United States Government Accountability Office

GAO

Report to Congressional Committees

July 2009

RECOVERY ACT
States’ and Localities’
Current and Planned
Uses of Funds While
Facing Fiscal Stresses

GAO-09-829

July 2009

RECOVERY ACT
Accountability Integrity Reliability

Highlights

States’ and Localities’ Current and Planned Uses of
Funds While Facing Fiscal Stresses

Highlights of GAO-09-829, a report to the
Senate and House Committees on
Appropriations, Senate Committee on
Homeland Security and Governmental
Affairs, and House Committee on
Oversight and Government Reform

Why GAO Did This Study

What GAO Found

This report, the second in response
to a mandate under the American
Recovery and Reinvestment Act of
2009 (Recovery Act), addresses the
following objectives: (1) selected
states’ and localities’ uses of
Recovery Act funds, (2) the
approaches taken by the selected
states and localities to ensure
accountability for Recovery Act
funds, and (3) states’ plans to
evaluate the impact of the
Recovery Act funds they received.
GAO’s work for this report is
focused on 16 states and certain
localities in those jurisdictions as
well as the District of Columbia—
representing about 65 percent of
the U.S. population and two-thirds
of the intergovernmental federal
assistance available. GAO collected
documents and interviewed state
and local officials. GAO analyzed
federal agency guidance and spoke
with Office of Management and
Budget (OMB) officials and with
relevant program officials at the
Centers for Medicare and Medicaid
Services (CMS), and the U.S.
Departments of Education, Energy,
Housing and Urban Development
(HUD), Justice, Labor, and
Transportation (DOT).

Across the United States, as of June 19, 2009, Treasury had outlayed about $29
billion of the estimated $49 billion in Recovery Act funds projected for use in
states and localities in fiscal year 2009. More than 90 percent of the $29 billion
in federal outlays has been provided through the increased Medicaid Federal
Medical Assistance Percentage (FMAP) and the State Fiscal Stabilization
Fund (SFSF) administered by the Department of Education.

What GAO Recommends
GAO makes recommendations and
a matter for congressional
consideration discussed on the
next page. The report draft was
discussed with federal and state
officials who generally agreed with
its contents. OMB officials
generally agreed with GAO’s
recommendations to OMB; DOT
agreed to consider GAO’s
recommendation.
View GAO-09-829 or key components.
For state summaries, see GAO-09-830SP.
For more information, contact J. Christopher
Mihm at (202) 512-6806 or mihmj@gao.gov.

GAO’s work focused on nine federal programs that are estimated to account
for approximately 87 percent of federal Recovery Act outlays in fiscal year
2009 for programs administered by states and localities. The following figure
shows the distribution by program of anticipated federal Recovery Act
spending in fiscal year 2009 for the nine programs discussed in this report.

87% of estimated federal Recovery Act

State Fiscal
Stabilization Fund
13%

Medicaid
63%

Highways
6%

outlays to states and localities in fiscal year
2009 will be in the nine programs reviewed
by GAO.

5%

Other selected
programs

Other programs
not in study
13%

1% IDEA, Parts B and C
1% WIA Youth Programs
1% ESEA, Title 1 Part A
Less than 1%
• Byrne grants
• Weatherization Assistance Program
• Public Housing Capital Fund

Source: GAO analysis of Congressional Budget Office and Federal Funds Information for States data.

Increased Medicaid FMAP Funding
All 16 states and the District have drawn down increased Medicaid FMAP
grant awards of just over $15 billion for October 1, 2008, through June 29,
2009, which amounted to almost 86 percent of funds available. Medicaid
enrollment increased for most of the selected states and the District, and
several states noted that the increased FMAP funds were critical in their
efforts to maintain coverage at current levels. States and the District reported
they are planning to use the increased federal funds to cover their increased
Medicaid caseload and to maintain current benefits and eligibility levels. Due
to the increased federal share of Medicaid funding, most state officials also
said they would use freed-up state funds to help cope with fiscal stresses.
Highway Infrastructure Investment
As of June 25, DOT had obligated about $9.2 billion for almost 2,600 highway
infrastructure and other eligible projects in the 16 states and the District and
had reimbursed about $96.4 million. Across the nation, almost half of the
obligations have been for pavement improvement projects because they did
not require extensive environmental clearances, were quick to design,
obligate and bid on, could employ people quickly, and could be completed
within 3 years. Officials from most states considered project readiness,
United States Government Accountability Office

Highlights of GAO-09-829 (continued)

including the 3-year completion requirement, when
making project selections and only later identified to
what extent these projects fulfilled the economically
distressed area (EDA) requirement. We found
substantial variation in how states identified areas in
economically distressed areas and how they prioritized
project selection for these areas.

available Web site—www.USAspending.gov—to report
financial information about entities awarded federal
funds. Yet, significant questions have been raised about
the reliability of the data on www.USAspending.gov,
primarily because what is reported by the prime
recipients is dependent on the unknown data quality and
reporting capabilities of subrecipients.

State Fiscal Stabilization Fund
As of June 30, 2009, of the 16 states and the District, only
Texas had not submitted an SFSF application.
Pennsylvania recently submitted an application but had
not yet received funding. The remaining 14 states and
the District had been awarded a total of about $17 billion
in initial funding from Education—of which about $4.3
billion has been drawn down. School districts said that
they would use SFSF funds to maintain current levels of
education funding, particularly for retaining staff and
current education programs. They also said that SFSF
funds would help offset state budget cuts.

GAO’s Recommendations
Accountability and Transparency
To leverage Single Audits as an effective oversight tool
for Recovery Act programs, the Director of OMB should
•
develop requirements for reporting on internal
controls during 2009 before significant Recovery Act
expenditures occur, as well as for ongoing reporting
after the initial report;
•
provide more direct focus on Recovery Act programs
through the Single Audit to help ensure that smaller
programs with high risk have audit coverage in the
area of internal controls and compliance;
•
evaluate options for providing relief related to audit
requirements for low-risk programs to balance new
audit responsibilities associated with the Recovery
Act; and
•
develop mechanisms to help fund the additional
Single Audit costs and efforts for auditing Recovery
Act programs.

Overall, states reported using Recovery Act funds to
stabilize state budgets and to cope with fiscal stresses.
The funds helped them maintain staffing for existing
programs and minimize or avoid tax increases as well as
reductions in services.
Accountability
States have implemented various internal control
programs; however, federal Single Audit guidance and
reporting does not fully address Recovery Act risk. The
Single Audit reporting deadline is too late to provide
audit results in time for the audited entity to take action
on deficiencies noted in Recovery Act programs.
Moreover, current guidance does not achieve the level of
accountability needed to effectively respond to Recovery
Act risks. Finally, state auditors need additional
flexibility and funding to undertake the added Single
Audit responsibilities under the Recovery Act.
Impact
Direct recipients of Recovery Act funds, including states
and localities, are expected to report quarterly on a
number of measures, including the use of funds and
estimates of the number of jobs created and the number
of jobs retained. The first of these reports is due in
October 2009. OMB—in consultation with a broad range
of stakeholders—issued additional implementing
guidance for recipient reporting on June 22, 2009, that
clarifies some requirements and establishes a central
reporting framework.
In addition to employment-related reporting, OMB
requires reporting on the use of funds by recipients and
nonfederal subrecipients receiving Recovery Act funds.
The tracking of funds is consistent with the Federal
Funding Accountability and Transparency Act (FFATA).
Like the Recovery Act, FFATA requires a publicly

Matter for Congressional Consideration: Congress
should consider a mechanism to help fund the additional
Single Audit costs and efforts for auditing Recovery Act
programs.
Reporting on Impact
The Director of OMB should work with federal agencies
to provide recipients with examples of the application of
OMB’s guidance on recipient reporting of jobs created
and retained. In addition, the Director of OMB should
work with agencies to clarify what new or existing
program performance measures are needed to assess the
impact of Recovery Act funding.
Communications and Guidance
To strengthen the effort to track funds and their uses,
the Director of OMB should (1) ensure more direct
communication with key state officials, (2) provide a
long range time line on issuing federal guidance, (3)
clarify what constitutes appropriate quality control and
reconciliation by prime recipients, and (4) specify who
should best provide formal certification and approval of
the data reported.
The Secretary of Transportation should develop clear
guidance on identifying and giving priority to
economically distressed areas that are in accordance
with the requirements of the Recovery Act and the
Public Works and Economic Development Act of 1965,
as amended, and more consistent procedures for the
Federal Highway Administration to use in reviewing and
approving states’ criteria.
United States Government Accountability Office

Contents

Letter

1
Background
States and Localities Are Using Recovery Act Funds for Purposes
of the Act and to Help Address Fiscal Stresses
States Have Implemented Various Internal Control Programs:
However, Single Audit Guidance and Reporting Does Not
Adequately Address Recovery Act Risk
Efforts to Assess Impact of Recovery Act Spending
Concluding Observations and Recommendations
Agency Comments and Our Evaluation

4

101
118
125
134

Appendix I

Objectives, Scope, and Methodology

140

Appendix II

Comments from the Office of Management and
Budget

147

Appendix III

Localities

150

Appendix IV

GAO Contacts and Staff Acknowledgments

157

6

Tables
Table 1: Percentage Point Increases in FMAP from Original Fiscal
Year 2009 to Third Quarter 2009 (estimated), for 16 States
and the District
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16
States and the District as of June 29, 2009
Table 3: Highway Apportionments and Obligations Nationwide and
in Selected States as of June 25, 2009
Table 4: Nationwide Highway Obligations by Project Improvement
Type as of June 25, 2009
Table 5: SFSF Recovery Act Allocations and Drawdowns for the 16
States and the District of Columbia

Page i

8
10
15
16
32

GAO-09-829 Recovery Act

Table 6: Education Stabilization Funds Made Available to States
and the Division of Education Stabilization Funds between
LEAs and IHEs
Table 7: Data Source and Data Elements for the Four SFSF
Education Reform Assurances
Table 8: Title I, Part A Recovery Act Allocations and Drawdowns
for 16 States and the District of Columbia
Table 9: IDEA, Parts B and C Recovery Act Allocations and Draw
Downs for the 16 States and the District of Columbia
Table 10: Allocations of Recovery Act WIA Youth Funds for 13
States and the District, as of June 30, 2009
Table 11: Recovery Act Edward Byrne Memorial Justice Assistance
Grant Program’s State Allocations and Pass-Through
Percentages, Local Allocations and Total Allocations for 16
States and the District
Table 12: Allocation of Edward Byrne Memorial Justice Assistance
Grants for 16 States and the District for Fiscal Years 2007
and 2008, as well as a Result of the Recovery Act
Table 13: Planned Use of Recovery Act JAG Funds for 16 States
and the District
Table 14: Recovery Act Edward Byrne Memorial Justice Assistance
Grants Awarded by the Bureau of Justice Assistance to
Localities in 16 States and the District
Table 15: DOE’s Allocation of the Recovery Act’s Weatherization
Funds for 16 States and the District
Table 16: DOE’s Approval of State Plans and Second Allocation of
the Recovery Act’s Weatherization Funds for 16 States and
the District
Table 17: States’ Proposed Funding Plans for Using the Recovery
Act’s Weatherization Funds
Table 18: Number of Housing Units Expected to Be Weatherized
Using Recovery Act Funds
Table 19: Single Audit Extensions for June 30, 2008, Fiscal Year
End
Table 20: Local School Districts and Postsecondary Institutions
Visited by GAO
Table 21: Public Housing Authorities Visited by GAO
Table 22: Location of Highway Projects visited by GAO
Table 23: Summer Youth Programs Visited by GAO
Table 24: Weatherization Programs Visited by GAO

Page ii

33
38
41
50
55

78

78
83

84
89

92
93
94
116
150
152
154
155
156

GAO-09-829 Recovery Act

Figures
Figure 1: Projected versus Actual Federal Outlays to States and
Localities under the Recovery Act
Figure 2: Programs in July Review, Estimated Federal Recovery
Act Outlays to States and Localities in Fiscal Year 2009 as
a Share of Total
Figure 3: Percentage Increase in Medicaid Enrollment from
October 2007 to May 2009, for 16 States and the District
Figure 4: Percentage of Recovery Act Highway Funds Obligated as
of June 25, 2009
Figure 5: Planned Uses of Title I Recovery Act Funds in the School
Districts We Visited
Figure 6: Officials in Districts We Visited Reported Receiving
Guidance in Many Forms
Figure 7: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn
Down Nationwide, as of June 20, 2009
Figure 8: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn
Down by 47 Public Housing Agencies Visited by GAO, as
of June 20, 2009
Figure 9: Unit That the Athens Housing Authority Plans to
Renovate with Recovery Act Funds
Figure 10: Philadelphia, Pennsylvania, Plans to Rehabilitate Vacant
Units at Scattered Sites
Figure 11: Siding in the process of completion using Rahway
Housing Authority’s Recovery Act funds
Figure 12: State and Local Government Current Receipts, Fiscal
Year 2008
Figure 13: Year-Over-Year Change in State and Local Government
Current Tax Receipts

5

6
9
20
45
48

64

65
66
68
70
95
97

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Page iii

GAO-09-829 Recovery Act

United States Government Accountability Office
Washington, DC 20548

July 8, 2009
Report to Congressional Committees
As federal funds provided by the American Recovery and Reinvestment
Act of 2009 (Recovery Act) 1 flow into the U.S. economy, state fiscal
conditions continue to be stressed. Actual declines in sales, personal
income, and corporate income tax revenues influenced state actions to
begin to fill an estimated $230 billion in budget gaps for fiscal years 2009
through 2011. 2 The national unemployment rate also increased to 9.5
percent in June 2009, and high unemployment can place greater stress on
state budgets as demand for services, such as Medicaid, increases. Some
economists have pointed to signs of economic improvement, although
associations representing state officials have also reported that state fiscal
conditions historically lag behind any national economic recovery.
The Recovery Act specifies several roles for GAO, including conducting
bimonthly reviews of selected states’ and localities’ use of funds made
available under the act. 3 This report, the second in response to the act’s
mandate, addresses the following objectives: (1) selected states’ and
localities’ uses of Recovery Act funds, (2) the approaches taken by the
selected states and localities to ensure accountability for Recovery Act
funds, and (3) states’ plans to evaluate the impact of the Recovery Act
funds they received. 4 The report provides overall findings, makes
recommendations, and discusses the status of actions in response to the
recommendations we made in our April 2009 report. Individual summaries
for the 16 selected states and the District of Columbia (District) are
accessible through GAO’s recovery page at www.gao.gov/recovery. In
addition, all of the summaries have been compiled into an electronic
supplement, GAO-09-830SP.

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).

2

The estimated budget gaps are reported by associations representing state officials. See
The National Governors Association and the National Association of State Budget Officers,
The Fiscal Survey of States (Washington, D.C., June 2009).

3

Recovery Act, div. A, title IX, §901.

4

GAO, Recovery Act: As Initial Implementation Unfolds in States and Localities,
Continued Attention to Accountability Issues Is Essential, GAO-09-580 (Washington, D.C.:
Apr. 23, 2009).

Page 1

GAO-09-829 Recovery Act

As reported in our April 2009 review, to address these objectives, we
selected a core group of 16 states and the District that we will follow over
the next few years. 5 Our bimonthly reviews examine how Recovery Act
funds are being used and whether they are achieving the stated purposes
of the act. These purposes include
•

to preserve and create jobs and promote economic recovery;

•

to assist those most impacted by the recession;

•

to provide investments needed to increase economic efficiency by
spurring technological advances in science and health;

•

to invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits; and

•

to stabilize state and local government budgets, in order to minimize and
avoid reductions in essential services and counterproductive state and
local tax increases.
The states selected for our bimonthly reviews contain about 65 percent of
the U.S. population and are estimated to receive collectively about twothirds of the intergovernmental federal assistance funds available through
the Recovery Act. We selected these states and the District on the basis of
federal outlay projections, percentage of the U.S. population represented,
unemployment rates and changes, and a mix of states’ poverty levels,
geographic coverage, and representation of both urban and rural areas. In
addition, we visited a nonprobability sample of about 178 local entities
within the 16 selected states and the District. 6
GAO’s work for this report focused on nine federal programs primarily
because they have begun disbursing funds to states or have known or

5
The states we are following as part of our analysis are Arizona, California, Colorado,
Florida, Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, and Texas.
6

This total includes two entities in the District of Columbia that received direct federal
funding that was not passed through the District government.

Page 2

GAO-09-829 Recovery Act

potential risks. 7 These risks can include existing programs receiving
significant amounts of Recovery Act funds or new programs. We collected
documents from and conducted semistructured interviews with executivelevel state and local officials and staff from state offices including
governors’ offices, “recovery czars,” state auditors, and controllers. In
addition, our work focused on federal, state, and local agencies
administering the selected programs receiving Recovery Act funds. We
analyzed guidance and interviewed officials from the federal Office of
Management and Budget (OMB). We also analyzed other federal agency
guidance on programs selected for this review and spoke with relevant
program officials at the Centers for Medicare and Medicaid Services
(CMS), the U.S. Departments of Education, Energy, Housing and Urban
Development, Justice, Labor, and Transportation. Where attributed to
state officials, we did not review state legal materials for this report, but
relied on state officials and other state sources for description and
interpretation of relevant state constitutions, statutes, legislative
proposals, and other state legal materials. The information obtained from
this review cannot be generalized to all states and localities receiving
Recovery Act funding. A detailed description of our scope and
methodology can be found in appendix I.
We conducted this performance audit from April 21, 2009, to July 2, 2009,
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.

7

For this report, GAO reviewed states’ and localities’ use of Recovery Act funds for (1) the
Medicaid Federal Medical Assistance Percentage (FMAP), (2) the State Fiscal Stabilization
Fund (SFSF), (3) the Federal-Aid Highway Surface Transportation Program, (4) the Public
Housing Capital Fund, (5) Title I, Part A of the Elementary and Secondary Education Act of
1965 (ESEA); (6) Parts B and C of the Individuals with Disabilities Education Act (IDEA);
(7) the Weatherization Assistance Program; (8) the Edward Byrne Memorial Justice
Assistance Grant (JAG) Program; and (9) the Workforce Investment Act (WIA) Youth
Program.

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GAO-09-829 Recovery Act

Background

Our analysis of initial estimates of Recovery Act spending provided by the
Congressional Budget Office (CBO) suggested that about $49 billion would
be outlayed to states and localities by the federal government in fiscal year
2009, which runs through September 30. However, our analysis of the
latest information available on actual federal outlays reported on
www.recovery.gov 8 indicates that in the 4 months since enactment, the
federal Treasury has paid out approximately $29 billion to states and
localities, which is about 60 percent of payments estimated for fiscal year
2009. Although this pattern may not continue for the remaining 3-1/2
months, at present spending is slightly ahead of estimates. More than 90
percent of the $29 billion in federal outlays has been provided through the
increased Federal Medical Assistance Percentage (FMAP) grant awards
and the State Fiscal Stabilization Fund administered by the Department of
Education. Figure 1 shows the original estimate of federal outlays to states
and localities under the Recovery Act compared with actual federal
outlays as reported by federal agencies on www.recovery.gov. The 16
states and the District of Columbia covered by our review account for
about two-thirds of the Recovery Act funding available to states and
localities. According to the Office of Management and Budget (OMB), an
estimated $149 billion in Recovery Act funding will be obligated to states
and localities in fiscal year 2009.

8

The Web site www.recovery.gov is mandated by the Recovery Act to foster greater
accountability and transparency in the use of the act’s funds. The Web site is required to
include plans from federal agencies; information on federal awards of formula grants and
awards of competitive grants; and information on federal allocations for mandatory and
other entitlement programs by state, county, or other appropriate geographical unit. The
Web site is maintained by the Recovery Accountability and Transparency Board.

Page 4

GAO-09-829 Recovery Act

Figure 1: Projected versus Actual Federal Outlays to States and Localities under
the Recovery Act
Dollars (in billions)
120

100
Actual
federal
outlays
as of
June 19,
2009
$28.8

80

60

40

20

0
2009

2010

2011

2012

2013

2014

2015

2016

Fiscal year
Source: GAO analysis of CBO, Federal Funds Information for States, and Recovery.gov data.

Our work for this bimonthly report focused on nine federal programs,
selected primarily because they have begun disbursing funds to states and
include programs with significant amounts of Recovery Act funds,
programs receiving significant increases in funding, and new programs.
Recovery Act funding of some of these programs is intended for further
disbursement to localities. Together, these nine programs are estimated to
account for approximately 87 percent of federal Recovery Act outlays to
state and localities in fiscal year 2009. Figure 2 shows the distribution by
program of anticipated federal Recovery Act spending in fiscal year 2009
to states and localities.

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GAO-09-829 Recovery Act

Figure 2: Programs in July Review, Estimated Federal Recovery Act Outlays to States and Localities in Fiscal Year 2009 as a
Share of Total

87%

of estimated federal Recovery Act outlays to states and localities in fiscal year 2009
will be in the nine programs reviewed by GAO.

Medicaid
63%

Highways
6%

Other selected
programs
5%

State Fiscal
Stabilization Fund
13%
1% IDEA, Parts B and C
1% WIA Youth Programs
1% ESEA, Title 1 Part A
Less than 1%
• Byrne grants
• Weatherization Assistance
Program
• Public Housing Capital Fund

Other programs
not in study
13%

Source: GAO analysis of data from CBO and Federal Funds Information for States.

States and Localities
Are Using Recovery
Act Funds for
Purposes of the Act
and to Help Address
Fiscal Stresses

Page 6

GAO-09-829 Recovery Act

Increased FMAP Has
Helped States Finance
Their Growing Medicaid
Programs, but Concerns
Remain about Compliance
with Recovery Act
Provisions

Medicaid is a joint federal-state program that finances health care for
certain categories of low-income individuals, including children, families,
persons with disabilities, and persons who are elderly. The federal
government matches state spending for Medicaid services according to a
formula based on each state’s per capita income in relation to the national
average per capita income. The rate at which states are reimbursed for
Medicaid service expenditures is known as the FMAP, which may range
from 50 percent to no more than 83 percent. The Recovery Act provides
eligible states with an increased FMAP for 27 months between October 1,
2008, and December 31, 2010. 9 On February 25, 2009, CMS made increased
FMAP grant awards to states, and states may retroactively claim
reimbursement for expenditures that occurred prior to the effective date
of the Recovery Act. Generally, for fiscal year 2009 through the first
quarter of fiscal year 2011, the increased FMAP, which is calculated on a
quarterly basis, provides for (1) the maintenance of states’ prior year
FMAPs, (2) a general across-the-board increase of 6.2 percentage points in
states’ FMAPs, and (3) a further increase to the FMAPs for those states
that have a qualifying increase in unemployment rates. The increased
FMAP available under the Recovery Act is for state expenditures for
Medicaid services. However, the receipt of this increased FMAP may
reduce the funds that states would otherwise have to use for their
Medicaid programs, and states have reported using these available funds
for a variety of purposes.
For the third quarter of fiscal year 2009, the increases in FMAP for the 16
states and the District of Columbia compared with the original fiscal year
2009 levels are estimated to range from 6.2 percentage points in Iowa to
12.24 percentage points in Florida, with the FMAP increase averaging
almost 10 percentage points. When compared with the first two quarters of
fiscal year 2009, the FMAP in the third quarter of fiscal year 2009 is
estimated to have increased in 12 of the 16 states and the District.

9

Recovery Act, div. B, title V, § 5001.

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GAO-09-829 Recovery Act

Table 1: Percentage Point Increases in FMAP from Original Fiscal Year 2009 to
Third Quarter 2009 (estimated), for 16 States and the District

Original fiscal
a
year 2009 FMAP

Adjusted fiscal
year 2009 FMAP,
third quarter
(estimated)

Difference between
original and adjusted
FMAP, third quarter
(estimated)

Arizona

65.77

75.01

9.24

California

50.00

61.59

11.59

Colorado

50.00

60.19

10.19

State

District of
Columbia

70.00

79.29

9.29

Florida

55.40

67.64

12.24

Georgia

64.49

74.42

9.93

Illinois

50.32

61.88

11.56

Iowa

62.62

68.82

6.20

Massachusetts

50.00

60.19

10.19

Michigan

60.27

70.68

10.41

Mississippi

75.84

84.24

8.40

New Jersey

50.00

60.19

10.19

New York

50.00

60.19

10.19

North Carolina

64.60

74.51

9.91

Ohio

62.14

71.29

9.15

Pennsylvania

54.52

64.32

9.80

Texas

59.44

68.76

9.32

Source: GAO analysis of data from Federal Funds Information for States, as of April 8, 2009.
a

The original fiscal year 2009 FMAP data were published in the Federal Register on November 28,
2007.

From October 2007 to May 2009, overall Medicaid enrollment in the 16
states and the District increased by 7 percent. 10 In addition, each of the
states and the District experienced an enrollment increase during this
period, with the highest number of programs experiencing an increase of 5
percent to 10 percent. However, the percentage increase in enrollment

10

The percentage increase is based on actual state enrollment data for October 2007 to
April 2009 and projected enrollment data for May 2009, with the exception of New York,
which provided projected enrollment data for March, April and May 2009. Three states—
Florida, Georgia, and Mississippi—did not provide projected enrollment data for May 2009.
We estimated enrollment for these states for May 2009 to determine the total change in
enrollment for October 2007 to May 2009.

Page 8

GAO-09-829 Recovery Act

varied widely ranging from just under 3 percent in California to nearly 20
percent in Colorado. (Figure 3.)
Figure 3: Percentage Increase in Medicaid Enrollment from October 2007 to May 2009, for 16 States and the District
Percentage change
20

15

10
Overall Medicaid enrollment increased by 7%
5

0
CA

MA

0% to
less than 5%

NJ

TX

MS

NY

PA

IL

DC

5% to
less than 10%

GA

MI

OH

NC

10% to
less than 15%

IA

AZ

FL

CO

15% to
less than 20%

Quintile category
Source: GAO analysis of state data.

Note: The percentage increase for each state is based on actual state enrollment data for October
2007 to April 2009 and projected enrollment data for May 2009, with the exception of New York,
which provided projected enrollment data for March, April and May 2009. Three states—Florida,
Georgia, and Mississippi—did not provide projected enrollment data for May 2009.

Overall enrollment growth was the most rapid in early 2009—generally
from January through April 2009—an enrollment trend that was mirrored
in several states and the District; however, variation existed. For example,
while Colorado and Mississippi experienced a nearly 5 percent increase in
Medicaid enrollment during this time, Medicaid enrollment in Illinois
remained relatively stable, growing at less than 1 percent. Most of the
increase in overall enrollment was attributable to populations that are
sensitive to economic downturns—primarily children and families
Nonetheless, enrollment growth in other population groups, such as
disabled individuals, also contributed to enrollment growth.
With regard to the states’ receipt of the increased FMAP, all 16 states and
the District had drawn down increased FMAP grant awards totaling just
over $15.0 billion for the period of October 1, 2008 through June 29, 2009

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which amounted to 86 percent of funds available. 11 (See table 2.) In
addition, except for the initial weeks that increased FMAP funds were
available, the weekly rate at which the sample states and the District have
drawn down these funds has remained relatively constant.
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the District
as of June 29, 2009
FMAP grant
a
awards

Funds
drawn

Percentage of
funds drawn

Arizona

$534,576

$512,550

96

California

3,330,010

2,753,245

83

Colorado

240,777

197,035

82

98,339

89,344

91

1,394,946

1,263,179

91

541,145

497,893

92

1,040,031

867,909

83

State
Dollars in thousands

District of Columbia
Florida
Georgia
Illinois
Iowa
Massachusetts

136,023

126,815

93

1,229,501

833,031

68

Michigan

728,425

715,843

98

Mississippi

232,014

206,890

89

New Jersey

579,976

579,976

100

New York

3,312,089

2,643,136

80

North Carolina

710,243

710,243

100

Ohio

832,391

711,435

85

Pennsylvania

1,097,544

957,094

87

Texas

1,444,026

1,351,960

94

$17,482,055

$15,017,578

86

Total
Source: GAO analysis of HHS data.
a

The FMAP grant awards listed are for the first three quarters of federal fiscal year 2009.

While the increased FMAP available under the Recovery Act is for state
expenditures for Medicaid services, the receipt of these funds may reduce
the state share for their Medicaid programs. As such, states reported that

11
Colorado was the only state in GAO’s sample of states that had not drawn down increased
FMAP funds as of GAO’s first report in April 2009. However, the state completed its first
draw down of funds on April 30, 2009.

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they are using or are planning to use the funds that have become freed up
as a result of increased FMAP for a variety of purposes. Most commonly,
states reported that they are using or planning to use freed-up funds to
cover their increased Medicaid caseload, to maintain current benefits and
eligibility levels, and to help finance their respective state budgets. Several
states noted that given the poor economic climate in their respective
states, these funds were critical in their efforts to maintain Medicaid
coverage at current levels. For example, officials from Georgia, Michigan,
and Pennsylvania reported that the increased FMAP funds have allowed
their respective states to maintain their Medicaid programs, which could
have been subject to cuts in eligibility or services without the increased
funds. Additionally, Medicaid officials in five states and the District
indicated that they used the funds made available as a result of the
increased FMAP to maintain program expansions or local health care
reform initiatives, which in some states would have otherwise been
vulnerable to program cuts. Lastly, all but Texas and the District reported
they are using or planning to use the freed-up funds to help finance their
state budgets. Five states—Arizona, California, Colorado, North Carolina,
and Ohio—-reported using or planning to use these funds solely for this
purpose.
For states to qualify for the increased FMAP available under the Recovery
Act, they must meet a number of requirements, including the following:
•

States generally may not apply eligibility standards, methodologies, or
procedures that are more restrictive than those in effect under their state
Medicaid programs on July 1, 2008. 12

•

States must comply with prompt payment requirements. 13

12

In order to qualify for the increased FMAP, states generally may not apply eligibility
standards, methodologies, or procedures that are more restrictive than those in effect
under their state Medicaid plans or waivers on July 1, 2008. See Recovery Act, div. B, title
V, §5001(f)(1)(A).

13

Under the Recovery Act, states are not eligible to receive the increased FMAP for certain
claims for days during any period in which that state has failed to meet the prompt
payment requirement under the Medicaid statute as applied to those claims. See Recovery
Act, div. B, title V, §5001(f)(2). Prompt payment requires states to pay 90 percent of clean
claims from health care practitioners and certain other providers within 30 days of receipt
and 99 percent of these claims within 90 days of receipt. See 42 U.S.C. §1396a(a)(37)(A).

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•

States cannot deposit or credit amounts attributable (either directly or
indirectly) to certain elements of the increased FMAP into any reserve or
rainy-day fund of the state. 14

•

States with political subdivisions—such as cities and counties—that
contribute to the nonfederal share of Medicaid spending cannot require
the subdivisions to pay a greater percentage of the nonfederal share than
would have been required on September 30, 2008. 15
Medicaid officials from many states and the District raised concerns about
their ability to meet these requirements and, thus, maintain eligibility for
the increased FMAP. While officials from several states spoke positively
about CMS’s guidance related to FMAP requirements, at least nine states
and the District reported they wanted CMS to provide additional guidance
regarding (1) how they report daily compliance with prompt pay
requirements, (2) how they report monthly on increased FMAP spending,
and (3) whether certain programmatic changes would affect their
eligibility for funds. For example, Medicaid officials from several states
told us they were hesitant to implement minor programmatic changes,
such as changes to prior authorization requirements, pregnancy
verifications, or ongoing rate changes, out of concern that doing so would
jeopardize their eligibility for increased FMAP. In addition, at least three
states raised concerns that glitches related to new or updated information
systems used to generate provider payments could affect their eligibility
for these funds. Specifically, Massachusetts Medicaid officials said they
are implementing a new provider payment system that will generate
payments to some providers on a monthly versus daily basis and would
like guidance from CMS on the availability of waivers for the prompt
payment requirement. A CMS official told us that the agency is in the
process of finalizing its guidance to states on reporting compliance with
the prompt payment requirement of the Recovery Act, but did not know
when this guidance would be publicly available. However, the official
noted that, in the near term, the agency intends to issue a new Fact Sheet,

14

See Recovery Act, div. B, title V, §5001(f)(3).

15

In some states, political subdivisions—such as cities and counties—may be required to
help finance the state’s share of Medicaid spending. Under the Recovery Act, a state that
has such financing arrangements is not eligible for certain elements of the increased FMAP
if it requires subdivisions to pay during a quarter of the recession adjustment period a
greater percentage of the nonfederal share than the percentage that would have otherwise
been required under the state plan on September 30, 2008. See Recovery Act, div. B., title V,
§ 5001(g)(2). The recession adjustment period is the period beginning October 1, 2008, and
ending December 31, 2010.

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which will include questions and answers on a variety of issues related to
the increased FMAP.
Due to the variability of state operations, funding processes, and political
structures, CMS has worked with states on a case-by-case basis to discuss
and resolve issues that arise. Specifically, communications between CMS
and several states indicate efforts to clarify issues related to the
contributions to the state share of Medicaid spending by political
subdivisions or to rainy-day funds. For example, in a May 20, 2009, letter,
CMS clarified that California would not fail to meet the provision of the
Recovery Act related to contributions by political subdivisions if a county
voluntarily used its funds to make up for a decrease in the amount the
state appropriated for the Medicaid payment of wages of personal care
service providers. Similarly, Mississippi clarified with CMS its
understanding that it would not be permissible to deposit general fund
savings resulting from the increased FMAP into the rainy-day fund in state
fiscal year 2010 in order to use those funds in state fiscal year 2011. 16
Regarding the tracking of the increased FMAP, most of the states and the
District use existing processes to track the receipt of the increased FMAP
separately from regular FMAP, and almost half of the states reported using
existing processes to reconcile these expenditures. In addition, we
reviewed the 2007 Single Audits 17 for the states and the District and
identified material weaknesses related to Medicaid, including weaknesses
related to provider enrollment processes and subrecipient monitoring, for
most of them. 18 The Single Audits indicated that many states and the
District planned or implemented actions to correct identified weaknesses.

16

A state is not eligible for certain elements of increased FMAP if any amounts attributable
directly or indirectly to them are deposited or credited into a state reserve or rainy day
fund. Recovery Act, div. B, title V, §5001(f)(3).

17

Our review focused on the 2007 Single Audits because it is the most recent year for which
single audits were completed for all our states and the District. However, as of June 10,
2009, 2008 Single Audits were available for eight states. For more information about the
material weaknesses identified in the Single Audits for 2007 and 2008, refer to the
individual state appendixes.
18

The Single Audit Act of 1984, as amended (31 U.S.C. ch. 75), requires that each state, local
government, or nonprofit organization that expends $500,000 or more a year in federal
awards must have a Single Audit conducted for that year subject to applicable
requirements, which are generally set out in Office of Management and Budget Circular No.
A-133, Audits of States, Local Governments and Non-Profit Organizations (June 27, 2003). If
an entity expends federal awards under only one federal program, the entity may elect to
have an audit of that program.

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According to CMS officials, CMS regional offices work with states to
address single audit findings related to Medicaid.

States Are Using Highway
Infrastructure Funds
Mainly For Pavement
Improvements and Are
Generally Complying with
Recovery Act
Requirements

The Recovery Act provides funding to the states for restoration, repair,
and construction of highways and other activities allowed under the
Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The act requires that 30 percent of
these funds be suballocated for projects in metropolitan and other areas of
the state. Highway funds are apportioned to the states through federal-aid
highway program mechanisms, and states must follow the requirements of
the existing program, which include ensuring the project meets all
environmental requirements associated with the National Environmental
Policy Act (NEPA), paying a prevailing wage in accordance with federal
Davis-Bacon requirements, complying with goals to ensure disadvantaged
businesses are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with Buy
America program requirements. However, the maximum federal fund
share of highway infrastructure investment projects under the Recovery
Act is 100 percent, while the federal share under the existing federal-aid
highway program is generally 80 percent.
In March 2009, $26.7 billion was apportioned to all 50 states and the
District of Columbia (District) for highway infrastructure and other
eligible projects. As of June 25, 2009, $15.9 billion of the funds had been
obligated 19 for over 5,000 projects nationwide, and $9.2 billion had been
obligated for nearly 2,600 projects in the 16 states and the District that are
the focus of our review.

19

The U.S. Department of Transportation has interpreted the term obligation of funds to
mean the federal government’s contractual commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government signs a project
agreement.

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Table 3: Highway Apportionments and Obligations Nationwide and in Selected
States as of June 25, 2009
Dollars in millions
Obligationsa

Apportionment

Obligated
amount

Percentage of
apportionment
obligated

Arizona

$522

$262

50.2

California

2,570

1,558

60.6

Colorado

404

244

60.4

District of Columbia

124

100

81.0

State

Florida

1,347

1,049

77.9

Georgia

932

449

48.2

Illinois

936

671

71.7

Iowa

358

319

89.2

Massachusetts

438

174

39.6

Michigan

847

421

49.7

Mississippi

355

276

77.9

New Jersey

652

410

62.9

1,121

589

52.6

736

423

57.6

New York
North Carolina
Ohio

936

384

41.1

Pennsylvania

1,026

729

71.0

Texas

2,250

1,163

51.7

Selected states total

$15,551

$9,222

59.3

U.S. total

$26,660

$15,867

59.5

Source: GAO analysis of Federal Highway Administration data.

Note: As of June 25, 2009, all states have met the Recovery Act requirement that 50 percent of
apportioned funds be obligated within 120 days of apportionment (before June 30, 2009), as
discussed later in this report. However, this requirement applies only to funds apportioned to the state
and not to the 30 percent of funds required by the Recovery Act to be suballocated, primarily based
on population, for metropolitan, regional, and local use or to funds transferred to FTA. This table
shows the percentage of all apportioned funds that have been obligated, which is why some states
show an obligation rate of less than 50 percent.
a

This does not include obligations associated with $61 million of apportioned funds that were
transferred from the Federal Highway Administration (FHWA) to the Federal Transit Administration
(FTA) for transit projects. Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to transfer
funds made available for transit projects to FTA.

