA define clear and measurable objectives for the RMAST program, TSA concurred and stated the Surface Compliance Branch has clarified in program guidance documents how to apply and measure certain security outcomes resulting from RMAST activities to security vulnerabilities identified from a previous BASE assessment or other security assessment program. Documentation corroborating these actions was not provided to GAO before the issuance of this report. However, if TSA is able to clearly state the purpose and objectives of RMAST activities, and track the extent to which these objectives have been met, this additional program guidance should address the intent of the recommendation. We are sending copies of this report to interested congressional committees, the Secretary of Homeland Security, and the Administrator of the Transportation Security Administration. 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) 512-7141 or groverj@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: Objectives, Scope, and Methodology Our objectives were to examine (1) how Transportation Security Administration (TSA) surface inspectors implement the agency’s surface transportation security mission, and (2) the extent to which TSA has used a risk-based approach to prioritize and implement surface inspector activities. This report is a public version of a prior sensitive report that we issued in October 2017. TSA deemed some of the information in the prior report sensitive security information, which must be protected from public disclosure. Therefore, this report omits sensitive information regarding the specific risks facing particular surface transportation modes as determined by TSA. However, the report addresses the same questions as the sensitive report and the overall methodology used for both reports is the same. To obtain background information and answer both questions we (1) reviewed background documents, including TSA strategic documents and previous GAO and Department of Homeland Security (DHS) Inspector General reports, (2) analyzed TSA data on surface inspector activities, and (3) conducted non-generalizable interviews of surface inspectors, their supervisors, and industry stakeholders. To understand TSA’s roles and responsibilities for surface security, as well as its mission, we examined statutes and regulations, including the Aviation and Transportation Security Act, the Implementing Recommendations of the 9/11 Commission Act of 2007, and TSA surface security and related regulations. We also reviewed DHS and TSA strategic documents including TSA’s National Strategy for Transportation Security 2016, the DHS National Infrastructure Protection Plan (NIPP) 2013, and the fiscal years 2016 to 2018 strategic plans for TSA’s Office of Security Operations and the Office of Security Policy and Industry Engagement. Additionally, we reviewed previous GAO and DHS Office of Inspector General reports on TSA’s surface security efforts and surface inspector programs. To evaluate how surface inspectors implemented TSA’s surface security mission and the extent to which this implementation was based on risk, we analyzed data from the surface module of the Performance and Results Information System (PARIS) on the activities of surface inspectors from fiscal year 2013 through March 24, 2017, the most recent data available. Based on TSA documents, regulations, and interviews with TSA data and program officials, we categorized surface inspector activities according to regulatory and non-regulatory activities and by mode, and calculated the total time surface inspectors reported spending for each category. We analyzed data from fiscal years 2013 through 2017 to ensure that we could compare several years of data and analyze data obtained after reorganizations of the surface inspector command structure in fiscal year 2010 and offices in mid-fiscal year 2013. We did not review data from the aviation module of PARIS because, as discussed below, it was not feasible to identify the data surface inspectors entered into this module, and, based on our interviews with TSA data officials and our review of related documentation, we determined that all other surface inspector activities were documented in the surface module of PARIS. To determine the reliability of data from the surface module of PARIS we (1) reviewed related documentation such as data dictionaries, schema, PARIS reliability assessments from previous GAO audits, TSA analyses of PARIS data, and data entry guidance, (2) interviewed TSA officials responsible for entering, reviewing, or using PARIS data, including headquarters officials, field office supervisors, and surface inspectors, (3) electronically and manually tested the data for completeness and obvious errors, such as duplicates and consistency with secondary sources, and (4) conducted internal logic tests on certain time-related fields in the data. Through these steps, we identified some inconsistencies in the data including incomplete data on surface inspectors’ aviation activities and non-specific data elements for inspection activities in fiscal year 2013, among others. However, we determined that for our purposes – to describe how surface inspectors reported spending their time at the summary-level – these inconsistencies did not affect the reliability of the PARIS surface module data and these data were reliable with some limitations. Specifically, based on interviews with TSA data officials and our review of TSA data entry guidance, we determined that the data in the surface module of PARIS did not represent the complete activities conducted by surface inspectors because they enter some aviation activities separately in the aviation module of PARIS. Further, we determined that it was not feasible to distinguish aviation activities documented by surface inspectors in the aviation module from aviation activities documented by cargo or aviation inspectors in this module at the aggregate level. However, based on our testing, review of related documentation, and interviews with TSA data officials, we determined that the data surface inspectors entered into the surface module of PARIS, including data on some aviation activities, were reliable for our purposes. As a result, we reported data on surface inspectors’ aviation activities as documented in the surface module of PARIS, with the limitation that these data represent the minimum aviation activities surface inspectors actually conducted. Additionally, through our analysis of PARIS data on regulatory inspections surface inspectors conducted in fiscal year 2013 and interviews with TSA data officials, we found that 25 percent of the total inspections in fiscal year 2013 (1,990 of 8,083) were documented under data elements that did not specify the type of inspection conducted. According to TSA officials, there are no additional data elements that would allow us to identify the specific type of inspection surface inspectors conducted for these 1,990 inspections. As a result, we determined that this portion of the fiscal year 2013 data was not reliable for our purposes of identifying the number of specific inspection types surface inspectors conducted. However, we found that the remaining 78 percent of inspection data for fiscal year 2013 was reliable for our purposes. As a result, the inspection counts and compliance rates we reported for fiscal year 2013 represent partial year data. To obtain the perspectives of a wide sample of TSA officials on both surface inspector activities and TSA’s use of risk, we conducted semi- structured interviews with surface inspectors and/or their supervisors in 17 of 49 field offices. We also interviewed the 6 Regional Security Inspectors (RSIs), who cover all seven TSA regions. We interviewed inspectors and supervisors from at least 2 offices in each region and selected the offices based on a variety of factors including geographic dispersion, staff level, surface transportation environment, and whether the office was co-located with a major airport. We physically visited 6 offices and conducted the remainder of our interviews remotely. We selected the offices we traveled to based on the location of GAO staff, the availability of industry representatives in the area, and the opportunity to observe surface inspector assessments, tabletop exercises, and other activities. The results of our interviews are not generalizable, but provide insight into how surface inspectors and their supervisors implement TSA surface programs and the challenges they may face, if any. To gain insight into the experience surface transportation industry stakeholders have had with TSA surface inspectors, we interviewed 15 industry stakeholders in four surface modes including 3 freight rail stakeholders, 3 maritime stakeholders, 3 highway stakeholders, and 6 passenger rail/mass transit stakeholders. We selected industry stakeholders based on their involvement and familiarity with TSA surface inspectors, the surface mode in which they operate, their ridership, and TSA recommendation. Three of these stakeholders consisted of national trade associations representing the highway, freight rail, and mass transit modes of transportation. As with our interviews with TSA surface inspectors and supervisors, our interviews with industry stakeholders are not generalizable but provided us with valuable information on the transportation industry’s interaction with TSA surface inspectors. To further address our first objective and describe how TSA surface inspectors implemented the agency’s surface transportation security mission, we examined TSA strategic and program documents including surface inspector work plans and implementation guidance from fiscal years 2013 to 2017, the TSA Inspector Compliance Manual, and TSA surface security regulations, and reviewed public testimony by TSA leadership. To understand how TSA has implemented the Baseline Assessment for Security Enhancement (BASE) program in particular, we reviewed TSA program documents and guidance for the BASE program, including the BASE workbook, and observed a BASE review on a mass transit entity. We also observed a regional Intermodal – Security Training Exercise Program (I-STEP) exercise and an Exercise Information System (EXIS) exercise, and interviewed TSA officials in headquarters, and inspectors and supervisors in the field. We used the results of our analysis of PARIS surface module data, specifically the number of each type of regulatory inspection TSA inspectors conducted from fiscal years 2013 to 2017, and PARIS data on the violations found during those inspections, to calculate regulatory compliance rates. We also used the results of our analysis of PARIS surface module data to describe how surface inspectors reported spending their time. As previously stated, we found the PARIS surface module data to be reliable for this purpose, with the limitation that TSA data on the time surface inspectors reported spending on aviation activities was incomplete because we could not identify surface inspector activities entered into the aviation module of PARIS. To evaluate the effects of this limitation, we compared the results of our data analysis, our reviews of PARIS documentation, and our interviews with TSA officials to Standards for Internal Control in the Federal Government. To further address our second objective, the extent to which TSA has used a risk-based approach to prioritize and implement surface inspector activities, we analyzed TSA’s risk guidance as contained in the NIPP risk management guidance, the DHS 2010 Risk Lexicon, and the DHS Risk Management Fundamentals to understand how TSA should assess and use risk information. To understand the risks TSA has identified for surface transportation modes during the time period we examined, we analyzed TSA’s cross-modal risk assessments in three Transportation Security Sector Risk Assessments (TSSRA) published between May 2013 and July 2016. We reviewed TSA’s fiscal year 2017 surface inspector staffing model and supporting documents and data and interviewed TSA officials responsible for developing and executing staffing. We compared that process to TSA risk guidance to evaluate the extent to which TSA considered risk when it staffed TSA surface inspectors for fiscal year 2017. We assessed only the fiscal year 2017 staffing model because TSA’s previous staffing model was last used in fiscal year 2011, which is outside our scope. To determine the extent to which TSA prioritized surface inspector activities based on risk when it planned these activities, we identified, compiled and analyzed activity requirements from surface inspector work plans and associated implementation guidance from fiscal years 2013 to fiscal year 2017. We (1) compared them to each other to identify changes in planned surface inspector activities over time and (2) compared them to results from the TSSRA, as well as other risk information including unattended rates for Toxic Inhalation Hazard (TIH) rail cars and the presence of Maritime Transportation Security Act of 2002-regulated facilities in each office’s area. We also interviewed TSA officials in headquarters and the field who were responsible for developing the surface inspector work plan about the process and information they considered during work plan development, and compared this information to TSA risk guidance. To determine the extent to which TSA’s implementation of surface inspector activities aligned with risk, we compared the results of our analysis of PARIS surface module data on the time surface inspectors spent in each surface mode to the results of the TSSRA cross-modal risk assessments from fiscal years 2013 to 2017. As previously discussed, we determined the data to be reliable for our purposes. We also compared the results of our analysis of PARIS surface module data to our analysis of work plan requirements to identify the amount of time surface inspectors reported spending on work plan activities. In addition, we identified the types of information TSA used in its fiscal year 2015 analysis of surface inspector time and activities to determine what TSA considered when it monitored how surface inspector activities were implemented. Additionally, we used the results of our analysis of PARIS surface module data to determine the percent of total time surface inspectors reported spending on Risk Mitigation Activities for Surface Transportation (RMAST) between fiscal years 2013 and 2017. To understand TSA’s objectives for the RMAST program, we analyzed program descriptions in TSA congressional budget justifications and TSA’s fiscal year 2017 work plan and work plan implementation guidance. We also conducted interviews with TSA officials in headquarters, and inspectors and supervisors in the field, and observed an RMAST activity to understand how TSA has implemented the program. We compared the results of our analysis and interviews to TSA’s risk guidance and Standards for Internal Control in the Federal Government to evaluate the extent to which the program was risk-based and to which TSA had established measurable goals for the program. The performance audit upon which this report is based was conducted from April 2016 to October 2017 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. We subsequently worked with TSA from September 2017 to December 2017 to prepare this nonsensitive version of the original report for public release. This public version was also prepared in accordance with these standards. Appendix II: Surface Inspector Activities Appendix II: Surface Inspector Activities 2005 High-visibility activities, such as patrols, passenger and baggage screening, and canine activities to introduce unpredictability, increase security, and deter potential terrorist actions on multiple modes of transportation. Managed by the U.S. Federal Air Marshal Service and conducted by TSA personnel, which may include surface inspectors. 2006 A voluntary review in which surface inspectors evaluate the security programs of transportation entities, offer technical assistance, and share best practices. TSA uses BASE to, among other things, determine priorities for allocating mass transit and passenger rail security grants, such as those provided through the Transportation Security Grant Program. 2006 Local field assessments of critical infrastructure, station and other facilities for mass transit, passenger rail, and commuter rail and bus systems. Station profiles provide detailed information of specific station-related intelligence, such as the locations of exits, telephones, CCTV, electrical power, station mangers etc. 2007 Inspectors verify that Toxic Inhalation Hazard (TIH) rail cars at rail yards within high- threat urban areas that transport TIH on a regular and reoccurring basis are being attended by railroad personnel. Inspectors also conduct “wildcard” RRS, during which they observe locations which do not normally handle TIH on a regular and recurring basis to determine if TIH cars are present, and if they are being attended by railroad personnel. 2008 Detailed assessments that focus on the vulnerabilities of high-population areas where TIH materials are moved by rail in significant quantities, and that provide site- specific mitigation strategies and lessons learned. 2008 I-STEP, which is managed through the Office of Security Policy and Industry Engagement, consists of contractor-facilitated exercises designed to help multimodal surface transportation entities closely examine their security programs and operational efforts. TSA facilitates I-STEP exercises across all surface transportation modes to help operators, law enforcement, first responders, and related entities test and evaluate their security plans, including prevention and preparedness capabilities, ability to respond to threats, and interagency coordination. TSA updates I-STEP scenarios as new threats emerge, helping industry partners prepare to implement the most appropriate countermeasures. 2014 Quality assurance assessments of Transportation Worker Identification Credential (TWIC) enrollment centers to, according to TSA officials, review contractor performance. 2015 EXIS consists of exercises facilitated by surface inspectors that utilize software developed by TSA for stakeholder use, generally focus on one entity, and are intended to build on the findings of a previously completed BASE assessment. Start Date (fiscal year) 2017 A program intended to focus time and resources on high-risk and critical assets, facilities and other infrastructure through the following activities: (1) public observation to identify suspicious activities, security vulnerabilities and/or suspicious behaviors that could be indicative of pre-operational planning related to terrorism; (2) site security observation to determine if the physical security measures and operational deterrence components are in place to effectively mitigate risk, and (3) stakeholder engagement including TSA’s public security awareness programs and improvised explosive device (IED) and intelligence briefings. In this table, passenger rail and rail transit systems consist of: each passenger railroad carrier, including each carrier operating light rail or heavy rail transit service on track that is part of the general railroad system of transportation, each carrier operating or providing intercity passenger train service or commuter or other short-haul railroad passenger service in a metropolitan or suburban area (as described by 49 U.S.C. § 20102), and each public authority operating passenger train service; (b) each passenger railroad carrier hosting an operation described in paragraph (a) of this section; (c) each tourist, scenic, historic, and excursion rail operator, whether operating on or off the general railroad system of transportation; (d) each operator of private cars, including business/office cars and circus trains, on or connected to the general railroad system of transportation, and (e) each operator of a rail transit system that is not operating on track that is part of the general railroad system of transportation, including heavy rail transit, light rail transit, automated guideway, cable car, inclined plane, funicular, and monorail systems. 49 C.F.R. § 1580.200. Appendix III: Surface Inspector Time Spent on Activities Reported in the Surface Module of PARIS for Fiscal Years 2013 to 2017 Appendix IV: Comments from the U.S Department of Homeland Security Appendix V: GAO Contact and Staff Acknowledgements GAO Contact Jennifer Grover (202) 512-7141 or groverj@gao.gov. Staff Acknowledgments In addition to the contact named above, Christopher E. Ferencik, Assistant Director; Brendan Kretzschmar, Analyst in Charge; Nanette Barton, and Katherine Blair made key contributions to this report. Also contributing to the report were, Charles Bausell, Katherine Davis, Eric Erdman, Anthony Fernandez, Eric D. Hauswirth, Paul Hobart, Tracey King, Christopher Lee, Mara McMillen, Amanda Miller, Claudia Rodriguez, Christine San, McKenna Storey, Natalie Swabb, Michelle Vaughn, Adam Vogt, Johanna Wong.

