USAID Reform: Efforts Address Most Key Practices but Could Improve in Performance Assessment and Strategic Workforce Planning

In March 2017, the President issued an executive order to federal agencies intended to improve the efficiency, effectiveness, and accountability of the executive branch. The order required the Director of the Office of Management and Budget (OMB) to develop a plan to reorganize and streamline the government. In April 2017, OMB issued additional guidance to agencies on implementing the order. In response, USAID launched several efforts to reform its organizational structure, workforce, programs, and processes with the ultimate goal of ending the need for foreign assistance by helping partner countries become more self-reliant. GAO's prior work has shown that successful agency reforms depend on following key practices for organizational transformation, such as establishing goals and outcomes and involving key stakeholders.

This report examines (1) the status of USAID's reform efforts and (2) the extent to which USAID has addressed key practices in planning and implementing those efforts. GAO reviewed USAID reform plans, proposals, and related documents and met with officials involved in its reform efforts. GAO also assessed USAID's planning and implementation of its reform efforts against 11 key practices identified in GAO's June 2018 report, Government Reorganization: Key Questions to Assess Agency Reform Efforts (GAO-18-427).

The reform efforts of the U.S. Agency for International Development (USAID) consist of a total of 32 reform projects—31 projects being implemented by USAID's Transformation Task Team and an additional Human Resources Transformation project that predates the 31 projects. As of July 2019, USAID has completed 19 reform projects and is implementing 12 additional projects, which it intends to complete by mid-2021. The task team has one additional project in the planning phase.

In planning and implementing these efforts, USAID has generally addressed nine of 11 key practices for organizational transformation and partially addressed two. For example, USAID generally addressed the key practice of involving employees and key stakeholders such as the Department of State and Congress through a variety of mechanisms, such as briefings and town halls. USAID also used data and evidence to guide its reform efforts by integrating employee and external input into its reform plans. Morever, USAID addressed fragmentation, overlap, and duplication by planning a restructuring effort to streamline operations and achieve efficiencies. Further, it generally addressed leadership focus and attention by designating a reform coordinator and establishing a dedicated team responsible for managing and planning USAID's reform efforts.

However, while USAID established goals for its reform efforts, it established outcome-oriented performance measures for only four of its 32 projects. Establishing such measures would improve its ability to assess the results of the changes it is making. In addition, while USAID is developing a strategic workforce plan, it has yet to develop the tools needed to identify and meet staffing needs arising from the reforms in order to fully assess its workforce. Completing a strategic workforce plan with these tools could help USAID ensure it has the workforce needed to meet existing and emergent program demands. Addressing these gaps could help USAID make long-term improvements in its efficiency and effectiveness.

USAID should (1) establish outcome-oriented performance measures to assess the effectiveness of its reform efforts and (2) complete a strategic workforce plan necessary to support its reform efforts. USAID concurred with the recommendations.

As the U.S. government’s lead agency for international development, the  U.S. Agency for International Development (USAID) manages billions of  dollars in U.S. foreign assistance that the Congress appropriates each  year. In March 2017, the President issued Executive Order 13781, which  directed the Office of Management and Budget (OMB) to propose a plan  for improving the efficiency, effectiveness, and accountability of the  executive branch by reorganizing governmental functions and eliminating  unnecessary agencies, components of agencies, and agency programs.  In April 2017, OMB issued Memorandum M-17-22, requiring executive  branch agencies to submit reform plans to OMB by September 2017.

The OMB memo included detailed guidance on how agencies were to  develop these reform plans.

In 2017, the U.S. Agency for International Development (USAID) initiated  a series of reform efforts in response to Executive Order 13781 and the  subsequent guidance from OMB. Our prior work has shown that the  success of agency reforms hinges on the agencies’ adherence to key  practices for organizational transformations, such as establishing clear  outcome-oriented goals and performance measures and consulting with  Congress, federal employees, and other key stakeholders to develop the  proposed reforms. In a June 2018 report, we presented key practices  based on our prior work that can help assess agency reform efforts.

We performed our work under the authority of the Comptroller General to  conduct work to assist Congress with its oversight responsibilities. This  report (1) examines the status of USAID’s reform efforts and (2) assesses  the extent to which USAID has addressed key practices for successful  planning and implementation of agency reform efforts. To address both  of these topics, we reviewed USAID internal reform plans, proposals, and  related documents and interviewed USAID and Department of State  (State) officials involved in USAID’s reform efforts. To assess USAID’s  planning and implementation, we compared its reform efforts against key  practices for assessing agency reforms compiled in our June 2018 report  on government reorganization. These practices were distilled from a body  of prior work and reviewed by subject matter specialists. We then made a  determination as to what extent, if any, USAID had addressed those  practices. For the purposes of our review, our scope was limited to  USAID’s efforts to plan and start the implementation of its internal reform  projects. See appendix I for more information on our scope and  methodology.

We conducted this performance audit from February 2018 to September  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

In response to Executive Order 13781, USAID established the  Transformation Task Team (T3) in June 2017 to plan and lead the  agency’s reform efforts. As noted in a previous GAO report, USAID  launched several internal reform efforts and participated in a joint State- USAID redesign process during mid-2017, which resulted in a joint reform  plan. USAID also developed a supplemental reform plan that focused on  issues internal to USAID. State and USAID submitted these plans to OMB  in September 2017. In January 2018, USAID suspended its participation  in the joint State–USAID redesign process and continued to plan and  implement its own internal reforms.

According to USAID, its reform efforts are intended to support its bilateral  partners to become more self-reliant and capable of leading their own  development, with the ultimate goal of ending the need for foreign  assistance. To achieve this goal, USAID identified five objectives,  referred to as “desired outcomes,” as the basis for its reform efforts. The  five objectives are: (1) establish metrics and approaches to help host  country recipients of assistance become more self-reliant; (2) restructure  bureaus and offices to strengthen the organization’s core capabilities; (3)  advance national security interests; (4) improve human capital processes;  and (5) maximize taxpayer investments in foreign assistance.

According to USAID officials, OMB generally approved the USAID reform  plans and associated projects by March 2018. Figure 1 shows the key  events in the initial phases of USAID’s reform efforts up to the point OMB  provided this approval.

In developing our June 2018 report to assist Congress, OMB, and  agencies in assessing agency reform plans, we reviewed our prior work  on key practices for organizational transformations; collaboration;  government streamlining and efficiency; fragmentation, overlap, and  duplication; and high risk and other long-standing agency management  challenges. The resulting report includes 58 key questions to aid in  assessing reform efforts. (See app. II for a complete list of the 58 key  questions.) The questions are organized into four broad categories and  12 subcategories, as shown in table 1. These subcategories encompass  the key practices that we used to assess USAID’s reform efforts. For the  purposes of this report, we determined that the subcategory of Workforce  Reduction Strategies was not applicable to our assessment because  USAID is not undertaking workforce reductions as part of its reform  effort.

USAID Has Completed 19 Reform Projects, Is Implementing 12, and Is Planning One Other as of July 2019

USAID’s reform efforts consist of a total of 32 reform projects—31  projects being implemented by USAID’s Transformation Task Team (T3)  and an additional Human Resources Transformation project that predates  USAID’s other reform efforts. As shown in table 2, as of July 2019,  USAID has completed 19 projects and is implementing 12 others, all of  which USAID intends to complete by 2021. The task team also has one  project still in the planning phase.

In order to develop and implement the 32 reform projects, USAID has  identified approximately $33 million in estimated costs associated with its  reforms up through April 2019. According to USAID, this total includes  about $3 million to develop the T3 reform efforts in fiscal year 2018 and  approximately $6 million to implement its reform efforts over a period of 2  years, which USAID assumes will cover fiscal years 2019 and 2020. In  addition, USAID estimated that, as of April 2019, it has expended about  $24 million in fiscal year 2017–2019 funds for human resource efforts that  are associated with its ongoing Human Resources Transformation  project.

Reform Efforts Generally Addressed Nearly All Key Practices, but Gaps Exist Related to Performance Measures and Strategic Workforce Planning

USAID Generally Addressed Nine Key Practices for Planning and Implementing Agency Reforms

As shown in table 3, USAID’s reform efforts generally addressed nine of  the key practices that we previously identified as critical to the success of  agency reforms, and its reform efforts partially addressed two others.

Determining the Appropriate Role of the Federal Government

USAID determined the appropriate role of the federal government by  considering the private sector and governments’ ability to manage  responsibility for and invest their own resources into foreign development  and humanitarian assistance programs. Our prior work shows it is  important for agencies engaged in reforms to reexamine the role of the  federal government in carrying out specific missions and programs,  policies, and activities by reviewing their continued relevance and  determining whether the federal government is best suited to provide that  service or if it can be provided by some other level of government or  sector more efficiently or effectively. In line with the USAID  Administrator’s vision of ending the need for foreign assistance, USAID  has developed several projects under its “Journey to Self-Reliance”  objective to increase bilateral partner countries’ ability to plan, finance,  and implement solutions to solve their own development challenges.