Almost half of Recovery Act highway obligations have been for pavement
improvements. Specifically, $7.8 billion of the $15.9 billion obligated

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nationwide as of June 25, 2009, is being used for projects such as
reconstructing or rehabilitating deteriorated roads, including $3.6 billion
for road resurfacing projects. Many state officials told us they selected a
large percentage of resurfacing and other pavement improvement projects
because they did not require extensive environmental clearances, were
quick to design, could be quickly obligated and bid, could employ people
quickly, and could be completed within 3 years. For example, Michigan
began a $22 million project on Interstate 196 in Allegan County that
involves resurfacing about seven miles of road. Michigan Department of
Transportation officials told us they focused primarily on pavement
improvements for Recovery Act projects because they could be obligated
quickly and could be under construction quickly, thereby employing
people this calendar year. Since many of the environmental clearances had
been completed, Michigan could accelerate the construction of these
projects when Recovery Act funds became available. Table 4 shows
obligations by the types of road and bridge improvements being made.
Table 4: Nationwide Highway Obligations by Project Improvement Type as of June 25, 2009
Dollars in millions
Pavement projects

Bridge projects

New
Pavement
construction improvement
Percent of
total
obligations

Pavement
widening

New
construction Replacement Improvement

$994

$7,765

$2,701

$418

$708

$851

6.3

48.9

17.0

2.6

4.5

5.4

a

Other

Totalb

$2,429 $15,867

15.3

100.0

Source: GAO analysis of Federal Highway Administration data.
a

Includes safety projects such as improving safety at railroad grade crossings, transportation
enhancement projects such as pedestrian and bicycle facilities, engineering, and right-of-way
purchases.

b

Totals may not add because of rounding.

As table 4 shows, in addition to pavement improvements, $2.7 billion, or
about 17 percent of Recovery Act funds nationally, has been obligated for
pavement-widening projects. These projects provide for reconstructing
and improving existing roads as well as increasing the capacity of the road
to accommodate traffic, which can reduce congestion. In Florida, around
47 percent of Recovery Act funds were obligated for widening projects
that increase capacity, while about 9 percent was obligated for pavement
improvements such as resurfacing.

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As of June 25, 2009, around 10 percent of the funds apportioned
nationwide have been obligated for the replacement or improvement or
rehabilitation of bridges. Funding for bridge rehabilitation and
replacement has been a growing national concern since the I-35 bridge
collapse in Minnesota in 2007. 20 Eleven of the states we visited had less
than 10 percent of their Recovery Act funds obligated for bridge
replacement and rehabilitation, while two states—New York and
Pennsylvania—and the District each had more than one-quarter of their
funds obligated for bridge replacement and rehabilitation. In the District,
about 36 percent of its obligations are for rehabilitating bridges, including
the District’s largest Recovery Act project—a bridge that has been
identified as having potentially significant safety concerns. Around 2.6
percent of apportioned funds have been obligated for construction of new
bridges.
As of June 25, 2009, $233 million had been reimbursed nationwide by the
Federal Highway Administration (FHWA) and $96.4 million had been
reimbursed to the 16 states and the District. States are just beginning to
get projects awarded so that contractors can begin work, and U.S.
Department of Transportation officials told us that although funding has
been obligated for more than 5,000 projects, it may be months before
states can request reimbursement. Once contractors mobilize and begin
work, states make payments to these contractors for completed work, and
may request reimbursement from FHWA. FHWA told us that once funds
are obligated for a project, it may take 2 or more months for a state to bid
and award the work to a contractor and have work begin. According to
FHWA, depending on the type of project, it can take days or years from the
date of obligation for those funds to be reimbursed. For example, the
North Carolina Department of Transportation (as of June 30, 2009) had
advertised 65 contracts representing $335 million in Recovery Act funding.
Of the 65 contracts, 55, representing $309 million, had been awarded; of
these contracts, 33, representing $200 million, are under way. North
Carolina has been reimbursed about $4 million of Recovery Act funding
for projects as of June 25, 2009. Approximately 27 of the 65 projects,
representing $70 million, are anticipated to be complete by December 1,
2009.

20

GAO, Highway Bridge Program: Clearer Goals and Performance Measures Needed for a
More Focused and Sustainable Program, GAO-08-1043 (Washington, D.C.: Sept. 10, 2008).

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According to state officials, because an increasing number of contractors
are looking for work, bids for Recovery Act contracts have come in under
estimates. State officials told us that bids for the first Recovery Act
contracts were ranging from around 5 percent to 30 percent below the
estimated cost. For example in California, officials reported they have had
8 to 10 bidders for each contract bid, compared with 2 to 4 bids per
contract prior to the economic downturn, and that bids are generally
coming in 30 percent below estimates. Arizona officials told us that
contractors are willing to bid for contracts with little profit margin in
order to cover overhead and put people to work, while Mississippi officials
told us that material costs had decreased. Several state officials told us
they expect this trend to continue until the economy substantially
improves and contractors begin taking on enough other work.
Funds appropriated for highway infrastructure spending must be used as
required by the Recovery Act. States are required to do the following:
•

Ensure that 50 percent of apportioned Recovery Act funds are obligated
within 120 days of apportionment (before June 30, 2009) and that the
remaining apportioned funds are obligated within 1 year. The 50 percent
rule applies only to funds apportioned to the state and not to the 30
percent of funds required by the Recovery Act to be suballocated,
primarily based on population, for metropolitan, regional, and local use.
The Secretary of Transportation is to withdraw and redistribute to other
states any amount that is not obligated within these time frames. 21

•

Give priority to projects that can be completed within 3 years and to
projects located in economically distressed areas (EDA). EDAs are defined
by the Public Works and Economic Development Act of 1965, as
amended. 22 According to this act, to qualify as an EDA, an area must meet

21

Recovery Act, div. A, title XII, 123 Stat. 115, 206.

22

Id.

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one or more of three criteria related to income and unemployment based
on the most recent federal or state data. 23
•

Certify that the state will maintain the level of spending for the types of
transportation projects funded by the Recovery Act that it planned to
spend the day the Recovery Act was enacted. As part of this certification,
the governor of each state is required to identify the amount of funds the
state plans to expend from state sources from February 17, 2009, through
September 30, 2010. 24
All states have met the first Recovery Act requirement that 50 percent of
their apportioned funds are obligated within 120 days. Of the $18.7 billion
nationally that is subject to this provision, 69 percent was obligated as of
June 25, 2009. The percentage of funds obligated nationwide and in each
of the states included in our review is shown in figure 4.

23

According to these criteria, to qualify as an EDA, the area must (1) have a per capita
income of 80 percent or less of the national average; (2) have an unemployment rate that is,
for the most recent 24-month period for which data are available, at least 1 percent greater
than the national average unemployment rate; or (3) be an area the Secretary of Commerce
determines has experienced or is about to experience a special need arising from actual or
threatened severe unemployment or economic adjustment problems resulting from severe
short-term or long-term changes in economic conditions (42 U.S.C. § 3161(a)). Eligibility
must be supported using the most recent federal data available or, in the absence of recent
federal data, by the most recent data available through the government of the state in
which the area is located. Federal data that may be used include data reported by the
Bureau of Economic Analysis, the Bureau of Labor Statistics, the Census Bureau, the
Bureau of Indian Affairs, or any other federal source determined by the Secretary of
Commerce to be appropriate (42 U.S.C. § 3161(c)).

24

Recovery Act, div. A, title XII, § 1201.

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Figure 4: Percentage of Recovery Act Highway Funds Obligated as of June 25, 2009a
Percentage
100
90
Level states were required to
reach before June 30, 2009

80
70
60
50
40
30
20
10

io
Oh

ia
org
Ge

se
tts
ac
hu
ss
Ma

Ca

Te
xa
s

na
rol
i

an
rth
No

Mi

ch
ig

k
Ne
wY
or

ia
Ca

lifo

rn

ia

na

ylv
an
ns
Pe
n

izo
Ar

o
ad
lor

Je

Co

rse
y

i
Ne
w

ss

iss

ipp

a
Mi

Iow

is
no
Illi

a
rid
Flo

Di

str

ict

of

Na

Co

tio

nw

lum

ide

bia

0

State
Source: GAO analysis of Federal Highway Adminstration data.
a

This figure does not include obligations that are not subject to the 120-day redistribution requirement
(including funds suballocated to localities) and obligations associated with apportioned funds that
were transferred from FHWA to the Federal Transit Administration (FTA) for transit projects.
Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made available for
transit projects to FTA.

The second Recovery Act requirement is to give priority to projects that
can be completed within 3 years and to projects located in economically
distressed areas. Officials from almost all of the states said they
considered project readiness, including the 3-year completion
requirement, when making project selections, and, according to officials
from just fewer than half of the states, project readiness was the single
most important consideration for selecting projects. Officials from most
states reported they expect all or most projects funded with Recovery Act
funds to be completed within 3 years, with the exception of some larger or
more complex projects that may take longer to complete. For example,
Massachusetts chose to use Recovery Act funds to construct a new
highway interchange in Fall River. Although this project will take longer
than other projects to complete, Massachusetts officials said they selected
it because it was located in the state’s only EDA.

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We found that due to the need to select projects and obligate funds
quickly, many states first selected projects based on other factors and only
later identified to what extent these projects fulfilled the EDA
requirement. According to the American Association of State Highway and
Transportation Officials, in December 2008, states had already identified
more than 5,000 “ready-to-go” projects as possible selections for federal
stimulus funding, 2 months prior to enactment of the Recovery Act.
Officials from several states also told us they had selected projects prior to
the enactment of the Recovery Act and that they only gave consideration
to EDAs after they received EDA guidance from DOT. For instance,
officials in New York said that in anticipation of the Recovery Act being
enacted the state initially selected projects that were ready to go and were
distributed throughout the state, without regard to their location in EDAs.
Since then, the state has emphasized the need to identify and fund projects
in EDAs, pushing such projects to the “head of the line.” Officials in
Pennsylvania said they selected projects before federal guidance was
available and that after reviewing project selections for compliance with
the EDA requirement, decided to make no changes because their choices
provided the greatest potential to provide jobs in an expeditious manner.
States also based project selection on priorities other than EDAs. State
officials we met with said they considered factors based on their own state
priorities, such as geographic distribution and a project’s potential for job
creation or other economic benefits. The use of state planning criteria or
funding formulas to distribute federal and state highway funds was one
factor that we found affected states’ implementation of the Recovery Act’s
prioritization requirements. According to officials in North Carolina, for
instance, the state used its statutory Equity Allocation Formula to
determine how highway infrastructure investment funds would be
distributed. Similarly, in Texas, state officials said they first selected
highway preservation projects by allocating a specific amount of funding
to each of the state’s 25 districts, where projects were identified that
addressed the most pressing needs. Officials then gave priority for funding
to those projects that were in EDAs.
In commenting on a draft of this report, DOT agreed that states must give
priority to projects located in EDAs, but said that states must balance all
the Recovery Act project selection criteria when selecting projects
including giving preference to activities that can be started and completed
expeditiously, using funds in a manner that maximizes job creation and
economic benefit, and other factors. DOT stated that the Recovery Act
does not give EDA projects absolute primacy over projects not located in
EDAs. However we would note that the Recovery Act contains both

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general directives, such as using funds in a manner that maximizes job
creation and economic benefit, and specific directives which we believe
must be seen as taking precedence. While we agree with DOT that there is
no absolute primacy of EDA projects in the sense that they must always be
started first, the specific directives in the act that apply to highway
infrastructure are that priority is to be given to projects that can be
completed in 3 years, and are located in EDAs.
We also found some instances of states developing their own eligibility
requirements using data or criteria not specified in the Public Works and
Economic Development Act, as amended. According to the act, the
Secretary of Commerce, not individual states, has the authority to
determine the eligibility of an area that does not meet the first two criteria
of the act. In each of these cases, FHWA approved the use of the states’
alternative criteria, but it is not clear on what authority FHWA approved
these criteria. For example:
•

Arizona based the identification of EDAs on home foreclosure rates and
disadvantaged business enterprises—data not specified in the Public
Works Act. Arizona officials said they used alternative criteria because the
initial determination of economic distress based on the act’s criteria
excluded three of Arizona’s largest and most populous counties, which
also contain substantial areas that, according to state officials, are clearly
economically distressed and include all or substantial portions of major
Indian reservations and many towns and cities hit especially hard by the
economic downturn. The state of Arizona, in consultation with FHWA,
developed additional criteria that resulted in these three counties being
classified as economically distressed.

•

Illinois based EDA classification on increases in the number of
unemployed persons and the unemployment rate, 25 whereas the act bases
this determination on how a county’s unemployment rate compares with
the national average unemployment rate. According to FHWA, Illinois
opted to explore other means of measuring recent economic distress
because the initial determination of economic distress based on the act’s
criteria was based on data not as current as information available within
the state and did not appear to accurately reflect the recent economic

25

The state based its EDA classification on (1) whether the 2008 year-end unemployment
rate was at or above the statewide average, (2) whether the change in the unemployment
rate between 2007 and 2008 was at or above the statewide average, or (3) whether the
number of unemployed persons for 2008 had grown by 500 or more.

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downturn in the state. Using the criteria established by the Public Works
Act, 30 of the 102 counties in Illinois were identified as not economically
distressed. Illinois’s use of alternative criteria resulted in 21 counties being
identified as EDAs that would not have been so classified following the
act’s criteria. 26
In commenting on a draft of this report, DOT stated that the basic
approach used in Arizona and Illinois is consistent with the Public Works
Act and its implementing regulations on EDAs because it makes use of
flexibilities provided by the Act to more accurately reflect changing
economic conditions. DOT recognizes that the Public Works Act provides
the definition of EDAs that states are to follow. DOT believes, however,
that it is appropriate to interpret the requirements of the Public Works Act
flexibly by applying the EDA special needs criteria to areas that are
experiencing unemployment or economic adjustment problems. We
recognize that states may want to reflect their own particular
circumstances in defining EDAs. However, the Public Works Act states
that to apply the definition to a special needs area, the area must be one
“that the Secretary of Commerce determines has experienced or is about
to experience a special need arising from actual or threatened severe
unemployment or economic adjustment problems . . .” The result of DOT’s
interpretation would be to allow states to prioritize projects based on
criteria that are not mentioned in the highway infrastructure investment
portion of the Recovery or the Public Works Acts without the involvement
of the Secretary or Department of Commerce. We plan to continue to
monitor states’ implementation of the EDA requirements and interagency
coordination at the federal level in future reports.
Some states’ circumstances served to largely ensure compliance with the
EDA requirement. For instance, all areas within the District of Columbia,
which the Recovery Act treats as a state, are a single EDA, assuring that
the selection of any project that can be completed within 3 years satisfies
the statutory priority rules. Mississippi has 75 of 82 counties that qualify as
EDAs, and Mississippi reported to FHWA that 87 percent of the funds
obligated to date had been obligated for to projects located in areas
classified as economically distressed. Likewise in Ohio, where 90 percent

26

Illinois’s criteria resulted in 21 counties being classified as EDAs that were not so
classified by FHWA and 8 counties not being classified as EDAs that were so classified by
FHWA, for a net difference of 13 counties. The map tool that FHWA developed to help
states identify which projects are located in EDAs is based on the criteria in the Public
Works Act.

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of all counties qualify as EDAs, a substantial number of Recovery Act
highway projects are located in EDAs.
DOT and FHWA have yet to provide clear guidance regarding how states
are to implement the EDA requirement. In February 2009, FHWA
published replies to questions from state transportation departments on its
Recovery Act Web site stating that because states have the authority to
prioritize and select federal-aid projects, it did not intend to develop or
prescribe a uniform procedure for applying the Recovery Act’s priority
rules. Nonetheless, FHWA provided a tool to help states identify whether
projects were located in EDAs. Further, in March 2009, FHWA provided
guidance to its division offices stating that FHWA would support the use of
“whatever current, defensible, and reliable information is available to
make the case that [a state] has made a good faith effort to consider
EDAs” and directed its division offices to take appropriate action to
ensure that the states gave adequate consideration to EDAs. FHWA
officials we spoke with said they discussed the priority requirements with
states and that the requirements were taken into consideration when
approving projects. They also stated that whether a state has satisfied the
EDA priority requirement will not be finally determined until the funds
apportioned to the state under the Recovery Act are all obligated, which
may not be completed until 2010. According to FHWA the states have until
then to address future compliance with the EDA priority requirement. By
2010, however, it will be too late to take corrective action. In each of the
cases where a state used its own criteria, state officials told us they did so
with the approval of the FHWA division office in that state. Without
clearer guidance to the states, it will be difficult to ensure that the act’s
priority provision is applied consistently.
Finally, the states are required to certify that they will maintain the level of
state effort for programs covered by the Recovery Act. With one
exception, the states have completed these certifications, but they face
challenges. Maintaining a state’s level of effort can be particularly
important in the highway program. We have found that the preponderance
of evidence suggests that increasing federal highway funds influences
states and localities to substitute federal funds for funds they otherwise
would have spent on highways. In 2004, we estimated that during the 1983
through 2000 period, states used roughly half of the increases in federal
highway funds to substitute for funding they would otherwise have spent
from their own resources and that the rate of substitution increased during

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the 1990s. The federal-aid highway program creates the opportunity for
substitution because states typically spend substantially more than the
amount required to meet federal matching requirements. 27 As a
consequence, when federal funding increases, states are able to reduce
their own highway spending and still obtain increased federal funds. 28 As
we previously reported, substitution makes it difficult to target an
economic stimulus package so that it results in a dollar-for-dollar increase
in infrastructure investment. 29
Most states revised the initial certifications they submitted to DOT. As we
reported in April, many states submitted explanatory certifications—such
as stating that the certification was based on the “best information
available at the time”—or conditional certifications, meaning that the
certification was subject to conditions or assumptions, future legislative
action, future revenues, or other conditions. The legal effect of such
qualifications was being examined by DOT when we completed our
review. On April 22, 2009, the Secretary of Transportation sent a letter to
each of the nation’s governors and provided additional guidance, including
that conditional and explanatory certifications were not permitted, and
gave states the option of amending their certifications by May 22. Each of
the 16 states and District selected for our review resubmitted their
certifications. According to DOT officials, the department has concluded
that the form of each certification is consistent with the additional
guidance, with the exception of Texas. Texas submitted an amended
certification on May 27, 2009, which contained qualifying language
explaining that the Governor could not certify any expenditure of funds
until the legislature passed an appropriation act. According to DOT
officials, as of June 25, 2009, the status of Texas’ revised certification
remains unresolved. Texas officials told us the state plans to submit a
revised certification letter, removing the qualifying language. For the
remaining states, while DOT has concluded that the form of the revised
certifications is consistent with the additional guidance, it is currently

27

The federal share under the existing federal-aid highway program is generally 80 percent
and the matching requirement for states is usually 20 percent. In 2004, we reported that in
2002, states and localities contributed 54 percent of the nation’s capital investment in
highways, while the federal government contributed 46 percent (in 2001 dollars).
28

GAO, Federal-Aid Highways: Trends, Effect on State Spending, and Options for Future
Program Design, GAO-04-802 (Washington, D.C.: Aug. 31, 2004).

29

GAO, Physical Infrastructure: Challenges and Investment Options for the Nation’s
Infrastructure, GAO-08-763T (Washington, D.C.: May 8, 2008).

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evaluating whether the states’ method of calculating the amounts they
planned to expend for the covered programs is in compliance with DOT
guidance.
States face drastic fiscal challenges, and most states are estimating that
their fiscal year 2009 and 2010 revenue collections will be well below
estimates. In the face of these challenges, some states told us that meeting
the maintenance-of-effort requirements over time poses significant
challenges. For example, federal and state transportation officials in
Illinois told us that to meet its maintenance-of-effort requirements in the
face of lower-than-expected fuel tax receipts, the state would have to use
general fund or other revenues to cover any shortfall in the level of effort
stated in its certification. Mississippi transportation officials are
concerned about the possibility of statewide, across-the-board spending
cuts in 2010. According to the Mississippi transportation department’s
budget director, the agency will try to absorb any budget reductions in
2010 by reducing administrative expenses to maintain the state’s level of
effort.
Other states have faced challenges calculating an appropriate level of
effort. For example, Georgia officials told us the state does not routinely
estimate future expenditures and had to develop an alternative method for
its revised certification using past expenditures to extrapolate future
expenditures. In Pennsylvania, transportation officials told us that
calculating the amounts for the amended certification involved making
estimates over three state fiscal years and making assumptions about
proposed budgets that are subject to future legislative action.
As discussed earlier, states using Recovery Act funds must comply with
the requirements of the federal-aid highway program, including
environmental requirements, paying a prevailing wage in accordance with
federal Davis-Bacon requirements, complying with goals to ensure
disadvantaged business enterprises are not discriminated against in
awarding construction contracts, and using American-made iron and steel
in accordance with Buy America program requirements. We discussed the
impact these requirements were having on project costs and time frames

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with officials in three states. 30 Transportation officials in Arizona,
Mississippi, and New Jersey each reported that these requirements were
not causing increases in project costs and were not delaying projects from
moving forward. For example, New Jersey officials stated that since these
requirements apply to all highway construction using federal highway
funds, not solely to Recovery Act funding, they were accustomed to
complying with these requirements and had a process in place for quickly
documenting compliance. In addition, these officials stated that to meet
the Recovery Act’s requirements to spend the funds quickly, the state
selected projects that had already completed the environmental review
process or that were relatively simple projects that would have limited
environmental impact.

State Fiscal Stabilization
Fund

The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in part
to help state and local governments stabilize their budgets by minimizing
budgetary cuts in education and other essential government services, such
as public safety. Stabilization funds for education distributed under the
Recovery Act must be used to alleviate shortfalls in state support for
education to school districts and public institutions of higher education
(IHEs). The U.S. Department of Education (Education), the federal agency
charged with administration and oversight of the SFSF, distributes the
funds on a formula basis, with 81.8 percent of each state’s allocation
designated for the education stabilization fund for local educational
agencies (LEA) and public IHEs. The remaining 18.2 percent of each
state’s allocation is designated for the government services fund for public
safety and other government services, which may include education.
Consistent with the purposes of the Recovery Act—which include, in
addition to stabilizing state and local budgets, promoting economic
recovery and preserving and creating jobs—the SFSF can be used by
states to restore cuts to state education spending. In return for SFSF
funding, a state must make several assurances, including that it will
maintain state support for education at least at fiscal year 2006 levels. In
order to receive SFSF funds, each state must also assure it will implement

30

We reported on the impact of federal requirements in December 2008 (see GAO-09-36).
We selected these three states because we did not include these states in the scope of our
previous report and because these states have varying environmental planning and labor
environments. For example, New Jersey has a state environmental planning law, while the
other states do not, and, according to the Bureau of Labor Statistics, in 2008, union
membership in New Jersey was 18.3 percent, while 8.8 percent of Arizona and 5.3 percent
of Mississippi workers were union members.

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strategies to advance education reform in four specific ways as described
by Education:
1. Increase teacher effectiveness and address inequities in the
distribution of highly qualified teachers;
2. Establish a pre-K-through-college data system to track student
progress and foster improvement;
3. Make progress toward rigorous college- and career-ready standards
and high-quality assessments that are valid and reliable for all students,
including students with limited English proficiency and students with
disabilities; and
4. Provide targeted, intensive support and effective interventions to turn
around schools identified for corrective action or restructuring. 31
Along with these education reform assurances, additional state assurances
must address federal requirements concerning accountability,
transparency, reporting, and compliance with certain federal laws and
regulations.
Beginning in March 2009, the Department of Education issued a series of
fact sheets, letters, and other guidance to states on the SFSF. Specifically,
a March fact sheet, the Secretary’s April letter to Governors, and program
guidance issued in April and May mention that the purposes of the SFSF
include helping stabilize state and local budgets, avoiding reductions in
education and other essential services, and ensuring LEAs and public IHEs
have resources to “avert cuts and retain teachers and professors.” The
documents also link educational progress to economic recovery and
growth and identify four principles to guide the distribution and use of
Recovery Act funds: (1) spend funds quickly to retain and create jobs; (2)
improve student achievement through school improvement and reform;
(3) ensure transparency, public reporting, and accountability; and (4)
invest one-time Recovery Act funds thoughtfully to avoid unsustainable
continuing commitments after the funding expires, known as the “funding
cliff.”

31

Schools identified for corrective action have missed academic targets for 4 consecutive
years and schools implementing restructuring have missed academic targets for 6
consecutive years.

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After meeting assurances to maintain state support for education at least
at fiscal year 2006 levels, states are required to use the education
stabilization fund to restore state support to the greater of fiscal year 2008
or 2009 levels for elementary and secondary education, public IHEs, and, if
applicable, early childhood education programs. States must distribute
these funds to school districts using the primary state education formula
but maintain discretion in how funds are allocated to public IHEs. If, after
restoring state support for education, additional funds remain, the state
must allocate those funds to school districts according to the Elementary
and Secondary Education Act of 1965 (ESEA), Title I, Part A funding
formula. On the other hand, if a state’s education stabilization fund
allocation is insufficient to restore state support for education, then a state
must allocate funds in proportion to the relative shortfall in state support
to public school districts and public IHEs. Education stabilization funds
must be allocated to school districts and public IHEs and cannot be
retained at the state level.
Once education stabilization funds are awarded to school districts and
public IHEs, they have considerable flexibility over how they use those
funds. School districts are allowed to use education stabilization funds for
any allowable purpose under ESEA, the Individuals with Disabilities
Education Act (IDEA), the Adult Education and Family Literacy Act, or the
Carl D. Perkins Career and Technical Education Act of 2006 (Perkins Act),
subject to some prohibitions on using funds for, among other things,
sports facilities and vehicles. In particular, Education’s guidance states
that because allowable uses under the Impact Aid provisions of ESEA are
broad, school districts have discretion to use education stabilization funds
for a broad range of things, such as salaries of teachers, administrators,
and support staff and purchases of textbooks, computers, and other
equipment. The Recovery Act allows public IHEs to use education
stabilization funds in such a way as to mitigate the need to raise tuition
and fees, as well as for the modernization, renovation, and repair of
facilities, subject to certain limitations. However, the Recovery Act
prohibits public IHEs from using education stabilization funds for such
things as increasing endowments; modernizing, renovating, or repairing
sports facilities; or maintaining equipment. Education’s SFSF guidance
expressly prohibits states from placing restrictions on LEAs’ use of
education stabilization funds, beyond those in the law, but allows states
some discretion in placing limits on how IHEs may use these funds.
The SFSF provides states and school districts with additional flexibility,
subject to certain conditions, to help them address fiscal challenges. For
example, the Secretary of Education is granted authority to permit waivers

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of state maintenance-of-effort (MOE) requirements if a state certified that
state education spending will not decrease as a percentage of total state
revenues. Education issued guidance on the MOE requirement, including
the waiver provision, on May 1, 2009. Also, the Secretary may permit a
state or school district to treat education stabilization funds as nonfederal
funds for the purpose of meeting MOE requirements for any program
administered by Education, subject to certain conditions. Education, as of
June 29, 2009, has not provided specific guidance on the process for states
and school districts to apply for the Secretary’s approval.
States have broad discretion over how the $8.8 billion in the SFSF
government services fund are used. The Recovery Act provides that these
funds must be used for public safety and other government services and
that these services may include assistance for education, as well as
modernization, renovation, and repairs of public schools or IHEs.
On April 1, 2009, Education made at least 67 percent of each state’s SFSF
funds 32 available, subject to the receipt of an application containing state
assurances, information on state levels of support for education and
estimates of restoration amounts, and baseline data demonstrating state
status on each of the four education reform assurances. If a state could not
certify that it would meet the MOE requirement, Education required it to
certify that it will meet requirements for receiving a waiver—that is, that
education spending would not decrease relative to total state revenues. In
determining state level of support for elementary and secondary
education, Education required states to use their primary formula for
distributing funds to school districts but also allowed states some
flexibility in broadening this definition. For IHEs, states have some
discretion in how they establish the state level of support, with the
provision that they cannot include support for capital projects, research
and development, or amounts paid in tuition and fees by students. In order
to meet statutory requirements for states to establish their current status
regarding each of the four required programmatic assurances, Education
provided each state with the option of using baseline data Education had
identified or providing another source of baseline data. Some of the data
provided by Education was derived from self-reported data submitted
annually by the states to Education as part of their Consolidated State

32

This was phase I funding. A state will receive the remaining allotment of its SFSF
allocation in phase II after Education approves the state’s comprehensive plan for making
progress with respect to the four education reform assurances. Education anticipates that
phase II funds will be awarded by September 30, 2009.

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Performance Reports (CSPR), but Education also relied on data from third
parties, including the Data Quality Campaign (DQC), the National Center
for Educational Achievement (NCEA), and Achieve. 33 Education has
reviewed applications as they arrive for completeness and has awarded
states their funds once it determined all assurances and required
information had been submitted. Education set the application deadline
for July 1, 2009. On June 24, 2009, Education issued guidance to states
informing them they must amend their applications if there are changes to
the reported levels of state support that were used to determine
maintenance of effort or to calculate restoration amounts.

Most States We Visited
Have Received SFSF
Funds and Have Planned
to Allocate Most Education
Stabilization Funds to
LEAs.

As of June 30, 2009, of the 16 states and the District of Columbia covered
by our review, only Texas had not submitted an SFSF application.
Pennsylvania recently submitted an application but had not yet received
funding. The remaining 14 states and the District of Columbia had
submitted applications and Education had made available to them a total
of about $17 billion in initial funding. As of June 26, 2009, only 5 of these
states had drawn down SFSF Recovery Act funds. In total, about 25
percent of allocated funds had been drawn down by these states. (See
table 5.) 34

33

DQC is a national collaborative effort involving more than 50 organizations working to
encourage and support state policymakers to improve the availability and use of highquality education data to improve student achievement. NCEA, a nonprofit organization
owned by ACT Inc.—a company that develops and markets assessments—focuses on
raising student achievement based on a higher college and career readiness standards.
Achieve, created in 1996 by the nation’s governors and corporate leaders, is an
independent, bipartisan, nonprofit education reform organization focused on raising
academic standards and graduation requirements, improving assessments, and
strengthening accountability.

34

GAO visited at least two LEAs per state and in the District of Columbia that were among
the top ten LEAs in the state, or the District of Columbia, in terms of Title I appropriations,
and that had schools in improvement status.

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Table 5: SFSF Recovery Act Allocations and Drawdowns for the 16 States and the District of Columbia

State:
Arizona

Total state allocation

Phase I funds made
Percentage of available
available to states as of
funds drawn down by
Funds drawn down by
June 30, 2009 states as of June 26, 2009
states

$1,016,955,172

$681,359,965

$0

0

California

5,960,267,431

3,993,379,179

2,867,792,114

71

Colorado

760,242,539

509,362,501

0

0

District of Columbia

89,377,071

59,882,637

0

0

Florida

2,700,292,474

1,809,195,958

0

0

Georgia

1,541,319,187

1,032,683,856

189,592,329

18

Illinois

2,055,171,987

1,376,965,231

1,038,987,579

75

472,339,542

316,467,493

40,000,000

13

Iowa
Massachusetts
Michigan
Mississippi

994,258,205

666,152,997

0

0

1,592,138,132

1,066,732,549

0

0

479,300,666

321,131,446

0

0

New Jersey

1,330,483,831

891,424,167

0

0

New York

3,017,796,810

2,021,923,863

0

0

North Carolina

1,420,454,235

1,011,164,552

150,867,275

16

Ohio

1,789,376,483

1,198,882,243

0

0

Pennsylvania

1,905,620,952

0

0

Texas
Total

3,973,437,816
$31,098,832,533

$16,956,708,637

0

0

$4,287,239,297

25

Source: U.S. Department of Education.

Three of these states—Florida, Massachusetts, and New Jersey—said they
would not meet the maintenance-of-effort requirements but would meet
the eligibility requirements for a waiver and that they would apply for a
waiver. Most of the states’ applications show that they plan to provide the
majority of education stabilization funds to LEAs, with the remainder of
funds going to IHEs. Several states and the District of Columbia estimated
in their application that they would have funds remaining beyond those
that would be used to restore education spending in fiscal years 2009 and
2010. These funds can be used to restore education spending in fiscal year
2011, with any amount left over to be distributed to LEAs. Table 6 shows
the amount of SFSF funds received by states and how the states indicate
they will divide education stabilization funds between LEAs and IHEs,
based on the states’ SFSF applications.

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Table 6: Education Stabilization Funds Made Available to States and the Division of
Education Stabilization Funds between LEAs and IHEs
Percentage of total available
education stabilization funds
between LEAs and IHEs to restore
state support for elementary and
secondary education and IHEs in
2009 and 2010
Education
stabilization
funds made
available
as of June 30, 2009

LEAs

IHEs

Remaining
amount

Arizona

$557,352,452

57

43

0

California

3,266,584,168

75

25

0

Colorado

416,658,526

24

48

27

State

District of Columbia
Florida
Georgia
Iowa
Illinois
Massachusetts

48,983,997

24

2

74

1,479,922,294

79

21

0

844,735,394

74

26

0

258,870,409

67

27

7

1,126,357,559

98

2

0

544,913,152

60

26

14

Michigan

872,587,225

95

5

0

Mississippi

262,685,523

38

10

52

New Jersey

729,184,969

93

7

0

1,653,933,720

95

3

2

North Carolina

778,494,148

62

11

27

Ohio

New York

980,685,675

27

21

52

Pennsylvania

0

-

-

-

Texas

0

-

-

-

Source: GAO analysis of state applications for SFSF that were approved by Education as of June 30, 2009.

States have flexibility in how they allocate education stabilization funds
among IHEs but, once they establish their state funding formula, not in
how they allocate the funds among LEAs. Florida and Mississippi allocated
funds among their IHEs, including universities and community colleges,
using formulas based on factors such as enrollment levels. Other states
allocated SFSF funds taking into consideration the budget conditions of
the IHEs. For example, Georgia allocated funds to universities based on
the degree to which each institution’s budget had been cut, and Illinois
allocated funds among universities to provide each university a share of

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SFSF funds proportionate to its share of state support in fiscal year 2006.
New York provided all SFSF funds slated for IHEs to community colleges
to avoid cutting community college budgets. On the other hand, California
planned to provide SFSF funds to its state university systems and not to
community colleges because the universities had received significant
budget cuts. However, California may change this plan because budget
cuts at community colleges are now likely.
Regarding LEAs, most states planned to allocate funds based on states’
primary funding formulae. Many states are using a state formula based on
student enrollment weighted by characteristics of students and LEAs. For
example, Colorado’s formula accounts for the number of students at risk
while the formula used by the District of Columbia allocates funds to LEAs
using weights for each student based on the relative cost of educating
students with specific characteristics. For example, an official from
Washington, D.C., Public Schools said a student who is an English
language learner may cost more to educate than a similar student who is
fluent in English.
States may use the government services portion of SFSF for education but
have discretion to use the funds for a variety of purposes. Officials from
Florida, Illinois, New Jersey, and New York reported that their states plan
to use some or most of their government services funds for educational
purposes. Other states are applying the funds to public safety. For
example, according to state officials, California is using the government
services fund for it corrections system, and Georgia will use the funds for
salaries of state troopers and staff of forensic laboratories and state
prisons.

Plans for SFSF Funds Usually
Target Restoring Funding, and
Many School Districts Reported
It Would Be Challenging to Use
SFSF Funds for Educational
Reform

Officials in many school districts told us that SFSF funds would help offset
state budget cuts and would be used to maintain current levels of
education funding. However, many school district officials also reported
that using SFSF funds for education reforms was challenging given the
other more pressing fiscal needs.
Although their plans are generally not finalized, officials in many school
districts we visited reported that their districts are preparing to use SFSF
funds to prevent teacher layoffs, hire new teachers, and provide
professional development programs. Most school districts will use the
funding to help retain jobs that would have been cut without SFSF
funding. For example, Miami Dade officials estimate that the stabilization
funds will help them save nearly two thousand teaching positions. State
and school district officials in eight states we visited (California, Colorado,

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Florida, Georgia, Massachusetts, Michigan, New York, and North Carolina)
also reported that SFSF funding will allow their state to retain positions,
including teaching positions that would have been eliminated without the
funding. In the Richmond County School System in Georgia, officials
noted they plan to retain positions that support its schools, such as
teachers, paraprofessionals, nurses, media specialists and guidance
counselors. Local officials in Mississippi reported that budget-related
hiring freezes had hindered their ability to hire new staff, but because of
SFSF funding, they now plan to hire. In addition, local officials in a few
states told us they plan to use the funding to support teachers. For
example, officials in Waterloo Community and Ottumwa Community
School Districts in Iowa as well as officials from Miami-Dade County in
Florida cited professional development as a potential use of funding to
support teachers.
Although school districts are preventing layoffs and continuing to provide
educational services with the SFSF funding, most did not indicate they
would use these funds to pursue educational reform. School district
officials cited a number of barriers, which include budget shortfalls, lack
of guidance from states, and insufficient planning time. In addition to
retaining and creating jobs, school districts have considerable flexibility to
use these resources over the next 2 years to advance reforms that could
have long-term impact. However, a few school district officials reported
that addressing reform efforts was not in their capacity when faced with
teacher layoffs and deep budget cuts. In Flint, Michigan, officials reported
that SFSF funds will be used to cope with budget deficits rather than to
advance programs, such as early childhood education or repairing public
school facilities. According to the Superintendent of Flint Community
Schools, the infrastructure in Flint is deteriorating, and no new school
buildings have been built in over 30 years. Flint officials said they would
like to use SFSF funds for renovating buildings and other programs, but
the SFSF funds are needed to maintain current education programs.
Officials in many school districts we visited reported having inadequate
guidance from their state on using SFSF funding, making reform efforts
more difficult to pursue. School district officials in most states we visited
reported they lacked adequate guidance from their state to plan and report
on the use of SFSF funding. Without adequate guidance and time for
planning, school district officials told us that preparing for the funds was
difficult. At the time of our visits, several school districts were unaware of
their funding amounts, which, officials in two school districts said, created
additional challenges in planning for the 2009-2010 school year. One
charter school we visited in North Carolina reported that layoffs will be

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required unless their state notifies them soon how much SFSF funding
they will receive. State officials in North Carolina, as well as in several
other states, told us they are waiting for the state legislature to pass the
state budget before finalizing SFSF funding amounts for school districts.

IHEs Plan to Use SFSF Funds
for Faculty Salaries and Other
Purposes and Expect the Funds
to Save Jobs and Mitigate
Tuition Increases

Although many IHEs had not finalized plans for using SFSF funds, the
most common expected use for the funds at the IHEs we visited was to
pay salaries of IHE faculty and staff. 35 Officials at most of the IHEs we
visited told us that, due to budget cuts, their institutions would have faced
difficult reductions in faculty and staff if they were not receiving SFSF
funds. In California and North Carolina, according to the IHE officials, the
states instructed their IHEs to use the funds to cover IHE payroll expenses
in certain months in spring 2009. Other IHEs expected to use SFSF funds
in the future to pay salaries of certain employees during the year. For
example, according to an official at Hillsborough Community College in
Florida, to avoid using the nonrecurring SFSF money for recurring
expenses, the IHE expects to use the funds to pay salaries of about 400
nonpermanent adjunct faculty members. Georgia Perimeter College plans
to use its SFSF funds to retain 51 full-time and 17 part-time positions in its
science department, and the University of Georgia plans to use the funds
to retain approximately 160 full-time positions in various departments.
Several IHEs we visited are considering other uses for SFSF funds.
Officials at the Borough of Manhattan Community College in New York
City want to use some of their SFSF funds to buy energy saving light bulbs
and to make improvements in the college’s very limited space such as, by
creating tutoring areas and study lounges. Northwest Mississippi
Community College wants to use some of the funds to increase e-learning
capacity to serve the institution’s rapidly increasing number of students.
Several other IHEs plan to use some of the SFSF funds for student
financial aid. For example, Hudson Valley Community College plans to use
some SFSF funds to provide financial aid to 500 or more low-income
students who do not qualify for federal Pell Grants or New York’s Tuition
Assistance Program.
Because many IHEs expect to use SFSF funds to pay salaries of current
employees that they likely would not have been able to pay without the

35

During our review, we met with IHEs and state officials responsible for IHE oversight in 8
states—California, Florida, Georgia, Illinois, Mississippi, New York, North Carolina, and
Ohio. Of the 16 states covered by our review, 6 had received approval from Education for
phase I SFSF funding as of May 8, 2009.

