Recovery Act
Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds
GAO-10-999, Sep 20, 2010
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This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the latest in a series of reports on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. This report also responds to GAO's mandate to comment on the jobs estimated in recipient reports. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and interviewed federal officials.
As of September 3, 2010, about $154.8 billion of the approximately $282 billion of total funds made available by the Recovery Act in 2009 for programs administered by states and localities had been paid out by the federal government. Of that amount, over 65 percent--$101.9 billion--had been paid out since the start of federal fiscal year 2010 on October 1, 2009. As of July 31, 2010, the 16 states and the District had drawn down $43.9 billion in increased FMAP funds. If current spending patterns continue, GAO estimates that these states and the District will draw down $56.2 billion by December 31, 2010--about 95 percent of their initial estimated allocation. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Congress recently passed legislation to extend the increased FMAP through June 2011, although at lower rates than provided by the Recovery Act. As of August 27, 2010, the District and states covered in GAO's review had drawn down 72 percent ($18.2 billion) of their awarded State Fiscal Stabilization Fund (SFSF) education stabilization funds; 46 percent ($3.0 billion) for Elementary and Secondary Education Act, Title I, Part A; and 45 percent ($3.4 billion) for Individuals with Disabilities Education Act, Part B. In the spring of 2010, GAO surveyed a nationally representative sample of local educational agencies (LEA) and found that job retention was the primary use of education Recovery Act funds in school year 2009-2010, with an estimated 87 percent of LEAs reporting that Recovery Act funds allowed them to retain or create jobs. Nationwide, the Federal Highway Administration (FHWA) obligated $25.6 billion in Recovery Act funds for over 12,300 highway projects, andreimbursed $11.1 billion as of August 2, 2010. The Federal Transit Administration obligated $8.76 billion of Recovery Act funds for about 1,055 grants, and reimbursed $3.6 billion as of August 5, 2010. Highway funds were used primarily for pavement improvement projects, and public transportation funds were used primarily for upgrading transit facilities and improving bus fleets. The EECBG program provides about $3.2 billion in grants to implement projects that improve energy efficiency; of this amount, approximately $2.8 billion has been allocated directly to recipients. As of August 2010, DOE has obligated about 99 percent of the $2.8 billion in direct formula grants to recipients, who have in turn, obligated about half to subrecipients. The majority of EECBG funds have been obligated for three purposes: energy efficiency retrofits to existing facilities, financial incentive programs, and buildings and facilities. As of August 7, 2010, housing agencies had obligated about 46 percent of the nearly $1 billion in Recovery Act Public Housing Capital Fund competitive grants allocated to them for projects such as installing energy-efficient heating and cooling systems in housing units. HUD officials anticipate that some housing agencies may not meet the September 2010 obligation deadline, resulting in those funds being recaptured. GAO believes HUD should continue to closely monitor agencies' progress in obligating remaining funds. As of July 31, 2010, HUD had outlayed about $733 million (32.6 percent) of TCAP funds and Treasury had outlayed about $1.4 billion (25.5 percent) of Section 1602 Program funds. GAO updates the status of agencies' efforts to implement GAO's 58 previous recommendations and makes 5 new recommendations to improve management and strengthen accountability to the Departments of Transportation (DOT), Housing and Urban Development (HUD), the Treasury, and the Office of Management and Budget (OMB).
Status Legend:
Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
- In Process
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To ensure that Congress and the public have accurate information on the extent to which the goals of the Recovery Act are being met, the Secretary of Transportation should direct FHWA to develop additional rules and data checks in the Recovery Act Data System, so that these data will accurately identify contract milestones such as award dates and amounts, and provide guidance to states to revise existing contract data.
Agency Affected: Department of Transportation
Status: Open
Comments: In its response, DOT stated that it had implemented measures to further improve data quality in the Recovery Act Data System, including additional data quality checks, as well as providing states with additional training and guidance to improve the quality of data entered into the system. We have requested documentation of these changes, but DOT has not yet provided it. We are therefore keeping our recommendation on this matter open.
Recommendation: To ensure that Congress and the public have accurate information on the extent to which the goals of the Recovery Act are being met, the Secretary of Transportation should direct FHWA to make publicly available--within 60 days after the September 30, 2010, obligation deadline--an accurate accounting and analysis of the extent to which states directed funds to economically distressed areas, including corrections to the data initially provided to Congress in December 2009.
Agency Affected: Department of Transportation
Status: Open
Comments: DOT stated that as part of its efforts to respond to our draft September 2010 report in which we made this recommendation on economically distressed areas, it completed a comprehensive review of projects in these areas, which it provided to GAO for that report. DOT recently posted an accounting of the extent to which states directed Recovery Act transportation funds to projects located in economically distressed areas on its website. We have requested documentation of the underlying data from DOT to verify this accounting, but DOT has not provided it. We are therefore keeping our recommendation on this matter open.
Recommendation: Because the absence of third-party investors reduces the amount of overall scrutiny TCAP projects would receive and Department of Housing and Urban Development (HUD) is currently not aware of how many projects lacked third-party investors, HUD should develop a risk-based plan for its role in overseeing TCAP projects that recognizes the level of oversight provided by others.
Agency Affected: Department of Housing and Urban Development
Status: Open
Comments: HUD responded to our recommendation by saying it must wait for project completion information to be entered into its reporting system in order to identify those projects that are in need of additional monitoring. HUD is currently in the process of identifying funding sources used for all TCAP projects completed as of September 30, 2011, and developing a report on that information. HUD will use the report to identify TCAP projects with little tax credit equity or no other federal funds leveraged that may need additional monitoring. HUD said it will develop a plan for monitoring those projects by November 30, 2011.
Recommendation: Treasury should expeditiously provide HFAs with guidance on monitoring project spending and develop plans for dealing with the possibility that projects could miss the spending deadline and face further project interruptions.
Agency Affected: Department of the Treasury
Status: Closed - Implemented
Comments: Treasury officials told us that after they provided additional guidance, every state HFA and the respective property owners complied with the 30 percent spending rule by the end of calendar year 2010. We concluded that Treasury and the state HFAs have addressed the intent of this recommendation.
Recommendation: To strengthen the Single Audit and federal follow up as oversight accountability mechanisms, the Director of OMB should (1) shorten the timeframes required for issuing management decisions by federal awarding agencies to grant recipients, and (2) issue the OMB Circular No. A-133 Compliance Supplement no later than March 31 of each year.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: Open
Comments: 1)Regarding the need for agencies to provide timely management decisions, OMB officials identified alternatives for helping to ensure that federal awarding agencies provide management decisions for corrective action plans in a timely manner, such as shortening the time frames required for federal agencies to provide these decisions to grant recipients. OMB officials have acknowledged that this issue continues to be a challenge. In fiscal year 2011, most of the federal awarding agencies that had grantees with deficiencies identified as a result of the Single Audit Internal Control Project did not submit all of their management decisions for corrective actions by the specified due date. We will continue to monitor OMB