Beginning in mid-2017, USAID launched a process to identify a set of  third-party metrics for assessing a country’s level of self-reliance. In June  2018, USAID announced the identification of 17 metrics to capture a  country’s overall commitment and capacity for self-reliance. The publicly  available metrics cover areas such as open and accountable governance;  inclusive development; economic policy; and the relative capacities of the  government. Starting in fiscal year 2019, USAID produced 136 “country  roadmaps,” or tools for measuring each low- and middle-income country’s  overall level of self-reliance through its performance on the 17 metrics.  USAID is using the country roadmaps as a tool to inform strategic  decision-making and resource allocation processes, better focus USAID’s  investments, and indicate when a recipient country should be considered  for a “strategic transition” to a new partnership model with the U.S.  government. For example, USAID identified Albania as a country to pilot  this concept, which envisions a new partnership model for a country  exhibiting an advanced level of self-reliance and the development of a  strategy and plan for how to shift to this new model over time.

In addition, USAID’s “Journey to Self-Reliance” efforts include a project to  expand its engagement with the private sector. According to a USAID  document, donor agencies are unable to fulfill their goals for sustainable  development on their own; in contrast, the private sector has the scale  and resources to address the complexity of challenges that developing countries face in becoming self-reliant. In December 2018, USAID  released a new “Private Sector Engagement Policy” intended to increase  and deepen the collaboration of USAID staff and its partners with the  private sector across all areas of the agency’s work.

Involving Employees and Key Stakeholders

USAID involved its employees and key stakeholders in its internal reform  efforts. Our prior work has shown that it is important for agencies to  directly and continuously involve not only their employees but also key  stakeholders in the development of major reforms. USAID has involved  its employees in its reform efforts through a variety of means. For  example, since 2017, USAID reform leaders have conducted town-hall  style meetings with employees in Washington, D.C., and in the field.  USAID reform leaders have also briefed senior management, bureau-  and office-level leadership, and mission directors about reform efforts. In  addition, they have communicated reform updates in the agency’s internal  newsletter and have informed employees of reform projects through  multiple venues, such as web-based seminars and agency notices.

USAID has also involved key stakeholders, including Congress and State,  in its reform efforts. The Administrator has testified before Congress, and  USAID officials have briefed Congress about the status of the reform  efforts. USAID also submitted reorganization proposals to congressional  committees for review and approval. Moreover, USAID engaged with  State officials at the senior and working levels on several of its reform  projects, including its self-reliance metrics, strategic transitions, and  workforce flexibility and mobility projects. However, T3 officials noted that  its engagement with State has been hindered by leadership challenges at  State, including the lack of a single official or entity at State with  responsibility for coordinating with USAID on reform efforts. In our prior  work, we found a lapse in State’s leadership focus on reform efforts, and  we recommended that State establish a dedicated team to manage the  implementation of all reform projects that the Secretary of State decides  to pursue.

USAID’s T3 used various sources of evidence and data to design its  reform plans, including recommendations made by external organizations  and employee feedback. Our prior work has shown that agencies are  better equipped to address management and performance challenges when managers effectively use data and evidence, such as from program  evaluations and performance data that provide information on how well a  program or agency is achieving its goals.

USAID developed its reform projects based on research and  recommendations from various sources, including GAO, the USAID Office  of Inspector General, USAID’s Advisory Committee on Voluntary Foreign  Aid, think tanks, and coalitions of organizations focused on international  development. For example, USAID’s reform proposal to merge and  restructure its Offices of U.S. Foreign Disaster Assistance and Food for  Peace into the Bureau for Humanitarian Assistance stems, in part, from  the results of an in-depth, external study that USAID commissioned in  2016, which entailed significant consultations with internal and external  stakeholders as well as data analysis. As another example, USAID’s  “Explore Delivery of Human Resources Operations” project was based, in  part, on two GAO reports recommending steps to improve the collection  of contract data.

In May 2017, State launched a “listening tour” intended to gather ideas  and feedback from State and USAID employees on the joint State-USAID  redesign process. As a key component of this outreach effort, State hired  a contractor to design and administer a confidential, online listening  survey, which was sent to State and USAID employees. The listening  survey identified pain points, recommendations, and themes that  informed USAID’s reform plans. For example, USAID’s projects aimed at  reorganizing its structure address a listening tour theme regarding the  need to better align its bureau and office functions with USAID’s core  mission. In another example, some of USAID’s human resource reform  projects address another listening tour theme related to the need to  support USAID employees in focusing more of their attention on  achieving strategic priorities and less time on inefficient and burdensome  administrative tasks.

Addressing Fragmentation, Overlap, and Duplication

According to USAID, it sought to reduce or better manage fragmentation,  overlap, and duplication through multiple reform efforts, including its  restructuring projects, its consolidated framework for private sector  engagement, and efforts aimed at redefining and rationalizing roles and  responsibilities in areas such as countering violent extremism and civilian- military coordination. In our prior work, we have identified actions that  agencies could take to achieve greater efficiency or effectiveness by  reducing or better managing programmatic fragmentation, overlap, and  duplication.

In July and August 2018, USAID sent to various congressional  committees for approval a series of initiatives to restructure its bureaus  and offices to streamline operations and gain efficiencies. USAID  included a proposal to restructure the Office of the Administrator by  adding two associate administrators. According to a USAID document,  this change would allow the administrator to more effectively manage the  complexity of USAID’s work and reduce the number of entities directly  reporting to the administrator from 27 to 11. One of the new associate  administrators would manage USAID’s relief, response and resilience  functions, and the other would manage the agency’s strategy,  management, and operations. The congressional committees had not  approved all of these proposals as of June 2019, according to USAID.

As of June 2019, according to USAID, the congressional committees had  approved five of the seven reorganized bureaus proposed by USAID: the  Bureau for Humanitarian Assistance; the Bureau for Resilience and Food  Security; the Bureau for Conflict Prevention and Stabilization; the Bureau  for Development, Democracy, and Innovation; and the Bureau for Asia.

Two other proposed bureaus had not yet received approval from all of the  committees: the Bureau for Management and the Bureau for Policy,  Resources, and Performance. Figure 2 shows USAID’s proposed  changes to its headquarters organizational structure.

According to USAID documents, reorganizing these bureaus is in part  intended to reduce fragmentation, overlap, and duplication, as well as to  make the agency more functionally aligned and field-focused. For  example, USAID states that the Bureau for Humanitarian Assistance will  reduce duplication and fragmentation by unifying humanitarian assistance  and eliminating the distinction between food and non-food emergency  response, eliminating confusion in the field, and providing beneficiaries  and partners with one cohesive USAID platform and voice on  humanitarian assistance. As another example, USAID states that the  Bureau for Policy, Resources, and Performance would consolidate  USAID’s policy, budget, and performance functions, which are currently  divided among five bureaus and offices.

Addressing High Risk Areas and Long-Standing Management Challenges

USAID’s reform efforts address several high risk and long-standing  management challenges, including a project to specifically address  external audit findings and implement auditors’ recommendations. Our  prior work noted that reforms improving the effectiveness and  responsiveness of the federal government often require addressing long- standing weaknesses in how some federal programs and agencies  operate. For example, agency reforms provide an opportunity to  address the high risk areas and government-wide challenges that we  have called attention to and that are vulnerable to fraud, waste, abuse,  and mismanagement, or are in need of transformation.

USAID has undertaken multiple projects to address high risk areas and  long-standing challenges. USAID T3’s “Addressing the Audit Backlog”  project was specifically designed to review, enhance, and revise USAID’s  management of audit engagements and recommendations by eliminating  the agency’s backlog of unresolved audit recommendations, developing  and implementing practices that would strengthen current programs, and  reducing the potential for a future backlog. In this way, USAID intends to  save taxpayer dollars by preventing and responding to fraud,  mismanagement, wasteful practices, and other challenges identified in  the audits. USAID reported that it had eliminated the backlog of  unresolved audit recommendations as of May 2018. As of early April  2019, USAID had implemented 75 of GAO’s 86 recommendations from  fiscal years 2015 through 2018.

In addition, several other reform projects address high risk areas and  long-standing management challenges identified by the USAID Office of  Inspector General (OIG). For example, USAID’s “Working in Non- Permissive Environments” project addresses challenges USAID faces  working in insecure, inaccessible, or unstable environments. USAID OIG  identified developing strategies to work effectively in non-permissive and  contingency environments, as one of the five top management challenges  for USAID in fiscal year 2017.

USAID’s leadership has demonstrated focus on and attention to the  planning and conduct of USAID’s reform efforts. Our prior work shows  that a dedicated team of high-performing leaders within the agency  should lead organizational transformations, such as agency reforms.  USAID has demonstrated leadership at various levels to manage and  guide the agency’s reform efforts. For example, USAID’s Administrator  first outlined his vision of USAID’s mission as being focused on ending  the need for foreign assistance in August 2017, and USAID’s reform  efforts are aimed at operationalizing the Administrator’s vision to end the  need for foreign assistance. USAID’s Administrator has had visible and  continuous involvement in USAID’s reform efforts, including through  informing various congressional committees, on multiple occasions, of  ongoing developments with USAID’s reform process.