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SFSF funds, IHEs officials said that SFSF funds will save jobs. Officials at
several IHEs noted that this will have a positive impact on the educational
environment such as, by preventing increases in class size and enabling
the institutions to offer the classes that students need to graduate. In
addition to preserving existing jobs, some IHEs anticipate creating jobs
with SFSF funds. For example, New York IHEs we spoke with plan to use
SFSF funds to hire additional staff and faculty. The University of South
Florida is considering using some SFSF money to hire postdoctoral
fellows to conduct scientific research, and Florida A&M University plans
to use the funds to hire students for assistantships. Besides saving and
creating jobs at IHEs, officials noted that SFSF monies will have an
indirect impact on jobs in the community. For example, University of
Mississippi officials noted that, without the SFSF funds, the university
probably would have shut down ongoing capital projects building
dormitories and upgrading campus heating and cooling systems, and this
would have had a negative impact on construction and engineering jobs in
the community. Jackson State University officials said SFSF monies will
help local contractors and vendors who conduct business with the
university because the funds will enable the university to recover from
severe budget cuts and resume normal spending. IHE officials also noted
that SFSF funds will indirectly improve employment because some faculty
being paid with the funds will help unemployed workers develop new
skills, including skills in fields, such as health care, that have a high
demand for trained workers.
State and IHE officials also believe that SFSF funds are reducing the size
of tuition and fee increases. For example, Florida officials said that the 8
percent tuition increase approved by the Florida Legislature likely would
have been much higher if the state had not received SFSF funds. Officials
estimated that without SFSF funds, the increase in tuition necessary to
compensate for decreases in state funding would have been 21 percent for
students at community colleges and 35 percent for students at universities.
A University of California official stated that, if the university system had
not received SFSF funds and had to use fee increases to cover its budget
shortfall, system-wide fees would have increased by about 24 percent
instead of the approved 9.3 percent increase.

Education Provided
Preliminary Baseline Data to
States to Ease the Application
Process but Plans to Implement
a New Approach for the Second
Round of Applications

U.S. Department of Education officials told us that to benchmark states’
current position on the four education reform assurances and to ease the
application process, they had provided base-line data for each state and
asked states to certify their acceptance of these data as part of their
application for SFSF funding, or provide alternate data. In their
applications to Education for SFSF funds, states were required to provide

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assurances that they were committed to advancing education reform in
these four areas. The table below lists the four assurances and the data
elements and sources Education chose to set base-line benchmarks for
states. Education officials told us that these data, while not perfect, were
the best available. Officials also told us that the data in the application
package were preliminary, and that they plan to develop a more complete
set of performance measures under each assurance for states to use or
develop for the final SFSF application.
Table 7: Data Source and Data Elements for the Four SFSF Education Reform Assurances
Assurance

Data source

1. Increasing Equity in Teacher
Distribution

States report these data annually on their
The number and percentage of core
Consolidated State Performance Report (CSPR) academic courses that are taught by
highly qualified teachers in high-poverty
schools and low-poverty schools
(presented separately for elementary
and high schools)

2. Improving Collection and Use of Data

•

•

The Data Quality Campaign and National
Center for Education Achievement 2008
survey assessing the status of state
educational data systems
State officials, primarily K-12 state data
managers, self-report on the capabilities of
their data systems

Data element

•

•

The survey identifies 10 essential
elements of a longitudinal data
system
Survey results indicate which
states have achieved which
elements (e.g., 28 states reported
being able to match student-level
preschool-12 data with higher
education data.)

3. Standards and Assessments
3-1. Enhancing the Quality of Academic
Assessments

1. State information chart, available at
1. This chart identifies whether a state’s
www.ed.gov/policy/elsec/guid/stateletters/ssc.xls assessment systems are “approved” or
“pending” or not yet approved or
pending for reading and mathematics
and for science, based on the results of
Education’s peer review process
2. State-specific letters the U.S. Department of
2. These letters describe what states
Education sent to state education agency
must do to satisfy assessment
officials in January and February 2009
requirements set forth in NCLB

3.2 Inclusion of Children with Disabilities
and Limited English Proficient Student

State information chart, available at
1. This chart identifies whether a state’s
www.ed.gov/policy/elsec/guid/stateletters/ssc.xls assessment systems are “approved,”
“not approved” or “pending”
2. These letters describe the state’s
current status related to the inclusion of
children with disabilities and limited
English proficient students in state
assessments, the validity and reliability
of the assessments for such children,
and the provision of accommodations

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Assurance

Data source

Data element

3.3 Improving State Academic Content
and Achievement Standards

Achieve’s 2009 report Closing the Expectations
Gap, a report based on a survey of state
policymakers to assess states’ policies
regarding standards and assessments

The survey provides information on
what states are currently doing to align
their standards, graduation
requirements, and assessments with
college and career expectations

4. Supporting Struggling Schools

States report these data annually on their
The number and names of schools in
Consolidated State Performance Report (CSPR) corrective action and restructuring for
the 2008-2009 school year
These data are based on assessments
in the 2007-2008 school year
Source: GAO analysis of SFSF applications and descriptions of Achieve and Data Quality Campaigns Surveys.

While Education officials told us that the base-line data are preliminary,
staff working at Achieve and the Data Quality Campaign—the two
educational advocacy groups whose survey data are being used to
measure two of the assurances—told us that while they believed their data
set appropriate baselines, they did not believe measuring change against
these baselines would be the best accountability mechanism. One staff
member said that since many states were already poised to make
substantial progress in implementing improved data systems in the next
two years, it would not be appropriate to automatically attribute state
progress in implementing the elements of a longitudinal data system to
Recovery Act funds. Staff at the Data Quality Campaign said that they have
told Education that it was fine to use their survey as a baseline, but that
they were not comfortable with the survey becoming a primary auditing
tool; doing so could change the incentives for states to respond to the
survey. Moreover, staff at the Data Quality Campaign believe the more
appropriate way to monitor progress is to ask states to publicly post
information and analyses on a series of metrics, because by posting such
information states would be verifying the capacity of their longitudinal
data systems.
Education officials told us that in making phase II SFSF funding available
to states, Education will ask states to report on a series of performance
measures for each of the four major themes for reform, which align with
the education reform assurances. According to these officials, the
performance measures developed for the second and final application will
allow Education to fulfill three main purposes: (1) to get a status report on
states’ progress in developing performance measures, (2) to put plans in
place to gather the relevant information if performance measures are not
available, and 3) to be able to track how states are progressing over time
with respect to education reform. Education officials also said that they
were aware of potential issues regarding data quality and that they plan to

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conduct an initial staff review and may later conduct an external review of
the reliability of data used for its performance measures.

Seven States We Visited
Have Drawn Down Title I
Recovery Act Funds and
Made Funds Available to
Local Educational
Agencies

The Recovery Act provides $10 billion to help local educational agencies
educate disadvantaged youth by making additional funds available beyond
those regularly allocated through Title I, Part A of the Elementary and
Secondary Education Act (ESEA) of 1965. 36 The Recovery Act requires
these additional funds to be distributed through states to local educational
agencies (LEAs) using existing federal funding formulas, which target
funds based on such factors as high concentrations of students from
families living in poverty. In using the funds, local educational agencies are
required to comply with current statutory and regulatory requirements and
must obligate 85 percent of these funds by September 30, 2010. 37 The
Department of Education is advising LEAs to use the funds in ways that
will build the agencies’ long-term capacity to serve disadvantaged youth,
such as through providing professional development to teachers. 38 The
Department of Education made the first half of states’ Recovery Act Title I,
Part A funding available on April 1, 2009, with the 16 states and the District
in our review receiving more than $3 billion of the $5 billion released to all
of the states and territories. The initial state allocations and amounts
drawn down as of June 26, 2009, are shown in table 8 below.

36

The Recovery Act also makes $3 billion in school improvement funds available under Title

I.
37

LEAs must obligate at least 85 percent of their Recovery Act ESEA Title I, Part A funds by
September 30, 2010, unless granted a waiver, and must grant all of their funds by
September 30, 2011—provisions referred to as carryover limitations.

38

Education provided examples of allowable uses such as teacher training, using
longitudinal data systems to improve achievement, and providing high-quality online
courseware in mathematics and science for secondary school students.

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Table 8: Title I, Part A Recovery Act Allocations and Drawdowns for 16 States and the District of Columbia
Percentage of
available funds
drawn down
by states

Total state allocation

Funds made available to
states as of April 1, 2009

Funds drawn down
by states as of
June 26, 2009

Arizona

$195,087,322

$ 97,543,661

$16,000

<1

California

1,124,920,474

562,460,237

450,284,592

80

Colorado

111,135,922

55,567,961

0

0

37,602,324

18,801,162

0

0

Florida

490,575,352

245,287,676

247,713

<1

Georgia

351,008,292

175,504,146

0

0

Illinois

420,263,562

210,131,781

120,476

<1

State

District of Columbia

Iowa

51,497,022

25,748,511

8,111,953

31.5

Massachusetts

163,680,278

81,840,139

0

0

Michigan

389,902,874

194,951,437

0

0

Mississippi

132,888,490

66,444,245

0

0

New Jersey

182,971,300

91,485,650

0

0

New York

907,152,150

453,576,075

North Carolina

257,444,956

128,722,478

780,237

<1

Ohio

372,673,474

186,336,737

0

0

0

Pennsylvania

400,603,678

200,301,839

0

0

Texas

948,737,780

474,368,890

58,060

<1

$6,538,145,250

$3,269,072,625

$459,619,032

14

$10,000,000,000

$5,000,000,000

Total for 16 states and
the District
Total Nationwide

Source: U.S. Department of Education data.

As shown in table 8, as of June 26, education officials in seven states—
Arizona, California, Florida, Illinois, Iowa, North Carolina, and Texas—had
drawn down a portion of their Title I Recovery Act funds. As of June 26,
Arizona had drawn down $16,000 in Title I Recovery Act funds. California
authorized the funds to be released to LEAs on May 28, 2009 and has
drawn down 80 percent of its available funds. According to local officials,
both of the LEAs we visited in California received funds the week of June
1, 2009.
According to U.S. Department of Education officials, they monitor state
drawdowns of Recovery Act funds and will meet with state officials if they
notice anything unusual. As a result of California’s large drawdown,
Education officials met with California state officials to discuss their

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justification, especially given recent findings by the department’s
Inspector General (IG) that the state lacked adequate oversight over cash
management practices of school districts. 39 According to department
officials, California officials informed the department that the drawdown
of Title I Recovery Act funds was in lieu of its normally scheduled
drawdown of school year 2008-2009 Title I funds. As a result, officials told
us the school districts were ready to use these funds quickly as they would
be used under approved plans for the current school year. However, the
department remains concerned over the state’s cash management system.
Further, the California State Auditor has cited continued concerns about
the California Department of Education’s (CDE) internal controls in both
the most recent statewide Single Audit issued on May 27, 2009, and a
Recovery Act funding review issued on June 24, 2009. The Single Audit
identified a number of significant deficiencies or material weaknesses,
including continued problems with CDE ESEA Title I cash management—
specifically, that CDE routinely disburses Title I funds to districts without
determining whether the LEAs need program cash at the time of the
disbursement.
According to California officials, the California Department of Education
has developed an improvement plan to address cash management
concerns. It involves LEAs reporting federal cash balances on a quarterly
basis using a Web-based reporting system. According to Education
officials, the first phase of this plan will be piloted beginning this summer.
CDE officials stated that the pilot project includes cash management fiscal
monitoring procedures to verify LEAs’ reported cash balances, ensure
compliance with cash management practices, and ensure that interest
earned on federal dollars is properly accounted for. Education officials
told us that, given the cash management concerns, they would work with
the California State Auditor and the Education Inspector General to
develop a monitoring and assistance plan to ensure that California
properly followed cash management requirements.

39

U.S. Department of Education, Final Audit Report ED-OIG/A09H0020, California
Department of Education Advances of Federal Funding to Local Educational Areas
(Washington, D.C., March 2009). The department’s IG noted, among other findings, that
California does not have an adequate system in place to ensure that LEAs comply with the
federal cash management rules requiring LEAs to remit on a timely basis interest earned on
cash advances for any amounts exceeding $100. The IG estimated that statewide, LEAs
earned about $11 million in interest on Title I cash balances and found that most LEAs the
IG reviewed did not calculate and remit their interest earnings.

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According to state education officials, Illinois allowed districts to
complete an application due May 29 to receive funds for summer
programming use and has started to draw down funds. State officials told
us that on June 2, Iowa made the first of six payments of Title I Recovery
funds available to LEAs. Florida allowed LEAs to begin obligating and
spending funds in late April or early May, according to a state official. In
North Carolina, a state official told us that Recovery Act Title I funds have
been available since May 4 for all LEAs with a current Title I application
on file and that as of June 19, 31 LEAs had submitted planning budgets to
the state’s Department of Public Instruction and the budgets have been
approved; these LEAs, in turn, can now obligate and spend funds. As of
June 26, Texas had drawn down $58,060 in Title I Recovery Act funds.

State Application Procedures
and Budget Deliberations Have
Affected the Release of Title I,
Part A Recovery Act Funds

Officials in Colorado and New Jersey were planning to release some Title I
Recovery Act funds to a small number of their districts in June to allow
them to fund summer programming and to release the rest of their funds
later in the summer. In the remaining states we visited, funds will not be
released to LEAs until July, August, or September. 40 Officials in the District
of Columbia, Massachusetts, Michigan, and New York said they expected
to release funds to LEAs in July.
Nearly all of the 16 states and the District of Columbia have required (or
will require) LEAs to submit an application, a budget, or a detailed plan as
a condition for receiving Recovery Act funding, 41 but the amount of time
needed to complete these processes has varied. For example, in Florida,
the State Educational Agency made available an online, abbreviated
application to receive funds on April 9, 2009, according to a state official.
The application asked LEAs to describe how they planned to spend the
funds, submit a budget, and make assurances specific to Title I. The state
sent award notices to LEAs the last week of April and the first week of
May 2009, allowing LEAs to begin obligating and expending funds,
according to a state official. In contrast, when we spoke with Mississippi
educational officials in early June, the state was still in the process of
developing a new application for Title I Recovery Act funds. Mississippi

40

Georgia did not set a specific application deadline, but once applications are approved,
LEAs will be asked to submit their budgets for fiscal year 2010 and cannot draw down their
allocated funds until their budgets have been approved.
41

California granted initial funding eligibility to all LEAs that had elected to receive Title I,
Part A funds in school year 2008-2009 and asked LEAs to finalize their eligibility by
applying for Title I funds in school year 2009-2010.

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planned to release the application within several weeks, provide LEAs
with training and a handbook on the application, and hoped to release
funds to LEAs by August 2009. Similarly, New York plans to require school
districts to agree to a number of assurances regarding the use of the Title I
Recovery Act funds before funds are disbursed; however, the application
was in draft form as of June 17, 2009 according to a state official.
Three of the states we visited (Colorado, Illinois, and New Jersey) issued
early applications inviting districts to apply to receive Recovery Act
funding for school year 2008-2009, such as to fund summer school
programs. Other states have tied the release of funds into their annual
application for regular Title I funding. For example, Georgia added seven
additional questions to its consolidated application and expects to release
funds on a rolling basis once LEA applications and budgets have been
approved.
According to officials in three of the states we visited, the state budget
process is slowing the release of funds and the ability of local and state
educational agencies to finalize their plans for using Title I Recovery Act
funds. For example, in Pennsylvania, funds have been allocated and
obligated but cannot be expended until the legislature passes a budget,
according to state officials. Similarly, in Ohio, a state official told us that
LEAs cannot yet spend their allocated funds because state law requires the
state legislature to pass a final budget before federal funds are made
available for use by state and local agencies. Education officials in
Chicago told us that because the General Assembly had not yet finalized
the state budget, they do not know exactly how much state funding they
will receive in fiscal year 2010 and have not been able to make final
decisions as to how they will spend Recovery Act Title I funds.

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Many LEAs We Visited Plan to
Use Title I Recovery Act Funds
for Professional Development
to Build Capacity and Avoid the
“Funding Cliff” or to Fund High
School Programs

As shown in figure 5 below, local officials most frequently reported
planning to use their Title I Recovery Act funds for professional
development or to fund high school programs; officials in nearly half of the
districts we visited 42 said they planned to use funds for these purposes.
Approximately one-third of these local officials indicated that spending on
professional development would allow them to build their long-term
ong-term
capacity and avoid the “funding cliff.”

Figure 5: Planned Uses of Title I Recovery Act Funds in the School Districts We Visited
Number of districts
25

20

20

20

16
15
11
10

10

10
8

8
7

7

7
6

5

4
2

2

2

2

ad

ing

sp
or ecia
co lis
ac ts
sp
he
ec No
s
ifie
p
d i lan
n D ne
CI d u
wr se
ite s
up

g
nto
Me

Tu
to

rin

g

Re

on
cti
tru
ns
ei
Hir

rin

s
al

ou

co

ns

elo

ac
he

rs

r
Ot

he
Hir
ec

so Tec
ftw hn
are olo
lic gy o
en
se r
s
Ne
w
sc
ho
ols
Ins
tru
cti
on
al
ma
Lo
ter
ng
ial
er
da
yo
rs
ch
oo
ly
ea
r
Pa
ren
t in
vo
lve
me
nt
Su
mm
er
pP
rog
ram
Cr
ea
te
or
sa
ve
job
s

e-K
Pr

Pr
de ofes
ve sio
lop n
me al
nt
Hig
hs
ch
oo
l

0

Planned use
Source: GAO analysis of site visit interviews.

Note: Many local officials we spoke with mentioned more than one planned use of funds.

Nearly one-half of the districts we visited plan to use funds to serve high
school students, and nearly 40 percent plan to use funds to serve
preschool students—purposes that the Department of Education gave as

42

GAO visited at least 2 LEAs in each of the 16 States and the District of Columbia. We
selected LEAs based on the size of their Title I allocations and the number of schools in
improvement in the district. The above analysis is based on 42 LEAs we visited.

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examples of uses that are allowable under Title I and consistent with the
goals of the Recovery Act. About one quarter of the districts planned to
fund schools that did not previously receive Title I funding, purchase
technology or software licenses, or purchase instructional materials.
About 20 percent planned to make the school day or year longer, fund
programs to increase parent involvement, or create or save jobs.

State and Local Education
Officials Express Interest in
Securing Flexibility, Such as
through Waivers

A common theme in our discussions with state education officials was the
desire to secure flexibility in using Title I Recovery Act funds. For
example, of the 16 states and the District in our review, officials from 14
states expressed interest in at least one waiver. Specifically, state officials
in 8 states planned to apply for at least one waiver: All of these officials
planned to apply for the carryover waiver, and 3 also planned to apply for
a maintenance-of-effort waiver. In addition, officials in 6 other states we
visited had not yet decided whether to apply for a waiver, but all
mentioned considering the carryover waiver and 3 mentioned considering
the maintenance-of-effort waiver. Officials in the remaining 3 states did
not plan to request a waiver. The most common waivers mentioned were
carryover waivers 43 (14 states), maintenance-of-effort waivers (6 states), 44
and waivers for required spending for supplemental educational services
or school choice transportation (3 states). 45
Local education officials were similarly interested in securing flexibility in
the uses of Title I Recovery Act Funds. Of the local officials we
interviewed, more than 40 percent said they planned to request at least

43

LEAs must obligate at least 85 percent of their Recovery Act ESEA Title I, Part A funds by
September 30, 2010, unless granted a waiver, and all of their funds by September 30, 2011.

44
Generally, States are required to demonstrate “maintenance of effort” by showing that
either their combined fiscal effort per student or the aggregate expenditures within the
state with respect to the provision of free public education for the preceding fiscal year
were not less than 90 percent of such combined fiscal effort or aggregate expenditures for
the second preceding fiscal year.
45

Under ESEA Title I, supplemental educational services must be available to students in
schools that have not met state targets for increasing student achievement (adequate yearly
progress) for 3 or more years. Districts with schools in improvement are required to
provide an amount no less than 20 percent of their Title I, Part A allocations for
supplemental educational services and public school transportation. The term
supplemental educational services means tutoring and other supplemental academic
enrichment services that are in addition to instruction provided during the school day, are
specifically designed to increase the academic achievement of eligible students as
measured by the state’s assessment system, and enable these children to attain proficiency
in meeting state academic achievement standards.

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one waiver and approximately one quarter said they did not plan to
request a waiver. The remaining officials were undecided at the time of
our interviews. The particular waivers most frequently mentioned by local
officials were carryover waivers, waivers of requirements for
supplemental educational services (SES) funding, and maintenance-ofeffort waivers. Nearly 40 percent of officials said they would request a
waiver on maintenance-of-effort, over half said they would request a
waiver for SES, and nearly 75 percent of these officials said they would
request a carryover waiver. Of those officials planning to request a waiver
for SES, officials in two school districts mentioned they did not typically
need all of the funds they were required to set aside for supplemental
services and wanted the flexibility to spend the funds more quickly and on
purposes that would most benefit disadvantaged students.

State and Local Officials Do
Not Want to Finalize Plans
before Receiving More
Guidance

On April 1, 2009, Education released policy guidance that included
principles, goals, and possible uses of funds. This guidance also included
information on allocations from Education to state educational agencies
and from states and the District of Columbia to their LEAs, addressed
fiscal issues such as the carryover limitation, and explained the process
for obtaining a waiver. Education officials told us they hosted three
conference calls with state Title I directors after releasing the guidance to
answer questions from state officials. Education officials also told us they
have made a number of presentations around the country on using
Recovery Act Title I funds and have planned a meeting for state Title I
directors for this July, by which time they hope to have released additional
written guidance on waivers and allowable uses of Title I Recovery Act
funds.
In addition to guidance from Education, LEAs report receiving various
forms of guidance from their state agencies on Title I Recovery Act
funding. Figure 6 shows the number of states we visited in which local
educational officials in at least one district we visited told us they had
received particular forms of guidance. In particular, local education
officials reported participating in webinars hosted by the state educational
agency (officials in eight states), participating in meetings (officials in six
states), receiving state-specific written guidance (officials in seven states),
obtaining information from the state educational agency Web site (officials
in six states), calling or e-mailing state officials (officials in four states),
participating in training sessions provided by state officials (officials in
two states), and participating in conference calls with state officials

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(officials in four states). In at least one LEA in nine of the states we
visited, local officials did not mention receiving any guidance from the
state. 46
Figure 6: Officials in Districts We Visited Reported Receiving Guidance in Many Forms
Number of states
10
9
9
8

8

7

7
6

6

6

5
4

4

4

4
3

3
3
2

2
1

r
he
Ot

s
op
sh
Wo
rk

s
ce
ren
nfe
Co

ren
nfe
Co

Tra
i

nin

gs

ce

Ca

es
sio
n

e-M
or
lls
ca
al
Inf
orm

lls

s

s
ail

e
sit
We
b
te
Sta

rec Dis
eiv tric
ing t di
sta d no
te
t
gu rep
ida ort
nc
e

wr Sta
itte te
n g spe
uid cifi
an c
ce

s
ng
eti
Me

We
b

ina

rs

0

SEA guidance received
Source: GAO analysis of site visit interviews.

Note: Officials in many districts reported receiving more than one form of guidance from their state
educational agency.

Officials in one state and one district said that local officials are fearful of
missteps with the funds. For example, officials in one LEA said they
wanted more specific guidance on how the Title I Recovery Act funds can
be spent in order to be sure they are doing things correctly. Given these
examples and the fact that nearly half of officials in districts we visited
reported wanting more guidance on allowable uses of Title I funds that

46
This does not necessarily mean that no guidance was received. The official could have
known about state guidance and not mentioned it in our interview or not been aware of
guidance that had been provided.

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meet the priorities of the Recovery Act, it seems likely that the lack of
guidance may be slowing LEA’s planning processes.
When asked about guidance they would particularly like to receive, state
education officials most frequently said they wanted more information
regarding guidance on waivers (nine states), reporting requirements (five
states), and how to define jobs created or saved (three states). Local
officials most frequently said they wanted guidance on reporting
requirements and on allowable uses of Title I funds that would be in
accordance with the priorities of the Recovery Act. They also reported
wanting more guidance on waivers, flexibility in spending, and the
“supplement-supplant” provision. 47

U.S. Department of
Education Has Allocated
Half of Recovery Act IDEA
Funding, but States and
Localities Have Drawn
Down Few Funds, and
Await Guidance on
Reporting and Other Issues

The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of the Individuals with Disabilities Education Act (IDEA),
the major federal statute that supports the provisions of early intervention
and special education and related services for infants, toddlers, children,
and youth with disabilities. Part B funds programs that ensure preschool
and school-aged children with disabilities have access to a free and
appropriate public education and Part C funds programs that provide early
intervention and related services for infants and toddlers with
disabilities—or at risk of developing a disability—and their families. IDEA
formula grants and Recovery Act funds are allocated to states through 3
grants—Part B grants to states (for school-age children), Part B preschool
grants (section 619), and Part C grants for infants and families. The U.S.
Department of Education made the first half of states’ Recovery Act IDEA
allocations to state agencies on April 1, 2009. As of June 26, 2009, of the
sixteen states and District of Columbia that we visited, only seven states
had drawn down IDEA Recovery Act funds. In total, just over eight
percent of allocated funds had been drawn down in these states. 48

47

LEAs must use federal funds to supplement state and local funds and cannot use federal
funds to supplant state or local spending.

48

States were not required to submit an application to Education in order to receive the
initial Recovery Act funding for IDEA Parts B and C, funding that represents 50 percent of
the total IDEA funding provided in the Recovery Act for each jurisdiction. States will
receive the remaining 50 percent by September 30, 2009, after submitting information to
Education addressing how they will meet Recovery Act accountability and reporting
requirements.

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(See table 9.) Most states that we visited are requiring LEAs to submit an
application to receive the IDEA Part B Recovery Act funding. 49

Table 9: IDEA, Parts B and C Recovery Act Allocations and Draw Downs for the 16 States and the District of Columbia
Total State
Allocation

Funds made available to
states as of April 1, 2009

Funds drawn down by
states as of June 26

Percentage of available funds
drawn down by states

Arizona

$194,166,881

$97,083,441

0

0

California

1,321,205,578

660,602,789

$241,541,985

37

Colorado

160,962,162

80,481,081

50,066

<1

18,842,253

9,421,127

0

0

Florida

670,040,593

335,020,297

38,138,170

11

Georgia

338,853,225

169,426,613

0

0

Illinois

542,335,730

271,167,865

$10,300,720

<4

State:

DC

Iowa

130,107,550

65,053,775

$25,866,684

40

Massachusetts

298,176,851

149,088,426

1,026,497

<1

Michigan

426,350,589

213,175,295

0

0

Mississippi

126,728,366

63,364,183

0

0

New Jersey

383,296,050

191,648,025

0

0

New York

817,897,473

408,948,737

0

0

North Carolina

339,211,862

169,605,931

12,636,562

7

Ohio

465,505,019

232,752,510

0

0

Pennsylvania

455,939,209

227,969,605

0

0

Texas

1,009,383,291

504,691,646

0

0

Total

$7,699,002,682

$3,849,501,341

$320,169,074

8.3

Source: Department of Education.

State and local officials report receiving general guidance from the U.S.
Department of Education (Education) but additional clarifications are
needed in key areas. In April 2009, Education released policy guidance
describing principles and goals of IDEA Recovery Act funds, and written
guidance with information on the timing of allocations of funds to states,
indirect costs, waivers, and authorized uses of IDEA Recovery Act funds.
According to Education officials, Education has also provided assistance

49

For the IDEA Part B Recovery Act funds, for each state covered by our review, GAO
visited at least two LEAs that were among the top ten LEAs in the state in terms of Title I
appropriations and that had schools in improvement status. In the District of Columbia,
GAO visited the District of Columbia Public Schools and a charter school company.

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and guidance to states and school districts in a variety of other ways,
including conference calls with state agencies administering Parts B and
C, presentations at conferences, and webinars on specific issues such as
IDEA maintenance-of-effort requirements. While Education officials
provided guidance with examples of allowable uses of Recovery Act IDEA
funds on April 24, states and LEAs indicate the need for further guidance
in this area. For example, several states and LEAs report needing clearer
guidance on allowable uses, including construction costs, and Education
officials said they have heard questions about allowable uses for buses for
students with disabilities. Education officials said that they are working on
a more detailed document on innovative strategies for increasing student
academic achievement and avoiding funding commitments that will be
unsustainable after the Recovery Act funding expires. Several states
reported offering various forms of guidance to LEAs, including holding
webinars, direct communication, and providing written guidance on
potential uses of Recovery Act IDEA funding.
At the time of our site visits neither Education nor the U.S. Office of
Management and Budget (OMB) had issued final guidance on Recovery
Act reporting. 50 Many state officials told us that it will be difficult to plan
how they will report the impact of Recovery Act funding until they receive
further guidance from OMB or Education. Education is planning to
supplement the guidance OMB provides, to help state agencies report the
proper data. In particular, Education officials noted that draft OMB
guidance on recipient reporting would require some additional Education
guidance to clarify issues for recipients of formula grants, such as the
IDEA grants.
Various state and local officials had concerns about whether their LEAs
would be able to exercise the flexibility allowed under IDEA Part B’s
maintenance-of-effort requirements. Generally, in any fiscal year that an
LEA’s IDEA, Part B section 611 or grants to states allocation exceeds the
amount the LEA received in the previous year, the LEA may reduce its
local spending on disabled students by up to 50 percent of the amount of
the increase, as long as the LEA (1) uses those freed-up funds for activities
that could be supported under the Elementary and Secondary Education
Act of 1965, (2) meets the requirements of the IDEA, including the

50

In response to requests for more guidance on the recipient reporting process and required
data, OMB issued additional implementing guidance for recipient reporting on June 22,
2009.

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performance targets in its state’s performance plan, and (3) can provide a
free appropriate public education. Pennsylvania officials said that this rule
has been a source of confusion for LEAs in their state, and state officials
said they have discussed it in great detail in webinars, conferences, and
other communication with LEAs. Education officials said that in
developing Education’s guidelines, in addition to reviewing and
interpreting the statutes, they have met with state and local educational
agencies and interest groups who have raised concerns. Education
officials told us that some interest groups have asked them to reconsider
the requirement that LEAs meet requirements of the IDEA, including
performance targets in state performance plans in order to qualify for the
MOE flexibility, but agency officials believe this requirement was
statutorily mandated. Another concern involves LEAs that have been
determined to have significant disproportionality based on race and
ethnicity, 51 because these districts are required to set aside 15 percent of
their total IDEA, Part B funds, including Recovery Act IDEA, Part B funds,
for comprehensive early intervention services. This limits their ability to
exercise MOE flexibility. According to Education officials, interest groups
have asked Education to reconsider its interpretation of this IDEA
provision.
States and LEAs plan to spend IDEA Part B Recovery Act funding for a
variety of services and initiatives. Most LEAs planned to offer professional
development activities and several noted that such activities could avoid
unsustainable funding commitments after Recovery Act funds expire. LEA
officials in the District of Columbia and Philadelphia said that their goal
with their IDEA Part B Recovery Act expenditures is to expand their
districts’ ability to serve more students with disabilities, which would
mean that the LEAs would receive IDEA funds for serving students with
disabilities who are currently served by going to schools outside the LEAs.
Other examples of areas in which LEAs plan to spend Recovery Act funds
include: acquiring and improving the use of assistive technologies;
improving transitions for students with disabilities, from preschool to K12, and from school to jobs; and increasing capacity to collect and utilize
data.

51

States are required to collect and examine data to determine if LEAs have significant
disproportionality based on race and ethnicity in the identification of children as children
with disabilities, the placement in particular education settings of such children, and the
incidence, duration, and type of disciplinary actions.

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States may use IDEA, Part C Recovery Act funds for any allowable
purpose under IDEA, Part C, including the direct provision of early
intervention services to infants and toddlers with disabilities and their
families, and implementing a statewide, comprehensive, coordinated,
multidisciplinary, interagency system to provide early intervention
services. 52 At the time of our interview, Illinois Department of Human
Services officials said that the department had already received and
expended its initial allocation of IDEA, Part C Recovery Act funds and that
the funds had been used to avert a 7 to 8 percent cut in its caseload.
Pennsylvania officials plan to spend most of the state’s IDEA, Part C
Recovery Act funds on basic services, but they also plan to spend $1
million in IDEA, Part C Recovery Act funds for an early childhood
integrated data system. In Arizona, officials told us that these services are
provided by entities that contract with the Arizona Department of
Economic Security (DES). DES officials maintain that these IDEA Part C
Recovery Act funds will be used to address funding shortfalls created by
an increasing caseload without a commensurate increase in base federal
or state funding for Part C services. In Colorado, state officials said that
the IDEA Part C Recovery Act funds would generally go to contracts with
community centered boards and some universities that provide
professional and paraprofessional development as well as technology and
services.

States and Localities Are
Using Recovery Act Funds
in an Effort to Provide
Summer Employment
Activities to Greater
Numbers of Youth

The Recovery Act provides an additional $1.2 billion in funds nationwide
for the Workforce Investment Act (WIA) Youth program to facilitate the
employment and training of youth. The WIA Youth program is designed to
provide low-income in-school and out-of-school youth age 14 to 21, who
have additional barriers to success, with services that lead to educational
achievement and successful employment, among other goals. The
Recovery Act extended eligibility through age 24 for youth receiving
services funded by the act. In addition, the Recovery Act provided that, of
the WIA Youth performance measures, only the work readiness measure is
required to assess the effectiveness of summer-only employment for youth
served with Recovery Act funds. Within the parameters set forth in federal
agency guidance, local areas may determine the methodology for
measuring work readiness gains. The WIA Youth program is administered

52

IDEA, Part C provides funds to each state lead agency designated by the governor. The
state lead agency can be a state educational agency, but it can also be another state agency.
For example, in Colorado and Illinois, the Part C lead agency is the state’s Department of
Human Services, and in Ohio, the Part C lead agency is the state Department of Health.

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by the Department of Labor (Labor), and funds are distributed to states
based on a statutory formula; states, in turn, distribute at least 85 percent
of the funds to local areas, reserving up to 15 percent for statewide
activities. The local areas, through their local workforce investment
boards, have flexibility to decide how they will use these funds to provide
required services.
In the conference report accompanying the bill that became the Recovery
Act, 53 the conferees stated they were particularly interested in states using
these funds to create summer employment opportunities for youth. While
the WIA Youth program requires a summer employment component to be
included in its year-round program, Labor has issued guidance indicating
that local areas have the program design flexibility to implement standalone summer youth employment activities with Recovery Act funds. 54
Local areas may design summer employment opportunities to include any
set of allowable WIA Youth activities—such as tutoring and study skills
training, occupational skills training, and supportive services—as long as it
also includes a work experience component. Labor has also encouraged
states and local areas to develop work experiences that introduce youth to
opportunities in “green” educational and career pathways. Work
experience may be provided at public sector, private sector, or nonprofit
work sites. The work sites must meet safety guidelines, as well as federal
and state wage laws. 55

States Have Allocated Recovery
Act WIA Youth Funds to Local
Workforce Areas

For this report, we focused on the WIA Youth program in 13 of our 16
states (all except Arizona, Colorado, and Iowa) 56 and the District of
Columbia (District). The 13 states and the District received nearly twothirds of the Recovery Act WIA Youth funds allotted by Labor. In turn, the
13 states have allocated at least 85 percent of these funds to their local

53

H.R. Rep. No. 111-16, at 448 (2009).

54

Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18,
2009).

55

Current federal wage law specifies a minimum wage of $6.55 per hour until July 24, 2009,
when it becomes $7.25 per hour. Where federal and state law have different minimum wage
rates, the higher standard applies.

56

We did not include these three states in our review due to workload considerations.

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workforce areas, as shown in table 10. 57 As allowed, the 13 states generally
reserved 15 percent of the Recovery Act WIA Youth funds for statewide
uses, although Florida and New Jersey instead allocated their entire
allotments to local workforce areas.
Table 10: Allocations of Recovery Act WIA Youth Funds for 13 States and the
District, as of June 30, 2009
Dollars in millions

State
California

Allotment from
Department of
Labor

Amount state
allocated to local
areas

Percentage of
allotment to
local areas

$186.6

$158.6

85

4.0

Not applicable

Not applicable

42.9

42.9

100

Georgia

31.4

26.7

85

Illinois

62.2

52.9

85

Massachusetts

24.8

21.1

85

Michigan

73.9

62.9

85

Mississippi

18.7

15.9

85

New Jersey

20.8

20.8

100

New York

71.5

60.8

85

North Carolina

25.1

21.3

85

Ohio

56.2

47.7

85

Pennsylvaniaa

40.6

34.6

85

82.0

69.7

85

$740.7

$635.9

District of Columbia
Florida

Texas
Total

Source: Department of Labor and state workforce agencies.
a

In Pennsylvania, only 40 percent of the allocation is available for the local areas to spend before July
1; Pennsylvania officials expect the balance to be available on or after July 1, when they expect the
state to enact its budget.

As of June 25, 2009, about 6 percent of Recovery Act WIA Youth funds had
been drawn down nationwide, according to Department of Labor data.
Draw downs represent cash transactions: funds drawn down by states and

57
In Pennsylvania, only 40 percent of the allocation is available for the local areas to spend
before July 1; Pennsylvania officials expect the balance to be available on or after July 1,
when they expect the state to enact its budget.

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localities to pay their bills. 58 Among the 13 states and the District of
Columbia, the percent drawn down generally ranged from zero for the
District to 10 percent for Ohio. However, one state—Mississippi—had
drawn down 39 percent of its funds. Draw downs do not provide a
complete picture of the extent to which states and localities have used
Recovery Act WIA Youth funds to provide services since payment for
services can occur after funds are obligated and services are provided. The
Department of Labor receives quarterly reports from states on their WIA
Youth expenditures for services that have been provided, but there is a
time lag before these data become available. For example, states’ reports
for the quarter ending June 30 are due to Labor 45 days after the end of the
quarter, or August 15, and Labor then reviews the data before releasing
them.