Why GAO Did This Study The global terrorist threat to surface transportation – freight and passenger rail, mass transit, highway, maritime and pipeline systems – has increased in recent years, as demonstrated by the 2017 London vehicle attacks and a 2016 thwarted attack on mass transit in the New York area. TSA is the primary federal agency responsible for securing surface transportation in the United States. GAO was asked to review TSA surface inspector activities. This report addresses (1) how TSA surface inspectors implement the agency's surface transportation security mission, and (2) the extent to which TSA has used a risk-based approach to prioritize and implement surface inspector activities. GAO analyzed TSA data on surface inspector activities from fiscal year 2013 through March 24, 2017, reviewed TSA program and risk documents and guidance, and observed surface inspectors conducting multiple activities. GAO also interviewed TSA officials in 17 of 49 surface field offices and 15 industry stakeholders. What GAO Found Transportation Security Administration (TSA) surface transportation security inspectors—known as surface inspectors—conduct a variety of activities to implement the agency's surface security mission, including: Regulatory Inspections: Surface inspectors enforce freight rail, passenger rail, and maritime security regulations. GAO found that, according to TSA data, surface inspectors reported spending approximately 20 percent of their time on these activities from fiscal years 2013 to 2017. Non-regulatory assessments and assistance: Surface inspectors conduct voluntary assessments and provide training to surface transportation entities, among other things. GAO found that, according to TSA data, inspectors reported spending approximately 80 percent of their time on these activities. In addition to mission-related activities, surface inspectors can assist with aviation-related activities. However, GAO found that TSA has incomplete information on the total time surface inspectors spend on these activities because of limitations in TSA's data system. Addressing these limitations would provide TSA with complete information when making decisions about inspector activities. GAO also found that TSA prioritized inspector activities in the surface transportation mode with the lowest risk because TSA did not incorporate risk assessment results when planning and monitoring activities. Specifically, in fiscal year 2016, the last full year for which data on inspectors' activities in the surface modes was available, surface inspectors reported spending more than twice as much time on the lowest risk surface transportation mode according to TSA risk assessments than on the highest risk surface transportation mode. Incorporating risk assessment results when prioritizing inspector activities would help TSA ensure that its surface security resources address the highest risks. In fiscal year 2017, TSA fully implemented a new risk mitigation program—Risk Mitigation Activities for Surface Transportation (RMAST)—intended to focus time and resources on high-risk surface transportation entities and locations. However, GAO found that TSA has not identified or prioritized these high-risk entities and locations, or defined the RMAST program's objectives and associated activities in a measurable and clear way. According to TSA officials, they have not done so because there are too many potential entities to list them all for prioritization and TSA has not identified an approach for determining the effectiveness of activities under the program. However, prioritizing high-risk entities, such as by type, characteristics, or location does not require a complete list of entities. By identifying and prioritizing high-risk entities and locations for RMAST, and clearly defining the program's activities and objectives, TSA would be better able to implement RMAST activities in a risk-based manner and measure their effectiveness. This is a public version of a sensitive report that GAO issued in October 2017. Information that TSA deemed sensitive has been omitted. What GAO Recommends GAO recommends that TSA (1) address limitations in its data system to collect complete information, (2) ensure inspector activities more closely align with the results of risk assessments, (3) identify and prioritize entities and locations for its risk mitigation program, and (4) define measurable and clear objectives for the program. TSA concurred with these recommendations.

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Background The Workforce Innovation and Opportunity Act (WIOA) WIOA was designed, in part, to deliver a broad array of integrated services to customers of the public workforce system, including individuals seeking jobs and skills training, and employers seeking skilled workers. WIOA authorizes six core programs, including youth formula grants, with four programs administered by DOL and two by Education, as described in table 1. Program participants, including youth, may co- enroll in multiple WIOA core programs, such as the adult education or vocational rehabilitation programs, if they meet eligibility requirements for each. The core programs are generally required to report on common performance indicators, such as how many workers entered and retained employment, their median wages, whether they attained credentials, and their measurable skill gains. The law also includes new requirements for state workforce development plans to unify workforce strategies across the six core programs. Most provisions of WIOA became effective on July 1, 2015, superseding the Workforce Investment Act (WIA) of 1998. The Departments of Labor and Education issued the final regulations in August 2016, just after the close of the first full WIOA program year. Figure 1 shows the timing of key actions in implementing WIOA and timeframes governing state and local spending of initial youth grants. As illustrated, compliance is determined over the period for which funds are available, rather than on a program year basis. States have 3 years after the start of the program year to expend each program year’s youth funds, and local areas have 2 years. WIOA also emphasized improving opportunities for populations with significant barriers to employment, including out-of-school youth. We have previously reported that disconnected youth (those neither in school nor employed) may experience challenges successfully transitioning to adulthood. Disconnected youth are more likely than in-school youth to have characteristics and/or circumstances that can pose obstacles to employment, such as a lack of stable housing or transportation, parenting responsibilities, disabilities, limited basic skills, criminal convictions, or lack of adult support. In addition, WIOA emphasizes work experiences for youth—both in- and out-of-school youth—including paid and unpaid work, pre-apprenticeships, and internships. To ensure states and local areas emphasized services to out-of-school youth and youth work experiences, WIOA introduced new expenditure requirements for each. WIOA also changed the age range of eligible youth (see table 2). However, DOL has broad authority to issue waivers to individual states or local areas, exempting them from meeting certain requirements, including those relating to expenditures. In addition to the new spending requirements and eligible age range, WIOA changed the services local areas are required to make available to youth, as appropriate. Specifically, 2 of WIA’s 10 program services were combined, and 5 new services were added, bringing the total to 14 (see table 3). In general, WIOA’s youth program elements support career readiness as a youth transitions from basic educational attainment to occupational skills training and work opportunities, then to post-secondary education or unsubsidized employment. Since 2011, total youth formula grants to states—under WIA and then WIOA—have fluctuated but declined overall, with $700,044,855 being allotted to the 50 states and the District of Columbia for all WIOA youth activities in PY2017 (see fig. 2). Under WIOA Title I, DOL administers youth grants to states based on a formula reflecting the distribution of unemployment and economically disadvantaged youth. In general, states allocate funds to local areas based on a similar formula. In addition to changes in federal grant funding, fluctuations in unemployment and estimates of disadvantaged youth affect annual state and local grants. Governors establish state Workforce Development Boards that help guide implementation of WIOA by developing state plans, crafting statewide WIOA policies, and assisting local boards in the planning and delivery of WIOA services, among other duties. The state Boards must include a majority share of leaders in the state business community as well as representation from the state legislative and executive leadership, and labor organizations, and may include community-based organizations and service providers. Local Workforce Development Boards operate under state Boards and perform several roles, including developing local WIOA plans, contracting with service providers, providing oversight of youth activities, and selecting American Job Center operators. As was the case with WIA, WIOA provides significant flexibility to states and local areas to design and operate their WIOA programs to best suit local needs. For example, some local Workforce Development Boards provide direct services to youth while others contract with one or more organizations to provide the WIOA youth program services. In addition, services can be provided to youth at the workforce area’s American Job Center, a separate youth center, service providers’ offices, other locations in the community, or a combination of these sites. Local service providers work with each youth participant to develop an individual service strategy, which is a combination of services connected to a career pathways plan and tailored to the youth’s needs. Local workforce areas generally must make available all 14 program services, though youth are not required to participate in all services. States and Local Workforce Areas Report Progress in Meeting Spending Requirements Most States Appear on Track to Meet Targets for Spending on Out-of- School Youth Complete data on the spending of youth grants allocated to states for the first 2 program years of WIOA (PY2015 and PY2016) were unavailable during our review, but available data states reported to DOL showed a growing number of states were on target to expend at least 75 percent of their youth formula grant on out-of-school youth (see fig. 3). Nationally, as of September 30, 2017, states reported spending over 99 percent of their WIOA youth grant program funds allotted in PY2015, and 36 states had spent 75 percent or more of their expended funds on out-of-school youth (with an additional 13 states having spent between 70 and 75 percent). Twenty-nine states reported having spent all of their PY2015 funds, and of these states, 21 had spent 75 percent or more on out-of-school youth. The remaining 8 fell short of the level generally required by statute. However, for PY2015 specifically, DOL officials told us that the agency used its transition authority to modify the requirement. For that program year, DOL allowed states that could not meet the 75 percent requirement to spend a minimum of 50 percent of funds on out-of-school youth (rather than 75 percent) if they spent at least 10 percentage points more on these youth than in the previous program year. Applying this standard to DOL data on state spending, all but two states were on track to meet the modified requirement for PY2015 funds. Available DOL data also suggest most states are making progress in meeting the out-of-school youth spending requirement for their PY2016 youth funds. The rate at which states are spending their PY2016 funds varies, but as of September 30, 2017, states had collectively spent approximately 77 percent of their allotments. As of that date, 48 states had spent 75 percent or more of their expended funds on out-of-school youth. Only 4 states reported they had spent all of their PY2016 funds, and of those 4, all had spent more than 75 percent on out-of-school youth. States that have not yet spent all of their youth funds nor met the requirement to spend 75 percent of their PY2015 or PY2016 funds on out-of-school youth may still do so by the end of the 3-year period, ending June 30, 2018 for PY2015 funds, and June 30, 2019 for PY2016 funds. Conversely, states that are currently at or above the 75 percent level, with substantial funds left to spend, may fall below that level by the end of the 3-year spending period. Past federal emphasis on serving out-of-school youth, and many states’ experience in doing so, may partially account for states’ progress in meeting WIOA’s higher spending targets for this population. As far back as 2002, DOL guidance had emphasized serving out-of-school youth. Even before WIOA went into effect, many states were exceeding the existing WIA requirement to spend 30 percent of their WIA youth grant funds on out-of-school youth, with nationwide levels exceeding 50 percent since 2012 (see fig. 4). State workforce board officials in the three states we visited reported that they did not need to make significant changes to their youth programs to meet the new spending requirement. For example, in Texas, officials told us that the state had anticipated the increased focus on out-of-school youth for a number of years. In response, in the years before WIOA, it began steering more of its WIA youth grant funds toward serving out-of-school youth. According to this state official, in PY2006, Texas increased the percentage of youth grant funds that local areas must spend on out-of-school youth from 30 (the requirement under WIA) to 45 percent, and raised the requirement again in PY2007 to 65 percent. Local Areas Reported Being on Track to Meet WIOA Spending Requirements Similar to states, most local workforce areas we surveyed reported that they were on track to meet the requirement that they spend 75 percent of their WIOA youth grant funds on out-of-school youth. They also reported they were making progress on the requirement that they spend 20 percent of their funds providing work experience to all youth served by WIOA (in- and out-of-school). With respect to the out-of-school youth spending requirement, approximately 76 percent of survey respondents reported spending at or above the required level, and 3 percent reported spending below it. The majority of local workforce areas reported that meeting the spending requirement on out-of-school youth was not challenging or only slightly challenging. Likewise, staff in several local workforce development areas we visited told us that meeting the out-of-school youth spending requirement was not a significant challenge. An estimated 15 percent of those surveyed reported that meeting the spending target for out-of- school youth in PY2016 was very or extremely challenging. A majority of local workforce areas we surveyed also reported they were on track to meet the requirement to spend 20 percent of local WIOA youth grant funds on work experiences for both in- and out-of-school youth. While work experience was a youth program element under WIA, spending a specific percentage of WIOA funds on the service is a new requirement and applies only to local areas and not to states. Based on our survey, we estimate that approximately two-thirds of local workforce areas reported spending 20 percent or more of their PY2016 youth funds on work experiences (see fig. 5), but around 11 percent reported spending less. In general, many local workforce areas reported that it was not challenging or only slightly challenging to meet WIOA’s spending requirements for serving out-of-school youth and the provision of work experiences. However, an estimated 15 percent reported that meeting the out-of-school youth requirement was very or extremely challenging, and around 21 percent reported the same about the work experience requirement (see fig. 6). Under WIOA, states are responsible for monitoring local areas’ progress in meeting youth spending requirements. DOL officials we interviewed told us that states collect local area expenditure data, but those data are not transmitted to DOL except in the aggregate. The three states we visited