USAID has designated leaders who are responsible for the day-to-day  management of USAID’s reform efforts. In June 2017, USAID’s Acting  Administrator established the Transformation Task Team (T3) to lead the  agency’s response to Executive Order 13781 and the subsequent  guidance from OMB. T3 is led by a Coordinator who concurrently serves  as the Assistant to the Administrator in USAID’s Bureau for Policy,  Planning, and Learning. The Coordinator told us that he meets with the  USAID Administrator on a regular basis to report the status of USAID’s  projects. T3 also includes seven deputy coordinators who are  accountable for the progress of all of the projects within a desired  outcome as well as 24 project managers who lead project  implementation. The T3 Coordinator indicated that the size of his team  will decrease over time as it hands over management of USAID’s reform  projects to bureau-level leaders.

USAID also assigned Senior Leader Champions to each of its reform  projects. The champions provide strategic guidance and act as the  representational “face and voice” of the project to Congress and the  agency. Further, USAID also established a Transformation Advisory  Council made up of senior leaders of USAID who have provided strategic  guidance to USAID’s reform efforts since October 2017. The council is  chaired by the T3 Coordinator and made up of Senior Leader Champions,  mission director liaisons, T3 leadership, and other standing members.  The Transformation Advisory Council meets to discuss the progress of  reform projects, ensure cross-project coordination, and to resolve any  duplication or dependencies.

USAID has developed and maintained a system for managing and  monitoring its reform process. We have previously reported that  organizational transformations must be carefully and closely managed by  developing an implementation plan with key milestones and deliverables  to track and communicate implementation progress, among other actions.  In May 2018, USAID T3 issued a task order for a contractor to help  ensure that USAID has the capacity to manage the planning and  implementation of USAID’s reform efforts. The contractor is responsible  for providing project and performance management support. Such  support included tracking USAID’s reform projects, providing summaries  and executive reports on the progress of USAID reform projects, and also  knowledge management, including the retention of key documents and  information related to project and performance management. The  contractor established a data tracking system that contains project end  dates and deliverables to track the progress of reform implementation.  The system notes which projects are on schedule, delayed, or complete.  The contractor has also generated periodic executive reports that outline  next steps for implementation reform and provide updates organized by  USAID’s five reform objectives.

USAID T3 has developed guidance for transferring responsibility for  project implementation to the appropriate bureaus and offices. The  guidance details who in the bureau will be responsible and accountable  for the project, resources that will be needed to initiate and complete  handover of the project, and the future end state of the projects, among  other items. As of July 2019, USAID had completed bureau handover  plans for 24 T3 reform projects.

USAID has demonstrated transparency over its reform efforts through  publicizing reform-related information on its website, including fact sheets  on its projects. USAID has also publicly released several of its reform  deliverables. For example, USAID made its “Journey to Self-Reliance”  portal available on its external website. Through the portal, viewers  have access to USAID’s Fiscal Year 2019 Country Roadmaps and can  download a wide range of supporting resources on the “Journey to Self- Reliance” effort and the methodology that underpins this effort.

Employee Engagement and Employee Performance Management

USAID’s reform efforts generally addressed two interrelated  subcategories of strategic workforce planning by instituting policies to  manage employee engagement and to improve employee performance  management. These policy initiatives were part of USAID’s broader effort  to create a human resource services system that, according to USAID  documents, will support a modern workforce in carrying out USAID’s  mission. Our prior work has found that increased levels of employee  engagement—generally defined as the sense of purpose and  commitment employees feel toward their employer and its mission—can  lead to better organizational performance and can sustain or increase  levels of employee engagement and morale, even as employees weather  reorganizations and other difficult external circumstances. Our prior work  also found that performance management systems—which are used to  plan work and set individual employee performance expectations, monitor  performance, develop capacities to perform and to rate and incentivize  individual performance—can help the organization manage employees on  a daily basis and provide supervisors and employees with the tools they  need to improve performance.

USAID developed and began implementing its Human Resources  Transformation project prior to the start of the current reform effort led by  T3. This project includes objectives and initiatives to both promote  employee engagement issues and establish a performance management  system during the 5-year transformation. USAID created a project  management office to plan and carry out between three and five initiatives  associated with each of the Human Resources Transformation project’s  objectives and a performance monitoring plan to track the progress of  each initiative.

As noted in figure 3, the three Human Resources Transformation  objectives and the associated intermediate results called for by the  project address both employee engagement and employee performance  management issues. For example, Transformation Objective 3, “Agency  Culture and Workplace Enhanced,” promotes employee engagement by  calling for an agency workplace enhanced by a stronger focus on the  culture of accountability with a workforce reflecting the diversity of  America’s population. The project is also using Federal Employee  Viewpoint Survey (FEVS) data to periodically gauge employees’ feedback  and level of engagement on the reform efforts.

Moreover, USAID noted in its April 2019 Human Resources  Transformation performance monitoring plan that USAID intends to  measure the effectiveness of its efforts to improve employee engagement  by assessing the extent to which those efforts increase employees’  positive response rates to human resources service- and delivery-related questions over the generally low baseline rates set by the FEVS 2016  survey response (ranging from 10 percent to 26 percent positive  response rates). The monitoring plan noted that USAID expects to  increase the positive response rates to these questions on the FEVS to  upwards of 74 percent by 2021. Furthermore, one of the intermediate  results associated with Transformation Objective 2, “Agency Workforce  Prepared for Today and the Future,” includes an effort to establish and  uphold a performance management system in areas such as provision of  feedback, professional development, and career advancement.

T3 also initiated six projects associated with its “Empower People to  Lead” objective that incorporate some of the Human Resources  Transformation project efforts to improve employee engagement and  implement a performance management system. For example, T3’s  project on “Managing Human Capital Talent” is developing new  automated tools to transition the paper-based Foreign Service and Civil  Service performance management and evaluation processes into online  evaluation systems administered electronically. As of July 2019, these  tools include an automated Foreign Service assignment tool and a Civil  Service performance management system and automated tool.

However, USAID delayed its expected completion date for these Foreign  Service and Civil Service tools from the end of December 2018 to March  2019 and August 2019, respectively. Further, T3’s “Leveraging Foreign  Service National Talent” project expects changes in job satisfaction- related survey scores, over time, will help USAID measure the success of  a reform project aimed at empowering the agency’s Foreign Service  Nationals workforce.

USAID Partially Addressed Two Key Reform Practices

USAID Established Goals but Generally Did Not Establish Outcome-Oriented Performance Measures to Gauge the Effectiveness of Efforts

Our prior work indicates that agency reforms should clearly identify what  an agency is trying to achieve by establishing outcome-oriented  performance measures that enable the agency to assess the extent to  which projects are achieving progress toward reform goals. Moreover,  T3 guidance states that, as responsibilities for project implementation are  transferred to bureau- and office-level units, project-level managers  should develop performance indicators to measure progress. While  USAID has established high-level goals associated with its reform efforts,  such as ending the need for foreign assistance, it has established  outcome-oriented performance measures for only four of its reform  efforts. Table 4 below provides examples of outcome-oriented  performance measures for those four reform projects.

USAID has not established outcome-oriented performance measures that  would enable it to gauge the effectiveness of the remaining reform  efforts. For example, USAID’s five reform objectives—(1) Journey to  Self-Reliance, (2) Strengthen Core Capabilities, (3) Advance National  Security, (4) Empower People to Lead, and (5) Respect Taxpayer  Investments—are not tied to outcome-oriented performance measures.

In explaining why they had not developed outcome-oriented performance  measures for all projects, USAID T3 officials indicated that thus far they  have focused their efforts on establishing outputs (e.g., products and  services) for the reform projects. Establishing outcome-oriented  performance measures for its reform projects would enhance USAID’s  ability to assess the effectiveness of its reform efforts.

USAID Is Developing a Strategic Workforce Plan but Lacks the Planning Tools to Justify How Work Force Adjustments Will Help Achieve Its Objectives

USAID documents and officials demonstrate that the agency is  developing an agency-wide strategic workforce plan in support of its  ongoing reform efforts, but the plan and its associated workforce planning  tools were not ready to implement as of July 2019. Strategic workforce  planning is an essential activity that an agency needs to conduct to  ensure that its human capital program aligns with its current and  emerging mission and programmatic goals, and that the agency is able to  meet its future needs. Our prior work also indicates the importance of  preceding any staff realignments or downsizing with strategic workforce  planning so that changed staff levels do not inadvertently result in skills  gaps or other adverse effects that could increase use of overtime and  contracting.

USAID has taken a number of steps since 2017 to develop an agency- wide strategic workforce plan both prior to and during the current reform  effort, including developing staff realignment plans as part of its process  for standing up the proposed new bureau structures. However, USAID  has not yet developed or implemented the data collection and  measurement tools that it has identified as necessary to gauge current  workforce capabilities, assess staffing needs arising from the proposed  reorganization, and identify ways to close gaps arising from changes in  workforce requirements. USAID documents note that such tools could  allow USAID to achieve its goal of hiring the right talent, at the right time,  for the right duration.