States Plan to Use Funds to
Provide More Youth with
Summer Employment Activities

Consistent with congressional intent that a substantial portion of these
funds be used for summer youth employment activities, our states
generally plan to use these funds to increase the number of youth served
through summer activities. For example, Michigan anticipates serving
about 25,000 youth in the summer of 2009, compared with about 4,000
youth served with WIA funds in the summer of 2008. Illinois plans to spend
about $50 million of its $62 million Recovery Act Youth allotment on youth
employment activities in the summer of 2009 and has set a target of
serving about 15,000 youth through these activities. Texas set a target of
spending 60 percent of Recovery Act WIA Youth funds allocated to local
areas on summer employment activities and serving about 14,400 youth in
the summer of 2009 (compared with 918 youth actually served in the
summer of 2008 with WIA funds). In contrast to these states, the District
plans to use its Recovery Act WIA Youth funds on its year-round WIA
Youth program. District officials told us that, before receiving the
Recovery Act funds, they had already allocated $45 million for the
district’s locally funded 2009 summer youth employment program, which
they said is the second-largest summer youth employment program in the
nation, serving about 23,000 youth.
Several states, including Massachusetts, Ohio, Pennsylvania, and Texas,
have required their local workforce areas to spend from 50 percent to 70
percent of their Recovery Act WIA Youth funds by September or October

58

These are cash draw downs from the Department of Health and Human Services’ Payment
Management System. Under the procedures for using these funds, funds are to be drawn
down no more than 3 days in advance of paying bills.

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2009. For example, Ohio requires local areas to spend at least 70 percent
of these funds by October 31, 2009, and 90 percent of funds by January 31,
2010, or risk having funds recaptured by the state. Massachusetts requires
local areas to spend at least 60 percent of their funds by September 30,
2009.

Local Flexibility Is Evident in
the Different Approaches
Planned for Providing Services
to Youth This Summer

States and local areas we visited varied in the approaches they planned to
use in providing summer youth employment activities. 59 While public
sector work sites were frequently mentioned, so, too, were private sector
and nonprofit organizations. Across the spectrum of work sites, work
activities ranged widely. Local areas were varied in the role that academic
and occupational skills training is playing in the summer activities and in
the extent to which contracted providers will administer the summer
activities.
Type of work experience. Planned work sites for the Recovery Act-funded
summer youth activities varied widely across the local areas we visited
and included public sector, private sector, and nonprofit organizations.
Most local areas expected at least some public sector jobs, and in some
areas the majority of the work sites are expected to be in the public sector.
These sites often included local government offices; public parks,
recreation centers, and camps; and public schools and community
colleges, public libraries, and animal shelters. Local areas in several states
were planning to place youth in private sector work sites, as well,
including supermarkets, pharmacies, health care institutions, and private
learning centers. Officials in two local areas we visited expected the
majority of their work sites to be in the private sector. In addition, at least
one local area in nearly all of the states we visited expects to make use of
nonprofit work sites, including community action agencies, boys and girls
clubs, and the YMCA. Across the different types of work sites, the specific
work activities planned for the youth ranged from clerical work, grounds
keeping, animal care, and kitchen support to customer service and serving
as camp counselors or radiology technicians’ assistants.
Labor encouraged states to develop work experiences in “green” jobs, and
officials reported that green jobs were available in nearly all local areas we
visited. The jobs they cited included landscape maintenance, recycling,
and green construction, and an automotive fuel technology project at a
university, as well as jobs in energy efficiency and weatherization.

59

We visited from two to four local workforce areas in each of our states.

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However, officials told us they were not always clear what constituted a
green job. For example, officials in Pennsylvania’s South Central local area
questioned whether a youth working in a plastics factory that makes parts
for a windmill is working in a “green” job. Labor has provided some
discussion of green jobs in its guidance letters to states on Recovery Act
funds. For example, Labor’s March 18, 2009, guidance letter highlights
areas within the energy efficiency and renewable energy industries that
will receive large Recovery Act investments, such as energy-efficiency
home retrofitting and biofuel development, and also provides examples of
occupations that could be impacted by “green” technologies, including
power plant operators, electrical engineers, and roofers and construction
managers. 60 Labor officials told us that their reporting requirements for
Recovery Act funds do not include any tracking of green jobs.
Role of academic and occupational skills training. While not all local
areas had completed their plans for the summer activities at the time of
our review, in about half of the states at least some local areas were
planning to provide academic or occupational skills training along with
work experience. For example, Buffalo, New York, plans several projects
that will combine green jobs with academic training, as well as
weatherization and construction skills. In one such program, youth will
work to earn their General Equivalency Diplomas (GED) while also
learning “green” construction skills. Participants will earn $7.25 an hour
for their work experience and $3 an hour while working on their GEDs.
Another of Buffalo’s projects will help youth who are at-risk of dropping
out of school by providing them with an opportunity to recover the high
school credits they need for graduation while also taking part in work
experience.
Even when local areas are focusing most of their efforts on work
experience, many are also planning to provide work readiness training as
part of an initial orientation to the summer activities, but the nature of the
work readiness training varied widely. In Mercer County, New Jersey, for
example, youth will be given a short workshop on interviewing skills prior
to a job fair. In addition to employment, youth age 14 to 17 will receive 21

60

Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18,
2009). This guidance also makes reference to the $750 million in separate Recovery Act
funds made available to Labor to award competitive grants for training and placing workers
in the energy efficiency, renewable energy, and other industries and indicates that about
$500 million of this funding will be used for activities that prepare individuals for careers in
industries as defined in the Green Jobs Act of 2007.

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hours of job readiness training, and those age 18 to 24 will receive 28
hours of job readiness training. In another New Jersey example, youth in
Camden County will receive 8 hours of life skills training using a standard
curriculum, followed by financial literacy training based on curricula
developed for youth by the Federal Deposit Insurance Corporation. Other
local areas we visited also plan to provide financial literacy training as part
of their orientation. Ohio’s Franklin and Montgomery Counties, for
example, have arranged for a local bank to help participating youth set up
bank accounts, into which their paychecks will be automatically
deposited. Youth will receive debit cards to access the account and will
receive basic financial counseling.
Administration of summer employment activities. Many local areas are
using contracted providers to operate key aspects of the WIA summer
youth employment activities, such as recruiting youth and work sites and
administering payroll. In some cases, officials report they have been able
to extend existing contracts with their WIA year-round program service
providers to cover the stand-alone summer employment activities. In other
cases, they have conducted new competitions, in part, because they
needed additional contractors to cover the expansion of services. All
thirteen of our states applied for and received a waiver from Labor relating
to procurement requirements for youth summer employment providers.
The waivers allow local areas to expand existing competitively procured
contracts or conduct an expedited, limited competition to select service
providers. Labor approved 10 of these waivers in April or May 2009, and
the other 3 in June 2009.
While using contracted providers to operate the program was more
common, in a few states at least some local areas were operating the
entire program in-house. In New Jersey, for example, the local areas we
visited are relying mostly on internal staff to carry out program
responsibilities; however, one area plans to use contracted providers for
some specific roles. In Ohio, two of the four local areas we visited had
decided to operate the program in-house. Officials in one of the local areas
in Ohio told us they made the decision for two reasons—they wanted to be
able to exercise greater control over the program and they were seeking to
avert staff layoffs due to funding cuts in other programs.

States and Local Areas
Experienced Multiple
Challenges in Quickly
Implementing Summer Youth
Employment Activities

State and local officials reported challenges in implementing their standalone summer youth employment activities that generally reflected three
key themes—tight time frames for implementing the program, lack of
staffing capacity to meet the expanding needs, and difficulty in
determining and documenting youth eligibility.

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Tight time frames. Many state and local officials commented that the
biggest challenge in implementing the program was the limited time frame
they had for making the program operational. Once the Recovery Act was
passed, states and local areas had only about 4 months to get their new
summer youth employment activities up and running—a process that
officials told us would normally begin many months earlier. And local
areas often lacked recent experience in operating such a stand-alone
program. In implementing the year-round service requirements of WIA (in
which summer employment is a component rather than a stand-alone
program), many states and local areas had greatly reduced their summer
youth employment programs and no longer offered a stand-alone summer
program—or they had found other funding sources, such as state, local, or
foundation funds, to cover it. Unlike WIA, its predecessor, the Job Training
Partnership Act, required local areas to provide a stand-alone summer
youth employment program. The local areas we reviewed represented a
mix of experiences. Those without recent experience had to build the
program from the ground up. These areas had to quickly confront many
basic decisions—how to structure the program, how to recruit work sites
and participants, whether to use contracted providers (and for what
functions) or whether to administer the program in house. Other areas,
however, had well-developed summer youth employment programs. These
areas already had some of these basic structures in place, but often still
found it challenging to quickly expand their existing programs.
Staffing capacity. Across the local areas we visited, many officials told us
staff were challenged to address the needs of the growing number of youth
they needed to serve. In some cases, states had been downsizing or did not
have the flexibility to hire additional staff due to hiring freezes and budget
cuts. For example, Essex County, New Jersey, operating with two full-time
staff, said the inability to hire additional staff posed challenges for
recruiting youth and monitoring the program. In the local areas we visited
in Ohio, the expected increases in enrollments were leaving local areas’
staff stretched thin. To address this challenge, some counties were
reassigning employees from other programs to work on WIA summer
youth employment activities. One county had arranged for additional staff
to monitor the summer program by using a temporary placement agency.
Similarly, Chicago officials said that, despite having had experience in
implementing a stand-alone summer program, they found implementing
the WIA summer youth employment activities challenging because, in
order to adequately ramp up their programs and prepare for
implementation, they had to borrow staff from other sections who do not
typically work on the WIA Youth program.

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Determining and documenting youth eligibility. Several states and local
areas commented that it was challenging to determine youth applicants’
eligibility and to obtain supporting documentation, especially for the
increased number of youth they are planning to serve. New Jersey officials
told us that the youth targeted for the program generally have difficulty
providing the kinds of documents required in order to prove WIA Youth
program eligibility. For example, to determine that youth meet the
eligibility requirements, local officials in New Jersey require
documentation that includes public assistance identification cards to
support total household income, birth certificates for proof of citizenship,
Social Security numbers, and documentation of selective service
registration for males age 18 and over. Officials in a few states also
expressed concern that the income eligibility standards were more
restrictive than for other programs, particularly those operated using state
funds, and that the standards may be excluding a significant number of
youth who need the services. For example, officials in Philadelphia
reported that some of their youth applicants whose parents had recently
lost their jobs were not eligible for the program because eligibility was
based on income earned during the period just prior to dislocation.

States Plan to Use Various
Procedures to Monitor Local
Areas’ Summer Youth Activities

With regard to program oversight, all 13 of our states and the District
reported they had the capacity to track and report on Recovery Act funded
WIA Youth expenditures separately from those not funded by the
Recovery Act. The states also reported plans to use a variety of procedures
to monitor local areas’ summer youth employment activities, such as risk
assessments, on-site monitoring, and periodic meetings with local program
directors. For example, Ohio state officials sent a survey to the local
workforce areas in May 2009 to help identify local areas with greater risk
due to factors such as critical timing issues, larger program scope, or
substantial changes from past programs, and the state planned to initially
focus its attention on these local areas. Massachusetts state officials said
they planned to conduct on-site visits to each local workforce area at least
twice during the summer and that the state’s monitoring efforts would
include file reviews of information pertaining to topics such as eligibility,
standard operating procedures, contracts, statements of work, and
subrecipient monitoring. Michigan state officials said they planned to hold
monthly meetings with all local program directors to encourage the
reporting of consistent information and that their on-site monitoring
would focus especially on private sector components of the program, such
as private sector worksites.
Department of Labor officials said that they have efforts underway to
understand the experiences of those operating summer youth activities

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through regular interaction with state and local service providers,
monitoring, identifying any issues, and providing assistance to address the
issues. For example, they said that Labor’s regional offices have begun
visiting local areas to monitor and gather information and will be visiting
about two areas in each of their states this summer. Beginning the week of
June 29, each of the six regional offices will begin providing weekly
narrative reports on the Recovery Act summer youth employment
activities from at least two local areas each week.

Measuring the Effects of the
Summer Youth Activities Will
Focus Largely on Work
Readiness Improvements

To assess the effects of the summer youth employment activities, states
will be required to report a work readiness attainment rate—defined as the
percentage of participants in summer employment who attain a work
readiness skill goal. Under Department of Labor guidelines, states and
local areas are permitted to determine the specific assessment tools and
the methodology they use to determine improvements in work readiness,
but it must be measured at the beginning and completion of the summer
experience. Not all areas had finalized their plans for assessing work
readiness at the time of our visits but were considering various pre- and
post-test options. For example, officials in Mississippi plan to do a written
pre- and post-test but will also assess youth at the midpoint through an
interview with an employment adviser. All three areas we visited in
Florida plan to supplement the pre- and post-tests with feedback from
businesses and work site supervisors.
To monitor and report on progress made in implementing the program,
Labor has instituted new reporting requirements on youth participating in
Recovery Act-funded activities. Under WIA, states have been required to
report quarterly to Labor on aggregate counts of youth participants,
activities, and outcomes. However, since these reports are not submitted
in time for Labor to comply with Recovery Act requirements to make
information readily available to the public, states will be required,
beginning on July 15, to submit a supplemental monthly report on youth.
In this supplemental report, states will submit aggregate counts of all
Recovery Act youth participants, including the characteristics of
participants, the number of participants in summer employment, services
received, attainment of a work readiness skill, and completion of summer
youth employment.
In addition to Labor’s reporting requirements, a few states were
developing plans for additional assessments of the program. Georgia
officials, for example, reported that they are considering tracking whether
youth return to school or obtain full-time employment after the summer
program is over. Similarly, officials in Illinois are currently designing a

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tracking system that will allow them to assess the long-term impacts of the
program, including job placement and job retention of participants.

Many Public Housing
Agencies Have Obligated,
but Few have Drawn
Down, Recovery Act
Funds

The Recovery Act requires the U.S. Department of Housing and Urban
Development (HUD) to allocate $3 billion through the Public Housing
Capital Fund to public housing agencies using the same formula for
amounts made available in fiscal year 2008. HUD allocated Capital Fund
formula dollars to public housing agencies shortly after passage of the
Recovery Act and, after entering into agreements with over 3,100 public
housing agencies, obligated these funds to public housing agencies on
March 18, 2009. 61 Although HUD has allocated and obligated almost $3
billion in formula capital grants to 3,123 public housing agencies, 62 and
1,483 agencies have begun obligating relatively less, little funding has been
drawn down by housing agencies. 63 Specifically, as of June 20, 2009, $466
million, or 16 percent, of the funds allocated by HUD to the housing
agencies has actually been obligated by the housing agencies, and $32
million, or 1.1 percent, has been drawn down (see figure 7).

61

HUD is also required to award $1 billion to public housing agencies based on competition
for priority investments, including investments that leverage private sector
funding/financing for renovations and energy conservation retrofit investments. HUD
expects to begin awarding competitive bids in July or August 2009.

62
HUD allocated Capital Fund formula dollars from the Recovery Act to 11 additional public
housing agencies, but these housing agencies chose not to accept Recovery Act funding, no
longer had eligible public housing projects that could utilize the funds, or had not yet
entered into an agreement with HUD for the funds. As a result, these funds have not been
obligated by HUD.
63

When housing agencies sign contracts for Capital Fund projects, they report obligations
of these funds in HUD’s Electronic Line of Credit and Control System (ELOCCS). As
invoices are submitted for actual work done, these funds are drawn from ELOCCS and
expended in payment of invoices.

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Figure 7: Percent of Public Housing Capital Fund Formula Grants Allocated by HUD that Have Been Obligated and Drawn
Down Nationwide, as of June 20, 2009
Funds obligated by HUD

Funds obligated
by public housing agencies

Funds drawn down
by public housing agencies

1.1%
15.6%

99.9%

$2,982 million

$466 million

$32 million

Number of public housing agencies
Entering into agreements for funds
Obligating funds
Drawing down funds

3,123
1,483
721

Source: GAO analysis of HUD data.

For this report, we visited 47 public housing agencies in the 16 states and
the District of Columbia, which had received formula grant awards
totaling $531 million. These housing agencies have identified projects and
are just beginning to obligate and draw down Recovery Act funds for
project expenses. As of June 20, 2009, these public housing agencies had
obligated almost $66 million, or about 12 percent of their $531 million
allocation, and had drawn down $2.6 million, or 0.5 percent of the $531
million. Thirty of the 47 agencies had obligated funds (including 3 small
agencies and 1 medium agency that had obligated 100 percent of their
funds), indicating that contracts had been awarded and signed and that
work was beginning, of which 20 had drawn down funds (see figure 8).

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Figure 8: Percent of Public Housing Capital Fund Formula Grants Allocated by HUD that Have Been Obligated and Drawn
Down by 47 Public Housing Agencies Visited by GAO, as of June 20, 2009
Funds obligated
by public housing agencies

Funds obligated by HUD

Funds drawn down
by public housing agencies

0.5%
12.4%

100%

$531,001,215

$65,938,547

$2,556,708

Number of public housing agencies
Entering into agreements for funds
Obligating funds
Drawing down funds

47
30
20

Source: GAO analysis of HUD data.

Several of the 17 public housing agencies we spoke to that had neither
obligated nor drawn down any funds stated that they had not done so
because they were awaiting approval from HUD on their plans for using
Recovery Act funds, or they were still soliciting bids and finalizing
contracts. Others were developing project plans or completing
environmental reviews. In addition, some public housing agency officials
stated that their status as a “troubled performer”—based on HUD’s Public
Housing Assessment System (PHAS) 64 —meant they faced more oversight
and monitoring from HUD, which was preventing them from obligating the
Recovery Act funds as quickly as they would like. However, many of these
17 agencies expected to begin awarding contracts, obligating funds, and

64

HUD developed PHAS to evaluate the overall condition of housing agencies and to
measure performance in major operational areas of the public housing program. These
include financial condition, management operations, and physical condition of the housing
agencies’ public housing programs. Housing agencies that are deficient in one or more of
these areas are designated as troubled performers by HUD and are statutorily subject to
increased monitoring.

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working on projects by July 2009. This timeline is in line with HUD
headquarters officials’ expectations that activity involving obligating
Recovery Act funds will increase substantially during the next quarter
(July to September 2009).

Planned Use of Recovery Act
Funds by Housing Agencies

For the 47 housing agencies that we visited, officials indicated that they
were planning to use their Recovery Act funds for various types of
activities, ranging from parking lot repaving to complete rehabilitation of
multi-unit structures. Among the most common Recovery Act project
types mentioned by public housing agency officials were roof and window
replacements; heating, ventilation, and air conditioning (HVAC) system
upgrades or replacements; and interior rehabilitation work, such as
kitchen or bathroom renovations and flooring or carpet replacements. For
example, Athens Housing Authority in Georgia plans to replace water
heaters and kitchen cabinets at 23 scattered sites (see figure 9). According
to the public housing agencies we visited, more than 15,000 units will be
rehabilitated, including more than 1,500 vacant units.

Figure 9: Unit That the Athens Housing Authority Plans to Renovate with Recovery Act Funds

Source: GAO.

Single space heater to be replaced with central heat (left) and kitchen (right).

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Relatively small-scale projects were already underway or had been
completed, such as the 10 bathroom remodels and 105 window
replacements that Ferris Housing Authority in Texas had finished. In
contrast, some major projects requiring planning and design work had yet
to begin. In fact, some public housing agencies avoided large, complex
projects because they believed the projects would take too long. However,
some of the large public housing agencies are funding major activities,
such as demolishing a public housing structure, constructing new
structures, or completely renovating hundreds of units across many
properties. For example, Philadelphia Housing Authority plans to spend
over $29 million to rehabilitate 300 vacant units at various sites—one of
which is shown in figure 10—and another $14.6 million to completely
reconfigure a 71-unit mid-rise building into a 53-unit building with new
community spaces, elevators, and energy-efficient electrical and
mechanical systems. Cuyahoga Metropolitan Housing Authority in Ohio is
using $12 million of Recovery Act funds to pay for part of a $65 million
redevelopment initiative that involves demolishing existing structures and
building new structures. HUD has informed housing agencies that they
may use the Recovery Act funds for demolition and construction of new
units, provided that they can meet the Act’s obligation and expenditure
deadlines.

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Figure 10: Philadelphia, Pennsylvania, Plans to Rehabilitate Vacant Units at
Scattered Sites

Source: Philadelphia Housing Authority.

Prioritization: The Recovery Act requires public housing agencies to give
priority to projects involving the rehabilitation of vacant units, projects
already underway or on the agency’s latest 5-year plan, and projects that
could be awarded based on bids within 120 days of the Recovery Act funds
becoming available. Public housing agency officials we spoke to generally
prioritized projects that were on their 5-year plan, that could be initiated
quickly, and that were, in their judgment, the most critical projects to be
completed.

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Only a few of the largest public housing agencies we visited stated that
they had relatively large numbers of vacant units they were going to
rehabilitate. More than 1,200 of the over 1,500 vacant units that agencies
we visited had slated for rehabilitation using Recovery Act funds were
identified by just five public housing agencies: Chicago Housing Authority,
Philadelphia Housing Authority, San Francisco Housing Authority,
Cuyahoga Metropolitan Housing Authority in Ohio, and Newark Housing
Authority. However, for some agencies facing relatively few vacancies,
rehabilitating vacant units was not the highest priority in selecting
projects. Instead, they focused on meeting other Recovery Act priorities,
such as selecting projects already underway or selecting projects for
which contracts could be awarded within 120 days.
An additional priority for public housing agencies in selecting projects was
finding ways to improve energy efficiency in their buildings. Some are
seeking to accomplish this by making exterior improvements, such as
replacing roofs, siding, or windows, while others will be replacing
appliances or HVAC equipment with more energy-efficient models. For
example, Rahway Housing Authority in New Jersey is in the process of
replacing siding on some of its buildings to increase the energy efficiency
(see figure 11). Another example of an exterior improvement is from the
District of Columbia Housing Authority. Agency officials told us they used
Recovery Act funds to install solar panels on top of one of the residential
buildings as part of its effort to “green retrofit” all the housing units in the
complex. These panels will help heat water for the building.

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Figure 11: Siding in the process of completion using Rahway Housing Authority’s
Recovery Act funds

I

Source: GAO.

Barriers and Challenges: Public housing agency officials noted a few
barriers and challenges they had confronted or anticipated related to
Recovery Act funds and projects, but in most cases no single concern was
widely shared among the officials with whom we spoke. In a few cases,
public housing agencies mentioned that they had experienced delays in
accessing their funds in HUD’s Electronic Line of Credit Control System
(ELOCCS) due to problems with or confusion about the requirement to
obtain a Data Universal Numbering System (DUNS) number and to
register in the Central Contractor Registration (CCR) system. For
example, two housing agencies had trouble registering because their
actual location (city or county) was different from the information
associated with the DUNS number in the system. However, once agencies
were properly registered, they did not anticipate any problems using the
system. According to HUD officials, registering in the CCR has been a
substantial problem nationwide, despite efforts by HUD to communicate
these requirements to public housing agencies. HUD officials estimated
that about 380 public housing agencies (out of approximately 3,100) had

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not properly registered in CCR and were therefore unable to obligate or
draw down Recovery Act funds as of June 15, 2009. HUD officials are
working with these agencies to resolve the problems as quickly as
possible.
Another challenge raised by public housing agency officials and HUD
officials was the “Buy American” provision of the Recovery Act. Several
officials noted that depending on how this provision was interpreted, it
could pose a barrier to getting contracts in place and completing projects.
For example, HUD officials noted that agencies may have difficulty in
finding an adequate selection of goods and materials for improving energy
efficiency that meet the “Buy American” requirement and are
competitively priced. For other public housing agencies, however, this
provision was not a concern. For example, two agencies stated they had
revised their procurement policy to include “Buy American” requirements,
while another agency required its contractors to certify the materials they
use are American-made.
An additional potential challenge that some officials had identified
involved the requirements HUD had placed on agencies in order to use
Recovery Act funds for administration. HUD’s guidance states that public
housing agencies may use 10 percent of their grant funds for
administration but that agencies can only draw down 10 percent of each
invoice submitted for administration. In addition, one public housing
agency official stated that he expected the documentation requirements
for drawing down these funds would require so much extra work that he
believed it would be better to use non-Recovery Act funds to cover all
administration expenses and devote his agency’s entire Recovery Act
award to the identified projects. HUD officials stated that these
requirements were intended to provide public housing agencies with an
incentive to use Recovery Act funds immediately on projects that would
create jobs.
Troubled housing agencies may also experience delays in obligating and
expending Recovery Act funds. Some officials from public housing
agencies that HUD has identified as troubled performers in PHAS stated
that additional requirements placed on them by HUD had hindered these
agencies’ ability to obligate and expend funds as quickly as they believe
necessary. At one public housing agency, officials stated that they were
designated as troubled because of the physical condition of their housing
units and that they were in need of the Recovery Act funding to address
these deficiencies. HUD has identified 172 housing agencies as troubled
under PHAS that will be subject to increased monitoring for the Recovery

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Act. These 172 troubled housing agencies have obligated and expended
Recovery Act funds at a slower rate than the overall group of housing
agencies receiving Recovery Act funding. Specifically, troubled performing
public housing agencies were allocated nearly $186 million of Recovery
Act funding, and as of June 20, 2009, 61 (35.5 percent) of these housing
agencies had obligated $15.1 million (8 percent) and 22 (13 percent) of
these housing agencies had drawn down almost $926,000 (0.5 percent).
Overall housing agencies have obligated and expended funds at about
double this rate.
One reason for these delays is the additional monitoring required by HUD
for housing agencies that are designated as troubled performers under
PHAS. HUD has informed these troubled public housing agencies that for
Recovery Act purposes they would receive increased monitoring and
placed them in either a high, medium, or low-risk category. Of these 172
troubled housing agencies, 106 (61.6 percent) were considered low-risk
troubled, 53 (30.8 percent) were considered medium-risk troubled, and the
remaining 13 (7.6 percent) were considered high-risk troubled. HUD has
established and is implementing a strategy for monitoring these troubled
housing agencies that have received Recovery Act funds. HUD stated to us
that they have disseminated this strategy to its field offices and it is
currently being administered to the 172 troubled housing agencies. For
example, according to HUD, all 172 troubled public housing agencies—
regardless of risk category—have been placed on a “zero threshold” status
and therefore cannot draw down Recovery Act funds without HUD Field
Office approval. HUD stated to us that the ability to place housing
agencies on “zero threshold” has always been available, and has been used
for housing agencies that have had problems obligating and expending
their Capital Fund grants appropriately. However, HUD has stated that
housing agencies that are troubled will be subject to additional monitoring
and oversight as deemed necessary to ensure proper uses of Recovery Act
funds. 65 Specifically, HUD Field Offices notified troubled housing agencies
that prior to obligation of Recovery Act funding, all award documents (i.e.,
solicitations, contracts, or board resolutions, where applicable) must be
submitted to their respective Field Office for review. Further, housing
agencies that HUD considers to be high-risk troubled are to be assigned to

65

The Recovery Act provided HUD the authority to decide whether to provide troubled
housing agencies Recovery Act funds. Although HUD determined that troubled housing
agencies have a need for Recovery Act funding, it acknowledged that troubled housing
agencies would require increased monitoring and oversight in order to meet the Recovery
Act requirements.

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a HUD designated team that will provide additional monitoring, oversight
and technical assistance. HUD further stated that the effect of any
increased requirements on obligating Recovery Act funds should be shortlived since Recovery Act funds must be obligated within one year, and
much of the funds should be obligated in the next few months.
The officials with whom we spoke generally did not anticipate that they
would face internal challenges with meeting the accelerated obligation and
expenditure requirements under the Recovery Act. Several cited the large
backlogs of projects that were ready to begin in welcoming the additional
funds. In Ohio, Columbus Metropolitan Housing Authority officials stated
that they began preparing projects in December 2008 in anticipation of the
Recovery Act’s passage. Two of the larger agencies, Tampa Housing
Authority and the District of Columbia Housing Authority, stated that they
had in place “job order contracting,” which establishes long-term contracts
with several contractors for a variety of routine construction projects, and
they had found that this strategy aided in their ability to award contracts
quickly and begin projects. Similarly, housing agency officials we
interviewed generally did not expect to encounter any challenges meeting
the Davis-Bacon local prevailing wage requirements because they were
used to complying with Davis-Bacon.

Most Agencies Expect Few
Monitoring Problems, and HUD
Systems Can Monitor Controls
And Safeguards Over Recovery
Act Funds

For public housing agencies, the responsibility for establishing and
maintaining internal controls rests with each housing agency and is
typically not part of the state’s overall system of internal controls that is
discussed in other parts of the report. GAO visited 47 housing agencies in
the 16 states plus the District of Columbia to discuss what internal
controls were in place to track the appropriate use of Recovery Act funds.
The housing agencies stated that they did not anticipate internal control
problems as a result of receiving Recovery Act funds because they would
use their existing accounting systems to track the use of these funds. They
noted that they have experience with tracking funding—including Capital
Fund grants awarded prior to the Recovery Act—and would simply add
specific funding codes to their system to track the use of the Recovery Act
funds.
Many housing agencies are subject to the Single Audit requirements that
have been discussed in this report. Single Audits provide federal agencies
with information on the use of federal funds, internal control deficiencies,
and compliance with federal program requirements. In addition, the HUD
Inspector General (HUD OIG) conducts audits of individual housing
agencies. Although we did not systematically review audit reports for
those housing agencies we visited and they did not anticipate problems

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with monitoring Recovery Act funds, it is important to note that both
single audits and HUD OIG’s audits have identified instances of internal
control deficiencies and noncompliance with HUD programs—including
the Capital Fund grants provided prior to the Recovery Act. In our June
2009 report, we reported that housing agency audits do report findings of
inappropriate use and mismanagement of public housing funds, including
problems with accounting, documentation, and internal controls. 66 That
report recommended that HUD better leverage the information in housing
agency audits to identify emerging issues, and evaluate its overall
monitoring and oversight processes. In addition to implementing its
strategy for monitoring troubled housing agencies, HUD stated to us that
they are in the process of developing a strategy to monitor non-troubled
housing agencies’ use of Recovery Act funds.

Public Housing Agencies Are
Taking Steps to Measure the
Impact of Recovery Act Funds

Preserving existing jobs, stimulating job creation, and promoting
economic recovery are among the Recovery Act’s key objectives. Public
housing agencies are taking steps to measure the extent to which
Recovery Act funds are achieving these objectives, though agencies are
waiting for guidance from HUD. As recipients of Recovery Act funds,
public housing agencies are expected to track and report on jobs created
and jobs retained through projects funded by the agency. Most public
housing agencies told us they plan to collect payroll data from contractors,
existing project management systems, or Davis-Bacon wage reports to
calculate the number of jobs created and retained. Some of the public
housing agencies told us they would include job-measurement
requirements in bid specifications, so that prospective contractors would
be aware that they would have to measure jobs if they won the bid. Other
agencies said they plan to employ agency employees or public housing
residents—whose jobs could be easily counted—on projects funded by the
Recovery Act. While some public housing agencies viewed calculating jobs
created or retained as straightforward, others expressed concerns about
the number of work hours defining jobs created or retained. One agency
reported that they had hired a third-party firm to provide tracking and
reporting services related to the Recovery Act. The firm will provide
analyses of construction-related items and contractor payroll records to
satisfy the requirement to report on jobs created and retained with
Recovery Act funding. Three public housing agencies reported they have
not yet made plans to track the effects of Recovery Act funds.

66

GAO, Public Housing: HUD’s Oversight of Housing Agencies Should Focus More on
Inappropriate Use of Program Funds, GAO-09-33 (Washington, D.C.: Jun. 11, 2009).

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Public housing agencies are also taking steps to report on another
Recovery Act objective—promoting energy conservation measures. Public
housing agencies are selecting projects that they expect will reduce energy
costs, support energy efficiency, and decrease usage of electricity and
water. For example, one public housing agency plans to replace older
appliances with newer, more energy-efficient models. Another agency
plans to replace all light bulbs with energy-efficient bulbs. To measure the
impact of these projects, several public housing agencies plan to compare
utility bills over time to assess the amount of dollar savings realized. One
public housing agency official told us that she plans to read the electric
meters in the public housing development to determine the change in
energy usage.
Public housing agencies also plan to track a number of other performance
measures. Many public housing agencies told us they regularly track the
budget control, timeliness, and quality of work of projects they fund and
that they plan to continue tracking these measures with Recovery Actfunded projects. In addition, some public housing agencies monitor the
number of contracts they have with minority- and women-owned
businesses, and they expect to be able to use Recovery Act-funded
projects to continue to meet their goals of contracting with such entities.
Lastly, public housing agencies anticipate that they may see improvement
in other measures—such as tenant satisfaction, occupancy rates, crime
rates, and employment among residents—as a result of the projects
funded through Recovery Act funds. For example, one public housing
agency official hoped that a new community center in one development
will lead to less apartment turnover, less maintenance expense, lower
crime, more efficient use of utilities, and more cooperation with residents.
Public housing agencies reported that they have not received guidance
from HUD on how to measure jobs created and retained. Most public
housing agency officials told us they would like guidance on how to
accomplish this objective. In the absence of centralized guidance, public
housing agencies are following individual strategies to track and report on
jobs. OMB’s June 2009 guidance provided this centralized guidance. 67

67

After soliciting responses from a broad array of stakeholders, OMB issued additional
implementing guidance for recipient reporting on June 22, 2009. See, OMB Memorandum,
M-09-21, Implementing Guidance for the Reports on Use of Funds Pursuant to the
American Recovery and Reinvestment Act of 2009.

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Quarterly reporting to HUD is another requirement of the Recovery Act. A
number of public housing agencies thought that meeting the quarterly
reporting requirement could be accomplished because they are already
reporting to HUD on a quarterly basis for other programs, such as HOPE
VI. Some agencies, however, told us they had neither heard of the
quarterly reporting requirement nor received guidance about what was to
be included. However, since OMB issued new guidance in June 2009, HUD
officials said they are finalizing work on designing and developing a
Recovery Act Management and Performance System for reporting jobs
created and other effects of the Recovery Act. OMB is also working on a
system it plans to have available by October 10, 2009. OMB’s June 2009
guidance clarified the reporting requirements for recipients and subrecipients.

The Edward Byrne
Memorial Justice
Assistance Grant (JAG)
Program

The Edward Byrne Memorial Justice Assistance Grant (JAG) Program
within the Department of Justice’s Bureau of Justice Assistance (BJA)
provides federal grants to state and local governments for law
enforcement and other criminal justice activities, such as corrections and
domestic violence programs. 68 The JAG program was established in law in
2006 to, among other things, provide state and local agencies with the
flexibility to prioritize and place justice funds where they are most needed
to prevent and control crime based on local needs and conditions. 69 JAG
funds can be used to support a range of activities in seven broad program
areas, including law enforcement; prosecution and courts; crime
prevention and education; corrections; drug treatment and enforcement;
program planning, evaluation, and technology improvement; and crime
victim and witness programs. Within these areas, JAG funds can be used
for state and local initiatives, training, personnel, equipment, supplies,
contractual support, research, and information systems for criminal
justice.
The procedure for allocating JAG funds is based on a statutory formula of
population and violent crime statistics, in combination with a minimum

68

State awards are provided to all states, the District of Columbia, Guam, American Samoa,
the Commonwealth of Puerto Rico, the Virgin Islands, and the Northern Mariana Islands.

69

As part of the Violence Against Women and Department of Justice Reauthorization Act of
2005 (Pub. L. No. 109-162, 119 Stat. 2960 (2006)), the JAG program was established by, in
general, blending the previous Byrne Grant and Local Law Enforcement Block Grant
programs.

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allocation to ensure that each state and territory receives some funding. 70
Using this formula, 60 percent of a state’s JAG allocation is awarded by
BJA directly to the state, which must in turn allocate a formula-based
share of those funds—a variable pass-through requirement—to local
governments within the state. 71 For Recovery Act JAG funds, the
percentage share that states are required to pass through to local
governments varies across the 16 states and the District of Columbia
(District) in our review, ranging from 36.52 percent (Massachusetts) to 100
percent (District). Further, states may use up to 10 percent of their state
award to cover costs associated with administering JAG funds. The
remaining 40 percent of funds is awarded directly by BJA to eligible units
of local government within the state. 72 Although allocations for JAG
funding are determined by formula, state and local governments must
apply to BJA to receive JAG funding.
Table 11 shows BJA’s Recovery Act JAG state allocations and variable
pass-through percentages for the 16 states and the District, as well as
BJA’s Recovery Act JAG allocations to localities within the 16 states and
the District and total Recovery Act JAG allocations.

70

DOJ’s Bureau of Justice Statistics calculates a minimum base allocation for each state and
territory, which, based on the statutory JAG formula, can be enhanced by (1) the state’s
share of the national population and (2) the state’s share of the country’s Part 1 violent
crime statistics. Part 1 violent crime statistics are computed as a 3-year average using
figures published in the FBI’s annual Crime in the United States and include murder,
nonnegligent manslaughter, forcible rape, robbery, and aggravated assault.

71

This amount is calculated by the Census Bureau for the Bureau of Justice Statistics and is
based on each state’s criminal justice expenditures.

72

For JAG program purposes, a unit of local government is a town, township, village, parish,
city, county, or other general purpose political subdivision of a state; any law enforcement
district or judicial enforcement district that is established under applicable state law and
has authority to, in a manner independent of other state entities, establish a budget and
impose taxes; or a federally recognized Indian tribe or Alaskan Native organization that
performs law enforcement functions as determined by the Secretary of the Interior. For the
JAG Recovery program, local governments were not eligible for direct awards from BJA if
they did not submit at least 3 years of crime data to the FBI for the most recent 10-year
period (1998-2007) or if their level of crime did not meet a certain threshold to be eligible.