confirmed that they collect local expenditure data from local areas using their own individual state reporting systems and then aggregate those data at the state level. DOL takes steps to determine whether states are carrying out their monitoring responsibilities, including conducting on-site visits to state offices. However, DOL officials said regional offices do not have the capacity to conduct on-site monitoring in each state every year. To make up for this, they conduct risk-based monitoring based on quarterly desk reviews that can alert them to expenditure issues at the state level. According to the officials, DOL regional offices typically conduct on-site monitoring of approximately one-third of their states each year. The officials said that during on-site monitoring, regional office staff may elect to review a sample of local area expenditures and the monitoring activities the state has taken to ensure local targets are being met. Also, to supplement their monitoring activities, DOL officials said they rely on regional offices’ ongoing interactions with states to stay abreast of state and local experiences and challenges. They said staff from regional offices maintain a dialogue with state officials, including periodic conference calls. As part of this communication, they said states might inform DOL regional officials about certain local areas experiencing challenges. DOL officials also said they hear from some local area staff directly during national conferences. As of February 2018, DOL’s monitoring had thus far focused on assisting states in overcoming challenges with WIOA requirements through technical assistance and guidance, according to DOL officials. At that time, the officials told us that the agency was moving to more formal compliance monitoring and would be beginning to address state-level non-compliance. DOL officials also told us that the agency has developed a core monitoring guide supplement for the WIOA Youth program and plans to publish the guide by December 2018. The tool will be used by DOL officials in their monitoring of states, but will also be shared with state officials to, among other things, help them organize their state-level monitoring of localities. Local Areas Reported Using a Combination of Strategies to Address the Out-of- School Youth Spending Requirement and Related Challenges Local Workforce Areas Restricted Enrollment of In-School Youth to Help Meet the Spending Requirement for Out-of- School Youth While most local areas reported that their efforts to meet the out-of-school youth spending requirement involved serving greater numbers of that population, they also reported the need to accommodate that increase by significantly reducing or eliminating services provided to in-school- youth. In addition to the estimated 71 percent of local areas reporting that the number of out-of-school youth receiving services had increased since the enactment of WIOA, an estimated 80 percent reported that the number of in-school youth receiving services had decreased. An estimated 51 percent said they had reduced outreach and services to in- school youth to a great or very great extent, with another 22 percent saying they had moderately reduced outreach or services to these youth. Notably, an estimated 35 percent of local areas reported that they had stopped enrolling in-school youth in their WIOA youth program entirely. Available DOL WIOA program participant data reflects this shift, as the number of in-school youth served since PY2014—the program year prior to when WIOA went into effect—through PY2016 has dropped from just over 97,700 to around 38,900, or approximately 60 percent (see fig. 7). During the same period, the levels of out-of-school youth served rose from nearly 97,200 to around 108,800, or approximately 12 percent. DOL officials and some local workforce area staff reported that it is generally more expensive to serve out-of-school youth, in part because they often require more services than other youth. Although DOL does not have current data on cost per participant, DOL’s Employment and Training Administration’s fiscal year 2017 Congressional Budget Justification notes that WIA data indicate that out-of-school youth may cost approximately $1,000 more per youth served than in-school youth. Survey respondents most frequently reported that the reduction in services to in-school youth was the most adverse consequence they observed as a result of the new WIOA youth requirements. Similarly, WIOA practitioners we interviewed during our local area site visits expressed concerns about reducing services for in-school youth. Several told us that local in-school youth were no longer receiving the level of services they might need and that the shift might lead to more youth becoming disconnected from school and employment. Staff in one of the more rural workforce areas we visited noted that there are often insufficient services available to replace these lost WIOA services. Without a presence in the schools, staff in one workforce area told us they were concerned that they were not reaching youth at the right time and that more youth might become disconnected as a result. Some survey respondents made similar points, reporting that youth are more likely to become disconnected without WIOA services available in schools. In addition, workforce development board staff in one local area we visited told us that the WIOA definition of out-of-school youth has limited their ability to provide services to youth who need them if they have enrolled in community college but are not yet attending classes. DOL has provided technical assistance identifying other federal programs available for assistance to in-school youth, but we did not determine the extent to which these resources were being used in the local areas we visited. One major urban area we visited had managed the program’s transition toward serving a larger proportion of out-of-school youth through a city-wide committee established by the mayor. According to workforce development board staff, this committee works with the workforce development board and other community partners (e.g., civic, business, and philanthropic groups) and has helped develop an overarching strategy to assist youth that did not exist prior to WIOA. To Address Challenges, Local Workforce Areas Have Increased Recruiting Efforts, Strengthened Partnerships, and Expanded Services As local areas have worked to meet the new out-of-school youth spending requirement, they report applying other strategies to address certain challenges associated with serving that population in greater numbers. While many local areas reported that one of the main benefits of WIOA was its focus on hard-to-serve youth and those in greatest need of services, survey respondents and local workforce area staff and service providers reported that it has forced them to make some adjustments in how they administer their local youth programs, particularly in their approach to recruitment, local partnerships, and service offerings. Challenges Associated with WIOA’s Shift toward Out-of-School Youth In response to our survey, local area staff cited a number of specific challenges related to recruiting, retaining, and serving out-of-school youth under WIOA (see fig. 8). Transportation: A lack of transportation can prevent youth from getting to and from WIOA-funded educational programs, service providers, training, and work, and it was among the most significant barrier to employment cited by survey respondents. An estimated 71 percent of local workforce areas reported that transportation barriers were moderately or very difficult, and an additional 18 percent said they were somewhat difficult. Local service providers also told us that the lack of transportation could be particularly acute in rural areas without public transportation, such as bus systems. Locating and Recruiting: Finding out-of-school youth to enroll in WIOA- funded services was a significant challenge cited by local workforce areas, with an estimated 59 percent reporting that locating out-of-school youth was moderately or very difficult and another 21 percent reporting that it was somewhat difficult. Some local workforce area staff and service providers told us that many out-of-school youth move frequently, making it difficult to find and track them. In some locations, workforce area staff or service providers reported that youth typically do not “walk-in” to American Job Centers seeking services or congregate in the same places as in-school youth. Staff in one rural area told us that service providers had to recruit constantly. But even in urban areas, locating and recruiting out-of-school youth can be difficult. In fact, service providers in one urban workforce development area we visited told us that recruiting out-of- school youth is by far their greatest challenge. “Life barriers crop up once engaged and can take the young adults off course. The system must be flexible to allow these young adults time to leave and come back multiple times.” Retaining and Serving: Convincing out-of-school youth to stay in a WIOA program is also challenging for workforce development areas and service providers. In our survey, retaining youth was cited as moderately or very difficult by an estimated 54 percent of workforce development areas, with another 31 percent reporting it was somewhat difficult. Some survey respondents and workforce development area staff and service providers cited current low unemployment rates, which make it easier for youth to find jobs without completing WIOA work experiences or services, and frequent moves by out-of-school youth, sometimes far from work or training locations, as reasons retaining these youth can be difficult. “Many of the out-of-school youth have significant barriers that they have faced their entire life. We have to address a series of barriers with the individual before we can even begin to think about career, training, education, or work experience.” Addressing Personal Barriers: Addressing the personal barriers often faced by out-of-school youth was also a key challenge cited by local workforce areas. According to an estimated 44 percent of local workforce areas, addressing obstacles faced by this population such as homelessness or having a criminal history is moderately or very difficult, with another 30 percent reporting that it is somewhat difficult. Multiple survey respondents noted that because of their multiple barriers, out-of- school youth require more frequent contact and intensive case management services. During our interviews in local workforce areas, staff and service providers told us that out-of-school youth tend to face more of these types of obstacles than in-school youth. They told us these youth may have disabilities, such as diagnosed or undiagnosed mental health needs. In addition, they may have children and lack childcare, be involved in the child welfare or juvenile justice system, or experience homelessness. Out-of-school youth also often lack basic academic or job readiness (“soft”) skills, and sometimes are not proficient in English or face other barriers to employment. Some survey respondents also noted that the needs of older out-of-school youth are often different from those of younger youth. For example, they may have multiple children or housing needs and thus require more supportive services. Strategies Local Areas Have Applied to Address Challenges To mitigate challenges in shifting spending to out-of-school youth, local workforce area staff and service providers said that they have increased their recruiting efforts, developed new partnerships, strengthened existing partnerships, and in some cases, expanded services. Increased Recruitment Efforts to Locate Out-of-School Youth: An estimated 51 percent of local workforce areas said they are spending a larger percentage of their WIOA youth grant funds on recruiting compared to what they spent under WIA. According to our survey, the top approaches workforce development areas use to recruit out-of-school youth involve seeking referrals from community-based organizations, family and friends, and other agencies. They also include recruiting in person and in places throughout the community where out-of-school youth tend to congregate. Advertising WIOA youth programs using fliers and social media were also cited as being used to a great or very great extent by about 50 percent of local workforce areas (see fig. 9). In addition to survey respondents, those we spoke to in the local workforce development areas we visited described how they have increased their recruitment efforts of out-of-school youth since the enactment of WIOA. For example, one local workforce development board used its funds to hire an additional staff person to assist a service provider with its recruitment efforts. Service provider staff from across the local areas we visited said they spend time out in the community where out-of-school youth congregate much more now than under WIA when they served more in-school youth who were easier to find. They told us they recruit at malls, barbershops, and other places where out-of-school youth are likely to gather. One service provider told us they have regular hours at a popular major-chain coffee shop where they meet with youth and complete enrollment paperwork rather than relying on youth coming to an American Job Center or the service provider’s office. According to our survey, an estimated 70 percent of local workforce areas receive referrals from parents, siblings, friends, and other community members to a great or very great extent. These word-of-mouth and peer- to-peer recruiting strategies were also frequently cited as being very successful by local workforce area staff and service providers we interviewed. For example, staff in one local workforce area told us that one of their most successful recruitment efforts has been using or employing youth who had experienced success in the program to help enroll others in the local community who could benefit from WIOA services. They reported these youth recruiters knew where to find out-of- school youth in need of services and can more easily establish relationships with these youth, both in person and via social media. Other approaches used by the local areas we visited included seeking referrals from other community-based organizations and agencies, placing information fliers in high school graduation packets, attending job fairs and other community events, using social media or radio ads, going door- to-door in public housing, using mobile recruiting units, and placing fliers for WIOA services in grocery bags or attaching them to water bills. Strengthened Partnerships: Local workforce areas report strengthening partnerships with other WIOA programs and organizations to enroll and serve out-of-school youth. Approximately 60 percent of local workforce areas reported developing new partnerships or strengthening relationships with other WIOA core programs. Specifically, approximately two-thirds reported that they are co-enrolling WIOA youth with other WIOA core programs. Similarly, local workforce areas reported developing new partnerships or strengthening relationships with state and local government agencies, as well as community-based organizations. For example, some local workforce development area staff and local service providers we interviewed told us they had strengthened relationships with child welfare, juvenile justice, vocational rehabilitation, community colleges, and adult education programs. Some service providers focus on delivering services to a specific population of youth, such as youth involved in the foster care or justice system. For example, staff at one local workforce board told us that one of its local service providers ran a program in a juvenile justice facility to provide services to incarcerated youth. Some local workforce areas also reported co-enrolling youth in non-WIOA programs such as Temporary Assistance for Needy Families (TANF). In addition, an estimated 80 percent of local workforce areas reported that they had created new partnerships or strengthened relationships with employers. Other ways that local workforce areas reported strengthening partnerships included strengthening coordination across youth serving programs by improving communication (an estimated 78 percent), co-locating programs (47 percent), and integrating