USAID is using both the Human Resource Transformation project and  two of T3’s projects to develop a strategic workforce plan and associated  tools:

USAID developed and began implementing the Human Resources  Transformation project prior to the start of the current reform effort  with the expectation that by 2020 the agency would have the  organizational structure and workforce characteristics that support  achievement of USAID’s mission. This new structure would include an  optimally sized workforce with an effective mix of all USAID employee  types created through the use of a new workforce planning model.

Project documents note, however, that developing this planning model  in turn would require developing a Workforce Planning Tool to define  workforce baselines and existing assets, identify future workforce  needs, assess gaps, and build capacity where needed. In June 2016,  USAID’s 2016–2021 Human Resource Transformation Strategy and  Action Plan stated that developing this model would be difficult but  nevertheless estimated that implementing this effort would require no  more than 2 years. However, USAID officials noted that the Human  Resources Transformation efforts did not “fully begin” until 2018.

T3 is implementing two projects associated with its objective titled  “Empower People to Lead.” First, T3’s Manage Human Capital Talent  project instituted an Employee Portal to provide all direct-hire  employees access to their human resources data in one centralized  online location. According to USAID documents, this project is also  developing for management an automated assignment, performance  management, and workforce planning tools, including separate  automated planning, performance, and assignment tools for its Civil  Service and Foreign Service personnel. The agency originally  intended to implement these tools by the end of calendar year 2018.  USAID’s April 2019 performance monitoring plan indicates that the  tools—particularly the workforce planning model that USAID  describes as a human-capital data analytics system to automate  various standardized and ad hoc reports and access previously  unconnected personnel data sources—will not be available before the  end of fiscal year 2019. Second, T3’s “Workforce Flexibility and  Mobility” project is focused on implementing a demonstration project,  the “Adaptive Personnel Project,” to replace non-career, program- funded positions with an excepted-service management system. The  “Adaptive Personnel Project” is to be launched as a pilot project in two  USAID bureaus in fiscal year 2020.

As of April 2019, USAID documents and USAID and employee union  officials noted that the strategic workforce plan has not yet been  completed. Moreover, the April 2019 Human Resources Performance  Monitoring Plan notes that the workforce planning tool needed to gauge  current capabilities and close gaps is not yet deployed and in use due to  competing programmatic and budgetary priorities. In addition, USAID’s T3 project data tracking system indicates that the agency has delayed the  implementation of the projects needed to establish baselines and create  pilot projects until late 2019 or later in order to focus on broader strategic  workforce planning objectives, such as the Strategic Workforce plan and  “Adaptive Personnel Project.”

The lack of a strategic workforce plan may limit USAID’s efforts to  estimate how its proposed reorganization will affect future staffing needs.  For example, USAID officials indicated in 2018 that the proposed  reorganization of its headquarters bureaus was intended to be “staff  neutral.” Its congressional notification pertaining to this reorganization  projected no net increase in its total combined headquarters workforce  level of 3,262 employees. Nevertheless, in its Fiscal Year 2020  Congressional Budget Justification, USAID identified a need for 40  additional Civil Service positions to “refocus Washington bureaus and  offices toward being effective service providers to the field consistent with  the vision of ending the need of foreign assistance.” USAID requested  $7.2 million to fund those positions in the restructured bureaus. Without a  strategic workforce plan, USAID cannot determine whether its current or  planned workforce requirements align with its reform and reorganization  objectives.

USAID is entrusted with managing billions of dollars in foreign assistance  funding, and USAID leadership recognizes that reforming its internal  operations and programming is integral to achieving its mission. In  developing and implementing its reform efforts, USAID addressed many  key practices that are critical to ensuring a successful agency reform or  reorganization, such as using data and evidence and providing leadership  focus and attention. Specifically, USAID’s reform efforts generally  addressed nine of the 11 key practices we assessed. However, taking  additional steps in two areas could further improve its reform efforts. First,  while it established goals and desired outcomes for its reform efforts, it  has not yet generally established outcome-oriented performance  measures necessary to assess the effectiveness and success of these  efforts. Second, while USAID has been developing a strategic workforce  plan since 2017, it has yet to complete this plan, which includes  developing the associated workforce planning tools to identify the staff  needed to meet existing and emergent program demands associated with  its transformation goals. Addressing these gaps could help USAID better  position itself to make long-term and sustainable improvements in its  efficiency and effectiveness.

We are making the following two recommendations to USAID:  The Administrator of USAID should establish outcome-oriented  performance measures to assess the effectiveness of USAID’s reform  projects. (Recommendation 1)

The Administrator of USAID should ensure that the agency completes a  strategic workforce plan necessary to support its reform efforts.  (Recommendation 2)

We provided a draft of this report to USAID, State, and OMB for review  and comment. We received comments from USAID, which are reprinted  in appendix IV. USAID concurred with our recommendations. We also  received technical comments from USAID and State, which we  incorporated in our report as appropriate.

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

If you or your staff have any questions about this report, please contact  me at (202) 512-6881 or BairJ@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

We performed our work under the authority of the Comptroller General to  conduct work to assist Congress with its oversight responsibilities. This  report (1) examines the status of the U.S. Agency for International  Development’s (USAID) reform efforts and (2) assesses the extent to  which USAID has addressed key practices and considerations critical to  the successful planning and implementation of agency reform efforts.  The scope of our review was limited to USAID’s internal reform efforts  and did not include government-wide or interagency reform proposals,  such as those referenced in the Office of Management and Budget’s  Delivering Government Solutions in the 21st Century report.

For both objectives, we reviewed USAID’s reform plans, proposals, and  related documents and interviewed officials involved in USAID’s reform  efforts. We interviewed USAID officials on the USAID Transformation  Task Team, including the task team Coordinator and Deputy  Coordinators. We also interviewed USAID representatives from two  USAID employee unions: the American Federation of Government  Employees and the American Foreign Service Association. In addition,  we interviewed officials from the Department of State and the Office of  Management and Budget.

To determine the status of USAID’s reform efforts, we also reviewed  USAID reform plans, reports, briefings, and project factsheets. We also  interviewed USAID officials responsible for the planning and  implementation of the agency’s reform projects. To determine the total  number of USAID reform projects, we included all USAID reform projects  identified by USAID as of July 2019. To provide the estimated costs  associated with USAID’s reform efforts for contextual purposes, we  obtained data from USAID on the costs of: 1) developing T3 reform  efforts, including T3’s operational costs, 2) implementing T3 reform  efforts, and 3) its Human Resource Transformation project contract data.  We reviewed supporting documentation, and interviewed cognizant  USAID officials about the completeness and accuracy of the data. We did  not independently assess the data used to estimate the costs associated  with its reform efforts. We determined it was beyond the scope of this  review to perform a full cost-benefit analysis to assess the potential  financial impact of USAID’s reform efforts using the cost estimates  provided by USAID.

To determine the extent to which USAID has addressed key practices for  planning and implementing its reform efforts, we assessed USAID’s  reform efforts against key practices identified in our June 2018 report,  which are organized by 12 subcategories of change management  practices. The subcategories are based on 58 key questions for  consideration in assessing reform efforts. We did not apply criteria from  the “Workforce Reduction Strategies” subcategory of our June 2018  report. We deemed those criteria not applicable to USAID’s reform efforts  because USAID officials stated their proposals regarding workforce  reductions were overtaken by events when congressional appropriations  for fiscal years 2018 and 2019 maintained USAID staffing at the levels  associated with its workforce as of December 2017. For the other 11  subcategories included in our assessment, we determined which key  questions of each subcategory were most relevant USAID’s reform efforts  and applied those key questions to our assessment.

We categorized USAID reform-related actions into two separate  categories: (1) those that generally addressed the subcategory and (2)  actions that partially addressed the subcategory. We determined that  USAID’s reform efforts had generally addressed a practice if we did not  identify significant gaps in its coverage of the actions associated with this  subcategory. We determined that USAID’s reform efforts had partially  addressed a practice if we identified significant gaps in its coverage of the  actions associated with this subcategory. We would have determined that  USAID had not addressed a practice if it had not substantively addressed  any of the key elements in the subcategory. However, we found that  USAID at least partially addressed all of the practices. We defined  “significant gaps” as the areas we identified, based on our analysis of the  key questions of each subcategory, that were both relevant to USAID as  an agency and important for the success of the reform efforts. Each of  two analysts made an independent qualitative judgment as to whether or  not USAID had generally, partially, or had not addressed those criteria.  The two analysts then reviewed and reconciled any differences in the  data used to reach each determination, and their results were subject to  supervisory review. The analysts’ determinations were then reviewed by  other GAO stakeholders with experience in this topic, and any concerns  raised were resolved through discussion to reach the final determinations.

Appendix II: Key Questions for Assessing Agency Reform Efforts

We developed key questions based on our prior work on key practices  that can help assess agency reform efforts. The 58 questions are  organized into four broad categories and 12 subcategories, as shown in  table 5.

Appendix III: U.S. Agency for International Development (USAID) Headquarters Structure before Implementation of Proposed Organizational Reforms

As of June 2019, the U.S. Agency for International Development (USAID)  headquarters was organized as shown in figure 4.