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Table 11: Recovery Act Edward Byrne Memorial Justice Assistance Grant Program’s State Allocations and Pass-Through
Percentages, Local Allocations and Total Allocations for 16 States and the District
Recovery Act
JAG state allocation

Recovery Act JAG
state variable pass
through percentage

Recovery Act
JAG local allocation

Recovery Act total
allocation

Arizona

$25,306,956

61.86%

$16,659,310

$41,966,266

California

135,641,945

67.34

89,712,677

225,354,622

Colorado

18,323,383

59.56

11,534,788

29,858,171

District of Columbia

11,741,539

100

N/Aa

11,741,539

Florida

81,537,096

64.85

53,582,326

135,119,422

Georgia

36,210,659

59.56

22,835,094

59,045,753

Illinois

50,198,081

65.51

33,465,389

83,663,470

Iowa

11,777,401

48.19

6,925,317

18,702,718

Massachusetts

25,044,649

36.52

15,749,229

40,793,878

Michigan

41,198,830

57.83

25,807,514

67,006,344

Mississippi

11,199,389

56.93

7,194,656

18,394,045

New Jersey

29,754,315

59.23

17,994,820

47,749,135

New York

67,280,689

65.16

43,311,580

110,592,269

North Carolina

34,491,558

42.41

21,853,798

56,345,356

Ohio

38,048,939

64.06

23,596,436

61,645,375

Pennsylvania

45,453,997

56.04

26,918,846

72,372,843

Texas

90,295,773

60.42

57,234,982

147,530,755

State

Source: Bureau of Justice Assistance data.
a

For the District of Columbia, all JAG funds are awarded directly to the District.

Federal funding for JAG has fluctuated significantly in recent years. From
fiscal years 2007 through 2008, federal JAG appropriations were reduced
by about 68 percent, from about $525 million to about $170 million. The
Recovery Act provides $2 billion in JAG funds nationwide for state and
local governments (see table 12).
Table 12: Allocation of Edward Byrne Memorial Justice Assistance Grants for 16
States and the District for Fiscal Years 2007 and 2008, as well as a Result of the
Recovery Act
State

Fiscal year 2007

Fiscal year 2008

Arizona

$9,138,401

$3,079,906

$41,966,266

California

52,556,190

17,115,576

225,354,622

Colorado

6,588,179

2,224,265

29,858,171

District of Columbia

2,647,465

872,084

11,741,539

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State

Fiscal year 2007

Fiscal year 2008

Recovery Act

Florida

30,272,528

10,054,495

135,119,422

Georgia

12,699,080

4,297,073

59,045,753

Illinois

19,302,761

6,326,515

83,663,470

4,226,284

1,396,960

18,702,718

Iowa
Massachusetts

9,476,365

3,093,460

40,793,878

15,098,595

5,024,283

67,006,344

Mississippi

4,262,895

1,386,088

18,394,045

New Jersey

11,207,725

3,661,286

47,749,135

New York

25,894,653

8,415,640

110,592,269

North Carolina

12,293,577

4,126,580

56,345,356

Ohio

14,130,523

4,666,868

61,645,375

Pennsylvania

16,420,810

5,467,997

72,372,843

Michigan

Texas
Total

33,159,568

10,992,438

147,530,755

$279,375,599

$92,201,514

$1,227,881,961

Source: Bureau of Justice Assistance data.

Office of Justice Programs Has
Plans to Oversee, Monitor, and
Measure Results Achieved by
Recovery Act JAG Funds

Using many of its existing grant award and oversight processes and
procedures, BJA and the Office of Justice Programs (OJP)—which
oversees BJA and establishes minimum standards for grant monitoring—
have reported plans and taken steps to oversee, measure, and monitor
Recovery Act JAG funds. For example, as part of BJA’s review of
applications for JAG funding, BJA reviewed states’ grant funding history
with OJP to identify any outstanding audit deficiencies, such as delinquent
financial and programmatic reports regarding OJP funding. If any such
deficiencies were identified, they were highlighted in the states’ award
letter from BJA for Recovery Act JAG funding as special conditions
requiring resolution by the state. According to BJA, 4 of the 16 states and
the District in our review had at least one special condition requiring
resolution that prohibited them from obligating or expending funds until
the specific issues were resolved. As of June 30, 2009, 3 of these states and
the District had resolved the issues and had received written approval
from BJA releasing the funds. OJP is working with the remaining state to
resolve the issues to release the special conditions.
With respect to monitoring grants once they are awarded, OJP’s plans
include, among others, taking steps to track Recovery Act funds and
assessing the performance of projects funded by these grants. For
example, OJP’s financial system allows it to track grantees’ use of funds by
program and project code, where project codes align with a grantee’s
program areas. As of June 30, 2009, project codes have been developed for

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the JAG program for Recovery Act funds. In addition, OJP plans to
conduct programmatic, administrative, and financial monitoring of its
Recovery Act grantees. 73 This monitoring, among other activities, includes
ongoing reviews of grantee compliance with program guidelines, as well as
on-site monitoring of grantee performance. OJP has reported plans to
conduct on-site monitoring of no less than 30 percent of open, active
Recovery Act grant funding. Further, the Office of Audit, Assessment, and
Management, within OJP, plans to collaborate with BJA to update
monitoring procedures. 74 For example, the office plans to develop
guidance that focuses on monitoring Recovery Act grants by July 31, 2009.
In addition, this office plans to complete quarterly reports on grantee data,
such as reporting compliance with requirements to submit performance
measure data and how grantees are obligating funds, to identify grantees
not complying with reporting requirements or program guidelines to
enable timely follow-up with grantees to correct such deficiencies. In
addition to other available courses, OJP plans to develop Web-accessible
training for grantees, which are to cover topics such as Recovery Act
reporting requirements, writing grant applications, and an orientation for
new grantees. OJP also reported that it facilitated training sessions in the
spring of 2009 for its employees on topics such as grant fraud detection
and how to create grant award packages, and it has plans to facilitate
training on monitoring Recovery Act grantees during fiscal year 2009.
In addition to two performance measures on the number of jobs created
and preserved that are to be collected under the Recovery Act, BJA
requires JAG grantees to report on additional performance measures for
the specific activities that apply to the programs being funded through the
Recovery Act. As of June 30, 2009, OJP has updated JAG program
performance measures for grants awarded with Recovery Act funds. For
example, if JAG Recovery funds are used to support a drug treatment
program, the grantee would be required to report on the number of

73

During programmatic monitoring, grant managers are to assess the performance of grant
programs by addressing the content and substance of a program. Administrative
monitoring addresses compliance with grant terms and grantee reporting and
documentation requirements, and financial monitoring reviews expenditures compared to
an approved budget.

74

The Office of Audit, Assessment, and Management serves as the central source for grant
management policy and procedures and oversees the programmatic monitoring activities
within OJP. In addition, this office ensures financial grant compliance and auditing of OJP’s
internal controls to prevent waste, fraud, and abuse; and conducts programmatic
assessments of Department of Justice grant programs.

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participants who completed the program, among other measures. BJA
requires that these reports be submitted by grant recipients within 30 days
after the end of each quarter. OJP has also developed an online
performance measurement tool for JAG grantees to use to report these
data, which it anticipates JAG fund recipients can begin to use to report on
updated measures in July 2009.

BJA Has Approved State-Level
Recovery Act JAG Awards for
the District of Columbia and All
States in Our Review, and Eight
States Have Obligated Funds •

As of June 30, 2009, all 16 states and the District in our review have
received their state award letter from BJA. Further, as of that date, 8 states
reported having obligated a share of these funds: 75

•

Colorado (about $13,700 obligated, or about .08 percent of its state award),

•

Florida (about $8,300 obligated, or about .01 percent of its state award),

•

Illinois (about $12.4 million obligated, or about 25 percent of its state
award),

•

Massachusetts (about $12.7 million obligated, or about 51 percent of its
state award),

•

Michigan (about $41.2 million obligated, or 100 percent of its state award),

•

Mississippi (about $57,000 obligated, or about 0.5 percent of its state
award), and

•

Texas (about $4.6 million obligated, or about 5 percent of its state award).

Arizona (about $23.1 million obligated, or about 91 percent of its state
award),

The remaining 8 states and the District reported that no state Recovery Act
JAG funds had yet been obligated. 76
According to officials from the states’ administering agencies (SAA), who
are responsible for, among other things, administering and setting

75

Texas officials provided information on state Recovery Act JAG funds obligated as of
June 25, 2009. Colorado and Massachusetts officials provided information on state
Recovery Act JAG funds obligated as of June 26, 2009.

76

Georgia officials provided information on state Recovery Act JAG funds obligated as of
June 25, 2009.

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priorities for the use of JAG funds for the state, they are in various stages
of finalizing how these funds will be used—primarily the portion that is to
be passed through to local entities, or subrecipients. 77 Specifically:
•

Four states are early in the request for proposal (RFP) process for local
entities to apply for state pass-through funds. For example, Mississippi and
New Jersey are developing their RFPs, while Pennsylvania and Illinois are
beginning to collect proposals. New Jersey officials stated they are in the
process of developing RFPs for local jurisdictions while Mississippi
officials similarly stated they plan to have a final RFP done in time to make
awards by August 1, 2009. Pennsylvania issued its RFP on June 18, 2009,
and plans to collect proposals from local entities until July 24, 2009, while
Illinois officials stated they plan to begin soliciting applications from local
law enforcement agencies in the first part of July 2009 and plan to notify
applicants of funding recommendations in early August 2009.

•

Eight states—Colorado, Florida, Georgia, Iowa, Massachusetts, New York,
Ohio, and Texas—and the District of Columbia have received applications
or letters of intent submitted by local entities for pass-through funding and
are in the process of reviewing and in some cases also approving them.
For example, according to Colorado officials, the state received 193
applications and is reviewing them for allowable costs, budgets, and a
description of how the funds are to help create or retain jobs, among other
items. Staff are also ranking the applications in preparation for their
presentation and scoring by the state’s JAG board in early July 2009. In
Massachusetts, an official noted the state is in different stages of reviewing
and finalizing agreements with state agencies that are to receive a share of
JAG funds and, for some funds, are awaiting final processing through the
state comptroller. In Ohio, officials stated they are performing compliance
reviews on the more than 500 applications received for JAG funding and
plan to notify subrecipients of their awards by July 31, 2009.

•

Three states have selected potential projects for funding and are awaiting
final governing body approval. For example, according to state officials in
California, the Legislature must approve the planning document for how
JAG funds are to be used in the state in order for funds to be allocated to
local agencies, and this approval has not yet occurred as of June 30, 2009.
In North Carolina, the SAA has selected 85 eligible projects for JAG
funding and is awaiting approval by the governor to proceed with

77

State administering agencies are also responsible for coordinating JAG funds among state
and local initiatives, monitoring subrecipients’ compliance with JAG requirements, and
submitting financial and programmatic reports to BJA.

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allocating those funds. Similarly, in Michigan, an official stated that
recommendations for grant awards have been sent to the Governor’s office
for final approval and that contracts are to have a July 1, 2009, start date.
•

One state has finalized and approved a list of projects to receive the state’s
JAG award. Specifically, Arizona has selected and approved 36 projects
that are to receive state Recovery Act JAG funds, and subrecipients are to
have those funds available on July 1, 2009.
However, all 16 states and the District of Columbia have reported uses for
their state Recovery Act JAG awards that are consistent with their states’
priorities and allowable uses of those funds, as determined by BJA. Table
13 shows planned uses of these funds for the 16 states and the District.

Table 13: Planned Use of Recovery Act JAG Funds for 16 States and the District
State

Examples of planned use of JAG funding

Arizona

To supplement current state law enforcement and criminal justice efforts in areas such as drug forensics,
drug and gang prosecution, rural law enforcement, and information sharing.

California

To support local drug reduction efforts and concentrate on the widespread apprehension, prosecution,
adjudication, detention, and rehabilitation of offenders by enabling law enforcement agencies to create and
retain between 275 and 300 positions over the next 4 years.

Colorado

To support initiatives such as the purchase of basic law enforcement equipment and supplies, information
sharing, the establishment of specialized courts addressing substance abuse and mental health, and drug
treatment and enforcement.

District of Columbia

To support programs focused on prisoners, criminal and juvenile justice research, and court diversion
services for at-risk youth.

Florida

To expand existing drug court programs, provide detention and treatment services for youth, purchase
radio equipment upgrades for the Department of Corrections, and to develop a database that enables
seaport security authorities to determine if individuals meet Florida statutory requirements to enter secure
or restricted areas of the seaport.

Georgia

To support positions at state agencies with criminal justice missions and fund assistance for victims of
crime, among other things.

Illinois

To support areas including programs that pursue violent and predatory criminals, efforts that focus on
prosecuting violent and predatory criminals and drug offenders, juvenile and adult re-entry programs,
programs that enhance jail or correctional facility security and safety, and programs that combat and disrupt
criminal drug networks and provide substance abuse treatment.

Iowa

To support a broad range of activities to prevent and control crime and improve the criminal justice system,
with an emphasis on violent crime, drug offenses and serious offenders.

Massachusetts

To supplement current state public safety programs, retain jobs, and support core services. Additional
funds are to support local police departments adversely affected by local budget conditions and a summer
jobs program targeted to at-risk youth.

Michigan

To continue planned technology enhancements, provide prescription drug abuse awareness programs, and
add courts focusing on crime areas, including domestic violence.

Mississippi

To fund programs for juvenile justice, as well as local drug treatment and enforcement through adult, family,
and juvenile drug courts, as well as crime laboratory enhancements.

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State

Examples of planned use of JAG funding

New Jersey

To support the state in funding new and existing programs for state and local law enforcement agencies in
enforcement (intelligence-led, data-driven policing), prevention (decreasing youth involvement in crime),
and re-entry of released prisoners into communities (reducing recidivism).

New York

To expand personnel and services in connection with recent drug law reform legislation, as well as to
provide transitional jobs and permanent job placement services for the formerly incarcerated.

North Carolina

To support criminal justice improvement and crime victims’ services. Criminal justice improvement funding
priorities include overtime requests to ensure that departments can maintain full coverage and requests for
equipment, such as weapons, uniforms, and communications devices; sexual assault and domestic
violence services; child abuse and neglect services; law enforcement, prosecutors’ office and court officials;
underserved crime victims’ services; and supervised visitation centers.

Ohio

To fund initiatives that support the state’s nine purpose areas: law enforcement, prevention and education,
corrections and community corrections, prosecution, court and victims’ services, research, evaluation,
technology improvement, and law enforcement programs.

Pennsylvania

To fund initiatives such as criminal records improvement, law enforcement, public awareness of victim
compensation and services, assistance with local criminal justice strategic planning, gun violence
reduction, mental health initiatives, and training.

Texas

To increase programs that divert juveniles away from criminal activities and toward productive lifestyles,
reduce crime and enhance resources for prosecution of offenders, and support solutions for restoring
victims of crime, reintegrating offenders into the community, and reducing the potential for recidivism.
Sources: Bureau of Justice Assistance, states, and the District of Columbia.

BJA Has Started to Make
Recovery Act JAG Awards to
Localities

BJA is in the process of reviewing and processing applications from local
governments for Recovery Act JAG funding. The solicitation for this
funding was closed on June 17, 2009. As of June 30, 2009, BJA has awarded
about 44 percent of allocated funds to local governments within the 16
states (see table 14). 78 BJA officials stated they intend to award all of these
local JAG funds by September 30, 2009.
Table 14: Recovery Act Edward Byrne Memorial Justice Assistance Grants
Awarded by the Bureau of Justice Assistance to Localities in 16 States and the
District
Recovery Act JAG
a
local awards made

Total Recovery Act
JAG local allocation

Percentage
awardeda

$865,559

$16,659,310

5.2

California

29,324,123

89,712,677

32.7

Colorado

8,474,100

11,534,788

73.5

State
Arizona

b

District of Columbia

N/A

N/A

N/A

Florida

8,813,275

53,582,326

16.4

Georgia

15,445,135

22,835,094

67.6

78

For the District of Columbia, all JAG funds are awarded directly to the District.

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State
Illinois

Recovery Act JAG
a
local awards made

Total Recovery Act
JAG local allocation

Percentage
awardeda

29,986,076

33,465,389

89.6

Iowa

3,347,457

6,925,317

48.3

Massachusetts

6,877,332

15,749,229

43.7

Michigan

18,246,124

25,807,514

70.7

Mississippi

203,873

7,194,656

2.8

New Jersey

979,950

17,994,820

5.4

39,621,699

43,311,580

91.5

9,329,683

21,853,798

42.7

20,079,913

23,596,436

85.1

412,080

26,918,846

1.5

14,439,818

57,234,982

25.2

$206,446,197

$474,376,762

43.5

New York
North Carolina
Ohio
Pennsylvania
Texas
Total

Source: GAO analysis of Bureau of Justice Assistance data.
a

As of June 30, 2009.

b

All JAG funds are awarded directly to the District of Columbia, thus, no local funds are allocated.

State Administering Agencies
Cited Challenges to Meeting
Recovery Act Reporting
Requirements

While Recovery Act JAG funds are calculated and administered using the
same rules and structure of the existing JAG program, the Recovery Act
introduces some new requirements for recipients. For example, recipients
are required to track performance measures on the number of jobs created
and preserved as a result of Recovery Act funds and must report certain
financial and programmatic information—such as the amount of Recovery
Act funds expended or obligated and an evaluation of the project’s
completion status—to the Recovery Act central reporting Web site 10 days
after the end of each quarter.
Officials from several of the 17 state administering agencies we visited
noted concerns about subrecipients’ ability to meet the act’s reporting
requirements for determining the number of jobs created and preserved,
and the majority noted challenges to meeting the 10-day deadline for
submitting quarterly reports on Recovery Act data. For example, state
officials noted the need for additional guidance on how to determine
whether JAG funds are contributing to job creation or job preservation.
Specifically, officials in three states raised questions about how, if at all,
grantees were to measure jobs that may be indirectly related to JAG fund
expenditures. For example, if a grantee purchased three new police
cruisers, how might it determine how many secondary jobs were retained
or created at the car manufacturer. On June 22, 2009, the Office of
Management and Budget (OMB) issued guidance on, among other things,

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how to report on job creation performance measures, which included
clarification that recipients should not attempt to report on the
employment impact on material suppliers and central service providers
(i.e., indirect jobs) that may be related to Recovery Act supported
activities. 79
Further, officials from the majority of states shared concerns over the
Recovery Act requirement that recipients submit reports within 10 days of
the end of each quarter. In previous years, JAG award recipients were
required to provide programmatic reports to BJA on an annual basis—
rather than on a quarterly basis, as required by the Recovery Act.
Specifically, state officials were concerned that subrecipients would not
be able to meet that deadline or that they may do so at the risk of quality
and accuracy of reporting. For example, officials in North Carolina stated
they were concerned about programs, specifically first-time subrecipients
from nonprofit and faith-based organizations, not being prepared for
compliance responsibilities, due to limitations in the numbers and
experience of staff that are to complete the reports. Officials stated that
many of the subrecipients’ offices do not have the resources to prepare
detailed reporting documents. Officials in Iowa expressed similar
concerns about the 10-day reporting requirement and noted that some
potential recipients—small law enforcement agencies with five or fewer
officers or staff—may not apply for Recovery Act funds if they believe the
reporting requirements are burdensome relative to the amount of JAG
funds they might receive. Alternatively, officials noted that some
recipients may choose to apply for funds and then spend them quickly
because the reporting requirement ends after the funds have been
expended, reported on, and the grant closed. Officials stated they are
concerned about the accuracy of the information the administering
agencies are to receive if the data are reported so quickly. For example,
officials in Michigan noted that to meet performance measurement
reporting on time, subrecipients are to submit reports within 5 days of the
end of the quarter to allow time for the state administering agency to
prepare and submit these reports. Officials in North Carolina noted that
with an increased number of localities receiving the awards compared
with previous years, compliance with tracking and consolidating reporting
requirements is expected to be more difficult. BJA officials stated they

79

See, OMB Memorandum, M-09-21, Implementing Guidance for the Reports on Use of
Funds Pursuant to the American Recovery and Reinvestment Act of 2009.

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recognized these concerns and agreed that states may face challenges
should they have hundreds of subrecipients for pass-through funds.
To help facilitate subrecipients in meeting the reporting requirements,
officials in many of the states and the District described plans to prepare
entities for reporting, such as conducting training, implementing Webbased reporting, and clarifying the requirements with potential
subrecipients. For instance, officials in North Carolina stated they plan to
sponsor workshops to provide additional information about the Recovery
Act reporting requirements to potential subrecipients. Officials in Illinois
stated that while they had some concerns about timely reporting, they plan
to require subrecipients to report on a monthly basis to the SAA, conduct
training for subrecipients, and transition to an electronic system to
facilitate tracking and reporting of funds.
The District of Columbia and states in our review reported they plan to use
existing grants management processes to ensure that subrecipients are
using JAG funds in accordance with BJA and Recovery Act requirements,
as can be seen in the following examples:

The District of Columbia and
States Reported Plans to Use
Existing Processes to
Safeguard the Use of JAG
Funds
•

Arizona SAA officials reported that as an established process they used a
peer-reviewed, risk-based scoring matrix to select subrecipients that
considered, among other things, the applicant’s most recent Single Audit
results, plans for evaluating the impact resulting from the use of such
funds, and funding history with the SAA including any past compliance
issues. Once grants are awarded, SAA officials stated that they have a
compliance team of six staff that are to perform ongoing financial and
programmatic compliance reviews to ensure that subrecipients comply
with grant guidance. For example, program compliance staff are to review
subrecipients’ monthly and quarterly financial reports and identify any
areas of concern, such as if funds are expended too slowly or too quickly,
if there are questionable expenses, or if monthly and quarterly reports do
not agree. Financial compliance staff are to also perform annual on-site
visits that include financial audits in addition to internal controls
inspections of, among other things, the accounting system and key
financial documentation. Officials estimated that the workload is likely to
double as a result of receiving additional funds through the Recovery Act
and plan to use some of the state’s administrative JAG funds to hire
additional staff to help manage the heightened Recovery Act requirements
and increased number of subrecipients.

•

District of Columbia SAA officials reported that they have established
programmatic and financial procedures for separately tracking and
reporting on all federal grant funding programs. The SAA requires

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subrecipients to provide detailed, separate monthly or quarterly financial
reports on their federal funding that includes supporting documentation
on all expenses. These financial reports and reimbursement requests are
tracked separately by the SAA in a grants management database as well as
through the District’s financial system; additionally, the Office of the Chief
Financial Officer is responsible for completing separate financial reports
on each federal grant and for drawing down funds in line with grant
expenditures.
•

New Jersey SAA officials reported that they plan to monitor the use of JAG
funds in several ways. First, the SAA plans to track expenditures through a
separate code in its accounting system for Recovery Act funds, as required
by the state and federal government. Second, the SAA plans to educate
subrecipients on how to comply with funding rules by holding postaward
conferences with subrecipients prior to the receipt of funds. Subsequently,
subrecipients are to be required to submit monthly financial and
programmatic reports to the SAA. Internally, the SAA plans to use existing
program and fiscal analysts to track spending and compliance with
financial and programmatic requirements. Officials said that they are
exploring ways to increase the number of staff monitoring subrecipients,
but because New Jersey is under a hiring freeze, any increase in staff to
conduct this monitoring would likely come as a result of reassignments
from other agencies or offices. Finally, SAA officials noted that an audit by
the Office of the State Auditor should provide another layer of review
regarding the use of JAG Recovery Act funds.

•

Texas SAA officials report that they plan to monitor performance and
financial aspects of awarded funds to ensure that funds are used for
authorized purposes. Also, the SAA, in coordination with the Office of the
Governor’s Financial Services Division, plans to able to account for, track,
and report on federal funds resulting from the Recovery Act separately
from other fund sources. According to the SAA officials, this will allow
each award to be directly tied to accounting codes to give the Governor’s
office the ability to account for, track, and report separately on these
funds. Texas also contracts with the Public Policy Research Institute at
Texas A&M University to maintain a Web-based data collection system
that can retrieve and analyze program performance data, and the state
plans to continue to do so to support Recovery Act reporting
requirements.

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DOE’s Weatherization
Assistance Program

The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia
(District), and seven territories and Indian tribes. According to DOE,
during the past 32 years, the program has assisted more than 6.2 million
low-income families to reduce their utility bills by making long-term
energy-efficiency improvements to homes. For example, by installing
insulation, sealing leaks around doors and windows, or modernizing
heating equipment, the weatherization program allows these households
to spend their money on more pressing family needs. The Recovery Act
appropriation represents a significant increase for a program that has
received about $225 million per year in recent years.

DOE Has Provided the States
with Initial Funds, but Most
States Report Using Little if
Any of the These Funds

In response to the Recovery Act, DOE announced on March 12, 2009, that
the 50 states, the District, and seven U.S. territories and Indian tribes are
eligible to receive weatherization formula grants. 80 Each of the 16 states
and the District in our review submitted an initial grant application. As
shown in table 15, DOE then provided each with an initial 10 percent of its
formula funds with the stipulation that the funds could be used only for
such start-up activities as preparing a state weatherization plan, hiring and
training staff, and purchasing needed equipment but could not be used for
the production of weatherized homes. Subsequently, on June 9, 2009, DOE
lifted this prohibition for local agencies that have previously provided
services and are included in a state’s plan, in response to states’ concern
that their local agencies were ready to begin weatherization activities but
lacked funding.
Table 15: DOE’s Allocation of the Recovery Act’s Weatherization Funds for 16
States and the District
State

Total allocation

Initial allocation

Date received

Arizona

a

$57,023,278

$5,702,328

April 10, 2009

California

185,811,061

18,581,106

April 10, 2009

Colorado

79,531,213

7,953,121

April 1, 2009

8,089,022

808,902

March 30, 2009

Florida

175,984,474

17,598,447

April 10, 2009

Georgia

124,756,312

12,475,631

April 20, 2009

District of Columbia

80

Our discussion on weatherization is primarily limited to the 16 states and the District of
Columbia that are the focus of this report.

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State
Illinois
Iowa

Total allocation

Initial allocation

Date received

242,526,619

24,252,662

April 1, 2009

80,834,411

8,083,441

March 27, 2009

Massachusetts

122,077,457

12,207,746

April 3, 2009

Michigan

243,398,975

24,339,898

March 27, 2009

Mississippi

49,421,193

4,942,119

April 3, 2009

New Jersey

118,821,296

11,882,130

April 7, 2009

New York

394,686,513

39,468,651

April 13, 2009

North Carolina

131,954,536

13,195,454

April 1, 2009

Ohio

266,781,409

26,678,141

March 27, 2009

Pennsylvania

252,793,062

25,279,306

March 27, 2009

Texas

326,975,732

32,697,573

April 10, 2009

Source: DOE.

Notes: DOE allocated the Recovery Act’s weatherization funds among the eligible states, territories,
and Indian tribes using (1) a fixed, base allocation and (2) a formula allocation for the remaining funds
that is based on each state’s low-income households, climate conditions, and expenditures by lowincome households on residential energy.
a

DOE allocated an additional $6 million to the Navajo Indian tribal areas in Arizona.

Most of the states reported that they have used little if any of the initial 10
percent allocation of Recovery Act funds. 81 In fact, some state
weatherization agencies have not received any of their DOE allocation
because the funds are being held at the state level. For example, Georgia
has not spent the 10 percent allocation because the action plan required by
the governor is still under review. In Pennsylvania, the funds must be
appropriated through the state budget process, and the budget has not yet
been approved. Other states decided not to use the funds until July 1, 2009
for a variety of reasons. Illinois waited until July 1 to begin spending the
weatherization funds because of DOE’s initial guidance that funds could
not be used for weatherization production activities. Massachusetts did
not spend any of the initial allocation until the beginning of the state’s
fiscal year on July 1. Furthermore, as of June 30, 2009, Florida reports
obligating $113,000 of its $17.6 million initial allocation for start-up
activities, such as hiring and training staff.

81

States also have the fiscal year 2009 appropriation and prior year balances available.

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DOE Is Reviewing State Plans
and Providing the Next 40
Percent of Weatherization
Funds

All of the states in our review submitted state weatherization plans to DOE
by May 12, 2009. State officials told us that DOE’s funding announcement
and e-mail messages had provided them with the guidance needed to
complete their weatherization plans, which outline the states’ plans for
using the weatherization funds and for monitoring and measuring
performance, among other things. DOE’s goal is to approve 80 percent of
all state weatherization plans by the end of July 2009. DOE is providing the
next 40 percent of weatherization funds to a state once the weatherization
plan is approved. DOE plans to release the final 50 percent of the funding
to each state based on the department’s progress reviews examining each
state’s performance in spending its first 50 percent of the funds and the
state’s compliance with the Recovery Act’s reporting and other
requirements.
As shown in table 16, as of June 30, 2009, DOE had approved the state
weatherization plans for Arizona, California, Florida, Georgia, Illinois,
Mississippi, New York, North Carolina, Ohio, and the District, enabling
them to receive the next 40 percent of their funds. 82 Most states expect
DOE approval of their plans by mid-July. However, the timing of DOE’s
approval could be an issue for some states. For example, Colorado
officials in the Governor’s Energy Office expressed concern about the
timing of DOE’s approval because their plan is designed to begin on July 1,
the beginning of the state’s fiscal year. DOE’s June 9 revised guidance
provided the states with some additional flexibility for using the initial 10
percent of funds. DOE’s continued communication with the states on the
timing of the approval of state plans will be important in minimizing
possible disruptions of states’ efforts to implement their weatherization
programs.

82
DOE has also approved state weatherization plans for Delaware, Kansas, Maryland,
Montana, Nebraska, Nevada, North Dakota, Oregon, South Carolina, South Dakota, Utah,
and West Virginia.

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Table 16: DOE’s Approval of State Plans and Second Allocation of the Recovery
Act’s Weatherization Funds for 16 States and the District

State

Date state plan
was submitted
(2009)

Date state plan was
approved (2009)

Arizona

April 28

June 8

$22,809,311

California

May 12

June 18

74,324,424

May 8

a

Colorado

Second allocation
of funds

a

District of Columbia May 12

June 18

3,235,609

Florida

May 11

June 18

70,393,790

Georgia

May 12

June 26

49,,902,525

Illinois

May 1

June 26

97,010,648

Iowa

May 11

a

a

Massachusetts

May 11

a

a

Michigan

May 12

a

a

Mississippi

May 11

June 8

New Jersey

May 11

a

New York

May 12

June 26

157,874,605

North Carolina

May 12

June 18

52,781,814

Ohio

May 12

June 18

106,712,564

Pennsylvania

May 12

a

a

Texas

May 6

a

a

19,768,477
a

Source: DOE.
a

DOE has not yet approved the state’s weatherization plan.

In addition, officials in nine of the states in our review expressed concern
that the Recovery Act requires that weatherization contractors and
subcontractors pay their laborers and mechanics at the locally prevailing
wage rates, as determined by the U.S. Secretary of Labor. Because prior
DOE weatherization funding did not have this requirement, questions have
been raised about how the requirement should be implemented. For
example, it creates the possibility that workers could be paid at different
wage rates for the same work, depending on the source of funds.
Pennsylvania officials noted that local community action agencies may
have difficulty tracking the number of hours worked by employees who
perform tasks at both prevailing and nonprevailing wage rates. We will
continue to monitor the implementation of this requirement.

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States’ Proposed Plans for
Using Weatherization Funds
Vary

As shown in table 17, each of the states in our review has provided its
plans for using its Recovery Act weatherization allocation by breaking
expenditures into program operations, administration, training and
technical assistance, and other activities. All of the states propose to
spend at least 50 percent of their allocation on program operations,
ranging from 53 percent in California to 90 percent in Massachusetts.
According to DOE, variances among the states in the percentage of funds
devoted to program operations reflect different levels of maturity in, for
example, providing the infrastructure needed to achieve the
administration’s overall goal of weatherizing 1 million houses per year.

Table 17: States’ Proposed Funding Plans for Using the Recovery Act’s Weatherization Funds

Administrationa

Training and
technical
assistanceb

$41,251,602

$5,702,328

$10,003,042

$66,306

98,215,497

18,581,106

32,515,292

36,499,166

79,531,213

58,103,432

6,445,791

4,916,481

10,065,509

8,089,022

5,098,516

808,902

1,454,968

726,636

Florida

175,984,474

124,008,695

17,598,448

29,917,361

4,379,970

Georgia

124,756,312

88,509,632

10,291,150

21,844,809

4,110,721

Illinois

242,526,619

174,946,540

24,252,660

42,427,419

900,000

80,834,411

46,865,882

8,083,441

11,168,618

14,716,470

Massachusetts

122,077,457

110,019,000

9,073,981

2,517,906

466,570

Michigan

243,398,975

195,159,247

17,305,253

11,129,275

19,805,200

Mississippi

49,421,193

33,579,102

4,471,060

8,678,559

2,692,472

New Jersey

118,821,296

89,354,321

10,806,268

9,308,242

9,352,465

New York

394,686,513

247,560,920

39,468,652

69,020,266

38,636,675

North Carolina

131,954,536

108,851,700

0

23,102,836

0

Ohio

266,781,409

209,167,751

21,280,186

7,737,330

28,596,142

Pennsylvania

252,793,062

192,936,342

21,729,647

20,000,000

18,127,073

Texas

326,975,732

218,701,202

30,833,844

21,253,423

56,187,263

Total
allocation

Program
operations

Arizona

$57,023,278

California

185,811,061

Colorado

State

District of Columbia

Iowa

Otherc

Source: State weatherization plans.

Notes: This table is based on the DOE funding announcement’s activity categories. Some states
categorized these amounts in their state weatherization plans differently than the way they are
presented in this table because of variances in how their categories were defined.
a

Administrative expenses cannot exceed 10 percent of a state’s allocation.

b

Training and technical assistance expenses cannot exceed 20 percent of a state’s allocation.

C

Includes vehicles, equipment, health and safety, liability insurance, and financial audits, among other
things.

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State Weatherization Plans
Focus on Units Weatherized as
a Measure of Impact

DOE’s funding announcement directs the states to report on the number of
housing units weatherized, the resulting energy savings, and the number of
jobs created. Table 18 shows the number of housing units that states
expect to weatherize using Recovery Act funds, according to states’
weatherization plans. While many of the weatherization plans estimate
expected energy savings, they do not use a consistent unit of measurement
or time frame. Few of the states’ weatherization plans present an estimate
of the expected jobs created. DOE officials told us that OMB will issue
additional guidance to the states regarding a consistent methodology for
making this calculation.
Table 18: Number of Housing Units Expected to Be Weatherized Using Recovery
Act Funds
State

Housing units expected to be weatherized

Arizona

6,409

California

50,330

Colorado

16,280

District of Columbia

784

Florida

19,000

Georgia

13,617

Iowa

7,196

Illinois

27,181

Massachusetts

16,926

Michigan

32,000

Mississippi

5,467

New Jersey

13,381

New York

45,000

North Carolina

23,500

Ohio

32,179

Pennsylvania

29,700

Texas

33,740

Sources: State weatherization plans and, for Michigan and North Carolina, interviews with state officials.

Recovery Act Funding
Helped States Address
Budget Challenges

The Office of Management and Budget estimates that, in addition to the
existing federal grants to states and territories, federal obligations of
Recovery Act funds for states and territories will be about $149 billion in
federal fiscal year 2009. Federal grants represented the second-largest
share of funding for state and local governments in 2008 (about 20 percent
or $388 billion). As shown in figure 12, state and local tax receipts

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constituted the largest share of funding for state and local governments in
2008 (about 68 percent or $1.3 trillion).
Figure 12: State and Local Government Current Receipts, Fiscal Year 2008
Dollars (in billions)

33%

Sales $436.3

31%

Property $404.6

25%

Personal income $333.4

7%
4%

Other taxes $96.7
Corporate income $47.6

20%
68%

Taxes
$1,318.6

12%

Other receipts $228.3
Federal grants-in-aid $388.3
Source: GAO analysis of Bureau of Economic Analysis data.

Note: Other receipts include contributions for government social insurance, income receipts on assets
such as interest receipts or rents, transfer receipts from businesses and persons, and surpluses from
government enterprises.

State revenue continued to decline and states used Recovery Act funding
to reduce some of their planned budget cuts and tax increases to close
current and anticipated budget shortfalls for fiscal years 2009 and 2010. 83
Of the 16 states and the District, 15 estimate fiscal year 2009 general fund

83

According to the National Association of State Budget Officers (NASBO), most states
have balanced-budget requirements for general funds, which may include requirements
such as (1) requiring governors to submit a balanced budget, (2) mandating that their
legislatures pass a balanced budget, (3) directing governors to sign a balanced budget, or
(4) requiring governors to execute a balanced budget. According to NASBO, all of the
states we visited have balanced-budget requirements. (In its report, NASBO did not provide
information on the District of Columbia’s balanced budget requirements.) See NASBO,
Budget Processes in the States (Washington, D.C.: Summer 2008).

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revenue collections will be less than in the previous fiscal year. 84 For
example, in Georgia, the state’s net revenue collections for May 2009 were
14.4 percent less than they were in May 2008, representing a decrease of
approximately $212 million in total tax and other collections. On May 28,
2009, the lower-than-expected revenue projections led the Governor to
instruct the Office of Planning and Budget to reduce available funds by 25
percent for the month of June (the last month of fiscal year 2009). In
Michigan, fiscal year 2008-2009 revenue collections are estimated to be
$1.9 billion—or 20.6 percent—less than fiscal year 2007-2008 collections,
putting current revenue estimates below 1971 levels, when adjusted for
inflation. The 2 remaining states —Iowa and North Carolina—had
revenues that were lower than projected. As shown in figure 13, data from
the Bureau of Economic Analysis (BEA) also indicate that the rate of state
and local revenue growth has generally declined since the second quarter
of 2005, and the rate of growth has been negative in the fourth quarter of
2008 and the first quarter of 2009. 85

84

Michigan—along with the District of Columbia—has a fiscal year that begins October 1.
New York’s fiscal year begins April 1, and the fiscal year for Texas begins on September 1.
All other states we visited have fiscal years beginning July 1.
85
Recent reports provide additional details regarding revenue declines beyond our selected
states. For example, see The National Governors Association and the National Association
of State Budget Officers, The Fiscal Survey of States (Washington, D.C., June 2009);
National Conference of State Legislatures, Budget Update: April 2009 (Washington, D.C.,
April 2009); Lucy Dadayan and Donald J. Boyd, The Nelson A. Rockefeller Institute of
Government, April is the Cruelest Month: Personal Income Tax Revenues Portend
Deepening Trouble for Many States (Albany, N.Y., June 18, 2009).

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Figure 13: Year-Over-Year Change in State and Local Government Current Tax Receipts
Percentage change
12
10
8
6
4
2
0
-2
-4
QI

Q2

Q3

2001

Q4

QI

Q2

Q3

2002

Q4

QI

Q2

Q3

Q4

QI

2003

Q2

Q3

Q4

QI

2004

Q2

Q3

2005

Q4

QI

Q2

Q3

2006

Q4

QI

Q2

Q3

2007

Q4

QI

Q2

Q3

2008

Q4

Q1
2009

Source: GAO analysis of BEA data.