information technology systems (21 percent). Several survey respondents said that new or strengthened partnerships were one of the primary benefits of the WIOA program and that referrals from these partners are an important way to recruit out-of-school youth for the WIOA youth program. Expanding or Intensifying Services: To encourage enrollment or retain and serve of out-of-school youth, local workforce areas reported that they had expanded the variety or intensity of the youth services they provide. For example, workforce areas reported that they had expanded occupational training (59 percent), adult education (55 percent), and the development of career pathways (63 percent). In addition, approximately 46 percent of local workforce areas reported they had expanded their supportive services and approximately one-third of workforce areas reported that they spent a higher percent of their youth grant funds on supportive services than they did under WIA. For example, local workforce area staff or service providers we interviewed in three local areas (in two different states) told us that they had used WIOA funds to pay for the care of children of enrolled youth. Staff at another local workforce development area we visited reported intensified focus on staff training in trauma-informed care and emphasized the need to assume trauma among program participants. One WIOA service provider we interviewed explained that keeping more transient out-of-school youth motivated and enrolled required more intensive services and more interaction with staff until they learn to become more self-sufficient. She also emphasized that linking occupational training to an employer is vital for success with out of school youth. Reducing Transportation Barriers: In addition to these overall strategies, some local workforce area staff and service providers we spoke to told us they had taken steps to address transportation obstacles, which were widely cited as especially challenging. For example, local workforce staff in one local area we visited reported supplying bus passes to help youth participants get to their work experience jobs or training in areas where bus systems existed. One service provider staff member in a more rural area told us his organization used two vans to transport youth and another told us that his organization had provided bicycles to out-of- school youth. In one location we visited, a community college that partners with the WIOA program provides shuttle bus services between its various campuses and has expanded this service to include transportation to various partners, to and from job sites, and to and from credentialing exams. The representative from this community college told us that this approach is working well but needs to be further expanded. A service provider in another local area we visited told us they have developed some portable training modules that can travel across the local area, alleviating some of the transportation issues out-of-school youth face. These modules help train students in more remote areas in fields such as heating, ventilation, and air conditioning (HVAC), electrical work, and plumbing. To help states and local areas implement their WIOA programs and overcome challenges, DOL has developed and provided a significant amount of guidance and technical assistance in the form of Training and Employment Guidance Letters, webinars, conferences, and online resources; all of which state and local officials generally reported as being helpful. Officials in the three states we visited stated that DOL’s guidance and technical assistance had been helpful and that DOL’s Employment and Training Administration regional offices had been responsive to their needs. While local workforce development board staff we interviewed in several local areas told us that they relied primarily on guidance from their state, they also reported using DOL guidance and technical assistance and agreed that it was generally helpful. About half of local workforce area survey respondents reported that DOL guidance and technical assistance are either extremely or very helpful. When asked what topics or issues related to WIOA youth needed additional or clearer guidance, 54 out of 106 (approximately 51 percent) survey respondents did not provide any examples. Of those that did respond, the most commonly cited areas for additional guidance included performance measures and work experiences. However, these topic areas were only mentioned by 14 and 9 of the survey respondents, respectively. Local Areas Used Various Strategies to Meet the New WIOA Work Experience Requirement, Yet Many Reported Challenges Local Areas Expanded Work Experience Opportunities for Youth and Frequently Paid for Youth Salaries in Order to Meet the New Work Experience Requirement Many local workforce areas we surveyed have increased their emphasis on work experiences for youth under WIOA, with paid employment being the most common type of opportunity provided to participants. While work experience was a youth program element under WIA, since the enactment of WIOA, an estimated 82 percent of local workforce areas reported they had expanded work experience opportunities, and 59 percent of local workforce areas reported they provided work experiences to a greater percentage of youth participants than in the years prior to WIOA. Year-round paid employment and summer paid employment were the most common work experience opportunities that local workforce areas reported providing to a great or very great extent (an estimated 69 percent and 42 percent, respectively). In contrast, pre-apprenticeship, on- the-job training, job shadowing, and internship opportunities were less commonly provided (see fig. 10). WIOA youth participated in several types of work experiences with employers in numerous occupational fields, local workforce areas reported, though some were more common than others. Since the enactment of WIOA, an estimated 80 percent of local areas developed new or strengthened existing partnerships with employers. Through partnerships with employers youth participated in work experiences in a wide range of fields, the most common being jobs involving retail, customer service, and hospitality. Healthcare and medical-related jobs were also common, as were jobs in manufacturing. These occupations were also associated with the three most common career pathway plans developed for participants, according to the local workforce areas we surveyed. Several local staff members and survey respondents said they try to align youth work experiences with the youth’s interests and career pathway plan. However, many survey respondents noted that finding a good match can be difficult. Several workforce development board staff members and service providers across the three states we visited told us they had a positive opinion of work experiences and thought they were beneficial for youth. They praised work experiences for reasons like helping youth learn valuable soft skills, helping them realize the value of work, and improving employment outcomes. An American Job Center staff member in one local area we visited told us how important work experiences were for letting youth explore their interests and “try out” a new field before investing program funds in a related training program, only for the youth to decide later they did not like that field. Staff at two other centers described similar instances where participants placed in teaching, medical, and veterinarian positions reconsidered their decisions after the work experience exposed them to some of less appealing aspects of the occupations. Payment of participants’ salary is the dominant strategy local workforce areas said they are using to meet the new WIOA work experience spending requirement. Specifically, based on our survey an estimated 81 percent of local areas reported that to a great or very great extent they relied on paying a youth participant’s salary to meet the requirement (see fig. 11). Our survey also indicates that when local areas paid a participant’s work experience salary, 88 percent often or very often paid the entire salary with youth program funds, far outpacing other payment structures (see fig. 12). Although there is no limit on the length of the paid employment experience, DOL officials told us the typical length is around 6 to 8 weeks. In one local area, service provider staff told us that paying a youth’s entire salary encourages businesses to take a chance on a youth when they otherwise might not. DOL officials also told us that out-of-school youth, in particular, are a harder population to serve and many employers are not willing to take a risk in hiring them without the full salary paid through WIOA. However, based on our survey, an estimated 42 percent of local areas have at least sometimes arranged an agreement that part of a participant’s salary be paid by the employer. Local Areas Have Taken Steps to Address a Variety of Challenges That Inhibit Their Ability to Provide Work Experiences to Youth WIOA requires local areas spend at least 20 percent of local youth funds on work experience for in-school and out-of-school youth. Most local workforce areas we surveyed reported meeting that requirement, with an estimated 42 percent reporting it was slightly or not at all challenging to meet it in PY2016. However, another 34 percent found it moderately challenging, and 21 percent reported that it was very or extremely challenging. As shown in figure 13, local areas reported experiencing a variety of challenges as they attempted to meet the new spending requirement. Participant Challenges: The fact that youth participants may be less prepared for employment than older participants posed a challenge for workforce area staff as they worked to address WIOA’s new emphasis on youth work experiences. Overall, we estimate that 38 percent of local areas found it moderately or very difficult to meet the spending requirement because youth were not ready for a work experience. An estimated 31 percent of local workforce areas reported it was moderately or very difficult to meet the new requirement as a result of youth not completing their work experiences because they failed to live up to employer expectations. Several local WIOA program staff members told us that youth often have no prior work experience, can lack the soft skills needed for work, and may face other barriers to employment that can complicate success in a work experience. Some local staff we interviewed noted that many youth require substantial preparation before, and support during, a work experience in order to succeed. Perhaps as a consequence, about half (48 percent) of local workforce areas provided job readiness training to youth to a great or very great extent in order to prepare them for work experiences. In addition, some local service providers we met with told us they provided orientations to employers in order to manage expectations and prepare them to employ WIOA youth. Further, local service provider staff members told us they lend ongoing support to both youth participants and employers throughout the work experience period. This included check-ins at employment sites, mediating employee/employer conflicts, and addressing employer concerns about a youth’s performance to ensure youth meet employers’ expectations. Employer Reluctance: Employers are crucial to a local workforce area’s ability to provide work experiences to youth, yet many local areas have struggled to develop effective employer relationships that foster such opportunities. Notably, identifying employer partners does not appear to be the primary challenge, as an estimated 55 percent of local workforce areas reported little or no difficulty doing so. Yet, the existence of employers may not readily yield work experiences, as approximately 35 percent of local areas reported it was moderately or very difficult to align youth interests with available work experiences. Nearly the same proportion reported similar difficulty generating work experience opportunities because employers may perceive that providing those experiences would come with additional burdens. For example, service provider staff in two local areas told us some employers expressed concern about whether they would be responsible for workers’ compensation should a youth be injured. Staff in other areas told us that large companies in particular worry about potential administrative burdens, such as getting approval from corporate headquarters for a WIOA-sponsored work experience, or incorporating a participating youth into their payroll system. Some of the additional administrative burden perceived by employers may be associated with their general concern about the job-readiness of youth enrolled in WIOA programs. Around 31 percent of local areas reported it was moderately or very difficult to meet the work experience spending requirement because employers were reluctant to work with WIOA youth participants. One local employer we interviewed said out-of- school youth, in particular, may require additional help with communication, professional presentation, punctuality, and interpersonal skills, which can require additional personal attention. Many local service provider staff and survey respondents described the numerous barriers to employment often faced by out-of-school youth. One service provider said, as a result of these barriers, employers may be less receptive to provide work experiences for them. A survey respondent voiced a similar concern, saying employers may think youth with significant barriers are “too difficult to manage and/or retain in employment.” In light of employers’ possible reluctance to provide work experiences for youth, our survey shows many local workforce areas focused more resources toward developing employer partnerships. Specifically, we estimate that 51 percent of local areas reported that they increased their spending on business/employer relations under WIOA. Service providers in two local areas we visited, as well as many survey respondents, reported they had hired new staff, or were utilizing existing staff, to coordinate with employers. In one local area, workforce board staff told us that even with an established community presence and decades of experience, they still had to convince potential employer partners that their youth program staff would do everything in their ability to make work experiences easier for the employer. Other Challenges: Youth interest in work experiences may also vary according to current life circumstances, especially the need for immediate income. About a quarter (23 percent) of local areas reported youths’ lack of interest in obtaining WIOA-funded work experiences made meeting the spending requirement moderately or very difficult. As one survey respondent reported, “Many youth in this program simply want and need a job.” This sentiment was echoed by service providers in all three states we visited, who said the need for income can inhibit youths’ interest in a temporary work experience opportunity. Also, during our interviews with local area service providers we were told that challenges associated with the WIOA work experience component may be more acute in rural areas. As with other WIOA components, such as education and training, the availability of transportation can determine whether a youth can participate in WIOA-funded work experiences. For example, service providers we interviewed in Texas stressed how a lack of transportation, especially in rural areas where employers may be more distant from a youth’s home, can prevent youth from getting to and from a work site. In addition, a lack of employers in rural areas can hinder the creation of work experience opportunities. One service provider we interviewed said that some rural towns in his local area “have little more than a gas station and a school,” and the lack of local employers significantly limits work experience opportunities for youth. In such cases, arranging an opportunity in an alternate location would also likely require that the youth have a means of transportation to travel to the job site. Agency Comments This report does not include any recommendations. We provided a draft of this report to the Secretaries of Labor and Education for review and comment. Both agencies provided technical comments which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretaries of Labor and Education, and other interested parties. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or gurkinc@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 II. Appendix I: Objectives, Scope, and Methodology This report examines the implementation of the Workforce Innovation and Opportunity Act (WIOA) youth program in states and local workforce areas with respect to the new requirements that 75 percent of youth funds be expended on out-of-school youth and 20 percent of youth funds be expended on work experiences. In particular, this report examines: (1) what is known about states’ and local areas’ progress in meeting the WIOA spending requirements for serving out-of-school youth and providing youth with work experiences; (2) how local areas are addressing WIOA’s emphasis on serving out-of-school youth, and any challenges they have encountered; and (3) how local areas are addressing WIOA’s emphasis on youth work experiences and any challenges they have encountered. To answer all of our research objectives we reviewed relevant federal laws, regulations, and guidance. We also employed other methods to answer our audit objectives, as described below. Analysis of DOL Data and Documents To address our first objective, we analyzed Department of Labor (DOL) state-level WIOA youth program expenditure data from program year (PY) 2015 and PY2016, the most recent data available, for the 50 states and the District of Columbia. We also analyzed WIA state level expenditure data from PY2012 through PY2014. These data include the funds allotted to each state, minus the governors’ reserve for statewide activities, which can be up to 15 percent of the total allotment. In addition, the data include funds spent by the states on out-of-school youth, and for PY2015 and PY2016, funds spent on work experiences. To determine whether states appeared to be on track to meet WIOA spending requirements, we considered the percentage of their overall funds they had spent, as well as the percentage of their expended funds that were spent on out-of-school youth and work experiences. Our analysis should not be used to make conclusions about legal compliance with WIOA requirements. To assess the reliability of these data, we interviewed DOL officials with knowledge of the data and reviewed written responses from the agency officials to data reliability questions. We also reviewed other documentation related to the data. We found these data to be reliable for the purposes of addressing our research objective. We also reviewed DOL guidance and technical assistance materials to identify the measures the agency is taking to help states and local areas meet program requirements and deliver WIOA services to youth. To gather information about the extent to which local areas are making progress in meeting WIOA spending requirements, we collected data through our nationally representative survey, described below. Interviews with DOL Headquarters and Regional Office Staff In addition, to address this research objective, we conducted semi- structured interviews with DOL headquarters and regional office officials to gain information on DOL’s role in the implementation and administration of the WIOA youth program, the steps the agency is taking to monitor states’ and local areas’ progress in meeting program requirements, and to assess the availability and reliability of program and expenditure data. We spoke to three of the Employment and Training Administration’s six regional offices, selected for their timely availability and to account for a large portion of state and territorial oversight. Among them, these regional offices were responsible for overseeing 24 states and 3 territories. Our review of DOL’s monitoring of state oversight was limited to aspects necessary to describe DOL’s general review structure and collection of information, if any, on local spending; we did not comprehensively assess DOL’s monitoring efforts. Survey of Local Workforce Development Areas To address each of our research objectives, we conducted a nationally representative web-based survey of local workforce development areas (local workforce areas) in the 50 states and the District of Columbia. We surveyed workforce development areas because they are responsible for overseeing local youth workforce investment activities. Our survey results can be generalized to the entire population of workforce development areas. Specifically, we took a stratified random sample of workforce development areas (130 out of a universe of 543) to create estimates about the population of all workforce development areas. To ensure that our survey included workforce development areas located in major population areas, in Strata 1 we included the 23 local areas serving the 20 largest metropolitan areas in the United States with a workforce development board within the city, as identified by U.S. Census Bureau data. In addition, we included all 11 states in which there is only a single workforce development board that oversees WIOA activities for the entire state. There were 33 total workforce development areas in this strata. Strata 2 included 97 other randomly selected workforce development areas across the country. Each workforce development area was weighted in the analysis so our survey would be representative of the entire universe of workforce development areas. We conducted the survey from November 15, 2017 through January 31, 2018. We emailed our survey to the executive director of each workforce development area and asked questions about changes the area has made in response to the enactment of WIOA, challenges the workforce area has faced in meeting WIOA requirements related to serving out-of- school youth, and the adequacy of federal guidance and technical assistance, among other topics. The survey contained a mix of closed- ended and open-ended items. The survey’s weighted response rate was 82.3 percent (81.5 percent unweighted), with 106 of 130 workforce areas surveyed responding. A small number of items had higher non-response rates; we note this in the text when the rate of non-response is material. All closed-ended questions were weighted; however, open-ended questions were analyzed without weighting. Open-ended items generally received fewer responses than closed-ended questions. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since 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). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that each of the confidence intervals in this report will include the true values in the study population. All percentage estimates in this report have a margin of error of plus or minus 10 percentage points or fewer, unless otherwise noted. State Interviews and Local Site Visits To collect more detailed information about WIOA implementation at the state and local levels than our survey allowed, we conducted semi- structured interviews of state and local officials, as well as WIOA service providers, and partners, in three states. For our state-level interviews we selected three states primarily based on two criteria: 1) Proportions of disconnected youth at or above the median for all states. 2) WIOA state youth grant allotment for PY2016 at or above the median for all states. Sixteen states met both criteria. From those 16 states, we selected 3 that ensured diversity across DOL Employment and Training Administration regions and provided a mix of states with large percentages of disconnected youth and large state allotments. Based on this process we selected Arizona, Michigan, and Texas. In aggregate, these 3 states received approximately 12 percent of total PY2016 WIOA Youth funds. In each of the three states we selected, we visited three separate local workforce development areas, for a total of nine local areas. For our local workforce development area site selection we considered a number of factors, including disconnected youth rate data, input from state officials, and logistical feasibility. We also selected workforce development areas that would provide a mix of urban and rural areas. Specifically, we analyzed data on the percentage of disconnected youth at the county or metro area level and selected local areas with relatively high percentages of disconnect youth. To ensure that we selected workforce areas that would provide both urban and rural perspectives, we relied on county classifications by the U.S. Census Bureau. As we narrowed the list of site visit candidates, we reviewed the local area strategic plans published on the state workforce board’s website to gain additional insight into youth-specific programs in these areas. We also considered state officials’ input regarding workforce development areas in their states. Lastly, in making our final selections, we considered the logistical feasibility of traveling between local areas. We held interviews with state workforce officials in these states by phone and then conducted site visits to the three selected workforce development areas in each of the three selected states. In the each local area we visited, we interviewed local workforce development board staff, including, for example, executive directors, youth program supervisors, workforce youth specialists, community and business liaisons or business service managers, and others. Members of the workforce development board, in addition to board staff, participated in some of these interviews. In addition, in these local areas we interviewed staff from American Job Centers (one-stops), contracted youth service providers, and WIOA youth partner organizations, such as community colleges and other educational services providers, Job Corps, vocational rehabilitation agencies, and the Temporary Assistance for Needy Families (TANF) program. In one of the three states we visited, we also spoke with a small number of employers in each local area that had provided work experiences or hired youth through the WIOA program. These interviews were designed to obtain information on a variety of topics related to our research objectives, such as: how local workforce practitioners were serving out-of-school youth through the WIOA program; changes made as a result of the transition from WIA to WIOA; recruitment and service delivery strategies focused on out-of-school youth; challenges related to implementing WIOA and meeting new WIOA spending requirements; and federal guidance and technical assistance. We conducted this performance audit from December 2016 to June 2018 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: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Cindy Brown Barnes (Director), Betty Ward Zukerman (Assistant Director), David Perkins (Analyst-in- Charge), David Barish, and Kelly Turner made significant contributions to this report. In addition, key support was provided by James Ashley, Susan Baker, James Bennett, Stephen Betsock, Holly Dye, David Forgosh, Laura Hoffrey, Benjamin Sinoff, Almeta Spencer, and Walter Vance. Related GAO Products Workforce Innovation and Opportunity Act: Federal Agencies’ Collaboration Generally Reflected Leading Practices, but Could Be Enhanced. GAO-18-171. Washington, D.C.: February 8, 2018. Workforce Innovation and Opportunity Act: Selected States’ Planning Approaches for Serving Job Seekers and Employers. GAO-17-31. Washington, D.C.: November 15, 2016. Workforce Innovation and Opportunity Act: Information on Planned Changes to State Performance Reporting and Related Challenges, GAO-16-287. Washington, D.C.: March 7, 2016). Workforce Innovation and Opportunity Act: Performance Reporting and Related Challenges. GAO-15-764R. Washington, D.C.: September 23, 2015. Transportation-Disadvantaged Populations: Federal Coordination Efforts Could Be Further Strengthened. GAO-12-647. Washington, D.C.: June 20, 2012. Disconnected Youth: Federal Actions Could Address Some of the Challenges Faced by Local Programs That Reconnect Youth to Education and Employment. GAO-08-313. Washington, D.C.: February, 28, 2008.

Why GAO Did This Study Approximately 4.6 million youth ages 16 to 24 were neither in school nor employed in 2016. WIOA, enacted in July 2014, provides, in part, grants to states and local areas to assist youth—particularly out-of-school youth—in accessing employment, education, and training services. It also emphasizes the provision of work experiences to in- and out-of-school youth. GAO was asked to review how states and local areas are using WIOA grants to serve youth. This report examines (1) what is known about states' and local areas' progress in meeting WIOA spending requirements for serving out-of-school youth and for providing youth with work experiences; (2) how local areas are addressing WIOA's emphasis on serving out-of-school youth and any challenges, and (3) how local areas are addressing WIOA's emphasis on youth work experiences and any challenges. GAO reviewed relevant federal laws, regulations, and guidance; interviewed DOL officials; analyzed DOL state level WIOA youth program expenditure data from program years 2015 and 2016, the most recent data available; surveyed a nationally representative sample of local workforce development areas; and visited nine local workforce development areas in three states selected for their relatively large WIOA Youth funding allotments and relatively high rates of out-of-school youth. GAO is not making recommendations in this report. DOL and the Department of Education provided technical comments on a draft of this report, which were incorporated as appropriate. What GAO Found Most states reported they were on target to meet the Workforce Innovation and Opportunity Act's (WIOA) requirement to spend 75 percent of their Program Year 2015 and 2016 youth grant funding to serve out-of-school youth, according to Department of Labor (DOL) data. Because deadlines had not arrived for the spending of state youth grant allotments for these program years, compliance could not be determined. Similarly, most local areas reported they were on track to meet the out-of-school youth spending requirement, as well as the requirement that 20 percent of local youth grant funds be spent on providing work experiences to youth. Through GAO's survey, many local areas reported it was not challenging or only slightly challenging to meet the spending requirements, but some reported experiencing greater challenges (see figure). Under WIOA, DOL does not collect local expenditure information, but states must monitor local areas' compliance while DOL monitors state oversight. DOL has taken some steps to determine whether states are carrying out their monitoring responsibilities, including limited on-site monitoring and ongoing dialogue with states. According to DOL officials, the agency's monitoring of the new requirements has thus far focused on providing technical assistance and guidance, but they reported plans for more formal compliance monitoring. Note: All percentage estimates in this figure have a margin of error of plus or minus 10 percentage points or fewer. Percentages do not add to 100 due to rounding and because a small number of survey respondents answered “don't know” or did not respond. Local areas reported in GAO's survey that they used a combination of strategies to meet the WIOA spending requirement for serving out-of-school youth and to address other related challenges. For example, many local areas reported suspending enrollment of in-school-youth to help meet the requirement to spend 75 percent of youth grant funds on out-of-school youth. In addition, local areas reported having taken steps to address challenges locating, retaining, and serving out-of-school youth in their WIOA-funded programs, including increasing their recruiting efforts and strengthening partnerships with other WIOA programs, state and local government agencies, and community-based organizations. To meet WIOA's 20 percent spending requirement for work experiences, local areas reported expanding work experience opportunities for youth, most commonly with temporary paid employment. An estimated 81 percent of local areas reported they paid youth participants' salaries, with most paying the entire salary. Many local areas also reported challenges, including youths' lack of job-readiness and employers' reluctance to hire WIOA participants. To address these challenges, local areas reported providing job-readiness training for youth and strengthening partnerships with employers.