Appendix IV: Comments from the U.S. Agency for International Development

Appendix V: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Thomas Costa (Assistant  Director), B. Patrick Hickey (Analyst in Charge), Joshua Akery, Peter  Beck, David Dayton, Martin de Alteriis, Emily Gupta, Christopher Keblitis,  Steven Putansu, Sarah Veale, and Alexander Welsh made key  contributions to this report.

USAID has undertaken a number of projects to reform its organizational structure, workforce, and programs—with the ultimate goal of helping partner countries become more self-reliant.

We found USAID generally addressed 9 of the 11 key practices necessary for successful agency reforms, but only partially addressed 2 others. For example, USAID solicited input from employees through briefings and town halls. But it hasn’t identified outcome-oriented performance measures for all its projects. It also hasn’t completed a strategic workforce plan to ensure that it can meet the agency’s future staff needs. We recommended that it do so.


Puerto Rico Hurricanes: Status of FEMA Funding, Oversight, and Recovery Challenges

In 2017 two major hurricanes – Irma and Maria – caused extensive damage throughout Puerto Rico. Hurricane Maria, a Category 4 hurricane, was the most intense hurricane to make landfall in Puerto Rico since 1928, destroying roads, buildings, and cutting power and communication lines, among other things. Puerto Rico estimates that $132 billion will be needed to repair and reconstruct infrastructure and services. FEMA—a component of the Department of Homeland Security (DHS)—is the lead federal agency responsible for assisting Puerto Rico as it recovers. FEMA administers the Public Assistance program in partnership with Puerto Rico to provide funds to rebuild damaged infrastructure and restore critically-needed services.

GAO was asked to review the federal government's recovery efforts related to the 2017 hurricanes. This report, among other objectives, describes (1) FEMA's Public Assistance spending in Puerto Rico and oversight efforts of federal recovery funds, and (2) initial challenges with the recovery process. GAO reviewed Public Assistance program documents; analyzed grant funding data; and interviewed officials from Puerto Rico and DHS about the Public Assistance program and recovery efforts, as well as officials from ten municipalities selected on the basis of population and Public Assistance spending.

GAO is not making recommendations at this time, but will continue monitoring the recovery as part of its ongoing work.

The Federal Emergency Management Agency (FEMA) obligated almost $4 billion in Public Assistance grant funding to Puerto Rico as of September 30, 2018 in response to the 2017 hurricanes. FEMA obligated about $3.63 billion for emergency work—emergency measures such as debris removal and generators—and about $151 million for permanent work to repair and replace public infrastructure such as roads (see figure).

Puerto Rico established a central recovery office to oversee federal recovery funds and is developing an internal controls plan to help ensure better management and accountability of the funds. In the interim, FEMA instituted a manual reimbursement process—requiring FEMA to review each reimbursement request before providing Public Assistance funds—to mitigate risk and help ensure financial accountability. FEMA officials stated that they will remove this manual process once the agency approves Puerto Rico's internal controls plan.

Officials from FEMA and Puerto Rico's central recovery office and municipalities that GAO interviewed reported initial challenges with the recovery process, including with Public Assistance alternative procedures. Unlike in the standard Public Assistance program where FEMA will fund the actual cost of a project, the Public Assistance alternative procedures allow awards for permanent work projects to be made on the basis of fixed cost estimates to provide financial incentives for the timely and cost-effective completion of work. Challenges identified included concerns about lack of experience and knowledge of the alternative procedures being applied in Puerto Rico; concerns about missing, incomplete, or conflicting guidance on the alternative procedures; and concerns that municipalities have not been fully reimbursed for work already completed in the immediate aftermath of the hurricanes, causing financial hardships in some municipalities.

FEMA officials stated that the agency is taking actions to address reported recovery challenges, such as leveraging existing expertise to train personnel and developing supplemental guidance on alternative procedures and reducing delays in reimbursements. GAO will continue to monitor these issues and plans to report additional findings and recommendations as appropriate later this year.

On September 6, 2017, Hurricane Irma’s eyewall passed 50 nautical  miles north of Puerto Rico as a category 5 hurricane, causing severe wind  and rain inundation to the main island and significant damage to the  island of Culebra. Less than two weeks later, on the morning of  September 20, 2017, Hurricane Maria made a direct hit as a category 4  storm on the main island of Puerto Rico. Although the storm moved  offshore in the early afternoon of September 20, 2017, tropical storm- force winds continued into the late night hours, causing extensive  damage to electrical utilities, roads, bridges, and other public  infrastructure throughout Puerto Rico. According to the National  Hurricane Center, Hurricane Maria was the most intense hurricane to  make landfall in Puerto Rico since 1928. In its recovery plan, Puerto Rico  estimates that $132 billion in funding from 2018 through 2028 will be  needed to repair and reconstruct the infrastructure damaged by the  hurricanes. This includes $30 billion to comprehensively modernize  Puerto Rico’s energy sector and improve its resiliency, nearly $5 billion to  replace Puerto Rico’s drinking water system, and between $8 to $12  billion to rehabilitate owner-occupied homes that were substantially  damaged by the hurricanes, among other things.

The Federal Emergency Management Agency (FEMA), a component of  the Department of Homeland Security (DHS), leads the federal effort to  mitigate, respond to, and recover from disasters, both natural and  manmade. Among other responsibilities, FEMA administers the Public  Assistance program in partnership with the Government of Puerto Rico  (Puerto Rico), providing grant funding for a wide range of response and  recovery activities. These activities include, among other efforts, debris removal; life-saving emergency protective measures; and the repair,  replacement, or restoration of disaster-damaged publicly-owned facilities.  In addition, FEMA coordinated with Puerto Rico to submit an economic  and disaster recovery plan to Congress, as required by the Bipartisan  Budget Act of 2018. FEMA also plans to work with Puerto Rico to ensure  that it has effective internal controls in place to oversee federal recovery  funds.

You asked us to review the federal government’s response and recovery  efforts related to the 2017 hurricanes. As part of that effort, we have  several reviews ongoing of FEMA’s and Puerto Rico’s disaster recovery  planning, oversight, and execution efforts in Puerto Rico. This report  provides information on (1) FEMA Public Assistance program spending  and actions FEMA and Puerto Rico have taken to provide oversight of  federal recovery funds, (2) initial challenges identified by officials from  FEMA and Puerto Rico with the recovery process, and (3) Puerto Rico’s  economic and disaster recovery plan.

We have another ongoing review that will examine disaster recovery  efforts in Puerto Rico and we plan to issue that report in 2019. In addition,  we are conducting a broader body of work covering various disaster  response and recovery issues, including disaster recovery in the U.S.  Virgin Islands and impacted states, and will also be reporting on those  issues over the next year.

For this report, we reviewed relevant FEMA Public Assistance program  documentation, and we obtained and analyzed data from FEMA’s  Emergency Management Mission Integrated Environment (EMMIE) and  Integrated Financial Management Information System (IFMIS) databases.  These databases include data on Public Assistance program obligations  and expenditures related to Hurricanes Irma and Maria in Puerto Rico as  of the end of fiscal year 2018. We assessed the reliability of EMMIE and  IFMIS data by reviewing existing information about these systems,  interviewing data users and managers responsible for these data, and  cross-checking data across disparate sources to ensure consistency.  Based on these steps, we determined these data to be sufficiently reliable  for the purposes of describing Public Assistance program obligations and  expenditures for Hurricanes Irma and Maria in Puerto Rico as of the end  of fiscal year 2018. An obligation is a definite commitment that creates a  legal liability of the government for the payment of goods and services  ordered or received. An expenditure is an amount paid by federal  agencies, by cash or cash equivalent, during the fiscal year to liquidate  government obligations. For the purpose of this report, an expenditure  represents the actual spending by Puerto Rico of money obligated by the  federal government.

We interviewed officials from FEMA headquarters, as well as officials  from FEMA Region II, the FEMA regional office with oversight for Puerto  Rico. Further, in May, August, and September of 2018, we conducted site  visits to Puerto Rico to observe hurricane-damaged areas and interview  relevant officials. In Puerto Rico, we interviewed FEMA officials at the  joint recovery office, a multiagency coordination center established in  Guaynabo, Puerto Rico to coordinate major disaster recovery efforts. At  this location, we interviewed the federal coordinating officer for Puerto  Rico, officials from the Public Assistance program, and officials from  FEMA’s finance and administration section to understand FEMA’s  recovery operations in Puerto Rico. In addition, we interviewed Puerto  Rico government officials from the Central Office for Recovery,  Reconstruction and Resilience (COR3) and ten selected municipal  governments throughout Puerto Rico. The results from our interviews  cannot be generalized to all of Puerto Rico’s 78 municipalities; however,  they provided important context about the status of recovery efforts in  various locations throughout Puerto Rico. We spoke with officials from the  Financial Oversight and Management Board (FOMB), a board established  in the Puerto Rico Oversight, Management, and Economic Stability Act  with broad budgetary and financial control over Puerto Rico. We also  interviewed the comptroller of Puerto Rico to obtain her input on Puerto  Rico’s government structures and municipal issues. Lastly, we reviewed  Puerto Rico government documents related to recovery planning and  internal controls.