Officials in most of the selected states and the District expect these
revenue trends to contribute to budget gaps (estimated revenues less than
estimated disbursements) anticipated for future fiscal years. All of the 16
states and the District forecasted budget gaps in state fiscal year 2009-2010
before budget actions were taken. New York’s enacted budget for fiscal
year 2009-2010 closed what state officials described as the largest budget
gap ever faced by the state. The combined New York current services
budget gaps totaled $2.2 billion in fiscal year 2008-2009 and $17.9 billion in
2009-2010 before the state instituted corrective budget actions and
received Recovery Act funding. In California, the governor projects a $24.3
billion budget gap in fiscal years 2008-2009 and 2009-2010, created in large
part by lower revenue estimates. 86 Florida, which recently passed a $66.5
billion budget for the state’s 2009-2010 fiscal year, faced what officials

86

This projected shortfall is after the California Governor and Legislature addressed a $42
billion budget gap in February 2009 in the general fund. As of June 30, the California
Legislature had not passed legislation for the Governor to sign that would resolve the
state’s budget deficit. The May 2009 budget revision indicates that revenues and transfers
in fiscal years 2008-2009 and 2009-2010 total approximately $178 billion.

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estimated as a $4.8 billion gap in general funds before corrective budget
actions were taken.

States Combined Use of
Recovery Act Funds with
Budget Actions to Maintain
Balance and Close Budget Gaps

Consistent with one of the purposes of the act, states’ use of Recovery Act
funds to stabilize their budgets helped them minimize and avoid
reductions in services as well as tax increases. States took a number of
actions to balance their budgets in fiscal year 2009-2010, including staff
layoffs, furloughs, and program cuts. The use of Recovery Act funds
affected the size and scope of some states’ budgeting decisions, and many
of the selected states reported they would have had to make further cuts
to services and programs without the receipt of Recovery Act funds. For
example, California, Colorado, Georgia, Illinois, Massachusetts, Michigan,
New York, and Pennsylvania budget officials all stated that current or
future budget cuts would have been deeper without the receipt of
Recovery Act funds.
Recovery Act funds helped cushion the impact of states’ planned budget
actions but officials also cautioned that current revenue estimates indicate
that additional state actions will be needed to balance future-year budgets.
Future actions to stabilize state budgets will require continued awareness
of the maintenance-of-effort (MOE) requirements for some federal
programs funded by the Recovery Act. For example, Massachusetts
officials expressed concerns regarding MOE requirements attached to
federal programs, including those funded through the Recovery Act, as
future across-the-board spending reductions could pose challenges for
maintaining spending levels in these programs. State officials said that
MOE requirements that require maintaining spending levels based upon
prior-year fixed dollar amounts will pose more of a challenge than
upholding spending levels based upon a percentage of program spending
relative to total state budget expenditures.
States’ current uses of Recovery Act funds helped fund and maintain
staffing for existing programs. In Arizona, state budget officials said that
Recovery Act funding enabled the state to, among other things, reduce the
number of furloughs and layoffs, avoid some service reductions, maintain
the level of state employee benefit levels, and prevent some contract
delays and reductions that otherwise would have occurred. Similarly,
officials in Mississippi plan to use Recovery Act funds to help Mississippi
stabilize its budget and support local governments, particularly school
districts. For example, officials at the two local education agencies and
three institutions of higher education we visited told us that they plan to
use Recovery Act funds to avoid layoffs and hire new staff. Officials in the
District told us that because they knew the Recovery Act funds were

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coming while they were developing the fiscal year 2010 budget, they did
not have to create a budget scenario in which additional actions, such as
furloughs, were necessary to fill the anticipated revenue gap. Similarly,
Colorado officials also knew early on that Recovery Act funds were
coming—particularly the increased federal share of Medicaid—thereby
making state funds that would have been used to pay the state share of
Medicaid available for avoiding certain budget actions including additional
furloughs. In New Jersey, although budget officials anticipated receiving
Recovery Act funds before the state finalized its 2010 budget, this did not
preclude the state from including personnel actions such as furloughs and
wage freezes to aid in closing the projected budget gap. In Iowa, for the
fiscal year 2009 budget, Recovery Act funding allowed state agencies to
avoid program cuts as well as mandatory layoffs and furloughs.
In addition to these budget actions, some states also reported accelerating
their use of Recovery Act funds to stabilize deteriorating budgets. For
example, in Georgia, lower-than-expected revenue numbers caused the
state to use more Recovery Act funds in state fiscal year 2009 than it had
anticipated using. In Massachusetts, state officials said that accelerating
their use of Recovery Act and state rainy-day funds was the most viable
solution to balance their budget. Massachusetts officials reported that the
state had hoped to leave a sizable amount of its State Fiscal Stabilization
Fund (SFSF) allocation available for 2011 but changed its planned
approach because of its deteriorating fiscal condition. Using more of these
funds in the 2008-2009 state fiscal year may make it more difficult for the
state to balance its budget after Recovery Act funds are no longer
available. California’s dire fiscal condition prompted the state to
accelerate the use of its Recovery Act funds, along with the use of a
number of additional measures to reduce the state’s 2008-2009 budget gap.
Many states, such as Colorado, Florida, Georgia, Iowa, New Jersey, and
North Carolina, also reported tapping into their reserve or rainy-day funds
in order to balance their budgets. In most cases, the receipt of Recovery
Act funds did not prevent the selected states from tapping into their
reserve funds, but a few states reported that without the receipt of
Recovery Act funds, withdrawals from reserve funds would have been
greater. 87 Officials from Georgia stated that although they have already
used reserve funds to balance their fiscal year 2009 and 2010 budgets, they

87

According to NASBO, the selected states have varying legal requirements regarding
contributions to and withdrawals from various types of reserve funds.

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may use additional reserve funds if, at the end of fiscal year 2009, revenues
are lower than the most recent projections. In contrast, New York officials
stated they were able to avoid tapping into the state’s reserve funds due to
the funds made available as a result of the increased Medicaid FMAP funds
provided by the Recovery Act.

Approaches to Developing Exit
Strategies for End of Recovery
Act Funding Influenced by
Nature of State Budget
Processes

States’ approaches to developing exit strategies for the use of Recovery
Act funds reflect the balanced-budget requirements in place for all of our
selected states and the District. Budget officials referred to the temporary
nature of the funds and fiscal challenges expected to extend beyond the
timing of funds provided by the Recovery Act. Officials discussed a desire
to avoid what they referred to as the “cliff effect” associated with the dates
when Recovery Act funding ends for various federal programs.
Budget officials in some of the selected states are preparing for the end of
Recovery Act funding by using funds for nonrecurring expenditures and
hiring limited-term positions to avoid creating long-term liabilities.
Representatives of the Texas Governor’s office also told us that their
office has advised state agencies that much of the funding is temporary.
The Texas Legislature provided similar guidance in the conference
committee report for the appropriations bill directing state agencies to
“give priority to expenditures that do not recur beyond the 2010-2011
biennium.” 88 In Ohio, budget officials remain focused on budgeting for the
coming biennia (2010-2011), but key legislators have queried state officials
during budget deliberations about their plans for the next biennia (20122013), when federal Recovery Act funding is no longer available.
A few states reported that although they are developing preliminary plans
for the phasing out of Recovery Act funds, further planning has been
delayed until revenue and expenditure projections are finalized. For
example, while Georgia’s Governor has encouraged state agencies to
spend funds judiciously and take into consideration that the funding is
temporary, the state is still in the process of developing a strategy for
winding down its use of Recovery Act funds. In part, such a strategy is
dependent on revenue and expenditure projections, which will be updated
as part of the fiscal year 2011 budget planning process. In addition, risk
mitigation plans currently being developed by state agencies may impact
the state’s exit strategy.

88

Texas Legislature, Conference Committee Report for S.B. No. 1 General Appropriations
Bill, Special Provisions for American Recovery and Reinvestment Act, section 7.

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Some states are in the process of developing exit strategies aligned with
planning for broader fiscal challenges. In North Carolina, the state’s
recovery office hired a temporary staff person to look at some of the
factors that may have caused the state’s economic slowdown, as well as to
help plan for an exit strategy after Recovery Act funds end. Officials in
Illinois also said that they plan to convene a working group to assess state
agencies’ level of preparedness for the end of Recovery Act funding. They
have issued guidance to state agencies regarding the use of the funds and
have directed agencies to submit hiring plans containing provisions that
mitigate the risk of layoffs, such as hiring temporary employees and
contractors.

States Have
Implemented Various
Internal Control
Programs: However,
Single Audit Guidance
and Reporting Does
Not Adequately
Address Recovery Act
Risk

Given that Recovery Act funds are to be distributed quickly, effective
internal controls over use of funds are critical to help ensure effective and
efficient use of resources, compliance with laws and regulations, and in
achieving accountability over Recovery Act programs. Internal controls
include management and program policies, procedures, and guidance that
help ensure effective and efficient use of resources; compliance with laws
and regulations; prevention and detection of fraud, waste, and abuse; and
the reliability of financial reporting. Management is responsible for the
design and implementation of internal controls and the states in our
review have a range of approaches for implementing their internal
controls.
Some states have internal control requirements in their state statutes,
while others have undertaken internal control programs as management
initiatives. In our sample, seven states—California, Colorado, Florida,
Michigan, Mississippi, New York, and North Carolina—noted they have
statutory requirements for internal control programs and activities. The
other nine states—Arizona, Georgia, Illinois, Iowa, Massachusetts, New
Jersey, Ohio, Pennsylvania, and Texas—noted they have undertaken
various internal control programs. In addition, the District of Columbia
has taken limited actions related to its internal control program. An
effective internal control program helps in managing change to cope with
shifting environments and evolving demands and priorities, as the
Recovery Act entails. Internal controls need to be continually assessed and
evaluated by management as programs change and entities strive to
improve operational processes.
Risk assessment and monitoring are key elements of internal controls, and
the states and the District in our review have undertaken a variety of
actions in the area of risk assessment. Risk assessment involves

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performing comprehensive reviews and analyses of program operations to
determine if internal and external risks exist and to evaluate the nature
and extent of risks identified. Approaches to risk analysis can vary across
organizations because of differences in missions and the methodologies
used to qualitatively and quantitatively assign risk levels. Monitoring
activities include the systemic process of reviewing the effectiveness of
the operation of the internal control system. These activities are
conducted by management, oversight entities, and internal and external
auditors. Monitoring enables stakeholders to determine whether the
internal control system continues to operate effectively over time. It also
improves the organization’s overall effectiveness and efficiency by
providing timely evidence of changes that have occurred, or might need to
occur, in the way the internal control system addresses evolving or
changing risks. Monitoring also provides information and feedback to the
risk assessment process.
In California, the Office of State Audits and Evaluations (OSAE) has
primary responsibility for reviewing whether state agencies receiving
Recovery Act funds have established adequate systems of internal control
to maintain accountability over those funds. According to state officials,
OSAE is using two primary approaches to assessing internal controls at
agencies receiving Recovery Act funds— Financial Integrity and State
Manager’s Accountability Act of 1983 (FISMA) reviews (an existing
internal control assessment tool) and readiness reviews (a new internal
control assessment tool). 89 Both the FISMA reviews and the readiness
reviews rely primarily on information that is self-certified by agency
officials. FISMA requires each state agency to maintain effective systems
of internal accounting and administrative control, to evaluate the
effectiveness of these controls on an ongoing basis, and to biennially
review and prepare a report on the adequacy of the agency’s systems of
internal accounting and administrative control.
The state of Colorado enacted the State Department Financial
Responsibility and Accountability Act in 1988, which which requires each
principal department of the state’s executive department to institute and
maintain systems of internal accounting and administrative control—
including an effective process of internal review and for making
adjustments for changing conditions. 90 The act also requires the head of

89

West’s Ann. Cal. Gov’t Code Sec. 13400 et seq.

90

Colo. Rev. Stat. § 24-17-102 (2008).

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each principal department to annually state in writing whether the
department’s systems of internal accounting and control either do or do
not fully comply with the act’s requirements. 91 While the Controller’s office
ensures that these statements are filed every year, historically, the
Controller has not had the resources to ensure that proper internal
controls are in place. The Controller’s office is developing an internal
control toolkit that will provide state departments with information on
internal control systems and checklists to formalize and improve their
existing processes and identify potential weaknesses. In addition, the
Controller’s office is in the process of filling its internal auditor position,
which has been vacant for over 2 years. According to the Controller, the
auditor will work with state departments to promote and monitor internal
controls, as well as monitor proper tracking and reporting of Recovery Act
funds.
Florida law also places the responsibility for internal controls on state
agencies. A Florida statute requires the agencies to establish and maintain
management systems and controls that promote and encourage
compliance; economic, efficient, and effective operations; reliability of
records and reports; and safeguarding of assets. 92 However, while Florida
law requires state agencies to have such internal controls, the state
oversight agencies are preparing for the infusion of Recovery Act funds
into the state. Annually, the Florida Department of Financial Services’
obtains representation letters from agency heads stating that they are
responsible for establishing and maintaining effective controls over
financial reporting and preventing and detecting fraud for all funds
administered by their agency. Department of Financial Services’ officials
stated that, this year, they will ask the agency heads to also to sign a
separate representation letter for Recovery Act funds that says internal
controls are in place for Recovery Act funds and that these funds will be
tracked separately from other funds.
New York State also enacted into law internal control requirements. The
law requires, among other things, that each agency establish and maintain
a system of internal controls and a review program, designate an internal
control officer, and periodically evaluate the need for an internal audit
function in each agency. 93 In addition, to fulfill the requirements of the

91

Colo. Rev. Stat. § 24-17-103 (2008).

92

Fla. Stat. § 215.86.

93

N.Y. Exec. § 950–953.

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New York State Government Accountability, Audit and Internal Control
Act (New York Internal Control Act), the Office of the State Comptroller is
responsible for developing the Standards for Internal Control in New York
State Government. 94 The Internal Control Act requires that the State
Division of the Budget (DOB) periodically (1) issue a list of agencies
covered by the act, and (2) issue a list of agencies required to have an
internal audit function. Beyond these two statutory requirements, DOB has
also taken administrative steps to facilitate and support the goals of the
Internal Control Act through the issuance of additional guidance and the
annual internal control certification requirement. Based on DOB’s
Governmental Internal Control and Internal Audit Requirements
manual, 95 the system of internal control should be developed using the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) conceptual framework and should incorporate COSO’s five basic
components of internal control. 96
North Carolina has enacted the State Governmental Accountability and
Internal Control Act, requiring the Office of the State Controller to
establish statewide internal control standards. 97 The Office of the State
Controller is implementing a statewide internal control program called
EAGLE (Enhancing Accountability in Government through Leadership and
Education). The purpose was not only to establish adequate internal
control, but also to increase fiscal accountability within state government.
North Carolina is using a phased approached to implement the EAGLE
program. In Phase I, state agencies and state universities are required to
perform an annual assessment of internal control over financial reporting.
This risk assessment is seen as a benefit to the agencies as it identifies
risks and compensating controls that reduce the possibility of material
misstatements of financial reports and misappropriation of assets, as well
as opportunities to increase efficiency and control effectiveness in
business processes and operations. In January 2008, the State Controller
requested each agency to appoint an Internal Control Officer to lead the
agency’s risk assessment team and monitor the agency’s compliance with

94

Standards for Internal Control in New York State Government, revised October 2007.

95

Budget Policy and Reporting Manual, Governmental Internal Control and Internal Audit
Requirements, B-350.

96

The five basic components of internal controls are control environment, risk assessment,
control activities, information and communication, and monitoring.
97

N.C.G. St. Ann. ch. 143D.

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EAGLE requirements. Phase II of the program will be “efficiency of
operations” and Phase III will be “compliance with laws and regulations.”
In accordance with Mississippi’s statutory requirement to maintain
continuous internal audit over the activities of each state agency,
Mississippi has implemented a program of internal control. 98 First,
Mississippi has required each state agency to certify in writing that it has
conducted an evaluation of internal controls and that the findings of the
evaluation provide reasonable assurance that the assets of the agency have
been preserved, duties have been segregated by function, and transactions
are executed in accordance with laws of the state of Mississippi. As part of
maintaining appropriate controls, the Department of Finance and
Administration directed all state agency executive and finance directors to
•

conduct a comprehensive review of their agency’s internal control
structure to determine if it is functioning properly and in accordance with
the agency’s internal control plan;

•

determine whether the internal control structure has been updated to
address operational or procedural changes made during the period under
review to processes, program areas, or functions;

•

identify internal control weaknesses;

•

initiate actions to ensure that control weaknesses discovered during the
period under review, and in prior periods, have been adequately
addressed; and

•

give immediate attention to all internal control related findings and
recommendations reported by auditors during the year.
Second, in addition to the certification required of all state agencies, the
Department of Finance and Administration is requiring another
certification of agencies receiving Recovery Act funds. Agencies must
certify that they accept responsibility for spending the funds as
responsibly and effectively as possible while maintaining the appropriate
controls and reporting mechanisms to ensure accountability and
transparency in compliance with the Recovery Act. The certifications also
include an agency’s guarantee that program risks are, or will be, identified

98

Miss. Code Ann. sec. 7-7-3(6).

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and that the agency has, or will, implement internal controls sufficient to
mitigate the risk of waste, fraud, and abuse. Finally, the Department of
Finance and Administration established an internal control unit that is
reviewing agency letters of certification and expects to weigh all agencies
internal control assessments, as well as the findings and corrective action
plans noted by the State Auditor in the 2007 and 2008 Mississippi Single
Audit Report, to decide which agencies receiving Recovery Act funds
should initially be the focus of the unit’s monitoring activities.
Although not based on a statutory requirement, Georgia is taking steps to
monitor and safeguard Recovery Act funds at the state and program level.
Georgia has established a Recovery Act Accountability and Transparency
Support Team comprising representatives from the Office of Planning and
Budget, State Accounting Office, and Department of Administrative
Services (the department responsible for procurement). In May 2009, the
Georgia Office of Planning and Budget issued a risk management
handbook to all state agencies. Its purpose is to provide a process that
allows agencies to identify potential Recovery Act risk areas and develop
risk mitigation strategies for each individual funding source. The State
Accounting Office developed the agency self-assessment questionnaire
that accompanied the risk management handbook. This survey included
questions about compiling Recovery Act data for reporting purposes, the
specific contracting requirements in the Recovery Act that are not current
agency practices, and agency internal controls. The State Accounting
Office plans to use the results to target its audit efforts.
Ohio has made strides in refining its internal control process to
accommodate the Recovery Act funds. The state Office of Budget and
Management issued guidance on risk assessment in March 2009
highlighting the significance of risk mitigation strategies that all state
agencies should have in place to ensure management controls are
operating effectively to identify and prevent wasteful spending and
minimize waste, fraud, and abuse. The new Office of Internal Audit is
working with state agencies to develop and evaluate these risk
assessments. Based on these agency risk assessments, the Office of
Internal Audit is developing an oversight strategy that it will present to the
Audit Committee on June 30, 2009.
Although the District of Columbia (District) government and agencies
have internal controls, the controls are not consolidated into a citywide
internal control program, and past reports have identified numerous
weaknesses in the District’s internal controls. The District’s Office of
Inspector General (OIG) has issued reports that identified weaknesses in

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the District’s internal controls and made several recommendations to
improve internal controls. One report recommends that the Chief
Financial Officer (CFO), in conjunction with the City Administrator, issue
citywide guidance requiring managers to establish, assess, correct, and
report on internal controls and that these requirements should be reflected
in personnel performance plans. 99 In addition, the fiscal year 2007 Single
Audit report for the District of Columbia identified 89 material weaknesses
in internal controls over both financial reporting and compliance with
requirements applicable to major federal programs. The Single Audit
report identified material weaknesses in compliance with requirements
applicable to major federal programs, including Medicaid’s FMAP, ESEA
Title I Education grants, and Workforce Investment Act programs, all of
which are receiving Recovery Act funds. The findings were significant
enough to result in a qualified opinion for that section of the report. In
September 2008, the Office of the Chief Financial Officer (OCFO)
contracted with an independent accounting firm to identify areas with
internal control problems and deficiencies in the office. The review may
help direct OCFO in developing an internal control program. The
assessments will not be available until the end of 2009. When the firm has
completed its OCFO assessment, it will expand its review to District
agencies.

Challenges Exist in
Tracking Recovery Act
Funds

States and localities receiving Recovery Act funds directly from federal
agencies are responsible for tracking and reporting on those Recovery Act
funds. 100 An effective internal control program is critical to preparing
reliable financial statements and other financial reports. OMB has issued
guidance to the states and localities that provides for separate
identification “tagging” of Recovery Act funds, so that specific reports can
be created and transactions can be specifically identified as Recovery Act
funds. 101 The flow of federal funds to the states varies by programs. As we
have previously reported, the grant programs generally have different
objectives and strategies that are reflected in their application, selection,
monitoring, and reporting processes. Multiple federal entities are involved

99

District of Columbia, Audit of the Department of Parks and Recreation’s Oversight of
Capital Projects, OIG No. 06-1-08HA (May 2008).

100

Recovery Act, div. A, title XV, § 1512.

101

OMB memoranda, M-09-10, Initial Implementing Guidance for the American Recovery
and Reinvestment Act of 2009 (Feb. 18, 2009); and M-09-15, Updated Implementing
Guidance for the American Recovery and Reinvestment Act of 2009 (Apr. 3, 2009).

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in grants administration; the grantor agencies have varied grants
management processes; the grantee groups are diverse; and grants
themselves vary substantially in their types, purposes, and administrative
requirements. 102 The federal grant system is highly fragmented. 103
Several states and the District of Columbia have created unique codes for
their financial systems in order to tag the Recovery Act funds. District of
Columbia’s Office of Finance and Treasury (OFT) has established a bank
account exclusively for depositing Recovery Act funds. Most states plan to
use their current financial system to track and report on Recovery Act
funds, but various challenges exist. For instance, since the state of Arizona
is decentralized, the recording and tracking responsibility lies with the
state agencies that have different accounting systems. The state agencies
will need to periodically transfer accounting data from the agencies’
systems to the state’s system. Georgia is segregating funds through a set of
Recovery Act fund sources in the state’s financial accounting system.
Georgia’s State Accounting Office issued guidance on Recovery Act
accounting that states those state agencies such as the Georgia
Department of Labor that do not use the state’s financial accounting
system must ensure that the data are maintained in accordance with all
Recovery Act financial reporting requirements.
California’s Recovery Task Force (Task Force), which has overarching
responsibility for ensuring that California’s Recovery Act funds are spent
efficiently and effectively, intends to use its existing internal control and
oversight structure, with some enhancements, to maintain accountability
for Recovery Act funds. State agencies, housing agencies, and other local
Recovery Act funding recipients we interviewed all told us that using
separate accounting codes within their existing accounting systems will
enable them to effectively track Recovery Act funds. However, officials
told us that accumulating this information at the statewide level will be
difficult using existing mechanisms. The state, which is currently relying
on lengthy manually updated spreadsheets, is awaiting additional federal
OMB guidance to design and implement a new system to effectively track
and report statewide Recovery Act funds. Most state and local program
officials told us they will apply existing controls and oversight processes

102

GAO, Grants Management: Additional Actions Needed to Streamline and Simplify
Process, GAO-05-335 (Washington, D.C.: Apr. 18, 2005).
103

GAO, Federal Assistance: Grant System Continues to Be Highly Fragmented,
GAO-03-718T (Washington, D.C.: Apr. 29, 2003).

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that they currently apply to other program funds to oversee Recovery Act
funds.
Officials from the Texas State Comptroller’s Office repeated their concern
in May 2009 that the federal government was not identifying Recovery Act
funds separately from other federal funds disbursed to the state. Absent
this identification, the Comptroller relies on state agencies to distinguish
between the two types of federal funds. Texas officials cited federal fund
transfers to the Texas Workforce Commission and the Texas Health and
Human Services Commission as examples of this fund identification
problem. Absent separate coding from the U.S. Department of the
Treasury, the Texas officials said the state relies on the state agencies to
inform the State Comptroller’s office on what portion of federal funds are
Recovery Act funds. The Texas officials commented that it would be
helpful if the federal government put in place the coding structure to
identify Recovery Act funds separately from other federal funds—as they
believe the Recovery Act requires—before Recovery Act funds are
disbursed to Texas. State agency officials told us they do not share the
Comptroller’s concern because they are able to distinguish between their
normal federal funds and Recovery Act funds when initiating fund
transfers.
The District of Columbia has also experienced a challenge. District of
Columbia’s Office of Finance and Treasury (OFT) has established a bank
account exclusively for depositing Recovery Act funds. Agencies are
notified by OFT when Recovery Act funds are received in the bank
account. All Recovery Act revenue received will be tracked by OFT in a
separate database. When Recovery Act funds are ready to be distributed
from federal agencies to District agencies, Recovery Act grant funding
notifications are sent directly to the District agencies. When an agency
receives a grant funding notification, it is the agency’s responsibility to
report the receipt to the Office of Budget and Planning (OBP). OBP
provides weekly reports of grant funding notifications that are reconciled
by the agencies. OBP stated there is a disparity of grant information
caused by the process and is working on a solution.
Mississippi is undergoing changes to most of the state’s central accounting
and reporting systems. The Department of Finance and Administration
(DFA) is making changes to the Statewide Automated Accounting System
(SAAS), which tracks purchasing, accounts payables, revenues, and
accounts receivable and includes Mississippi’s general ledger. The use of
reporting categories does not allow DFA to currently tie individual
obligations or expenditures to the contract for which they were incurred.

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However, DFA is in the process of making modifications to the state
central accounting system that will allow the system to do so. Once
completed, these changes will provide greater transparency of Recovery
Act fund usage. For example, the changes will allow the public to view
online Recovery Act contracts and expenditures for specific contracts. In
addition, the changes will add further system controls, such as the ability
to deny the obligation of funds until state agencies have posted the
contract that supports the obligation.

Single Audit Guidance and
Reporting Does Not
Adequately Address
Recovery Act Risks

In addition to being an important accountability mechanism, the results of
audits can provide valuable information for management’s risk assessment
and monitoring processes. The Single Audit report, prepared to meet the
requirements of the Single Audit Act, 104 as amended (Single Audit Act), is a
source of information on internal control and compliance findings and the
underlying causes and risks. The report is prepared in accordance with
OMB’s implementing guidance in OMB Circular No. A-133, Audits of
States, Local Governments, and Non-Profit Organizations, 105 which
provides guidance to auditors on selecting federal programs for audit and
the related internal control and compliance audit procedures to be
performed. A Single Audit report includes the auditor’s schedule of
findings and questioned costs, internal control and compliance
deficiencies, and the auditee’s corrective action plans and a summary of
prior audit findings that includes planned and completed corrective
actions. The Single Audit Act requires that a nonfederal entity subject to
the act transmit its reporting package to a federal clearinghouse
designated by OMB 9 months after the end of the period audited.

104

The Single Audit Act requires states, local governments, and nonprofit organizations
expending more than $500,000 in federal awards in a year to obtain an audit in accordance
with requirements set forth in the act. A Single Audit consists of (1) an audit and opinions
on the fair presentation of the financial statements and the Schedule of Expenditures of
Federal Awards; (2) gaining an understanding of and testing internal control over financial
reporting and the entity’s compliance with laws, regulations, and contract or grant
provisions that have a direct and material effect on certain federal programs (i.e., the
program requirements); and (3) an audit and an opinion on compliance with applicable
program requirements for certain federal programs.
105

The auditor identifies the applicable federal programs, including “major programs,”
based on risk criteria, including minimum dollar thresholds, set out in the Single Audit Act
and OMB Circular No. A-133. Guidance on identifying compliance requirements for most
large federal programs is set out in the Compliance Supplement to OMB Circular No. A-133.
OMB has 14 requirements that generally are to be tested for each major federal program to
opine on compliance and report on significant deficiencies in internal control over
compliance with each applicable compliance requirement.

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In our April 2009 report, we reported that the guidance and criteria in
OMB Circular No. A-133 do not adequately address the substantial added
risks posed by the new Recovery Act funding. Such risks may result from
(1) new government programs, (2) the sudden increase in funds or
programs that are new to the recipient entity, and (3) the expectation that
some programs and projects will be delivered faster so as to inject funds
into the economy. With some adjustment, the Single Audit could be an
effective oversight tool for Recovery Act programs, addressing risks
associated with all three of these factors.
Our April report included recommendations that OMB adjust the current
audit process to
•

focus the risk assessment auditors use to select programs to test for
compliance with 2009 federal program requirements on Recovery Act
funding;

•

provide for review of the design of internal controls during 2009 over
programs to receive Recovery Act funding, before significant expenditures
in 2010; and

•

evaluate options for providing relief related to audit requirements for lowrisk programs to balance new audit responsibilities associated with the
Recovery Act.
Since April, OMB has taken several steps in response to our
recommendations. However, those actions do not sufficiently address the
risks leading to our recommendations. In OMB’s view, it is limited in its
options to address our concerns due to specific requirements set forth in
the Single Audit Act. The Single Audit Act charges OMB with, among other
things, prescribing the risk-based criteria auditors use to select federal
programs to include for Single Audit compliance and internal controls
testing. To focus auditor risk assessments on Recovery Act-funded
programs and to provide guidance on internal control reviews for
Recovery Act programs, OMB is working within the framework defined by
existing mechanisms—Circular No. A-133 and the Compliance
Supplement. In this context, OMB has made limited adjustments to its
Single Audit guidance and is planning to issue additional guidance.
Following is the status of OMB’s actions related to our April
recommendations.

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Focusing Auditors’ Program
Risk Assessments on Programs
with Recovery Act Funding

In our April report, we recommended that OMB focus the risk assessment
auditors use to select programs to test for compliance with 2009 federal
program requirements on Recovery Act funding. On May 26, OMB made
available the 2009 edition of the Circular A-133 Compliance Supplement.
The new Compliance Supplement includes the following, which is
intended to focus auditor risk assessment on Recovery Act funding:

•

A requirement that auditors specifically ask auditees about and be alert to
expenditure of funds provided by the Recovery Act.

•

An appendix that highlights some areas of the Recovery Act impacting
single audits. The appendix adds a requirement that large programs and
program clusters with Recovery Act funding cannot be assessed as low
risk for the purposes of program selection without clear documentation of
the reasons that the expenditures of Recovery Act awards are low risk for
the program. The appendix also states that recipients are to separately
identify expenditures for Recovery Act programs on the Schedule of
Expenditures of Federal Awards. It also notes that compliance
requirements unique to Recovery Act-funded programs are not included in
the Compliance Supplement and advises auditors to review award
documents, check the OMB Web site for addenda to the supplement, and
use the existing Compliance Supplement framework as guidance to
identify material Recovery Act compliance requirements.
OMB has not yet identified program groupings critical to auditors’
selection of programs to be audited for compliance with program
requirements. As we reported in April 2009, the current approach
prescribed by OMB Circular No. A-133 relies heavily on the amount of
federal expenditures in a program during a fiscal year and whether
findings were reported in the previous period to determine whether
detailed compliance testing is required for that year. In some cases, OMB
requires that auditors group closely related programs that share common
compliance requirements and consider them as one program when
selecting programs for testing. OMB specifically identifies these groups of
programs, called “clusters,” in the Compliance Supplement. OMB has
noted that many of the Recovery Act awards will share common
compliance requirements with existing programs and that the Compliance
Supplement cluster list will be updated to include Recovery Act programs.
OMB is currently considering ways to cluster programs for Single Audit
selection in ways that would make it more likely that Recovery Act
programs would be selected and, therefore, be subjected to internal
control and compliance testing, but the dollar formulas would not change
under this plan. This approach may not provide sufficient assurance that

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smaller, but nonetheless significant, Recovery Act-funded programs would
be selected for audit. OMB plans to issue the new cluster information by
mid-July 2009.
In addition, the 2009 Compliance Supplement to OMB’s Circular No. A-133
does not yet provide specific auditor guidance for new programs funded
by the Recovery Act or for new compliance requirements specific to
Recovery Act funding within existing programs, that may be selected as
major programs for audit. For instance, there is currently no programspecific audit guidance included in the Compliance Supplement on the
new State Fiscal Stabilization Fund programs, significant programs
administered by the Department of Education to support education and
other government services, with federal funds already flowing to the
states. OMB acknowledges that additional guidance is called for and is in
the process of drafting such guidance. OMB plans to issue an addendum to
the Compliance Supplement that would address some Recovery Actrelated compliance requirements by mid-July 2009.

Early Review of the Design
of Internal Controls over
Recovery Act-Funded
Programs before
Significant Expenditures in
2010

In our April 2009 report, we recommended that OMB adjust the current
Single Audit process to provide for review of the design of internal
controls during 2009 over programs to receive Recovery Act funding,
before significant expenditures in 2010.
To provide additional focus on internal control reviews, OMB has drafted
guidance that indicates the importance of such reviews and encourages
auditors to communicate weaknesses to management early in the audit
process but does not add requirements for auditors to take these steps.
Because OMB is choosing to address this recommendation through the
existing audit framework, it has not changed the reporting time frames and
therefore does not address our concern that internal controls over
Recovery Act programs should be reviewed before significant funding is
expended. OMB plans to finalize and issue the guidance by mid-July 2009.
In addition, the guidance to be provided by OMB will be limited to those
programs selected by the auditor as “major programs” under the current
approach for selecting programs for audit, which may not adequately
consider Recovery Act program risks. Finally, if this internal control work
is done within the current Single Audit framework and reporting timelines,
the auditor evaluation of internal control and related reporting will occur
too late—after significant levels of federal expenditures have already
occurred.

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Providing Relief Related to
Low-Risk Programs to
Balance Expected
Increased Workload

In our April 2009 report, we recommended that the Director of OMB
evaluate options for providing relief related to audit requirements for lowrisk programs to balance new audit responsibilities associated with the
Recovery Act. While OMB has noted the increased responsibilities falling
on those responsible for performing Single Audits, to date it has not issued
any proposals and does not have plans to address this recommendation.
A recent survey conducted by the staff of the National State Auditors
Association (NSAA) 106 highlighted the need for relief to overburdened
state audit organizations. Survey participants were asked whether they
were experiencing cuts in staffing and to comment on the effects of these
cuts on their ability to perform effective audits. Thirty-two state audit
organizations that indicated in an earlier survey that their responsibilities
included Single Audit had responded to the survey as of June 24. Of the 32
respondents, 17 indicated that staff had been cut by 5 percent or more.
Eight respondents are anticipating that staff will be required to take
unpaid leave in fiscal year 2010.
OMB officials told us they are considering reducing auditor workload by
decreasing the number of risk assessments of smaller federal programs.
Auditors conduct these risk assessments as part of the planning process to
identify which federal programs will be subject to detailed internal control
and compliance testing. GAO believes that this step in itself will not
provide sufficient relief to balance the additional audit requirements for
Recovery Act programs.
OMB officials have expressed reluctance to revise OMB Circular No. A-133
or to propose revisions to the Single Audit Act to provide auditor relief or
to provide additional flexibility to allow auditors to have more control
over the selection of programs tested for internal control and compliance.
They stated that to do so would take considerable time and could not be
accomplished in time to have adequate coverage of Recovery Act funds. In
addition, federal inspectors general have expressed concern about
reducing audit coverage of existing programs. However, without action
now, audit coverage of Recovery Act programs will not be sufficient to
address Recovery Act risks, and the audit reporting that does occur will be
after significant Recovery Act funds have already been expended.

106

NSAA’s mission is to unite state auditors by encouraging and providing opportunities for
the free exchange of information and ideas between auditors on the state, federal, and local
levels.

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Congress is currently considering a bill, H.R. 2182, that could provide
some financial relief to auditors lacking the staff capacity necessary to
handle the increased audit responsibilities associated with the Recovery
Act. 107 H.R. 2182 would amend the Recovery Act to provide for enhanced
state and local oversight of activities conducted pursuant to the Recovery
Act. As passed by the House, H.R. 2182 would allow state and local
governments to set aside 0.5 percent of Recovery Act funds, in addition to
funds already allocated to administrative expenditures, to conduct
planning and oversight to prevent and detect waste, fraud, and abuse.

Single Audit Reporting Will
Not Facilitate Timely
Reporting of Recovery
Program Findings and
Risks

The Single Audit reporting deadline is too late to provide audit results in
time for the audited entity to take action on deficiencies noted in Recovery
Act programs. The Single Audit Act requires that recipients submit their
Single Audit reports to the federal government no later than 9 months after
the end of the period being audited. 108 As a result an audited entity may not
receive feedback needed to correct an identified internal control or
compliance weakness until the latter part of the subsequent fiscal year.
For example, states that have a fiscal year end of June 30 have a reporting
deadline of March 31, which leaves program management only 3 months to
take corrective action on any audit findings before the end of the
subsequent fiscal year. For Recovery Act programs, significant
expenditure of funds could occur during the period prior to the audit
report being issued.
The timing problem is exacerbated by the extensions to the 9-month
deadline that are routinely granted by the awarding agencies, consistent
with OMB guidance. For example, 13 of the 17 states in our review have a
June 30 fiscal year end. We found that 7 of these 13 states requested and
received extensions for their March 31, 2009, submission requirement of

107

H.R. 2182, 11th Cong. (2009). H.R. 2182 passed in the House of Representatives on May
19, 2009, but, as of June 29, 2009, had not passed the Senate.
108

Single Audit Act Section 7502(b)(2). The guidance provides that under certain conditions,
Single Audit auditees may be audited biennially instead of annually. For entities that are
audited biennially, it is longer before internal control and compliance weaknesses are
identified and remediate.

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their fiscal year 2008 reporting package. 109 Three of the requests for
extensions were from auditors, and the remaining requests were from the
audited entities. Table 19 below lists the seven states, the extension date
requested, and the reason for the extension.
Table 19: Single Audit Extensions for June 30, 2008, Fiscal Year End
Total number of
months between
year-end and audit
reporting

State

Extension date
requested

Arizona

June 30, 2009

12

Delay in completion of Comprehensive Annual Financial Report
(CAFR).

California

June 30, 2009

12

The state has not yet completed its GAAP-basis financial statements
and does not anticipate completing them in time for the auditor to finish
the audit work by the reporting deadline.

Illinois

June 30, 2009

12

(1) The status of completing the audit process, (2) the first year of
several parties participating electronically in filing the reporting package
with the Federal Audit Clearinghouse, and (3) the state is not
anticipating the release of its fiscal year 2008 CAFR until March 31,
2009, which is the Single Audit report due date.

Mississippi

April 30, 2009

10

(1) Dealing with the current economic recovery emphasis which is
requiring additional work on management of the various agencies
included in the Single Audit report and (2) allowing the needed time for
agencies to respond to audit findings as well as the Summary Schedule
of Prior Audit Findings.

New Jersey

August 31, 2009

14

The extension is needed because of a delay experienced in processing
the necessary contract extension with the audit firm.

Ohio

December 31, 2009

18

The programming required for creation of the CAFR financial
statements and the late issuance of agencies and component units
separately issued reports has delayed the state’s fiscal year 2008
financial statements preparation.