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Background EM oversees a nationwide complex of 16 sites. A majority of the sites were created during World War II and the Cold War to research, produce, and test nuclear weapons (see figure 1). Much of the complex is no longer in productive use but still contains vast quantities of radioactive and hazardous materials related to the production of nuclear weapons. In 1989, EM began carrying out activities around the complex to clean up, contain, safely store, and dispose of these materials. Starting at about the same time, DOE documents indicate that EM and state and federal regulators entered into numerous cleanup agreements that defined the scope of cleanup work and established dates for coming into compliance with applicable environmental laws. EM has spent more than $170 billion since it began its cleanup program, but its most challenging and costly cleanup work remains, according to EM documents. The processes that govern the cleanup at EM’s nuclear waste sites are complicated, involving multiple laws, agencies, and administrative steps. EM’s cleanup responsibilities derive from different laws, including CERCLA, RCRA, the Atomic Energy Act, and state hazardous waste laws. Federal facility agreements, compliance orders, and other compliance agreements also govern this cleanup. Federal facility agreements are generally enforceable agreements that DOE enters into with EPA and affected states under CERCLA and applicable state laws. For each federal facility listed on the National Priorities List, EPA’s list of seriously contaminated sites, section 120 of CERCLA requires the relevant federal agency to enter into an interagency agreement with EPA for the completion of all necessary cleanup actions at the facility. The interagency agreement must include, among other things, the selection of the cleanup action and schedule for its completion. Interagency agreement provisions can be renegotiated, as necessary, to incorporate new information, adjust schedules, and address changing conditions. States generally issue federal facility compliance orders to DOE under RCRA and the Federal Facilities Compliance Act. RCRA prohibits the treatment, storage or disposal of hazardous waste without a permit from EPA or a state that EPA has authorized to implement and enforce a hazardous waste management program. Under the Federal Facilities Compliance Act, federal agencies are subject to state hazardous waste laws and state enforcement actions, including compliance orders. RCRA regulations establish detailed and often waste-specific requirements for the management and disposal of hazardous wastes, including the hazardous waste component of mixed waste. Tri-party agreements among DOE, EPA, and the relevant state often serve as both a federal facility agreement and a compliance order. In addition to federal facility agreements, other types of agreements governing cleanup at specific sites may also be in place, including administrative compliance orders, court-ordered agreements, and settlement agreements. Administrative compliance orders are orders from state agencies enforcing state hazardous waste management laws. Court-ordered agreements result from lawsuits initiated primarily by states. Settlement agreements are agreements between parties that end a legal dispute. These agreements may include milestones—dates by which DOE commits to plan and carry out its cleanup work at the sites. DOE has identified two different types of milestones: enforceable and planning milestones. Generally, an enforceable milestone has a fixed, mandatory due date, subject to the availability of appropriated funds, whereas a planning milestone is not enforceable and usually represents a placeholder or shorter term of work. In this report, we are examining any enforceable milestone that derives from either federal facility agreements or other compliance agreements. EM manages its cleanup program based on internal guidance, on milestone commitments to regulators, and in consultation with a variety of stakeholders. First, according to EM officials, EM manages cleanup activities based on requirements listed in a cleanup policy that it issued in July 2017 along with guidance listed in standard operating policies and procedures associated with this policy. The 2017 cleanup policy states that EM will apply DOE’s project management principles described in Order 413.3B to its operations activities in a tailored way. Second, EM’s budget requests are explicit regarding the role the milestones play in the cleanup effort. For example, in its fiscal year 2019 request to Congress, EM stated that the request addresses cleanup “governed through enforceable regulatory milestones.” Third, in addition to the milestone commitments to EPA and state environmental agencies, other stakeholders involved include county and local governmental agencies, citizen groups, and other organizations. These stakeholders advocate their views through various public involvement processes, including site- specific advisory boards. At EM’s 16 Cleanup Sites, Cleanup Is Governed by 72 Agreements, but EM Headquarters and Sites Do Not Consistently Define or Track Milestones At EM’s 16 cleanup sites, cleanup is governed by 72 agreements and hundreds of cleanup milestones. These agreements include federal facility agreements generally negotiated between DOE, the state, and EPA, and compliance orders from state regulators. These agreements may impose penalties for missing milestones and may amend or modify earlier agreements, including extending or eliminating milestone dates. Within the agreements, hundreds of milestones outline deadlines for specific actions to be taken by EM as it carries out its cleanup work. However, because EM lacks a standard definition of milestones, some sites track milestones differently than EM headquarters, limiting EM’s ability to monitor performance. At EM’s 16 Cleanup Sites, Cleanup Is Governed by 72 Agreements, Most of Which Include Cleanup Milestones In total, DOE has entered into 72 cleanup agreements at EM’s 16 cleanup sites. The agreements were initially signed between 1985 and 2009 (see table 1). With the exception of the Moab Uranium Mill Tailings Remedial Action Project in Utah and the Waste Isolation Pilot Plant in New Mexico, each site is governed by at least one cleanup agreement. Twelve are governed by multiple agreements (up to as many as 17 at the Savannah River Site, for example). Twelve sites are governed by federal facility agreements, generally with the relevant state and EPA. These agreements generally set out a sequence for accomplishing the work, tend to cover a relatively large number of cleanup activities, and include milestones that DOE must meet. All of the 12 sites with federal facility agreements are also governed by additional compliance agreements that have been negotiated at each site subsequent to the initial federal facility agreement or other agreement with the state. These agreements may impose penalties for missing milestones and may amend or modify earlier agreements, including extending or eliminating milestone dates. For example, the Hanford Site is subject to three consent decrees that resulted from litigation in which the state of Washington sued DOE for failing to meet certain cleanup milestones. EM Headquarters and Selected Cleanup Sites Do Not Consistently Define or Track Milestones EM headquarters and cleanup site officials provided us with different totals on the number of milestones in place at the four sites we selected for further review. Both federal facility agreements and other compliance agreements contain milestones with which EM must comply and, according to EM officials and our review of the agreements, these agreements collectively contain hundreds of milestones. However, milestone information that EM headquarters and site officials shared with us was not consistent. For example, for milestones due in fiscal years 2018 through 2020, officials at EM headquarters identified 135 enforceable cleanup milestones at the four selected sites, which was less than half of the number of such milestones officials at those sites reported to us (see table 2). These discrepancies result from how headquarters and selected sites define and track milestones. Milestone definitions. EM headquarters officials said that they are primarily concerned with milestones related to on-the-ground cleanup; that is, cleanup activities that actually result in waste being removed, treated, or disposed of. EM officials said they consider these to be major milestones. However, not all sites make the same distinction between major and non-major milestones and, as a result, are not consistently reporting the same types of milestones to EM headquarters. For example, officials at the Savannah River Site track milestones in a federal facility agreement that lists 79 milestones due in fiscal years 2018 through 2020. This agreement makes no distinction between major and non-major milestones and includes administrative activities, such as revisions to cleanup reports, in its milestone totals. EM headquarters officials, on the other hand, do not include these activities as major milestones and list only 43 milestones due in the same time frame. Similarly, Hanford officials do not distinguish between major or other milestones in their internal tracking. As a result, Hanford officials are tracking 178 milestones due in fiscal years 2018 through 2020, whereas EM headquarters officials are tracking 57 for the same time frame at Hanford. Requirements for updating milestones. Sites do not consistently provide EM headquarters with the most up-to-date information on the status of milestones at each site. This is because EM requirements governing the submission of milestone information do not specify when or how often sites are to update this information, so sites have the discretion to choose when to send updated milestone data to headquarters. As a result, the information on the list of milestones used to track cleanup performance by EM headquarters may differ from the more up-to-date information kept by the sites. For example, officials at each of the four sites we examined stated that they try to send updated information on the status of milestones to headquarters on an annual basis, though they sometimes send it less frequently. Officials at EM headquarters acknowledged that their list of milestones is not always up-to-date because of the lag between when a milestone changes at the site and when sites update that information in the EM headquarters’ database. In addition to inconsistencies in tracking and defining milestones, lists of milestones maintained by EM headquarters and the four selected sites may not include all cleanup milestones governing the cleanup work at the site. We found two cases in which permits at two sites included milestones that neither EM headquarters nor site officials included in their list of sites’ cleanup milestones. For example, milestones related to a major construction project at one of the selected sites we reviewed— Savannah River—are not listed in either EM headquarters’ or the Savannah River Site’s list of enforceable milestones. According to South Carolina state environmental officials, milestones associated with this project are part of a separate permit and dispute resolution agreement not connected to the federal facility agreement or one of the sites’ compliance agreements. Recently, DOE acknowledged in its fiscal year 2019 budget request that this project has faced technical challenges, and officials noted that the previously agreed-upon start date for operating this project would be delayed. However, this milestone and its delay are not included in either EM headquarters’ or Savannah River’s list of milestones. Similarly, officials at the Hanford Site said that some milestones governing Hanford’s cleanup are part of the site wide RCRA permit issued by the state, which is separate from its federal facility agreement, and, as a result, officials do not track this information in the same Hanford milestone tracking system and do not report it to EM headquarters. EM does not have a standard definition of milestones for either sites or headquarters to use for reporting and monitoring cleanup milestones or guidance on how often sites should update the status of milestones. EM headquarters officials cited guidance that sites can refer to when entering their milestone data into the headquarters-managed database. This guidance addresses how to submit milestone data but does not include a definition of milestones or specify how often sites should update the information. EM headquarters officials noted that sites have the discretion to input milestones as they choose. EM’s lack of a standard definition of milestones limits management’s ability to use milestones to manage EM’s cleanup mission and monitor its progress. We have previously found that poorly defined, incomplete, or missing requirements make it difficult to hold projects accountable, result in programs or projects that do not meet user needs, and can result in cost and schedule growth. In addition, according to Standards for Internal Control in the Federal Government, information and communication are vital for an entity to achieve its objectives. According to these standards, the first principle of information and communication is that management should define the information requirements at the relevant level and the requisite specificity for appropriate personnel. Without this, EM’s ability to use milestones for managing and measuring the performance of its cleanup program is limited. EM Does Not Track Sites’ Renegotiated Milestone Dates and Has Not Consistently Reported Milestone Information to Congress as Required EM relies on cleanup milestones, among other metrics, to measure the overall performance of its operations activities. However, sites regularly renegotiate milestones they are at risk of missing, and EM does not track data on the history of postponed milestones. As a result, EM cannot accurately track the progress of cleanup activities to meet these milestones. Additionally, EM has not consistently reported required information to Congress, and the information it has reported is incomplete. For example, in its report to Congress on the status of the enforceable milestones, EM includes the latest (meaning the most recently renegotiated) milestone dates with no indication of whether or how often those milestones have been missed or postponed. Sites Renegotiate Milestone Dates Before They Are Missed, and EM Does Not Track How Often This Occurs Site officials typically renegotiate enforceable milestones they are at risk of missing with their regulators, in accordance with the modification procedures established in federal facility agreements. EM officials said that sites have the ability to renegotiate milestones before they are missed. For example, the Hanford Site Federal Facility Agreement allows DOE to request an extension of any milestone; the request must include, among other things, DOE’s explanation of the good cause for the extension. As long as there is consensus among EM and its regulators, the milestone is changed. Similarly, the Los Alamos Federal Facility Agreement requires site officials to negotiate cleanup milestones each fiscal year. Because renegotiated milestones are not technically missed, EM avoids any fines or penalties associated with missed milestones. Site officials we interviewed at the four selected sites stated that it is common for regulators and sites to renegotiate milestones before sites miss them. For example, at the Savannah River Site, both DOE and South Carolina officials said they could not recall any missed milestones among the thousands of milestones completed since the cleanup began. Similarly, Hanford officials told us that since the beginning of the cleanup effort in 1989, more than 1,300 milestones had been completed and only 62 had actually been missed because, in most cases, whenever milestones were at risk of being missed, they were renegotiated. However, officials at these sites could not provide us with the exact number of times milestones had been renegotiated. This is because once milestones are changed, sites are not required to maintain or track the original milestones. As a result, the new milestones become the new agreed-upon time frame, essentially resetting the deadline. Because EM does not track the original baseline schedule for renegotiated milestone dates, milestones do not provide a reliable measure of program performance. According to best practices identified in GAO’s schedule assessment guide, agencies should formally establish a baseline schedule against which performance can be measured. In particular, we have previously found that management does not have the ability to identify and mitigate the effects