We conducted this performance audit from March 2018 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

On September 6, 2017, the eye of Hurricane Irma traveled about 50  nautical miles to the north of the northern shore of Puerto Rico as a  category 5 hurricane. Less than two weeks later, Hurricane Maria made  landfall as a category 4 hurricane on the main island of Puerto Rico on  the morning of September 20, 2017 with wind speeds up to 155 miles per hour. The center of the hurricane moved through southeastern Puerto  Rico to the northwest part of the island, as shown in figure 1 below.

In response to the request of the Governor of Puerto Rico, the President  declared a major disaster the day after each hurricane impacted Puerto  Rico. Major disaster declarations can trigger a variety of federal  response and recovery programs for government and nongovernmental  entities, households, and individuals, including assistance through the  Public Assistance program. Under the National Response Framework,  DHS is the federal department with primary responsibility for coordinating  disaster response, and within DHS, FEMA has lead responsibility. The  Administrator of FEMA serves as the principal adviser to the President  and the Secretary of Homeland Security regarding emergency  management.

FEMA’s Public Assistance program provides funding to state, territorial,  local, and tribal governments to assist them in responding to and  recovering from major disasters or emergencies. As shown in figure 2,  Public Assistance program funds are categorized broadly as either  “emergency work” or “permanent work.” Within those two broad  categories are separate sub-categories. In addition to the emergency  work and permanent work categories, FEMA’s Public Assistance program  includes category Z, which represents indirect costs, administrative  expenses, and other expenses a recipient or subrecipient incurs in  administering and managing projects.

Puerto Rico’s agencies, such as the Department of Housing; public  corporations, such the Puerto Rico Electric Power Authority and the  Puerto Rico Aqueduct and Sewer Authority; and Puerto Rico’s 78  municipalities are eligible to apply for the Public Assistance program.  FEMA’s Public Assistance program also provides funding for cost- effective hazard mitigation measures to reduce or eliminate the long-term  risk to people and property from future natural and man-made disasters  and their effects. Specifically, FEMA provides funding for hazard  mitigation measures in conjunction with the repair of disaster-damaged  facilities to enhance their resilience during future disasters. For example,  a community that had a fire station damaged by a disaster could use  Public Assistance funding to repair the facility and incorporate additional  measures such as installing hurricane shutters over the windows to  mitigate the potential for future damage.

In Puerto Rico, the Public Assistance program is administered through a  partnership between FEMA and the recipient (Puerto Rico), which  provides funding to eligible subrecipients (local or territory-level entities).  Under the standard Public Assistance program process, once the  President has declared a disaster, Public Assistance staff work with the  recipient or subrecipients to help them document damages, identify  eligible costs and work, and prepare requests for Public Assistance grant  funds by developing project proposals. Officials then review and obtain  approval of projects prior to FEMA obligating funds to reimburse  recipients or subrecipients for eligible work.

The Use of Alternative Procedures for Public Assistance Projects in Puerto Rico

The Sandy Recovery Improvement Act of 2013 authorized the use of  alternative procedures in administering the Public Assistance program,  thereby providing new flexibilities to FEMA, states, territories, and local  governments for debris removal, infrastructure repair, and rebuilding  projects using funds from this program. The stated goals of the alternative procedures are to reduce the costs to the federal government,  increase flexibility in the administration of the Public Assistance program,  expedite the provision of assistance under the program, and provide  financial incentives for recipients of the program for the timely and cost- effective completion of projects.

Unlike the standard Public Assistance program where FEMA will fund the  actual cost of a project, the Public Assistance alternative procedures  allow awards for permanent work projects to be made on the basis of  fixed cost estimates to provide financial incentives for the timely and cost- effective completion of work. Under these procedures, if the actual cost  of the project exceeds the fixed cost estimate agreed upon by FEMA and  the recipient, the recipient or subrecipient is responsible for the additional  costs. However, if the actual cost of completing eligible work for a project  is below the estimate, the recipient or subrecipient may use the remaining  funds for other eligible purposes, such as for additional cost-effective  hazard mitigation measures to increase the resiliency of public  infrastructure. These funds may also be used for activities that improve  the recipient’s or subrecipient’s future Public Assistance operations or  planning. Although FEMA had approved alternative procedure grants in  30 states as of April, 2018, in these cases, alternative procedures were  used on a project-by-project basis. Puerto Rico’s recovery from the 2017  hurricanes is the first recovery to use alternative procedures for all large  permanent work projects.

On October 30, 2017, Puerto Rico requested to use the alternative  procedures process for all large-project funding for Public Assistance  permanent work, categories C through G. According to FEMA guidance,  as part of the alternative procedures process in Puerto Rico, FEMA and  Puerto Rico must agree on a group of personnel with cost estimation  expertise who will serve as part of a center of excellence. This center of  excellence will assist FEMA and Puerto Rico in developing cost  estimating methodologies to be used for determining fixed cost estimates  for Public Assistance permanent work projects. FEMA officials stated that  they are in the process of conducting inspections for Public Assistance  projects for permanent work and, as of August 2018, had a total list of  10,000 site inspections to complete. FEMA officials stated that October  2019 is their target date for completing all alternative procedures fixed  cost estimates for Public Assistance permanent work. However,  pursuant to 428 guidance published in April 2018, this time frame may be  adjusted on a project-by-project basis, based on extenuating  circumstances.

Puerto Rico’s Central Recovery Office Oversees Federal Recovery Spending

Amendment 5 to the President’s disaster declaration imposed a number  of grant conditions, including that Puerto Rico establish an oversight  authority supported by third-party experts. This authority is to act as the  grant recipient for all Public Assistance and hazard mitigation funding to  ensure sound project management and enhanced, centralized oversight  over FEMA grant distributions. In October 2017, the Governor of Puerto  Rico established COR3, a Puerto Rico government office, to plan, guide,  and oversee recovery efforts, including administering and overseeing the  Public Assistance program. According to FEMA and COR3 officials,  COR3 will fulfill the oversight requirements outlined in Amendment 5.  According to COR 3 officials, COR3 was also established to ensure  coordination with FEMA. The Executive Director of COR3 will act as the  Governor’s Authorized Representative, which is the designated individual  responsible for administering federal disaster assistance programs on  behalf of Puerto Rico. Among other things, COR3 will:  Identify, procure, and administer all federal, territorial, and private  resources available to Puerto Rico related to recovery;

Provide oversight of subrecipients using risk-based monitoring; and

Provide technical assistance and advise Puerto Rico’s governmental  agencies and municipalities regarding any matter related to recovery.

According to COR3 officials, they will also implement internal controls,  policies, and procedures to appropriately manage recovery funds.

COR3 has also launched an online transparency portal intended to  provide a breakdown of FEMA Public Assistance and other federal  funding made available for disaster recovery in Puerto Rico.

Bipartisan Budget Act of 2018 Requirements for Puerto Rico and Congressional Oversight of Recovery Efforts

The Bipartisan Budget Act of 2018 (Bipartisan Budget Act) required that  Puerto Rico submit an economic and disaster recovery plan to Congress  by August 9, 2018, that defines the priorities, goals, and expected  outcomes of Puerto Rico’s recovery related to a number of sectors,  including, among other things, infrastructure, housing, electric power  systems and grid restoration. The Bipartisan Budget Act also directs the  Governor of Puerto Rico to develop the disaster recovery plan in  coordination with FEMA, with support and contributions from other federal  agencies having designated responsibilities in the National Disaster  Recovery Framework.

As of June 2015, Puerto Rico had roughly $66.9 billion in outstanding  debt. According to the recovery plan, economic contraction in the years  prior to the hurricanes contributed to a severe fiscal crisis and Puerto  Rico’s credit rating dropped below investment grade in early 2014,  followed by a series of defaults on debt payments. In response to Puerto  Rico’s financial crisis, Congress passed and the President signed the  Puerto Rico Oversight, Management, and Economic Stability Act in June  2016, which established the FOMB with broad budgetary and financial  control over Puerto Rico. The Bipartisan Budget Act also permits the  FOMB to review any federal funds over $10 million that are designated for  Puerto Rico’s response to or recovery from Hurricanes Irma or Maria.

FEMA Obligated Almost $4 Billion in Public Assistance Funding, and Puerto Rico and FEMA Have Taken Actions to Provide Oversight of Federal Recovery Funds

FEMA obligated nearly $4 billion in Public Assistance funds for Puerto  Rico’s emergency work projects, as well as the repair and restoration of  its public infrastructure, among other things. In order to provide financial  oversight of these funds, Puerto Rico is developing an internal controls  plan as well as management policies and procedures that will, in part,  help provide financial monitoring. In the interim, FEMA has instituted a  manual reimbursement process to mitigate risk and ensure fiscal  accountability.

FEMA Obligated Almost $4 Billion, and Puerto Rico Expended Almost $1.7 Billion in Public Assistance Funding as of September 2018

As shown in figure 3, FEMA has obligated $3.63 billion (93 percent) for  emergency work (categories A and B), and $151 million (4 percent) for  permanent work (categories C through G) in Puerto Rico as of September  30, 2018. An additional $136 million (3 percent) was obligated for  management and administrative costs.