12

(1) Delay in the issuance of the commonwealth’s CAFR, (2)
implementation of several new auditing standards and (3) changes in
audit documentation and additional testing of systems changes in
various federal programs.

Pennsylvania June 30, 2009

Extension reason per Health and Human Services Inspector
General

Source: GAO analysis of Health and Human Services information.

The Health and Human Services Office of Inspector General (HHS OIG) is
the cognizant agency for most of the states, including all of the states

109

Department of Health and Human Services is the cognizant agency for the 16 states and
District of Columbia that are included in our review. According to OMB Circular No. A-133
§.400(a)(2), if an entity needs an extension for submission of their Single Audit report, the
cognizant agency must consider auditee requests for extension to the report submission
due date.

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selected for our review under the Recovery Act. According to an HHS OIG
official, states contact HHS requesting and providing a reason for an
extension of their report submission; the HHS IG has had a practice of
routinely granting the requested extensions. The HHS OIG noted that the
IG has no means to enforce compliance with the reporting time frames.
The program office of the federal agency issuing the federal awards, not
the cognizant IG, has the authority at the federal level to impose sanctions
when the state or local government has not complied with the audit
requirement. 110 According to an HHS OIG official, beginning in May 2009,
the HHS IG adopted a policy of no longer approving requests for
extensions of the due dates for Single Audit reporting package
submissions. OMB officials have stated they plan to eliminate allowing
extensions of the reporting package but have not issued any official
guidance or memorandums to the agencies, OIGs, or federal award
recipients.
In order to realize the Single Audit’s full potential as an effective Recovery
Act oversight tool, OMB needs to take additional action to focus auditors’
efforts on areas that can provide the most efficient, and most timely,
results. OMB has taken some first steps, and has plans to issue additional
guidance. As federal funding of Recovery Act programs accelerates in the
next few months, we are particularly concerned that the Single Audit
process may not provide the timely accountability and focus needed to
assist recipients in making necessary adjustments to internal controls, so
that they achieve sufficient strength and capacity to provide assurances
that the money is being spent as effectively as possible to meet program
objectives.
Legislative changes may be necessary to make certain changes to the
Single Audit requirements to address the new risks brought on by
Recovery Act funding if OMB concludes that it is unable to take the
necessary steps under the current framework to adequately address
accountability for the Recovery Act programs and related risks and to
provide for more timely reporting, especially in the area of internal
controls. Given that the scope of Single Audit workloads will increase,
consideration should be given to determining what funds can be used to
support Single Audit efforts related to Recovery Act programs, including

110

OMB Circular No. A-133 provides that federal agencies can use sanctions, including
withholding a percentage of federal awards until the audit is completed satisfactorily,
withholding or disallowing federal costs, suspending federal awards until an audit is
conducted, or terminating the federal award.

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whether legislative changes are needed to specifically direct resources to
cover incremental audit costs related to Recovery Act programs.

Efforts to Assess
Impact of Recovery
Act Spending

Under the Recovery Act, direct recipients of Recovery Act funds, including
states and localities, are expected to report quarterly on a number of
measures, including the use of funds and an estimate of the number of jobs
created and the number of jobs retained. The jobs created and jobs
retained are part of the “recipient reports” required under section 1512(c)
of the Recovery Act and will be submitted by recipients starting in October
2009. In addition to this statutory requirement to report on jobs, the Office
of Management and Budget (OMB) has directed federal agencies to collect
other performance information from entities that receive funding. To the
extent possible, OMB’s guidance also requires agencies to instruct
recipients to collect and report performance information that is consistent
with the agency’s program performance measures. 111 This is intended to
allow an assessment of what OMB describes as the marginal performance
impact of Recovery Act requirements.
In general, states are adapting information systems, issuing guidance, and
beginning to collect data on jobs created and jobs retained, but questions
remain about how to count jobs and measure performance under
Recovery Act-funded programs. For example, many state education
officials told us it has been difficult to plan how they will report the impact
of Recovery Act funding until they receive further guidance from OMB or
the Department of Education. Education is planning to supplement the
guidance OMB provided to help state agencies report the proper data. In
particular, Education officials noted that draft OMB guidance on recipient
reporting would require some additional Education guidance to clarify
issues for recipients of formula grants, such as the IDEA grants. OMB’s
latest guidance on recipient reporting addresses some of these concerns.

111

OMB Memorandum M-09-15, Updated Implementing Guidance for the American
Recovery and Reinvestment Act of 2009 (Apr. 3, 2009). This guidance supplements,
amends, and clarifies the initial guidance issued by OMB on February 18, 2009.

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OMB’s June 22, 2009,
Guidance Provides More
Detail on the Recipient
Reporting Process,
Clarifies Some
Requirements, and
Establishes a Central
Reporting Framework

In response to requests for more guidance on the recipient reporting
process and required data, OMB, after soliciting responses from an array
of stakeholders, issued additional implementing guidance for recipient
reporting on June 22, 2009. 112 As discussed in our April 2009 report and
echoed in this report, state and local officials had questions and concerns
about the recipient reporting requirements contained in the Recovery Act.
For example, officials had expressed some confusion about how to count
less than full-time jobs and indirect jobs. Over the last several months
OMB met regularly with state and local officials, federal agencies, and
others to gather input on the reporting requirements and implementation
guidance. OMB also worked with the Recovery Accountability and
Transparency Board to design a nationwide data collection system that
will reduce information reporting burdens on recipients by simplifying
reporting instructions and providing a user-friendly mechanism for
submitting required data; OMB will be testing this system in July. This
latest guidance attempts to address these concerns through additional
details and clarification of previous guidance.

Guidance on Job Creation and
Job Retention

In its June 22 guidance, OMB endeavors to (1) dispel some of the
confusion related to reporting on jobs created and retained versus the
macroeconomic impact of the Recovery Act, (2) clarify which recipients of
Recovery Act funds are required to report under the act, and (3) provide
additional detail on how to calculate jobs created and retained. The new
guidance articulates once again that under the Recovery Act, there are two
distinct types of job reports. First, the Council of Economic Advisers
(CEA), in consultation with OMB and the Department of the Treasury, is
required to submit quarterly reports to Congress that detail the impact of
programs funded through the Recovery Act on employment, economic
growth, and other key economic indicators. In order to fulfill this mandate,
CEA has developed macroeconomic methodologies to estimate
employment effects for both the national and state levels. These macrolevel employment estimates will attempt to capture the full employment
impact of the Recovery Act. OMB and federal agencies will coordinate
with CEA on these quarterly reports and other questions regarding macrolevel jobs estimates.
The second type of job report is part of the “recipient reports” required
under section 1512 of the Recovery Act. Specifically, section 1512(c)(3)(D)

112

See, OMB memoranda, M-09-21, Implementing Guidance for the Reports on Use of
Funds Pursuant to the American Recovery and Reinvestment Act of 2009 (June 22, 2009).

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requires recipients of Recovery Act funds to report an estimate of the
direct jobs created or retained by the Recovery Act project or activity.
These reporting requirements apply only to nonfederal recipients of
funding, including all entities receiving Recovery Act funds directly from
the federal government such as state and local governments, private
companies, educational institutions, nonprofits, and other private
organizations. However, the recipient reporting requirement only covers a
defined subset of the Recovery Act’s funding. OMB’s guidance, consistent
with the statutory language in the Recovery Act, states that these reporting
requirements apply to recipients who receive funding through
discretionary appropriations, not recipients receiving funds through
entitlement programs, such as Medicaid, or tax programs. Recipient
reporting also does not apply to individuals. 113 These reports are to provide
information on direct job creation and retention, and OMB expects they
will be useful in the overall estimation and evaluation of the employment
effects of the Recovery Act, such as the employment reporting undertaken
by CEA.
The OMB guidance also clarifies that recipients of Recovery Act funds are
required to report only on jobs directly created or retained by Recovery
Act-funded projects, activities, and contracts. Recipients are not expected
to report on the employment impact on materials suppliers (“indirect”
jobs) or on the local community (“induced” jobs). According to OMB,
recipients are to report only direct jobs because they may not have
sufficient insight or consistent methodologies for reporting indirect or
induced jobs. OMB notes this broader view of the overall employment
impact of the Recovery Act will be covered in the estimates generated by
CEA using a macro-economic approach. According to CEA, it will consider
the direct jobs created and retained reported by recipients to supplement
its analysis. 114
The new OMB guidance also provides additional instruction on how to
estimate the number of jobs created and retained by Recovery Act
funding. The guidance explains that the number of jobs created or retained
should be expressed as “full-time equivalents” (FTE), which is calculated
as total hours worked in jobs funded by the Recovery Act divided by the
number of hours in a full-time schedule, as defined by the recipient. This

113

Recovery Act, div. A, title XV, § 1512(b)(1)(A).

114

Executive Office of the President, Council of Economic Advisers, Estimates of Job
Creation From the American Recovery and Reinvestment Act of 2009 (May 2009).

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calculation is designed to increase consistency in reported data by
converting part-time and temporary jobs into FTE-jobs. By doing so, it
seeks to avoid overstating the number of jobs that could occur through
other methods or reporting of part-time, partial-time, or nonpermanent
jobs.
The new guidance restates from earlier guidance the definitions of jobs
created and jobs retained. According to OMB guidance, a job created is a
new position created and filled or an existing unfilled position that is filled
as a result of the Recovery Act; a job retained is an existing position that
would have been eliminated were it not for Recovery Act funding. A job
cannot be counted as both created and retained, and only compensated
employment in the United States should be counted.
OMB’s guidance for reporting on job creation aims to shed light on the
immediate uses of Recovery Act funding; however, reports from recipients
of Recovery Act funds must be interpreted with care. For example,
accurate, consistent reports will only reflect a portion of the likely impact
of the Recovery Act on national employment, since Recovery Act
resources are also made available directly through tax cuts and benefit
payments.

Recipient Data Reporting
Model

Some of the questions and concerns raised by state and local officials
about the recipient reporting requirements centered on the reporting
logistics and information technology requirements. For example,
California and District of Columbia officials said they were awaiting final
guidance on the data standards before finalizing their reporting
approaches. Officials from several states said they modified, or are
assessing whether they can modify, existing reporting systems for
Recovery Act reporting. The new OMB guidance should answer many of
these questions as it describes in detail the reporting model to be used for
recipient reporting. The information reported by all prime recipients (and
subrecipients to which the prime recipient has delegated reporting
responsibility) 115 will be submitted through www.federalreporting.gov, an
online Web portal designed to collect all Recovery Act recipient reports.
All recipient reports will be made available on www.recovery.gov and, as
appropriate, on individual federal agency recovery Web sites.

115

Subrecipients are nonfederal entities awarded Recovery Act funding through a legal
instrument from the prime recipient to support the performance of any portion of the
substantive project or program for which the prime recipient received the Recovery Act
funding.

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The guidance also provides documentation of the data model for recipient
reporting that includes a reporting template, a data dictionary, and an
Extensible Markup Language (XML) schema for electronic data
submissions. 116 The reporting template is a simple spreadsheet table that
enables manual data entry and collection of recipient reporting
information in a familiar spreadsheet format. The data dictionary
describes the data elements specifically required for recipient reporting
under the Recovery Act.
Our initial assessment of the technical specifications and framework of the
recipient reporting model suggests that this is a reasonable approach. The
pilot testing scheduled for July will provide additional information about
potential technical and reporting challenges. It is likely that there will be
challenges associated with data quality, including timeliness and
completeness of submissions as well as the technical ability of some
recipients to develop solutions (including processes and procedures) for
capturing, tracking, and submitting the required data on a consistent basis.
We will continue to monitor and assess OMB’s recipient reporting model
and July pilot test.

OMB Requires Agencies to
Measure Program
Performance beyond Jobs
Created and Retained

OMB guidance described recipient reporting requirements under the
Recovery Act’s section 1512 as the minimum that must be collected,
leaving it to federal agencies to determine additional information that
would be required for oversight of individual programs. OMB has
instructed federal agencies to develop formal documented plans for how
Recovery Act funds will be used and managed that are consistent with
sound program management principles. 117 According to the guidance,
agencies must describe how they are coordinating broad Recovery Act
efforts toward successful implementation and monitoring of performance
and results in a comprehensive “agency plan.” Officials from some states
indicated they would use existing program indicators and, in some cases,
build on these indicators to measure performance. Officials also expressed
a desire for additional guidance from federal agencies on what
performance measures to use.

116

XML is a language to describe structured data.

117

OMB Memorandum M-09-15, Updated Implementing Guidance for the American
Recovery and Reinvestment Act of 2009 (Apr. 3, 2009).

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As instructed by OMB, each Recovery Act federal agency plan must
describe the program’s Recovery Act objectives and relationships with
corresponding goals and objectives through ongoing agency programs and
activities. OMB states that expected public benefits should demonstrate
cost-effectiveness and be clearly stated in concise, clear, and plain
language targeted to an audience with no in-depth knowledge of the
program. Furthermore, OMB guidance states that, to the extent possible,
Recovery Act goals should be expressed in the same terms as programs’
goals in federal departmental strategic plans, 118 and agencies should
instruct recipients to collect and report performance information to the
extent possible as part of their quarterly submissions. The objective is to
use existing measures to allow the public to see the marginal performance
impact of Recovery Act investments. Some state program officials have
said that they do plan to use existing program performance measures. For
example, public housing agencies told us they regularly track the budget
control, timeliness, and quality of work of projects they fund and that they
plan to continue using these measures with Recovery Act-funded projects.
Some other performance measures public housing agencies typically track
include tenant satisfaction, occupancy rates, crime rates, and employment
among residents.
Some states are issuing guidance and modifying their information systems
to capture and report on jobs created and retained, but many state and
local officials expressed concern about the lack of clear guidance on what
other program or impact measures are required for evaluating the impact
of Recovery Act funding. Some federal agencies have issued such
additional guidance, but others have not. For example, the Department of
Transportation (DOT) through the Federal Highway Administration
(FHWA) has provided guidance specifying the data to be reported when
complying with the requirements in section 1201(c) of division A of the
Recovery Act, which stipulates, among other requirements, that each
highway infrastructure grant recipient submit periodic reports on the use
of the funds. For example, California state transportation officials said that
contractors will be required to report on the number of workers and
payroll amounts on a monthly basis to the California Department of
Transportation. The state office will then provide the data to the FHWA
California division office, which will provide it to FHWA headquarters.
DOT said that grantees will not be expected to estimate employment data

118

Such plans are required by the Government Performance and Results Act of 1993. 5
U.S.C. § 306.

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other than the direct on-site jobs and noted that the reporting to FHWA is
in addition to the recipient reporting to OMB. DOT economists in
coordination with CEA plan to compute the number of indirect jobs and
induced jobs using direct on-site job data provided by the state
transportation departments.
OMB guidance also states that federal agencies must have a process in
place for senior managers to regularly review the progress and
performance of major programs. To achieve this objective, OMB has
encouraged federal agencies to leverage their existing Senior Management
Councils 119 to oversee Recovery Act performance. OMB states that the
councils should review Recovery Act reporting and performance across
each agency; establish and oversee development and implementation of
agency guidance to identify and mitigate risk; and ensure the correction of
weaknesses relating to the Recovery Act. According to OMB, the councils
should analyze findings and results from quarterly or monthly
performance reviews, coordinated by the agency’s Performance
Improvement Officer, to help determine the highest-risk program areas
and ensure corrective actions are implemented.

OMB’s Recipient Reporting
Implementing Guidance
Addresses Some Concerns,
but Additional Instruction
on Reporting May Be
Needed

OMB’s new guidance on the implementation of recipient reporting should
be helpful in addressing answers to many of the questions and concerns
raised by state and local program officials. However, a number of the
issues were covered in previous guidance, and some concerns remain. For
example, the counting of part-time employment was covered to some
extent in previous guidance but continued to be mentioned by officials in
some states. Overall, state and local officials were clearly aware of the
requirements to report on jobs created and jobs retained, but questions
persist on how to do this. For example, public housing agencies reported
they have not received guidance from HUD on how to measure jobs
created and retained or other performance measures. Most public housing
agency officials told us they would like guidance on how to accomplish

119

According to OMB guidance, rather than establishing a new council, agencies are
encouraged to leverage their existing Senior Management Councils to oversee Recovery
Act performance across the agency, including risk management. The Senior Management
Council should be composed of the Chief Financial Officer, Senior Procurement Executive,
Chief Human Capital Officer, Chief Information Officer, Performance Improvement Officer,
and managers of programmatic offices. The agency’s Senior Accountable Official should
also participate and assume a leadership role. Agencies should also consider having their
Office of General Counsel and Office of Inspector General serve in advisory roles on the
Senior Management Council.

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these objectives. Similarly, Education officials noted that draft OMB
guidance on recipient reporting would require some additional Education
guidance to clarify issues for recipients of formula grants, such as special
education IDEA grants.
In sum, federal agencies may need to do a better job of communicating the
OMB guidance in a timely manner to their state counterparts and, as
appropriate, issue clarifying guidance on required performance
measurement. In particular, while any additional guidance for recipients
must be in accordance with OMB guidance, OMB could work with federal
agencies to provide program-specific examples about how to count jobs
created and jobs retained. This would be especially helpful for programs
that have not previously tracked and reported such metrics, such as with
public housing and special education grants. Other channels to educate
state and local program officials on the reporting requirements could be
considered, including Web- or telephone-based information sessions or
other forums.

Concluding
Observations and
Recommendations

Since enactment of the Recovery Act 120 in February 2009, OMB has issued
three sets of guidance—on February 18, April 3 and, most recently, June
22, 2009 121 —to announce spending and performance reporting
requirements to assist prime recipients and subrecipients of federal
Recovery Act funds to comply with these requirements. OMB has reached
out to Congress, federal, state, and local government officials, grant and
contract recipients, and the accountability community to get a broad
perspective on what is needed to meet the high expectations set by
Congress and the administration. Further, according to OMB’s June
guidance, OMB has worked with the Recovery Accountability and
Transparency Board to deploy a nationwide data collection system at
www.federalreporting.gov.

120

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).

121

OMB Memorandum M-09-15, Updated Implementing Guidance for the American
Recovery and Reinvestment Act of 2009 (Apr. 3, 2009). This guidance supplements,
amends, and clarifies the initial guidance issued by OMB on February 18, 2009. OMB
memorandum, M-09-21, Implementing Guidance for the Reports on Use of Funds
Pursuant to the American Recovery and Reinvestment Act of 2009 (June 22, 2009).

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As work proceeds on the implementation of the Recovery Act, OMB and
the cognizant federal agencies have opportunities to build on the early
efforts by continuing to address several important issues.
These issues can be placed broadly into three categories, which have been
revised from our last report to better reflect evolving events since April:
(1) accountability and transparency requirements, (2) reporting on impact,
(3) communications and guidance. 122

Accountability and
Transparency
Requirements

Recipients of Recovery Act funding face a number of implementation
challenges in this area. The act includes new programs and significant
increases in funds out of normal cycles and processes. There is an
expectation that many programs and projects will be delivered faster so as
to inject funds into the economy, and the administration has indicated its
intent to assure transparency and accountability over the use of Recovery
Act funds. Issues regarding the Single Audit process and administrative
support and oversight are important.
Single Audit: The Single Audit process needs adjustments to provide
appropriate risk-based focus and the necessary level of accountability over
Recovery Act programs in a timely manner.
In our April 2009 report, we reported that the guidance and criteria in
OMB Circular No. A-133 do not adequately address the substantial added
risks posed by the new Recovery Act funding. Such risks may result from
(1) new government programs, (2) the sudden increase in funds or
programs that are new to the recipient entity, and (3) the expectation that
some programs and projects will be delivered faster so as to inject funds
into the economy. With some adjustment, the Single Audit could be an
effective oversight tool for Recovery Act programs because it can address
risks associated with all three of these factors.
April report recommendations: Our April report included
recommendations that OMB adjust the current audit process to focus the
risk assessment auditors use to select programs to test for compliance

122

The three categories identified in GAO’s April report are (1) accountability and
transparency requirements, (2) administrative support and oversight, and (3)
communications. For additional details, see GAO, Recovery Act: As Initial
Implementation Unfolds in States and Localities, Continued Attention to Accountability
Issues Is Essential, GAO-09-580 (Washington, D.C.: Apr. 23, 2009).

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with 2009 federal program requirements on Recovery Act funding; provide
for review of the design of internal controls during 2009 over programs to
receive Recovery Act funding, before significant expenditures in 2010; and
evaluate options for providing relief related to audit requirements for lowrisk programs to balance new audit responsibilities associated with the
Recovery Act.
Status of April report recommendations: OMB has taken some actions
and has other planned actions to help focus the program selection risk
assessment on Recovery Act programs and to provide guidance on
auditors’ reviews of internal controls for those programs. However, we
remain concerned that OMB’s planned actions would not achieve the level
of accountability needed to effectively respond to Recovery Act risks and
does not provide for timely reporting on internal controls for Recovery Act
programs. Therefore, we are re-emphasizing our previous
recommendations in this area.
To help auditors with single audit responsibilities meet the increased
demands imposed on them by Recovery Act funding, we recommend that
the Director of OMB take the following four actions:
•

Develop requirements for reporting on internal controls during 2009
before significant Recovery Act expenditures occur as well as ongoing
reporting after the initial report.

•

Provide more focus on Recovery Act programs through the Single Audit to
help ensure that smaller programs with high risk have audit coverage in
the area of internal controls and compliance.

•

Evaluate options for providing relief related to audit requirements for lowrisk programs to balance new audit responsibilities associated with the
Recovery Act.

•

To the extent that options for auditor relief are not provided, develop
mechanisms to help fund the additional Single Audit costs and efforts for
auditing Recovery Act programs.
Administrative Support and Oversight: States have been concerned
about the burden imposed by new requirements, increased accounting and
management workloads, and strains on information systems and staff
capacity at a time when they are under severe budgetary stress.

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April report recommendation: In our April report, we recommended
that the Director of OMB clarify what Recovery Act funds can be used to
support state efforts to ensure accountability and oversight, especially in
light of enhanced oversight and coordination requirements.
Status of April report recommendation: On May 11, 2009, OMB
released a memorandum 123 clarifying how state grantees could recover
administrative costs of Recovery Act activities.

Matter for Congressional
Consideration

Because a significant portion of Recovery Act expenditures will be in the
form of federal grants and awards, the Single Audit process could be used
as a key accountability tool over these funds. However, the Single Audit
Act, enacted in 1984 and most recently amended in 1996, did not
contemplate the risks associated with the current environment where
large amounts of federal awards are being expended quickly through new
programs, greatly expanded programs, and existing programs. The current
Single Audit process is largely driven by the amount of federal funds
expended by a recipient in order to determine which federal programs are
subject to compliance and internal control testing. Not only does this
model potentially miss smaller programs with high risk, but it also relies
on audit reporting 9 months after the end of a grantee’s fiscal year—far too
late to pre-emptively correct deficiencies and weaknesses before
significant expenditures of federal funds. Congress is considering a
legislative proposal in this area and could address the following issues:
•

To the extent that appropriate adjustments to the Single Audit process are
not accomplished under the current Single Audit structure, Congress
should consider amending the Single Audit Act or enacting new legislation
that provides for more timely internal control reporting, as well as audit
coverage for smaller Recovery Act programs with high risk.

•

To the extent that additional audit coverage is needed to achieve
accountability over Recovery Act programs, Congress should consider
mechanisms to provide additional resources to support those charged with
carrying out the Single Audit Act and related audits.

123

OMB memorandum, M-09-18, Payments to State Grantees for Administrative Costs of
Recovery Act Activities (May 11, 2009).

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Reporting on Impact

Under the Recovery Act, responsibility for reporting on jobs created and
retained falls to nonfederal recipients of Recovery Act funds. As such,
states and localities have a critical role in identifying the degree to which
Recovery Act goals are achieved.
Performance reporting is broader than the jobs reporting required under
section 1512 of the Recovery Act. OMB guidance requires that agencies
collect and report performance information consistent with the agency’s
program performance measures. As described earlier in this report, some
agencies have imposed additional performance measures on projects or
activities funded through the Recovery Act.
April report recommendation: In our April report, we recommended
that given questions raised by many state and local officials about how
best to determine both direct and indirect jobs created and retained under
the Recovery Act, the Director of OMB should continue OMB’s efforts to
identify appropriate methodologies that can be used to (1) assess jobs
created and retained from projects funded by the Recovery Act; (2)
determine the impact of Recovery Act spending when job creation is
indirect; (3) identify those types of programs, projects, or activities that in
the past have demonstrated substantial job creation or are considered
likely to do so in the future and consider whether the approaches taken to
estimate jobs created and jobs retained in these cases can be replicated or
adapted to other programs.
Status of April report recommendation: OMB has been meeting on a
regular basis with state and local officials, federal agencies, and others to
gather input on reporting requirements and implementation guidance and
has worked with the Recovery Accountability and Transparency Board on
a nationwide data collection system. On June 22, OMB issued additional
implementation guidance on recipient reporting of jobs created and
retained. This guidance is responsive to much of what we said in our April
report. It states that there are two different types of jobs reports under the
Recovery Act and clarifies that recipient reports are to cover only direct
jobs created or retained. “Indirect” jobs (employment impact on
suppliers) and “induced” jobs (employment impact on communities) will
be covered in Council of Economic Advisers (CEA) quarterly reports on
employment, economic growth, and other key economic indicators.
Consistent with the statutory language of the act, OMB’s guidance states
that these recipient reporting requirements apply to recipients who receive
funding through discretionary appropriations, not to those receiving funds
through either entitlement or tax programs. These reporting requirements
also do not apply to individuals. It clarifies that the prime recipient and

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not the subrecipient is responsible for reporting section 1512 information
on jobs created or retained to the federal government. The June 2009
guidance also provides detailed instructions on how to calculate and
report jobs as full-time equivalents (FTE). It also describes in detail the
data model and reporting system to be used for the required recipient
reporting on jobs.
The guidance provided for reporting job creation aims to shed light on the
immediate uses of Recovery Act funding and is reasonable in that context.
It will be important, however, to interpret the recipient reports with care.
As noted in the guidance, these reports are only one of the two distinct
types of reports seeking to describe the jobs impact of the Recovery Act.
CEA's quarterly reports will cover the impact on employment, economic
growth, and other key economic indicators. Further, the recipient reports
will not reflect the impact of resources made available through tax
provisions or entitlement programs. 124
Recipients are required to report no later than 10 days after the end of the
calendar quarter. The first of these reports is due on October 10, 2009.
After prime recipients and federal agencies perform data quality checks,
detailed recipient reports are to be made available to the public no later
than 30 days after the end of the quarter. Initial summary statistics will be
available on www.recovery.gov. The guidance explicitly does not mandate
a specific methodology for conducting quality reviews. Rather, federal
agencies are directed to coordinate the application of definitions of
material omission and significant reporting error to “ensure consistency”
in the conduct of data quality reviews. Although recipients and federal
agency reviewers are required to perform data quality checks, none are
required to certify or approve data for publication. It is unclear how any
issues identified under data quality reviews would be resolved and how
frequently data quality problems would have been identified in the
reviews. GAO will continue to monitor this data quality and recipient
reporting requirements.

124

Consistent with GAO’s past work showing that tax expenditures receive less scrutiny
than outlay programs (e.g., GAO, Government Performance and Accountability: Tax
Expenditures Represent a Substantial Federal Commitment and Need to Be Reexamined,
GAO-05-690 (Washington, D.C.: Sept. 23, 2005), we have begun work to determine the level
of transparency and oversight that will be provided for the Recovery Act tax provisions.
Administration officials are formulating plans for what information will be collected,
analyzed, and reported for the tax provisions. See also: GAO, American Recovery and
Reinvestment Act: GAO’s Role in Helping to Ensure Accountability and Transparency,
GAO-09-453T (Washington, D.C.: Mar. 5. 2009).

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Our recommendations: To increase consistency in recipient reporting or
jobs created and retained, the Director of OMB should work with federal
agencies to have them provide program-specific examples of the
application of OMB’s guidance on recipient reporting of jobs created and
retained. This would be especially helpful for programs that have not
previously tracked and reported such metrics.
Because performance reporting is broader than the jobs reporting required
by section 1512, the Director of OMB should also work with federal
agencies—perhaps through the Senior Management Councils—to clarify
what new or existing program performance measures—in addition to jobs
created and retained—that recipients should collect and report in order to
demonstrate the impact of Recovery Act funding.
In addition to providing these additional types of program-specific
examples of guidance, the Director of OMB should work with federal
agencies to use other channels to educate state and local program officials
on reporting requirements, such as Web- or telephone-based information
sessions or other forums.

Communications and
Guidance

Financial funding and program guidance: State officials expressed
concerns regarding communication on the release of Recovery Act funds
and their inability to determine when to expect federal agency program
guidance. Once funds are released there is no easily accessible, real-time
procedure for ensuring that appropriate officials in states and localities
are notified. Because half of the estimated spending programs in the
Recovery Act will be administered by nonfederal entities, states wish to be
notified when funds are made available to them for their use as well as
when funding is received by other recipients within their state that are not
state agencies.
OMB does not have a master timeline for issuing federal agency guidance.
OMB’s preferred approach is to issue guidance incrementally. This
approach potentially produces a more timely response and allows for midcourse corrections; however, this approach also creates uncertainty
among state and local recipients responsible for implementing programs.
We continue to believe that OMB can strike a better balance between
developing timely and responsive guidance and providing a long range
time line that gives some structure to state and localities’ planning efforts.
We appreciate that the timeline will almost certainty be modified over time
as new issues emerge that require additional guidance and clarification.

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April report recommendation: In our April report, we recommended
that to foster timely and efficient communications, the Director of OMB
should develop an approach that provides dependable notification to (1)
prime recipients in states and localities when funds are made available for
their use, (2) states—where the state is not the primary recipient of funds
but has a statewide interest in this information—and (3) all nonfederal
recipients on planned releases of federal agency guidance and, if known,
whether additional guidance or modifications are recommended.
Status of April recommendation: OMB has made important progress in
the type and level of information provided in its reports on Recovery.gov.
Nonetheless, OMB has additional opportunities to more fully address the
recommendations we made in April. By providing a standard format
across disparate programs, OMB has improved its Funding Notification
reports, making it easier for the public to track when funds become
available. Agencies update their Funding Notification reports for each
program individually whenever they make funds available. Both reports
are available on www.recovery.gov. OMB has taken the additional step of
disaggregating financial information, i.e., federal obligations and outlays
by Recovery Act programs and by state in its Weekly Financial Activity
Report.
Our recommendation: The Director of OMB should continue to develop
and implement an approach that provides easily accessible, real-time
notification to (1) prime recipients in states and localities when funds are
made available for their use, and (2) states—where the state is not the
primary recipient of funds but has a statewide interest in this information.
In addition, OMB should provide a long range time line for the release of
federal guidance for the benefit of nonfederal recipients responsible for
implementing Recovery Act programs.
Recipient financial tracking and reporting guidance: In addition to
employment related reporting, OMB’s guidance calls for the tracking of
funds by the prime recipient, recipient vendors, and subrecipients
receiving payments. OMB’s guidance also allows that a “prime recipients
may delegate certain reporting requirements to subrecipients.” Either the
prime or sub-recipient must report the D-U-N-S number (or an acceptable
alternative) for any vendor or sub-recipient receiving payments greater
than $25 thousand. In addition, the prime recipient must report what was
purchased and the amount, and a total number and amount for sub-awards
of less than $25 thousand. By reporting the DUNS number, OMB guidance
provides a way to identify subrecipients by project, but this alone does not
ensure data quality.

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The approach to tracking funds is generally consistent with the Federal
Funding Accountability and Transparency Act (FFATA). Like the Recovery
Act, the FFATA requires a publicly available Web site—
www.USAspending.gov—to report financial information about entities
awarded federal funds. Yet, significant questions have been raised about
the reliability of the data on USAspending.gov, primarily because what is
reported by the prime recipients is dependent on the unknown data quality
and reporting capabilities of their subrecipients.
For example, earlier this year, more than 2 years after passage of FFATA,
the Congressional Research Service (CRS) questioned the reliability of the
data on USAspending.gov. We share CRS’s concerns associated with
USAspending.gov, including incomplete, inaccurate, and other data quality
problems. More broadly, these concerns also pertain to recipient financial
reporting in accordance with the Recovery Act and its federal reporting
vehicle, www.FederalReporting.gov, currently under development.
Our recommendation: To strengthen the effort to track the use of funds,
the Director of OMB should (1) clarify what constitutes appropriate quality
control and reconciliation by prime recipients, especially for subrecipient
data, and (2) specify who should best provide formal certification and
approval of the data reported.
Agency-specific guidance: DOT and FHWA have yet to provide clear
guidance regarding how states are to implement the Recovery Act
requirement that economically distressed areas (EDA) are to receive
priority in the selection of highway projects for funding. We found
substantial variation both in how states identified areas in economic
distress and how they prioritized project selection for these areas. As a
result, it is not clear whether areas most in need are receiving priority in
the selection of highway infrastructure projects, as Congress intended.
While it is true that states have discretion in selecting and prioritizing
projects, it is also important that this goal of the Recovery Act be met.
Our recommendation: To ensure states meet Congress’s direction to give
areas with the greatest need priority in project selection, the Secretary of
Transportation should develop clear guidance on identifying and giving
priority to economically distressed areas that are in accordance with the
requirements of the Recovery Act and the Public Works and Economic
Development Act of 1965, as amended, and more consistent procedures
for the Federal Highway Administration to use in reviewing and approving
states’ criteria.

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Agency Comments
and Our Evaluation

We received comments on a draft of this report from the Office of
Management and Budget (OMB) and the U.S. Department of
Transportation (DOT) on our report recommendations.

Office of Management and
Budget

OMB concurs with the overall objectives of GAO’s recommendations made
to OMB in this report. OMB offered clarifications regarding the area of
Single Audit and did not concur with some of GAO’s conclusions related to
communications. What follows summarizes OMB’s comments and our
responses.

Single Audit Act

OMB agreed with the overall objectives of GAO’s recommendations and
offered clarifications regarding the areas of Single Audit. OMB also noted
it believes that the new requirements for more rigorous internal control
reviews will yield important short-term benefits and the steps taken by
state and local recipients to immediately initiate controls will withstand
increased scrutiny later in the process.
OMB commented that it has already taken and is planning actions to focus
program selection risk assessment on Recovery Act programs and to
increase the rigor of state/local internal controls on Recovery Act
activities. However, our report points out that OMB has not yet completed
critical guidance in these areas. Unless OMB plans to change the risk
assessment process conducted for federal programs under Circular A-133,
smaller, but significantly risky programs under the Recovery Act may not
receive adequate attention and scrutiny under the Single Audit process.
OMB acknowledged that acceleration of internal control reviews could
cause more work for state auditors, for which OMB and Congress should
explore potential options for relief. This is consistent with the
recommendations we make in this report. OMB also noted that our draft
report did not offer a specific recommendation for achieving acceleration
of internal control reporting. Because there are various ways to achieve
the objective of early reporting on internal controls, we initially chose not
to prescribe a specific method; however, such accelerated reporting could
be achieved in various ways. For instance, OMB could require specific
internal control certifications from federal award recipients meeting
certain criteria as of a specified date, such as December 31, 2009, before
significant Recovery Act expenditures occur. Those certifications could
then be reviewed by the auditor as part of the regular single audit process.
Alternatively, or in addition, OMB could require that the internal control
portion of the single audit be completed early, with a report submitted 60
days after the recipient’s year end. We look forward to continuing our
dialog with OMB on various options available to achieve the objective of

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early reporting on internal controls. We will also continue to review
OMB’s guidance in the area of single audits as such guidance is being
developed.

Communications

OMB has made important progress relative to some communications. In
particular, we agree with OMB’s statements that it requires agencies to
post guidance and funding information to agency Recovery Act websites,
disseminates guidance broadly, and seeks out and responds to stakeholder
input. In addition, OMB is planning a series of interactive forums to offer
training and information to Recovery Act recipients on the process and
mechanics of recipient reporting and they could also serve as a vehicle for
additional communication. Moving forward and building on the progress it
has made, OMB can take the following additional steps related to funding
notification and guidance.
First, OMB should require direct notification to key state officials when
funds become available within a state. OMB has improved Funding
Notification reports by providing a standard format across disparate
programs, making it easier for the public to track when funds become
available. However, it does not provide an easily accessible, real-time
notification of when funds are available. OMB recognized the shared
responsibilities of federal agencies and states in its April 3, 2009 guidance
when it noted that federal agencies should expect states to assign a
responsible office to oversee data collection to ensure quality,
completeness, and timeliness of data submissions for recipient reporting.
In return, states have expressed a need to know when funds flow into the
state regardless of which level of government or governmental entity
within the state receives the funding so that they can meet the
accountability objectives of the Recovery Act. We continue to recommend
more direct notification to (1) prime recipients in states and localities
when funds are made available for their use, and (2) states-where the state
is not the primary recipient of funds but has a statewide interest in this
information.
Second, OMB should provide a long range time line for the release of
federal guidance. In an attempt to be responsive to emerging issues and
questions from the recipient community, OMB’s preferred approach is to
issue guidance incrementally. This approach potentially produces a more
timely response and allows for mid-course corrections; however, this
approach also creates uncertainty among state and local recipients. State
and local officials expressed concerns that this incremental approach
hinders their efforts to plan and administer Recovery Act programs. As a
result, we continue to believe OMB can strike a better balance between

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developing timely and responsive guidance and providing some degree of
a longer range time line so that states and localities can better anticipate
which programs will be affected and when new guidance is likely to be
issued. OMB’s consideration of a master schedule and its
acknowledgement of the extraordinary proliferation of program guidance
in response to Recovery Act requirements seem to support a more
structured approach. We appreciate that a longer range time line would
need to be flexible so that OMB could also continue to issue guidance and
clarifications in a timely manner as new issues and questions emerge.
OMB also offered suggestions for several technical clarifications which we
have made when appropriate.

U.S. Department of
Transportation

DOT generally agreed to consider the recommendation that it develop
clear guidance on identifying and giving priority to economically
distressed areas and more consistent procedures for reviewing and
approving states’ criteria. As discussed in the highways section of this
report, in commenting on a draft of this report, DOT agreed that states
must give priority to projects located in economically distressed areas
(EDAs), but said that states must balance all the Recovery Act project
selection criteria when selecting projects including giving preference to
activities that can be started and completed expeditiously, using funds in a
manner that maximizes job creation and economic benefit, and other
factors. While we agree with DOT that there is no absolute primacy of
EDA projects in the sense that they must always be started first, the
specific directives in the act that apply to highway infrastructure are that
priority is to be given to projects that can be completed in 3 years, and are
located in EDAs. DOT also stated that the basic approach used by
selected states to apply alternative criteria is consistent with the Public
Works and Economic Development Act and its implementing regulations
on EDAs because it makes use of flexibilities provided by the Public
Works Act to more accurately reflect changing economic conditions.
However the result of DOT’s interpretation would be to allow states to
prioritize projects based on criteria that are not mentioned in the highway
infrastructure investment portion of the Recovery or the Public Works
Acts without the involvement of the Secretary or Department of
Commerce. We plan to continue to monitor states’ implementation of the
EDA requirements and interagency coordination at the federal level in
future reports.