of unfavorable performance without a formally established baseline schedule against which it can measure performance. We have also found that, without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management’s insight into the true performance of the project. In addition, DOE’s internal project management policies call for steps to maintain a change control process, including setting a baseline schedule for completing certain activities and maintaining a record of any subsequent deviations from that baseline. EM uses milestones as one of its metrics for measuring the performance of its cleanup efforts, since the milestones are effectively schedule targets. However, since neither EM headquarters nor the sites track renegotiated milestones and their baseline dates at the sites, EM cannot accurately use milestones for managing and measuring the performance of its cleanup program. EM Has Not Consistently Reported Required Information to Congress, and the Information It Has Reported Is Incomplete EM has not consistently reported required information to Congress on the status of its milestones. The National Defense Authorization Act for Fiscal Year 2011 established a requirement for EM to annually provide Congress with a future-years defense environmental cleanup plan. This plan is to contain, among other things, information on the current dates for enforceable milestones at specified cleanup sites, including whether each milestone will be met and, if not, an explanation as to why and when it will be met. However, since 2011, EM has only provided Congress with the required annual plan in 2 years—2012 and 2017—and EM officials told us in September 2018 that they were unsure when EM would release the next future-years plan. EM officials said that, instead of the annual plan, they have provided oral briefings to Congressional staff during the 4 years when a formal report was not produced. In addition, our analysis of the 2012 and 2017 plans EM submitted to Congress identified three ways in which the plans provide inaccurate or incomplete information on EM’s enforceable milestones. No historical record. First, the plans contain no indication of whether each milestone date reported is the original date for that milestone or whether or how many times the milestones listed have been missed or postponed. Instead, the plans report the latest (and most recently renegotiated) dates for the milestones without listing the original dates or acknowledging that some of the milestones have been delayed, in some cases by several years, beyond their original agreed-upon completion dates. For example, we found that at least 14 milestones from the 2012 plan were repeated in the 2017 plan with new forecasted completion dates, but the 2017 plan gave no indication that these milestones had been postponed (see table 3). The milestones’ due dates had been pushed back by as many as 6 years without any indication in the 2017 report that they were delayed. As noted above, EM headquarters does not track changes to milestones and EM officials at both headquarters and the sites said that they have not historically kept a record of the original baseline dates for renegotiated milestones they change. As a result, EM officials could not readily provide information on whether the other milestones listed in the 2012 report met their listed due date or whether they were postponed. Headquarters officials stated that to gather this information they would need to survey officials at each site. Inaccurate forecast. Second, the forecast completion dates for milestones listed in the 2012 and 2017 plans may not present an accurate picture of the status of the milestones and EM’s cleanup efforts. For example, in the 2012 plan, DOE reported that four out of 218 milestones were at risk of missing their planned completion date, while the rest were on schedule. As discussed above, we found 14 of the milestones in the 2012 plan had been postponed and listed again in the 2017 plan. Similarly, the 2017 plan listed only one milestone out of 154 as forecasted to miss its due date. However, because EM does not have a historical record of the changes made to the milestones, it is unclear how many of these milestones represented their original due dates. Incomplete list. Third, the plans did not include milestones from all of the 10 DOE cleanup sites that EM is required to report on. In 2012, EM did not report milestone information for two of the 10 sites that were required to be included in the plan. In the 2017 plan, information was missing for one of the 10 required sites. EM headquarters officials said that this could be because some sites did not update their milestone information or some sites may still be renegotiating new milestones. However, neither report indicated that data were missing for these sites. As a result of these issues, DOE’s future-years defense environmental cleanup plans provide only a partial picture of the milestones and overall cleanup progress made across the cleanup complex, and actual progress made in cleanup is not transparent to Congress. The absence of reliable and complete information on the progress of EM’s cleanup mission limits EM’s ability to manage its mission and complicates Congress’s ability to oversee the cleanup work. EM Does Not Analyze the Root Causes of Missed or Postponed Milestones and Does Not Have Guidelines for Considering Root Causes When Renegotiating New Milestones Best practices and DOE requirements for project management call for a root cause analysis when problems lead to schedule delays, but EM officials at both headquarters and selected sites have not analyzed reasons why milestones are missed or postponed. According to best practices identified in GAO’s cost estimating guide, agencies should identify root causes of problems that lead to schedule delays and renegotiated milestones. Specifically, when risks materialize (i.e., when milestones are missed or delayed), risk management should provide a structure for identifying and analyzing root causes. The benefits of doing so include developing a better understanding of the factors that caused milestones to be missed and providing agencies with information to more effectively address those factors in the future. In addition, DOE has recently emphasized the importance of doing this kind of analysis. In 2015, DOE issued a directive requiring sites to do a root cause analysis when the project team, program office, or independent oversight offices determine that a project has breached its cost or schedule thresholds. This directive, which applies to all programs and projects within DOE, calls for “an independent and objective root cause analysis to determine the underlying contributing causes of cost overruns, schedule delays, and performance shortcomings,” such as missed or postponed milestones. However, EM has not done a complex-wide analysis of the reasons for missed or postponed milestones. Similarly, officials we interviewed at the four selected sites said that they were not aware of any site-wide review of why milestones were missed or postponed. According to headquarters officials, this analysis has not been done because EM has determined that DOE requirements governing this type of analysis apply only to contract schedules, not regulatory milestones, and that missed or postponed milestones are not necessarily an indication of cleanup performance shortcomings. However, as previously noted in this report, missing or postponing milestones is a systemic problem across the cleanup complex that makes it difficult for DOE to accurately identify cleanup performance shortcomings. Because EM has not analyzed why it has missed or postponed milestones, EM cannot address these systemic problems and consider those problems when renegotiating milestones with regulators. Without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones and, as a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work. As we have reported previously, these delays lead to increases in the overall cost of the cleanup. Conclusions The federal government faces a large and growing future environmental liability, the vast majority of which is related to the cleanup of radioactive and hazardous waste at DOE’s 16 sites around the country. EM has responsibility for addressing the human health and environmental risks presented by this contamination in the most cost-effective way. However, most of EM’s largest projects are significantly delayed and over budget, and state regulators for nearly all of EM’s cleanup sites have responded by initiating enforcement actions, often leading to additional agreements, including administrative orders and court settlements, in addition to initial federal facility agreements to ensure those risks are addressed. EM relies on cleanup milestones, among other metrics, to measure the overall performance of its operations activities, and EM reports that very few of its cleanup milestones over the past 2 decades have been missed. However, EM’s self-reported performance in achieving milestones does not provide an accurate view of actual progress in cleaning up sites. EM has not established clear definitions for tracking and reporting milestones and does not have any requirements governing the way sites are to update milestone information. As a result, EM’s internal tracking of these milestones has inconsistencies. Additionally, since the requirement to annually report on the status of milestones was set in 2011, EM has produced only two reports to Congress, and these were inaccurate and incomplete. Without a clear and consistent approach to collecting and reporting this data, including the history of milestone changes, EM cannot accurately use milestones for managing and measuring the performance of its cleanup program. The absence of reliable and complete information on the progress of EM’s cleanup mission also limits EM’s and Congress’s ability to oversee the cleanup work. In addition, without a root cause analysis of why milestones are missed or postponed, EM and its cleanup regulators lack information to set more realistic and achievable milestones. As a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work, which will likely increase cleanup costs and risks to human health and the environment. Recommendations for Executive Action We are making the following four recommendations to DOE: The Assistant Secretary of DOE’s Office of Environmental Management should update EM’s policies and procedures to establish a standard definition of milestones and specify requirements for both including and updating information on milestones across the complex. (Recommendation 1) The Assistant Secretary of DOE’s Office of Environmental Management should track original milestone dates as well as changes to its cleanup milestones. (Recommendation 2) The Assistant Secretary of DOE’s Office of Environmental Management should comply with the requirements in the National Defense Authorization Act by reporting annually to Congress on the status of its cleanup milestones and including a complete list of cleanup milestones for all sites required by the act. The annual reports should also include, for each milestone, the original date along with the currently negotiated date. (Recommendation 3) The Assistant Secretary of DOE’s Office of Environmental Management should conduct root cause analyses of missed or postponed milestones. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this report to DOE for review and comment. DOE provided written comments, which are reproduced in appendix II; the agency also provided technical comments that we incorporated in the report as appropriate. Of the four recommendations in the report, DOE agreed with three, and partially agreed with one. Regarding the recommendation that DOE update EM’s policies and procedures to establish a standard definition of milestones and specify requirements for both including and updating information on milestones across the complex, the agency agreed with the recommendation. DOE stated that these policy-driven reforms can improve the efficiency of milestone tracking. Regarding the recommendation that DOE track changes to cleanup milestones, the agency agreed with the recommendation. DOE stated that EM currently monitors milestone status, including changes as the need for changes are identified and as part of its ongoing communication with field offices, and therefore DOE considers the recommendation to be closed. However, as we noted in the report, neither EM headquarters nor the sites track the original baseline schedule for renegotiated milestone dates. We adjusted the language of the recommendation to make clear that the EM Assistant Secretary should track original milestone dates as well as changes to cleanup milestones. DOE stated in its written comments that EM does not believe that tracking original and changed milestones will strengthen EM's ability to use milestones to manage and measure the performance of its cleanup program. However, as we noted in this report, according to best practices identified in GAO's schedule assessment guide, agencies should formally establish a baseline schedule against which performance can be measured. We have found that, without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management's insight into the true performance of the project. In addition, DOE's internal project management policies call for steps to maintain a change control process, including setting a baseline schedule for completing certain activities and maintaining a record of any subsequent deviations from that baseline. Regarding our recommendation that DOE comply with the requirements in the National Defense Authorization Act by reporting annually to Congress on the status of its cleanup milestones and including a complete list of cleanup milestones for all sites required by the act, the agency partially agreed with the recommendation. DOE stated that additional budget and clarification of purpose and scope would be required to fulfill this recommendation. As we point out in our report, DOE has not fully complied with requirements established by the act, including not submitting all required annual reports and, even when DOE did submit these reports, its reporting omitted information about some sites. DOE stated that EM is reviewing options to address this recommendation. Regarding our recommendation that DOE conduct root cause analyses of performance shortcomings that lead to missed or postponed milestones, the agency agreed with the recommendation and stated that EM is evaluating options to implement it. However, DOE stated that there may be multiple reasons why milestones are changed, and not all of the changes are due to DOE performance. To acknowledge the uncertainty in the causes of missed or postponed milestones, we adjusted the language of the recommendation to clarify that the EM Assistant Secretary should conduct root cause analyses of missed or postponed milestones. In addition, in its written comments, DOE disagreed with the draft report's description of the process and authorities related to renegotiating compliance milestones, stating that EM cannot and does not unilaterally delay/postpone milestones and that EPA and state regulator approval of milestone changes is required. We agree, and the report states that it is common for regulators and sites to renegotiate milestones before sites miss them. DOE also disagreed with the draft report’s characterization of the coordination between EM sites and headquarters in tracking milestones. In particular, DOE’s written comments state that site-specific databases include all regulatory compliance milestones drawn from applicable agreements, while the headquarters database tracks major enforceable milestones. However, as our report notes, because not all sites make the same distinction between major and non-major milestones, sites are not consistently reporting the same types of milestones to EM headquarters. In addition, DOE’s written comments state that EM sites and headquarters routinely collaborate and discuss the status of milestones via meetings and EM periodically requests that sites verify the data in the EM headquarters database. Nevertheless, as our report notes, EM requirements governing the submission of milestone information do not specify when or how often sites are to update this information. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, this 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) 512-3841 or trimbled@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 significant contributions to this report are listed in appendix III. Appendix I: Department of Energy (DOE) Cleanup Sites Brookhaven National Laboratory The Brookhaven National Laboratory was established in 1947 by the Atomic Energy Commission. Formerly Camp Upton, a U.S. Army installation site, Brookhaven is located on a 5,263-acre site on Long Island in Upton, NY, approximately 60 miles east of New York City. Historically, Brookhaven was involved in the construction of accelerators and research reactors such as the Cosmotron, the High Flux Beam Reactor, and the Brookhaven Graphite Research Reactor. These accelerators and reactors led the way in high-energy physics experiments and subsequent discoveries but also resulted in radioactive waste. To complete the cleanup mission, DOE is working to build and operate groundwater treatment plants, decontaminate and decommission the High Flux Beam Reactor and the Brookhaven Graphite Research Reactor, and dispose of some wastes off-site. Energy Technology Engineering Center The Energy Technology Engineering Center occupies 90 acres within the 290 acre Santa Susana Field Laboratory 30 miles north of Los Angeles, California. The area was primarily used for DOE research and development activities. In the mid-1950s, part of the area was set aside for nuclear reactor development and testing, primarily related to the development of nuclear power plants and space power systems, using sodium and potassium as coolants. In the mid-1960s, the Energy Technology Engineering Center was established as a DOE laboratory for the development of liquid metal heat transfer systems to support the Office of Nuclear Energy Liquid Metal Fast Breeder Reactor program. DOE is now involved in the deactivation, decommissioning, and dismantlement of contaminated facilities on the site. Hanford Site DOE is responsible for one of the world’s largest environmental cleanup projects: the treatment and disposal of millions of gallons of radioactive and hazardous waste at its 586 square mile Hanford Site in southeastern Washington State. Hanford facilities produced more than 20 million pieces of uranium metal fuel for nine nuclear reactors along the Columbia River. Five plants in the center of the Hanford Site processed 110,000 tons of fuel from the reactors, discharging an estimated 450 billion gallons of liquids to soil disposal sites and 53 million gallons of radioactive waste to 177 large underground tanks. Plutonium production ended in the late 1980s. Hanford cleanup began in 1989 and now involves (1) groundwater monitoring and treatment, (2) deactivation and decommissioning of contaminated facilities, and (3) the construction of the waste treatment and immobilization plant intended, when complete, to treat the waste in the underground tanks. Idaho National Laboratory DOE’s Idaho Site is an 890-square-mile federal reserve, situated in the Arco Desert over the Snake River Plain Aquifer in central Idaho. The Idaho Cleanup Project involves the environmental cleanup of the Idaho Site, contaminated with legacy wastes generated from World War II-era conventional weapons testing, government-owned research and defense reactors, spent nuclear fuel reprocessing, laboratory research, and defense missions at other DOE sites. Lawrence Livermore National Laboratory The 1-square-mile Lawrence Livermore National Laboratory site is an active, multi-program DOE research laboratory about 45 miles east of San Francisco. A number of research and support operations at Lawrence Livermore handle, generate, or manage hazardous materials that include radioactive wastes. The site first was used as a Naval Air Station in the 1940s. In 1951, it was transferred to the U.S. Atomic Energy Commission and was established as a nuclear weapons and magnetic fusion energy research facility. Over the past several years, Lawrence Livermore constructed several treatment plants for groundwater pumping and treatment and for soil vapor extraction. These systems will continue to operate until cleanup standards are achieved. Los Alamos National Laboratory Los Alamos National Laboratory is located in Los Alamos County in north central New Mexico. The laboratory, founded in 1943 during World War II, served as a secret facility for research and development of the first nuclear weapon. The site was chosen because the area provided controlled access, steep canyons for testing high explosives, and existing infrastructure. The Manhattan Project’s research and development efforts that were previously spread throughout the nation became centralized at Los Alamos and left a legacy of contamination. Today, the Los Alamos National Laboratory Cleanup Project is responsible for the treatment, storage, and disposition of a variety of radioactive and hazardous waste streams; removal and disposition of buried waste; protection of the regional aquifer; and removal or deactivation of unneeded facilities. Moab Uranium Mill Tailings Project The Moab Site is located about 3 miles northwest of the city of Moab in Grand County, Utah. The former mill site encompasses approximately 435 acres, of which about 130 acres is covered by the uranium mill tailings pile. Uranium concentrate (called yellowcake), the milling product, was sold to the U.S. Atomic Energy Commission through December 1970 for use in national defense programs. After 1970, production was primarily for commercial sales to nuclear power plants. During its years of operation, the mill processed an average of about 1,400 tons of ore a day. The milling operations created process-related wastes and tailings, a radioactive sand-like material. The tailings were pumped to an unlined impoundment in the western portion of the Moab Site property that accumulated over time, forming a pile more than 80 feet thick. The tailings, particularly in the center of the pile, have a high water content. Excess water in the pile drains into underlying soils, contaminating the ground water. Nevada National Security Site In 1950, President Truman established what is now known as the Nevada National Security Site in Mercury, Nevada, to perform nuclear weapons testing activities. In support of national defense initiatives, a total of 928 atmospheric and underground nuclear weapons tests were conducted at the site between 1951 and 1992, when a moratorium on nuclear testing went into effect. Today, the site is a large, geographically-diverse research, evaluation, and development complex that supports homeland security, national defense, and nuclear nonproliferation. In Nevada, DOE activities focus on groundwater, soil, and on-site facilities; radioactive, hazardous, and sanitary waste management and disposal; and environmental planning. Oak Ridge Reservation DOE’s Oak Ridge Reservation is located on approximately 33,500 acres in eastern Tennessee. The reservation was established in the early 1940s by the Manhattan Engineer District of the U. S. Army Corps of Engineers and played a role in the production of enriched uranium during the Manhattan Project and the Cold War. DOE is now working to address excess and contaminated facilities, remove soil and groundwater contamination, and enable modernization that allows the National Nuclear Security Administration to continue its national security and nuclear nonproliferation responsibilities and the Oak Ridge National Laboratory to continue its mission for advancing technology and science. Paducah Gaseous Diffusion Plant The Paducah Gaseous Diffusion Plant, located within an approximately 650-acre fenced security area in in McCracken County in western Kentucky, opened in 1952 and played a role in the production of enriched uranium during and after the Cold War until ceasing production for commercial reactor fuel purposes in 2013. Decades of uranium enrichment and support activities required the use of a number of typical and special industrial chemicals and materials. Plant operations generated hazardous, radioactive, mixed (both hazardous and radioactive), and nonchemical (sanitary) wastes. Past operations also resulted in soil, groundwater, and surface water contamination at several sites located within plant boundaries. Portsmouth Gaseous Diffusion Plant The Portsmouth Gaseous Diffusion Plant is located in Pike County, Ohio, in southern central Ohio, approximately 20 miles north of the city of Portsmouth, Ohio. Like the Paducah Plant, this facility was also initially constructed to produce enriched uranium to support the nation’s nuclear weapons program and was later used by commercial nuclear reactors. Cleanup activities here are similar to those at the Paducah Plant. Sandia National Laboratories The Sandia National Laboratories comprises 2,820 acres within the boundaries of the 118 square miles of Kirtland Air Force Base and is located about 6 miles east of downtown Albuquerque, New Mexico. It is managed by the National Nuclear Security Administration. Sandia National Laboratories was established in 1945 for nuclear weapons development, testing, and assembly for the Manhattan Engineering District. Beginning in 1980, the mission shifted toward research and development for nonnuclear components of nuclear weapons. Subsequently, the mission was expanded to research and development on nuclear safeguards and security and multiple areas in science and technology. Savannah River Site The Savannah River Site complex covers 198,344 acres, or 310 square miles, encompassing parts of Aiken, Barnwell, and Allendale counties in South Carolina, bordering the Savannah River. The site is a key DOE industrial complex responsible for environmental stewardship, environmental cleanup, waste management, and disposition of nuclear materials. During the early 1950s, the site began to produce materials used in nuclear weapons, primarily tritium and plutonium-239. Five reactors were built to produce nuclear materials and resulted in unusable by-products, such as radioactive waste. About 35 million gallons of radioactive liquid waste are stored in 43 underground tanks. The Defense Waste Processing Facility is processing the high-activity waste, encapsulating radioactive elements in borosilicate glass, a stable storage form. Since the facility began operations in March 1996, it has produced more than 4,000 canisters (more than 16 million pounds) of radioactive glass. Separations Process Research Unit The Separations Process Research Unit is an inactive facility located at the Knolls Atomic Power Laboratory in Niskayuna, New York, near Schenectady. The Mohawk River forms the northern boundary of this site. Built in the late 1940s, its mission was to research the chemical process to extract plutonium from irradiated materials. Equipment was flushed and drained, and bulk waste was removed following the shutdown of the facilities in 1953. Today, process vessels and piping have been removed from all the research unit’s facilities. In 2010, cleanup of radioactivity and chemical contamination in the Lower Level Railroad Staging Area, Lower Level Parking Lot, and North Field areas was completed. Waste Isolation Pilot Plant The Waste Isolation Pilot Plant is an underground repository located near Carlsbad, New Mexico, that is used for disposing of defense transuranic waste. The plant is managed by DOE’s Office of Environmental Management and is the only deep geological repository for the permanent disposal of defense generated transuranic waste. West Valley Demonstration Project The West Valley Demonstration Project occupies approximately 200 acres within the 3,345 acres of land called the Western New York Nuclear Service Center. The project is located approximately 40 miles south of Buffalo, New York. The West Valley Demonstration Project Act of 1980 established the project. The act directed DOE to solidify and dispose of the high-level waste and decontaminate and decommission the facilities used in the process. The land and facilities are not owned by DOE. Rather, the project premises are the property of the New York State Energy Research and Development Authority. DOE does not have access to the entire 3,345 acres of property. Appendix II: Comments from the Department of Energy Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Nico Sloss (Assistant Director), Jeffrey T. Larson (Analyst in Charge), Natalie M. Block, Antoinette C. Capaccio, R. Scott Fletcher, Cindy K. Gilbert, Richard P. Johnson, Jeffrey R. Rueckhaus, Ilga Semeiks, Sheryl E. Stein, and Joshua G. Wiener made key contributions to this report.

Why GAO Did This Study EM manages DOE's radioactive and hazardous waste cleanup program using compliance agreements negotiated between DOE and other federal and state agencies. Within the agreements, milestones outline cleanup work to be accomplished by specific deadlines. EM's cleanup program faces nearly $500 billion in future environmental liability, which has grown substantially. GAO was asked to review DOE's cleanup agreements. This report examines the extent to which EM (1) tracks the milestones in cleanup agreements for EM's cleanup sites; (2) has met, missed, or postponed cleanup-related milestones at selected sites and how EM reports information; and (3) has analyzed why milestones are missed or postponed and how EM considers those reasons when renegotiating milestones. GAO reviewed agreements and milestones at EM's 16 cleanup sites and compared information tracked by EM headquarters and these sites; interviewed officials from four selected sites (chosen for variation in location and scope of cleanup, among other factors); and reviewed EM guidance related to milestone negotiations. What GAO Found The cleanup process at the 16 sites overseen by the Department of Energy's (DOE) Office of Environmental Management (EM) is governed by 72 agreements and hundreds of milestones specifying actions EM is to take as it carries out its cleanup work. However, EM headquarters and site officials do not consistently track data on the milestones. EM headquarters and site officials provided GAO with different totals on the number of milestones in place at the four sites GAO selected for review. These discrepancies result from how headquarters and selected sites define and track milestones. First, not all sites make the same distinction between major (i.e., related to on-the-ground cleanup) and non-major milestones and, as a result, are not consistently reporting the same milestones to EM headquarters. Second, sites do not consistently provide EM headquarters with the most up-to-date information on the status of milestones at each site. These inconsistencies limit EM's ability to use milestones to manage the cleanup mission and monitor its progress. EM does not accurately track met, missed, or postponed cleanup-related milestones at the four selected sites, and EM's milestone reporting to Congress is incomplete. EM sites renegotiate milestone dates before they are missed, and EM does not track the history of these changes. This is because once milestones change, sites are not required to maintain or track the original milestone dates. GAO has previously found that without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management's insight into the true performance of the project. Further, since 2011, EM has not consistently reported to Congress on the status of the milestones each year, as required, and the information it has reported is incomplete. EM reports the most recently renegotiated milestone dates with no indication of whether or how often those milestones have been missed or postponed. Since neither EM headquarters nor the sites track renegotiated milestones and their baseline dates at the sites, milestones do not provide a reliable measure of program performance. EM officials at headquarters and selected sites have not conducted root cause analyses on missed or postponed milestones; thus, such analyses are not part of milestone negotiations. Specifically, EM has not done a complex-wide analysis of the reasons for missed or postponed milestones. Similarly, officials GAO interviewed at the four selected sites said that they were not aware of any site-wide review of why milestones were missed or postponed. Best practices for project and program management outlined in GAO's Cost Estimating and Assessment Guide note the importance of identifying root causes of problems that lead to schedule delays. Additionally, in a 2015 directive, DOE emphasized the importance of conducting such analysis. Analyzing the root causes of missed or postponed milestones would better position EM to address systemic problems and consider those problems when renegotiating milestones with regulators. Without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones and, as a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work. As GAO has reported previously, these delays lead to increases in the overall cost of the cleanup. What GAO Recommends GAO is making four recommendations, including that EM establish a standard definition of milestones across the cleanup sites, track and report original and renegotiated milestone dates, and identify the root causes of why milestones are missed or postponed. In commenting on a draft of this report, DOE agreed with three of the recommendations and partially agreed with a fourth.