As of the end of fiscal year 2018, Puerto Rico expended about $1.7 billion  (about 43 percent) of the almost $4 billion Public Assistance funds  obligated by FEMA. Ninety-eight percent of this amount went toward  emergency work projects in categories A and B. For example, the Puerto  Rico Aqueduct and Sewer Authority expended almost $91 million to cover  the costs of generator usage. Aside from generators, one category B  project by the Puerto Rico Emergency Management Agency repaired the  emergency warning system for about $9.4 million. A third project put a  temporary roof on a Puerto Rico Institute of Culture facility in Vieques for  $4,000.

As shown in table 1, the majority of FEMA’s obligations in Puerto Rico as  of September 30, 2018, have been for emergency work categories  because these projects began soon after the disasters struck and focused  on removing debris and providing assistance to address immediate  threats to life and property.

In contrast, permanent work projects take time to identify, develop, and  ultimately complete as they represent the longer-term repair and  restoration of public infrastructure. Funds expended by Puerto Rico for  permanent work have been mostly limited to roads and bridges (category  C) because impassable roads like the one shown in figure 4 below  impede the provision of critical services to citizens. They can also get in  the way of other disaster recovery efforts.

Expenditures for roads and bridges (category C) amount to approximately  $32 million, while expenditures for other permanent work categories (D- G) total approximately $1 million. According to FEMA officials, Public  Assistance projects in categories D-G are still pending prioritization and  formulation. For example, figure 5 below shows a recreational public  space along the edge of a river in Maricao. The dashed line indicates  where the iron railing and concrete paving used to continue, overlooking  the river, before Hurricane Maria. As of September 2018, the municipality  was awaiting FEMA assistance to begin restoration   FEMA categorizes Puerto Rico’s subrecipients as commonwealth public  corporations, commonwealth agencies, municipalities, and all other  entities.  As shown in table 2 below, 89 percent of obligations, as of the  end of September 2018, for Puerto Rico were awarded to commonwealth  public corporations and commonwealth agencies, with 47 percent  awarded to the Puerto Rico Electric Power Authority.  Overall, about 43  percent of obligated funds have been expended.

Puerto Rico is Developing an Internal Controls Plan and Recovery Management Policies and Procedures to Provide Oversight of Federal Recovery Funds

As previously discussed, Puerto Rico designated COR3 to administer and  manage the Public Assistance program in coordination with FEMA. As  part of COR3’s recovery oversight role, COR3 officials stated that they  are developing an internal controls plan and recovery management  policies and procedures with FEMA. According to COR3, these oversight  documents will provide detailed guidance on grant application,  procurement, payment and cash management, and financial monitoring  and reporting, among other things. According to COR3 officials, they have  held numerous meetings to coordinate with FEMA and have submitted  drafts of the internal controls plan as well as management policies and  procedures for FEMA’s consideration. In addition, according to COR3  officials, COR3 plans to provide direct technical assistance related to  federal grants management to Puerto Rico’s cabinet-level agencies,  public corporations, municipalities and other eligible subrecipients. As  part of COR3’s advisory role, COR3 is expected to help Puerto Rico’s  agencies, public corporations, municipalities, and some nonprofit entities  formulate projects, draft cost estimates, and make funding requests,  among other things.

FEMA Has Instituted an Interim Manual Reimbursement Process to Mitigate Risk

Federal grant award regulations allow FEMA to impose additional specific  grant award conditions in specific circumstances, such as to mitigate risk  and ensure fiscal accountability of the recipient or subrecipient.  According to FEMA, once FEMA obligates funds, the recipient is able to  expend funds as necessary. However, in November 2017, according to  FEMA officials, the agency instituted a manual reimbursement process for  subrecipients in Puerto Rico for federal funds, including Public Assistance  funds, to mitigate fiduciary risk and decrease the risk of misuse of funds.  Specifically, FEMA officials stated that they decided to institute this  process because the government of Puerto Rico had expended funds  prior to submitting complete documentation of work performed.  According to FEMA officials, they also decided to institute the manual  reimbursement process due to Puerto Rico’s financial situation,  weaknesses in internal controls, and the large amount of recovery funds,  among other things.

This manual reimbursement process requires that COR3 fill out the Office  of Management and Budget’s Standard Form 270 and submit supporting  documentation before obligated funds can be withdrawn by Puerto Rico  through COR3 and reimbursed to subrecipients. Subsequently, FEMA  must review the submitted Standard Form 270 and all project  documentation for completeness, compliance, and accuracy before  disbursing funds to the recipient. In cases where FEMA requires  additional documentation to process a Standard Form 270 request, FEMA  will submit requests for information asking COR3 to supply the  information needed for FEMA to complete the review. FEMA officials  said that they aim to complete the entire process described above within  ten calendar days, or 15-20 calendar days if FEMA needs to request  additional information from COR3. Additionally, FEMA officials stated that  the manual reimbursement process is intended as a temporary measure.  They will cease the process once FEMA has reviewed the operational  effectiveness of COR3’s internal controls and approved the final internal  controls plan, which are under review.

FEMA, COR3, and Subrecipients Report Initial Challenges with the Recovery Process

FEMA, COR3, and Puerto Rico municipal government officials from ten  municipalities we interviewed reported initial challenges with the recovery  process, including with Public Assistance alternative procedures. These  concerns included (1) workforce capacity constraints, (2) a need for  additional guidance, (3) delays related to choosing cost estimators, and  (4) reimbursement for emergency work.

Workforce capacity constraints. FEMA and municipality officials cited  concerns about FEMA staff turnover and lack of knowledge about how  the Public Assistance alternative procedures are to be applied in Puerto  Rico. While several municipal officials we spoke to remarked positively on  consistent communication with FEMA officials, municipal officials in six  municipalities we visited cited high levels of turnover among FEMA staff  as a challenge. For example, officials in three municipalities said that  discontinuity in FEMA personnel has caused them to have duplicative  conversations with FEMA. An official from one municipality described the  disruption that had been caused by repeated changes in FEMA  personnel, especially when their point of contact at FEMA changed at  least six times since the hurricanes.

FEMA officials acknowledged that more personnel with expertise in the  alternative procedures process are needed to administer the Public  Assistance program and assist subrecipients. According to FEMA  officials, FEMA has leveraged existing expertise from personnel in the  Federal Coordinating Officer Advisory Group to train new employees to  increase workforce capacity. FEMA personnel from this group are rotating  experts assigned to recovery issues to increase institutional  understanding of alternative procedures and train local hires. According to  FEMA officials, these local hires can serve as FEMA staff for up to one  year before they become reservists. In addition, FEMA officials stated  that they have identified contractors with previous experience regarding  alternative procedures to provide additional assistance to subrecipients.

Need for additional guidance. Municipal officials cited concerns about a  lack of comprehensive guidance for the alternative procedures process.  Specifically, officials in eight municipalities we interviewed cited problems  with missing, incomplete, or conflicting guidance from FEMA. In addition,  officials in four municipalities stated that they are waiting on additional  written instructions to establish more clear and consistent guidance.  Officials from one municipality told us that the lack of written guidance  has meant that the municipality has had to re-submit documents to FEMA  multiple times to respond to changing guidance that they have received  verbally. Additionally, four municipalities cited missing, incomplete, or  conflicting guidance from COR3 as a challenge. However, one  municipality noted that the quality of communication with COR3 has  improved over time as COR3 has become more established.

According to FEMA officials, they are drafting supplemental guidance for  the alternative procedures process with the goal of incorporating lessons  learned from prior iterations of the alternative procedures. Similarly,  according to COR3 officials, COR3 is currently developing additional  guidance and standard operating procedures to help subrecipients,  including municipalities and Puerto Rico government agencies, better  understand FEMA Public Assistance grant requirements.

Delays related to choosing cost estimators for Puerto Rico. As  mentioned previously, FEMA’s guidance for alternative procedures  requires that FEMA and Puerto Rico, through COR3, choose personnel  with expertise in cost estimation to serve as a center of excellence, which  will develop a cost estimating methodology. FEMA has chosen personnel  to staff the center of excellence. However, in August 2018, FEMA officials  told us that COR3 had not yet finalized their choice of personnel, which  had delayed the cost estimation process. Subsequently, COR3 officials  told us that personnel have been identified to serve on the center of  excellence and the final contracting process for these personnel is now in  progress.

Reimbursement for emergency work. Officials in nine municipalities we  spoke to said that they had not been fully reimbursed for emergency work  they completed. Further, officials in five municipalities we interviewed  stated that the lack of full reimbursement has caused financial hardships.  For example, officials in three municipalities said that the lack of full  reimbursement has meant that the municipalities have had to pause or  delay recovery work due to lack of financial resources. A mayor in one  municipality stated that they have scaled back some essential services,  such as the frequency of garbage pick-up, while waiting for full  reimbursement.