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We are sending copies of this report to the Office of Management and
Budget and the Department of Transportation, as well as sections of the
report to officials of the 16 states and the District covered in our review.
The report will also be available at no charge on the GAO Web site at
http://www.gao.gov.
If you or your staffs have any questions about this report, please contact
me at (202) 512-5500. 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.

Gene L. Dodaro
Acting Comptroller General of the United States

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List of Committees
The Honorable Nancy Pelosi
Speaker of the House of Representatives
The Honorable Robert C. Byrd
President Pro Tempore of the Senate
The Honorable Harry Reid
Majority Leader
United States Senate
The Honorable Mitch McConnell
Republican Leader
United States Senate
The Honorable Steny Hoyer
Majority Leader
House of Representatives
The Honorable John Boehner
Minority Leader
House of Representatives
The Honorable Daniel K. Inouye
Chairman
The Honorable Thad Cochran
Vice Chairman
Committee on Appropriations
United States Senate
The Honorable Dave Obey
Chairman
The Honorable Jerry Lewis
Ranking Member
Committee on Appropriations
House of Representatives

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The Honorable Joseph I. Lieberman
Chairman
The Honorable Susan M. Collins
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable Edolphus Towns
Chairman
The Honorable Darrell E. Issa
Ranking Member
Committee on Oversight and Government Reform
House of Representatives

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Appendix I: Objectives, Scope, and
Methodology

Appendix I: Objectives, Scope, and
Methodology
This appendix describes our objectives, scope, and methodology (OSM)
for this second report on our bimonthly reviews on the Recovery Act. A
detailed description of the criteria used to select the core group of 16
states and the District of Columbia (District) and programs we reviewed is
found in appendix I of our April 2009 Recovery Act bimonthly report. 1

Objectives and Scope

The Recovery Act specifies several roles for GAO, including conducting
bimonthly reviews of selected states’ and localities’ use of funds made
available under the act. As a result, our objectives for this report were to
assess (1) selected states’ and localities’ uses of and planning for Recovery
Act funds, (2) the approaches taken by the selected states and localities to
ensure accountability for Recovery Act funds, and (3) states’ plans to
evaluate the impact of the Recovery Act funds they have received to date.
Our teams visited the 16 selected states, the District, and a non-probability
sample of 178 localities during May and June 2009. 2 As described in our
previous Recovery Act report’s OSM, our teams met again with a variety of
state and local officials from executive-level and program offices. During
discussions with state and local officials, teams used a series of program
review and semistructured interview guides that addressed state plans for
management, tracking, and reporting of Recovery Act funds and activities.
We also reviewed state constitutions, statutes, legislative proposals, and
other state legal materials for this report. Where attributed, we relied on
state officials and other state sources for description and interpretation of
state legal materials. Appendix II details the states and localities visited by
GAO. Criteria used to select localities within our selected states follow.

States’ and Localities’
Uses of Recovery Act
Funds

Using criteria described in our last bimonthly report, we selected the
following streams of Recovery Act funding flowing to states and localities
for review during this report: increased Medicaid Federal Medical
Assistance Percentage (FMAP) grant awards; the Federal-Aid Highway
Surface Transportation Program; the State Fiscal Stabilization Fund

1

GAO, Recovery Act: As Initial Implementation Unfolds in States and Localities,
Continued Attention to Accountability Issues Is Essential, GAO-09-580 (Washington, D.C.:
Apr. 23, 2009).
2
States selected for our longitudinal analysis are Arizona, California, Colorado, Florida,
Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, and Texas.

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Appendix I: Objectives, Scope, and
Methodology

(SFSF); Title I, Part A of the Elementary and Secondary Education Act of
1965 (ESEA); Parts B and C of the Individuals with Disabilities Education
Act (IDEA); the Workforce Investment Act (WIA) Youth program; the
Public Housing Capital Fund; Edward Byrne Memorial Justice Assistance
Grant (JAG) Program, and the Weatherization Assistance Program.
Together, these nine programs are estimated to account for approximately
87 percent of federal Recovery Act outlays to states and localities in fiscal
year 2009. We also reviewed how Recovery Act funds are being used by
states to stabilize their budgets. In addition, we analyzed
www.recovery.gov data on federal spending.

Medicaid Federal Medical
Assistance Percentage

For the FMAP grant awards, we again relied on our web-based inquiry,
asking the 16 states and the District to update information they had
previously provided to us on enrollment, expenditures, and changes to
their Medicaid programs and to report their plans to use state funds made
available as a result of the increased FMAP. We also reviewed states’
Single Audit results for 2007 and, where available, for 2008, to identify
material weaknesses related to the Medicaid programs in the 16 states and
the District. In interviews with Medicaid officials from all the sample
states and the District, we obtained additional information regarding
states’ efforts to comply with the provisions of the Recovery Act, as well
as states’ responses to material weaknesses identified in their Single
Audits. We spoke with individuals from the Centers for Medicare &
Medicaid Services (CMS) regarding their oversight and guidance to states,
their FMAP grant awards, and funds drawn down by states.

Federal-Aid Highway
Surface Transportation
Program

For highway infrastructure investment, we reviewed status reports and
guidance to the states and discussed these with the U.S. Department of
Transportation (DOT) and Federal Highway Administration (FHWA)
officials. We obtained data from FHWA on obligations and
reimbursements for the Recovery Act’s highway infrastructure funds
nationally and for each of our selected states. We selected two projects in
every state that were furthest along—for example, projects under
construction or out for bid. In selecting projects, we attempted to select a
mix of projects, including projects that were in and outside of
economically distressed areas; projects administered by the state and
locally administered projects; projects in urban and rural areas; and
projects requiring various amounts of funding—both large and small. To
obtain information on the impact certain requirements associated with
highway funding were having on states, we selected three states—New
Jersey, Arizona, and Mississippi—because we did not include these states

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Appendix I: Objectives, Scope, and
Methodology

in the scope of our previous report on this issue and because they have
varying environmental planning and labor environments. 3 For example,
according to the Council on Environmental Quality, New Jersey has a state
environmental planning law similar to the National Environmental Policy
Act (NEPA), while Arizona and Mississippi do not, and, according to the
Bureau of Labor Statistics, in 2008, union membership in New Jersey was
18.3 percent, while 8.8 percent of Arizona and 5.3 percent of Mississippi
workers were union members.

SFSF, ESEA Title I, and
IDEA

To understand how the U.S. Department of Education is implementing the
SFSF, ESEA Title I, and IDEA under the Recovery Act, we reviewed
relevant laws, guidance, and communications to the states and
interviewed Education officials. Our review of related documents and
interviews with federal agency officials focused on determining and
clarifying how states, school districts, and public institutions of higher
education would be expected to implement various provisions of the
SFSF. Also, to understand the baseline data being used to demonstrate
states’ status related to the assurances states must make about education
reform in their SFSF applications, we interviewed Education officials
about the data being used and officials at organizations such as Achieve
and the Data Quality Campaign, which develop and assess the data.
We visited at least two school districts in each state covered by our review
to learn the districts’ plans for Recovery Act funds received for SFSF,
ESEA Title I, and IDEA. For our visits to school districts, in each state, we
selected from school districts that were among the top 10 recipients of
Recovery Act funds for the ESEA Title I program and, when possible,
included school districts with a high number of schools in improvement
and school districts in locales other than large cities. For our visits to
public institutions of higher education (IHE), we visited IHEs in Ohio and
North Carolina and the six states—California, Florida, Georgia, Illinois,
Mississippi, and New York—that had received approval of their
applications for State Fiscal Stabilization Funds from Education by the
time of our initial site visits in May 2009. For each state, we selected
among the largest, in terms of enrollment, public IHEs in the state that
would be receiving SFSF funds, including universities and community

3

GAO, Federal-Aid Highways: Federal Requirements for Highways May Influence
Funding Decisions and Create Challenges, but Benefits and Costs Are Not Tracked,
GAO-09-36 (Washington, D.C.: Dec. 12, 2008).

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Appendix I: Objectives, Scope, and
Methodology

colleges. In 3 states, we also visited some public historically black colleges
and universities.

WIA Youth Program

We reviewed the Recovery Act-funded WIA Youth program in 13 of our 16
states (all except Arizona, Colorado, and Iowa) 4 and the District. We
focused on state and local efforts to provide summer youth employment
activities. To learn about the status of implementation, the use and
oversight of funds, and the challenges faced, we interviewed workforce
development officials in all 13 states and at least two local areas in each
state—for a total of 34 local areas—and the District. We also reviewed
relevant documents obtained from state and local officials. In addition, we
obtained and analyzed data from the Department of Labor on the amount
of Recovery Act WIA Youth funds allotted to, and drawn down by states,
and reviewed Labor’s guidance to states and local areas on Recovery Act
funds.

Public Housing Capital
Fund

For Public Housing, we obtained data from HUD’s Electronic Line of
Credit and Control System on the amount of Recovery Act funds that have
been obligated and/or drawn down by each housing agency in the country,
as of June 20, 2009. To determine how housing agencies were using or
planning to use these funds, we selected a sample of 47 agencies in our
sample of 16 states and the District. At the selected agencies we
interviewed housing agency officials and conducted site visits of ongoing
or planned Recovery Act projects. GAO selected these locations to obtain
a mix of large, medium, and small housing agencies, housing agencies
designated as troubled performers by HUD, those to which HUD allocated
significant amounts of Recovery Act funding, and housing agencies that
had drawn down funds at the time of our selection. We also interviewed
HUD Headquarters officials in the District to understand their procedures
for monitoring housing agency use of Recovery Act Funds.

JAG Program

For our review of the JAG program, we reviewed relevant laws, federal
guidance, and states’ grant applications and award letters; interviewed
officials with the Department of Justice’s Office of Justice Programs and
Bureau of Justice Assistance; and interviewed officials from state
administering agencies that oversee the JAG program in their state. We

4

We did not include these three states in our review due to workload considerations.

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Appendix I: Objectives, Scope, and
Methodology

spoke with and reviewed documentation from Department of Justice
officials on the agency’s coordination with, guidance to, and oversight of
grant recipients. We interviewed state officials and reviewed relevant state
documentation to determine and clarify states’ plans for using JAG funds
awarded to the state and their progress in using and overseeing those
funds. We did not review JAG grants awarded directly to local
governments in this report because the Bureau of Justice Assistance’s
(BJA) solicitation for local governments closed on June 17; therefore, not
all of these funds have been awarded.

Weatherization Assistance
Program

For the Weatherization Assistance Program, we reviewed relevant laws,
regulations, and federal guidance and interviewed Department of Energy
officials who administer the program at the federal level. We also
coordinated activities with officials from the department’s Office of
Inspector General. In addition, we conducted semistructured interviews
with officials in the states’ energy agencies that administer the
weatherization program. We collected data about each state’s total
allocation for weatherization through the Recovery Act, as well as the
initial allocation already sent to the states. We asked DOE officials about
their timetable for reviewing state energy plans and when they would
provide the next allocation to the states. Finally, we reviewed the state
weatherization plans to determine how each state intends to allocate their
funds and the outcomes they expect.

State Budget Stabilization

To better understand how states and the District are using Recovery Act
funds to stabilize government budgets, we reviewed enacted and proposed
state budgets and revenue estimates for state fiscal years 2008-2009 and
2009-2010. In addition, we reviewed reports and analysis regarding state
fiscal conditions. We interviewed state budget officials to determine how
states are using Recovery Act funds to avoid reductions in essential
services or tax increases and developing exit strategies to plan for the end
of Recovery Act funding. We also consulted with researchers and
associations representing state officials to better understand states’
current fiscal conditions.

Assessing States’ and
Localities’ Safeguards
and Internal Controls

To determine how states and localities are tracking the receipt of and use
of Recovery Act funds, the state and District teams asked cognizant
officials to describe the accounting systems and conventions being used to
execute transactions and to monitor and report on Recovery Act
expenditures. To determine the current internal control structure in states

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Appendix I: Objectives, Scope, and
Methodology

and the District, we asked cognizant officials to describe and provide
relevant documentation about their current internal control program,
including risk assessment and monitoring. In addition, to assist in the
planning of the audit work, we provided the state and District teams, as
well as certain program teams, with available fiscal year 2008 Single Audit
summary information. Single Audit information was obtained from the
Federal Audit Clearinghouse (FAC) Single Audit data collection forms and
the Single Audit reports. We discussed with relevant OMB officials the
Single Audit reports and guidance. We also analyzed how OMB was
addressing the recommendations related to the Single Audit in the April
2009 Recovery Act report. We also asked auditors to address how they
were monitoring and overseeing the Recovery Act.

Efforts to Assess
Impact of Recovery
Act Spending

To understand the reporting requirements on the impact of the Recovery
Act, we reviewed the guidance issued by OMB on February 18, April 3, and
June 22, 2009, as well as selective federal agency guidance related to
grants and to states and localities. We also interviewed selected state,
District, and local officials to understand their views of agency and OMB
guidance for reporting on implementation of the Recovery Act, as well as
about their plans to provide assessment data required by Section 1512.

Data and Data
Reliability

We collected funding data from www.recovery.gov and federal agencies
administering Recovery Act programs for the purpose of providing
background information. We used funding data from www.recovery.gov—
which is overseen by the Recovery Accountability and Transparency
Board—because it is the official source for Recovery Act spending. We
collected data on states’ and localities’ plans, uses, and tracking of
Recovery Act funds during interviews and follow-up meetings with state
and local officials. In addition, we used data collected from state and local
officials to report the amount of Recovery Act funding received by states
and localities thus far. Based on a preliminary and limited examination of
this information, we consider these data sufficiently reliable with
attribution to official sources for the purposes of providing background
information on Recovery Act funding for this report. Our sample of
selected states and localities is not a random selection and therefore
cannot be generalized to the total population of state and local
governments.
We conducted this performance audit from April 21, 2009, to July 2, 2009,
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain

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Appendix I: Objectives, Scope, and
Methodology

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.

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Appendix II: Comments from the Office of
Management and Budget

Appendix II: Comments from the Office of
Management and Budget

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done our bc:st 10 cornplctc an initial ,,"'View Rascof on th,s review, OMB COfll:UB with thc
"vcn!l ubject,VCll "fGAO's n::cUlnmo;;r.l>Ilinrls m the report. llowever, we olTer the
following c1arifieatiOllll for your consid..,.,.li...n in tile arcllS ofS",g1c AOOlllllld
oommunICllI,nn~.

Single Audjt As your dl'l1!l rcroft ootes, OMIl has already laken, and is plannio~
adioos 10 focus progrwn selection risk aSSC>l.~menl on Recovery Act pmgmm., and to
Increase the rigor ofstalc:/loca1 inl"",,,1 ounlrul~ On recovery DCIIVIIIe!<. GAO f"nher
rJXammcnds that OMI} establish new requircm~'T11s tJuol resull III IINltlor 1lSlIC'<.Sl1lcni of
IIllcroa1lX)1l\ml~"before sigl1lficant Rocovcry Ad eJlpcndilurus(JCl,:Ur" Although GAO
"lTcnI 1111 "JIC'CI rIC roc..,mlllc"d.ll.ion for aclllcvlng ;K:Qt:kntion of inlcmal control .udit
acti~,tic5, GAO doCII rccogmze that such I requlrcmcntll'dllmpooe admtnlstr.1l1~
burdcnson the Stale .uditor l;OC1II'T1urnly for ... I"ch OMU Uld Congre:tlI.,oould explore
poICIlllal opI1OI'IS for rcbe( OMU concun that ..-ICf1Ilion oflOtc:mal control n:vil:'A'$
1',11 add admmISlTall~'e burden to Slate audll~. Oflllllc. o~m bo;;h(:\'cs suc:h dllnr;cs in
IoUdIl proccd......, w,1I Il~ Impact the te5IClWl;:CS of 5bItc and kx:;,,1 p<UgnmlS wuri<ing to
.sdrcss other M1muuSU1llivc challenges BSSOC:1atcd Wllh Recovery At:! implt:mmtation.
OMU hehevO'S lhal the new r~wn::mcnt! for II'lOr\: ngorous intem~ control T'C'.'lCWS that
an: bclng pul ,n pi""" will yickl importanl ~ho"·tcrm benefit! as stale Uld 10Cll1 reclptCllt!
lake steps 10 immediately initiale controls IhIIl WIll wllhstand Increased IUK!'I!lCOlIrOy
laler in the procC$S. Wnh these darifiCllttuns rooted, OMB ronan wilh GAO's
rccommendahnn to pursue allcmDlh'cs for lecdcrnling Dudil activiliell.

Page 147

GAO-09-829 Recovery Act

Appendix II: Comments from the Office of
Management and Budget

CommurnCllhOM. OMS does l'IOl: concur ....1ll GAO', cnncIu,.ion lNl OMR ' not mspondc:d 10 reo:ll1UllCl1ollionJ rcIau:d I<> cnmmUnlC<ltions. OM8 has lakCrl
rournerous stcp!i I<> advance effeclJve commWllCllllJOfl of the aVllilab,lity of I'fUSl'IIDJpocific gu,dance: and fundmg. Specifically. OMD guidance n::qIllR::!l FcdenJ agencies 10
poJt an program """"i'ic &",dance On ageney rewvqy ....cbsitQl. diSS<:ltlinate Jucll
,guidance to a broatl rllng<: of CJllcmal stllkclloltkB. ropond promptly to $ULkl:holdcr
mput, and mgago (llS appropriate) with stateholdl'fS dunng the development of ruch
guidance. OMR hll.~ explored the possibility of developing II tnllSler schooule of
progfllm-spcclflC gUidance. flowevCf, we have di$C()"crcd Ihat Ihc prohfc'llloon of
prognnn guidance ia mOre on"n driven by emergmg iJSuC$ amI qUCl<lio"~ from the
reeipien, oommunity. We bel,cve llltChedlilc would imply a slringl'l1Cy in (he liming for
the release of agency guidan"", and Icclmical aSJiSlance Ihat we do 001 believe IS
oonsl~lcnl with a prdmcd approach of. ooll,illOOUll now of guidance from IIgellClc\<; in
t~"-'\C to ongOIng fcedbad and queries frum .!tJIkeholdcn..
With rcspca to <:omrnuoiQt,on 00 funding. OMD guidancecool.:lins riJ;OroWl
reponing requirCl1lQll.S (or agg>cics to post C(lIllmunieations 00 agency n:eo\'Cf)' wcbsitc:s
on a\'Olilablc fundmg for rmpicnts. Furtht:nnorc, wcbsltcs S\IdIu Gl'anu.tlP y and
FedRJ.7.OppS.g<W rroY,dc speaaI news o( rewyct)~fundcdoppor1.unllld.. GAO lfl(heatcs
lhal '"the currenl .!Irudun: of [agency reoovery rqlQrting] does not proYidc a mc:du!nism
for stale anti klo;al l:<'Ycnunt:nl>r: and thar e,t'7.cM to I'Ndlly vHlw the lOIal Qtmt of
Rrooyery Act funds nowing through ,CiOYCl'TlInCfltal and non-gcwernmental entmcs In exh
st'lle. ~ OMB requests fiuthcr" cbrifiC<ltion from GAOOlllhc nal\ln:: and lype: of
OIm,mumcallon that would effect,vely supplanc:nt t.~ inf\)mllllllOO on rt:COyu-y
funding, .....h..;h elllTClltly mdudc detailed anti fn:qu<:nt reporu on:
• rceovety awill'd availability (which wherc Icoowllble. i~ dj~ggrcgated by
Io.:ution)
• obligatiornl and outl~y!l by pmgtRllls and ~talc
ohlignlillrul hy r<""'lpic", as I'CllOrted on USAspending.gov
llXjuirexl infonnation Ih:ll prim:tty recipients will report bc:ginning in
OcIObt..,. Ihal willttRck fund~ provided 10 sub·rocipicnts and Ycndon.
Ofoote., OMB is ...."(lrking with the Il.coovcry Floard 10 run II series ofinlcraclivc
forums in late July with r<:clplenlS all O\<cr the "",untty to orr" lnoonlng and lllfonnatiOll
on 1l.000\"Cf)' ACt rcport,ngrequirancnts. "IbcK fo","", am p:ut o(alarger, CQOI"l.!inat."J
l)IItread! and commUnlClll1OO plan to emurc a consi.slmt flow ofinfornt.:100n bctwocn the
Ft:dcnJ tlP""",,,na'l anti all <devant st3l<dloldcB on Recovery Act .mplanCfltatlOO
efforts.
oYer the next $C\-~ W1ys. we will compla.ca ~ lhoorough review of the dr.tn
will funhereonsull on the contentS ofthc l"C1Xlrt with Fcdcr:I.I a,;tnelcs and the
Recovery Act Aecountabihty and Transp:trmcy Doard.

rqJOIt and

OMH loot, forward 10 .....Orlclllg Wllh (jAO to further the accountnblh,y Md
rranspart.'I1eyooJ<""'hVCJ oflhc ACI and 10 deli"e the best path fj,rwurd 0" GAO's spccilie

Page 148

GAO-09-829 Recovery Act

Appendix II: Comments from the Office of
Management and Budget

m:ommend31Hm\ r.n OMB. Again. we :approcialc lhe opportunily 10 comment on the
dnft report. ",dud",& addluonal teclmJcaI su~'OOlIl1uol will proV1dc III the ncar
future:,

If you have lilly '1UCS1KmS. please fccl fr"" lu oontact me II 202·39So3993.

Page 149

GAO-09-829 Recovery Act

Appendix III: Localities

Appendix III: Localities

Table 20: Local School Districts and Postsecondary Institutions Visited by GAO
States and District of
Columbia

Local school districts: Title I-LEA, IDEA, State
Fiscal Stabilization Fund

Arizona

Phoenix Elementary School District No.1
Phoenix Union High School District No. 210
Mesa Unified School District No. 4
Tucson Unified School District No. 1
Imagine Charter Elementary at Desert West Inc.

California

Los Angeles Unified School District
San Bernardino City Unified School District

Colorado

Denver County School District 1
Jefferson County School District R-1

District of Columbia

District of Columbia Public Schools
Friendship Public Charter School

Florida

Hillsborough County Local Education Agency
Miami-Dade County Public Schools

University of South Florida
Hillsborough Community College
Florida A&M University

Georgia

Atlanta Public Schools
Richmond County School System

University of Georgia
Georgia Perimeter College

Illinois

Chicago Public Schools
Waukegan Public School District 60

University of Illinois
College of DuPage

Iowa

Des Moines Independent Community School District
Ottumwa Community School District
Waterloo Community School District

Massachusetts

Boston Public Schools
Lawrence Public Schools

Michigan

Detroit Public Schools
Lansing Public School District
Grand Rapids Public Schools
Flint Community Schools
School District of the City of Saginaw

Mississippi

Holmes County School District
Jackson Public School District

New Jersey

Newark Public Schools
Camden City Public Schools
Trenton Public Schools

New York

New York City Department of Education
Rochester City School District

State University of New York/Hudson Valley
Community College
City University of New York/Borough of Manhattan
Community College

North Carolina

Charlotte-Mecklenburg School District
Robeson School District
Sugar Creek Charter School
The Roger Bacon Academy

Cape Fear Community College
University of North Carolina-Charlotte
Fayetteville State University

Page 150

Postsecondary Institutions: State Fiscal
Stabilization Fund

California State University
University of California

University of Mississippi
Jackson State University
Northwest Mississippi Community College

GAO-09-829 Recovery Act

Appendix III: Localities

States and District of
Columbia

Local school districts: Title I-LEA, IDEA, State
Fiscal Stabilization Fund

Postsecondary Institutions: State Fiscal
Stabilization Fund

Ohio

Cleveland Municipal School District
Youngstown City School District

Cuyahoga Community College
University of Akron

Pennsylvania

Philadelphia School District
Harrisburg School District

Texas

Houston Independent School District
Fort Worth Independent School District
Source: GAO.

Page 151

GAO-09-829 Recovery Act

Appendix III: Localities

Table 21: Public Housing Authorities Visited by GAO
States and District of Columbia

Public Housing Authority: Public Housing Capital Fund Formula Grants

Arizona

City of Phoenix Housing Department
Housing Authority of Maricopa County
City of Glendale Community Housing Division
Pinal County Housing Authority
Housing and Community Development Department of the City of Tucson

California

Area Housing Authority of the County of Ventura
Sacramento Housing and Redevelopment Agency
San Francisco Housing Authority

Colorado

Housing Authority of the City and County of Denver
Holyoke Housing Authority
Housing Authority of the Town of Kersey

District of Columbia

District of Columbia Housing Authority

Florida

Venice Housing Authority ,
Tallahassee Housing Authority
Tampa Housing Authority

Georgia

Atlanta Housing Authority
Athens Housing Authority

Illinois

Chicago Housing Authority
Housing Authority for LaSalle County

Iowa

Des Moines Municipal Housing Agency
Evansdale Municipal Housing Authority
North Iowa Regional Housing Authority
Ottumwa Housing Authority

Massachusetts

Revere Housing Authority
Boston Housing Authority

Michigan

Detroit Housing Commission
Lansing Housing Commission
Flint Housing Commission

Mississippi

Mississippi Regional Housing Authority No. VIII (Gulfport)
Picayune Housing Authority

New Jersey

Newark Housing Authority
Trenton Housing Authority
Housing Authority of Plainfield Rahway Housing Authority

New York

Binghamton Public Housing Authority
Glen Cove Public Housing Authority
Buffalo Municipal Housing Authority

North Carolina

Housing Authority of the City of Charlotte
Beaufort Public Housing Authority

Ohio

Columbus Metropolitan Housing Authority
Cuyahoga Metropolitan Housing Authority
London Metropolitan Housing Authority

Pennsylvania

Harrisburg Housing Authority
Philadelphia Housing Authority

Page 152

GAO-09-829 Recovery Act

Appendix III: Localities

States and District of Columbia

Public Housing Authority: Public Housing Capital Fund Formula Grants

Texas

San Antonio Housing Authority
Ferris Housing Authority
Source: GAO.

Page 153

GAO-09-829 Recovery Act

Appendix III: Localities

Table 22: Location of Highway Projects visited by GAO
States and District of Columbia

Highway project location

California

City of Seaside (Monterey County)
Solano County

Colorado

Denver
Chaffee County

Florida

Hillsborough County
Citrus County
Hernando County
Pasco County

Georgia

Gwinnett County
Henry County

Illinois

Cook County (1 project)
Grundy County (1 project)

Iowa

Mason City to Floyd County Line
Decatur County Line north to US 34 in Clarke County (southbound lane)

Massachusetts

Adams County
Swansea County

Michigan

Allegan County
Flint County

Mississippi

Laurel (Jones County)
Meridian (Lauderdale County)

New York

Albany County
Herkimer County

North Carolina

Hertford County
Johnston County
Forsyth County
Stokes County

Ohio

Cuyahoga County
Hancock County

Pennsylvania

Bedford County
Chester County

Texas

Dallas County
Tarrant County
Uvalde County
Source: GAO.

Page 154

GAO-09-829 Recovery Act

Appendix III: Localities

Table 23: Summer Youth Programs Visited by GAO
States and District of Columbia

Summer youth programs: Workforce Investment Act

California

City and County of San Francisco Office of Economic and Workforce Development
City of Los Angeles-Workforce Investment Board and Community Development
Department

Florida

Tampa Bay Workforce Alliance
Broward County Workforce One
South Florida Workforce

Georgia

Atlanta Regional Workforce Board
Richmond-Burke Job Training Authority, Inc

Illinois

Chicago Workforce Investment Board
Grundy Livingston Kankakee Workforce Investment Board

Massachusetts

Merrimack Valley Workforce Investment Board
Central Massachusetts Regional Employment Board

Michigan

Detroit Workforce Development Department
Capital Area Michigan Works

Mississippi

Delta Workforce Investment Area
Mississippi Partnership Workforce Investment Area
Southcentral Mississippi Works Workforce Investment Area
Twin Districts Workforce Investment Area

New Jersey

Camden County Workforce Investment Board
Essex County Workforce Investment Board
Mercer County Workforce Investment Board
Newark Workforce Investment Board

New York

Buffalo and Erie Country Workforce Investment Board, Inc.
New York City Workforce Investment Board
Herkimer-Madison-Oneida Workforce Investment Board

North Carolina

Charlotte-Mecklenburg Workforce Development Board
Cape Fear Workforce Development Board

Ohio

Central Ohio Workforce Investment Corporation
Licking County Job and Family Services
Licking/Knox Goodwill Industries Inc.
Montgomery County Department of Job and Family Services
Union County Job and Family Services

Pennsylvania

South Central Pennsylvania Workforce Investment Board-Harrisburg
Philadelphia Workforce Investment Board

Texas

Gulf Coast Workforce Development Board
North Central Workforce Development Board
Source: GAO.

Page 155

GAO-09-829 Recovery Act

Appendix III: Localities

Table 24: Weatherization Programs Visited by GAO
States and District of Columbia

Weatherization

North Carolina

Resources for Seniors (Raleigh)
New Hanover County Community Action
Source: GAO.

Page 156

GAO-09-829 Recovery Act

Appendix IV: GAO Contacts and Staff
Acknowledgments

Appendix IV: GAO Contacts and Staff
Acknowledgments
GAO Contacts

J. Chris Mihm, Managing Director for Strategic Issues, (202) 512-6806 or
mihmj@gao.gov
For issues related to WIA, SFSF, and other education programs: Cynthia
M. Fagnoni, Managing Director of Education, Workforce, and Income
Security, (202) 512-7215 or fagnonic@gao.gov
For issues related to Medicaid and FMAP programs: Dr. Marjorie Kanof,
Managing Director of Health Care, (202) 512-7114 or kanofm@gao.gov
For issues related to highways and other transportation programs:
Katherine A. Siggerud, Managing Director of Physical Infrastructure,
(202) 512- 2834 or siggerudk@gao.gov
For issues related to energy and weatherization: Patricia Dalton, Managing
Director of Natural Resources and Environment, (202) 512- 3841 or
daltonp@gao.gov
For issues related to the Edward Byrne Memorial Justice Assistance Grant
Program: Cathleen A. Berrick, Managing Director of Homeland Security
and Justice, (202)-512-3404 or berrickc@gao.gov
For issues related to public housing: Richard J. Hillman, Managing
Director of Financial Markets and Community Investment, (202) 512-9073
or hillmanr@gao.gov
For issues related to internal controls and Single Audits: Jeanette M.
Franzel, Managing Director of Financial Management and Assurance, (202)
512-9471 or franzelj@gao.gov
For issues related to contracting and procurement: Paul L. Francis,
Managing Director of Acquisition Sourcing Management, (202) 512-2811 or
francisp@gao.gov

Staff
Acknowledgments

The following staff contributed to this report: Stanley Czerwinski, Denise
Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas James,
James McTigue, and Michelle Sager, (Assistant Directors); and Allison
Abrams, David Alexander, Judith Ambrose, Peter Anderson, Lydia Araya,
Thomas Beall, Sandra Beattie, Jessica Botsford, Karen Burke, Richard
Cambosos, Ralph Campbell Jr., Virginia Chanley, Tina Cheng, Marcus
Corbin, Sarah Cornetto, Robert Cramer, Michael Derr, Helen Desaulniers,
Kevin Dooley, Holly Dye, Abe Dymond, Doreen Feldman, Alice Feldesman,

Page 157

GAO-09-829 Recovery Act

Appendix IV: GAO Contacts and Staff
Acknowledgments

Michele Fejfar, Shannon Finnegan, Alexander Galuten, Ellen Grady,
Victoria Green, Brandon Haller, Anita Hamilton, Geoffrey Hamilton, Jackie
Hamilton, Tracy Harris, Barbara Hills, David Hooper, Bert Japikse, Stuart
Kaufman, Karen Keegan, Nancy Kingsbury, Judith Kordahl, Hannah Laufe,
Armetha Liles, John McGrail, Sarah McGrath, Jean McSween, Donna
Miller, Kevin Milne, Marc Molino, Susan Offutt, Sarah Prendergast, Brenda
Rabinowitz, Carl Ramirez, James Rebbe, Audrey Ruge, Sidney Schwartz,
Jena Sinkfield, John Smale Jr., Michael Springer, George Stalcup, Jonathan
Stehle, Andrew J. Stephens, Gloria Sutton, Barbara Timmerman, Crystal
Wesco, Michelle Woods, and Kimberly Young.

Program Contributors

The names of GAO staff contributing to information contained in the
sections on the selected program are as follows:

Edward Byrne Memorial Justice Assistance Grant
Program

Mary Catherine Hult, Eileen Larence, and Margaret Vo

Education—SFSF, IDEA, Title I

Cornelia Ashby, Sandra Baxter, Amy Buck, Bryon Gordon, Sonya Harmeyer,
Susan Lawless, Beth Morrison, Kathy Peyman, Michelle Verbrugge, and Charlie
Willson

Medicaid

Susan T. Anthony, Ted Burik, Julianne Flowers, JoAnn Martinez, Vic Miller, and
Carolyn Yocom

Public Housing

Don Brown, Nina Horowitz, May Lee, John Lord, Paul Schmidt, and Matt Scire

Safeguarding/Single Audit

Devin Barnas, Marcia Buchanan, James Healy, Eric Holbrook, Kim McGatlin,
Susan Ragland, and Doris Yanger

State Budget Stabilization

Sandra Beattie, Stanley Czerwinski, Shannon Finnegan, Sarah Prendergast,
Michelle Sager, and Michelle Woods

Transportation/highway programs

Steve Cohen, Heather Halliwell, Greg Hanna, and Les Locke

Weatherization

Ric Cheston, Mark Gaffigan, Stuart Ryba and Jason Trentacoste

WIA Youth Program

Dianne Blank, Laura Heald, and Andy Sherrill

Page 158

GAO-09-829 Recovery Act

Appendix IV: GAO Contacts and Staff
Acknowledgments

Contributors to the
Selected States and
the District
Appendixes

The names of GAO staff contributing to the selected states and the District
appendixes are as follows:

Arizona

Lisa Brownson, Aisha Cabrer, Steve Calvo, Charles Jeszeck, Eileen Larence, Alberto Leff, Jeff
Schmerling, Margaret Vo, and Ann Walker

California

Paul Aussendorf, Linda Calbom, Joonho Choi, Michelle Everett, Chad Gorman, Richard Griswold,
Bonnie Hall, Don Hunts, Delwen Jones, Al Larpenteur, Susan Lawless, Brooke Leary Heather
MacLeod, Jeff Schmerling, Eddie Uyekawa, and Randy Williamson

Colorado

Paul Begnaud, Steve Gaty, Kathy Hale, Susan Iott, Jennifer Leone, Brian Lepore, Robin Nazarro,
Tony Padilla, Ellen Phelps Ranen, Lesley Rinner, and Mary Welch

District of Columbia

Shawn Arbogast, Sunny Chang, Marisol Cruz, Nagla’a El-Hodiri , James Healy, John Hansen,
William O. Jenkins, Jr., Linda Miller, Justin Monroe, Ellen Phelps Ranen, Melissa Schermerhorn,
Maria Strudwick, and Carolyn Yocom

Florida

Fannie Bivins, Susan Compton, Patrick Dibattista, Carmen Harris, Anna Kelly, Kevin Kumanga,
Zina Merritt, Jennifer McDonald, Frank Minore, Vernette Shaw, Andy Sherrill, Cherie’ Starck, and
Robyn Trotter

Georgia

Alicia Puente Cackley, Steve Carter, Emily Chalmers, Chase Cook, Stephanie Gaines, Nadine
Garrick, Erica Harrison, Marc Molino, Daniel Newman, Terri Rivera Russell, Paige Smith, David
Shoemaker, and Robyn Trotter

Illinois

Leslie Aronovitz, Cynthia Bascetta, Rick Calhoon, Dean Campbell, Katherine Iritani, Dave Lehrer,
Rosemary Torres Lerma, Tarek Mahmassani, Lisa Reynolds, Paul Schmidt

Iowa

Tom Cook, James Cooksey, Dan Egan, Christine Frye, Belva Martin, Marietta Mayfield, Ronald
Maxon, Mark Ryan, Lisa Shames and Carol Herrnstadt Shulman

Massachusetts

Stanley Czerwinski, Ramona L. Burton, Nancy J. Donovan, Kathleen M. Drennan, Denise de
Bellerive Hunter, Carol Patey, Salvatore F. Sorbello Jr., and Robert Yetvin

Michigan

Manuel Buentello, Leland Cogliani, Jeff Isaacs, Henry Malone, Revae Moran, Robert Owens,
Anthony Patterson, Susan Ragland, and Mark Ward

Mississippi

David Adams, Marshall Hamlett, Barbara Haynes, John K. Needham, Mike O’Neill, Norman J.
Rabkin, Kathleen Peyman, Carrie Rogers, and Erin Stockdale

New Jersey

Gene Aloise, Tahra Nichols, Diana Glod, Greg Hanna, Joah Iannotta, Kieran McCarthy,
Tarunkant Mithani, Vincent Morello, Nitin Rao, Raymond Sendejas, Cheri Truett , David Wise, and
Nancy Zearfoss
Peter Anderson, Jeremiah Donoghue, Colin Fallon, Susan Fleming, Dave Maurer, Summer
Pachman, Frank Puttallaz, Jeremy Rothberger, Barbara Shields, Ronald Stouffer, and Cheri
Truett
Cornelia Ashby, Carleen Bennett, Bonnie Derby, Terrell Dorn, Bryon Gordon, Leslie Locke,
Stephanie Moriarty, Anthony Patterson, and Scott Spicer

New York

North Carolina
Ohio

Matthew Drerup, Cynthia M. Fagnoni, Laura Jezewski, Bill J. Keller, Sanford Reigle, David C.
Trimble, Myra Watts-Butler, Lindsay Welter; Charles Wilson, and Doris Yanger

Pennsylvania

Mark Gaffigan, Phil Herr, Richard Jorgenson, Richard Mayfield, Andrea E. Richardson, MaryLynn
Sergent, George A. Taylor, Jr., Laurie F. Thurber, and Lindsay Welter

Page 159

GAO-09-829 Recovery Act

Appendix IV: GAO Contacts and Staff
Acknowledgments

Texas

(450759)

Anthony Adesina, Carol Anderson-Guthrie, Fred Berry, Ron Berteotti, Camille Chaires,
Sharhonda Deloach, Wendy Dye, K. Eric Essig, Michael O’Neill, Daniel Silva , and Lorelei St.
James

Page 160

GAO-09-829 Recovery Act

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