According to FEMA officials, delays in providing reimbursement were due  to several factors including a loss in FEMA personnel to process  reimbursement requests and a significant increase in the volume of  reimbursement requests submitted by COR3 to FEMA. FEMA officials  also stated an increasing need to make requests for information to COR3  due to a lack of documentation submitted at the time of the  reimbursement request. In response to these factors, FEMA officials told  us that they have undertaken new procedures with COR3. For example,  according to FEMA officials, COR3 adopted procedures to review the  completeness of documentation prior to submitting a reimbursement  request to FEMA. FEMA officials stated that the agency is also holding  weekly meetings with COR3 to increase coordination, and that FEMA  increased the number of personnel devoted to reimbursement reviews.  According to officials from FEMA and COR3, these steps have  contributed to reduced delays.

Puerto Rico Developed an Economic and Disaster Recovery Plan in Response to the Bipartisan Budget Act of 2018 That Addresses Long- and Short-Term Needs

In response to the Bipartisan Budget Act, Puerto Rico submitted an  economic and disaster recovery plan (recovery plan) to Congress on  August 8, 2018. The recovery plan defines the priorities, goals, and  expected outcomes of Puerto Rico’s recovery related to building  government capacity for the recovery and strengthening of Puerto Rico’s  infrastructure, among other things. The recovery plan estimates  infrastructure repair and recovery costs of $132 billion and total recovery  costs of $139 billion for a time period starting in 2018 and ending in 2028.  According to the recovery plan, COR3 will guide recovery investment and  policy in the months and years ahead and is intended to serve as a focal  point for strategic thought and management of Puerto Rico’s recovery.

The recovery plan is generally responsive to the directives outlined in the  Bipartisan Budget Act. For example, Puerto Rico submitted the plan to  Congress within 180 days of enactment of the Bipartisan Budget Act. The  recovery plan defines priorities, goals, and expected outcomes for Puerto  Rico’s recovery effort based on damage assessments conducted by  sector. As mentioned earlier, Puerto Rico developed the recovery plan in  coordination with FEMA and with support of the U.S. Department of  Energy, the U.S. Department of Health and Human Services, and other  federal agencies with responsibilities outlined in the National Disaster  Recovery Framework.

Additionally, the FOMB of Puerto Rico certified the recovery plan on  August 28, 2018, as directed in the Bipartisan Budget Act, but provided  two caveats to its certification. First, FOMB expressed concern that the  recovery plan lacks sufficient detail of funding sources and estimates a  much greater amount of federal funding than the certified fiscal plan for  Puerto Rico projects. The recovery plan states that at the time of its  release, Puerto Rico had not undergone eligibility reviews in various  federal funding programs, and therefore the ability to identify accurate  funding sources was limited. COR3 officials confirmed that full recovery  funding needs will not be known until all damage assessments are  complete, and they will continue to identify and leverage all funding  resources as they are made available. Second, FOMB indicated that the  recovery plan does not address oversight of federal funds and the  recovery process. While the Bipartisan Budget Act does not require  specific mechanisms for oversight of federal funding as part of the  recovery plan, according to COR3 officials, they plan to implement  internal controls, policies, and procedures to provide oversight.

Puerto Rico’s recovery plan outlines 276 “courses of action” (actions)— defined by the plan as “a collection of potential activities, policies, and  other actions that could contribute to recovery”—selected by Puerto Rico  to align with its future recovery vision. As shown in table 3 below, the  actions reflect Puerto Rico’s short-term and long-term recovery vision,  organized into three areas. First, the recovery plan proposes “precursor”  actions—those that serve as a foundation for all future actions—that will  be prioritized for implementation. For example, the recovery plan includes  actions to build capacity of municipalities to secure and manage recovery  funds, and to improve the quality and volume of public data available to  decision makers. Second, the recovery plan proposes a set of actions  that aim to build the infrastructure and systems that support Puerto Rico’s  economy, society, and disaster resiliency, such as addressing  vulnerabilities in Puerto Rico’s electric grid. Finally, the recovery plan  proposes a set of actions that address Puerto Rico’s long-term recovery  goals, such as developing and enhancing Puerto Rico’s visitor economy.

Most individual actions in the recovery plan include initial and recurring  cost estimates for the time period from 2018 through 2028. The recovery  plan describes all cost estimates as preliminary, and says that more  specific cost estimates require completion of damage assessments and  more details about the implementation of actions.

To develop Puerto Rico’s disaster recovery plan, FEMA assisted COR3 in  retaining the Homeland Security Operational Analysis Center (HSOAC), a  federally-funded research and development center operated by the RAND  Corporation under contract with DHS. According to FEMA officials, FEMA  provided funding and technical assistance, through contractor support, for  Puerto Rico to develop the recovery plan, but COR3 and Puerto Rico will  be responsible for its implementation. These officials also stated that  Puerto Rico received input and technical assistance from other federal  departments, such as those in the Recovery Support Function Leadership  Group led by FEMA.

HSOAC developed the recovery plan in consultation with Puerto Rico by  developing a preliminary sector-by-sector assessment of damages and  needs caused by Hurricanes Irma and Maria across Puerto Rico. In  conjunction with Puerto Rico’s stated vision for the recovery process,  HSOAC’s damage assessment report provided the baseline needed to  define, compare, and prioritize actions.

HSOAC worked in teams of sector-specific experts to develop and refine  the actions by reviewing reports, proposals, best practices, and other  literature. For example, in June 2018, the U.S. Department of Energy  released a report on energy resilience for Puerto Rico’s electric grid,  containing recommendations for Puerto Rico to consider when developing  the Recovery Plan. HSOAC sought feedback from various subject matter  experts and stakeholders while developing the recovery plan. According  to FEMA officials, FEMA’s joint recovery office delivered interim drafts of  the recovery plan to federal agency partners and Puerto Rico for  feedback. HSOAC also sought input from local-level stakeholders,  including Puerto Rico’s municipal governments. For example, HSOAC  commissioned a survey of officials from municipalities to gauge the  challenges they faced in the aftermath of the 2017 hurricanes. According  to FEMA and HSOAC officials, the survey, along with other input provided  by mayors led to the development of actions focused on building the  capacity of municipal governments to support recovery efforts.

HSOAC officials noted that while the final recovery plan was submitted to  Congress, they will continue to produce products that will assist Puerto  Rico and their stakeholders in recovery implementation. HSOAC intends  to release updated versions of the recovery plan, including updated  damage and needs assessments. Other expected products include  detailed descriptions and cost estimates for each action and a lessons  learned report. The Bipartisan Budget Act also directs Puerto Rico to  develop a public report on the progress made in achieving the recovery  plan’s goals every 180 days after submission.

FEMA officials explained that the recovery plan serves as a strategic,  direction-setting plan for recovery, and does not provide step-by-step or  site-by-site guidance on the recovery process. FEMA officials also  acknowledged that there may be some overlap between some of the  actions in the recovery plan and some of the permanent work funded  through FEMA’s Public Assistance program, but that it is COR3’s  responsibility to merge and coordinate such recovery efforts.

We provided a draft of this report to DHS and the government of Puerto  Rico for review and comment. In its comments, reproduced in appendix I,  DHS summarized the amount of Public Assistance funding provided to  Puerto Rico through fiscal year 2018. DHS also described FEMA’s  temporary manual reimbursement process instituted to mitigate risk and  ensure fiscal accountability of taxpayer dollars, and stated that FEMA is  committed to supporting Puerto Rico as it finalizes internal controls,  management policies and procedures to oversee disaster recovery funds.   DHS also provided technical comments, which we incorporated as  appropriate.

The government of Puerto Rico provided comments that we reproduced  in appendix II. In its comments, the government of Puerto Rico stated that  in addition to what was discussed in this report, COR3 achieved progress  and faced additional challenges.

This report is a part of an ongoing review of disaster recovery efforts in  Puerto Rico. The remainder of our ongoing work will continue to examine  Puerto Rico’s recovery process, including implementation of the Public  Assistance alternative procedures process and efforts by FEMA and  Puerto Rico to oversee disaster recovery funds, including the manual  reimbursement process.

If you and your staff have any questions, please contact me at (404) 679- 1875 or curriec@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  II.

Appendix I: Comments from the Department of Homeland Security

Appendix II: Comments from the Government of Puerto Rico

Appendix III: GAO Contact and Staff Acknowledgments

Chris Currie, (404) 679-1875 or CurrieC@gao.gov.

In addition to the contact named above, Joel Aldape (Assistant Director),  Pedro Almoguera, Aditi Archer, Michelle Bacon, Sylvia Bascope, Lilia  Chaidez, Taylor Hadfield, Danielle Pakdaman, Lorraine Ettaro, Eric  Hauswirth, Heidi Nielson, and Kevin Reeves made key contributions to  this report.

In 2017, Hurricanes Irma and Maria caused extensive damage throughout Puerto Rico, destroying roads and buildings and cutting power and communication lines. Puerto Rico estimates that $132 billion will be needed to repair and reconstruct its infrastructure and services.

FEMA has provided nearly $4 billion in public assistance grant funding to Puerto Rico as of September 2018, mostly for emergency work like debris removal. However, applicants in Puerto Rico have reported encountering challenges in applying for funding of more permanent projects (like repairs to roads)—including unclear guidance on how to properly apply for these funds.